Investment by locals gallops in Tanzania after law amendment

Dar es Salaam. Local investment capital has reached an average of 50 percent of all projects registered every month.

The development comes just one year after the government lowered the investment capital requirement for local investor, from $100,000 (Sh250 million) to $50,000 (Sh125 million).

The changes involved the implementation of the Tanzania Investment Act, 2022, which repealed the Tanzania Investment Act, 1997.

The new law sets conditions for a better environment, institutional framework, protection, attraction, motivation and facilitation of investment in the country, according to Tanzania Investment Centre (TIC) executive director Gilead Teri.

“There were complaints that investments have been benefiting foreigners and not locals, so the change in the law made several differences,” he said in an interview.

The new law recognises an investment worth at least $50,000 by a Tanzanian to be registered for investment incentives.

Increased local investment is also happening at a time the UNCTAD’s World Investment Report 2023 has revealed a widening annual investment deficit that developing countries face as they work to achieve the Sustainable Development Goals (SDGs) by 2030.

According to the report, global foreign direct investment (FDI) fell by 12 percent in 2022.

Mr Teri said local investment projects accounted for an average of 20 percent of all the projects before the implementation of the new law.

“The changes are big,” he said, adding that the number of projects has been consistently increasing since May this year.

“Throughout the year 2021, Tanzania had $2 billion worth of registered projects, but in only August this year, we have registered about $1 billion in projects.”

Increased local investment offers hope for job creation in Tanzania, according to analysts.

“The trend strengthens our private sector, reducing employment challenges and influencing partnerships with international companies that need natives with security of their capital,” said an independent economic analyst, Mr Water Nguma.

Mr Teri said the legal reforms made several changes including to reduce the amount of capital required for natives and counting assets as part of the capital.

“With a capital of just Sh100 million, many will miss opportunities but the law allows counting of the assets. For example, a person has a farm, a machine, a roller head with a value close to that capital, then they can meet the criteria for TIC registration to get the existing incentives,” he said.

According to him, the law has also gone further for a Tanzanian who has raw materials with a value equivalent to the capital requirement can be registered. “For example, a factory for rice husking 100 sacks whose value reaches that capital will then be registered,” he said.

Tanzania has recorded a more than 100 percent increase in foreign direct investment (FDI) as the value of invested projects decreased by $347.51 million in the first quarter of 2023 compared with that of the preceding year, according to a TIC recent report.

The document shows that commercial buildings, manufacturing, agriculture, transportation and tourism were the five leading sectors for FDI attraction during that period.

On the other hand, agriculture, economic infrastructure, manufacturing and commercial building were the top factors that attracted FDI during the said period of review.