Tanzania’s FDI inflows hit $1bn mark in 2020

Dar es Salaam. Regardless of the adverse impact of the Covid-19 pandemic on the economy, Tanzania’s Foreign Direct Investments (FDIs) reached the $1 billion mark in 2020, the highest in five years.

The country recorded a total of $1.01 billion in FDIs 2020, higher than the $991 million that it recorded in 2019, according to data from the World Investment Report 2021 by the United Nations Conference on Trade and Development (Unctad).

The last time the country reported over a billion-dollar FDI inflows was in 2015: $1.56 billion. Then the inflows dropped to $864 million in 2016.

In 2017 and 2018, the country recorded $938 million and $972 million in FDIs respectively, says the Unctad report.

Year-on-year, Tanzania was reported to be the country that led with the highest increase of FDI inflows in the East African region, while other countries suffered adversely from the pandemic woes.

From 2019 to 2020, Tanzania recorded a 2.2 percent increase of FDI inflows, while Uganda, Kenya and Rwanda recorded a huge drop.

The United Nations agency Unctad says the positive trend from Tanzania was among other things backed by the investment decision to construct the East African Crude Oil Pipeline project from Uganda to Tanga port at an estimated cost of $3.5 billion.

“The development of an oil pipeline to transport crude oil extracted in Uganda to the Tanzanian port of Tanga could sustain investment in both countries in future,” the report reads in part.

The finalization of the agreement was done in May this year, where presidents from the two countries agreed the project would have huge socio-economic and geo-dynamics impact.

Partly, the development of the FDI in Tanzania was attributed to the fact that it was the only East African country that did not impose tough restrictions like lockdowns during the pandemic.

Though faced with many clap backs and criticisms, the-then Tanzania President John Magufuli decided that the economy in general, as well as government and private enterprise activities in particular, remain open.

Unctad also stated that, although Burundi’s inflows were the smallest in the region - at $6 million - the country experienced a sixfold increase from the 2019 inflows of $1 million.

Nonetheless other East African countries suffered adverse economic disruptions due to the strict measures imposed.

FDI inflows to Kenya fell to $717 million in 2020 compared to $1.09 billion in 2019.

The drop in Kenya last year was attributed to new local ownership rules meant to protect local industries and firms, and a slowdown in mergers and acquisitions after the outbreak of Covid-19.

“Kenya introduced local participation requirements in various industries, including insurance, telecommunication and ICT services,” Unctad reports.

Uganda registered a 35 percent drop in FDI to $823 million last year, while Rwanda’s flows were recorded at $135 million last year, from $354 million in 2019.

In general, FDI inflows into the East African countries fell from $6.25 billion in 2019 to $5.09 billion last year.

In the longer term, however, Unctad says the policy of FDI diversification appears to have had some impact, even though the signs for immediate recovery are weak.

“Amid the slow roll-out of vaccines and the emergence of new Covid-19 strains, significant downside risks persist for foreign investments in Africa, and the prospects for an immediate substantial recovery are bleak,” the report states.

Beyond this year, however, the United Nations agency says an expected rise in demand for commodities, as well as approval of key projects and the impending finalization of the African Continental Free Trade Area (AfCFTA) agreement’s Sustainable Investment Protocol could lead to investments picking up greater momentum.