Download THE RISING STAR OF EAST AFRICA

Tanzania
THE RISING STAR OF EAST AFRICA
Eight reasons why we're at the start of the great
Tanzanian growth story
SUMMARY
The following is a summary of over 100 studies and reports to
demonstrate why international, regional, and local investors
should take a serious look at investing in Tanzania for the
medium and long-term.
1
Tanzania has excellent market size and access.
2
Tanzania is safe and peaceful.
3
Tanzania's economic growth is accelerating.
4
Tanzanian industrial developments have a synergistic
effect on growth.
5
Tanzania is fiscally strong for its level of development.
6
Tanzania is open and welcoming new investment
7
Smart money continues to flow into Tanzania.
8
Tanzania is overcoming its challenges.
Contact [email protected] to request source
files supporting our investment thesis
1
TANZANIA HAS EXCELLENT
MARKET SIZE AND ACCESS
Tanzania has a population of 49 million people, is 18th fastest growing country by population, home
to the fastest growing city in Africa, and is surrounded by five land-locked nations.
Tanzania is the 5th most youthful nation in the world with 94% of the population of working age and a
national median age of 17 years.
Tanzania is a member of both the SADC and EAC trading unions allowing tax free trade to access to
over 420 million people combined in Eastern and Southern Africa.
Growth typically occurs following infrastructure development, in the past few years Tanzania has
built roads facilitating highway transportation across all regions of the country.
The Dar es Salaam port is the second largest port in the region and upgrades are anticipated to
increase cargo volume by 80% to make it one of the world's most modern and efficient ports.
International investors are constructing a $10 Billion USD on a second port in Bagamoyo, 90 kilometers
away from the port of Dar es Salaam and investing $9 billion USD in projects for port-to-railway to
transform the country into a regional transport hub.
In addition, the Chinese and Tanzanian governments are building a logistics center near Dar es
Salaam designed to increase trade infrastructure and access to landlocked markets.
Donors invest approximately $550 million per year to match billions of private investment into additional
infrastructure and development across all sectors.
In addition to its linkages with its neighbors and investors, English is an official language in
Tanzania common to over 500 million people globally.
2
TANZANIA IS SAFE
AND PEACEFUL
Tanzania is judged as one of the most peaceful countries in Africa and with peaceful elections in October
2015, the country has matched the Africa-wide record for number of successful transitions of power at 5 since
unified Tanzanian elections began in 1992.
Tanzania’s commercial and financial center is named Dar es Salaam or "place of peace" and has
recently won Africa-wide awards for urban development.
3
TANZANIA IS SAFE
AND PEACEFUL
Tanzania's GDP is currently $36.6 billion or $1,900 per capita with an incredibly low base and largely
uncounted informal sector. GDP was rebalanced for accuracy in 2014 to reflect a 33% higher value,
the highest revaluation in East Africa.
Tanzania’s GDP growth rate was 8.2% in Q3 of 2014, faster than China at the time, and is on average
growing 7% per year since 2012 and projected to increase beyond 2016.
By 2019, Tanzania’s GDP is expected to almost double in size to $57.4 billion.
Some projections suggest the country will grow at over 15% per annum for the next 12 years, making it the
fastest growing country in the world.
4
TANZANIA'S EMERGING
INDUSTRIES HAVE A SYNERGISTIC
EFFECT ON GROWTH
Key sectors of the Tanzanian economy foster increased development and additional growth.
From 2010 to 2015, 2 million jobs were created, surpassing the stated goal of 1 million jobs, the
majority in the private sector.
Natural Gas: Tanzania has discovered over 50 trillion cubic feet of natural gas, enough to power 50 million
Americans for 15 years or provide energy for over 3,500 years for the entire nation of Tanzania at current
consumption levels. The first of these new gas discoveries is has commissioned with several others
coming online beyond 2022.
Agriculture: Fertilizer development from natural gas is in development to support 80% of the country's
workforce involved in agriculture. Tanzania has access to 37% more fresh water than Uganda and triple the
amount of fresh water than Kenya can access. Technological solutions being adopted can reduce
post-harvest losses by as much as 40%.
