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Ethiopia

Executive Summary

Ethiopia is the second most populous country in Africa after Nigeria, with a growing population of over 110 million, approximately two-thirds of whom are under age 30. A reform-minded government, low-cost labor, a national airline with over 100 passenger connections, and growing consumer markets are key elements attracting foreign investment.

Ethiopia faced several economic challenges in 2021 related to the COVID-19 pandemic, a drought in the southern and eastern lowlands, political tension and unrest in parts of the country, and an ongoing conflict in the north. Ethiopia’s macroeconomic position was characterized by over 30 percent inflation, meager foreign exchange reserves, a large budget deficit, and plummeting credit ratings. The IMF estimated GDP growth at 2.0 percent in 2021, a significant drop from 6.0 percent in 2020 and double-digit growth for much of the past decade. During 2021, the Government of Ethiopia (GOE) made the first revisions in over 60 years to the commercial code, awarded a spectrum license to a private telecom operator, and took initial steps toward privatization of other state-owned sectors, including the telecom and sugar industries.

Ethiopia is a signatory of the Paris Agreement on Climate Change, and it has a climate resilience green economy strategy (CRGES) to build a green and resilient economy. Ethiopia has also formulated climate-resilient sectoral policies and strategies to provide specific strategic interventions in areas such as agriculture, forestry, transport, health, urban development, and housing.

In 2020-21, the GOE provided liquidity to private banks to mitigate the impact of COVID-19 on businesses, to facilitate debt restructuring and to prevent bankruptcies and it also injected liquidity into the hotel and tourism sector through commercial banks. The GOE planned to allocate roughly $1 billion U.S. dollars during the same period for medical equipment purchases, healthcare worker salaries, quarantine and isolation facilities, and the procurement of disinfectants and personal protective equipment.

The challenges of doing business in Ethiopia remain daunting. Companies often face long lead-times importing goods and dispatching exports due to logistical bottlenecks, corruption, high land-transportation costs, and bureaucratic delays. An acute foreign exchange shortage (the Ethiopian birr is not a freely convertible currency) impedes companies’ ability to repatriate profits and obtain investment inputs. The lack of a capital market hinders private sector growth. Export performance remains weak, as the country struggles to develop exports beyond primary commodities (coffee, gold, and oil seeds) and the Ethiopian birr remains overvalued. Ethiopia is not a signatory of major intellectual property rights treaties such as the Paris Convention for the Protection of Industrial Property and the Madrid System for the International Registration of Marks.

Insecurity and political instability associated with various ethnic conflicts – particularly the conflict in northern Ethiopia – have negatively impacted the investment climate and dissuaded foreign direct investment (FDI).

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 87 of 180 https://www.transparency.org/en/countries/ethiopia 
Global Innovation Index 2020 126 of 131 https://www.globalinnovationindex.org/gii-2018-report#  
U.S. FDI in partner country (M USD, stock positions) 2021 N/A https://apps.bea.gov/international/factsheet/factsheet.html#411 
World Bank GNI per capita 2020 $890 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD  

1. Openness To, and Restrictions Upon, Foreign Investment

2. Bilateral Investment Agreements and Taxation Treaties

Ethiopia is a member of the Multilateral Investment Guarantee Agency (MIGA), and it has bilateral investment and protection agreements with Algeria, Austria, China, Denmark, Egypt, Germany, Finland, France, Iran, Israel, Italy, Kuwait, Libya, Malaysia, the Netherlands, Sudan, Sweden, Switzerland, Tunisia, Turkey, and Yemen. Other bilateral investment agreements have been signed but are not in force with Belgium/Luxemburg, Brazil, Equatorial Guinea, India, Morocco, Nigeria, South Africa, Spain, the United Kingdom, and the United Arab Emirates. Ethiopia signed a protection of investment and property acquisition agreement with Djibouti. A Treaty of Amity and Economic Relations, which entered into force in 1953, governs economic and consular relations with the United States.

There is no double taxation treaty between the United States and Ethiopia. Ethiopia has taxation treaties with fourteen countries, including Italy, Kuwait, Romania, Russia, Tunisia, Yemen, Israel, South Africa, Sudan, and the United Kingdom.

