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ALGERIA
BOTSWANA
ETHIOPIA
GUINEA
KENYA
MADAGASCAR
MALAWI
MAURITIUS
MOROCCO
MOZAMBIQUE
NIGERIA
RWANDA
SUDAN
TANZANIA
UGANDA
ZAMBIA
INVESTMENT GUIDE2016/2017
ABOUT ALN
ALN IN TANZANIA
ALN is an alliance of independent top tier African law firms. It is the largest and only grouping of its kind in Africa, with close working relationships across its members and an established network of Best Friends across the continent. ALN’s
firms are committed to working together to provide extensive coverage and on-the-ground experience. The network has consistently been ranked Band 1 in the Leading Regional Law Firm Networks category, by Chambers Global.
ATZ Law Chambers is a leading full-service corporate and commercial law firm with substantial experience and knowledge of the Tanzanian market. Shamiza Ratansi and Amish Shah (both formerly of Adept Chambers) set up ATZ Law Chambers, which was then formally welcomed as ALN’s Tanzanian member firm.
ATZ Law Chambers’ lawyers are involved in a variety of transactions including complex mergers and acquisitions, banking, project finance, capital markets
ALN Member Firm: ATZ Law Chambers
transactions, corporate commercial work, privatization projects, corporate restructuring, insolvency, mining, energy, telecoms, infrastructure and projects work, real estate and general advisory work.
The firm is frequently praised for its approachable and attentive team of lawyers. The firm adopts a practical, commercially vigilant approach to problem solving and strives to develop long-term client relationships.
Tanzania offers a number of strategic advantages to investors and businesses, including a wealth of natural resources and a government that is becoming increasingly more open to foreign participation in the economy - BMI View, Tanzania Trade and Investment Risk Report, April 2016
“Their [ATZ Law Chambers] overall performance has been very good and they are very knowledgeable about local laws, which is important to us.” – Chambers Global 2016
CONTENTSOVERVIEW
POLITICAL OVERVIEW 5
ECONOMIC OVERVIEW 5
BILATERAL & MULTILATERAL TREATIES 6
REGULATORY ENVIRONMENT 6
INVESTMENT PROMOTION
INSTITUTES GOVERNING INVESTMENT PROMOTION 8
INVESTMENT INCENTIVES 8
TAX
INCOME TAX 11
CAPITAL GAINS TAX 11
WITHHOLDING TAX 12
OTHER TAX 12
STAMP & REGISTRATION FEES 12
TRANSFER PRICING & THIN CAPITALISATION 12
DOUBLE TAX TREATY WITH MAURITIUS 13
DOING BUSINESS
ACCOUNTING PRINCIPLES 15
INDUSTRIAL RELATIONS 15
REAL PROPERTY 16
CORRUPTION 16
COMPETITION 16
CONSUMER PROTECTION 17
LEGAL FORMS OF INCORPORATION 17
INTELLECTUAL PROPERTY 19
DISPUTE SETTLEMENT 19
INDUSTRY SECTORS
AGRICULTURE 21
BANKING AND FINANCIAL SERVICES 21
ENERGY 22
MANUFACTURING 22
MINING 23
TELECOMMUNICATIONS 23
TOURISM 24
KEY DEVELOPMENTS
ENERGY AND INFRASTRUCTURE 26
FINANCIAL SERVICES 27
NATURAL RESOURCES 27
OTHER DEVELOPMENTS 28
4
947,303 km2AREA
53.470 Million(2015 World Bank Data)
POPULATION
The LeftDRIVES ON
.tzTOP LEVEL DOMAIN
Kiswahili, EnglishLANGUAGES
44.90 Billion(2015 World Bank Data)
GDP
Tanzania Shilling (TZS)CURRENCY
John Pombe MagufuliPRESIDENT
GOVERNMENT
+255CALLING CODE
GMT + 3TIMEZONE
Dar Es Salaam(Commercial Capital)
Dodoma(Political Capital)
Unitary Republic withMulti-Party Democracy
OVERVIEW
5
POLITICAL OVERVIEW
Tanzania has a long record of political stability. It has had nearly half a century of political stability as a sovereign country, including over ten years as a multiparty democracy; there have been no coups or civil wars in Tanzania. According to the 2015 Ibrahim Index of African Governance, which measures governance using a number of different variables, Tanzania’s Government is ranked 18th out of 54 countries.
The President of Tanzania and Parliament members are elected concurrently by universal adult suffrage, every five years. The President then appoints a prime minister who serves as the Government’s
leader in Parliament. Presidential and all Parliamentary elections were last held in October 2015. The next presidential and parliamentary elections will be held in 2020. For administrative purposes, Tanzania is divided into 30 regions - 25 in the mainland, 3 in Zanzibar, and 2 in Pemba, Zanzibar’s second isle. The National Assembly, comprising 357 members enacts laws applying to the United Republic of Tanzania and laws applicable exclusively to the mainland. Zanzibar maintains extensive autonomy within Tanzania, with its own president, legislature and bureaucracy. Zanzibar’s House of Representatives also legislates on internal matters.
