Economic Overview of Tanzania
Although Tanzania’s economy is one of the poorest in the world, it has one of the fastest-growing economies in the East African Community. The region’s GDP has consistently averaged above 6.4% for the past seven years, with a 7.8% GDP in 2017. Much of the growth is due to Tanzania’s steady gold production, agriculture, and tourism.
The rapid development is also because of the fast growth rate of sub-activities such as construction, transport and storage, trade and retail, financial jeweler and insurance, power generation, and mining.
Tanzania is one of the fastest-growing countries in the East African region. According to the 2015 Ibrahim index of African governance, Tanzania’s Government ranks 18 out of 54 countries.
Also, it is a member of the World Bank’s 7% club, which is composed of countries forecasted to achieve a GDP of 7% in the next decade. The country recorded a 7% GDP in 2014 and projected significant growth in 2017 with a 7.8% GDP.
Bilateral and Multilateral treaties
Tanzania is a South African Development Community (SADC) member, the East African Community (EAC), the African, Caribbean, and Pacific Group of States.
Also, it is a member of the World Trade Organization and the African Union. Tanzania has double taxation treaties with Canada, Denmark, Finland, India, Italy, Norway, South Africa, Sweden, and Zambia.
The country has entered into Bilateral investment treaties with Denmark, Egypt, Finland, Germany, Italy, the Republic of Korea, the Netherlands, Sweden, Switzerland, and the United Kingdom.
Countries with which negotiations are continuing to include Zimbabwe, United Arab
Emirates, Russia, Seychelles, Mauritius, Egypt, Yugoslavia, Oman, and South Korea
Non-residents Tanzania-sourced income is subject to income tax. A corporation is a resident if it incorporates under Tanzania’s Companies Act. Individuals are residents if who have spent more than 183days of the tax year in Tanzania.
Income tax in Tanzania is chargeable under the provisions of the Income Tax Act (ITA). By the ITA, the total income of a corporation subjected at a tax rate of 30%. Companies in export processing zones are exempt from income tax and withholding tax for the first ten years.
Capital Gains Tax
Under the ITA, Capital Gains Tax (CGT) is payable at realizing any investment asset. Investment assets include shares and securities in a corporation and interest in land and buildings. The rate varies depending on the legal nature and residency status of the seller.
On the other hand, a resident Tanzanian corporate entity must pay a CGT rate of 30 per cent on the gain made from either asset’s sale. Also, a non-resident individual is obliged to pay a CGT rate of 20 to remove Tanzanian support.
Investment opportunities in Tanzania
Tanzania Investment Centre, also known as TIC, is the principal agency responsible for coordinating, promoting, and facilitating Tanzania investment.
The centre aims at creating and maintaining a conducive climate for investors in the private sector. It is also responsible for supporting the growth of entrepreneurs and Small and medium-Sized Enterprises (SME’s).
The centre also monitors Tanzania’s business environment and the growth of foreign direct investments in the country.
Types of Investments supported by TIC
Locally owned investments
The industrial sector.
The Tanzania Investment Centre is responsible for connecting investors with the TIC staff immediately. The center also arranges appointments for investors within 24hours, and preparation and confirmation of itinerary for potential investors in 3 days.
The commercialization of the agriculture sector in Tanzania saw 30,000 ha of land put under commercial farming, which increased the sugar production by 150,000 megatons (MT).
It has also converted 83,000 ha of previously underutilized land into commercial farmland and saw the expansion of 330,000ha of irrigation land under small-scale farmers, which increased rice production by 290,000 MT.
The commercialization has secured two lands title deeds of the Mkulazi farm with 63,227ha and the Bagamoyo farm of 20,374ha. Tanzania investment center proposed an agricultural hub at Mkulazi as part of the project set aside for implementation during the current five-year national development plan. The farm is open for investments and offers easy asses to the Dar es salaam.
The TIC has improved maize marketing through Collective Warehouse Based Marketing Schemes and increased maize production by 100,000MT. Tanzania’s government has partnered with the private sector and donor community to develop profitable and sustainable Agribusiness across the high-potential southern region of Tanzania.
Investment opportunities for investors in the sector include the cultivation of major cash crops like coffee, tea, and cotton and food crops such as maize, rice, and wheat.
The processing and marketing of countries’ cash crops is also an investment opportunity.
Tanzania has a conducive environment and climate for agriculture. The weather is predominantly tropical with bimodal and inimical rainfall patterns. The high irrigation potential of the region has facilitated agriculture investments. The country provides almost 30 Million ha of land suitable for irrigation. Lakes, rivers, and underground water are the sources of water for irrigation.
Availability of arable land. Out of the 44million ha in Tanzania, only 24% of the land is currently under cultivation, thus providing abundant investment opportunities and sustainable agriculture for future investors.
In Tanzania, the number of livestock reared on commercial farms is currently 1%. The region’s four slaughterhouses are insufficient to meet the growing demand for hygienic and quality meat.
The locally processed meat amounts to 1%, with a vast quantity of processed meat exported from Kenya. Tanzania imports 700MT of quality meat annually, with demands for meat raising. A 40% export tax on unprocessed hides creates significant competitive advantages for local firms and investors.
The meat demand in Tanzania will triple in 2030; therefore, investors can supply Tanzania’s high demand for meat. The region has a capita consumption rate of 12Kg per annum.