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

Ethiopia’s roughly 40 state-owned enterprises (SOEs) dominate major sectors of the economy. There is a state monopoly or state dominance in telecommunications, power, banking, insurance, air transport, shipping, railway, industrial parks, and petroleum importing. SOEs have considerable advantages over private firms, including priority access to credit, foreign exchange, land, and quick customs clearances. While there are no conclusive reports of credit preference for these entities, there are indications that they receive incentives, such as priority foreign exchange allocation, preferences in government tenders, and marketing assistance. Ethiopia does not publish financial data for most state-owned enterprises, but Ethiopian Airlines and the Commercial Bank of Ethiopia have transparent accounts

Ethiopia is not a member of the Organization for Economic Co-operation and Development (OECD) and does not adhere to the guidelines on corporate governance of SOEs. Corporate governance of SOEs is structured and monitored by a board of directors composed of senior government officials and politically affiliated individuals, but there is a lack of transparency in the structure of SOEs.

8. Responsible Business Conduct

Some larger international companies in Ethiopia have introduced corporate social responsibility (CSR) programs. Most Ethiopian companies, however, do not officially practice CSR, though individual entrepreneurs engage in charity, sometimes on a large scale. There are efforts to develop CSR programs by MOTRI in collaboration with the World Bank, U.S. Agency for International Development, and other institutions.

The government encourages CSR programs for both local and foreign direct investors but does not maintain specific guidelines for these programs, which are inconsistently applied and not controlled or monitored. The Addis Ababa Chamber of Commerce also has a corporate governance institute, which promotes responsible business conduct among private business enterprises.

The GOE does not publish data on the number of children who are victims of forced labor. The Ethiopian Central Statistics Agency’s 2015 National Child Labor Survey and 2021 Labor Force and Migration Survey did not assess forced labor.

On January 1, 2022, the U.S. Trade Representative (USTR) announced that due to human rights concerns related to the conflict in northern Ethiopia, Ethiopia no longer met the eligibility criteria for African Growth and Opportunity Act (AGOA) trade preferences. Ethiopia will continue to undergo AGOA’s annual review process and may regain eligibility once it meets the criteria.

The 2020 Investment Law requires all investors to give due regard to social and environmental sustainability values including environmental protection standards and social inclusion objectives. The 2002 Environmental Impact Assessment Proclamation number 299/2002 mandates any government agency issuing business licenses or permits for investment projects ensure that federal or relevant regional environmental agencies authorize the project’s implementation. In practice, environmental laws and regulations are not fully enforced due to limited capacity at government regulatory bodies.

In 2014, the Extractive Industry Transparency Initiative (EITI) admitted Ethiopia as a candidate-member. In 2019, EITI found Ethiopia made meaningful progress in implementing EITI standards. The Commercial Code requires extractive industries and other businesses to conduct statuary audits of their financial statements at the end of each financial year.

9. Corruption

The Federal Ethics and Anticorruption Proclamation number 1236/2020 aims to combat corruption involving government officials and organizations, religious organizations, political parties, and international organizations. The Federal Ethics and Anti-Corruption Commission (FEACC) is accountable to parliament and charged with preventing corruption among government officials by providing ethics training and education. MOJ is responsible for investigating corruption crimes and prosecutions. The Office of the Ombudsman is responsible for ensuring good governance and preventing administrative abuses by public offices.

Transparency International’s 2022 Corruption Perceptions Index, which measures perceived levels of public sector corruption, rated Ethiopia’s corruption at 39 (the score indicates the perceived level of public sector corruption on a scale of zero to 100, with the former indicating highly corrupt and the latter indicating very clean). Its comparative rank in 2021 was 87 out of 180 countries, a seven-point improvement from its 2020 rank. In 2020 the American Chamber of Commerce in Ethiopia polled its members and asked what the leading business climate challenges were; transparency and governance ranked as the 4th leading business climate challenge, ahead of licensing and registration, and public procurement.

Ethiopian and foreign businesses routinely encounter corruption in tax collection, customs clearance, and land administration. Many past procurement deals for major government contracts, especially in the power generation, telecommunications, and construction sectors, were widely viewed as corrupt. Allegations of corruption in the allocation of urban land to private investors by government agencies are a major source of popular discontent in Ethiopia.

