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An Overview of the Investment Climate

and Investment Opportunities in

Tanzania

AGENDA

Tanzania Economy

Why Tanzania

Investment Opportunities

Trend of Investments

Investment Facilitation Services

Investment Incentives

Conclusion

2


TANZANIA’S ECONOMIC OVERVIEW

• According to the World Bank, Tanzania’s economy has been growing steadily for the past 10 years. In 2012, the economy expanded by 6.9%, which is close to its more recent historical average.

• A survey done in collaboration between this institution and KPMG revealed that the economy was performing better in 2013 than in 2012 and business leaders were positive about the prospects for 2014.

• Rapid and stable growth of economy over the past few years is explained by several factors. These include rapid expansion in sectors like communication and increasing domestic demand due to rapid population growth.

GDP BY SECTOR (PERCENTAGE OF GDP) • Based on year 2012 estimates,

the country’s GDP was composed of following major sectors :

agriculture: 27.7%

industry: 25.1%

services: 47.2%

• Agriculture products: coffee, sisal, tea, cotton, pyrethrum, cashew nuts, tobacco, cloves, corn, wheat, cassava, bananas, fruits & vegetables.

• Industries: agricultural processing including sugar, beer, cigarettes & sisal twine, salt, cement, oil refining, shoes, apparel, wood products& fertilizer.

• Services: financial services, telecommunication, trade and tourism.

2007 2011 Agriculture. forestry.

fishing & hunting 30 27.7

Mining and quarrying 3.9 3.7

Manufacturing 8.6 10.2

Electricity. gas and water 2.2 2.4

Construction 8.6 8.8

Wholesale and retail

trade. hotels and

restaurants 15.7 16

Transport. storage and

communication 7.2 8.2

Finance. real estate and

business services 12.3 11.4

General government

services 8.7 8.8

Other services 2.8 2.7

Gross domestic product

at basic prices / factor

cost 100 100

Source: Data from National Authorities; estimates (e) and prediction (p) based

on authors' calculations


ANNUAL AVERAGE REAL GDP GROWTH RATE

• Annual Average Real GDP Growth Rate 7.0% (2003 – 2012)

• The annual growth rate in GDP measures the change in the value of the goods and services produced by the country economy during the period of a year

0

1

2

3

4

5

6

7

8

9

10

Real GDP growth (%)

Southern Africa - Real GDPgrowth (%)

Africa - Real GDP growth (%)

Source: AfDB, Statistics Department AEO. Estimates (e); projections (p)

MACROECONOMIC INDICATORS

In summary between 2011 and 2014:

Real GDP Growth Rate projected to increase from 6.4% to 7%.

Real GDP per capita growth also projected to grow from 3.4 % to 3.9%.

Consumer Price Index (CPI) inflation is projected to decrease from 12.7 % to 6.9 %.

Budget balance as % of GDP is expected to decrease from -6 to -3.1.

Current account balance as % of GDP projected to decrease from -11.9 to -10.8.

2011 2012(e) 2013(p) 2014(p)

Real GDP

Growth

6.4 6.4 6.9 7

Real GDP

per capita

growth

3.4 3.3 3.8 3.9

CPI

inflation

12.7 16.1 8.4 6.9

Budget

balance %

GDP

-6 -9.1 -3.9 -3.1

Current

account

balance %

GDP

-11.9 -11.1 -11.9 -10.8

Source: Data from National Authorities; estimates (e) and

prediction (p) based on calculations


POPULATION TRENDS

• The population of Tanzania has more than tripled from 12.3 million in 1967 to 44.9 million in 2012

• A young population age structure, with 43.9 percent of the population aged below 15 years, and 3.9 percent aged 65 years and above.

• The median age of the Tanzania’s population is 18 years.

• Dar es Salaam accounts for 10 percent of the total Tanzania Mainland population

Source: National Bureau of Statistics

WHY INVEST IN TANZANIA?


10 Most Attractive Investment Destinations in Africa...

Tanzania’s Advantages:

10

Tan

zan

ia’s

inh

ere

nt

adva

nta

ges

Government’s Commitment

Good Governance & Political Stability

Predictable Investment Climate

Preferred Investment Destination

Strategic Geographical Location

Gateway to Potential Markets

Attractive Investment Regime

Strong Public-Private Partnerships & Interactions


Source: World Bank; Doing Business Index 2012;

