Economic situation Untapped potential

In the period from 2015 to 2019, Tanzania’s economy grew by an average of more than six per cent. Following a slump to two per cent in 2020 in the wake of the COVID-19 pandemic, the economy recovered in 2021 (plus 4.3 per cent). The International Monetary Fund (IMF) has predicted growth rates of between five and seven per cent for the next few years.

Street vendor in Tanzania

Street vendor in Tanzania

Street vendor in Tanzania

The services sector contributes roughly one third to gross domestic product (GDP). That includes tourism, which is an important foreign exchange earner and source of employment for the country. The COVID-19 pandemic hit the industry especially hard. Revenues slumped, countless jobs were lost in the tourism sector and in other related sectors. After travel restrictions were lifted, however, tourists returned to the country. In 2022, the country saw a significant increase in tourist numbers.

Important engines of growth in recent years were the construction, mining, transport and logistics sectors.

The industrial sector contributes roughly 30 per cent of gross domestic product, but only accounts for ten per cent of jobs. Two thirds of employed workers make their living from agriculture. Crops grown for export are, in particular, coffee, cotton, tea, tobacco, sisal and cashew nuts. The agricultural sector generates 25 per cent of GDP.

Private investors are hesitant

Under President Samia Suluhu Hassan the government of Tanzania is pursuing a business-friendly approach. However, impenetrable laws, red tape and corruption tend to hamper entrepreneurial initiative. In addition, there is a lack of skilled workers and deficits in the country’s energy and transport infrastructure.

Investment currently comes mainly from the public sector. The government is putting a strong emphasis on major infrastructure projects (transport, energy, water, housing construction).

Development potential

Tanzania’s diversity of landscapes and its rich biodiversity are already very important economic factors for the country. However, there is still considerable potential for growth in the tourism sector. So far, a large part of the protected areas is not developed for tourism and the local population receives little benefit from the country's wealth of natural resources. A sustainably managed tourism sector could increase public revenues, would create new jobs and at the same time make a decisive contribution towards conserving the country’s biodiversity.

In the agricultural sector, production could be expanded and diversified more, so that the economy is less dependent on a few individual products and on world market prices for those products. If Tanzania’s agricultural products were processed in the country itself, that would create new jobs and generate additional income. However, in order for that to happen, the general conditions for small and medium-sized businesses would need to be improved.

Tanzania, with its access to the sea, plays an important role as a transit country and transshipment hub for the landlocked states of eastern and central Africa. Opportunities are created by the country’s membership of the East African Community (EAC), which seeks to substantially ease trade between its seven member states.

As at: 30/03/2023