Tanzania, rising star in Africa
The opinions and thoughts expressed in this article reflect only the author's views and do not represent Global South World.
Dean Tavakoli is an analyst and a senior executive who possesses over a decade of extensive global quantitative investment experience. He is the CEO of Sea Enerji, a petrochemical trading company based in Turkey and has also served as a strategic advisor for the Middle East Oil and Gas.
The global economy has increasingly become competitive, leading many individuals to transition from corporate employment to entrepreneurship.
In this environment, it is essential to identify markets with significant growth potential. Currently, the European economy faces challenges due to the ongoing Russia-Ukraine conflict. Furthermore, East Asian markets present considerable barriers to entry for new businesses. The United States market is progressing toward a highly advanced technology-driven economy. Conversely, Africa's market remains relatively undeveloped and possesses the highest growth potential in the world.
This presents unique opportunities for a diverse range of investments and business ventures that possess viable business plans and are not overly complex. Within the African continent, there exist a variety of business opportunities. For example, nations such as South Africa, Egypt, Algeria, and Nigeria boast well-established markets, which may pose challenges for new businesses seeking entry. Conversely, countries like Equatorial Guinea currently lack the fundamental infrastructure necessary for investment and the operation of businesses.
East Africa possesses both geopolitical and geographical advantages. The region is predominantly comprised of English-speaking countries, which facilitates communication and international relations. Additionally, its proximity to the Middle East enhances its ability to secure energy, petrochemical, and petroleum resources. Landlocked countries in Central Africa depend significantly on East African nations for their supply needs, often more so than they rely on West African countries.
In the context of Eastern African nations, Tanzania's gross domestic product (GDP) has demonstrated a consistent upward trend, transitioning from a controlled market system to a free market economy.
Investments in infrastructure, including roads and railways, along with the presence of three major ports, position Tanzania to potentially double its Gross Domestic Product (GDP) from $80 billion to $160 billion within the next four years, position itself as a leader in East Africa, and Africa along with South Africa, Egypt and Algeria. This economic growth presents a compelling opportunity for entrepreneurs and businesses seeking to capitalize on emerging markets at entry-level stages.
Tanzania Economy Structure
Tanzania's economy is characterized by a diverse array of sectors that collectively contribute to its development and growth.
An essential component of this economy is agriculture, which accounts for approximately 26.2% of the Gross Domestic Product (GDP) and employs around 65% of the labor force. The country produces several key agricultural commodities, including coffee, tea, cotton, cashew nuts, tobacco, and cloves. Additionally, subsistence farming is prevalent, with maize, rice, bananas, and cassava serving as staple crops for the population.
Tanzania is endowed with a diverse array of minerals, including gold, diamonds, tanzanite, and other gemstones. The mining sector is a vital component of the national economy, contributing approximately 6.3% to the Gross Domestic Product (GDP). As the fourth-largest gold producer in Africa, Tanzania has experienced significant growth in this industry. Additionally, the recent development of natural gas extraction from offshore reserves has notably enhanced the energy sector, further supporting economic advancement.
The industrial sector in Tanzania encompasses manufacturing, construction, electricity, gas, and water supply, contributing approximately 30% to the nation's Gross Domestic Product (GDP). Key industries within the manufacturing domain include cement, textiles, steel, and beverages. The government has been actively promoting industrialization as a means to diversify the economy and generate employment opportunities.
The financial sector in Tanzania has experienced significant growth, characterized by enhanced access to banking services and the widespread adoption of mobile money platforms. This sector encompasses a variety of institutions, including commercial banks, insurance companies, microfinance institutions, and capital markets.
Tanzania Economic Goal
Tanzania is recognized as one of the most politically stable countries in Africa, which provides a degree of assurance to investors regarding the absence of significant political upheaval. Notably, Tanzania has recently overtaken Kenya as the leading nation in trade within East Africa. This development is expected to further enhance Tanzania's position as a key government partner for neighboring countries seeking to meet their energy, and goods need through its ports, roads, infostructure, and financial system.
