2013 Investment Climate Statement - Tanzania

2013 Investment Climate Statement
Bureau of Economic and Business Affairs
March 2013

Openness to, and restrictions upon, foreign investment

The Government of Tanzania (GOT) generally has a favorable attitude toward foreign direct investment (FDI) and has had considerable success in attracting FDI. In 2012, FDI into Tanzania rose to over USD 1.1 billion, the highest in East Africa. The legacy of socialist policies endures in certain sectors, however, and some officials remain suspicious of foreign investors and free competition. There are no laws or regulations that limit or prohibit foreign investment, participation, or control, and firms generally do not restrict foreign participation.

The Tanzania Investment Center (TIC) is the primary agency of the GOT to coordinate, promote and facilitate investment in Tanzania. Established by the Tanzanian Investment Act of 1997, TIC is a one stop facilitative center for all investors, and has the authority to manage Public Private Partnerships (PPPs) under the 2010 PPP legislation that sets a framework for Build-Operate-Transfer arrangements with private companies. Registering with TIC is not mandatory, but offers incentives for joint ventures with Tanzanians and wholly owned foreign projects above USD $300,000. The review process takes up to 10 days and involves multiple GOT agencies, which are required by law to coordinate fully with TIC in facilitating foreign investment, but in practice can create bureaucratic delays.

TIC does not have specific criteria for screening or approving projects, and considers factors such as: foreign exchange generation, import substitution, employment creation, linkages to the local economy, technology transfer, and expansion of production of goods and services. Currently, TIC does not require companies to disclose proprietary information or meet standard fair competition practices in order to be approved. Projects with all required documents submitted are seldom rejected. Approved projects receive TIC certificates of incentive and are allowed 100% foreign ownership; VAT and import duty exemptions; and 100% repatriation of profits, dividends, and capital after tax. Similar incentives are offered to investors in semi-autonomous Zanzibar through the Zanzibar Investment Promotion Agency (ZIPA). TIC promotes investment and trade opportunities in agriculture, mining, tourism, telecommunications, financial services, energy, and transportation infrastructure. However, investment tax incentives can be unpredictable; in 2010 capital goods tax exemptions were reinstated, and agricultural equipment imports were given generous exemptions.

TIC continues to improve investment facilitation services through provision of joint venture opportunities between local and foreign investors, and information dissemination. Despite a number of improvements in recent years, some investment challenges remain. In 2010, a new legislation required foreign-owned telecommunications firms to list on the Dar es Salaam Stock Exchange (DSE) within 3 years. This legislation also gave the Minister of Energy and Minerals discretion to require foreign mining companies to give the government an ownership share in order to receive a Mining Development Agreement. Foreign investors generally receive national treatment but the Tourism Act of 2008 bars foreign companies from engaging in mountain guiding activities and only Tanzanian citizens can operate travel agencies and car rental services and engage in tour guiding.

Land ownership remains restrictive in Tanzania. Under the Land Act of 1999, all land in Tanzania belongs to the state. Procedures for obtaining a lease or certificate of occupancy can be complex and lengthy, both for citizens and foreign investors. Less than 10% of land has been surveyed, and registration of title deeds is currently manual and mainly handled at the local level. Foreign investors may occupy land for investment purposes through a government-granted right of occupancy ("derivative rights" facilitated by TIC), or through sub-leases through a granted right of occupancy. Foreign investors can also partner with Tanzanian leaseholders. Rights of occupancy and derivative rights may be granted for periods up to 99 years and are renewable. The GOT's Better Regulation Unit (BRU) manages the implementation of the World Bank- supported Business Environment Strengthening for Tanzania (BEST) program. In 2007, the World Bank's "Doing Business" report listed Tanzania as among the top ten reformers. In 2012, however, Tanzania’s ranking slipped substantially to its current ranking of 134 out of the 185 countries surveyed. In response to this decline, the GOT has consolidated key reform programs requiring inter-ministerial actions in the Prime Minister's Office.

The financial sector has continued to expand, with an increase in foreign-affiliated financial institutions and banks operating in Tanzania. As of 2012, the Bank of Tanzania listed a total of 32 commercial banks licensed and operating in Tanzania, over half of which are foreign-affiliated. The banking system showed a high concentration of total assets, 57% of which are held by four large banks. Foreign-owned banks in Tanzania account for about 48% of the banking industry’s total assets. Competition among these foreign commercial banks has resulted in significant improvement in the efficiency and quality of financial services, though interest rates are still relatively high, reflecting a high risk of fraud. To mitigate this fraud risk, the GOT is in the process of implementing a national ID program, which would require all Tanzanian citizens to get a national ID card. The registration process for IDs began in early 2012 with the date for issuing IDs still to be announced.

