Booming sectors: Where investors put their money

Dar es Salaam. Tanzania’s manufacturing, transportation and commercial building sectors are increasingly appealing to investors due to their potential for profit, personnel availability, policy framework, growing demand and perceived sector stability.

The three sectors, according to the statistics of registered projects by the Tanzania Investment Centre (TIC), were top investors’ choices in the country in 2023, as the centre reports over $5.67 billion (estimated Sh14.38 trillion) in total capital injected.

Data showed that the three sectors contributed more than two-thirds of the total capital injected from January to December 2023, at nearly $3.9 billion.

A total of 523 projects were registered last year, of which 363 were from the three sectors alone.

Further analysis conducted by The Citizen, utilising TIC’s monthly and quarterly updates, indicates that the investors are also directing funds into various other sectors.

Notably among these are agriculture, with registered projects totaling $782.84 million; the services sector ($310.63 million), economic infrastructure ($249.39 million), tourism ($163.48 million), energy ($58.22 million), mining and petroleum ($47.52 million), telecommunications ($28.52 million), and human resources ($7.06 million).

University of Dar es Salaam (UDSM) Prof Jehovaness Aikaeli said investors look at sectors that can generate lucrative returns, those with the potential to bring profit and those with a high probability of growth over time.

“But they also consider the availability of inputs, the global economic situation, and the specific economic conditions of the sector, as well as the security of their investments in the country,” he said.

Prof Aikaeli said the attractiveness of these sectors in the country can also be influenced by the availability of skilled personnel or manpower, which is influenced by the education and technology accessible in the country.

“Therefore, in choosing where to invest, investors conduct in-depth research in areas like these and many others, such as the level of infrastructure development in the country that supports either directly or indirectly their investments,” he said.

He added that sectors like commercial buildings will continue to perform well due to the high demand for real estate in the country, especially as many regions in Tanzania are urbanising rapidly and the population is also increasing rapidly.

However, he noted that sectors like agriculture struggle to attract many new investors largely because the necessary infrastructure to support large projects, such as advanced irrigation schemes, is lacking.

Agricultural Trade Economist from the University of Dodoma (Udom), Dr Lutengano Mwinuka, said there have been good efforts by the government and through TIC to publicise areas of investment in the country.

“However, for certain sectors, investors are attracted because of the associated lower business risks and the friendly policy and legal framework of that particular sector,” he said.

Dr Mwinuka said sectors like commercial real estate have been able to attract new investments year after year because their associated risks are relatively low compared to other areas.

In contrast, sectors like tourism, heavily affected by Covid-19 and other global challenges, are gradually recovering, with many returning investors being those who were present before those challenging times.

Dr Mwinuka emphasised the persistent risks in agriculture and suggested a wake-up call for the government to start reducing these risks.

This includes moving away from dependency on rain-fed agriculture and investing in infrastructure such as irrigation schemes and water harvesting facilities.

According to their recent update, the TIC, through their current five-year strategic plan, 2023/2024 to 2027/2028, aims to register 3000 projects targeting not only traditional sectors but also Foreign Direct Investment (FDI) registration of $5 billion annually and $3.5 billion of domestic investment annually by June 2028.