Construction: Only 27% of the country is urbanized with current demand for 3.8 million homes, growing at
200 thousand annually. Less than 10% of the property in the country has been surveyed and included
in the national land registry. However the government has launched a new private-public comprehensive
land survey that will increase this scope, with a complete accounting of land by 2017.
Cement: Seven new cement factories will be built in the near future, projected to double the amount of
cement produced to 8.3 million tonnes. One of the new factories to be built includes a $500 million USD
investment by Nigeria’s Dangote Cement scheduled to begin producing in August 2015. Tanzania is
projected to soon be a net exporter of cement.
Communications: At the end of 2015 there were nearly 40 million mobile phone subscribers in Tanzania.
Internet users increased to 17 million which represents a 52% increase from 2014. Tanzania has some
of the lowest mobile phone rates in Africa and it's been shown that lower communications costs have a
positive effect on economic growth.
4
TANZANIA'S EMERGING
INDUSTRIES HAVE A SYNERGISTIC
EFFECT ON GROWTH
Financial Services: Tanzania has over 50 licensed banks. The IPO of the newest entrant into the banking
sector was oversubscribed as projected. Tanzanian banks have make significant record profits each year.
Corporate initiatives to increase bank deposits have generated a deposit increase of 700%.
Mobile Money: Tanzania leads the world as the first country to reach mobile money operability by having
mobile money transfers across all service providers. By the end of 2014, 41 million active mobile
money accounts were reported in Tanzania, generating $1.7 billion monthly in transactions, an amount
that reflected 54% of the total 2013 GDP of Tanzania. As a result, mobile money providers have
been making record profits. Payment providers are growing rapidly creating 200,000 new jobs from a
single payments provider. Mobile money compounds economic growth by saving consumers $2
billion USD annually throughout the continent.
Mining: The country has diverse mineral deposits, including precious minerals such as gold, diamonds,
tanzanite and rubies as well as industrial minerals such as iron, tin, copper, nickel, cobalt, lead,
limestone, titanium, vanadium, uranium, phosphate and gypsum. Tanzania has a transparent process
of granting mineral rights as well as accessible geological data. Recently, mining companies such as
Ashanti Anglo-Gold, and Barrick Gold have started investing in large-scale mines in Tanzania. Tanzania
has the second largest gold reserves in Africa; with over 130 million tonnes of gold reserves under
Tanzanian soil worth over $4 trillion USD at current market prices. Tanzania’s mining industry has grown
at a rate of 7.7% between 2011 and 2015 with high potential for strong growth in the future.
Tourism: Tanzania is home to Mount Kilimanjaro, the tallest peak in Africa; the great wildebeest
migration, tens of thousands of acres of national safari parks; and the beautiful beaches and spices of
Zanzibar. Tourism is Tanzania's largest export sector bringing in over $2 billion USD of mostly hard
currency into the country and growth 7% each year. Over 40% of Tanzania’s land has been designated
as protected areas, which include forest reserves, game reserves, marine reserves, national parks and
game-controlled areas. It has an abundance of diverse wildlife and 7 UNESCO World Heritage sites that
appeal deeply to tourists. Tanzania’s general tourism and air travel infrastructure have been
expanded and upgraded to international standards. Tourism is expected to grow 8 fold from 1 million
visitors per annum at present to 8 million visitors per annum by 2025 based upon support from the
World Bank.
Informal Sector: Comprising over 40% of the economy and challenging to measure, unregistered
business activity in areas such as construction, transport, tuition, medical services, recreational halls,
animal husbandry, milling business, entertainment and urban agriculture, trading, and others, make
up Tanzania's informal sector. Tanzania's informal sector ranks in the top 3 by size in Africa. Over $10
million USD trades each day in Dar es Salaam's largest wholesale and retail market.
5
TANZANIA IS FISCALLY STRONG
FOR ITS LEVEL OF DEVELOPMENT
The Bank of Tanzania is effective in managing the economy with an inflation rate of only 5.6% down from
7.9% in 2013 and from a high of 20% in the aftermath of the recent global recession.
