Tanzania’s sustainable future - the investment opportunity

For many in Africa, it may be inconceivable to live in a city of more than 10m (million) people, a megacity. The World Economic Forum projects the existence of 47 megacities worldwide by 2050. Perhaps surprising to many Tanzanians, Dar es Salaam is expected to be the biggest of the next ten emerging megacities, reaching an estimated population of 16.4m. Some of these fastest growing cities struggle with poor sanitation, high pollution and ecological threats amongst other challenges; but there are opportunities to improve lives through sustainable urban development, new technologies and efficient use of resources.

The United States of America Strategy (the Strategy) towards Sub Saharan Africa released in August 2022 acknowledges the importance of African contributions and leadership in confronting this era’s defining challenges. It recognizes that the African Continental Free Trade Area (AfCFTA), once fully implemented, will be the fifth-largest economy in the world with a potential combined gross domestic product of more than $3.4 trillion. The “Support Sustainable Development and Resilience” component of the Strategy promotes approaches that are environmentally sustainable, enhance food security, build social inclusion and gender equity.

During the recent United States (US) Africa Business Forum (USABF), sustainable growth featured heavily in the new commitments announced of $15.7bn (billion). Those involving Tanzania include a $1bn investment into the Kabanga Nickel project using technology considered to have a significantly lower environmental impact, Mohammed Enterprises Tanzania Limited Group $100m anchor commitment towards an African food security fund, United States Agency for International Development (USAID) $39m Kilimo Tija program for economic opportunities in horticulture market systems and the USAID partnership with TradeMark East Africa to invest $25m in trade enabling infrastructure and expanded access to trade finance leveraging $90m of private capital.

On 20 December 2022, the World Bank approved $775m financing programs for Tanzania, $500m credit for the first Inclusive and Resilient Growth Development Policy Financing and $250m credit plus $25m grant for the Maternal and Child Health Investment Program.

“Invest in Tanzania’s Sustainable Future” was the theme of Tanzania’s first ever Sustainable Development Goals (SDGs) Investment Forum (held on 30 November 2022) during which the Tanzania SDG Invest Map (the Map) was launched. The Map is a market intelligence tool that identifies Investment Opportunity Areas (IOAs) where national sustainable development needs, government policy and market demand meet. For Tanzania, 13 IOAs across five priority sectors have been identified. Nine of the 13 IOAs have an indicative return of over 20%, and five of the IOAs with an estimated market of over $100m (two of which exceed $1bn).

Investors when considering investment opportunities need to consider not just the rate of return but also the need to advance the sustainability agenda in a transparent way. 

One pathway to sustainability transparency is given by the SDG Impact (a United Nations Development Program initiative to catalyze investment to achieve the SDGs), which has developed global standards for how investors and enterprises manage and measure their impacts on sustainable development and the SDGs along four interconnected themes – strategy, management approach, transparency and governance. Locally, the National Board of Accountants and Auditors has mandated all entities to discuss environmental, social and governance matters within the directors’ report published together with the financial statements while the Dar es Salaam Stock Exchange rules encourage listed companies to disclose their sustainability policies, including mitigation of risks, performance data and other material information which deepens stakeholders’ understanding of corporate performance. 

Globally, providers of capital are increasingly directing funds towards sustainable projects. Examples closer to home include the African Development Bank (AfDB) Green Bond program, Alliance for Green Infrastructure Africa Fund by the AfDB, CRDB Bank Plc Green Climate Fund and NMB Bank Plc Social Bond Framework.

Overall, it is a great time to consider investing in sustainable projects in Tanzania but to do this effectively there is a need to meet the ever-increasing expectations on sustainability transparency.

By Patrick Kiambi, Partner and Assurance leader with PwC Tanzania.