What makes Tanzania an investment hotspot

The RMB, which markets itself as a leading African corporate and investment bank, puts Tanzania only second to Kenya in East Africa.

In its “Where to Invest in Africa 2024’ report, the RMB derives its data based on four key parameters, which include Economic Performance and Potential; Market Accessibility and Innovation; Economic Stability and Investment Climate as well as Social and Human Development.

According to the report, Tanzania is specifically doing well in three key parameters.

It scores fourth on the Economic Performance and Potential pillar and ninth on the Economic Stability and Investment Climate pillar.

Tanzania is ranked 12th on the Social and Human Development pillar, while on the Market Accessibility and Innovation, the country comes in 20th.

“Three measures of growth position Tanzania well. The IMF GDP growth forecast puts the East African nation in seventh place out of 31 countries,” the report says.

According to the report, Rwanda comes third among member states of the East African Community (EAC) and 15th in Africa. Uganda and the Democratic Republic of the Congo (DRC) complete the fourth and fifth positions, respectively. They are also in positions 17 and 26 out of the 31 surveyed African countries. Burundi, South Sudan, and Somalia—the other three EAC member states—were not involved in the survey.

The growth structure score, the report says, is better, putting it in fourth place with forecast growth of five percent.

Tanzania also hosts the tenth largest economy in Africa out of the 31 that RMB surveyed.

According to the report, Tanzania is also the world’s 14th largest producer of natural gas, and the country’s output increased by 18 percent during 2022, significant discoveries in recent years from “flagship projects in Tanzania’s Third National Five Years Development Plan.

The project will involve drilling development wells in deep offshore fields, construction of subsea pipelines from deep offshore fields that will transport natural gas onshore for processing, construction of a Liquefied Natural Gas (LNG) plant, and development of jetty loading facilities in the project area. Total investment in these activities is estimated to be about $32.7 billion (over 40 percent of current GDP).”

The country’s 20th rank on Market Accessibility and Innovation, RMB says, stems from the fact that the country’s hugeness in size hinders the urbanisation speed.

“Being a large nation with limited metropolitan areas outside of Dar es Salaam, the country is hampered by lower urbanisation levels,” the report says.

As such, connectedness is poor, resulting in low quality of life, as reflected by low human development. However, the report says Tanzania’s large and growing population and low unemployment levels could propel the country’s growth to new levels. “Tailwinds for Tanzania include a large and growing population and low unemployment levels. Scores in the bottom third for economic complexity and GDP per capita suggest that growing into more productive industries will improve investment attractiveness,” read part of the report.

Analysts say much as the report has more positives than negatives for Tanzania, the country still has room to unlock potential improvements, including enhancing tax administration, integrating regulatory bodies, and issuance of permits to attract more investment.

A Senior Lecturer in Economics from the University of Dar es Salaam (Udsm), Dr Wilhelm Ngasamiaku, said the World Bank has also ranked Tanzania in a favourable position and identified several areas that need reform, including tax administration.

“In general, it is a positive development, but there is room for improvement if we enhance tax administration and streamline the systems for issuing permits to investors. It will reduce bureaucracy and attract more investment to the country,” he said.

He added that with effective management, taxes would become more predictable, encouraging continued investment in the country.

An independent economic analyst, Mr Oscar Mkude, said such reports as the one by the RMB need to be taken seriously because they portray the country’s image to the outside world and inform investors on where they should invest their money.

Mr Mkude added that such assessments are highly important for investors, who often use them as a reference to justify investing in a particular country; therefore, while the 12th position is positive, further changes are needed to improve the ranking even more.

“For the country to achieve further growth, the business environment must continue to improve. Many investors want to ensure that they can both invest and withdraw their capital easily; with such access, more investors will be attracted,” he said.

According to him, long-term investors seek quick decisions. Among the challenges facing the government is the prolonged negotiation process. As seen in the LNG project, investors are ready, but repeated delays in negotiations can discourage them.

He said Tanzania has a large, young population seeking employment, and there is a need to unlock the available potential. “Let’s move beyond investors with mere intentions and work towards turning those intentions into tangible results so that we can see real benefits.”