Foreign Investors Challenges in Tanzania

“We are writing to express our concerns regarding both recent and ongoing challenges faced by foreign investors in Tanzania,” said a letter by a group of Ambassadors representing the United States, the United Kingdom, the Kingdom of Netherlands, France, Belgium, Canada, Korea, Sweden and Germany obtained by The Exchange, in part.

According to the letter addressed to January Makamba, Minister of Foreign Affairs and East African Cooperation dated June 26^th, 2024, with the subject “Addressing Urgent Challenges Faced by Foreign Investors in Tanzania” the French Embassy concerns are coming as Tanzania’s government strives to deal with tax burden cries from its local trade community.

The French Embassy acknowledges the contribution to attracting and expanding quality international investment into Tanzania over the last few years, emphasing good governance and best practices through regular trade missions and meetings within the nation’s business community.

“Business investment registrations increased from $3 billion in 2022 to $5.5 billion in 2023, reflecting good progress by the Tanzania Investment Centre,” said the letter in part.

The letter continues to address the progress made by President Samia Suluhu Hassan’s administration in restoring the nation’s reputation as a destination for foreign direct investments (FDI). However, the embassy fears the challenges undermine the latter.

“Many of our investors are encountering significant disruption due to unevidenced notices from the Tanzania Revenue Authority (TRA) demanding payments and account reconciliations dating back up to 15 years.” said the letter.

According to the exclusive obtained detailed letter, many businesses have faced “bank agency notices” that freeze accounts, halt operations, and negatively impact employee salaries and supplier cash flow.

Further, the letter highlighted that companies have signed tax concessions agreements with the Tanzania Investment Centre and line ministries, only to be advised that the Tanzania Revenue Authority (TRA) will neither recognise nor honor the agreements because they have not been “gazetted” in Dodoma.

The letter did not shy away from pointing out hiccups faced by TRA. “investors also report that TRA agents levy extraordinary tax bills not supported by Tanzanian law, threaten investors and Tanzanian partners when companies protest or appeal these practices and freeze or seise bank accounts and company assets without notification nor timely legal recourse”

The letter also indicated how companies are receiving notices with additional demands for tax payments.

“For instance, one company received a notice for $455,407, demanding resolution within three working days for discrepancies dating back 12 years, under the threat of having their operational accounts frozen and funds withdrawn. The company had to halt nearly all business operations to address the issue”

The letter indicated that the ambassadors requested a meeting with the Minister of Finance, Minister of Investment and Planning, Minister for Industry and Trade, and the Commissioner General of TRA to “discuss a more amicable and constructive way forward”.

On the other side of the aisle, Minister Makamba replied to the letter from the ambassadors. According to a letter obtained by The Exchange, Minister Makamba acknowledged the concerns raised and agreed to find a way to resolve the challenges.

“It is in this spirit that I accept your request for a meeting to discuss matters you raised in your letter. I will organise the participation of my colleagues whom you requested their presence. For this meeting to be productive, I request that the investors whom you are referencing prepare a compendium/presentation detailing, in specificity, their grievances. The sooner this report is presented to us, the sooner we will be able to schedule the requested meeting. I am open to inviting their representatives to our meeting so that we can hear directly from them,” the letter read in part.

Read Also: How Tanzania’s President Samia attracted over $1 billion in foreign investments

Investment in Tanzania

Earlier this year, Tanzanian President Samia Suluhu Hassan announced that it is targeting to increase investment to at least $15 billion by 2025 after embarking on a campaign that seeks to convince more locals.

During her 2023 state visit to India, it was revealed how Tanzania made remarkable progress on the investment front.

Since 1997 to date, Tanzania has attracted a stock of over $3.87 billion of investments from India, with a total of 675 projects and over 61,000 jobs delivered, making India one of the Top 5 investors in India.

There with no doubt, Tanzania made significant strides. However, can the progress made so far stain the reputation built by local and foreign investors to rally their dissatisfaction with taxation?

Minister for Planning and Investment, Prof Kitila Mkumbo, commented on January 2024 that the Tanzania Investment Centre (TIC) registered 504 projects worth $5.3 billion in 2023, up from $3 billion previously, and now the government has a campaign that will be used to sensitise Tanzanians to invest in the country.

Further down the line, the minister indicated an interesting development.

“We will also explain the procedures for registering investment projects through TIC, and we will explain the various tax and non-tax incentives offered to local and foreign investors when they register projects through the agency,” said Prof Mkumbo.

Giving an example of specific benefits that Tanzanians will get if they order investment facilities through TIC, he said that if you order a car with a cooling system for selling vegetables and fruits and you register through TIC, then you will get a 100 per cent customs tax exemption.

“If you are building your hotel, internal equipment such as furniture is exempted by 100 per cent. These opportunities are also available to Tanzanians,” he said.

Minister Makamba addressed the concerns adequately saying “I would like to assure you that this government takes very seriously any alleged transgression, by any public entity, that endangers the success of any business in our country and our reputation as investor-friendly destination. Our commitment to protect all investments and ensure their success is ironclad,”