A local daily in Tanzania says, Dewji was kidnapped on his way to the Oysterbay hotel in in Dar es Salaam for a routine gym exercise.
Three people have been arrested in connection with the kidnapping and two are believed to be foreign nationals, police said.
Adding to the confusion, the city's police chief, Lazaro Mambosasa, was widely reported as saying that Mr Dewji had been rescued, only to retract the claim later, saying he was misquoted.
Mr Dewji studied at Georgetown University in Washington DC.
Eye witnesses said that the kidnappers who had their faces covered, shot in the air before they grabbed the businessman and took off with him.
The regional governor Paul Makonda said, "Initial information indicates he was kidnapped by whites traveling in two vehicles".
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43-year old Dewji was elected to parliament on the CCM ticket but did not seek re-election to his seat in the 2015 election.
"They then got into the hotel and came out with someone whom I identified as Mohammed."According to Forbes, Dewji has an estimated net worth of US$1.54 billion (Sh154 billion), and is the 17th richest person in Africa".
He is also the main shareholder in Tanzania's Simba FC football club.
Dar es Salaam special zone commander said security police around the country, including at airports and all exit points have been put on high alert in the hunt for the abductors.
Dewji is Africa's youngest billionaire and runs the METL group, a family business founded by his father in the 1970s, that operates across six African countries. In 2016, he signed a pledge to donate at least half his fortune to philanthropic causes.
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