Guidance

Overseas business risk: Tanzania

Published 24 August 2023

General overview

Tanzania’s economy is the second largest in East Africa, with an average 6.3% growth rate over the decade to 2020. It achieved Lower Middle-Income Country (LMIC) status in July 2020 (World Bank classification). Tanzania’s economy weathered COVID-19 well with the World Bank reporting growth of 2% in 2020, rebounding to 4.3% in 2021 and forecast to return to 6.1% in 2024. A relatively diversified export basket helped mitigate some of the economic shock of COVID-19, and a period of proactive re-engagement with the International Financial Institutions helped with an injection of external finance.

More generally Tanzania’s macro-economic stability is strong compared with other countries in the region - inflation has been low, and external debt is only 41% of GDP. Favourable geographic location, rich natural endowments and rapid urbanisation create opportunities for structural transformation in Tanzania. Recent growth has been underpinned by public investments in infrastructure and a rebound in tourism receipts. Large gas reserves create further potential.

Recent economic shifts, including global inflationary pressure and rising interest rates have had a noticeable impact on Tanzania.  Higher global interest rates and rising import costs have put the Tanzanian Shilling’s stability against the US Dollar under pressure and resulted in a shortage of foreign exchange and a small parallel market.  However, the government has begun a gradual depreciation and if a new equilibrium rate is established should reduce the Dollar shortage.

While economic growth has been impressive it has not been inclusive. Headline poverty rates remain unchanged since 2010 at around 50% of the population. In 2020 Tanzania ranked at 152 out of 174 countries on its Human Capital Index score. Tanzania’s tax revenue performance is below the average for Sub-Saharan Africa. In addition, population growth is high (3.2% per year) and youth unemployment is a growing problem.

Tanzania is prioritising attracting Foreign Direct Investment (FDI), seeing through to completion a suite of major national infrastructure projects, initiating a programme to boost agricultural productivity, and taking steps to improve the business environment.

Political

The United Republic of Tanzania was formed in 1964, following the joining of Tanganyika and Zanzibar. It is a presidential republic, in which the president is Head of State and Head of Government. The role of president has significant formal and informal power vested in it as a result of Tanzania’s constitution and political culture. The current incumbent, President Samia Suluhu Hassan, has been in office since 19 March 2021. The islands of Zanzibar have their own semi-autonomous government, with its own parliament and president, which holds responsibility for the majority of issues with the exception of foreign and defence policy. The current President, Dr Hussein Mwinyi, has been in office since 3rd November 2020.

Tanzania introduced multi-party democracy in 1992 and holds parliamentary and presidential elections every five years. The next such elections are due to take place in late 2025. Tanzania has been continuously governed by Chama Cha Mapinduzi (CCM) since independence, though Zanzibar is currently governed through a power sharing agreement (The Government of National Unity) between CCM and the ACT-Wazalendo party. Zanzibar has a long history of disputed election results, which have sometimes resulted in political violence.

Tanzania was rated 21st out of 54 countries in 2022 on the Mo Ibrahim Index of African Governance. Tanzania’s political liberties and civic space were rated ‘Partly Free’ in 2023 by Freedom House and Tanzania was rated 143rd globally in 2023 on media freedom by Reporters Without Borders.

Economic

Tanzania offers significant opportunities for economic growth and investment. The country’s strategic location, rich and diverse natural resources, long history of peace and political stability (ethnic tensions are rare) are solid foundations.

Despite strong global headwinds, the World Bank forecasts GDP growth of 5.3% in 2023, and 6.1% in 2024. Tanzania’s risk of debt distress was recently downgraded from low to moderate; nevertheless, debt to GDP is comparatively low for the region, at 41%.

Tanzania hosts the 2nd largest port in East Africa making Tanzania a hub for regional trade with landlocked neighbours. Dar es Salaam port serves 200m people; nearly 40% of goods are bound for six land-locked neighbours and transit trade is an important driver of economic growth. In 2022, Tanzania ratified the African Continental Free Trade Agreement, further demonstrating a commitment to free trade and an ambition to become a strategic trading partner with access to East Africa and beyond.

Growth in Tanzania has been driven mainly by services (39.2%), industry and construction (29.6%), agriculture (25.3%), and mining (7.3%). The government plans to grow mining to contribute up to 10% of the GDP by 2025. Foreign exchange earnings potential is good with growing remittances and tourism, but gold accounts for close to 40% of all goods exports, leaving Tanzania exposed to commodity price changes. Tanzania is a major destination in East Africa for FDI, with global investment flows increasing each year since 2016 and exceeding $1 billion in 2020. This is despite East Africa’s overall FDI inflows falling each year since 2017.

Tanzania’s third Five Year Development Plan (FYDP 3) aims to support increased FDI, through building a competitive economy that will stimulate trade, investment, and human development. The plan aims for 8% growth per year and the creation of 8 million new jobs by 2025. Tanzania’s Development Vision 2025 envisages Tanzania as a middle-income country with well-developed human capital, an ample supply of high-quality livelihood opportunities, and broad-based gains in living standards.

Business environment

The business environment is on an improving path and many UK investors or business managers in Tanzania have positive experiences, however, the business environment is not consistently straightforward to navigate. The process of securing regulatory licenses or approvals can be time consuming, and some businesses have experienced problems with tax assessments and resolution processes can be opaque and lengthy. Commercial and legal disputes can be difficult to navigate and the position on international arbitration is unclear. The government acknowledges the need for criminal justice reform, which can function arbitrarily. Due diligence is particularly important when leasing land.