Ethiopia is not a party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. Ethiopia is a signatory to the African Union Convention on Preventing and Combating Corruption. Ethiopia is also member of the East African Association of Anti-Corruption Authorities. Ethiopia signed the UN Anticorruption Convention in 2003, which was eventually ratified in November 2007. It is a criminal offense to give or receive bribes, and bribes are not tax deductible.

10. Political and Security Environment

Ethnic conflict – often sparked by historical grievances or resource competition, including land disputes – has resulted in varying levels of violence across Ethiopia. According to the 2022 Global Humanitarian Overview, there were an estimated 4.2 million Internally Displaced Persons (IDPs) in Ethiopia at the end of 2021, with high levels of need also identified among non-displaced people living in conflict-affected areas. The primary cause of displacements was conflict and insecurity, followed by drought and seasonal floods and flash flooding.

Most significantly, in early November 2020, a conflict broke out between a regional political party in the Tigray Region and the federal government. The conflict quickly enlarged, with Eritrean troops present in parts of Tigray Region, and Amhara Region forces controlling much of Western Tigray. The conflict in northern Ethiopia has led to many deaths, widespread displacements, extensive destruction of infrastructure, widespread gross human rights violations, gender-based violence, a vast reduction in public services, and widespread hunger.

Insecurity, often driven by ethnic tensions, persists in many other areas, notably in the southern and western Oromia Region; eastern Southern Nations, Nationalities, and People’s Region; and in the Hararges on the border of the Somali Region. In western Oromia, the Oromo Liberation Army-Shane and other unidentified armed groups have intensified attacks against public and local government officials; this violence has spilled over into other parts of Oromia. In far western Ethiopia, ethnic violence and clashes in Benishangul-Gumuz Region have continued throughout 2021 and into early 2022, leaving hundreds dead and hundreds of thousands displaced. Amhara has experienced altercations in 2022 between regional security forces and youth militias.

When Prime Minister Abiy came to power in 2018, political space opened significantly, although it has since regressed especially after the government declared a State of Emergency in November 2021. While the State of Emergency was lifted in February 2022, during its implementation thousands of people, mostly of Tigrayan ethnicity, were arbitrarily detained and freedom of the press was significantly curtailed. Constitutional rights, including freedoms of assembly and expression, are generally supported at the level of the federal government, though the protection of these rights remains uneven, especially at regional and local levels. While opposition parties mostly operate freely, authorities, especially at the sub-national level, have employed politically motivated procedural roadblocks to hinder opposition parties’ efforts to hold meetings or other party activities; this was especially true in the run-up to the June 2021 general election.

The space for media and civil society groups has generally become freer following reforms instituted by Prime Minister Abiy. Still, journalism in the country remains undeveloped, social media is often rife with unfounded rumors, and government officials occasionally react with heavy-handedness, especially to news they feel might spur social unrest, resulting in self-censorship. Civil society reforms have spurred an expansion of the sector, though many civil society groups continue to struggle with capacity and resource issues.

11. Labor Policies and Practices

The national unemployment rate in February 2021 was 8 percent according to the 2021 Labor Force and Migration Survey. The unemployment rates for men and women were 5 and 11.7 percent, respectively. The law only gives refugees and asylum seekers the opportunity to work on a development project supported by the international community that economically benefits both refugees and citizens or to earn wages through self-employment. The law prohibits discrimination with respect to employment and occupations. However, there are legal restrictions on women’s employment, including limitations on occupations deemed dangerous and in industries, such as mining and agriculture. Women have fewer employment opportunities than men. Around 46.3 percent of people were working in the informal sector nationally according to the 2021 Labor Force and Migration Survey.

According to a 2020 International Labor Organization labor market assessment across all sectors, there was a generally higher demand for highly skilled workers, followed by medium-skilled workers; low-skilled workers had the lowest demand, especially in construction and manufacturing sectors. In terms of supply, there was generally an oversupply of low- and medium-skilled workers across major sectors such as agriculture, construction, and manufacturing. The Ministry of Labor and Skills, in collaboration with other international and national stakeholders, provides trainings for technical and vocational trainers.

