Growing aid and trade boost Tanzania's international connectivity


Long before the arrival of Europeans, the territory where Tanzania lies today was a thriving centre of trade with Arab and Eastern merchants. With the establishment of German East Africa in the 1880s, however, more Western influence started to penetrate the area.

In the years that followed independence in 1961, Julius Nyerere, Tanzania’s first president, maintained good relations with the West, although his advocacy for African socialism and staunch support of liberation movements across the continent brought his policies more in line with those of other socialist countries, such as China. Economic difficulties throughout the 1980s led the country to review some of its policies, particularly those pertaining to trade and exchange rate liberalisation, in return for international support. Ever since, much of Tanzania’s foreign policy has revolved around aid, investment and economic assistance.


The EU is the largest source of foreign direct investment in Tanzania, channelling more than €3bn into the country in the 40 years leading up to 2016. Cooperation between both parties has largely been driven by economic and political development, with the EU’s aid strategy, the National Indicative Programme 2014-20, proposing that €626m be given to finance development in various sectors, including energy and agriculture.

An economic partnership agreement is also in the works, and is expected to grant EAC members quotaand duty-free access to the EU if ratified. Tanzania, however, has opposed the deal, claiming it goes against national economic interests, and asked for discussions regarding the potential impact of the deal on regional manufacturing. Tanzania already accesses the EU under the bloc’s Everything but Arms initiative. Today, the EU accounts for around 16% of Tanzania’s exports, making it the nation’s second-largest export destination.


Tanzania has also been a major recipient of aid from the US, which has provided assistance to a variety of sectors, most notably health, education and energy. One of the major agreements binding both countries is the compact from US government aid agency Millennium Challenge Corporation (MCC), which was signed in 2008 and is aimed at promoting economic growth and reducing poverty through investments in the transport, energy and water sectors. The five-year partnership saw the MCC contribute $698.1m in funding, although concerns over the annulment of Zanzibar’s elections in October 2015 led to a suspension of $472m in funding.

Concerning trade, Tanzania is a main beneficiary of the African Growth and Opportunity Act signed in 2000, which is granting the country preferential trade benefits, as well as the Trade and Investment Framework Agreement signed with the EAC in 2008.


A key economic and political partner, China has traditionally provided aid in the form of interest-free loans, primarily benefitting infrastructure and transportation. Indeed, Chinese investors are behind some of the country’s largest standing infrastructure today, such as the Nyerere Bridge and the National ICT Broadband Backbone. According to the Tanzania Investment Centre, a total of 670 Chinese projects were registered in the country between 1990 and May 2017, generating upwards of 83,000 jobs. Recently, China has been particularly supportive of Tanzania’s industrial ambitions under its Second Five-Year Development Plan (2016/17-2020/21), investing in a $100m tile factory in the Mkuranga district in 2016 and a $1bn cement plant in the coastal town of Tanga in 2017.


India is another of Tanzania’s primary partners. Cultural and political ties have traditionally bound the countries, though economic cooperation has grown in the past few decades. In 2014 the value of Tanzanian goods exported to India peaked at $1.3bn, while India’s exports to Tanzania reached $2.5bn, according to the Tanzania Revenue Authority. Five agreements were signed in 2016, including a major commitment by India to provide a $92m line of credit for the rehabilitation of Zanzibar’s water supply system, as well as cooperation in food security, vocational training and natural gas.

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

Cover of The Report: Tanzania 2018

The Report

This article is from the Country Profile chapter of The Report: Tanzania 2018. Explore other chapters from this report.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart