Tanzania

Economic Overview

In the last three years, Tanzania recorded a high GDP growth (around 7%), due to the recent oil and natural gas exploitation, to the increase in raw material prices, to the cancellation of its debt (Highly Indebted Poor Countries Initiative), and to the implementation of a liberalization program. However, the global crisis provoked a growth slowdown due to the decrease of capital and tourism inflows and the decline in exports. From 6% in 2009, the growth rate has slightly increased again in 2010 with the revival (6.5%) and it should continue to consolidate. Tanzania’s obsolete infrastructure, insufficient hydro-electric power generation, and adverse climatic conditions are some of the factors that limit its economic growth. The country remains heavily dependent on foreign aid.

 In June, 2010, the government settled a three-year cooperation agreement with the IMF (framework of surveillance policy). The program emphasizes the increase of public services supplies, especially investments in road infrastructures. Priority is also given to the reinforcement of debt management. Structural reform aims to improve the financial sector as well as the management of public finance.

 Despite a good macro-economic performance, Tanzania remains amongst one of the 15 poorest countries in the world. More than 30% of the population lives below the poverty threshold and the access to basic services (water, electricity and health care) is difficult.

FDI in Figures

Tanzania is one of the favourite destinations for foreign investments in Africa and the first among the East Africa Community. FDI stocks, in terms of the GDP, doubled between 2000 and 2008, but the FDI flows slowed down in 2009 under the effect of the global economic crisis. Later on, they started to increase again, a trend that should continue.

The implementation of good macro-economic policies, an effective privatization program, and the natural wealth of the country are factors that attract foreign investors. Nevertheless, certain factors such as a very low level of industrial development, environment concerns, the lack of transparency and little respect for the law are hindrances to investments.

The mining sector, the oil and gas industry, as well as the agricultural commodity sector (coffee, cashew nuts, and tobacco) attract most of the foreign investment. The main investors are South Africa, the European Union and Canada.

 Foreign Trade Overview

Tanzania is open to foreign trade, which represented more than 60% of the GDP during the 2007-2009 period. Its trade policy aims at making the local industry more competitive and to develop a diversified export sector in order to stimulate economic growth.

Customs duties are not very high and the country is easily accessible with very few trade barriers. However, there are problems such as burdensome administrative formalities and the lack of a system ensuring the respect for intellectual property rights.

Tanzania shows a chronic and increasing trade deficit, a trend that should continue in the next coming years.

Tanzania mainly exports gold, coffee, cashews, cotton, manufactured products and services to Switzerland, China, Kenya, South Africa and India. It imports consumption goods, machinery, transport equipment, basic industrial products and crude oil from India, China, South Africa, the United Arab Emirates and Japan. The main trade partners are the European Union countries, the COMESA (Common Market for Eastern and Southern Africa) and Switzerland.