TPSF Policy Note Urges Tanzanian Private Sector to Shift from Trading to Investment as FDI Hits USD 1.72 Billion in 2024

The Tanzania Private Sector Federation (TPSF) has released a Strategic Policy Note calling for a structural shift of the domestic private sector from trading activities to productive investment, as Foreign Direct Investment (FDI) inflows into Tanzania reached a record USD 1.72 billion in 2024, marking a 28.3% growth compared to the previous year.

The policy note, titled “Rethinking Tanzania’s Path from Trade to Investment Towards Vision 2050 – Who Owns the Economy?”, was authored by Policy Analyst Michael Kijavara and published in May 2026.

It argues that while Tanzania has benefited from sustained FDI inflows over the past decade, the local private sector remains predominantly anchored in trading rather than industrial production, creating a structural imbalance in which foreign investors dominate capital-intensive production while Tanzanians concentrate on distribution and commerce.

According to the document, FDI inflows averaged USD 1.11 billion per year between 2016 and 2024, rising from USD 0.86 billion in 2016 to USD 1.72 billion in 2024.

Citing Bank of Tanzania (BOT) data, the note indicates that FDI sources remain highly concentrated, with the top 10 source countries accounting for 76.4% of total inflows in 2022.

The Cayman Islands retained its position as the leading source for the third consecutive year, followed by the Netherlands, Canada, and Mauritius.

The note also reports a marked decline in Chinese FDI, attributed to reduced reinvestment of earnings in manufacturing and construction.

TPSF identifies the dominance of importation and short-term commercial activities among local enterprises as a key constraint, warning that this model limits capital accumulation, weakens domestic industrial capacity, and risks turning Tanzania into a consumption-driven rather than production-led economy.

The Federation contrasts this trajectory with the experiences of China, Vietnam, and India, where domestic capital played a central role in building manufacturing capacity, driving exports, and fostering innovation.

The policy note outlines three concrete requirements to align private sector behavior with Vision 2050.

1) Domestic entrepreneurs must move beyond importation into local manufacturing and value addition, targeting sectors where Tanzania holds a competitive advantage, namely agro-processing, textiles, construction materials, and pharmaceuticals.

2) Local capital must be directed toward equity participation in productive enterprises, including joint ventures with foreign investors, to ensure Tanzanians own a growing share of what the economy produces.

3) Financial institutions and development banks must evolve their products to support long-tenor investment financing, moving away from the short-cycle trade-finance instruments that currently dominate the market.

TPSF emphasizes that the role of government remains critical in enabling this transition through access to long-term finance, promotion of joint ventures between local and foreign investors, and platforms for technology transfer, but stresses that even the most progressive policies will have limited impact without a corresponding shift in private sector ambition.

The note frames the choice facing Tanzanian entrepreneurs as a strategic one, between continuing to operate as traders within an economy shaped by external capital or transitioning into investors who shape, own, and drive the economy.