ECONOMIC OVERVIEW
Despite having one of the world’s poorest economies in terms of per capita income, Tanzania’s real GDP growth rate has consistently averaged over 6.4 percent in (2012 estimate), 6.9 percent in (2013 projection) , 7.0 percent in (2014 projection) 7.0 percent in (2015 projection) for the past seven years while the growth for 2016 is projected to be 6.9 percent. Much of this growth is attributed to strong performances in gold production and tourism. In 2015 tourism was the biggest foreign exchange earner for Tanzania. The economy still depends heavily on agriculture, which accounts for more than a quarter of GDP, provides 85 percent of exports, and employs about 80 percent of the work force. Tanzania has largely completed its transition to a liberalised market economy, though the Government retains a presence in sectors such as telecommunications, banking, energy, and mining.
Since 1996, Tanzania has made extensive efforts towards macro-economic stabilisation and structural reforms. Fiscal stimulus and a loosening of monetary policy have helped ease the impact of the global recession, and Tanzania has been able to maintain relatively strong growth. The IMF’s most recent Debt Sustainability Analysis indicates that debt relief under the Heavily Indebted Poor Countries Initiative combined with sound macroeconomic policies place Tanzania at low risk of debt distress. The World Bank, the IMF, and bilateral donors have provided funds to rehabilitate Tanzania’s aging economic infrastructure, including rail and port infrastructure that are important trade links for inland countries.
Banking reforms have helped increase private-sector growth and investment, and the Government has increased spending on agriculture to 7 percent
6
BILATERAL & MULTILATERAL TREATIES
Tanzania is a member of the South African Development Community, the East African Community (EAC), the African, Caribbean and Pacific Group of States, the World Trade Organisation and the African Union.
Tanzania has double taxation agreements with Canada, Denmark, Finland, India, Italy, Norway, South Africa, Sweden and
Zambia. Bilateral investment treaties have been entered into with Denmark, Egypt, Finland, Germany, Italy, the Republic of Korea, the Netherlands, Sweden, Switzerland and the United Kingdom. Countries with which negotiations are continuing include Zimbabwe, United Arab Emirates, Russia, Seychelles, Mauritius, Egypt, Yugoslavia and Oman.
of its budget. The financial sector in Tanzania has expanded in recent years and foreign - owned banks account for about 48 percent of the banking industry’s total assets. Competition
among foreign commercial banks has resulted in significant improvements in the efficiency and quality of financial services.
The Index of Economic Freedom 2016 ranks Tanzania 17th out of 46 countries in the sub-Saharan Africa region. Tanzania’s economic freedom score is 58.5, making its economy the110th freest in the 2016 Index. Its score is 1 point higher than the previous year, with improvements in 2 of the 10 economic freedoms, including Fiscal Freedom and Investment Freedom. The Tanzanian economy has weathered the impact of the global economic turmoil relatively well, achieving an average growth rate above 6 percent over the past five years. Continued economic expansion has been facilitated by open-market policies related to global commerce. The financial sector and the investment framework are relatively well developed for the region.
In recent years, the Tanzanian Government has made substantial efforts
to privatise commercial sectors that were previously government owned or managed. Consequently regulations concerning foreign investment have been simplified and streamlined. Foreign and domestic investors receive equal treatment under the law in all sectors. There are no limits on foreign ownership of enterprises and investment is not screened save for specified sector such as insurance, mining, shipping and public listed companies. Foreign exchange and capital transactions are permitted with few restrictions and profits, dividends and capital can be repatriated. However, further institutional reforms would help to lift the burden of the regulatory system. Whilst requirements for launching a business are not time-consuming, the licensing process can be costly; the legal system is also subject to delays.
REGULATORY ENVIRONMENT
INVESTMENT PROMOTION
8
Whilst foreign investment in Tanzania was not welcome in the socialist era, legislation developed from the early 1990s has significantly improved the investment climate in the country. Investment is actively promoted and encouraged under the Tanzania Investment Act, 1997 (TIA) by the Tanzania Investment Centre (TIC). All Government departments and agencies are required by law to cooperate fully
with TIC in facilitating investment. The TIC is regarded as a ‘one stop facilitative centre for all investors’. Its roles include assisting in the establishment of enterprises; facilitating the acquisition of licences, permits, visas and approvals; helping to address administrative barriers confronting both local and foreign investments; and issuing Certificates of Incentives.
