Tourism Doing Business Investing in the United Republic of Tanzania
"With an increased focus on green investments, the United Republic of Tanzania has a great potential to seize on these opportunities and formulate a value proposition based on these comparative advantages"
In an effort of the continuous series of Tourism Doing Business reports, the World Tourism Organization (UNWTO) is proud to have coordinated efforts with the Ministry of Natural Resources and Tourism (MNRT), the Tanzania Investment Centre (TIC) and the Zanzibar Investment Promotion Authority (ZIPA) to create this tool to promote investments in the United Republic of Tanzania. This publication builds a reference for investors by providing valuable information and guidance on the United Republic of Tanzania’s current investment climate as well as emerging investment opportunities in its tourism sector.
With a population of almost 60 million inhabitants, the United Republic of Tanzania has a relatively stable political environment, sound macroeconomic policies and a clear resilience to external shocks. After experiencing a strong growth in recent years, the country’s growth rate of GDP slowed down over the past two years due to the detrimental consequences of COVID-19. Nevertheless, the United Republic of Tanzania’s GDP grew at 4.90% in 2021 whilst the global economic recovery rebooted and experts forecast that economic growth will pick up again from 2022 with an estimation of 5% of GDP growth.
The United Republic of Tanzania demonstrates a very promising investment environment with a strong growth potential of its nature-based tourism sector. Indeed, growing on average at 6.5%, per year the United Republic of Tanzania of has demonstrated an impressive growth performance and stability over the past decade. Also, between 2015 and 2021, the country experienced a marginal increase of its GDP per capita of 24.15%, growing from USD 981 million to USD 1,218 million. Consequently, the United Republic of Tanzania positioned itself as one of the most preferred destinations for foreign direct investment (FDI) in Africa and among the 10 biggest recipients of FDI on the continent. FDI inflows in the United Republic of Tanzania rose by 35 % from USD 685 million in 2020 to USD 922 million in 2021, and new greenfield project announcements tripled in value.
On the other hand, with its abundance of natural and cultural resources, the United Republic of Tanzania has gained international recognition for its nature-based tourism in Africa and the world. The Travel and Tourism Competitiveness Index by the World Economic Forum ranked the United Republic of Tanzania 1st in Africa and 12th worldwide regarding the quality of its nature-based tourism resources as well as 32nd in Africa vis-à-vis its cultural resources. As a result, the tourism value chain defines a key component of the United Republic of Tanzania’s economy today, contributing to an estimated 17% of the country’s GDP and building the country’s third-largest source of employment by directly employing over 850,000 workers. Tourism-related services are especially crucial in Zanzibar, accounting for 55.5% of total services output, and for more than half of Zanzibar’s GDP, generating the largest share of private-sector employment. This said, tourism has been among the largest foreign-exchange earners in the United Republic of Tanzania since 2012. According to data from the UNWTO, tourism accounted for over one-quarter of the country’s foreign-exchange earnings in 2019, representing around USD 2,605 million. In addition, the latest report by fDi Intelligence from the Financial Times and UNWTO ranked the United Republic of Tanzania, with nine projects, among the top 10 countries in Africa and the Middle East with the greatest number of greenfield investments in the tourism sector.
- The United Republic of Tanzania has been attracting international investments and increasing its inflows in the last decade, which positioned the country among one of the top destinations for tourism investments in the African continent. However, the country should continue implementing its efforts to improve its business enabling environment. This might involve strengthening institutions, regulations, policies, and transparency frameworks that facilitate the attraction and promotion of investment inflows towards the tourism sector and its value chain. Consequently, this will improve the country’s investment climate and encourage the development of strategic partnerships between government, and the private sector.
- The United Republic of Tanzania is known for its rich biodiversity, wildlife attractions, and cultural resources. The country is home to several nature reserves and national parks and represents a unique tourist destination for thousands of tourists each year. Henceforth with an increased focus on green investments, the United Republic of Tanzania has a great potential to seize on these opportunities and formulate a value proposition based on these comparative advantages. In addition, when considering new emerging consumer behaviors focused on sustainable and rural tourism demand the United Republic of Tanzania may create strategic investment opportunities for conservation, climate finance, and green investments to further diversify, attract and mobilize international and private investments. Likewise, improving the country’s regulatory mechanisms and incentives concerning climate change mitigation and adaptation as well as conservation efforts will help foster green investments to ensure the environmental, social, and economic development of its destination and safeguard its natural and cultural resources.
- Finally, the United Republic of Tanzania might consider developing new incentives and investment mechanisms to strengthen and expand its tourism value chain and supply of tourism services. The COVID-19 pandemic has tremendously harmed the tourism sector, most severely affecting small and medium-sized enterprises (SMEs) within the tourism value chain. According to the World Bank, the United Republic of Tanzania experienced a 72 % drop in tourism revenue between 2019 and 2020. To guarantee a more resilient, innovative, and sustainable tourism sector particularly digitalization and innovation among SMEs are critical and SMEs must apply strategies to upskill and train their employees. Moreover, the United Republic of Tanzania may also promote programs and opportunities for innovations through the incorporation of travel and tourism startups to facilitate the diffusion of new technologies and increase inflows of new capital for diversification.