Tanzania Economic Goal should become a trading hub. Most of the global trade, approximately 90%, is conducted via sea routes due to their costeffectiveness. Countries that offer new sea routes and corridors are wellpositioned to leverage this opportunity. The Belt and Road Initiatives, for instance, have formed a triangular trade network between Asia, led by China, Africa, particularly East Africa led by Tanzania, and Europe (Turkey), with Tanzania serving as the only connector of Asia and Europe.
To achieve this objective, the country is progressing in the right direction; however, it necessitates further implementation within the global financial system. Additionally, the adoption of more aligned regulatory frameworks that support free market principles is essential to facilitate business processes effectively.
Attracting direct foreign investments will enhance liquidity, bolster the local currency, increase employment opportunities, and facilitate the development of efficient infrastructure, thereby positioning the region as a significant trading hub on both regional and global levels.
Opportunities
Agriculture serves as a fundamental component of economic stability in numerous nations, especially in rural areas, by providing significant employment opportunities and generating income. It plays an essential role in contributing to gross domestic product (GDP) and supplying vital raw materials for various industries.
The agriculture sector in Tanzania is experiencing significant growth and reaching new milestones. This sector has the potential to make an even greater contribution to the nation's gross domestic product (GDP). To maximize this potential, it is essential to foster further industrialization and enhance the education system. Improving the knowledge of farmers will enable them to achieve greater self-sufficiency and efficiency in their practices. Establishing enterprises within the agricultural sector presents a plethora of opportunities and benefits for both entrepreneurs and the surrounding communities. This sector offers significant potential for innovation, economic growth, and sustainability, making it an attractive field for business development.
Tanzania possesses significant mineral resources, including gold and diamonds. The extraction of these precious metals not only contributes to the Gross Domestic Product (GDP) but also generates employment opportunities, attracts foreign investment, and supports the development of infrastructure and social services. Their impact is crucial for fostering economic stability and growth across various regions. Presently, the extraction of gold and diamonds is undertaken manually. However, with strategic investments in advanced machinery and technology, it is anticipated that both productivity and the overall contribution to GDP could experience substantial enhancement.
The construction and tourism sectors are experiencing notable growth and are anticipated to significantly enhance Tanzania's gross domestic product (GDP) and employment opportunities in the forthcoming years.
Challenges
Tanzania, despite its significant potential, encounters various economic challenges that hinder its progress. These challenges encompass deficiencies in infrastructure, shortages of energy, and regulatory obstacles. Effectively addressing these issues is essential for promoting sustained economic growth and fostering development.
Tanzania has the potential to address its challenges by streamlining regulatory frameworks and implementing incentives to attract direct foreign investment. Such measures will facilitate the nation’s ambition to emerge as a regional and global trading hub.
Future
The new generation of Africans is characterized by a strong educational foundation, a comprehensive understanding of the global market facilitated by technological advancements, and notable ambition. According to projections from the International Monetary Fund (IMF), Africa's Gross Domestic Product (GDP) growth is anticipated to reach approximately 4.0% by 2025. This growth is attributed to several factors, including infrastructure development, the expansion of the middle class, and advancements in key sectors such as technology, mining, and agriculture.
As Africa is set to undergo significant economic growth, Tanzania is wellpositioned to capitalize on this potential. The country stands to become a rising economy and a key player in the global trading arena.
Based on the factors outlined, it is evident that Tanzania's economy has the capacity to double and achieve a GDP of 200 billion USD in the coming years. This potential establishes Tanzania as an appealing destination for investment and the establishment of new business ventures for entrepreneurs around the world.
The opinions and thoughts expressed in this article reflect only the author's views and do not represent Global South World.
Dean Tavakoli is an analyst and a senior executive who possesses over a decade of extensive global quantitative investment experience. He is the CEO of Sea Enerji, a petrochemical trading company based in Turkey and has also served as a strategic advisor for the Middle East Oil and Gas.