INSTITUTES GOVERNING INVESTMENT PROMOTION
INVESTMENT INCENTIVES
To encourage investment, the Government has redrawn tax codes, floated the exchange rate, licensed foreign banks and created the TIC to cut red tape. Certificates of Incentives are offered to investors under the Tanzania Investment Act, 1997. Incentives can be broadly categorised into fiscal incentives (import duty and VAT exemption on project/capital goods) and non-fiscal incentives. For projects of over USD20 million, for locally owned investment and USD50 million, for foreign owned investment offering specific beneficial impacts to the society or economy, investors can negotiate special incentives from the Tanzanian Government.
The Special Economic Zones Act (SPEZA) creates special economic zones to promote priority economic activities in key sectors. These sectors include industry, tourism, commercial activities, forestry, information and communication technology, and banking and finance.
Companies licensed under the SPEZA enjoy various incentives and exemptions:
a. Exemption from payment of withholding tax on rent, dividends and interest for the first ten years; and
b. Exemption from payment of corporate tax for an initial period of ten years.
The Export Processing Zones Act, (CAP 373 R.E. 2002) creates Export Processing Zones (EPZ) to promote creation of international competitiveness for export growth in certain sectors which are textiles and garments; agro processing; leather processing and manufacture of leather products; fish processing; lapidary (gold, diamonds and gemstones, including the famous tanzanite); wood products; electrical & electronic appliances; and information and communication technology (ICT) industries.
9
Companies licensed under the EPZ enjoy various incentives and exemptions:
a. Exemption from payment of withholding tax on rent, dividends and interest for the first ten years;
b. exemption from payment of all taxes and levies imposed by the local
government authorities for a the first ten years; and
c. Exemption from payment of corporate tax for an initial period of ten years.
TAX
11
INCOME TAX
Resident companies and businesses are taxed on worldwide income. Non-residents are taxed on Tanzania-sourced income. A corporation is a resident if it is incorporated under Tanzania’s Companies Act or, at any time during the tax year, management and control of its affairs are exercised in Tanzania. Individuals are resident if they are domiciled in Tanzania; spend more than 183 days of the tax year in Tanzania; have a combined presence of at least 122 days in that tax year and the two preceding tax years; or are employees or officials of the Government of Tanzania posted abroad during the tax year. Income tax in Tanzania is chargeable
pursuant to the provisions of the Income Tax Act (ITA).
In accordance with the ITA, the total income of a corporation is taxed at the rate of 30 percent. Newly listed companies on the Dar es Salaam Stock Exchange (DSE) that have issued at least 30 percent of their share capital to the public are subject to a corporate income tax rate of 25 percent for 3 consecutive years from the date of listing. Companies in export processing zones are exempt from income tax and withholding tax on dividends, interests and rent for the first 10 years.
CAPITAL GAINS TAX
Under the ITA, Capital Gains Tax (CGT) is payable on realisation of any investment asset. Investment assets include shares and securities in a corporation, beneficial interest in a non-resident trust and interest in land and buildings. The rate varies depending on the legal nature and residency status of the seller, including whether the investment asset being disposed of is a Tanzanian asset or an overseas asset.
Hence, a resident Tanzanian individual is required to pay a CGT rate of 10 percent on the gain made from the disposal of a Tanzanian asset and a CGT rate of 30 percent on the gain made from the disposal of an overseas asset. On
the other hand, a resident Tanzanian corporate entity is obliged to pay a CGT rate of 30 percent on the gain made from the disposal of either a Tanzanian or an overseas asset.
Conversely, a non-resident individual is obliged to pay a CGT rate of 20 percent on the disposal of a Tanzanian asset. No CGT is applicable in relation to a non-resident individual’s disposal of an overseas asset. A non-resident corporate entity has to pay a CGT rate of 30 percent on the disposal of a Tanzanian asset; no CGT is applicable in relation to a non-resident corporate entity’s disposal of an overseas asset.
12
WITHHOLDING TAX
Withholding tax is payable on dividends (10 percent), interest (10 percent), royalties (15 percent), management
OTHER TAX
fees (15 percent) and directors’ fees (15 percent).
Value added tax (VAT) is charged on the supply of goods and services. The basic rate of VAT is 18 percent. Exports of certain goods and professional and communications services are subject to VAT at zero rate. The registration
threshold is a turnover of approximately USD 49,000 (TZS 100 million), over a period of 12 consecutive months or approximately USD 24,000 (TZS 50 million) over a period of 6 consecutive months.
STAMP & REGISTRATION FEES
Stamp duty may be levied either as a specific amount or at progressive rates up to a maximum of 1 percent of the
value of the consideration on a transfer. Registration fees are also payable on a transfer of land.
