Tanzania's remarkable socioeconomic transformation is making waves across East Africa, capturing significant attention for its accelerating economic performance. At the helm of this change is President Samia Suluhu Hassan, who, alongside her predecessor the late John Pombe Magufuli, has championed policies fostering foreign investment and trade.
Kenyan President William Ruto recently acknowledged Tanzania's burgeoning trade dominance during the East African Community Heads of State Summit. He remarked, "Today, Tanzania has overtaken Kenya, and I must commend them for the progress they are making," highlighting how Tanzania's commercial capital, Dar es Salaam, has dethroned Nairobi as the center of intraregional trade, valued at approximately $12.1 billion this year.
According to projections from the International Monetary Fund (IMF), Tanzania may surpass Kenya as the largest economy within the East African Community (EAC) within the next decade, with GDP growth soaring to 5.4% for 2024 and reaching 6% by 2025. The country is becoming increasingly attractive to international investors seeking stability and growth opportunities.
The past decade has seen Tanzania's economy grow at an average of 5.5%. Tenda Msinjili, head of banking and finance at Clyde & Co.’s Tanzania office, noted, “Tanzania has a reputation for peace and stability compared to other countries in East Africa,” allowing investors to plan for the long term without the apprehension of political instability.
This political stability, paired with transformative economic reforms, has bolstered Tanzania's standing as a bastion for foreign direct investment (FDI). Notably, the 2022 Tanzania Investment Act has simplified business registration, enforced transparency, and mitigated bureaucratic red tape. Imani Muhingo from Alpha Capital states, “The act has been a major shift in the government’s rhetoric toward investments and the business community.” This act has reduced the minimum capital requirement for foreign investors to $500,000, enhancing Tanzania's appeal.
Recent data from the Tanzania Investment Centre (TIC) suggests the country netted $3.5 billion in FDI during the 2023/24 fiscal year. This rise correlates with Tanzania’s commitment to improving its infrastructure, including major projects like the $2.9 billion Julius Nyerere hydropower project, which aims to cut power costs significantly.
Meanwhile, neighbouring Kenya continues to capture substantial investment deals. Stears Private Capital's Africa Report highlighted Kenya and South Africa accounting for 66% of the 73 private investment deals recorded on the continent during the first three quarters of 2024. Kenya commands about 80% of private market deals within East Africa, maintaining its historical spotlight as the region's leading investment hub.
Despite political and economic upheavals affecting various economies, Kenya's allure remains vibrant, with significant deals primarily documented within financial services—accounting for one-third of transactions across the continent. Payments and micro, small, and medium enterprise lending are leading these financial activities.
Investments are also thriving within the agricultural sector, showcasing growth opportunities reflective of the continent's food security challenges. It is believed agriculture, which employs half the working population, will continue to attract private equity and influence developmental trajectories.
While Kenya and South Africa lead the charge, Tanzania stands out with steady growth and performance improvements. The mining sector remains pivotal, contributing 9.1% to the GDP and set to double revenues by 2027. Barrick Gold, AngloGold Ashanti, and new entrants like Peak Rare Earths are seizing opportunities within Tanzania's rich mineral base.
Tanzania is not only competing vigorously with Kenya; its strategic location as a gateway for the EAC stands to reshape regional trade dynamics. The recent involvement with the US-backed Lobito Corridor railway project symbolizes ambitions to solidify this positioning, linking Angola, Zambia, and the DRC to the Indian Ocean.
The competition remains fierce; with high public debt and currency shortages posing risks, analysts advise caution. Nonetheless, experts indicate there's substantial long-term potential as investor confidence grows, emboldened by Tanzania's economic reforms and geopolitical stability.
Conclusively, East Africa appears poised for transformative shifts as Tanzania's appeal rises and Kenya seeks to maintain its leading investment market status. The burgeoning investment landscapes offer diverse opportunities for stakeholders, marking the beginning of what could be a new economic era for the region.