The investment law gives employment priority for nationals and provides that any investor may employ duly qualified expatriate experts in the positions of “higher management, supervision, trainers and other technical professions” required for the operation of business only when it is ascertained that Ethiopians possessing similar qualifications or experiences are not available.

There is no restriction on employers adjusting employment to respond to fluctuating market conditions. The labor law allows employers to terminate employment contracts with notice when demand falls for the employer’s products or services and reduces the volume of work or profit. The law differentiates between firing and layoffs.

The national labor law recognizes the right to collective bargaining, but this right was severely restricted under the law. Negotiations aimed at amending or replacing a collectively bargained agreement must take place within three months of its expiration; otherwise, the prior provisions on wages and other benefits cease to apply. The constitution and the labor law recognize the right of association for workers.

Labor divisions are established at the federal and regional level. Employers and workers may also introduce social dialogue to prevent and resolve labor disputes amicably. The Ministry of Labor and Skills assigns councilors or arbitrators when a dispute is brought to the attention of the Ministry or the appropriate authority by either of the parties to the dispute.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount  
Host Country Gross Domestic Product (GDP) (M USD) 2020/21** $111.3 2020 $107.6 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country (M USD, stock positions) 2021 $741 N/A N/A https://apps.bea.gov/international/factsheet/ 
Host country’s FDI in the United States (M USD, stock positions) 2020 N/A N/A N/A http://bea.gov/international/direct_
investment_multinational_companies_
comprehensive_data.htm
 
Total inbound stock of FDI as % host GDP 2020-21** 10% 2020 2.22% www.worldbank.org/en/country 

*National Bank of Ethiopia and Ethiopian Investment Commission

**Ethiopian Fiscal Year 2020-21, which begins on July 8, 2020.

Table 3: Sources and Destination of FDI
Data regarding inward direct investment are not available for Ethiopia via the IMF’s Coordinated Direct Investment Survey (CDIS) site ( http://data.imf.org/CDIS ).

14. Contact for More Information

The U.S. Embassy’s main number is +251 011 130 6000.

Economic Officer, USEmbassyPolEconExternal@state.gov

Tanzania

Executive Summary

The United Republic of Tanzania achieved lower-middle income country status in July 2020, following two decades of sustained economic growth. The country’s solid macroeconomic foundation, sound fiscal policies, rich natural endowments, and strategic geographic position have fostered a diverse economy resilient to external shocks. This proved critical as the COVID-19 pandemic resulted in an economic downturn, though Tanzania avoided a more severe pandemic-induced recession.

The Government of Tanzania (GoT) welcomes foreign direct investment. In March 2021, President Samia Suluhu Hassan assumed the presidency following the death of President John Pombe Magufuli. In her first months in office, President Hassan promised reforms to improve the business climate and identified attracting foreign investment as a key priority. This commitment to increasing investment has continued throughout her tenure and economic issues remain at the forefront of the administration’s policies, strategies, and goals. President Hassan’s government has sought to engage stakeholders, including local private sector organizations and development partners, to improve the business climate and regain investor confidence. Consistent with this shift in rhetoric, significant changes to improving the business environment and investment climate have been made over the past year: improving the complex, and sometimes inconsistent, work permit issuance process for foreign workers and investors; streamlining Tanzania Investment Center (TIC) operations; disbandment of the special ‘Tax Task Force’ previously associated with heavy-handed and arbitrary tax enforcement; and strengthening regional trade cooperation.

However, while several laws have been reviewed, business climate legislative reforms have not yet been sweeping. There remain significant legislative obstacles to foreign investment such as the Natural Resources and Wealth Act, Permanent Sovereignty Act, Public Private Partnership Act, and the Mining Laws and Regulations. Despite pledges by President Hassan and senior government officials, these have yet to be resolved; rather, the administration has selectively eased the application of these laws. The primary business and investment challenges lie in tax administration; opening and closing businesses; inconsistent institutions compounded by corruption and requests for “facilitation payments” at many levels of government; late payment issues; and cross-border trade obstacles. In recent years, aggressive and arbitrary tax collection policies targeted foreign and domestic companies and individuals alike, and tough labor regulations made it difficult to hire foreign employees, even when the required skills were not available within the local labor force. Corruption, especially in government procurement, taxation, and customs clearance remains a concern for foreign investors, though the government has prioritized efforts to combat the practice.

