Foreign direct investment (FDI) in Tanzania

FDI in Figures

Tanzania is one of the most preferred destinations for foreign investment in Africa, ranking among the 10 biggest recipients of FDI on the continent. According to UNCTAD’s World Investment Report 2024, FDI to the United Republic of Tanzania increased by 5.9% to USD 1.34 billion (from USD 1.26 billion one year earlier). At the end of the same period, the total stock of FDI stood at USD 19.97 billion, around 25.1% of the country’s GDP. The Tanzania Investment Centre (TIC) registered 842 projects worth USD 7.7 billion in 2024, the highest investment value since 1991, led by the manufacturing and transport sectors. Other sectors with significant investments included commercial buildings (91 projects worth USD 706 million), tourism (76 projects valued at USD 337 million), and agriculture (66 projects totalling USD 599 million). The projects are expected to create 248,078 jobs. The top six origin countries for FDI stock include Canada (USD 650.1 million), China (USD 696.8 million), Australia (USD 836.7 million), South Africa (USD 887.3 million), Nigeria (USD 1,131.3 million), and the Cayman Islands (USD 1,275.0 million – data Bank of Tanzania). Several foreign companies, including Equinor (formerly Statoil), Shell (which acquired BG Group), and ExxonMobil, are investing in natural gas exploration and production in Tanzania. Additionally, mining companies such as Barrick Gold, AngloGold Ashanti, and Acacia Mining (now part of Barrick) are also making significant investments in the country.

Investors are drawn to the country's commitment to implementing sound macroeconomic policies, its efficient privatization program, and abundant natural resources. However, low levels of industrial development, environmental concerns, lack of transparency, and poor compliance with legislation are barriers to investment. The business environment remains hampered by ineffective regulations. Labour regulations are not flexible enough to support a dynamic labour market. Foreign investment in land is limited, and investment in other sectors can be screened. Foreign investors in Tanzania generally receive treatment equivalent to domestic investors, with no geographical restrictions or limits on the number of foreign entities in any sector. However, limitations exist in certain industries, such as aerospace, agribusiness, fisheries, banking, insurance, construction, energy, and media, through restrictions on foreign equity ownership or other activities. While Tanzania relaxed foreign ownership restrictions in the mining sector in 2020, complaints persist from mining investors regarding local banking requirements, which are considered a significant barrier to investment. In 2022, Tanzania's Parliament enacted a new Investment Act, replacing the 1997 law to enhance the investment environment. Key reforms include strengthening the Tanzania Investment Centre's (TIC) role, establishing an integrated electronic system for investment facilitation, and removing time limits on appeals for rejected applications. The act also clarifies timeframes for certificates of incentives, reduces the minimum investment capital threshold for domestic investors, and protects existing certificates. Additionally, it grants foreign investors access to international arbitration for disputes with TIC or the government. In July 2023, the Tanzania Investment Regulation 2023 was issued, outlining the functions of the National Investment Steering Committee and procedures for strategic investments and incentives. The regulation also empowers government officers to coordinate and streamline the processing of licenses and permits. Tanzania ranks 82nd among the 180 economies on the 2024 Corruption Perception Index and 92nd out of 184 countries on the latest Index of Economic Freedom.

What to consider if you invest in Tanzania

Strong Points

Strong points of investing in Tanzania include:

• High economic growth potential (the GDP growth over the last 10 years is around 7%, one of the fastest growing economies in Africa)
• Increasing economic stability (inflation down from 16% in 2012 to 4% in 2018)
• Rich natural resources (arable land and mineral subsoil)
• Strategic location (the country is a gateway to 6 landlocked countries - Uganda, DRC, Rwanda, Burundi, Zambia and Malawi)
• Three deep water ports that serve neighbouring countries
• Access to Southern African Development Community free trade market
• Political stability (the country has not experienced any conflict or civil war since gaining independence)

Weak Points

Weak points of investing in Tanzania include:

• Limits of foreign right to private establishment (foreign companies are banned from operating certain tourist businesses and need to give a certain share of ownership to the government to receive a mining development license, investment restrictions on government bonds, etc.)
• Foreign equity ownership restrictions on certain services sector (telecommunications, TV channels, newspapers)
• Lack of adequate and reliable power
• Poor infrastructure
• Lack of skilled labour force

Government Measures to Motivate or Restrict FDI

Foreign investors can benefit from many fiscal and non-fiscal incentives. These include:

• Access to Tanzania Investment Centre (TIC) One Stop Facilitation Centre for procedures related to permits, licenses and approvals
• 0% import duty on Project Capital Goods, Computers and Computer Accessories, Raw Materials and Replacement Parts for Agriculture, Animal Husbandry and Fishing, Human and Livestock Pharmaceuticals and Medicaments, Motor Vehicle in Completely Knocked down (CKD) form and inputs for Manufacturing Pharmaceutical Products, Hotel equipment
• 10% import duty on semi-processed/semi-finished goods
• 100% capital expenditure deduction (mining and agricultural sectors)
• 50% capital allowances in the first year of use for plant and machinery used in manufacturing processes and fixed in a factory, fish farming; or providing services to tourists and in a hotel
• Right to repatriate 100% of foreign exchange earned, profits and capital.
• Automatic permit of employment to 5 foreign nationals on projects holding certificates of incentives