Investors can partner with the National Ranching Company to produce various livestock, including beef and dairy cattle. Also, investment opportunities are in the processing of meat, milk, hides, and skins.
Tanzania five-year development plan, a merger of two development plans, was built on three pillars; Industrialization, Human development, and implementation effectiveness.
The manufacturing sector falls under the industrialization pillar. The 5th phase of government focuses on the establishment of fisheries and livestock product processing plants.
It also focuses on the formation of industries to produce mass consumables such as clothes and food. The Industry will create massive job and investment opportunities for the people.
Investment opportunities include the potential for direct exports to the USA and EU under the AGOA and EBA, respectively. Also, there is the opportunity to export value addition to China and India.
Other manufacturing industries with investment opportunities for investors include processing dairy products, textiles, clothing, leather products, chemical fertilizers, cement, and steel.
Tanzania membership to SADC and EAC provides foreign or domestic investors with access to a market of over 30million people.
In between 2010 and 2015, Tanzania doubled in value from $0.64bn to $1.28bn. Tanzania mining sectors produce Gold, Gemstone, appetite, and tanzanite.
Tanzania Gold production is currently at 40 tons a year. Gemstones in eastern and western belts cutting from the Kenan northern border to the southern border.
Investment opportunities in the sector include oil and gas investment projects. The country is estimated to have over 56 trillion cubic feet of recoverable natural gas.
Investment opportunities are present in Gemstone carving, polishing, and jewelry making, essential in the industries.
Tanzania has 16 national parks, 32 game reserves, with 25% of the region dedicated to wild parks and game reserves. Tanzania’s critical tourist circus is The Serengeti national park of the northern circuit, the Selous game reserve at the southern course, and beach tourism in the coast circuit.
Investment opportunities include constructing hotels and lodges, recreational facilities like lake cruising, deep-sea diving, and amusement parks. Other options are investments in the tour operation and transport service and eco-tourism.
The government of Tanzania encourages the private sector to participate in aquaculture development. Tanzania is committed to the maintenance and development of the appropriate legal and administrative framework for aquaculture development.
The aquaculture investment opportunities are at Mafia Island, with around 3000ha suitable for shrimp farming. Investors can invest in maricultural and keep culture species, including mad crabs, oysters, and scallops.
Investments opportunities are also available in freshwater fishing and freshwater fish species, including Tilapia and African catfish. The production of formulated fish feed is also an investment option.
They include exemptions of import duty and tax on project capital goods, 75% tax exemption on deemed capital goods, and capital allowance in agriculture, mining, hotel fish farming, and tourism services.
These non-fiscal incentives include the automatic immigration quote,
protection against non-commercial risks,
protection against nationalization and confiscation, and an unconditional transferability of funds.
Strategic investors status
Investors who seek additional investment incentives from the government for projects of significant impact on society seek strategic investors’ status.
The project awarded should create employment opportunities and introduce new and innovative technology.
According to the works investment report 2015, Tanzania investment inflow receives $2.146 billion in Foreign Direct Investments (FDI). Its neighboring East African Communities received as follows: Kenya $989 million, Rwanda and Burundi $268 million, and $32 million, respectively.
Many countries with registered investments in Tanzania increase the number of investment projects, enhancing the investment value, which creates job opportunities in the country, placing the country on an upward trend.
At the 5th Annual Investment Meeting (AIM), held in Dubai, voted Tanzania Investment Centre the best investment project in 2014 in the east, central and sub-Saharan Africa.
Should You invest in Tanzania?
Tanzania is a peaceful and politically stable country that provides investors with a conducive environment for operation. The government has no history of civil wars, ethical conflicts, or internal chaos. This solidifies the country’s political stability especially when compared to its neighboring countries in Sudan and Congo.
The political stability in the country should give investors’ confidence while eliminating any shred of uncertainty that could weigh heavy on a given company’s profitability.
The county is a member of the world bank’s 7% club, which means Tanzania’s GDP can consistently rise annually. Also, Tanzania boosts national resources, including minerals and precious stones, e.g., Tanzanite, Gold. Resources such as forests and physical features enable investment in the tourism sector.
Its attractive fiscal investment attracts investors and guarantees against initialization and expropriation. This attraction has garnered the country a total of 23 bilateral investment treaties signed with different countries.
The country’s strategic geographic location provides access to markets catering to investors’ needs and acts as a gateway to six landlocked countries: Uganda, Rwanda, Burundi, DR condo, Zambia, and Malawi.
The government has the presence of three major ports in Dar es Salaam, Tanga, and Mtwara. These ports have solidified the country’s strategic position, allowing the state to access bigger markets such as Kenya. Not only that but the government has made efforts to develop the country’s social and economic infrastructure.
So, should you invest in Tanzania? Yes, if you are willing to cope with the substandard infrastructure in various regions in the country. Also, the country has a developing private sector which can make it challenging for new investors. However, the business opportunities that the country offers will prove worthwhile in the long run.
Are You Looking to Invest in Tanzania?
One important aspect of investing that cannot be overlooked is skilled labour. Tanzania has a huge working population. However, it can be challenging for new companies to attract and retain top talent.
For this reason, many organizations choose to work with a staffing and recruitment firm to help them attract top talent. Flexi Personnel is one such company with a track record of success in helping companies attract highly skilled individuals.
We would like to work with you on your next project. Feel free to contact us at Flexi Personnel today for this and other HR management solutions.