The country’s drastic and improved shift in its acknowledgement of and approach to COVID-19 in 2021 led to the creation and implementation of a national COVID-19 response plan that addressed both health and socio-economic impacts of the pandemic. Tanzania has reengaged with the international community to support implementation of its robust national pandemic response plan with key pillars for improving data sharing, welcoming vaccines, and conducting vaccination outreach campaigns.

Sectors traditionally attracting U.S. investment include infrastructure, transportation, energy, mining and extractive industries, tourism, agriculture, fishing, agro-processing, and manufacturing. Other opportunities exist in workforce development, microfinance solutions, technology, and consumer products and services.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2021 87 of 180 http://www.transparency.org/research/cpi/overview 
Global Innovation Index 2021 90 of 132 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country (historical stock positions) 2020 USD 1,510 Million https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2019 USD 1,080 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

1. Openness To, and Restrictions Upon, Foreign Investment

3. Legal Regime

4. Industrial Policies

5. Protection of Property Rights

6. Financial Sector

7. State-Owned Enterprises

Public enterprises do not compete under the same terms and conditions as private enterprises because they have access to government subsidies and other benefits. SOEs are active in the power, communications, rail, telecommunications, insurance, aviation, and port sectors. SOEs generally report to ministries and are led by a board. Typically, a presidential appointee chairs the board, which usually includes private sector representatives. SOEs are not subjected to hard budget constraints. SOEs do not discriminate against or unfairly burden foreigners, though they do have access to sovereign credit guarantees.

Specific details on SOE financials and employment figures are not publicly available.

As of June 2019, the GoT’s Treasury Registrar reported shares and interests in 266 public parastatals, companies and statutory corporations ( view the most recent Treasury Registrar report ).

8. Responsible Business Conduct

The GoT’s National Environment Management Council (NEMC) undertakes enforcement, compliance, review, and monitoring of environmental impact assessments; performs research; facilitates public participation in environmental decision-making; raises environmental awareness; and collects and disseminates environmental information. Stakeholders, however, have expressed concerns over whether the NEMC has sufficient funding and capacity to handle its broad mandate.

There are no legal requirements for public disclosure of RBC, and the GoT has not yet addressed executive compensation standards. Dar es Salaam Stock Exchange (DSE) listed companies, however, must release legally required information to shareholders and the general public. In addition, the DSE signed a voluntary commitment with the United Nations Sustainable Stock Exchanges Initiative in June 2016, to promote long-term sustainable investments and improve environmental, social, and corporate governance. Tanzania has accounting standards compatible with international accounting bodies.

The Tanzanian government does not usually factor RBC into procurement decisions. The GoT is responsible for enforcing local laws, however, the media regularly reports on corruption cases where offenders allegedly avoid sanctions. There have also been reports of corporate entities collaborating with local governments to carry out controversial undertakings that may not be in the best interest of the local population.

Some foreign companies have engaged NGOs that monitor and promote RBC to avoid adversarial confrontations. In addition, some of the multinational companies who are signatories to the Voluntary Principles on Security and Human Rights (VPs) have taken the lead and appointed NGOs to conduct programs to mitigate conflicts between the mining companies, surrounding communities, local government officials and the police.

Tanzania is a member of the Extractive Industries Transparency Initiative (EITI) and in 2015 Tanzania enacted the Extractive Industries Transparency and Accountability Act, which demands that all new concessions, contracts and licenses are made available to the public. The government produces EITI reports that disclose revenues from the extraction of its natural resources.

Investors should be aware of human and labor rights concerns in the minerals and extractives sector, as well as agriculture. In May 2021 there was a high-profile USD 6 million out of court settlement for alleged breaches of human rights associated with third-party security operations at the Williamson Diamond Mine in Tanzania, which is 25% owned by the Government of Tanzania and 75% owned by Petra (UK). Petra (UK) agreed to pay claimants and committed to invest in programs dedicated to providing long-term sustainable support to the communities living around the Mine. Petra is also establishing a new and independent (“Tier 2”) Operational Grievance Mechanism (“OGM”). It will be managed by an independent panel and operate according to the highest international standards, as set out in the United Nations Guiding Principles on Business and Human Rights.

