In this article, investment advisory firm Shikana Group highlights the top sectors where to invest in Tanzania.
As the Republic of Tanzania works towards development and industrialization, the country has become open to direct foreign investments. Due to this, it is known to be one of the fastest-growing economies in Africa. It is a strategic location to establish a business, as the country possesses bountiful natural resources and a steadily growing population. Recently Dangote, the richest man in Africa, was impressed by the swift improvement in the business environment in Tanzania.
In 2020, on the 30th of November, the late President of the Republic of Tanzania laid out several trades and investment priorities while encouraging foreign investment inflows in Tanzania. Also, he emphasized target points to boost economic development for the next five years. This plan aims to maintain approximately 8% annual economic growth by supporting citizens owning small and medium-scale businesses and entrepreneurs with low-interest loans.
Following this plan, maintaining a constant rate of interest, inflation, and money value by improving monetary and economic policies is a work in progress in Tanzania. The country also aims to create eight million job opportunities and increase privatization (freedom to invest in a private sector), focusing on tourism, manufacturing, fishery, agriculture, livestock, health, energy, ICT, infrastructural (industrial), and entertainment sectors, etc.
Although doing business in Tanzania is not very easy, several profitable investment opportunities are presented by the country in various sectors listed below.
Mining
Recent data collected by the International Trade Administration notes mining as the best prospect sector in Tanzania, owing this to the endowment of several resources such as gold, silver, tin, diamond, ruby, limestone, Tanzanite, gypsum, coal, etc. Being the fourth-largest producer of gold in Africa, it is a site of attraction to several foreign investors from the UK, USA, Canada, Netherlands, and several emerging markets (such as India, China, and South Africa). The International Trade Administration noted over 5% growth in the mining industry between the first quarter of 2019 and 2020.
Shikana Group highlights the plan to improve the mining sector in Tanzania. These include: strengthening laws to protect minerals, improving the capacity of small-scale miners by increasing access to funds and adequate equipment, encouraging refineries construction, and attracting investors into Mining Development Agreements via negotiation.
The mining sector constitutes about 3% of Tanzania’s annual GDP, with a tremendous increase in value, making it one of the leading sectors for investment. Of the several minerals exported, gold mines accounted for over 95% of revenue attained in 2011. By 2025, Tanzania is looking forward to making the mining industry contribute at least 10% to its GDP.
Agriculture
The agriculture sector makes up about 29% of Tanzania’s GDP. It is a crucial sector of the economy, as it fills in for over half of the labour force required for production. Not only does this enhance food supply, but also raw materials that will require processing to a more relevant & stable product. These agricultural products are most times exchanged for foreign currencies via exportation. The agricultural sector takes into record both crop cultivation and animal rearing, thereby broadening the available segments for investments.
Tanzania aims to elevate to being a middle-class economy by 2025 and plans to leverage a certain percentage of this transformation into the country’s agricultural growth. To grow this sector, investment in processing agricultural products will increase the value and overall quality. Many opportunities exist in processing leather, textile, cashew, oil seeds, cashew nut, fruits & vegetables, meat, dairy products, etc.
Despite the numerous opportunities posed by the agricultural sector, several other factors may cause hindrances if not mitigated. These challenges include exportation and importation bans on certain goods, limited financing, a burden on the pricing of produce, etc.
Energy
Following the increasing industrial activities in Tanzania, the energy demand, especially for power generation, is also increasing. As part of the 5-year expansion plan, Tanzania plans to diversify energy sources by utilizing coal, natural gas, wind, biomass, geothermal, hydro, solar, and other renewable sources to generate energy. This is aimed at increasing electricity capacity to 10,000 MW and connectivity to 50% by 2025. With the movement towards a greener, eco-friendly planet, it would be advisable to invest more in renewable energy sources, promoting sustainability.
