The new Tanzania Investment Act, No. 10 of 2022 of the laws of Tanzania (the “New Act”) was enacted in 2022 repealing and replacing the Tanzania Investment Act, No. 26 of 1997(the “Old Act”). At present, the New Act is in Kiswahili language with no English translation. This Article, therefore, highlights the key changes made by the New Act and the import of these changes on investments in Tanzania.
One of the significant changes is the reduction of the minimum investment capital for local investors from One Hundred Thousand United States Dollars (USD 100,000) to Fifty Thousand United States Dollars (USD 50,000). This is likely to encourage and promote investment by citizens/locals into various investments.
Another notable change, which is also a new concept, is the introduction of an integrated electronic system to promote data sharing between the relevant regulatory authorities involved in receiving applications and issuing regulatory licences, permits, approvals and consents to investors. This is a welcome idea and it is likely to give investors an easier and more seamless process of registration by providing services “under one roof” through a digital platform. This will not only promote the investor experience in Tanzania but also create a more effective mode of data management between the government agencies involved in various aspects of investment.
The New Act also provides for the period of validity of a Certificate of Incentive, which was not previously stated in the old act. The New Act clarifies that financial incentives shall be valid for a period of five (5) years, whereas non-monetary incentives shall be active throughout the project implementation period.
The New Act outlines additional instances which could result in the cancellation of a Certificate of Incentive under Section 20 (3). Such instances include, inter alia: violation of any of the conditions for provision of incentives; failure to submit annual information on the implementation and development of the investment project for two (2) consecutive years and transferring the certificate to another person or investment without Tanzanian Investment Center’s (TIC) permission.
The New Act has included additional requirements for an investment to qualify as a Special or Strategic Investment. This is what was previously referred to as strategic or major investment under Section 20 of the Old Act and Regulation 49 of the Tanzania Investment Regulations, 2002. These additional requirements include, inter alia: the generation of at least 1,000 local jobs with a sufficient number of senior positions on projects that do not require advanced and modern technology and the ability to increase exports by at least 50% or reduce imports of the products that are produced.
The New Act has also expressly included the Special Strategic Investment category which was created under Regulation 49 of the Tanzania Investment Regulations, 2002. The requirements for recognition under this category have stayed the same with the minimum investment capital being the sum of not less than Three Hundred Million United States Dollars (USD 300,000,000) and the investment being one that can generate at least 1,500 local jobs, among other things.
Whereas the New Act has some notable positive changes and clarifications, it has introduced several adverse changes that were covered in the Old Act, one of them being the removal of the channel of appeal from TIC to the Minister of Investment, Industry and Trade (the Minister) where an investor has been denied a licence, approval and/or consent by an authority. When the authority refuses to grant a license, approval, or consent, the investor is left to seek recourse by either contacting the authority directly or appealing to the Minister without any assistance. This process could not only be cumbersome for the investor but also time consuming and possibly expensive for an investor. This is likely to discourage investors from pursuing the licence, approval and/or consent and possibly abandon the investment altogether. This also works in contradiction to the move to have an integrated system which is meant to centralize operations of the various government agencies involved in this process.
Another downside is the removal of all provisions that relate to technology transfer agreements which had been provided for under the Old Act. The New Act has omitted the same and not provided alternatives as to how the same shall be handled in relation to the investors. The New Act has also removed the automatic immigration quota of five (5) work and residence permits for expatriate workers which was a provision under the Old Act. Nonetheless, this can be cured by Section 19(1) of the Non-Citizens (Employment Regulation) Act, 2015 which provides that anyone who is granted an incentive pursuant to the Tanzania Investment Act is still entitled to an initial automatic immigration of up to five (5) persons during the start-up period of the investment. However, the investor will undertake this process directly with the immigration department unlike before where it was done under TIC.
Additionally, the New Act has not made any considerations for the East African Community (EAC) members, especially in the minimum investment capital. As such the EAC members are categorized as foreigners and are still subject to the same stringent rules of investment. The EAC’s mission is to: widen and deepen economic, political, social and cultural integration … through increased competitiveness, value added production, trade and investments. One of the key things that the EAC seeks to do is to promote inter-country trade and investments by creating a conducive business environment for trading and working towards boosting investors’ confidence. We would, therefore, recommend that the TIC consider the inclusion of the EAC category of investors whose investment capital shall be slightly higher than those of locals and lower than those of foreigners and who shall also have more flexible terms of investments as opposed to foreigners. This shall be a great positive step towards the promotion of the EAC vision and mission to which Tanzania is a party.
From our analysis of the New Act, we note that the same is fairly comprehensive and has sought to make some additional clarifications to matters provided for under the Old Act. The provisions are more alluring to the citizens, especially with the reduction of the minimum investment capital and hopefully, it shall incentivize more locals to invest in the economy. It, however, seems to discourage foreign investments by creating additional hurdles and requirements for investment in Tanzania. Further, whereas the New Act seems to move towards an integrated service provision approach, the investor seems to have a tedious recourse in instances where their application for licences, approvals and/or consents is declined by an issuing authority.
We are hopeful that some of these deficits shall be cured at the point of the enactment of the resultant Regulations. Nonetheless, the New Act is still a step in the right direction and can hopefully be amended as time goes by to accommodate any matters that could arise from its implementation.
By Catherine Kamau - Senior Associate (Ngeri, Omiti & Bush Advocates LLP of Kenya)
Note: This is not a legal opinion and the contents hereof are not meant to be relied upon by any recipient unless our written consent is sought and explicitly obtained in writing.
