Why investors are attracted by these five sectors in Tanzania

Dar es Salaam.  The manufacturing sector in Tanzania led in attracting capital investments over the past five years.

According to the Ministry of Finance’s State of the Economy reports from 2019 to 2023, the Tanzania Investment Centre (TIC) registered projects with cumulative capital valued at over $17.44 billion, with the manufacturing sector commanding 44 percent of the sum.

The commercial building sector attracted $2.76 billion, making it the second-largest sector for investment.

The transportation sector followed closely with $2.58 billion, while agriculture attracted $1.63 billion.

Despite facing challenges during the Covid-19 pandemic, the tourism sector managed to attract $715 million in cumulative capital.

As analysed by The Citizen, the industrial sector’s robust performance is attributed to several factors, including the growing domestic demand for industrial products, favourable government policies and strategic efforts to boost local production.

A micro and macroeconomics expert from the University of Dar es Salaam Business School, Mr Godsaviour Christopher, highlighted the government’s role in this growth.

Read: Key sectors driving employment growth in Tanzania

He said that the industrialisation policy started during the fifth government under the late President John Magufuli, noting that the policy has been carried forward as the government’s continued support, especially in reducing the import of goods, has been crucial.

“With the dollar shortage crisis being prevalent since last year, the government has been finding ways to improve domestic production and reduce the amount of dollar reserves spent on imports. There have also been initiatives to improve the value of exported goods and boost job creation,” he said.

Mr Christopher also highlighted that inflation in Tanzania is often imported, and strengthening domestic industries could protect the country from future economic shocks.

Prof Jehovaness Aikaeli of the University of Dar es Salaam provided insights into why the manufacturing sector has attracted more capital than others.

“Investors direct their capital into sectors that promise higher and quicker returns.  These investors are business people who look for profitability,” he said.

Despite agriculture being a major sector involving a large portion of the population, it has not attracted as much new capital.

Read: Booming sectors: Where investors put their money 

Prof Aikaeli suggested that for Tanzania to benefit from significant investments in manufacturing, there needs to be a linkage with sectors impacting many people’s lives, such as agriculture.

He said as Tanzania continues to develop its industrial base, linking these industries with other vital sectors like agriculture could further enhance economic growth and stability.

”We need these industries to be focused on inputs, processing, or value addition.  When industries boost productivity, the economy will grow faster.”

Dr Daudi Ndaki of Mzumbe University said investors conduct thorough feasibility studies and consider the country’s political stability before committing capital.

He added that sectors that have shown the most growth are those that correlate with population growth, such as real estate in commercial buildings and transportation.

The Tanzanian government has played a crucial role in creating an enabling environment for the manufacturing sector.

Dr Ashatu Kijaji said when she presented the 2024/25 Industry and Trade budget that the manufacturing sector contributed 7 percent to gross domestic product in 2023, a slight decrease from 7.1 percent in 2022.

However, the sector grew by 4.3 percent in 2023, up from 4.2 percent in 2022.

The government’s initiatives to encourage local production and reduce dependency on imports have also fuelled the sector’s growth.

The preference for locally produced goods among Tanzanians has spurred increased production, thereby attracting more investments.