Tanzania's debt to GDP ratio is below 40% in 2015 down from over 63% in 2007 and significantly below the
global average.
Tanzania is expecting to join over 120 nations in receiving a credit rating in 2016 by Moody’s and Standard
and Poor's. Once the credit ratings have been released, Tanzania will begin a Eurobond issuance enabling
foreign investors access to Tanzanian sovereign debt for the first time.
Tanzanian's international bond issuance is likely to be successful as government bonds issued locally
continue to be oversubscribed.
6
TANZANIA IS OPEN AND
WELCOMING NEW INVESTMENT
The Dar es Salaam Stock Exchange is one of 29 bourses amongst the 54 African nations and lists
equities, corporate bonds, government bonds, municipal bonds, REITs, and derivatives.
In equities, the Tanzania Share Index outperformed all of Bloomberg’s African gauges, by gaining 50
percent for investors in 2014. Restrictions limiting foreign ownership were lifted in late 2014. This reform
grants Tanzanian companies greater access to international capital markets, spurring more IPOs and stable
growth.
The DSE is encouraging increased local participation through adoption of new innovative technology
for acquiring shares of companies via mobile phone, a first in Africa.
Tanzanian pension funds have $5.4 billion under management but only 8% in public equities markets
with significant opportunities for additional uptake.
Historically all corporate bonds have been oversubscribed and almost all government bonds are
oversubscribed.
Tanzania has entered several bilateral agreements on the protection of financial investment and double
tax treaties with several countries. It is a signatory of the International Centre for Settlement of
Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA).
7
SMART MONEY CONTINUES
TO FLOW INTO TANZANIA
Tanzania received the most Foreign Direct Investment in 2013 of the countries in the East Africa
Community totaling 1.9 billion USD and 12.7 billion USD in FDI stock incorporating profits to foreign
corporations.
The Carlyle Group has partnered with Standard Chartered and Pembani Remgro to make a minority
investment of $210 million USD in the Export Trading Group based in Tanzania.
Nigeria’s Dangote Cement is building a 500 million USD cement-producing factory, with a 3 million tonne
production capacity anticipated.
8
TANZANIA IS OVERCOMING
ITS CHALLENGES
Tanzania is making great strides in reducing poverty as much as 1% reduction per year despite
increasing population growth. Urban poverty has reduced 70% in the past 5 years.
VAT tax collection has increased 40% due to the introduction of fiscal devices for VAT measurement and
collection. In late 2013, the Tanzania Revenue Authority launched a new payment system utilizing mobile
phones which increased revenue collection dramatically in a short period of time.
While many challenges remain, Tanzania’s ease of trading internationally has increased, and by all
measures is less time-consuming and costly than the average measures for its Sub-Saharan African
peers.
Tanzanian institutions are working to reduce bureaucracy to increase ease of investment including
the use of an online investment window for company registration.
Despite this, Tanzania remains one of the most challenging places in the world to do business more suitable
for long-term investors than those seeking short term gains.
HOW TO INVEST IN TANZANIA?
Statera Capital assists multi-lateral, donor, and private investors seeking to
participate in what we foresee is a unique time in the history of Tanzania to invest.
We welcome collaboration with investors foreign and domestic on projects valued
above $5 million USD.
Statera Capital is a globalization advisory and impact investment banking firm with
a focus on frontier markets and a specialization in Sub-Saharan Africa. We provide
strategic, program management,and acquisition advisory services to both US and
Western European companies expanding operations into the developing world
and companies from the developing world expanding into the US market. We
develop and finance projects and business expansions on projects in our key
sectors. Clients of Statera Capital have included HSBC, Credit-Suisse, Chartis
Insurance, JP Morgan Chase, GMAC, Pfizer, Johnson & Johnson, as well as several
innovative mid-sized firms.
CONTACT:
David L. Ross | Managing Director | Statera Capital Limited
Global Phone: +1 (646) 450 - 0357 | Tanzania Phone: +255 767 144 608
Email: [email protected] | Web: www.stateracapital.com