There are numerous opportunities presented by the anticipation of the Ministry of Energy to diversify power-producing energy sources. Some of the investment opportunities in this sector include electricity metering, gas/diesel turbines (servicing & spare parts), equipment required for electricity transmission, and various related services (such as installation, repairs & maintenance). Several projects relevant to the energy sector similar to that of the construction of the Ruhudji Dam are ongoing but the priority is on the LNG project in Lindi.
Tourism
The best prospects to undergo within the tourism sector are: construction & proper management of hotels and restaurants, travel agencies, tour services, infrastructural ventures, marketing organizations, training institutions, upgrade of airport terminals, and shops, etc. Tanzania is continuously seeking to broaden its horizon by exploring new markets in South Asia, China, and Russia. Americans are the number one tourist in Tanzania. Tanzania’s tourism sector also has massive investment opportunities in wildlife, forestry, antiquities, etc.
The tourism sector is Tanzania’s major gainer in foreign exchange. In 2018, Tanzania’s tourism sector generated USD 2.4 billion marking an increment of up to 9.1% when compared to the earnings acquired in 2017. The ‘finest in the world’ as wildlife resources in Tanzania are considered, making up about 25% of the total area of the country. The popular ‘Mount Kilimanjaro’ is located in Tanzania, crowning it as one of the most renowned destinations for tourism in Africa.
As a part of wildlife, hunting (sport or safari) alongside forestry fills in for 2-3% of Tanzania’s GDP, although, it is usually planned and performed in a regulated manner.
Telecommunication / ICT
The dominating feature of technology in this information generation has led to its increasing relevance in every other sector. With a contribution of 1.9% to Tanzania’s real GDP, the telecom sector has shown a huge increase of 28% between 2018 and 2014, and a further rapid hike at present following the lockdown imposed by COVID-19.
Health
The World Bank emphasizes the urgent need for investments in the health and education sector. This urgency was based on the fact that acceleration in these sectors will lead to human capital development, and enhance the movement towards building a sustainable environment to boost growth in other sectors. In every country, not only in Tanzania, investment in the health sector is a good prospect. This prospect is not only growth-enhancing, the study of economic trends has shown that the return on investment in the health sector is huge, as it not only secures the citizens but it also attracts foreigners to partake in the use of the presented health facilities and services.
Following the rapid involvement of technology, telehealth is the near future of healthcare. The Tanzania Digital Health Investment Road Map highlights recommendations for a better healthcare system in Tanzania. These recommendations are aimed at improving healthcare services delivery by optimizing resource management, improving data supply & demand, and harmonizing systems & data. Also, this road map determined how governance, Health workforce, technologies, adequate medical products, information, and finance impact the health sector. Tanzania is focusing immense effort on addressing nutritional challenges in adolescents, maternal, and infant health.
Media & Entertainment
To grow the entertainment sector, Tanzania envisions the establishment of the Arts Fund, to provide support either as loans, training, or both to artists. Although the media and entertainment industry seems to be neglected, future projection forecasts revenue generation of USD 1.1 billion by 2022. At present, the swift increase in the need for information and communication has led to the high influence of the media in this era. Presenting the knowledge of the power of media, several organizations and individuals utilize this as a prominent means of generating profit.
The most promising segment of the media and entertainment sector is the Internet, followed by TV and video.
Education
Surrounded by uncertainties, how can a country survive without investing in the future? In this millennial/information generation with easy access to the internet, and an increasingly rapid change of things, investing in proper education yields the highest return on investment. Education is the foundation on which every sector gains full stability, but it also depends on other sectors, especially the technological sector. Hence, it is important to create an environment that is conducive to learning, thereby increasing the skilled labour force. If a foundation is faulty, the risk of the whole building collapsing can not be overemphasized. Furthermore, following Tanzania’s growth plan, UNDP advised that the gateway to this desire is education.
About Shikana Group
Shikana Group is a team of leading lawyers and investment advisors based in Tanzania and operating in the East African community.
For more details visit Shikana Group at https://shikanagroup.com/.