Tanzania previous administration, from 2015 to 2021, oversaw a deterioration in relations between the government and private sector. This included the setting up of a Task Force on tax which put pressure on a number of senior managers of international businesses, including through detention and passport confiscation. The current administration has disbanded the Task Force and is seeking to encourage FDI and improve the business environment. Nevertheless, an ability to manage risk is required and we advise you to seek legal advice as you explore investment opportunities in Tanzania to be aware of any upcoming changes in the legal or regulatory environments.

The government is working to address these issues and reform efforts are bearing fruit. The ‘Blueprint for Regulatory Reform’ has removed or reduced nuisance fees, and an electronic single window are making it easier to access permits of various kinds. Work permits are easier to secure, and a new Investment Act was recently passed to clarify the legal rights of the Tanzania Investment Centre (TIC) as a step to enhancing the TIC’s ability to help investors. The UK is working with the government to take this programme of reform forward. The UK maintains a Bilateral Investment Treaty with Tanzania providing protection for UK investments in Tanzania. Read more about the treaty.

Bilateral trade and investment

The UK is one of the largest foreign investors in Tanzania, by FDI stock. Communications, food & beverages, and financial services are the largest sectors. Total trade in goods and services (exports plus imports) between the UK and Tanzania was £270 million, in current prices, in the four quarters to the end of Q3 2022, an increase of 31.7%. UK exports to Tanzania totalled £239 million.

Tanzania’s main exports overall are tourism, minerals, manufactured goods, crops, fish and fish products, and horticultural products. See most up to date trade and investment data with the UK - Trade and investment factsheets.

Human rights

Tanzania’s performance around human rights is mixed. Some effort is made through legislation to support improved participation of marginalised groups, such as the disabled, in political processes and ensuring access to services. Gender equality has been a major rhetorical focus of President Samia’s administration, and provisions exist to increase the representation of female MPs in parliament and other senior positions in government. However, implementation and funding for initiatives to support marginalised groups are limited and there are many structural factors which limit their impact.

The period 2015 to 2021 saw increased restrictions on freedom of speech and assembly. Though many of these restrictions remain in law, President Samia’s administration has lifted the ban on political rallies, reduced attacks on freedom of expression, initiated domestic political reconciliation and promoted gender equality. Homosexuality is illegal in Tanzania and there is little visible public or governmental support for greater acceptance of LGBTI+ rights.

Bribery and corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case, it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere. For more, read the information provided on our Bribery and corruption page.

In Tanzania, bribery and corruption are outlawed under the 2007 Prevention and Combatting Corruption Act (2007) on the mainland, and the Zanzibar Anti-Corruption and Economic Crimes Act (2012) on Zanzibar. Yet corruption and bribery are widespread in Tanzania. Tanzania ranked 94th in Transparency International’s 2022 Corruption Perception Index, placing it 2nd best in East Africa based on perceptions of corruption. However, for the first time in 4 years, Tanzania slipped back in absolute terms, from 39 points to 38, following 3 straight years of improvement. The government has been vocal in acknowledging the problem of corruption, and recognises that it needs to do more to address the structural enablers of corruption.

In October 2022 the Financial Action Task Force placed Tanzania under enhanced monitoring (‘grey listing’), following a 2021 Mutual Evaluation Report which found that Tanzania’s systems were not effective at detecting and sanctioning money laundering, terrorist financing and proliferation financing. Tanzania is implementing the remedial Action Plan it has agreed with FATF, a process which is expected to take some time. In the meantime there is a risk that Tanzania’s grey listing may deter Foreign Direct Investment due to enhanced due diligence requirements placed on potential investors. For more information on money laundering and terrorist financing see Crime and fraud prevention for businesses in international trade.

Terrorism threats

Read more information on terrorism threat in Tanzania in our Tanzania travel advice.

Read information provided on our Terrorism page.

Protective security advice

See information on personal security advice in the travel advice for Tanzania. Additionally, National Protective Security Authority (NPSA) provides protective security advice to businesses.

For information on travel to other parts of the country see travel advice for Tanzania.

Read the information provided on our Safety and Security page.

Intellectual property

Tanzania is a signatory to the World Intellectual Property Organisation (WIPO) and the African Regional Intellectual Property Organisation (ARIPO). Copyrights are regulated by the Copyright and Neighbouring Rights Act (2002), administered by the Copyright Society of Tanzania. Trademarks are regulated under the Trade and Service Marks Act (1986), and patents under the Patent (Registration) Act (1994). Both are administered by the Business Regulation and Licensing Authority (BRELA). British businesses looking to protect their intellectual property rights in Tanzania should seek advice from a local lawyer or IP advisor before they start selling into the Tanzanian market. A list of lawyers can be provided by the Department of Business and Trade team in country.

Criminal activity/Organised crime

Information on organised crime in Tanzania can be found on our organised crime page - Crime and fraud prevention for businesses in international trade.

Contact

British High Commission
Umoja House
Garden Avenue
P O Box 9200
Dar es Salaam - Tanzania
General Tel: +255 22 2290000
Fax no:+255 22 2290209

Email: [email protected]

www.ukintanzania.fco.gov.uk