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Section 1: Industrial Manufacturing Focus in Tanzania

The current Tanzanian administration has prioritised industrialisation, and the decision not to sign a trade deal with the European Union was taken with the purpose of stopping cheap imports from crowding out domestic industries over a longer time frame. Development of the industrial sector is ongoing, with construction of a number of factories underway, including new facilities for the manufacturing of industrial materials such as tiles, tractors, glass, fertiliser and petrochemicals. A mix of investors from Mainland China, Europe and Africa will build these facilities.

Industrial Clusters: Parks and Zones

The manufacturing sector is in its infancy and processed agricultural commodities have dominated major exports. The manufacturing sector accounts for 8% of total workers, mainly in urban areas. The activities consist of manufacturing simple consumer goods such as food, beverages, textiles, tobacco, wood products, rubber products, iron, steel and fabricated metal products. The government's Sustainable Industrial Development Policy envisages Tanzania becoming a semi-industrialised country over the next decade. The government puts emphasis on only a few manufacturing areas, which are textiles, leather and food processing.

Chart: Manufacturing Sector as a Share of Total Gross Value Added (%), 2018
Chart: Manufacturing Sector as a Share of Total Gross Value Added (%), 2018

Tanzania's Export Processing Zones (EPZs) and Special Economic Zones (SEZs) are assigned to geographical areas or industries that are designated to undertake specific economic activities under special regulations. EPZ status can also be extended to stand-alone factories in any geographical location. EPZ status requires the export of 80% or more of the goods produced, while SEZ status has no export requirement, allowing manufacturers to sell their goods locally. As of March 2018, there were 14 designated EPZ/SEZ industrial parks, 10 of which are in development, and 75 stand-alone EPZ factories. Tanzania's Second Five-Year Development Plan 2016/17-2020/21 prioritises SEZ development in Bagamoyo, Mtwara, Kigoma, Tanga, Ruvuma, Dodoma, Manyoni and the Kurasini Logistic Centre.

Table: Industrial Parks or Zones in Tanzania
Table: Industrial Parks or Zones in Tanzania

Manufacturing Prospects

Suitable Industries

The underdevelopment of mineral processing and agribusiness means there are untapped industrialisation opportunities in these sectors. Opportunities in light manufacturing are less common. The most attractive light-manufacturing industries are listed below.

Textiles: There is an established domestic textile sector and textile exports are the country's largest manufacturing export, reaching a combined US$92.3 million in 2018. A growing share of these exports are sent to the US, aided by the African Growth and Opportunity Act (AGOA), which facilitates market access to the US for qualifying African nations. Tanzania is Africa's fourth-largest producer of cotton, which provides cheap feedstock. The country has more than 40 cotton ginning companies, including S.M. Holdings, Alliance Ginneries, Birchand Oil Mill, Afrisian Ginning and Gaki Investment Co. Tanzania only processes around 10% of the raw hides and skins that it exports, which implies potential for leather processing and manufacturing.

Cosmetics: Cosmetics is a fast-growth manufacturing export sector in Tanzania. Exports grew at an annual average of 53.9% over 2014-2018, to reach US$65 million and become the largest manufactured export after textiles in 2018. At present, the vast majority of these exports are to regional destinations, particularly Uganda.

Autos: Autos production is a higher risk industry opportunity. Tanzania has been trying to build a domestic automotive industry for years, but with little success. The country has yet to attract the required level of interest from foreign investors that would be key to the long-term viability of its domestic automotive sector. There are, however, signs that foreign investment is beginning to materialise. In November 2018, it was reported that IPP Automobile Company, a new subsidiary of IPP Group, and Youngsan Glonet Corporation agreed to enter into a joint venture to set up an assembly plant in Tanzania for Hyundai, Kia and Daewoo vehicles. The plant will require an investment of US$10 million and will target not only the domestic market but also the wider East African region. The plant is expected to be operational by September 2019 and will have an initial capacity of 1,000 units, which will consist of commercial and construction trucks, buses and sports utility vehicles.

 

Manufacturing in East Africa: Tanzania

Section 1: Industrial Manufacturing Focus
Section 2: Labour & Land Resources
Section 3: Infrastructure
Section 4: Regulations & Tax Incentives
Appendix: Relevant Government Bodies
        
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Content provided by Picture: Fitch Solutions – BMI Research
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