TRANSFER PRICING & THIN CAPITALISATION
Tanzanian transfer pricing rules require that transactions between associated persons (both resident and non-resident) be at arm’s length terms. Definitive transfer pricing guidelines and regulations were issued in 2014. The Income Tax (Transfer pricing) Regulations 2014 apply to tax payers dealing with related parties located both inside and outside the United Republic of Tanzania. The definition of related parties also covers relatives of individual and partners in partnership as well as an entity that may reasonably be expected to act
in accordance with the intentions of another.
A company is said to be thinly capitalised when its capital is made up of a much greater proportion of debt than equity. Certain interest deductions made may be disallowed by the Tanzania Revenue Authority (TRA) if the company is thinly capitalised. The total amount of interest that an entity may deduct under its total income is limited to the interest portion in respect of debt that does not exceed the 7:3 debt-to-equity ratio.
13
DOUBLE TAX TREATY WITH MAURITIUS
Currently, Tanzania has no double tax treaty with Mauritius. However negotiations are currently taking place.
DOING BUSINESS
15
ACCOUNTING PRINCIPLES
INDUSTRIAL RELATIONS
The Employment and Labour Relations Act, 2004 (the ELRA) regulates, amongst other things, conditions of employment for employers and employees. The law expressly prohibits the use of forced labour, as well as the employment of a child under the age of fourteen years. Maximum working hours, compensation, annual leave, maternity leave, complaint procedures, night and holiday work and medical care are also regulated by the ELRA.
The National Social Security Fund Act (the NSSFA) and the Parastatal Organisation Pensions Scheme Act (the POPSA) provides for a retirement age of 60 years. Both the NSSFA and the POPSA require every employer, for every contribution period after the appointed day during which he employs an employee, to pay to the NSSF and the Parastatal Pension Fund (PPF) a contribution, which consists of the employer’s contribution and the employee’s contribution, at the prescribed percentage. The employer is required to deduct from an employee’s gross salary the amount of contribution not exceeding 10 percent of the employee’s salary. The employer adds the remaining balance to make the required contribution rate of 20 percent. Further, there is an obligation on the employer to
Tanzania has adopted and applies International Financing Reporting Standards and certain local standards.
register with the Workers Compensation Fund Pursuant to Section 71 of the Workers Compensation Act, 2008.
Expatriates who want to work in Tanzania are required to obtain a work permit under the Non-Citizens(Employment Regulations) Act, 2015 issued by the Labour Commissioner under the Ministry of labour, Youth, Employment and persons with Disability (“the Ministry of Labour”). The type of work permit to be issued will depend on the type of work to be undertaken by the expatriates. A work permit may be issued for a period of two years and may be renewed provided that the total period of the validity of the original permit and its renewals shall not exceed five years. Further the expatriates will be required to obtain a residence permit under the Immigration Act (Cap 54). The policy and practice of the Labour and Immigration authorities is to decline applications for work and residence permits, where local skills are available to meet the requirements. A residence permit may be issued for any period not exceeding three years and may be renewed for any period not exceeding two years. However, the total period of the validity of the original permit and its renewals shall not exceed five years.
16
REAL PROPERTY
All land in Tanzania is state land, vested in the President of the United Republic of Tanzania as trustee for the nation. Statutory leases of up to 99, 66 or 33 years may, however, be obtained. These leasehold interests represent title analogous to ownership and may be sold
and encumbered. Foreign nationals and foreign companies cannot own land in Tanzania. A Tanzanian company wholly owned by foreigners or majority owned by foreigners can hold land through a derivative right if it holds a Certificate of Incentives issued by the TIC.
CORRUPTION
Tanzania enacted the Prevention and Combating of Corruption Act in 2007 (PCCA). The PCCA makes it an offence for any person to offer an advantage to a public official as an inducement to, or reward for, or, otherwise on account of such public official’s giving assistance
or using influence in or having given assistance or used influence to assist in the promotion, execution, or procuring of any contract. Corruption investigation and prosecution is undertaken by the Prevention and Combating of Corruption Bureau.
COMPETITION
Competition is regulated by the Fair Competition Act, 2003 (FCA). The FCA promotes and protects effective competition in trade and commerce; it also protects consumers from unfair and misleading market conduct. The main aim of the FCA is to increase efficiency in the production, distribution and supply of goods and services, promote innovation, maximise the efficient allocation of resources and protect consumers.
The FCA prohibits anti-competitive agreements and the misuse of market power. It generally and specifically prohibits price fixing, collective boycotts, output restrictions and collusive
bidding. Mergers and acquisitions (direct or indirect) involving turnover or assets above a prescribed threshold, currently approximately USD 390,000 (TZS 800,000,000), must be notified to and may be examined by the Fair Competition Commission. A merger is prohibited if it creates or strengthens a position of dominance in the market. It is worth noting that the FCA also applies to conduct outside Tanzania relating to the supply or acquisition of goods or services within Tanzania, or any acquisition leading to a change of control of part of a business or an asset of a business located in Tanzania.