The East African Community's (EAC) Customs Union came into force on January 1, 2010. In July 2010, the member states (Burundi, Kenya, Rwanda, Tanzania, and Uganda) enacted a Common Market Protocol to allow free movement of goods, people, and capital within the region. Although the EAC member countries continue to discuss economic integration and harmonize regulations, non-tariff barriers--such as the administration of duties and other taxes, and corruption--remain a problem. Tanzania is also a member of the Southern Africa Development Community and the Common Market for East and Southern Africa (COMESA).




TI Corruption Index



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MCC Land Rights Access



MCC Natural Resource Protection



Conversion and Transfer Policies

Tanzanian regulations permit unconditional transfers through any authorized bank in freely convertible currency of net profits, repayment of foreign loans, royalties, fees charged for foreign technology and remittance of proceeds. The only official limit on transfers of foreign currency is on cash carried by individuals traveling abroad, which cannot exceed USD $10,000 over a period of forty days. Shortages of foreign exchange occur rarely. Bureaucratic hurdles continue to cause delays in processing and effecting transfers; delays can range from days to weeks. Investors rarely use convertible instruments. The Embassy is not aware of any recent complaints from investors regarding delays in remitting returns and there have been no remittance policy changes this year.

Expropriation and Compensation

The GOT may expropriate property after due process for the purpose of national interest . The Tanzanian Investment Law guarantees:

--Payment of fair, adequate and prompt compensation

--A right of access to the Court or a right to arbitration for the determination of the investor’s interest or right and the amount of compensation

--Any compensation shall be paid promptly and authorization for its repatriation in convertible currency, where applicable, shall be issued

GOT authorities do not discriminate against U.S. investments, companies or representatives in expropriation. Since 1985, the Government of Tanzania has not expropriated any foreign investments.

Dispute Settlement

Investment-related disputes in Tanzania can be protracted. The Commercial Court of Tanzania, established in 1999, is headquartered in Dar es Salaam, and operates two sub-registries located in Arusha and Mwanza. The government intends to establish more branches in other regions including Mbeya, Tanga and Dodoma, in the coming years. Lack of court capacity remains an issue, and cases are currently backlogged 2 - 4 years. Tanzania recently moved to a computerized arbitration system aimed at solving business related disputes within a short period of time but backlogs remain.

Despite the legal mechanisms in place, foreign investors sometimes complain that the GOT "changes the goalposts" and does not honor agreements. Additionally, investors continue to face challenges receiving payment for services rendered for GOT projects. The GOT has acknowledged the problem as being affiliated with the current budget crisis, leading many government ministries to try to work with significantly reduced budgets. The GOT is engaging in a number of strategies to pay off a number of debts including those incurred in the energy sector.

According to the World Bank's Doing Business report it takes on average 3 years to close a business. The recovery rate for creditors on insolvent firms is only 21.9 U.S. cents on the dollar with judgments typically made in local currency.

Tanzania is a member of both the International Center for the Settlement of Investment Disputes (ICSID) and the Multilateral Investment Guarantee Agency (MIGA). The ICSID was established under the auspices of the World Bank by the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. MIGA is also World Bank-affiliated and issues guarantees against non-commercial risk to enterprises that invest in member countries. There is no specific legislation in Tanzania providing for enforcement under the 1958 New York Convention or for the enforcement of awards under the ICSID Convention.

Under Tanzanian regulations, disputes between a foreign investor and the Tanzanian Investment Center that are not settled through negotiations may be submitted to arbitration, through one of several options:

--Arbitration based on the arbitration laws of Tanzania

--Arbitration in accordance with the rules of procedures of the ICSID

--Arbitration within the framework of any bilateral or multilateral agreement on investment protection to which the Government and the country of which the investor is a national are parties

--Arbitration in accordance with the World Bank's Multilateral Investment Guarantee Agency (MIGA), to which Tanzania is a signatory

--Arbitration in accordance with any other international machinery for settlement of investment disputes agreed upon by the parties

Performance Requirements and Incentives

The GOT uses the World Trade Organization's (WTO) Trade-related Investment Measures (TRIMs) to promote development objectives, encourage investments in line with national priorities, and to attract and regulate foreign investment. Trade development instruments that Tanzania has adopted include Export Processing Zones (EPZs), Investment Code and Rules, and Export Development/Promotion and Export Facilitation. EPZs were established by the 2002 EPZ Act and are open to both domestic and foreign investors. The Export Processing Zones Authority (EPZA) is charged with designating suitable areas for the location of EPZs. The EPZA also oversees incentive packages such as exemptions from corporate tax and withholding taxes on rent, dividends and interest; remission of customs duty, value-added tax (VAT) and other taxes on raw materials and capital goods; and exemption from VAT on utilities, wharf charges, and levies imposed by local authorities.