9. Corruption

Tanzania has laws and institutions designed to combat corruption and illicit practices. It is a party to the UN Convention against Corruption, but it is not a signatory to the OECD Convention on Combating Bribery. While former President Magufuli’s focus on anti-corruption translated into an increased judiciary budget and new corruption cases, corruption is still viewed as a major, and potentially growing, problem. There have been various efforts to mitigate corruption – including implementing electronic services to reduce the opportunity for corruption through human interactions at agencies such as the Tanzania Revenue Authority (TRA), the Business Registration and Licensing Authority (BRELA), and the Port Authority – however, the broader concerns surrounding corruption persist.

Tanzania has three institutions specifically focused on anti-corruption. The Prevention and Combating of Corruption Bureau (PCCB) prevents corruption, educates the public, and enforces the law against corruption. The Ethics Secretariat and its associated Ethics Tribunal under the President’s office enforce compliance with ethical standards defined in the Public Leadership Codes of Ethics Act 1995.

Companies and individuals seeking government tenders are required to submit a written commitment to uphold anti-bribery policies and abide by a compliance program. These steps are designed to ensure that company management complies with anti-bribery polices, though the effectiveness of this step is unclear.

The GoT is currently implementing its National Anti-Corruption Strategy and Action Plan Phase III (2017-2022) (NACSAP III) which is a decentralized approach focused on broad government participation. NACSAP III has been prepared to involve a broader domain of key stakeholders including GoT local officials, development partners, civil society organization (CSOs), and the private sector. The strategy puts more emphasis on areas that historically have been more prone to corruption in Tanzania such as oil, gas, and other natural resources. Despite the outlined role of the GoT, CSOs, NGOs and media find it increasingly difficult to investigate corruption in the current political environment.

The GoT’s anti-corruption campaign affected public discourse about the prevailing climate of impunity, and some officials are reluctant to engage openly in corruption. Some critics, however, question how effective the initiative will be in tackling deeper structural issues that have allowed corruption to thrive.

Transparency International (TI), which ranks perception of corruption in public sector, gave Tanzania a score of 39 points out of 100 for 2021 and 38 points for 2020. The Afrobarometer report estimates that between 2015 and 2019 the corruption increase in the previous 12 months was only 10 percent in Tanzania, the lowest in Africa. While for the same period, 23 percent of the respondents voted that Tanzania is doing a bad job of fighting corruption, again the lowest in Africa. Thirty-two percent of the respondents also noted that business executives are corrupt, up from 31 percent in 2015.

10. Political and Security Environment

Since gaining independence, Tanzania has enjoyed a relatively high degree of peace and stability compared to its neighbors in the region. Tanzania has held six national multi-party elections since 1995, the most recent in October 2020 which saw the ruling party’s candidates win by vast majorities. There were serious doubts about the credibility of the October 2020 elections on the mainland and Zanzibar, as there were for byelections in 2018 and 2019. Zanzibar, particularly experienced political violence several times since 1995, including in 2020.

Following the untimely death of President Magufuli (elected in October 2020) in March 2021, a peaceful transfer of power to Vice President Samia Suhulu Hassan took place in accordance with constitutionally mandated procedures. President Hassan continues to follow the CCM ruling party’s manifesto and has begun to lay out her own priorities, which include a reset on international relations and an effort to revive the private sector and attract foreign investment.

Tanzania is generally free from violent conflict, however, there are ongoing concerns about insecurity spilling over from neighboring countries, particularly religious extremism from the Tanzania-Mozambique border. There are a significant number of refugees from crisis and conflicts in neighboring Democratic Republic of the Congo and Burundi, and the continuing violence in neighboring Mozambique has resulted in Mozambican citizens seeking refuge across the border in southern Tanzania.

11. Labor Policies and Practices

Despite Tanzania’s large youth population, there is a shortage of skilled labor and gaps remain in professional training to support industrialization. Only 3.6 percent of Tanzania’s 20-million-person labor force is highly skilled. On the regional front, Tanzania, Uganda, Rwanda and Kenya have committed to the EAC’s 2012 Mutual Recognition Agreement of engineers, making for a more regionally competitive engineering market.