17
LEGAL FORMS OF INCORPORATION
The principal forms of business arrangements in Tanzania are sole proprietorships, partnerships, trusts, cooperative societies, non-governmental organisations and companies. The Companies Act, 2002 recognises three types of companies: a company limited by shares, a company limited by guarantee, and an unlimited company. Companies may either be private companies or what are commonly known as “public companies”.
A foreign investor can set up a place of business in Tanzania by either setting up a branch or incorporating a company. The company can be incorporated as
an independent entity or a subsidiary of the parent company which is located in the foreign investor’s country. Except in certain cases, there are no minimum capital requirements. A company can be incorporated with any amount as its authorised share capital.
The 2015 World Bank ‘Doing Business Report’ ranks Tanzania 139th out of 189 economies in terms of the ease of conducting business. The table below provides a summary of the procedures and the associated completion time and cost for setting up a private limited company:
CONSUMER PROTECTION
Consumer protection legislation in Tanzania is contained primarily in the FCA and the Law of Contract Act (Cap 345) and the Sale of Goods Act (Cap.214). The LCA regulates contracts and extra-contractual liability. The FCA defines the standard of goods permissible for supply and sale and the liability of manufacturers, suppliers, sellers or their agents for product defects which cause loss or damage to consumers. Misleading conduct in relation to the advertisement or supply of goods and services is also prohibited, and there are a number of terms implied into consumer contracts for the protection of consumers.
The FCA implies a number of conditions in contracts for the supply of goods; there is an implied warranty that goods supplied by description correspond with that description. Goods supplied to consumers in the course of business carry an implied warranty of merchantability as well.
Furthermore, the Standard Form (Consumer Contracts) regulations, 2014 requires all standard forms contract to be registered by the fair Competition Commission.
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No. ProcedureEstimated time to complete (days)
Cost (in TZS)
1
Apply for clearance of the proposed company name at the Business Registration and Licensing Authority (BRELA)
2 - 3 days No charge
2Apply for a certificate of incorporation from the Registrar of Companies
7 days440,000 (dependent on share capital)
3
Apply for taxpayer identification number (TIN) with the Tanzania Revenue Authority - Under the new internal policy Tanzania Revenue Authority requires at least one director to go to their offices to provide fingerprints and digital pictures
7 - 14 days No charge
4*Income tax officials inspect the office site of the new company
1 day No charge
5*Apply for Pay As You Earn (PAYE) with the Tanzania Revenue Authority
1 day No charge
6
Apply for a business licence from the regional trade office (depending on nature of business)
7 - 14 daysDepends on the sector and the nature of the business
7
*Have the land and town-planning officer inspect the premises and obtain signatures
1 day Transport cost, trivial
8Apply for VAT certificate with the Tanzania Revenue Authority
7 - 14 days No charge
9
Register for the workmen’s compensation insurance at the National insurance Corporation or other alternative insurance policy
1 dayCost of insurance varies depending on number of employees and coverage
10
Obtain registration number at the National SocialSecurity Fund (NSSF) and Parastatal Pension Fund(PPF)
7 days No charge
*Takes place simultaneously with another procedure
19
INTELLECTUAL PROPERTY
DISPUTE SETTLEMENT
The Tanzanian legal system is largely based on English common law. The Commercial Court of Tanzania was established in 1999 as a division of the High Court dealing with disputes of a commercial nature. There is also a Lands Division of the High Court dealing with land matters. Finally, the Commission for Mediation and Arbitration has been established under the Labour Institutions Act to handle labour disputes.
Tanzania is a member of several international organisations that help protect investment. Any dispute arising between the Government and investors may be settled amicably through negotiations or may be submitted for arbitration under the international agreements listed below:
• The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958, which entered into force on 7 June 1959 (also known as the New York Convention);
• The Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1965, which entered into force on 14 October 1966;
• The Convention establishing the Multilateral Investment Guarantee Agency of 1985, which entered into force on 12 April 1988; and
• The Paris Convention for the Protection of Industrial Property of 1883, revised at various time, amended in 1979 and signed by Tanzania in 1994.
Tanzania is a party to the Paris Convention and uses the Nice International Classification of Goods and Services. The Business Registration and Licensing Agency (BRELA) in Tanzania handles the registration of trademarks and copyrights.
Many international marks are registered in Tanzania. The Fair Competition Commission (established under the FCA) also handles seizure of counterfeit products.
INDUSTRY SECTORS
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AGRICULTURE
Agriculture is the mainstay of the Tanzania economy, providing livelihood to approximately 80 percent of the population. Food and raw materials account for almost half of the GDP. Cash crops, including coffee, cotton, tea, cashew nuts, sisal and cloves account for the majority of export earnings.