Tanzania has largely completed its transition to a liberalized market economy, though the government retains a presence in sectors such as telecommunications, banking, energy and mining. The GOT has sought foreign investors to manage formerly state-run companies in public-private partnerships, but successful privatizations have been rare. Though there is an official privatization program, bidding criteria are not always clear and transparent. In 2009-10 the government took back its control from formerly privatized Tanzania Railways Limited, General Tyre, and Kilimanjaro International Airport after expressing disappointment with the failure of the management companies to achieve desired goals.

TIC’s Investment Code offers a package of investment benefits and incentives that are applied uniformly to both domestic and foreign investors without performance requirements. These include:

- Zero Custom Duty and deferred corporate tax and VAT on capital goods for investments in mining, infrastructure, road construction, bridges, railways, airports, electricity generation, agro-processing, telecommunications and water services.

- 100% capital allowance deduction in the years of income for the above mentioned types of investments.

- No remittance restrictions. The GOT does not restrict the right of a foreign investor to repatriate returns from an investment.

- Guarantees against nationalization and expropriation. Any dispute arising between the Government and investors can be settled through negotiations or submitted for arbitration.

- Allowing interest deduction on capital loans; removal of the 5-year limit for carrying forward losses of investors.

- Customs Duty and VAT tax deferral on capital goods for priority sectors, including agro-processing and transport.

The Zanzibar Investment Promotion Agency (ZIPA) and the Zanzibar Free Economic Zones Authority (ZAFREZA) offer roughly equivalent incentives as those offered by the Mainland's TIC and EPZ policies.

There are currently no requirements that all foreign investors buy from local sources, export a certain percentage of output, or only access foreign exchange in relation to exports. TIC guides foreign investors to specific locations through its land bank system. The GOT plans to expand TIC's land bank and modernize its land titling and registration system, though both changes are long delayed in execution. U.S. and other foreign firms can and do participate in government/donor-funded research and development programs on a national treatment basis.

Right to Private Ownership and Establishment

Tanzanian regulations allow foreign and domestic private entities to establish and own business enterprises and engage in legal forms of remunerative activity. The Business Registration and Licensing Act established licensing regulations for business operations. It provides the right to freely establish private entities, to own property both movable and immovable, and to acquire and dispose of property including interest in business enterprises and intellectual property. The Act stipulates that no business entity can enter into business activities in Tanzania before obtaining a business license through the Business Registration and Licensing Agency (BRELA). Registration fees and charges for foreign companies are significantly higher than for domestic companies. The government is now implementing the Business Activities Registration Act of 2007, which aims to reduce administrative barriers with one centralized licensing database.

Under the Tanzania Investment Act 1997 and the Land Act 1999, occupation of land by non-citizen investors is restricted to lands for investment purposes. Land in Tanzania is state property that can be leased for up to 99 years. The law does not allow individual Tanzanians to sell land to foreigners. Foreigners can only lease land in Tanzania through the Tanzania Investment Center (TIC), which has designated specific plots of land (a land bank) to be made available to foreign investors. Foreign investors may also enter into joint ventures with Tanzanians, in which case the Tanzanian provides the use of the land (but retains ownership, i.e., the leasehold).

Protection of Property Rights

Tanzania's Fair Competition Commission (FCC) actively combats intellectual property rights (IPR) violations, but its impact is limited by inadequate legal penalties for counterfeiters. FCC is pursuing increase in penalties through changes to Tanzania's law, but considers the East African Community's draft Anti-Counterfeiting Act (ACA) as a possible faster route to achieve the same end.

Tanzania is one of the signatories to WTO and TRIPS agreements. The available IPR-related legal instruments in the country are governed by the following acts: The Fair Competition Act, 2003 (FCA); Merchandise Marks Act Regulations 2008 and Zanzibar Industrial Property Act 2008. Tanzania has made a big step to stamp out counterfeiting and piracy by amending its laws on the protection of IP rights to comply with international standards prescribed in the TRIPs Agreement and other international conventions. However, despite enacting a number of domestic laws on intellectual property rights protection, the sale of counterfeit goods, particularly in the entertainment and apparel sector remains common and widespread.

Secured interests in property, both movable and real, are recognized and enforced under different laws in Tanzania. There is no single comprehensive law to secure property rights. Though the Tanzania Investment Center maintains a land bank, restrictions on foreign land ownership can significantly delay investments. Land not already processed for investment in the land bank has to go through a lengthy review and approval process by local level authorities as well as the Ministry of Lands and Human Settlements Development and the President's office, in order to be officially re-designated, from Village Land, with customary rights of occupancy, to General Land, which can be titled for investment and sale

The Ministry of Lands and Human Settlements Development handles registration of mortgages and rights of occupancies. The Office of the Registrar of Titles is responsible for issuing titles and registering mortgage deeds. Title deeds are recognized as a mortgage for securing loans from banks. Traditional Certificates of Occupancy for Village Land are still being piloted for use as collateral, and this is currently limited to groupings of village-level borrowers.

