Tanzania: A New Dawn for Impact Investing
Tanzania has emerged as an attractive investment hotspot with its politically stable environment, rapid economic growth, and efforts toward sustainable development. Despite being a relatively new concept, private equity impact investing is flourishing in Tanzania. Central to its promotion is the recently established National Advisory Board for Impact Investing (NABII).
Tanzania’s impressive economic growth of 6.5% over the past decade makes it a compelling location for impact investments. Sectors aligned with Sustainable Development Goals (SDGs) — like agriculture, renewable energy, and telecommunications — present numerous investment opportunities. The country’s geographical location and abundant natural resources, coupled with a young and growing population, make it an attractive destination for impact investors. According to the Regional Analysis for Youth Demographic by Research for Evidence Division (RED), Tanzania young people aged 15-34 are projected to increase from 17.8 million to 62.3 million by 2065.
Tanzania President Samia Suluhu Hassan
Government reforms have further boosted Tanzania’s investment appeal. Under the leadership of President Samia Suluhu Hassan, efforts to streamline business licenses and permit procedures have been initiated, creating a conducive business environment. As a result, Tanzania now ranks among the ten biggest recipients of foreign direct investment (FDI) in Africa. The Tanzania Investment Centre reported a 128% increase in registered development projects in February 2023 compared to the same month in the previous year.
However, understanding the Tanzanian investment landscape is key for potential impact investors. While the country has very significant investment opportunities in the agriculture, tourism, manufacturing, renewable energy, healthcare, education, and financial sectors, there are challenges on the ground that the actors in the ecosystem and prospective investors need to understand and address. For example, recent surveys have identified a number of challenges in three areas: 1) the starting a business in Tanzania (formalization cost, land, skilled labor), 2) infrastructure (power, access to finance), and 3) daily operations (laws and regulations).
There is increasing impact investment activity within the country from international, regional, and local development banks, among other players. However, it’s important to note the success stories of private equity impact investing in Tanzania. Notable examples include the Mkoba Private Equity Fund, which supports growth capital for high-growth small and medium-sized enterprises, and Emerging Capital Partners, a firm with a strong track record of investing in the region.
<< While Tanzania has its unique challenges for impact investing, its potential cannot be overstated. >>
Yet, for Tanzania to continue attracting and benefiting from impact investments, several initiatives are crucial. One such effort is the UNDP’s Tanzania SDG Investor Map, a tool aimed at connecting investment opportunities to sustainable development needs. The map was launched at the Tanzania Sustainable Development Goals (SDGs) Investment Forum in November 2022, with the aim of directing financing flows toward Tanzania to achieve the SDGs.
Source: Swiss Microfinance & Impact Investing Report 2019
Here, the NABII has a crucial role to play in incentivizing impact investors to contribute to Tanzania’s development goals and the SDGs. It will need to legitimize the impact investing field, help define it, and aid in policy development and engagement. The NABII can facilitate an environment that encourages SDG-aligned investments, particularly in the SME sector. The NABII also has the mandate to build an enabling impact investment ecosystem, gather intelligence, and facilitate knowledge exchange. Moreover, it has a critical role in awareness raising, education, and outreach, given the growing interest among investors to allocate investment into activities that deliver both financial returns and SDG impact.
The NABII, led by Coordinator Dr. Neema Robert, aims to work with established institutions to facilitate and promote impact capital inflows, provide capacity building on innovative ideas promoting impact investing, research and disseminate findings, and create a cross-sectoral dialogue platform to improve the country’s investment climate. It will also work on developing strategic partnerships between the government and the private sector as key ecosystem enablers.
In conclusion, while Tanzania has its unique challenges for impact investing, its potential cannot be overstated. The country is rapidly becoming a leading destination for impact investors, and with the right guidance, infrastructure, and regulation, this trend is likely to continue, contributing significantly to Tanzania’s development goals.
In terms of future growth, we anticipate that the country’s strong SDG-aligned sectors will remain attractive to impact investors. With increasing government support and the UNDP’s SDG Investor Map initiative, these sectors are expected to provide not only profitable returns but also meaningful impacts in areas such as renewable energy, infrastructure, and agriculture. The establishment of the NABII marks a milestone for impact investment in Tanzania. By legitimizing the field, providing an impact investing ecosystem, and facilitating knowledge exchange, it is set to attract more investors. Furthermore, its focus on policy development and tax incentives will help to navigate the regulatory complexities that have previously posed a challenge to investment in Tanzania.
The initiative’s emphasis on outreach and education is another important step towards fostering a robust impact investment culture in Tanzania. By raising awareness about the opportunities and benefits of impact investment, it will inspire more investors to consider this form of investing.
Finally, strategic partnerships, especially between the government and the private sector, will play a crucial role in further advancing Tanzania’s impact investment landscape. These alliances can create a stable framework that encourages more impact capital inflows, fostering a stronger and more resilient economy.
Dar Es Salaam, Tanzania
In sum, Tanzania’s growth as an impact investment destination looks promising. Its unique blend of economic potential, commitment to the SDGs, and recent initiatives aimed at promoting impact investing sets it on a path of significant growth and meaningful contribution to sustainable development. However, it will require continued effort, policy support, and collaborative work from all stakeholders to ensure that impact investing can truly make a difference in Tanzania’s journey towards sustainable development.
The authors are optimistic about Tanzania’s trajectory in the field of impact investment. The combination of government support, strategic partnerships, and increased awareness among investors could pave the way for the country to be a frontrunner in SDG-aligned investments, ultimately contributing to its economic growth and sustainable development.