There is considerable scope for diversification and expansion of the agricultural sector through accelerated food crop production and increase of non-traditional exports. Arable land is underutilised due to outdated production systems in tillage, storage and processing. It is estimated that only 25 percent of the arable land is utilised. Tanzania’s climate is ideal for horticulture, coffee, tobacco, sisal, cashew nuts and sugar. Tanzania has about sixty million hectares of land suitable for livestock development, of
which only approximately 26 percent is utilised.
There are numerous statutes regulating agricultural investment, depending on the particular agricultural activity the investor undertakes. Investment in the coffee sector is regulated by the Coffee Act (Cap 347). Under the Coffee Act, a licence issued by the Tanzanian Coffee Board is required in order to buy, process, liquor, roast, warehouse, export or otherwise deal in any business in coffee. A licence or permit is not required if the person is obtaining coffee for personal use. Similar restrictions apply to cotton, tea, sugar, pyrethrum sisal, cashew nut and wheat production under the relevant Acts of Parliament. There are also various sectoral statutes that regulate the livestock, dairy and meat marketing industry.
BANKING AND FINANCIAL SERVICES
The banking industry is governed by the Banking and Financial institutions Act, 2006 and the Bank of Tanzania Act, 2006. The banking industry is regulated by BOT, which is responsible for formulating and implementing monetary policy.
Tanzania’s relatively small financial sector is developing rapidly. Thirty nine commercial banks are licensed and operating in Tanzania, and 50 percent of these are foreign-affiliated. Restrictions on foreign banks are minimal. Credit is increasingly allocated at market rates and the range of commercial credit instruments available to the private
sector is developing.
The Dar es Salaam Stock Exchange (DSE) became operational in 1998. The securities currently being traded are Ordinary Shares of 23 listed companies, 4 corporate bonds and 8 government bonds. The DSE has two market segments: the Main Investment Market Segment caters for big companies while the Enterprise Growth Market Segment caters for medium sized growth oriented companies. There is no limit for foreigner participation in shares of listed companies, save for Government securities. Once invested, there is a lock-in period of six months before a foreign
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ENERGY
The electricity sector in Tanzania is dominated by the Tanzania Electric Supply Company Limited in a vertically integrated market structure carrying out generation, transmission and supply. In 1992, the National Energy Policy ended the monopoly held by the public utility and allowed private sector involvement in the electricity industry. This major policy reform enabled Independent Power Producers to operate in the power generation segment of the market.
Tanzania has abundant untapped energy resources, which could be exploited for electricity generation. Tanzania has coal reserves of up to 5 billion tonnes, more than thrice its previously stated figure of about 1.5 billion tonnes. Natural
gas is estimated at 53.1 trillion cubic feet of proven reserves. Hydroelectric energy has a potential capacity of 4,700 MWh, of which only about 10 percent is developed. Solar, wind and geothermal sources remain relatively untapped.
The energy sector in Tanzania is governed by the Energy and Water Utilities Regulatory Authority Act (Cap 414) (EWURA Act). The EWURA Act establishes the Energy and Water Utilities Regulatory Authority to regulate the issuance, renewal and revocation of the relevant licences. EWURA also determines the rates and shares of the services and monitors the performance of investments, as well as service quality and efficiency.
investor is allowed to exit. Foreigners can invest 100 percent in Corporate Bonds and those who are residents of a member of the EAC can invest in Government securities. However, the total amount
of government securities acquired by residents from the EAC cannot exceed forty percent (40 percent) of the issued securities.
MANUFACTURING
The manufacturing industry in Tanzania is relatively underdeveloped. The main industrial activities are dominated by small and medium sized enterprises mostly concentrated in Dar es Salaam. The sector primarily incorporates animal-feed processing, beverages, textiles and apparel, leather, plastics, cement and
steel. An expanding domestic market and the regional markets of the SADC and the East EAC provide manufacturers in Tanzania with abundant opportunities.
23
MINING
TELECOMMUNICATIONS
Tanzania’s mining sector has been a key contributor to sustained economic growth over the past decade. Available resources include gold, diamonds, gemstones, base metals and industrial minerals. The principal statute governing mining in Tanzania is the Mining Act 2010 (the Mining Act) and accompanying Mining (Mineral Rights) Regulations. Under the Mining Act, no person can undertake any mining operations without a licence; the Commissioner for Minerals regulates the issuance of licences.
There are a variety of licences issued under the Mining Act including:
a. primary mining licences, which give exclusive rights to the holder to carry on mining operations in a designated mining area;
b. prospecting licences, which grant permission to carry out prospecting operations;
c. retention licences, which are given to holders of prospecting licences who have identified mineral deposits but cannot immediately develop the deposits;
d. special mining licences, which permit the mining of minerals other than building materials;
e. gemstone prospecting licences, which permit prospecting for gemstones; and
f. mining licences, which allow the mining of minerals or gemstones.