In Tanzania, labor and immigration regulations permit foreign investors to recruit up to ten expatriates with the possibility of additional work permits granted under specific conditions. The Non-Citizens (Employment Regulation) Act 2015 introduced stricter rules for hiring foreign workers. Under the Act, the Labor Commissioner must determine if “all possible efforts have been explored to obtain a local expert” before approving a non-citizen work permit. In addition, employers must submit “succession plans” for foreign employees, detailing how knowledge and skills will be transferred to local employees. The Act was amended in 2021, increasing the period of work permit validity from five years to eight years, with applications to be renewed every 24 months. The non-citizens quota shall not preclude the investor from employing other non-citizens provided that such employment complies with the employment ratio of one non-citizen to ten local employees and that the investor has satisfied the Labor Commissioner that the nature of the business necessitates such number of non-citizens. Foreign investors may be granted ten-year work permits which may be extended if the investor is determined to be contributing to the economy and wellbeing of Tanzanians. In April 2021, the government introduced a simplified online system of applying and issuing work permit which reduces the waiting period from 33 days to less than a week.

Mainland Tanzania’s minimum wage, which has not changed since July 2013, is set by categories covering 12 employment sectors. The minimum wage ranges from TZS 100,000 ($43.20) per month for agricultural laborers to TZS 400,000 ($172.79) per month for laborers employed in the mining sector. Zanzibar’s minimum wage is TZS 300,000 ($129.59).

Mainland Tanzania and Zanzibar governments maintain separate labor laws. Workers on the mainland have the right to join trade unions. Any company with a recognized trade union possessing bargaining rights can negotiate in a Collective Bargaining Agreement. In the public sector, the government sets wages administratively, including for employees of state-owned enterprises.

Mainland workers have the legal right to strike, and employers have the right to a lockout. The law restricts the right to strike when doing so may endanger the health of the population. Workers in certain sectors are restricted from striking or subject to limitations. In 2017, the GoT issued regulations that strengthened child labor laws, created minimum one-year terms for certain contracts, expanded the scope of what is considered discrimination, and changed contract requirements for outsourcing agreements.

The labor law in Zanzibar applies to both public and private sector workers. Zanzibar government workers have the right to strike as long as they follow procedures outlined in the Employment Act of 2005, but they are not allowed to join Mainland-based labor unions. Zanzibar requires a union with 50 or more members to be registered and sets literacy standards for trade union officers. An estimated 40 percent of Zanzibar’s workforce is unionized.

The Integrated Labor Force Survey of 2020/21 indicates that employment in the informal sector has increased from 22 percent in 2014 to 29.4 percent in 2020/21, with the most significant increase in rural areas. The informal sector operates outside of the legal system with no formal contracts, leaving workers vulnerable to precarious working conditions, limited social protection, and low earnings.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (USD) 2019 $63 billion 2020 $62.41 billion www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source USG or international statistical source USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country (USD, stock positions) N/A N/A 2020 $1.47 million BEA data available at https://apps.bea.gov/international/factsheet/ 
Host country’s FDI in the United States (USD, stock positions) N/A N/A 2020 $ (-2) million BEA data available at https://www.bea.gov/international/
direct-investment-and-multinational-enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP N/A N/A 2020 1.5% UNCTAD data available at https://stats.unctad.org/handbook/Economic
Trends/Fdi.html
 

* Source for Host Country Data: host country data not publicly available.

Table 3: Sources and Destination of FDI

There is no data for Tanzania in the IMF’s Coordinated Direct Investment Survey (CDIS).

According to the Bank of Tanzania, the top sources for inward foreign investment into Tanzania are South Africa, Canada, Nigeria, Netherlands, United Kingdom, Mauritius, Kenya, United States, Vietnam, and France.

Data on outward direct investment is not available.

Table 4: Sources of Portfolio Investment

There is no data for Tanzania in the IMF’s Coordinated Direct Investment Survey (CDIS).

14. Contact for More Information

Economic Officer
U.S. Embassy Dar es Salaam
686 Old Bagamoyo Road
Msasani, Dar es Salaam
Tel: 255-22-229-4000
DarPolEconPublic@state.gov 

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The Lessons of 1989: Freedom and Our Future