The United Republic of Tanzania achieved lower-middle income country status in July 2020, which reflects two decades of sustained macroeconomic stability. The country’s rich natural endowments and strategic geographic position fostered a diverse economy resilient to external shocks. Tanzania’s economy fared better than many regional peers during the COVID-19 pandemic, but still suffered significant losses due to decline in tourism and related services. The pandemic also compounded preexisting financial sector issues, and private sector credit growth slowed while nonperforming loans continue to be high.
The Government of Tanzania welcomes foreign direct investment. However, over the past several years there was a marked deterioration in the business and investment climate. Tanzania ranked 141 out of 190 countries on the 2020 World Bank Ease of Doing Business Report, the lowest among its regional peers. According to the report, the biggest challenges lie in tax administration, opening and closing businesses, and trading across borders. In recent years, aggressive and arbitrary tax collection policies targeted foreign companies and individuals, and labor regulations make it difficult to hire foreign employees, even when the required skills are not available within the local labor force. Corruption, especially in government procurement, privatization, taxation, and customs clearance remains a concern for foreign investors, though the government has prioritized efforts to combat the practice.
On March 19, 2021, President Samia Suluhu Hassan became the sixth President of the United Republic of Tanzania, following the death of President John Pombe Magufuli. In her first months in office, President Hassan promised reforms to improve the business climate, and identified attracting foreign investment as a key priority. The Government of Tanzania has signaled that new Investment Policy and Investment Promotion legislation as well as changes to prevailing tax and labor regulations will be adopted in 2021. Hassan’s government is also engaging in dialogue with stakeholders including private sector organizations and development partners to identify measures to improve the business climate and win back investor confidence. There remain significant legislative obstacles to foreign investment such as the Natural Resources and Wealth Act, Permanent Sovereignty Act, Public Private Partnership Act, and the Mining Laws and Regulations.
Sectors traditionally attracting U.S. investment include infrastructure, transportation, energy, mining and extractive industries, tourism, agriculture, fishing, agro-processing and other manufacturing. Other opportunities exist in workforce development, microfinance solutions, technology, and consumer products and services.
|TI Corruption Perceptions Index||2020||94 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2020||141 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2020||88 of 131||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country (historical stock positions)||2020||USD 1,510 Million||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2019||USD 1,080||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|
6. Financial Sector
Capital Markets and Portfolio Investment
Tanzania’s Dar es Salaam Stock Exchange (DSE) is a self-listed publicly owned company. In 2013, the DSE launched a second-tier market, the Enterprise Growth Market (EGM) with lower listing requirements designed to attract small and medium sized companies with high growth potential. As of March 1, 2021, DSE’s total market capitalization reached USD 6.7 billion, a 36.1 percent drop from December 2017 figure, with the drop is primarily attributed to the effects of the COVID 19 pandemic. The Capital Markets and Securities Authority (CMSA) Act facilitates the flow of capital and financial resources to support the capital market and securities industry. Tanzania, however, restricts the free flow of investment in and out of the country, and Tanzanians cannot sell or issue securities abroad unless approved by the CMSA.
Under the Capital Markets and Securities (Foreign Investors) Regulation 2014, there is no aggregate value limitation on foreign ownership of listed non-government securities. Only foreign individuals or companies from other EAC nations are permitted to participate in the government securities market. Even with this recent development allowing EAC participation, foreign ownership of government securities is still limited to 40 percent of each security issued.
Tanzania’s Electronic and Postal Communications Act 2010 amended in 2016 by the Finance Act 2016 requires telecom companies to list 25 percent of their shares via an initial public offering (IPO) on the DSE. Of the seven telecom companies that filed IPO applications with the CMSA, only Vodacom’s application received approval.
As part of the Mining (Minimum Shareholding and Public Offering) Regulations 2016, large scale mining operators were required to float a 30 percent stake on the DSE by October 7, 2018. Currently, no mining companies are listed on the DSE.
