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WHY TANZANIA IS ONE OF THE BEST DESTINATIONS FOR INVESTMENT IN AFRICA.

WHY TANZANIA IS ONE OF THE BEST DESTINATIONS FOR INVESTMENT IN AFRICA.

INTRODUCTION

The paradox of Africa is nothing new to world observers. A continent blessed with immense natural resources backed up with adequate human capital still struggles with underdevelopment and poverty due to its inability to utilize its optimum potential.

However, the future of the African economy indicates hope due to the increasing acceptance of technology and favorable government policies to boost economic growth and development. 

Sub-Saharan African countries have seen the need to enhance industrialization and productivity by making their environment conducive for investment.

WHAT TO KNOW ABOUT THE ECONOMY OF TANZANIA

 

Tanzania is a Sub-Saharan East African country known for its massive wilderness areas. It can also be described as a haven of tourism because of the heavy presence of exotic wildlife. 

Kilimanjaro National Park (Where Africa’s largest mountain is located) and Serengeti National Park are the major game reserve centers in Tanzania which show the potential and strength of tourism in this country. 

Tanzania was initially known to be a state-owned economy but has now fully transitioned itself as a mixed economy because the government still interferes with the telecommunications, banking, mining, and energy sectors.

Regarded as the second-largest economy in east Africa and seventh largest in Sub-Saharan Africa after the rebasing of the GDP in 2019, the agricultural sector dominates the GDP of Tanzania employing over 60% of the labor force. 

Other sectors of the economy such as mining, tourism, services, and manufacturing are beginning to gain more ground, and the unemployment rate is about 2.2%. It is important to note that Tanzania has constantly maintained a steady high growth rate with GDP growth averaging 6% to 7% per year since the last decade. 

However, the GDP growth rate declined from 6.8% in 2019 to 2.0% in 2020 and this was due to the negative impact of COVID 19. Economists forecast that the GDP is expected to pick up and rise to 3.6% in 2021 and 6.1% in 2022.

Furthermore, due to its sustained GDP growth rate, Tanzania moved from the level of a low-income country to a lower-middle-income country in 2020 when the Gross Domestic Income (GNI) rose from $1,020 in 2019 to $1,080 in the following year. 

This was attributed to the improvement in macroeconomic policies and natural endowment in the country. The poverty rate significantly declined from 60% in 2007 to 26.4% in 2018 but about 13 million people are still living below the poverty line. 

This indicates that there is a presence of economic growth which necessarily does not translate to economic development. The inflation rate also stood at 3.3% in 2020, a 0.2% decrease from the previous year, and this was caused by a steady decline in food prices and a reduction in production and consumption.

The industrial sector of the economy accounts for 25% of the GDP with a total of about 6% employed in that sector. Mining happens to be an important player in the industrial sector due to the presence of gold reserves, the fourth largest in Africa. Other minerals such as copper and nickel are also extracted. 

With the increase in real estate and infrastructure projects, construction indirectly contributes to the GDP. The service sector also contributes 37.9% to the GDP, employing a labor force of 28%. With the rise in the sub sectors such as tourism, telecommunications, and financial and insurance activities, the service sector has impacted the economy positively. 

In 2018, the total contribution of wildlife alone was 10.4% and 10% of jobs were created by tourism alone.

KEY FACTORS THAT ENCOURAGE INVESTMENT

Investors are only encouraged to put their money in places that would give them positive returns and they often look at indicators especially regarding the countries of interest and what they have to offer. 

The better the ease of doing business in a particular country, the higher the chances of winning over investors.

