IN a world where Foreign Direct Investment (FDI) flows have largely been on the decline, Tanzania has emerged as a notable exception, with inflows steadily increasing over the past few years.
This rise in investment is being hailed as a direct result of President Samia Suluhu Hassan’s bold and pro-business policies, which have fostered a more conducive environment for international investors.
Since assuming office in 2021, President Suluhu Hassan has prioritised creating an investment-friendly landscape, shifting Tanzania into a position of economic resilience and growth despite global uncertainties.
FDI inflows, which have surged since 2021, reflect this growing investor confidence in the country’s economic prospects, particularly when compared to the broader global trends.
The latest Tanzania Investment Report 2024 paints a striking picture of the country’s remarkable recovery and growth.
After a significant dip in 2020, when FDI inflows dropped from 1.2 billion US dollars to 943.8 million US dollars due to the global economic fallout from the Covid-19 pandemic, Tanzania has managed not only to recover but also to experience consistent growth year-on-year.
In 2021, the country witnessed a steady increase in FDI, rising to 1.19 billion US dollars. The momentum continued into 2022 with a further jump to 1.4 billion US dollars. But it was in 2023 that Tanzania’s performance truly shone, with FDI inflows reaching a substantial 1.65 billion US dollars, a remarkable 14.7 per cent increase compared to 2022. This rise is especially noteworthy considering the broader global context.
According to the World Investment Report 2024, global FDI flows experienced a 2 per cent decline in 2023, falling to 1.3 trillion US dollars due to an economic slowdown and rising geopolitical tensions.
Africa, in particular, witnessed a downturn in investment, making Tanzania’s growth all the more striking. In an environment where many African nations faced challenges in attracting foreign capital, Tanzania’s success has become a model for other nations to follow.
The country’s ability to defy global trends and attract significant investment speaks volumes about the efficacy of the policies put in place by President Samia’s administration.
The Tanzania Investment Report, compiled by the Bank of Tanzania (BOT), Tanzania Investment Centre (TIC), and the National Bureau of Statistics (NBS), attributes these remarkable achievements to a combination of factors: Tanzania’s stable political environment, consistent economic growth, controlled inflation, and a narrowing current account deficit have created a favourable investment climate.
The government’s strategic policy reforms, targeted investment promotion initiatives, and a commitment to improving the business environment have been crucial.
Notably, sectors such as mining, manufacturing, finance, insurance and information and communication have driven this growth.
The ICT sector, in particular, saw a remarkable doubling of inflows to 198 million US dollars, driven by the increasing demand for digital services.
Tanzania’s proactive approach to investment promotion, including streamlining business processes, enhancing digitalisation and improving access to finance, has garnered international recognition.
Organisations like the World Bank and the IMF have acknowledged Tanzania’s progress in creating a conducive investment climate.
The country’s commitment to legal and structural reforms has positioned it as a leading investment destination in the region.
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According to KPMG’s “Doing Deals in Sub-Saharan Africa Report – October 2023,” Tanzania ranks as the third most preferred investment destination in SSA, following South Africa and Nigeria.
By hosting the regional headquarters for the African Court on Human and Peoples’ Rights and the East African Community (EAC), Tanzania reinforces its commitment to peace and security, facilitating trade relations and intra-regional commerce which is crucial in attracting investments.
Furthermore, its strategic geographic location makes it an attractive investment destination. Tanzania is accessible through the Indian Ocean, which gives it trade links to Asia and sits in between six landlocked countries: the Democratic Republic of Congo (“DRC”), Uganda, Rwanda, Burundi, Zambia, and Malawi.
These nations rely on Tanzania as the most efficient point for the passage of goods.
The Dar es Salaam port serves as a vital gateway for these neighbouring countries, facilitating their import and export activities. Tanzania’s credit ratings of B1 from Moody’s and B+ from Fitch underscore its stable and manageable risk profile.
These ratings reflect confidence in the country’s prudent macroeconomic and financial policies, leading to lower borrowing costs and enabling increased investment in infrastructure and development projects.
Significant infrastructure improvements, such as the Julius Nyerere Hydropower Project, the Standard Gauge Railway (SGR) and extensive road upgrades, are enhancing connectivity and facilitating economic activity across the country.
The tourism sector has also experienced substantial growth, with tourist arrivals reaching a record 1,808,205 in 2023. Tanzania has been recognised as a leading African destination in 2024, with Kilimanjaro National Park named Africa’s leading tourist attraction, the Tanzania Tourism Board recognised as Africa’s leading tourism board, and Serengeti National Park receiving the Africa’s leading national park award for the sixth consecutive year.
Tanzania’s appeal as an FDI destination is a result of a synergy between its stable political and economic environment, proactive government policies, strategic location, infrastructure development, and thriving sectors.
All of these factors combine to create a compelling narrative for investors seeking opportunities in Africa.