Money and Banking System
Tanzania’s financial inclusion rate increased significantly over the past decade thanks to mobile phones and mobile banking. However, participation in the formal banking sector remains low. Low private sector credit growth and high non-performing loan (NPL) rates are persistent problems. The NPL ratios further deteriorated with the COVID 19 pandemic.
According to the IMF’s most recent Financial System Stability Assessment, Tanzania’s bank-dominated financial sector is small, concentrated, and at a relatively nascent stage of development. Financial services provision is dominated by commercial banks, with the ten largest institutions being preeminent in terms of mobilizing savings and intermediating credit. The report found that nearly half of Tanzania’s 45 banks are vulnerable to adverse shocks and risk insolvency in the event of a global financial crisis. (Source: https://www.imf.org/en/Publications/CR/Issues/2018/12/04/United-Republic-of-Tanzania-Financial-Sector-Assessment-Program-Press-Release-Staff-Report-46418 )
The two largest banks are CRDB Bank and National Microfinance Bank (NMB), which represent almost 30 percent of the market. The only U.S. bank is Citibank Tanzania Limited. Private sector companies have access to commercial credit instruments including documentary credits (letters of credit), overdrafts, term loans, and guarantees. Foreign investors may open accounts and earn tax-free interest in Tanzanian commercial banks.
The Banking and Financial Institution Act 2006 established a framework for credit reference bureaus, permits the release of information to licensed reference bureaus, and allows credit reference bureaus to provide to any person, upon a legitimate business request, a credit report. Currently, there are two private credit bureaus operating in Tanzania – Credit Info Tanzania Limited and Dun & Bradstreet Credit Bureau Tanzania Limited.
Foreign Exchange and Remittances
Tanzanian regulations permit unconditional transfers through any authorized bank in freely convertible currency of net profits, repayment of foreign loans, royalties, fees charged for foreign technology, and remittance of proceeds. The only official limit on transfers of foreign currency is on cash carried by individuals traveling abroad, which cannot exceed USD 10,000 over a period of 40 days. Investors rarely use convertible instruments.
The Bank of Tanzania’s new Bureau de Change regulations with stringent requirements came into force in June 2019. The regulations include a minimum capital requirement of TZS 1 billion (Approx. USD 431,000) and a non-interest-bearing deposit of USD 100,000 with the Bank of Tanzania (the regulator). Regulations also require the business premises to be fitted with CCTV cameras, and new stringent procedures and policies for detecting and reporting money laundering and terrorism finance. The Bank of Tanzania closed more than ninety percent of all forex shops in the country, stating that they did not pass inspection for compliance with these requirements. In response, commercial banks and Tanzania Posts Corporation were licensed to provide forex services.
The value of the Tanzanian currency, the shilling, is determined by a free-floating exchange rate system based on supply and demand in international foreign exchange markets. However, Interbank Foreign Exchange Market (IFEM) and the rates quoted by commercial banks and exchange bureaus often vary considerably. There are anecdotal reports that the Bank of Tanzania has artificially fixed the exchange rate.
The last Article IV Executive Board Consultation was on March 18, 2019. The GoT did not consent to publication of the report and discussions for an IMF staff monitored program are stalled.
There are no recent changes or known plans to change investment remittance policies that either tighten or relax access to foreign exchange for investment remittances.
Sovereign Wealth Funds
Tanzania does not have a sovereign wealth fund.
Tanzania has laws and institutions designed to combat corruption and illicit practices. It is a party to the UN Convention against Corruption, but it is not a signatory to the OECD Convention on Combating Bribery. Although corruption is still viewed as a major problem, former President Magufuli’s focus on anti-corruption translated into an increased judiciary budget, new corruption cases, and a decline in perceived corruption, especially low-level corruption. This improvement is partly attributed to instituting electronic services which reduce the opportunity for corruption through human interactions at agencies such as the Tanzania Revenue Authority (TRA), the Business Registration and Licensing Authority (BRELA), and the Port Authority.
Tanzania has three institutions specifically focused on anti-corruption. The Prevention and Combating of Corruption Bureau (PCCB) prevents corruption, educates the public, and enforces the law against corruption. The Ethics Secretariat and its associated Ethics Tribunal under the President’s office enforces compliance with ethical standards defined in the Public Leadership Codes of Ethics Act 1995.