Transparency of the Regulatory System

The following laws were established to support GOT efforts to strengthen regulatory efforts:

The Energy and Water Utilities Regulatory Authority Act, 2001 (EWURA)

The functions of EWURA include: licensing, tariff review, monitoring performance and standards with regards to quality, safety, health and environment. EWURA is also responsible for promoting effective competition and economic efficiency, protecting the interests of consumers and promoting the availability of regulated services to all consumers including low income, rural and disadvantaged consumers in the regulated sectors.

The Surface and Marine Transport Regulatory Act, 2001 (SUMATRA)

SUMATRA is a multi-sector regulatory agency which was established by an Act of Parliament (No. 9) of 2001 to regulate Rail, Road and Maritime transport services.

Tanzania Civil Aviation Regulatory Authority Act, 2003 (TCAA)

To ensure safety, security and regularity of civil aviation in Tanzania by providing effective oversight and efficient air navigation services while protecting the environment and safeguarding the interest of consumers and the public.

The Tanzania Communications Regulatory Authority Act, 2003 (TCRA)

The functions of TCRA include: issue, renew and cancel licenses; establish standards for regulated goods and regulated services; establish standards for the terms and conditions of supply of the regulated goods and services; regulate rates and charges; monitor the performance of the regulated sectors; and facilitate the resolution of complaints and disputes;

The Fair Competition Act, 2003 (FCA)

According to the Fair Competition Act, the FCC will work to develop and promote polices to enhance competition and consumer welfare and help to publicize consumer information and guidelines relating to the obligations of persons under the Act and the rights and remedies available to consumers under the Act.

Tanzania is implementing a taxpayer's charter that enables taxpayers to complain about problems or malpractice within the Tanzania Revenue Authority (TRA). The tax policy reform agenda includes abolition of nuisance taxes, harmonization of the regulatory framework, establishment of a clear incentive regime and gradual reduction in rate structure. The GOT has broadened tax incentives and incorporated them in the relevant tax laws to attract more investments.

The private sector is represented through private associations such as the Confederation of Tanzania Industries (CTI), TIC, and the umbrella Tanzania Private Sector Federation, which provides grants and business training for small local businesses. The Tanzania National Business Council (made up of 50% government and 50% Private Sector representatives) is the lead dialogue institution where the government interacts with diverse stakeholder representatives from the private sector for discussions on strategic issues related to the investment process and business environment in Tanzania. The Council is chaired by the President of Tanzania. The President participates in several roundtables such as the local Investor’s Round Table (LIRT), International Investor’s Roundtable (IIRT) and the Chief Executive Officers (CEO) Roundtable on a periodic basis to discuss specific issues aimed at improving Tanzania’s business competitiveness. Businesspeople complain, however, that the government is not sufficiently responsive to the private sector's concerns.

Bureaucratic procedures for licenses and permits continue to be burdensome and time-consuming. The GOT's "Road Map" to improve the investment climate seeks to reduce the number of construction permits and inspection procedures. The Tanzania Chamber of Commerce and Industry Association issues certificates of origin for companies exporting to the U.S. under AGOA. Proposed laws and regulations are sometimes published in draft form for public comment.

There are many opportunities to provide input as government officials are relatively accessible, especially to industry associations. The Tanzania Chamber of Minerals and Energy was heavily involved in the years-long dialogue process that led to the Mining Act of 2010. The Electronic Communications Act, however, which requires telecommunications firms to list on the DSE, was passed in early 2010 with little opportunity for stakeholder comment. Legal, regulatory, and accounting systems are transparent and consistent with international norms. There are no efforts to restrict foreign participation in industry standards-setting consortia or organizations. Associations representing the tourism, telecommunications, and mining industries are composed of, and often led by, foreigners.

The GOT established a Law Reform Commission (LRC) in 1980 to periodically review the legal and regulatory requirements relating to trade and investments and proposed appropriate reforms. The GOT is also modernizing the business-licensing regime to reduce impediments to investment. Under the Tanzania Investment Act, the Tanzania Investment Center (TIC) has become a 'one-stop shop' that provides fast track assistance to obtain approvals and permits such as work permits, industrial licenses, and trading licenses from various ministries. The Business Activities Registration Act (BARA), enacted in February 2007, is implemented by the Business Registration and Licensing Agency (BRELA). BRELA intends to start a simplified and decentralized registration system which establishes a single national database for all registered businesses. The Tanzanian judicial system continues to function inefficiently and remains plagued with corruption. These factors increase the cost and difficulty of doing business in Tanzania, particularly with regard to dispute resolution. The GOT has begun a program to train judiciary officials and combat corruption in the regulatory system; challenges with the judiciary persist.