• Ever since the mid 1990s Tanzania has

followed a path of liberalisation and

privatisation. It has welcomed foreign

investment and managed to attract more

FDI than Kenya or Rwanda, particularly in

areas such as agriculture, tourism, mining

and FMCG

• The government is continuing to pursue

Public Private Partnerships (PPP) for

infrastructure, agriculture, energy and

other strategic investments. Privatisation

and modernisation of key assets is a main

focus area

• Policies and laws defining incentives for

investment are continuously being updated

and improved

• Relative to the rest of Africa, Tanzania

continues to be competitive in the World

Bank’s Doing Business Index. In the

category “enforcing contracts“ Tanzania is

the best performing country in Sub-

Saharan Africa

Enforcing Contracts (Doing Business Index 2012)

Ranking of Sub-Saharan African countries

Foreign Direct Investment (FDI), USD billion, 2000-2010

1. Government Commitment to Investments & Private Sector Development

11

• Tanzania is a stable, multiparty

democracy with a Competent Executive

under President, Democratic Parliament

and An Independent Judiciary.

• Presidential elections are held every 5

years. The current President will be

stepping down in 2015, followed by the

tradition of free and fair elections between

different candidates and parties

• Became independent in the early 1960s.

Since then, we been without civil wars or

ethnic rivalries. High Observant to Good

governance practices and Freedom of

Expression where; Media, Civil Societies

and opposition parties are able to operate

freely and challenge the ruling party openly.

• According to Transparency International,

Tanzania ranks as one of the least corrupt

countries in the region

Source: Mo Ibrahim Foundation, Press Freedom Index 2011

Ranking of countries in Mo Ibrahim Governance Index, 2011, (Score/100)

Ranking of countries in Global Press Freedom Index, 2011, Rank

<<1>> Tanzania is one of the most open and stable democracies in Africa 2. Tanzania: Governance & Political Stability

12


13

• With GDP growth averaging 7% per year, Tanzania is

one of the fastest growing economies in East Africa

• Other growth indicators over the last decade:

– The number of tourists to Tanzania has grown

by more than 70% to 780,000

– Consumption expenditure has grown by 96%

– The number of cell phone subscribers has

increased from 110,000 to 21 million

– FDI of more than US$5billion was invested in

the country’s booming agriculture, mining,

FMCG and other industries

Source : World Bank

Average annual GDP growth, %, 2001-2010

+175%

Number of tourists visiting Tanzania, thousands

Dar es Salaam

3. Tanzania: fastest growing Economy

13

Due to its Predictable Fiscal Investment Regime, there is increasing number of

foreign direct investments in the country. Meanwhile, economic and structural

reforms have led to substantial progress in establishing a functioning market

economy, making it among the Top 10 fastest-growing economies in the world.

4. Predictable Fiscal Investment Regime

14


5. Tanzania Ranked as #1 Investment

Destination for Corporates in the EAC

Source: RMB Global Markets Data – September 2013

15

Trend of FDI flows into East African

Countries (US $ Million)

16


EAST AFRICA

COMMUNITY

(About 130M People)

AGOA (USA)

Africa Growth and

Opportunity Act

Over 6,000 items

China

(Over 4,000 Items)

Negotiated EPA with

European Union SADC

(About 300m People)

Japan, Canada etc

6. ACCESS TO POTENTIAL MARKETS

Tanzania enjoys Preferential Market Access with;

17

3 MAJOR PORTS; GATEWAY TO SIX (6) LAND-LOCKED COUTRIES

(Uganda, Rwanda, Burundi, DR Congo, Zambia & Malawi)

Potential Sectors with Investment Opportunities

18

2 Livestock

3 Manufacturing

4

Health and Education

5 Mining

6

Tourism 7

Natural Resources

1 Agriculture & Agro-processing

8

Economic Infrastructure

18


1. AGRICULTURE

Facts & Figures • Arable Land available 44 mn hectare, but

land under cultivation is 10.2 mn hectares. Available land is 29.4 mn hectare, with high Potential Land at 2.3 mn hectare.

• Reasons to invest in the country include availability of long term lease of 99 years, existance of integrated Road Project to connect rural areas and numerous rivers and lakes for irrigation. Processing and marketing of cash crops is allowed.

Opportunity Available • Cultivation of major cash crops including

Coffee, Cotton, Tea, Tobacco &Cashew and food crops such as Maize, Rice, Pulses & Wheat.

• Global Companies in Large Scale Farming include Brooke Bond United Kingdom for Tea & Illovo, South Africa for Sugar.

$0

$2

$4

$6

$8

$10

$12

$14

$16

$18

2007 2009 2011

Tanzania Rice Imports (Million USD)

CAGR 25%

2. LIVESTOCK Facts & Figures

• National stock is 15 million, out of which only 2% is commercial stock.Ranching accounts for 1% of total beef. Less than 5% of all hides are processed to leather. We are net importers of milk and related products. Deficit of around 170 million litres of milk per annum.

