Will Tanzania become the next “Vietnam”?

Increasing tension between China and the US has led to many investors relocating their investments from China to Vietnam as a key manufacturing hub. Shortage of readily available labor, complication in supply chains and unreliable raw materials availability however continue to affect these investments and business owners try to seek new suitable manufacturing hubs.

African Forestry (AF) believes East Africa led by Tanzania can be the next Vietnam. Tanzania has readily available labor and adequate raw materials which support the establishment of forest industries to encourage more investment. It’s ideal location as a coastal country and a gateway to other east, central and southern African countries can also make it a central market for finished forest products. Despite these facts, the following must be considered:

The need to create an enabling environment for investors to invest in forest industries and providing areas where they can build their industries near the raw material areas is inevitable. Reducing import tariffs on materials/equipment that are necessary for the establishment and processing activities of forestry enterprises like treatment chemicals and machinery.

 

The Tanzanian government has made several fiscal interventions this year that directly relate to the forestry business environment including the removal of value-added tax on standing trees to facilitate investments in forestry enterprises, increase employment opportunities and sustainable management of forest resources. Through this, it will increase revenue due to the growth of the sector and its value chain and thus bring an increase by a scale of 7,311 million shillings. The recently launched engineered wood product development framework outlines the steps Tanzania will take toward forestry industry growth. Secondly, the government has reduced excise duty on forest products (forest produce CESS) from 5 percent to 3 percent. The aim of this measure is to reduce costs for forest products traders and to promote the forestry sector.