  • Political Stability: A country that does not have a stable political climate will not easily attract investors due to the high risks attached to such a venture. Sub-Saharan Africa has been negatively affected by poor government institutions. For example, Zimbabwe had a failed institution and this was shown by Robert Mugabe winning a national lottery in a period of hyperinflation. Their economy was affected with an unemployment rate of 94% as of 2009. Many African countries fail because their government institutions do not create an incentive to save, invest and innovate and the consequences of these include civil wars, mass displacements, famines leading to underdevelopment. Corruption, which is common among third world countries also stands in the way of economic progress through investment.
  • Exchange Rates: Investors are usually encouraged when the exchange rate of the host country is weak. This is because it would be cheaper for them to set up large enterprises. The demerit is that countries with high exchange rates tend to experience irregularities in the strength of their currency and this could discourage investment.
  • Interest Rates: Interest rates are determined by the level of savings in a particular economy. If savings is high among the people of that economy, the interest rate is bound to rise and this will encourage both savers and investors. However, if savings are low, usually caused by the level of inflation, the interest rate will not be encouraging to investors.
  • Transport and Infrastructure: Investors are encouraged when infrastructure is well laid out. This would reduce the production costs of the commodity. The transport network is also very significant to the economic development of a country. With proper and adequate road and rail line networks, sustained supply of power, and other basic amenities, investors will be willing to take the risk.
  • Market Size: The major aim for any business enterprise is to make a profit and profit comes when the revenue of the producer is more than the cost of production. What majorly determines that is the size of the market. If the size of the market for that commodity being produced is high, then investors would look into that market. No one wants to produce goods or services that do not have a large market share.

WHAT TANZANIA HAS TO OFFER AND WHY IT IS ONE OF THE BEST DESTINATIONS FOR INVESTMENT

Tanzania is ranked 7th among the top countries in Africa to invest in and 10th on the list of growing tourism markets in Africa. Due to the abundance of natural resources in Tanzania, investors are attracted to the opportunities the country has to offer. 

Tanzania is well situated geographically and many countries depend on their ports for the importation and exportation of goods. Furthermore, the fertility of the land makes it possible for farm products to be well produced and tourism is at its peak in this environment.

More recently , the government of the united republic of Tanzania have gone big on enacting laws that favour the influx of foreign investments in the countries. So many processes that proved difficult for foreign investors have simplified and digitalised. 

Tanzania remains at the moment one of the best if not the best African country to invest.

Tourism in Tanzania is a major sector in the economy and has a strong impact on the GDP in terms of revenue and job creation. The sightseeing attractions that Tanzania has to offer have attracted over  45,000 foreign tourists and 2,000 local tourists annually. The major tourist centers include:

  • Mount Kilimanjaro: The highest mountain peak found in Africa is about 5895 meters tall and it is famously called The Roof of Africa. This mountain is well known for being the mountain with all world climatic conditions and the only free-standing snow-capped mountain in the tropics.
  • Shengena Peak: This mountain is estimated to be about 2,463 meters. Found in the North West of the Chrome Natural Forest Reserves, this mountain is the second highest peak in the Kilimanjaro region. From the Shengena peak, tourists can have spectacular views of Mkomazi National Park, the North Pare Mountains, Taita Hills and even Mount Kilimanjaro and Mount Meru in Arusha
  • The Rau Forest: This is located 3 kilometers around the southeastern parts of Moshi close to Mount Kilimanjaro. The presence of unique tree species including the largest Milicia excelsa (Mvule Mkuu) species in Africa, Oxystigma mso can rarely be found elsewhere.
  • Mkomazi National Park: Located in the northeastern part of Tanzania and close to the borders of Kenya. It became an established game reserve in 1951 before officially becoming a National park in 2006. This national park is an important home for Savannah wildlife where the majority of species found are the rare Black Rhinos, bovine, and few carnivores.

In 2019, the contribution of tourism to the GDP of Tanzania was a total of $7.1 billion and between 2000 and 2019, the impact of tourism on the GDP of Tanzania grew substantially from $0.8 billion to $7.1 billion leading to an increasing annual rate that reached a maximum of 39.93% in 2001 and then decreased to 6.94% in 2019.

Shikana Group is one of the leading investment firms in East Africa offering legal and investment advisory services to potential investors. Strategic planning is one of their core strengths in order to optimize efficiency and reduce cost.  

With over 15 years of operation, Shikana Group has a vast knowledge on the economic sectors in East Africa such as mining, finance, real estate and tourism.  Tanzania has a lot to offer in terms of tourism and exotic wildlife. 

In over forty years of the country’s independence, there has been no case of civil unrest caused by the government which is a good sign for the economic growth of the nation. With the right investment in tourism with Shikana Group, Tanzania has the potential to be the top country in Africa in terms of economic development. Take the right step to invest in Tanzania today with Shikana Group. 

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