Companies and individuals seeking government tenders are required to submit a written commitment to uphold anti-bribery policies and abide by a compliance program. These steps are designed to ensure that company management complies with anti-bribery polices.
The GoT is currently implementing its National Anti-Corruption Strategy and Action Plan Phase III (2017-2022) (NACSAP III) which is a decentralized approach focused on broad government participation. NACSAP III has been prepared to involve a broader domain of key stakeholders including GoT local officials, development partners, civil society organization (CSOs), and the private sector. The strategy puts more emphasis on areas that historically have been more prone to corruption in Tanzania such as oil, gas, and other natural resources. Despite the outlined role of the GoT, CSOs, NGOs and media find it increasingly difficult to investigate corruption in the current political environment.
The GoT’s anti-corruption campaign affected public discourse about the prevailing climate of impunity, and some officials are reluctant to engage openly in corruption. Some critics, however, question how effective the initiative will be in tackling deeper structural issues that have allowed corruption to thrive.
Transparency International (TI), which ranks perception of corruption in public sector, gave Tanzania a score of 38 points out of 100 for 2020 and 37 points for 2019. The Afrobarometer report estimates that between 2015 and 2019 the corruption increase in the previous 12 months was only 10% in Tanzania, the lowest in Africa. While for the same period, 23% of the respondents voted that Tanzania is doing a bad job of fighting corruption, again the lowest in Africa. 32 percent of the respondents also noted that business executives are corrupt, up from 31 percent in 2015.
Resources to Report Corruption
The Director General
Prevention and Combating of Corruption Bureau
P.O. Box 4865, Dar es Salaam, Tanzania
Tel: +255 22 2150043
Legal and Human Rights Centre
P.O. Box 75254, Dar es Salaam, Tanzania
Tel: +255 22 2773038/48
12. U.S. International Development Finance Corporation (DFC) and Other Investment Insurance and Development Finance Programs
In 1996, the U.S. Overseas Private Investment Corporation (OPIC), the predecessor agency to the U.S. International Development Finance Corporation (DFC), signed an incentive agreement with the GoT. The Ministry of Foreign Affairs has in principle agreed that the existing OPIC agreement will allow for the International Development Finance Corporation (DFC) to operate in Tanzania. The current portfolio includes projects in agriculture, energy, health care, micro-finance, and logistics. In addition, the DFC inherits USAID’s Development Credit Authority (DCA)’s active portfolio including guarantees to several banks to encourage lending to small and medium sized enterprises.
Tanzania is also a member of the World Bank’s Multilateral Investment Guarantee Agency (MIGA), which offers political risk insurance and technical assistance to attract FDI. 13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
|Host Country Statistical source*||USG or international statistical source||USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other|
|Host Country Gross Domestic Product (GDP) (USD)||2019||$63 billion||2019||63.177 billion||www.worldbank.org/en/country|
|Foreign Direct Investment||Host Country Statistical source||USG or international statistical source||USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other|
|U.S. FDI in partner country (USD, stock positions)||N/A||N/A||2019||$1,510 million||BEA data available at
|Host country’s FDI in the United States (USD, stock positions)||N/A||N/A||2019||$1 million||BEA data available at
|Total inbound stock of FDI as % host GDP||N/A||N/A||2019||1.7%||UNCTAD data available at
* Source for Host Country Data: host country data not publicly available.
Table 3: Sources and Destination of FDI
There is no data for Tanzania in the IMF’s Coordinated Direct Investment Survey (CDIS).
According to the Bank of Tanzania, the top sources for inward foreign investment into Tanzania are South Africa, Canada, Nigeria, Netherlands, United Kingdom, Mauritius, Kenya, United States, Vietnam, and France.
Data on outward direct investment is not available.
Table 4: Sources of Portfolio Investment
There is no data for Tanzania in the IMF’s Coordinated Direct Investment Survey (CDIS).