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ALL YOU NEED TO KNOW ABOUT INVESTING IN TANZANIA

Tanzania is undoubtedly a great country to invest in as it has shown tremendous growth over the years compared to other African countries. 

It is the largest in East Africa and functions as a major trade center for 6 land-locked countries which include Rwanda, Uganda, Malawi, the Democratic Republic of Congo, Burundi, and Zambia.

Tanzania is among the top 10 countries with the biggest foreign direct investment(FDI) in Africa with the inflow reaching a sum of USD 1.1billion as of 2019 and it draws this inflow from the mining sector, agricultural farm crops including tobacco and coffee, and the oil and gas industry. 

It draws a lot of investments due to the focus it has shown for building strong socio-economic policies, its efficient participation and work in the private sector and privatization, and the overflowing amount of natural resources it has.

Some of the major countries heavily invested in Tanzania are China, the USA, UK, Netherlands, Kenya, and the UAE.

Tanzania offers numerous investment opportunities in its different sectors and some of these investment opportunities that should be considered include:

  • Manufacturing industries

These industries include agro-based industries, engineering industries, food processing industries, clothing, textiles and leather industries etc. 

  • Petroleum and mining

This involves the exploration and production of energy, oil and gas as well as other natural minerals such as gold, diamonds, tanzanite(which occurs only in Tanzania) and many other minerals.

  • Construction

This involves the construction of anything that is required ranging from accommodation facilities for residents and non-resident a including tourists to educational facilities to commercial and industrial buildings to health facilities.

  • Transport

This includes road and rail transportation facilities, water and shipping transport methods, as well as transportation facilities by air.

  • Transit trade

This involves all the activities related to the movement of goods to other countries, and to the import and export of goods and services.

  • Technological industries

This includes activities relating to the production,development, marketing and distribution of computers and other information and communication technology.

  • Agriculture

This involves the production and export of large 

quantities of major cash crops and food crops including cotton, coffee, tobacco, nuts, oils, sugar, rice, cereals and many others.It also includes livestock production ranging from, dairy farming, beef ranching, piggery and poultry, bee-keeping and many others.

  • Tourism

This is the operation of hotels, lodges, restaurants, tour guides and many other tourism focused activities.

However, before investing in the various available sectors and industries in Tanzania you must research as much as you can, find out as much beneficial information as possible and get professional help before going ahead with your investment plans. 

What You Should Know Before Investing in Tanzania

Tanzania like any other country has strong and weak points that need to be carefully considered and understood before committing to an investment agreement.

Some of these points are:

  • Economic Growth

It is important to consider the economic growth rate of whatever country you might be interested in investing in as it is one factor that will help you determine whether or not you would be making profitable gains.

Tanzania has shown tremendous growth over a period of many years and currently has a GDP of 7% which when compared to the average growth rate of 4.7% of Sub-Saharan Africa is definitely one of the biggest.

The country also boasts of increasing economic stability evidenced in the decrease in inflation rate from 16% in 2012 to 4% in 2018, and in the advancement of the country from being a low-income country to being a lower-middle-income country in July 2020.

One of the many strategies that was employed by the country to foster this tremendous economic growth and stability was through heavy investment in major industries like- the transport industry, urban development, education, energy, water, social protection, health, and natural resources sector.

However, Tanzania like other nations of the world suffered dire consequences 

from the rampage of the pandemic- Covid 19 in 2020 and is still on a slow recovery uptake from that.

  • Strategic Location and Market Access

Tanzania functions as a gateway for 6countries and has 3 water ports that serve the neighbouring countries due to its strategic location.

The 2010 East African Community (EAC) Common Market Protocol is an agreement.

Tanzania has with other countries including Kenya, Uganda, Rwanda, and Burundi, and is also a member of the Southern Africa Development Community (SADC). 

This membership and agreement gives investors in Tanzania enviable access into trade markets and helps them to optimally utilize the opportunities that exist within the markets of other member countries.

  • Government policies and restrictions

The Tanzania Investment Act of 1997 promotes fair, adequate, and prompt compensation to all foreign investors. It also provides foreign investors access to court for the determination of adequate compensation; and prompt payment of benefits.

Also, foreign investors can purchase and own shares of local companies up to a certain percentage but there are some restrictions in certain sectors and industries. 

For example, foreign investors can own only up to 49% of a TV station and are not allowed to own shares of the nation’s newspapers.

In the mining sector, the company must be owned by 51% Tanzanians and non-managerial positions must be held 100% by Tanzanians.

Foreign investors are also banned from local tourism trading.

The Tanzanian investment despite all its benefits for investments is still too complex and outdated and changes need to be made and regularized for the country to come to par with other African countries in the area of investment.

  • Environmental and Climate Challenge

Tanzania over many years has relied greatly on hydropower to produce electricity but this has failed in recent years as a result of little rainfall leading to the deletion of the water reserves.

This has affected the economy especially in the agricultural sector as it is dependent on rainfall. About half of the country’s GDP is accounted for by agricultural production and the erratic and poor rainfall conditions have led to poor and low production of food which has led to an increase in food production challenges and food insecurity.

  • Taxation Policies

There are different taxation policies for the different sectors and industries in Tanzania and all of these should be considered. Some of these taxation policies are:

  • Corporate tax which all companies are subject to paying 30% of their worldwide taxable income or 25% if some of their equity is listed on the Dar es Salaam stock Exchange.
  • VAT which is charged at 18% on the supply of goods and services.
  • Land and property tax which is paid annually to the Tanzanian government. It is important to note that all land belongs to the government who only issue leasing rights to investors for up to 99years which can also be renewed.
  • Employee and social security tax which is based on residence and source. Individuals in the country are taxed based on their worldwide income while individuals outside the country are taxed based on their income gotten in/from Tanzania. 

Individual Pay-as-you-earn(PAYE) ranges from 0-30% of all remunerations while the social security tax is 20% with 10% from employee’s gross income and 10% from the employers.

  • Mining tax is about 4% of the royalty rate on minerals but having a Minerals Development Agreement with the government provides other incentives for investors.
  • Labour and Infrastructure

Tanzaniais at a point where its economic growth has outpaced its labour pool and infrastructural facilities. 

This poses a problem for investors as Tanzanian policies require the labour force to be 100% indigenous even when this is not available. 

However, government permits for foreign labour when indigenous labour is unavailable can be issued. 

The government is however in charge of regulating the minimum wage for employed labour in certain sectors such as the construction sector, transport sector, mining sector, telecommunication sector and the agricultural sector.

Also, disputes that might arise from the labour workforce are resolved and mediated by the responsible governmental body which is the Commission for Mediation and Arbitration.

  • Foreign Exchange Control

The Foreign Exchange Act, 1992 allows individuals, whether indigenes or not, to hold various amounts of foreign currency. It also allows individuals to open and maintain a foreign currency account and sell any amount foreign currency to authorized dealers only.

Also, the Investment Act of 1997 assures investors of the unconditional transferability of net profits, foreign loan services, royalties, fees and technology transfer charges, emoluments of foreign personnel and repatriation of capital, after taxes on the sale of the investment through authorized dealers only.

Despite having all of this information at hand it is still quite challenging to navigate the waters of investment in Tanzania especially with the complexity that exists in their laws and policies and this is why you need professional help.

The firm excels in taking strategic and informed decisions while also taking into great consideration the needs of their clients. They major in various sectors including Banking and Finance, Mining, Energy, Oil and Gas, Real Estate, Construction and Engineering, Tourism and Wildlife and various other sectors.

With their impressive portfolio it is evident that you can’t do better than Shikana Law Group.

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