With a significant percentage of funding slated for infrastructure developments, construction industry bosses and investors are gearing up for a busy future.

With growth forecast well into the future, construction will necessarily precede other sectors in creating the spaces and infrastructure for new economic activities. In economic terms, construction-related activities contributed 7.3% to national GDP in 2013, while employing around 10% of the workforce in Tanzania, according to UNESCO. During the same year, the sector grew at an accelerated rate of 9.4%—up from 7.8% in 2012—and with the IMF predicting GDP growth to maintain of at least 7% through 2015, construction sector growth should maintain its lead as well. These numbers also reflect years of unprecedented growth as new houses have sprung up across the country, while roads and bridges have spurred strong demand for steel and concrete. This construction is taking place across the economic spectrum. A housing deficit is spurring demand for residential construction, while infrastructure for offshore gas reserves will require attention from the sector. Tanzania is also launching its first Eurobond offering in 2015-2016, which could raise up to $1 billion. With a significant percentage of this funding slated for infrastructure developments, construction industry leaders are gearing up for more projects through at least 2019.


The construction sector is regulated by the Ministry of Works (MOW), which is tasked with developing an efficient and self-sustaining construction industry that meets the country's requirements for private sector construction, rehabilitation and maintenance of civil works. The MOW also ensures that government buildings are properly constructed and maintained, as well as making sure that necessary equipment and vehicles are available to the construction sectors at large.

The Tanzania Roads Agency (TANROADS) operates under the MOW and, as its name implies, handles the development and maintenance of arterial, and regional, roads. Meanwhile, urban, district, and feeder roads are the responsibility of the Prime Minister's Office, local governments, and regional administrations.

The housing sector falls under the auspices of the Ministry of Lands, Housing, and Settlement Development—which works with the National Housing Corporation (NHC). The NHC is responsible for the allocation of land, housing, and other building services in the country. The NHC is the largest real estate developer in the Tanzanian market, providing spaces for commercial and residential purposes. Since 1994, the corporation's portfolios have been divided into profit centers, which are income generating, self-sustaining directorates, and cost centers, which play a supportive role. This variance allows the NHC to engage in an array of business.


With millions of Tanzanians residing in the hinterlands, improving the country's network of roads is a national priority. According to UN data, roads carry 90% of passenger travel and 80% of freight traffic, making their maintenance and expansion a critical part of development. Here, Tanzania faces the daunting task of modernizing and expanding its 92,000-kilometer road network. UNESCO estimates that only 10% of the country's roads are paved. However, Tanzania is on the right track. It is estimated that 77% of paved roads are in good condition, whereas only 8% are considered to be in poor shape. To improve these numbers, the government has stepped up funding for the Roads Fund from TZS47 billion in 2000/1 to TSZ500 billion in 2013/14. Overall, for the 2013/14 fiscal year, a total of TZS1.54 trillion was disbursed for the construction and rehabilitation of roads.


With so much resting on meeting development demands, demand for concrete has surged in recent years. Tanzania's cement industry is dominated by four major players: Afrisam's subsidiary Tanga Cement Company, Heidelberg's subsidiary Tanzania Portland Cement (currently the country's biggest producer with a production capacity of 1.4 million tons per annum), LaFarge's subsidiary Mbeya Cement Company, and ARM Cement Company. By 2016, Tanzania's cement production capacity is predicted to more than double from a current 3.75 million tons to over 8 million tons per year. With current demand already at over 4 million tons per year, compound annual growth rates have been rising at around 10% annually. To meet this demand, the country is importing excess demand in the form of clinker and finished product; however, as new production comes online, Tanzania is expected to transform into a net exporter.

ARM is nearing completion of a new clinker plant in Tanga that will have a production capacity of 1.2 million tons, which will add another 750,000 tons of cement capacity. Tanzania Portland Cement is also finishing construction on a 600,000 ton-per-year facility at Wazo Hill. Mbeya Cement also plans to increase capacity by 350,000 tons per year. While these projects are sure to solidify the status of established firms, new players are also entering the market, lured by impending infrastructure projects and the huge volume they entail. India-based Banco Products is investing $65 million in its cement plant in Tanzania, which targets the East African market. Lake Cement is in the process of commissioning a greenfield cement plant with an initial capacity of 500,000 tons per annum. In 2013, Nigeria-based Dangote Cement started construction of a 3 million ton gas fired cement plant in Mtwara that is expected to come online in late 2015. Finally, Mamba Cement has announced that it will break ground on a 1 million ton capacity plant in the Pwani region. While these developments are a sign of increasing completion in years to come, demand is expected to increase by almost 4.5 million tons by 2016 alone, and even more investment in the sector may be in the works.


Steel production is set to emulate the trajectory of the construction sector as bridges and high-rises are added to Tanzania's man-made landscape. In August 2014, Kamal Steel Limited inaugurated a $200 million addition to its Chang'ombe plant in Dar Es Salam. At full capacity, the plant will have an 80 million ton annual capacity. The new plant is part of a strategy to meet current annual demand for over 300,000 tons of steel. In early 2014, East African Business Week reported that a joint venture company, Tanzania-China International Mineral Resources Limited (TCIMRL), would invest about $2 billion in an iron ore mine in Liganga, to be followed by a sponge-iron plant that would be set up in Ludewa District. The plant will use iron ore from Maganga Matitu and coal from Katewaka to produce sponge iron. At full capacity, the plant will produce 330,000 tons per annum, with a 45 MW captive power plant. This will allow producers to capitalize on the Ludewa District's vast iron ore reserves, which are estimated at 1.2 billion tons.

Despite all the positive developments over previous years, Tanzania still faces challenges that must be addressed for growth to meet the country's long-term development goals. Most pressing is a shortage of technical skills, which has led to instances of unsafe construction and cost overruns. Banks must also improve their relationships with the construction sector. According to a UN report, financial institutions remain on poor terms with the construction industry, and loans are often extended on unfavorable terms and at insufficient amounts. The business climate must also evolve. Late payments and poor invoicing are driving up the cost of loans and slowing financial cycles. Moreover, transparency must be increased to attract foreign investors who are wary of poorly defined rules of the game. Practices that sufficed for regional economies are incompatible with the international markets that Tanzania is integrating with. The good news is that President Kikwete and his administration are taking these matters seriously, and corruption is being tackled on all levels. As international business practices become the norm in Tanzania, these reforms will pay off for Tanzanians.