Research on World Agricultural Economy

Foreign Direct Investment Inflows in Agriculture Sector and Poverty Reduction in Developing Countries: Evidence from Tanzania

Shakila Halifan Mteti

Mkwawa University College of Education

DOI: https://doi.org/10.36956/rwae.v6i2.1778

Received: 25 February 2025; Published: 20 May 2025

Abstract

Historically, foreign direct investments (FDIs) have been said to play a significant role in promoting local development in the recipient countries. This article explores the linkage between Tanzania’s post-2006 agriculture transformation initiatives using the agro-based FDI approach to modernize and commercialize smallholder agriculture and reduce rural poverty. The study employs secondary data sources to address its central question. A scoping review was employed to systematically select sixteen (16) research articles published between 2004 and 2024 on agro-based FDI in Tanzania.  The study mapped the investors’ country of origin and strategic areas for agricultural investment in Tanzania. It was found that most of the agricultural sector’s foreign direct investors come from Europe, Asia, Africa, and North America, and the study found no evidence of investors from Latin America.  The study revealed that the number of foreign investors in the agricultural sector increased rapidly in the past decade following the global crises and the country’s desire to transform its agricultural sector from subsistence to a more modernized, commercialized and highly productive sector. FDI inflows in agriculture have helped transform agriculture and reduce poverty by integrating smallholder farmers into agricultural value chains as contract farmers/out-growers, creating wage labour opportunities in agro-industries, and technological spillover effects. The study highlights the importance of FDI in reducing poverty while drawing special attention to policymakers to carefully use FDI as an approach to development.

Keywords: Agro-Based Foreign Direct Investment; Agriculture Sector; Poverty Reduction; Developing Countries; Tanzania

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