Will acclaimed Mtwara Gas & Oil Special Zone Project ever be realized?

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Market News | Oil & Gas Tanzania 2021Tanzania set aside over 110 hectares for the construction of the Mtwara Free Port Zone over a decade ago (2009) but since then, only 10 hectares have been put to use. Now Tanzania’s parliament wants answers as to why the project is lagging behind.

Special Seats Member of Parliament (CCM) Anastasia Wambura raised the concern recently in the August House citing that the project was very promising yet little groundwork has actually been done.

Responding the Deputy Minister of Agriculture Hussein Bashe acknowledged the slow pace of investment in the Mtwara Free Port Zone but blamed it on the overall drop in global economies that have affected the oil (and gas) industry gravely.

However, as to the MP’s suggestion that the government reassign the remaining 100 hectares to some other economic activity, Minister Bashe who was addressing the House on behalf of the Minister of Industry and Trade, said the government has no such intention and intends to pursue the original purpose.

He maintained that the energy industry tends to fluctuate and while it may be down now, it will get back up again and so;

“The idea of redistributing the area for other uses is until now not justifiable,” he said.

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The Upside Of Things

The ambitious project goes in line with an executive order issued by president Samia Suluhu Hassan who ordered streamlining and easing investment regulations for both local and foreign investors in the extractive industries.

Placing the oil and gas investment zone within the free port area allows for investors in the sector to acquire the materials they need at affordable prices.

The project is being developed in phases and already phase one of the projects, which involves setting up of some ten hectares of land is already complete. It encompasses several offsite and onsite infrastructures including tarmac roads as well as electricity and water supply systems.

The said 10 hectares are been developed into what is called the Oil Field Supply Base, where investor companies are to set up infrastructure and afford complementary services to the oil and gas exploration firms.

The Oil Field Supply Base is the first of its kind across East and Southern Africa and bares considerable economic potential for the region and country. However, stakeholders have raised concerns about what they describe as the ‘snail paced’ speed of the project.

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A Stalling Project

While stakeholders were informed that ‘several multinational companies are ready to invest in the area,’ few of the supposed investors have shown up. In fact, even with the completion of the first phase of the 10 phase project, only three major companies have set up shop and begun production and supply activities to the oil and gas investors in the region.

Among the companies that were purportedly ready to invest in the 10 hectares Oil Field Supply Base are Schlumberger, Weatherford and Halliburton International Inc from the United States of America; Lena, FFF (T), Alpha group and Queensway from Dubai and the United Kingdom; Altus Tanzania Ltd from Singapore; Tans Ocean Industries & Services Ltd from Dubai and Intershore Tanzania Ltd from South Africa.

Management of the Export Processing Zones Authority (EPZA) and the Tanzania Ports Authority (TPA) invited bids for leasing plots of between 6,200 square metres and 15,900 square metres a few years back and the EPZA research and planning manager James Maziku had at that time described investor response to the invitation as positive.

“Many companies have shown interest to invest in the (Mtwara Freeport) zone — it’s an indication that investors are eager to operate in the area,” he told the press.

However, to date, only the said three companies have actually materialized. While it has not been specified as to the type of production they are engaged in, the Special Economic Zone Act 2006 and the EAC Customs Union (Freeport Operations Regulations) stipulate that operations in the EPZA should be limited to warehousing and storage, as well as labelling, packaging and repacking; sorting, grading, cleaning and mixing, breaking bulky, simple assembly and grouping of packages.

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Investors Gem: Export Processing Zones

The 6th administration under President Samia Suluhu Hassan is expected to push the agenda for Export Processing Zones (EPZ) as well as Special Economic Zones (SPZ) as key to attracting both foreign and local investors. The President has made it clear that her administration will prioritize regaining investor confidence and part of that means promoting the perks of EPZ and SEZ.

Here are some of the perks that investors enjoy in the EPZ and SEZ:

 

  • Exemption from payment of VAT and customs duties for raw materials, machinery, equipment, heavy-duty vehicles, buildings, construction materials and any other goods of capital nature to be used for purposes of development of the EPZ and SEZ infrastructure.
  • Exemption from withholding tax on rent, dividends and interest for 10years v Exemption from taxes and levies imposed by Local Government authorities on products produced in EPZs.
  • Exemption from VAT on utility and wharfage charges
  • Exemption from the pre-shipment inspection requirement
  • Exemption from payment of withholding tax on interest on the foreign-sourced loan
  • Exemption on VAT and customs duties on one administrative vehicle fire fighting equipment, two staff buses and an ambulance
  • Unconditional transferability of profits dividends, royalties
  • Privilege procedure on work permit and visa

Giza Mdoe is an experienced journalist with 10 plus years. He's been a Creative Director on various brand awareness campaigns and a former Copy Editor for some of Tanzania's leading newspapers. He's a graduate with a BA in Journalism from the University of San Jose.

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