• Low per capita consumption of eggs ad meat at 17 eggs and 1 kg of meat respectively. Ony 50% of hatching capacity of 30 mn eggs utilised.

Opportunity Available • Establishment of beef processing plant in

country . Commercial scale poultry and dairy farms are also required .

• 40% export levy on unprocessed skins creates a significant competitive advantage for processing industry in the country.


3. MANUFACTURING Facts & Figures • Large Agriculture Sector contributing Up to

50% GDP from agriculture, but little value addition resulting into high post harvest losses of upto 40%.

Poor packing technicques and raw material exports to countries such as China and India

Opportunity Available • Huge potential for direct exports to USA

(AGOA) and EU (EBA). Also opportunity for Exports after value additon in China and India.

Cashew, coffee have high export potential.

Other potential manufacturing industries in Agro Processing and dairy products,

Textiles, clothing and leather products. Chemicals and fertiliser. Cement and Iron and Steel.

Tanzania sugar demand & production, 2001-2020 (Tons/year)

0

200

400

600

800

1000

1200

2001 2004 2007 2010 2013 2016 2019

304

508

628

>600,000 tons

supply gap by 2020

Production

>300,000 tons

current supply

gap

4. ECONOMIC INFRASTRUCTURE Facts & Figures • Tanzania has road network totalling 85,000

km; only 5% of the road network is bituminised. Country uses three international airports as well as 5 major domestic airports. Major ports include Dar es Salaam, Tanga and Mtwara; as well as several lake ports.

• The railway system has a track length of 3,685 km, including the TRL and TAZARA lines. Hydropower accounts for approximately half of Tanzania's total power generation. Tanzania’s energy demand is expected to grow by between 5% and 8.5% each year for the next 5 years

Opportunity Available • Huge untapped opportunity in the power

generation sector. Large road construction works as well as PPP opportunities.

• Investment opportunities in developing inland container depots ; development of extended railway lines and sea and lake ports.


5. MINING

Facts & Figures • Tanzania's mining industry is envisaged to

double in value to $1.28bn from $0.64bn between 2010 and 2015 [study by Business Monitor International].

• Tanzania ‘s gold production currently stands at ~40 tons a year.

• Basemetals found in a belt running from Kagera through Kigoma to Mbeya, Ruvuma and Mtwara regions.

• Gemstones are found in eastern and western belts running from Kenya border in the northern part to Mozambique in the south and Mbeya and Rukwa regions. They include apatite,niobium, tanzanite which is 1000 rarer than diamonds.

Opportunity Available • Mining and exploration activities. Tanzania is

estimated to have over 40 Trillion Cubic Feet (TCF) of recoverable natural gas. Gemstone carving and cutting, Polishing and Jewellery making are also important investment areas.

6. NATURAL RESOURCES

Facts & Figures • Jatropha grows in north east, south west

regions. Oil palm grows in eastern, western, central regions. Fresh water lakes in Victoria, Tanganyika, Nyasa. Marine resources along 800 km coastline. Fish resources of 730,000 metric tons/annum.

• Honey is organic with good demand from Europe, Japan and Middle East.

• 33.5 million hectares of woodlands, out of which 39% are gazetted as forest reserves. 80,000 hectares under managed plantation forestry and 1.6 million hectares under water catchments

Opportunity Available • Huge Potential for Bio Fuel to reduce oil

import bill. Good prospect for pulp, paper

and wood products . Opportunity to produce honey for local and export markets.


7. TOURISM

Facts & Figures

• Tanzania is a renowned tourist destination and has allocated more than 25% of its total area to wildlife parks and game reserves.

• It has 16 national parks, 17 game reserves, 50 game-controlled areas, and several other iconic attractions like Mt. Kilimanjaro and Zanzibar.

• Has 3 Key tourist circuits, with Northern circuit comprising Serengeti National Park, Southern circuit that has Selous Game Reserve and Beach Tourism providing some of the finest unpolluted beaches in Africa

• Zanzibar and Pemba , the exotic ‘Spice Islands’ are famous for their history, deep-sea game fishing and beaches

Opportunity Available • Construction of hotels & lodges,

Recreational facilities like amusement parks, deep-sea fishing, sea and lake cruising.

• Other opportunities for conference and eco- tourism, tour operators & transport services

8. HEALTH AND EDUCATION

Facts & Figures

• Low Teacher to Pupil Ratio: 1 teacher for 13.6 pupils in USA, 1 teacher for 16.8 pupils in China, 1 teacher for 18.7 pupils in UK , 1 teacher for 33.5 pupils in South Africa and 1 teacher for 50.8 pupils in Tanzania.

