Tanzania: Investing

FDI in Figures

Tanzania is one of the most preferred destinations for foreign investment in Africa (it counts among the 10 biggest recipients of FDI in Africa). According to UNCTAD’s 2021 World Investment Report, FDI inflows to Tanzania reached USD 1 billion in 2020 and showed an increase from the previous year (USD 991 million), despite the global economic crisis triggered by the Covid-19 pandemic. According to UNCTAD’ Investment Trends Monitor, global FDI flows rebounded strongly in 2021, but FDI flows to African countries (excluding South Africa) rose only moderately. The mining sector, the oil and gas industry, as well as the primary agricultural products sector (coffee, cashew nuts and tobacco) draw most FDI. The country’s primary investors are China, India, Kenya, United Kingdom, Mauritius, Oman, the United Arab Emirates, Canada, the United States, the Netherlands, South Africa, and Germany.

According to the Doing Business 2020 report published by the World Bank, Tanzania ranked 141st out of 190 countries, gaining three positions compared to the previous report. Investors are drawn to the country's commitment to implement 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. Labor regulations are not flexible enough to support a dynamic labor market. Foreign investment in land is limited and investment in other sectors can be screened. During John Magufuli's presidency (2015-2021), investor unfriendly policies have caused a growing mistrust of international investors, damaging the perception of Tanzania's business climate, which remains restrictive. In 2017, Tanzania approved new regulations in the mining sector that allows the government to tear up and renegotiate mining contracts, partially nationalise mining companies, introduce higher royalties, enforce local beneficiation of minerals and bring in strict local-content requirements, which undermined investor confidence. President Samia Suluhu Hassan affirmed her commitment to prioritise economic growth and strengthen Tanzania's economy through further development of the country's mining and quarrying sector. She also stressed the need for Tanzania to increase foreign investment to encourage growth, particularly in helium, gold and nickel mining and oil extraction. In 2016, a large deposit of helium gas was discovered in Tanzania, but its exploration work was postponed. China and Tanzania have embarked on 19 multi-billion dollar projects. Among these projects, are the USD 11 billion port of Bagamoyo, and the 34 km road between Bagamoyo and Mlandizi, connecting the port to Tanzania's internal rail network and the Zambia Railway.

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

Procedures Relative to Foreign Investment

Freedom of Establishment

The Tanzania Investment Act of 1997 provides for payment of fair, adequate, and prompt compensation to foreign investors. The law also guarantees access to the court or arbitration for the determination of adequate compensation; and prompt repatriation of benefits in convertible currency where applicable.

Acquisition of Holdings

Foreigners can acquire interests in a domestic company through purchase of its shares and assets. However, there are certain sector-specific restrictions. These include:

• Telecommunications and media: Foreign capital participation in the telecommunications can be up to 75% maximum. Tanzanian TV stations can be owned up to 49% by foreigners. Foreign investors are barred from acquiring shares in nationwide newspapers. Telecommunication companies are required to list 25% of their shares on the Dar es Salaam Stock Exchange.
• Mining: Foreign mining firms must have at least 5% equity from an 'indigenous Tanzanian company' (indigenous Tanzanian company is defined as a firm owned at least 51% by Tanzanians and with 100% of its non-managerial positions held by Tanzanians). Foreign firms are also required to grant the government a 16% carried interest. Foreign companies that provide goods or services to the mining sector must incorporate a joint venture company in which an indigenous Tanzanian company holds equity of at least 20%.

Obligation to Declare

The Tanzania Investment Centre (TIC) operates as a one-stop shop for foreign investors. Foreign companies are not required to register with the TIC; however, registering is the only way to be eligible to benefit from investment incentives (through investment incentives), including VAT and import duty exemptions. Registering with the Zanzibar Investment Promotion Authority (ZIPA) in the semi-autonomous region of Zanzibar provides access to similar investment incentives.

Requests For Specific Authorisations

Foreigners need to meet certain conditions in order to be recognised as "strategic" or "special strategic investors": The minimum investment capital to obtain "strategic investor" status is USD50 million for wholly owned foreign companies and joint ventures with Tanzanians. The threshold is USD300 million for the "special strategic investor" status. The status is granted by the National Investment Steering Committee (NISC).
Foreign investors are barred from most tourism activities: Mountain guiding, travel agency, car rental and tour guiding are not open to foreigners. Port services licences are only granted to Tanzanian companies. Furthermore, there are various restrictions in fisheries: Foreign-owned ships cannot engage in local trade. Only Tanzanians can be licenses as shipping agents. Fishing and fish export licenses cost three times the local ones, exclude several operations and collection of specified fish and fish products.
Gemstone mining licenses are granted exclusively to Tanzanians (a minister waiver is available).
Pursuant to the Zanzibar Investment Promotion and Protection Act, the government can restrict foreign investment in Zanzibar in order to provide better terms to Zanzibaris engaged in businesses requiring natural resources.

Investment Opportunities

Investment Aid Agency

Tanzania eRegulations - Investment Framework

Tenders, Projects and Public Procurement

Tenders Info, Tanzania Tenders
Online Tenders, Tanzania Tenders
Tanzania Invest, Tanzania Tenders

Other Useful Resources

Tanzania Chamber of Commerce, Industry & Agriculture
TIB Development Bank

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