Efficient Capital Markets and Portfolio Investment

The banking system continues to be sound and stable. Although only 12% of the population participates in the formal banking sector, most banks are well capitalized and liquidity is well above the regulatory requirements, making the banking industry consistently profitable.

The Tanzanian Capital Markets and Securities Authority (CMSA) Act facilitates the free flow of capital and financial resources to support the product and factor markets. Foreign individuals or companies can invest in shares with foreign participation limit of 60 % of the aggregate value of the listed shares.

It is worth noting that despite meaningful progress, the country’s capital account is not fully liberalized and foreign individuals or companies are not permitted to participate in the government securities market. This constraint on investment flows has consequences which negatively affect both the cost and availability of capital for all borrowers. Steps have been taken to address this issue and in Q4 2012 the GOT announced that EAC-based investors will be permitted to invest directly in domestic government securities in 2013 and international investors will eligible in 2015.

There are no "cross-shareholding" and "stable shareholder" arrangements to restrict foreign investment through mergers and acquisitions. There are no measures designed to protect against foreign hostile takeovers.

Foreign investors can get credit in the local financial market, where credit is allocated on market terms. Recent bank lending rates ranged from 13 to 15 percent for ordinary borrowers. Corporate borrowers can negotiate lower lending rates. Credit to the private sector continues to grow though there are few local institutions large enough to finance significant deals such as infrastructure projects and power stations.

The financial sector in Tanzania has expanded in recent years, with a significant increase in the number of foreign-affiliated financial institutions and banks. Of the 32 commercial banks licensed and operating in Tanzania, more than half are foreign-affiliated banks. The banking sector is adequately capitalized and has limited reliance on foreign borrowing. Private sector companies have access to a variety of commercial credit instruments including documentary credits (letters of credit), overdrafts, term loans, and guarantees. Foreign investors can open accounts and make deposits in registered private commercial banks. Interest earned by non-residents or foreign investors from deposits in banks registered by the Bank of Tanzania (BOT) is exempt from income tax, in accordance with the Income Tax Act of 2004. Foreign exchange regulations have been eliminated to attract investors and simplify international transactions.

Profits, dividends, and capital can be readily repatriated. Several venture capital funds have been established to meet the demand for equity by growing businesses. The Banking and Financial Institution Act of 2006 establishes a framework for a Credit Reference Bureau and permits banks and financial institutions to release information to licensed reference bureaus in accordance with regulations and allows credit reference bureaus to provide to any person, upon legitimate business request, a credit report. There is, however, no national credit database. The Tanzania Bankers Association recently agreed to share information and the central Bank of Tanzania will consolidate credit histories for release to authorized bureaus.

Tanzania restricts the free flow of investment in and out of the country and non-citizens cannot buy bonds and other debt securities in the domestic market. In addition, Tanzanians cannot sell or issue securities abroad, unless approved by the Capital Markets and Securities Authority. The Dar Es Salaam Stock Exchange forbids companies with more than 60 % foreign ownership from listing. Under the terms of the planned East African Community (EAC) monetary union, all EAC residents were expected to receive national treatment by 2012, however this has yet to be implemented.

Competition from State-Owned Enterprises (SOEs)

Public enterprises do not compete under the same terms and conditions as private enterprises because they have access to government subsidies and other benefits. SOEs are active in the power, communications, railway, telecommunication, aviation, and port sectors. SOEs typically report to ministries and are led by a board possibly a presidential appointee but also composed of private leadership. SOEs are not subjected to hard budget constraints and Tanzania does not have a sovereign wealth fund. SOEs do not discriminate against or unfairly burden foreigners, though they do have access to sovereign credit guarantees. SOE financial results are audited by donors and accessed by the media. SOEs primarily work in industries that are nationalized are not competitive e.g. in aviation (Air Tanzania). With emerging potentials in the oil and gas sector, investors continue to monitor the potential increase of governmental influence on these economic activities.

SOEs are required to publish details of subsidies received for the current and previous years, the percentage of the government’s holding and its value at cost for the current and previous years. Additional information available to the public includes subsidiaries (above 50%), associates (20-50%) and shareholdings of below 20%. The financial results of these entities are not consolidated within the main financial statements of GOT. Details such as the balance at the year-end (and for the previous year) of any funds operating within ministries, departments and agencies are also provided.

Corporate Social Responsibility (CSR)

Tanzania has in place modern shareholders protection mechanisms that at least meet the minimum standards set out under the OECD principles on corporate governance.

CSR is practiced mainly by large foreign firms in the banking, mining and telecommunications sectors and is generally viewed favorably. Companies typically pay for media coverage of their charitable activities. Tanzania also has guidelines on corporate governance by publically listed companies.