• Low Physician to Patient Ratio: 27.7 physicians for 10,000 patients in UK, 24.2 physicians for 10,000 patients in USA, 14.6 physicians for 10,000 patients in China, 7.6 physicians for 10,000 patients in South Africa and 0.1 physicians in for 10,000 patients Tanzania

Opportunity Available

• Over 5,000 students going abroad/annum, while many patients from Africa go to India.Potential to emerge as Centre for Excellence in East Africa.

• Opportunitiesfor Universities, Technical College, Specialised Hospitals and Research Centres.


TREND OF NUMBER OF PROJECTS REGISTERED WITH TIC FROM 2005-2013

0

550

678 701

871

572

509

825

869 885

0

100

200

300

400

500

600

700

800

900

1000

YEAR 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: TIC data

FDI INFLOWS TO TANZANIA FROM 2007 – 2012 (US$ MILLION)

Source: UNCTAD - World Investment Report – 2013


DISTRIBUTION OF TIC REGISTERED PROJECTS IN 2013

0

50

100

150

200

250

300

Source: TIC data

OWNERSHIP OF PROJECTS REGISTERED BY TIC IN YEAR 2013

30

Source; Tanzania Investment Centre, 2013

LOCAL PROJECTS 47%

FOREIGN PROJECTS 21%

JOINT VENTURE 32%


31

Source: TIC Database (2013)

TOP TEN (10) LEADING COUNTRIES WITH REGISTERED INVESTMENTS IN TANZANIA

(BY VALUE OF MILLION US$) FROM 2006 - 2012

S/N Country No. Of Projects Jobs Value(Mln. USD) Trend (%)

1 UK 934 271,202 5,180.56 35.86

2 China 455 72,068 2,175.53 15.06

3 India 365 51,419 1,916.63 13.27

4 Kenya 455 50,786 1,504.80 10.42

5 USA 218 48,469 998.65 7.25

6 Netherland 162 13,747 950.44 6.58

7 S.A. 208 20,406 706.85 4.89

8 Canada 195 25,489 539.21 3.73

9 German 146 14,763 313.34 2.17

10 Oman 89 6,157 112.65 0.78

TOTAL 3,227 574,507 14,398.66 100.00

TANZANIA INVESTMENT CENTRE

INVESTMENTS WITH JAPAN INTEREST FROM 1997 - DEC. 2013

S/N Sector No. of Projects Jobs

Value in Miln

US$

1. Economic Infrastructure 1 0 2.815

2. Tourism 2 21 1.55

3. Manufacturing 2 52 4.805

4. Services 1 0 22.6

Total 6 73 31.77


WHERE TIC COMES IN...

INVESTMENT AVENUES IN TANZANIA

1.Tanzania Investment Centre (TIC)

General investment promotion and facilitation

(Manufacturing, Tourism, Agriculture,

Infrastructure, etc.) Special incentives for

“Strategic investors”

2. Export Processing Zones Authority (EPZA)

Provides promotion and facilitation services in

special zones (EPZs & SEZs). Offers special

incentives for export oriented manufacturing

investments.

3. Zanzibar Investment Promotion Authority (ZIPA)

Investment promotion, facilitation, Free Economic

Zones and Free Ports in Zanzibar


ROLES OF TANZANIA INVESTMENT CENTRE

• Tanzania Investment Centre was established by an

act of parliament (Tanzania Investment Act (TIA),

1997) with the following objectives;-

• To promote various investment opportunities

available in Tanzania

• To facilitate investors to obtain relevant permits,

approvals and licenses required to establish

business

• To advise the government on investment policy and

related issues.

WINDOWS FOR GRANTING FISCAL INCENTIVES

A) PPP Projects

Receive Fiscal Incentives through PPP Law

B) Priority Sector Projects

Receive Fiscal Incentives through Investment Law

C) Specialized Sector Projects

Receive fiscal incentives through specific laws (e.g. EPZ/SEZ/Mining/Gas etc.)

D) Service Sector Projects

Do not receive fiscal incentives but can process Non-fiscal Incentives through TIC

36


INVESTMENT FACILITATION SERVICES

Senior Government officials from the following

Ministries/Government Departments have been stationed at

TIC to assist investors to obtain various licenses and permits

they need in order to start business.

