Indian companies are increasing their presence in East Africa where they have been sourcing raw materials for the country’s thriving industry and manufacturing sector.

Close to 10 companies — dealing in steel, seed, packaging, electrical appliances and tourism among others — are set to build factories or set up operations in Tanzania at a cost of over $250 million.

According to Trade and Industry Minister Cyril Chami, the construction of the factories will start in the next six months.

The biggest single investment will see Kamal Steel Industries build a $220 million-worth steel and iron sheet factory that is expected to generate almost 5,000 jobs. The current factory in Dar es Salaam employs about 400 people.

The other investment, which will cost about $20 million, will involve the construction of an assembly line for Bajaj vehicles (auto richshaws) and motorcycles by Bajaj Auto. The assembly line will employ 500 people.

Adelhelm Meru, managing director of the Economic Processing Zone Authority, said that other projects by Indian investors are a $3 million seed plant to be built by Science and Corp Ltd in line with the government’s implementation of Kilimo Kwanza. This will create another 500 jobs.

Lotters Packaging Ltd will invest $1.2 million in a manufacturing plant to take advatange of the country’s acute shortage of modern packaging.

Other investments will be by UK Electrical (India Ltd) which will produce water pumps. Other investors have expressed interest in a factory for producing mechanical spare parts and small machines which will be helpful to the informal sector.

According to Dr Meru, beyond industry, Indian business magnate Mukesh Ambani plans to invest in luxury hotel chains to tap into the growing tourism industry.

Tanzania’s economy depends on tourism, mining and agriculture. But the growing telecommunications, energy, manufacturing, financial services and transport sectors are attracting investors who see great potential for returns.

According to the Investment Climate 2010 report prepared by the Bank of Tanzania, the country generally has a favourable attitude toward foreign direct investment and has made significant efforts to encourage foreign investment.

Emmanuel ole Naiko, the executive director of Tanzania Investment Centre, said that despite the fact that the world is still recovering from the financial crisis, FDI is expected to rebound and to surge to $800 million in 2011 from a low of $645m in 2009.