The Tanzanian economy is experiencing rapid expansion with its GDP expected to grow from US$50-Billion in 2016 to $100-Billion in 2026, and his forecast may well be a conservative one as it excludes the recent oil and gas finds in Tanzania.
It is projected that the Tanzanian GDP will grow from US$50 billion in 2016 to reach $100-Billion in 2026, but this excludes the recent oil and gas discoveries in Tanzania. Tanzania’s economy is reliant on agriculture, a sector that employs at least 65% of the workforce and accounts for just under a quarter of the GDP.
As with most other countries, the COVID-19 pandemic stunted economic growth, resulting in a drop of 3% between 2020 and 2021. However, renewed focus on and reform in sectors such as agriculture, mining, manufacturing and construction will see the GDP bounce back to at least 6% in 2026. A stronger GDP is certainly needed in a population that is projected to grow from 58-million to at least 79-million by 2030.
PROJECT PROFILE
The East African Crude Oil Pipeline, at an estimated capital investment of $3.5-Billion, is a critical project between Tanzania and Uganda that is currently under construction. This project will unlock the development of Tanga and northern Tanzania, and is expected to attract investors and companies. The initial capital investment is projected to increase the FDI of both counties by 60%.
It is set to be the longest oil pipeline in the world once completed, spanning a total area of 1 450 kilometres, and will include eight or nine camp sites, with all the utilities, pump stations, oil storage and an export terminal at Tanga Port which is being upgraded for this purpose.
IN THE PIPELINE
Tanzania’s Energy Minister, Medard Kalemani, has confirmed in a parliamentary presentation that the Lindi LNG project is due to commence in 2022, with completion expected in 2028. The plant is a collaborative effort between Equinor, Royal Dutch Shell, Exxon Mobil, Ophir Energy and Pavilion Energy. This project will add at least 2 percentage points to the country’s current economic growth.
INDUSTRY
Mining is undoubtedly Tanzania’s leading industrial sector and includes exports of a diverse range of natural and mineral resources including iron, ore, nickel, copper, golds, diamonds, tanzanite, limestone, coal and uranium. However, newer developments have seen the country stepping away from gold and coal to new energy minerals like graphite, nickel and uranium. With at least 12 hydroelectric power stations in Tanzania, the government has a strong focus on hydroelectric power generation and aims to increase transmission voltage at its Julius Nyerere Hydroelectric plant with the installation of additional transformers.
The Standard Gauge Railway is under construction and will link Tanzania directly to Rwanda and Uganda and also to Burundi and DRC through these countries. The project is in its second phase and will offer a total of 2 561 km of electrified rail as part of the East African Railway Master Plan.
ECONOMIC EMPOWERMENT
Import substitution is a central focal point of the Tanzanian government. Through this principle, the government aims to replace foreign imports with domestic production, and thereby create the opportunity for domestic investment. To this end, imports of basic commodities such as edible oil, flour and condiments have been banned. Producing these products locally will not only offer employment opportunities but also increase demand for storage drums and containers as well as other packaging materials. Some key changes in Tanzania since Samia Suluhu Hassan was sworn-in in March 2021:
Tanzania has been looking forward to both democratic and financial reform, and this is the hope that its new president has brought. Her agenda is far more liberal than that of any of her predecessors, and she began her term with immediate efforts to reopen international relationships by showing a willingness to travel to meet foreign leaders.
She has also made marked progress in the reduction of aggressive tax tactics with the Revenue Services adopting a more streamlined ICT approach to improve tax collections. Under her leadership there has been renewed trust in government securities and stronger indications of investor and local participation as the demand for government bonds has led to over subscriptions in the past 12 months.
Tourism continues to grow with Zanzibar showing an increase in visitors amidst the pandemic while employing softer tax and immigration laws that investors see as a new opportunity. Tensions with mining and gas companies have been eased with a US$30-Billion injection into gas projects and developments in Southern Tanzania. China has also lost ground under the new Tanzanian regime due to the rejection of loan terms.
DOING BUSINESS IN TANZANIA
Tanzania has an extensive trade footprint with its import and export partners including South Africa, DRC, Switzerland, Kenya, China, Japan and the United Arab Emirates. Although the government still has a strong presence in a number of sectors, the country’s transition to a market economy is almost complete. Dar-Es-Salaam is a key distribution point for the country with access to surrounding landlocked countries. The local manufacturing and distribution sectors are transitioning into hubs that are within reach of East Africa, and the middle income group in the country is experiencing growth. One of the biggest threats to the economy, however, is the smuggling of goods that remains problematic.