Tanzania remains attractive to FDI’s despite regional slow down

Tanzania’s economy has continued to show resilience, with the country remaining attractive to Foreign Direct Investments (FDI’s) and Private Equity Investments – despite a slowdown witnessed in the region last year.

The country’s FDI in-flows have been above most of the ones experienced in other East African countries – within the last five years. In this view, Tanzania is currently only rivalled by Ethiopia, which similar to Tanzania, has recorded an average Gross Domestic Product (GDP) growth of 7%, in recent times.

According to the East Africa Private Equity and Venture Capital Association (EAVCA), the witnessed strong performance is attributed mainly owing to developments within the energy sector.

Regionally, FDI in-flows into East Africa rose significantly in 2016, hitting US$1.37 billion, before cooling off to US$1.18billion in 2017.

FDI is presently a significant contributor to Tanzania’s total Gross Fixed Capital, fuelled by the growth in capital spending – in infrastructure. This is the measure of the value of acquisitions of new or existing fixed assets by the business sector, governments and households’ fewer disposals of fixed assets (excluding their unincorporated enterprises).

Last year, FDI accounted for 35% of the country’s Gross Fixed Capital.

“Tanzania remains a regional economic influence for Greenfield projects recording a total of 272 Greenfield FDI backed projects in 10 years,” explained Eva Warigia, EAVCA Executive Director-Research and Advocacy.

“Capital deployed in the region varies in the recent past with Ethiopia and Tanzania taking a strong lead, backed by new government projects,” she added.

The most active period for Greenfield investments in East Africa, was between 2012 and 2015.

Recently, EAVCA led the private and public sectors in unpacking investment opportunities in Tanzania, during the 2nd East Africa Venture Capital Association conference held in Dar es Salaam on October 11, 2018.

During the event, private equity firms expressed their quest to invest in the country where agribusiness was mentioned as one of the lucrative areas.

This is pegged on the country’s demographic development and level of competition, which is low, compared to that of its neighbour, Kenya. According to industry specialists, the country presents opportunities across the whole supply chain of agriculture.

Meanwhile, Tanzania has continued to record good performance in the Private Equity arena, where the region’s total number of deals reached 180 last year (2017), since 2012.

African Private Equity and Venture Capital Association annual PE data tracker (2017) shows the total value stood at US$2.4 billion, with the median deal size averaging at US$5.0 million. Of this, Tanzania commanded 10% of the total volume and a 17% share of the cumulative value.

The number of deals announced in the country within the last six years reached 19, with a total disclosed value of US$379 million. During this period, the markets have witnessed seven notable exits.

Top five sectors attracting PE ventures include consumer staples, which accounted for 39% of the deals.

Industrial and utilities each accounted for 22%, the financial sector 11%, while the health sector accounts for 6% of the share of deals during the period.

Source: African Strategic-Ventures (ASV) & The Exchange.