TRENDS AND IMPACTS OF FOREIGN INVESTMENT IN DEVELOPING COUNTRY AGRICULTURE

Analysis of private investments
in the agricultural sector of the
United Republic of Tanzania 1
1. Introduction
In Africa, international concerns have been raised
by recent foreign, large-scale land acquisitions
over the impacts on small farmers and food
security. There are fears that local concerns
are not emphasized in investment contracts
and international investment agreements, and
that domestic laws are inadequate to redress
this imbalance. However, given the limited
information on the nature and impact of these
investments, this chapter attempts to highlight
the key issues. The study examines the extent,
nature and impact of international (private)
investments in the agricultural sector of the
United Republic of Tanzania. It achieves this by
analysing the policies, legislation and institutions
and other related issues affecting international
investment generally. Agriculture and land are
then examined in more specific detail. It traces
the evolution of investment and divestiture
policies, and highlights the primary practices
and policies – including business models –
influencing the investment climate in the country.
The investment status of certain agricultural
commodity sectors is then identified and the areas
of the value chains that are more attractive to
investors are examined. Finally, the study proposes
options for policy-makers and investors to ensure
that the nation’s food security and the rights of
resource-poor farmers are not compromised by
these large-scale land investments.
Agriculture is the backbone of the Tanzanian
economy; it contributes significantly to the
production of food and raw materials for
industries, employment generation and foreign
1 This chapter was prepared by Suffyan Koroma,
Economist, Trade and Markets Division, FAO and
Bede Lyimo, Tanzanian national Consultant.
exchange earnings. In 2009, agriculture
contributed about 27 percent to the GDP; second
only to the services sector (Figure 1). Given the
economic significance of this sector, investment
(both public and private), is seen as a way of
spurring economic growth. The role played by
foreign direct investment (FDI) in stimulating
production, bringing in new technology and
capital for investment, contributing to the balance
of payments and opening up employment is
generally recognized.
Since the mid-1980s, the Tanzanian economy
has undergone a gradual and fundamental
transformation that has redefined the role of
government and the private sector. Under the
current prevailing environment, most of the
production, processing and marketing functions
have been assigned to the private sector, while the
government has retained regulatory and public
support functions. These macro changes have,
FIGURE 1
Shares of GDP by type of economic activities,
2009 current prices
Services
48 %
Source: Economic Survey, URT 2010
Agriculture,
hunting and forestry
27 %
Fishing
1 %
Industry and construction
24 %
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