Shareholders’ rights to obtain relevant and material information of the corporation on a timely and regular basis in Tanzania is provided under the Companies Act; whereby a company must hold an initial general meeting within 18 months from incorporation, and from that point hold at least one annual general meeting and additional general meetings as needed. In these meetings, shareholders have the right to view annual accounts, directors' report, auditors' report, proposal for appointment of auditors, proposals for the appointment and resignation of directors. A company must also provide shareholders bi-annual and quarterly results as a matter of best practice. The Tanzania guidelines state that the board should ensure shareholders' right of participation are protected by providing them with sufficient information on voting procedures, opportunity to put questions to the management, right to place items on the agenda, opportunity to vote in absentia and opportunity to consider the costs and benefits of their votes. Recently, Tanzania has developed new regulations requiring companies mainly in the mobile telecommunications and mining sectors to list on the Dar es Salaam stock exchange.

Political Violence

Tanzania has been one of the most politically stable countries in Africa. Since gaining independence, Tanzania has enjoyed a remarkable degree of peace and stability. Tanzania has held four national multi-party elections since 1995, the most recent in 2010. Elections on the mainland have been generally free of political violence. The 2010 elections in Zanzibar, held following changes to the constitution to mandate formation of a Government of National Unity, were the most peaceful since Zanzibar's entry into the union.

Tanzania's next general election is scheduled for 2015. Prior to the next election, the GOT hopes to complete a constitutional review process and hold a referendum on a new constitution in 2014. As this process continues, tensions remain high as public debate centers on a number of controversial issues including the status of the Union between mainland Tanzania and Zanzibar, land reform, and others.

Furthermore, 2012 experienced an increase in demonstrations by citizens regarding a variety of political causes, including Zanzibari independence. Although some of the demonstrations were marred by violence, a number of the demonstrations both on the mainland and in Zanzibar proceeded peacefully.

In addition to monitoring the political climate in the run up to the completion of the constitutional review and 2015 elections, foreign investors remain concerned about land tenure issues. Although the government owns all land in Tanzania and oversees the issuance of land leases of up to 99 years, many Tanzanian citizens feel that foreign investment has led to exploitation of Tanzanian resources. This has resulted in conflict between investors and residents in some areas. In Arusha, some of these conflicts have lead to violence, prompting the GOT to emphasize its commitment to supporting foreign investment while also ensuring the intended benefit of the investments to Tanzanian citizens.


Corruption remains a major concern for foreign investors. While giving or receiving a bribe (including bribes to a foreign official) is a criminal offense in Tanzania, the enforcement of laws, regulations and penalties to combat corruption has largely been ineffective. The government launched a series of high-profile corruption prosecutions in late 2008 and secured a conviction in 2010. Corruption is endemic, and measures to combat it are applied impartially to foreign and domestic investors. Corruption persists in government procurement, privatization, taxation, and customs clearance. A 2010 nationwide survey by NGO Concern for Development in Africa (ForDIA) found that the police authorities were considered most corrupt, followed by local health authorities, the judiciary, state power utility Tanesco and the Tanzania Revenue Authority (TRA).

The Tanzania Port Authority and the TRA remain a great hindrance to importers throughout Tanzania despite some success in recent years reducing average port dwell times from more than 20 days to about 11 days by increasing storage fees and pushing more goods to inland container depots. Unpredictable and lengthy clearance delays and bribes to expedite service are commonplace.

Transparency International (TI) has consistently rated Tanzania poorly for its perceived corrupt practices. TI’s 2012 Corruption Perception Index (CPI) rated Tanzania 102 / 176 for a score of 3.5 (Note: The CPI score tracks perceptions of corruption seen by business and country analysts, ranging from zero as highly corrupt, to 10, not corrupt). The Tanzania police and judiciary featured in the list of the top 10 most corrupt institutions in the region. U.S. businessmen have identified petty corruption, particularly among customs and immigration agents and traffic police, as an obstacle to investment. In an effort to deal with corruption, the GOT put in place the National Anti-Corruption Strategy (NACS) and sector-specific action plans for all ministries, independent government departments, executive agencies and local authorities. The Anti-Corruption Bill, commonly referred to as the Prevention and Combating of Corruption Bureau (PCCB) Act, became operational in 2007. The PCCB is responsible for combating corruption alongside international, regional and local watchdog organizations. Transparency International, ForDIA, and the Tanzania Media Women's Association operate freely in Tanzania. Tanzania is a party to the UN Convention against Corruption but not a signatory to the OECD Convention on Combating Bribery.