A corporate entity cannot obtain a primary mining licence unless all of it members and directors are Tanzanian citizens. This restriction does not apply to prospecting, mining or special mining licences. However, gemstone mining ventures require a local shareholding participation of 50 percent for licences to be granted.
The telecommunication sector was liberalised in 1993, opening the market for both local and foreign investment. The principal statute governing telecommunications in Tanzania is the Electronic and Postal Communications Act, 2010. The industry is regulated by the Tanzania Communications Regulatory Authority (TCRA) which licenses operators in each class of telecommunications.
The TCRA applies a converged licensing framework under which there are four main classes of licences:
a. The Network Facility Licence, which authorises ownership and control of electronic communication infrastructure such as earth stations, public payphone facilities, radio communication transmitters and links and satellite hubs;
b. The Network Service Licence, which authorises the operation of electronic communication networks for the delivery of services including bandwidth services, broadcasting distribution services, cellular mobile services, access applications services and space segment services;
c. The Applications Service Licence,
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TOURISM
Tourism is a critical industry in Tanzania. Tanzania is the only country in the world to allocate more than 25 percent of its total area to wildlife parks and game reserves. There are 16 national parks, 17 game reserves, 50 game-controlled areas, a conservation area, 2 marine parks and 2 marine reserves.
Tanzania’s wildlife resources are among the finest in the world and have long been widely known.
The Northern Circuit includes the Serengeti plains, the spectacular Ngorongoro crater, Lake Manyara and
Africa’s highest mountain, Kilimanjaro. The Southern Circuit, comprising the Mikumi and Ruaha National Parks and the Selous Game Reserve, remains relatively underexploited. Additional natural attractions include the sandy beaches north and south of Dar es Salaam, the spice islands of Zanzibar and deep sea fishing at Mafia and Pemba Islands.
The Tourism Industry in Tanzania is primarily regulated by the following Acts:
a. The Wildlife Conservation Act, 2009 and
b. The Tourism Act, 2008.
which authorises reselling or procurement of services from network service operators, but not the ownership or operation of services; and
d. The Content Service Licence, which authorises the provision of content services such as satellite broadcasting or terrestrial free to air TV and broadcasting.
KEY DEVELOPMENTS
26
ENERGY AND INFRASTRUCTURE
The Government of Tanzania, through its Ministry of Energy and Minerals, approved a Model Power Purchase Agreement (MPPA) to accelerate access to electricity as well as promote development and operations of small power projects by local and foreign private investors. The framework, which was released in August 2015, introduces the Standardized Power Purchase Agreement and Standard Tariff Methodology applicable between developers and buyers. The document identifies the eligible projects as small power projects whose capacity ranges
Tanzania Government approves Model Power Purchase
Agreementfrom 100 kW to 10 MW and which utilise renewable energy sources. The framework that was developed pursuant to the Electricity Act, 2008 covers major investments in gas, water, solar energy, geothermal, wind and coal sub-sectors and leaves limited room for negotiations between the Tanzania Electricity Supply Company (TANESCO) and prospective investors, which have in the past resulted in high power tariffs in the country. Formerly, TANESCO had been receiving as many model PPAs as the number of investors it receives.
35 percent of Tanzania’s electricity comes from hydropower, while oil and gas make up for the difference. TANESCO, the country’s state-run power utility firm, is investing in more fossil fuel plants to maintain its electricity supply as demand grows while water supply dwindles. The company is hoping to reduce hydropower dependence to 15 percent once the gas-fired plants, which can provide 60 percent of the country’s electricity needs, become fully operational. According to TANESCO, the country’s hydropower
Tanzania’s multi-million Kigamboni Bridge was officially launched in April 2016, by President John Magufuli. The 680 metre-long seven-lane bridge, which is the longest cable-stayed bridge in the East African region, connects Dar es Salaam City to the suburban Kigamboni
plants, which can produce as much as 561 megawatts of power, generated only 110 megawatts in December 2015. The hydropower shortfalls have led TANESCO to suffer losses of about USD 230,000 daily. Tanzania’s Government which is keen on alternative power production, in 2014 launched an electricity supply roadmap that aims at boosting generating capacity from about 1,590 megawatts to 10,800 megawatts in a decade, largely by building more gas and coal power plants.
District, across an Indian Ocean creek. It links to an area earmarked in 2010 for an ambitious plan to build a satellite city, known as the Kigamboni New City Development. It further links Tanzania’s commercial capital, with the economically productive and agriculturally rich
Tanzania seeks alternative to hydropower
Tanzania’s multi-million Kigamboni Bridge was officially
launched
27
southern regions. It is also the first toll road in Tanzania. The bridge is expected to open up trade and investment
opportunities and boost economic growth in Dar es Salaam and the entire country.
FINANCIAL SERVICES
According to Business Monitor International (BMI)’s May 2016 report, buoyant economic growth, a low statistical base and the increase in mobile financial services will sustain rapid rates of expansion within Tanzania’s banking sector over the coming years. Extension of credit continues to be the main engine of asset growth in the sector. BMI estimates that credit growth in Tanzania will continue at a rapid pace, owing to a rapidly expanding economy and a very low statistical base. Asset quality is strong and improving and the banking sector is also set to benefit from the implementation of new capital adequacy requirements and macro-prudential regulations. These factors,
Tanzania’s banking sector is expected to continue growing
over the coming yearstogether with the rise of mobile financial services across the country, will ensure that Tanzania’s banking sector will be a regional outperformer over the coming years. Trade, which stood at 22 percent as at December 2015, continues to account for the largest share of total outstanding credit, followed by personal loans which accounted for 18 percent, manufacturing at 11 percent and agriculture at 8 percent. It is noteworthy that credit to agriculture continued to slow down in favour of other economic activities, notably trade and manufacturing. With economic growth set to remain robust, averaging over 6 percent annually over the medium term, the fundamental outlook for the sector is bright.
NATURAL RESOURCES
In early 2015, Norway’s Statoil found more gas offshore Tanzania, increasing its chances for an investment decision on a liquefaction plant with Britain’s BG Group, which operates a neighbouring exploration block. Statoil found 1.2 trillion cubic feet of gas in its block, totalling its volume to 21 trillion cubic feet or about 3.8 billion barrels of oil equivalent. BG has also found about 15 trillion cubic feet of gross resources in nearby blocks. This discovery has proven
that the gas resources extend into the western part of block 2, which opens up additional prospects. Although Statoil and its partner ExxonMobil have released few details on the project, one of BG’s partners earlier said that the volumes in place would support two 5 million tonnes per annum liquefaction units also known as Liquefied Natural Gas trains. Production is expected to begin around 2020.
Statoil finds more gas offshore in Tanzania
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Following new deep sea discoveries off Tanzania’s southern coast, the country’s current natural gas reserves have increased by 18 percent to 55 trillion cubic feet from a former 46.5 trillion cubic feet in June 2014. This is according to the country’s Energy and Minerals
Ministry. The new discoveries were made by Statoil, Exxon Mobil, BG Group and Ophir Energy. East Africa is a new hotspot in hydrocarbon exploration after substantial deposits of crude oil were found in Uganda and major gas reserves discovered in Tanzania and Mozambique.
Tanzania gas resources rise to 55 trillion cubic feet
OTHER DEVELOPMENTS
Tanzania’s GDP has expanded by 32 percent after it rebased its calculation to incorporate new sectors in the economy, such as the ongoing mobile phone revolution in the country. Rebasing of the GDP gives a true reflection of a country’s economic situation by taking into account new transformations in the economy. Farming remains Tanzania’s economic mainstay, while tourism, mining, communications and financial services are the other key sectors. Tanzania has made big natural gas discoveries, with revenues expected to give a boost to the economy by 2020.
Tanzania’s Government struck a deal with Bharti Airtel to buy back its 35 percent share in Tanzania Telecommunications Corporation (TTCL). This is according to a statement by the country’s Ministry of Communication, Science and Technology in May 2015. The Tanzanian Government, which also owns a 40 percent stake in Bharti Airtel’s Tanzanian subsidiary, has been in talks with the company over
the deal for the past five years, but had failed to reach an agreement on the price in the past. Analysts predict that the Government aims to regain 100 percent ownership of TTCL in order to recapitalize the company and ensure that it has a competitive edge in the fast growing telecommunications sector.
President John Magufuli was sworn into office as Tanzania’s new president on 5 November 2015, at a ceremony that was attended by high-profile leaders from several African nations including Kenya, Zimbabwe, Uganda, Rwanda, Ethiopia, Democratic Republic of Congo, Zambia, South Africa and Mozambique. He was declared the winner of the 2015 Tanzania Presidential Elections in October 2015. Former President Jakaya Kikwete voluntarily stepped down at the end of his term, unlike some of his Africa counterparts. It was generally peaceful during the most hotly contested election in the country, in more than a half of a century’s rule by the Chama Cha Mapinduzi (CCM) Party.
SOURCESallafrica.comwww.cnbcafrica.comwww.bmiresearch.comwww.reuters.com
www.theafricareport.comwww.theeastafrican.co.kewww.thecitizen.co.tz
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the future. No one should act upon such information without appropriate professional advice after a thorough
examination of the particular situation.
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