37

1

2

• Registrar of Companies

• Immigration

3

4

• Business Licensing

• Land

5

6

• Labour

• Tanzania Revenue Authority

For Guidance and more info, visit our new web portal…

www.tic.co.tz

38

Our new website provides a one-stop platform for foreign investors to access information relevant to making investments in Tanzania

Key benefits of the new system for domestic & foreign investors:

1. Transparency - the administrative process clearly detailed and made public for FREE

2. Time-required - indicates the time in number of hours or days required to complete a step in the process

3. Information on fees - it states clearly the official fees that may need to be paid for a particular administrative step

4. Multi-language - the information is available in over 60 different languages

5. Direct contact - up to date contact information on who the responsible official is

6. Detailed Guidelines- Investment Opportunities in Tanzania

http://www.tic.co.tz/


OUR COMMITMENT TO INVESTORS

Application Maximum Time taken

Company Registration 3days

Industrial License 1day

Business licensing 1day

Certificate of incentives 7days

Resident Permit Class ‘A’ 14days

Resident Permit Class ‘B’ 14days

Special Pass 1day

Appointment with TIC staff Immediately

Arranging appointments 24hours

Investor Access pass (Airports) 3days

NATIONAL INVESTMENT STEERING COMMITTEE (NISC)

In an effort to improve the business environment and foster

economic growth through increased investment the

Government formed a National Investment Steering

Committee chaired by the Hon. Prime Minister.

Other members of the committee are Minister of Finance,

Minister of Industry and Trade, Minister of Agriculture, Minister

of Lands, Minister for Investment and Empowerment, Attorney

General, Governor of the Bank of Tanzania and the Executive

Director TIC (Secretary).

This committee is entrusted with the role of investment policy

formulation and solving problems of investors on a fast track

basis.


INCENTIVES UNDER THE TIA, 1997

A) Tax incentives

Projects capital goods i) Import duty – 0% ii) Value added tax – 0% Deemed capital goods i) Import duty – Exempted by 75% ii) Value added tax – Reduced to 10% Capital allowance i) Agriculture – 100% ii) Mining - 100% iii) Manufacturing – 50% iv)Fish farming - 50%

INCENTIVES UNDER THE TIA, 1997

A) Tax incentives (continue) v) Tourist services – 50% vi) Hotels - 50% Others - Depreciation allowance ranging from 37.5% to

5% depending on the class of the depreciable asset. B) Non Tax incentives Automatic immigration quota of up to 5 expatriates at the

initial stage of the projects Unconditional transferability through any authorized dealer

bank in freely convertible currency of ; net profit, loan payment (servicing a foreign loan) royalties , fees and charges in respect of any technology transfer agreement,

payment of emoluments and other benefits to foreign personnel.

C) Strategic investor status In addition to existing investment incentives a potential

investor may apply for a strategic investor status to seek additional investment incentives

42


CASE EXAMPLE: DANGOTE INDUSTRIES (TANZANIA) LIMITED

• With an estimated population of about 42 million, Tanzania's per capita cement consumption of 50.0 kg per annum fall way below global average.

• The improving performance of the economy has fuelled strong growth in cement demand and the prospects remain favourable, given the linear relationship between economic growth and cement consumption.

• Dangote Cement PLC is setting up a 1.5 MTPA Integrated Cement plant in port city of Mtwara in Tanzania. This project will cost 750 Million US$ and will turn Mtwara town into a booming city.

• With good Limestone and Gypsum deposits, Tanzania provided sound investment opportunities in the sector and also offered an ideal opportunity for Dangote Cement to foray and consolidate its operations in Eastern Africa.

• The massive investment is expected to also create about 6000 jobs direct and about 12,000 indirect employments upon completion.

CASE EXAMPLE: DANGOTE INDUSTRIES (TANZANIA) LIMITED

• The factory will be completed in the second quarter of 2015.

• Upon completion of the industry, it is expected that Tanzania will be a net exporter of cement

• There is a projected strong demand from neighbouring countries of Burundi, Rwanda and Democratic Republic of Congo.

• Dangote was registered at TIC in 2006 and got strategic investor status in December 2011.

• Performance contract was signed with Government in June 2013; while land title was issued through TIC in 2012.


C O N C L U S I O N

45

We welcome you to invest in Tanzania.

Tanzania Investment Centre is ready and will be happy to work

with you and accord due assistance to conform to both legal and

regulatory requirements, until your investment project is fully

established as per your plans.

THANK YOU FOR YOUR ATTENTION

Contacts Executive Director Tanzania Investment Centre P.O.Box 938 Dar es Salaam Tel: +255 22 2116328-32 Fax: +255 22 2118253 Email: [email protected] Website: www.tic.co.tz

46

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