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Tanzania becomes attractive to foreign investors

2016-11-29 09:01:51

By Paul Kibuuka

A few months ago, we launched our maiden Annual Tanzania Investment Attractiveness Survey at Isidora & Company Advocates. It’s a must-attend event for anyone keen on initiating businesses, projects or investment activities in Tanzania.

The survey examines the attractiveness of Tanzania as an investment destination for foreign direct investors. As well, the survey is the result of analysis from over 200 foreign business executives polled from a broad spectrum of industry sectors in the country.

So, what is the consensus?

Tanzania is becoming increasingly more attractive than in previous years to foreign investors, and opinions are becoming more positive due to improved socio-economic growth and the discovery of huge reserves of natural gas that has attracted the world’s oil and gas majors.

They agreed that Tanzania is one of the fastest growing economies in the world, with the highest return on investment. And, as Tanzania makes efforts to continually advance its society through political reform, macroeconomic stability and social development, these trends are expected to improve markedly.

Foreign Direct Investment (FDI) flows have strongly increased in the last decade or so, and it’s expected to get even better. Anticipated FDI inflows are expected to hit the US$3 billion mark by the end of 2015.

The escalating population growth, rapid growth of the middle class, increased investments in oil and gas exploration, power, mining, and manufacturing, among others, are seen as the key drivers of the anticipated increase in FDIs.

According to the 2012 Population and Housing Census (PHC), Tanzania has 44.9 million people and this makes for an increased consumer market base demanding to be serviced with new goods, products and services.

These factors – and the country’s strategic location that provides access to the Indian Ocean and to the neighbouring landlocked countries – have opened up enormous opportunities for foreign direct investors, making Tanzania an investment haven.

Now is a good time to invest in Tanzania, and while the country might be enjoying its attractiveness to foreign investors from countries, such as, the U.S, U.K, Brazil, Norway, Japan, China and India, there is still a lot of work that needs to be done.

Notwithstanding the growth trends, Tanzania still attracts less than 4% of FDIs to Africa. This is relatively low when viewed from a continental perspective.

The reasons include bureaucratic red tape, corruption and an inadequate level of education and skills. More importantly, Tanzania still suffers a major infrastructure deficit. For example, the country has experienced a major setback through the crisis of intermittent electric power supply that has clouded Tanzania for several decades.

A serious commitment towards providing a lasting solution to the problem is yet to be seen. Business and industry cannot operate effectively without electricity; thus, foreign-owned businesses that would have otherwise prospered in the country have to turn elsewhere.

But despite these shortcomings, and compared with all of your other choices, Tanzania is still the next best place to invest your money today.

Interestingly, former President Jakaya Kikwete shared the same view when, during a U.S - Africa Business Forum held in Washington D.C., he said, 

"Investing in Tanzania is a right decision to make…I welcome you to look at Tanzania seriously and come and visit with us, learn more, and set up your business there."

Paul Kibuuka is the Managing Partner of Isidora & Company Advocates. Email: Twitter: @isidoralaw

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