The Tanzanian government is on the brink of implementing transformative reforms to its investment framework through the Investment and Special Economic Zones Bill, 2024. These changes aim to streamline operations, enhance incentives, and position the country as a premier investment destination in Africa. This newsletter delves into the key highlights, opportunities, and implications for businesses considering or already operating in Tanzania.

Overview of the Bill

The Investment and Special Economic Zones Bill, 2024, is structured into several key sections, each designed to address different aspects of investment and economic development. The Bill seeks to replace previous legislation, thereby consolidating and updating the legal framework to reflect current economic priorities.

Key Provisions and Their Business Implications

1. Establishment of the Investment Authority (Sections 4-11)

• The bill aims to establish the Tanzania Investment and Special Economic Zones Authority, merging the Tanzania Investment Centre (TIC) and the Export Processing Zones Authority (EPZA). This unified body will oversee investments across all sectors, simplifying processes and reducing redundancies. The creation of a single authoritative entity aims to eliminate bureaucratic inefficiencies and provide a seamless experience for investors. This Authority will serve as a one-stop service center, intended to simplify and expedite the investment process.

• Business Implication: Businesses can expect a more streamlined and efficient process for obtaining necessary permits and approvals, reducing bureaucratic delays and fostering a more conducive investment environment.

2. Investment Facilitation (Sections 12-24)
   • Introduction of a One-Stop Service Center for investors, along with an integrated electronic system for registration and licensing.

• Business Implication: By centralizing services and leveraging technology, the Bill reduces administrative burdens and enhances transparency, making it easier for investors to navigate the regulatory landscape.

3. Incentive Packages (Sections 19-20).
   • The bill introduces significant fiscal incentives, including a 75% relief on import duties for capital goods, tax exemptions for ten years for strategic investments in manufacturing, renewable energy, and agriculture, and long-term guarantees against policy changes
   • Business Implication: These incentives are designed to attract high-impact investments and foster economic growth.
4. Land Bank (Section 23)
   • A centralized land bank will list government-designated investment lands and privately-owned properties available for lease.
   • Business Implication: This initiative addresses land acquisition challenges and facilitates the easier establishment of business operations. The streamlined process for acquiring land aims to attract more foreign and domestic investors by reducing one of the significant barriers to entry.
5. Special Economic Zones (Sections 25-30)

• The Bill outlines the establishment and management of Special Economic Zones (SEZs), with specific provisions for customs, service delivery, and product handling within these zones.
• Business Implication: SEZs offer attractive incentives such as tax breaks and infrastructural support, making them appealing locations for businesses seeking to reduce operational costs and increase competitiveness.

6. Rights and Obligations of Investors (Sections 31-37)
   • Clear articulation of investor rights, including capital repatriation and protection against expropriation, as well as obligations such as compliance with local labor laws.
   • Business Implication: These provisions provide legal certainty and protection for investors, fostering confidence and encouraging both domestic and foreign investment.
7. Grievance Handling and Dispute Resolution (Sections 38-40)
   • Establishment of procedures for addressing complaints and resolving disputes, including an appeals process.
   • Business Implication: Efficient conflict resolution mechanisms ensure that business operations are not hampered by legal uncertainties, promoting a stable investment climate.
8. Financial Provisions (Sections 41-44)
   • Details on the financial sources and budgetary allocations for the Investment Authority, along with auditing requirements.
   • Business Implication: Transparency in financial management of the Authority ensures accountability and efficient use of resources, indirectly benefiting investors through improved service delivery.
9. General Provisions and Legal Amendments (Sections 45-68)
   • The Bill introduces amendments to various related laws, including land, employment, and tax regulations, to harmonize them with the new investment framework.
   • Business Implication: By aligning related legislation, the Bill removes conflicting provisions, simplifying compliance for businesses and creating a more coherent legal environment.

Strategic Importance for Businesses

The introduction of the Investment and Special Economic Zones Bill, 2024, is a significant development for businesses operating in or considering entering the Tanzanian market. The Bill not only presents new opportunities but also necessitates strategic adjustments to align with the updated legal and regulatory requirements. The new investment law is significant for businesses in several ways:

1. Enhanced Competitiveness: By reducing barriers to entry and providing attract incentives, Tanzania positions itself as a competitive destination for investment in Africa.
2. Increased Foreign Direct Investment (FDI): The clear and stable regulatory framework is likely to boost FDI, bringing in capital, technology, and expertise that can drive economic growth.
3. Local Economic Development: By emphasizing priority sectors and providing opportunities for domestic investors, the law supports local economic development and job creation.
4. Sustainability and Innovation: The focus on renewable energy and technology sectors aligns with global sustainability goals and encourages innovation-driven growth.
5. Enhanced Investment Climate: – By improving the ease of doing business and offering competitive incentives, the Bill positions Tanzania as a more attractive destination for investment. Businesses can leverage these reforms to expand their operations, access new markets, and enhance their competitive edge.
6. Risk Mitigation and Legal Protection: The Bill’s provisions for investor protection and dispute resolution mitigate risks associated with investment, providing a more secure environment for capital deployment. Businesses can operate with greater confidence, knowing that their investments are safeguarded by comprehensive legal measures.
7. Opportunities in Special Economic Zones: With the establishment of SEZs, businesses have the opportunity to benefit from reduced operational costs and enhanced infrastructure. This can be particularly advantageous for manufacturing and export-oriented enterprises seeking to maximize efficiency and profitability.

Challenges to Consider

While the law presents numerous opportunities, businesses should be aware of potential challenges:

1. Implementation Capacity: The newly established Tanzania Investment and Special Economic Zones Authority may face challenges in effectively implementing the provisions of the Act, particularly during the transition phase as it assumes responsibilities from previous entities.
2. Infrastructure Development: The success of Special Economic Zones largely depends on adequate infrastructure. If the necessary transportation, utilities, and communication systems are not developed in line with investments, it could hinder business operations and deter potential investors.
3. Land Acquisition Issues: While the Bill aims to streamline land access through a centralized land bank, complications surrounding land tenure, existing disputes, and bureaucratic processes could still pose significant challenges for investors looking to establish operations in Tanzania.

Conclusion

The Investment and Special Economic Zones Bill, 2024, represents a significant advancement in Tanzania’s commitment to economic transformation and sustainable growth. The reforms outlined in this bill provide a clear pathway to a competitive and investor-friendly environment. While challenges remain, the potential benefits for businesses and the broader economy are substantial, positioning Tanzania as a leading destination for investment in Africa. By fostering a more favorable investment climate and providing robust legal protections, the Bill is set to drive economic growth and attract significant domestic and foreign investment.

At Rive & Co, we are dedicated to assisting businesses in navigating these changes, ensuring they are well-positioned to capitalize on the opportunities presented by this landmark legislation. Our team of legal experts is ready to provide comprehensive support and guidance tailored to your specific needs.