Tanzania is an economy in transition. Newly discovered sources of gas have injected optimism into a country that is hoping to use its solid GDP figures to fuel socio-economic evolution.

Tanzania has maintained macroeconomic stability well over recent years, with institutional reforms also contributing to GDP growth of 6.4% in 2012 and an anticipated 6.9% in 2013. Newly discovered sources of natural gas are likely to boost the industrial output of the East African nation in the medium to long term, allowing growth in real GDP per capita—at around $600—to play catch up with a rapidly growing population.

Boosted by the possibility of natural gas exports, Tanzania's medium-term growth prospects are at around 7%—GDP currently sits at $28 billion—while agriculture, manufacturing, wholesale and retail trade, transport, and telecoms are providing fuel for the country's economic fire. Deposits of coal and uranium offer up potential for further industrial output over the coming years, while opportunities to develop a more attractive tourism matrix will ensure that officials do not put all of their eggs in one basket.

Despite solid export growth in 2012, the country's current account deficit (CAD) remained in double-digit territory, and is likely to stay there over the medium term. Meanwhile, investors, riding a wave of confidence across East Africa thanks to significant resource discoveries in the region, have contributed to a 10% growth in Tanzania's FDI haul in 2013 over the previous year. The grand total of $13 billion was reached in part thanks to a hefty sum of $1.4 billion from Chinese investors, who were all but absent in 2011.


GDP growth will hit 6.9% in 2013 according to estimates, on the back of figures above the 6% mark over the past two years. The African Economic Outlook (AEO) estimates growth in 2014 of 7%, putting the country on a gas-fuelled growth curve. Per capita GDP is growing at a slower rate, expanding by 3.3% in 2012 with AEO estimates of 3.8% for 2013 and 3.9% for 2014, as a result of a swelling population that has left many at arm's length of the country's rising economic fortunes. Three-quarters of the population are engaged in the country's agriculture sector, unemployment stands at over 10%, and underemployment is chronic. Inflation has been easier on prices over recent months, the consumer price index (CPI) declining by 0.5% month on month in June, putting 1H2013 CPI inflation on a 9.4% average year on year. By end-2013, the figure is expected to reach 8%, down from 16% in 2012.

Tanzania's services sector, driven by the robust telecoms, banking, and trade sub-sectors, represents 47.5% of GDP, while industry, backed up by the construction, mining, and manufacturing sub-sectors, accounts for 25.3%. Agriculture, which employs 75% of the population, represents the remaining 27.2%, despite being dominated by small-scale farms and low mechanization and irrigation rates, putting it at risk from adverse weather conditions and fluctuating commodity prices.

With approximately 5% of the population engaged in the industrial complex (the remaining 20% work in services), it is down to the government to ensure the equal distribution of wealth once the gas begins to flow. According to Sospeter M. Muhongo, Minister of Energy & Minerals, the road ahead is a long one. “Our objective for the next two years is minimum growth of 8%. Economically, while this would actually result in a reduction in poverty, it would be insufficient to eradicate it," he stated, suggesting that if the country is to achieve the levels of growth it needs, a figure he puts at over 10%, then a reliable source of energy is crucial. Plagued by an insufficient power supply, expanding the generation matrix to 3,000 MW within three years, up from the current 1,438.24 MW, as planned, could go a long way to improving the fortunes of the rural poor. In that respect, it seems that gas will serve not just to fill state coffers, but also to generate much-needed electricity.


Tanzania is active on the international trade scene, playing a key role in the East African Community (EAC) and the Southern African Development Community (SADC). While currently implementing the EAC Common Market Protocol, it is also playing a part in the development of the SADC's own common market.

Exports grew to $8.7 billion in 2012, up by 17.4% over the $7.4 billion in 2011. Imports were also up, albeit more modestly, by 5.3% in 2012, to $12.7 billion from $12 billion in 2011. This resulted in a narrowing of the CAD by 13.6% to $3.44 billion, leaving it in double figures as a percentage of GDP.

Tanzania's largest export is gold, representing as it does 36.7% of exports in 2012. Despite a fall in international gold prices, exports of the shiny stuff still brought in $2.1 billion in 2012, down just a touch from $2.2 billion in 2011. While increasing production will offset a further drop in price, the metal's share of the limelight will be diminished as exports in non-gold categories are ramped up—AEO suggests gold's share in total exports could drop to just 27.9% by 2016.

The second largest export category is tobacco, at 5.9% in 2012, followed by coffee and fish and fish products. The country's major import products include oil-related goods (32.8%), machinery (16.68%), transport equipment (11.22%), and building materials (7.8%).

In 1Q2013, Tanzania's CAD widened by 19.6% year on year to $1.26 billion as a result of higher imports and diminished exports, although robust FDI gains make the gap less of a concern in the short to medium term.


FDI is to grow 10% to $13 billion in 2013, with China replacing the US as the country's fourth-largest investor, having been absent from the top-10 list in 2011. Investments from Chinese sources totaled $1.4 billion, while flows from the US were worth $950 million. Projects with China include a $3 billion deal to develop coal and steel projects with Sichuan Hongda Co., and a 500-kilometer gas pipeline from Mtwara to Dar es Salaam at a cost of $1.2 billion to be funded by the Export-Import Bank of China.

Atop the investment podium for the year was the UK, contributing $4.7 billion through firms including multinational oil and gas company BG Group and brewer SABMiller, while India took silver with $1.8 billion and Kenya claimed bronze with $1.5 billion.

The upcoming period is likely to be positive for Tanzania from an FDI perspective, with prospects for improved electricity generation likely to improve the investment environment in the medium term. KPMG estimates that FDI will increase by an average of 8.9% over the 2013-2014 period, with the net inflow to GDP rate rising above the 4% level.

On the verge of increased government revenues, positive in light of a budget deficit at 9.1% of GDP in 2012, Tanzania must act carefully if its wider population is to see the benefits of the country's newfound natural resources. With so much of the population still engaged in agricultural activities, improving infrastructure, and therefore opportunity, is vital if growing population can be reconciled with profits at the big business level.