The government's efforts to fight corruption have been fitful. Late 2008 saw the first-ever major court cases on grand corruption, with the arrests of individuals whose companies allegedly siphoned funds from the Bank of Tanzania (BOT), along with several Bank employees, and the separate arrests of two long-serving former ministers on corruption-related charges. In May 2010, the former BOT Director of Personnel and Administration, Amatus Liyumba, was sentenced to two years in prison for abuse of office in connection with construction of the BOT headquarters. This conviction marked the first in the grand corruption cases. Overall, the court cases have progressed slowly and several other well-publicized scandals have yet to result in prosecutions.

Bilateral Investment Agreements

Currently, the United States of America and Tanzania do not have bilateral investment or taxation agreements. Tanzania is a member of the East African Community (EAC), which signed a Trade and Investment Framework Agreement (TIFA) with the United States in July 2008. Under the U.S.-EAC Trade and Investment Partnership Initiative, the U.S. and EAC are seeking to expand trade and investment ties and dialogue with the private sector. In November 2007, the EAC member states signed an interim economic partnership agreement with the European Union; as of 2012 this still had not been finalized.

OPIC and Other Investment Insurance Programs

The U.S. Overseas Private Investment Corporation (OPIC) signed an incentive agreement with the GOT in December 1996. While the number of U.S. subsidiaries and affiliated companies that could qualify for OPIC financing remains small, a growing number of companies have received OPIC funds for operations in Tanzania. Tanzania is an active member of the Multilateral Investment Guarantee Agency (MIGA), a member of the World Bank Group that promotes foreign direct investment in developing countries by offering political risk insurance (guarantees) to investors and lenders, and by providing technical assistance to help developing countries attract and retain foreign investment. The Export-Import Bank (Ex-Im Bank) of the United States has established a cooperative agreement with the EXIM Bank of Tanzania Limited to facilitate access to guarantees by investors and importers within Tanzania. In 2012, the Ex-Im Bank provided USD $8 million in short-term insurance funding to Tanzanian companies in a variety of sectors including mining, agriculture and manufacturing. Tanzania is also a member of the International Center for Settlement of Investment Disputes (ICSID). Investments in Tanzania are guaranteed against nationalization and expropriation.

The risk of currency depreciation over the next year is low due to stable reserves and sound Central Bank’s monetary policy. However inflationary risk remain. For mission operations, the average exchange rate in 2012 was 1,550 Tsh to 1 USD.


Tanzania faces persistent shortages of skilled labor. While the number of university graduates, especially in business management and information technology, continues to grow, tertiary education is very limited, and many foreign investors find that local labor is insufficient to fill even administrative positions. Only few professions within the EAC, such as English and science teachers, are granted cross-border access to Tanzania's labor market without a work permit. Tanzania's recent signing of a Mutual Recognition Agreement with Kenya and Uganda, which recognizes the credentials and legalizes the employment of engineers in any of the member states, reflects progress in the regional integration process. Labor and immigration regulations permit foreign investors to recruit up to five expatriates with more work permits may be granted under specific conditions. As an incentive under the EPZ Act, the government may provide work permits for management and technical staff when these skills are unavailable locally. Machinery is relatively expensive to import, making labor more attractive.

Tanzania's minimum wage is set by categories covering eight employment sectors. The minimum wage ranges from 70,000 Tsh per month for hotel workers to 350,000 Tsh per month for laborers in the mineral sector. Tanzania's minimum wage was last changed in May 2010.

The union and Zanzibar governments have separate labor laws. Workers on the mainland have the right to form and join independent trade unions. Trade unions must consist of more than 20 employees and are required to register with the government. A trade union or employers' association must register within six months of its establishment; failure to register is a criminal offense. The registrar in the Ministry of Labor exerted significant power over trade unions, including the right to deregister unions if overlap existed within an enterprise. Unions must submit financial records and a membership list to the registrar annually. The registrar can suspend a trade union if it determined that the union violated the law or endangered public security. Association with an international trade union requires government approval.

As of 2012, approximately 13 percent of the formal sector work force (approximately 540,000 people) are unionized workers including members of the Trade Union Congress of Tanzania, (TUCTA), the leading labor federation. In the agricultural sector, the country's largest employment sector, an estimated 5 to 8 percent of the work force was unionized.

The law provides for collective bargaining in the private sector. In the public sector, the government set wages administratively, including for employees of state-owned organizations. On the mainland, disputes were regulated and resolved by mediation through the Commission for Mediation and Arbitration. If the mediator failed to resolve a dispute within 30 days of referral, or any longer period agreed upon in writing by both parties, either party to the dispute may give notice of its intention to commence a strike or lockout. If the mediation fails to resolve the complaint, the Commission for Mediation and Arbitration may appoint an arbitrator to decide the dispute, or it may be referred to the labor court.

On the mainland, the law prohibits discriminatory activities by an employer against union members. In practice, however, many private sector employers adopted anti-union policies or tactics. The law required employers found guilty of anti-union activities to reinstate workers.

Mainland workers have the legal right to strike, and employers have the right to a lockout after complying with certain legal requirements and procedures. These rights are qualified according to the law. For example, all parties to a dispute may be bound by an agreement to arbitrate, and neither party may then engage in a strike or a lockout until that process has been completed. A lawful strike or lockout is protected and does not constitute a breach of contract, nor can it be considered a criminal offense. An employer may not terminate the employment of an employee for participating in a lawful strike or terminate an employee who accedes to the demands of an employer during a lockout.

The law restricts the right to strike when to do so would endanger the life and health of the population. Workers in certain sectors (water and sanitation, electricity, health services and associated laboratory services, firefighting, air traffic control, civil aviation telecommunications, and any transport services required for the provisions of these services) are restricted from striking. Workers in other sectors may also be subject to this limitation.

The labor law in Zanzibar applies to both public and to private sector workers. Zanzibar government workers have the right to strike as long as they follow outlined procedures in the Employment Act of 2005. They are not allowed to join mainland-based labor unions. The Zanzibar labor law requires a union with 50 or more members to be registered and sets literacy standards for trade union officers. An estimated 40 percent of the Zanzibar workforce is unionized. In collaboration with the International Labor Organization (ILO), the Zanzibar government worked to draft regulations under the Employment Act of 2005 to facilitate a smooth implementation of the Act. The regulations have been finalized but have not yet been implemented.

Foreign Trade Zones/Free Ports

The Economic Processing Zones Act of 2006 authorized the establishment of Special Economic Zones (SEZs) to encourage greenfield investments in the light industry, agro-processing industry and agriculture sectors. The GOT's Export Processing Zones Authority (EPZA) continues to promote Export Processing Zones (EPZ) to attract investments in agricultural value added processing, textiles and electronics. EPZA has earmarked 4000 hectares for export clusters, though on-site infrastructure and facilities are lacking. Six zones have already been developed; one is owned by the GOT and the rest by the private sector (85 companies are registered under EPZA to operate in two categories - infrastructure development and manufacturing). Tanzania Revenue Authority has an office in Mabibo EPZ complex to streamline tax and revenue procedures for participants and the GOT hopes to increase the presence of other GOT offices in additional EPZ areas. Investors in EPZs are eligible for various incentives including prime locations near ports and main roads, 10 year tax holidays, exemption on interest and dividend taxes for 10 years, duty free importation of capital goods, exemption on VAT for utilities and exemption of local tax levies.

EPZA made the following steps toward improving the investment climate:

  • Streamlining bureaucratic procedures and requirements, the EPZA has reduced the amount of time required to register and license new investors from a reported maximum 7 days in 2010 to 2 to 3 days in 2012.
  • The establishment of a One Stop Service Center at Benjamin William Mkapa Special Economic Zone puts various procedures from different departments under one roof e.g., work permit and licensing applications.
  • The EPZA has set aside additional land, equipped with infrastructure, for EPZ activities in Bagamoyo and Mkuranga. The authority has earmarked an additional 16 sites countrywide for development.
  • Goods destined for EPZA registered companies have been accorded special treatment and exemptions and are treated as transit cargo. This results in faster clearance and lower clearance costs.
  • Efforts are progressing to make Zanzibar's Malindi Port a free port. In addition, free economic zones have been established in three areas of Pemba and Zanzibar. The GOT intends to establish free trade zones in Tanga and Kigoma ports. Foreign owned firms have the same investment opportunities as host country entities in Foreign Trade Zones.

Foreign Direct Investment and Foreign Portfolio Investment Statistics

Some of the U.S. companies with large foreign direct investments in Tanzania include: Talktel Communications Ltd (USD $145.5 million), Agrisol Energy Tanzania (USD $83.77 million), Ameri-International of Louisiana inc. Ltd. (USD $ 56.134 million), Thomson Safaris Ltd (USD $30 million). Top country sources of FDI into Tanzania include the United Kingdom, Kenya, South Africa, India, China and the United States. According to TIC, the UK was the largest source of FDI in 2012. Foreign direct investment continues to grow, particularly in the sectors of telecommunications services; energy infrastructure; road construction; breweries; tourism and hotels; mining; and agriculture.

Tanzanians are currently restricted from investing abroad while very few international firms (primarily Kenyan) list on the Dar es Salaam stock exchange. There is currently no information on Tanzanian FDI abroad (FDI outflows), as Tanzanians are legally barred from participating in foreign investment funds or offerings.

The Bank of Tanzania (BOT) and Tanzania Investment Center (TIC) reported Foreign Direct Investment (FDI) trends in Tanzania as follows: