Official reports from the 2022 Mid-Year Monetary Policy Statement state that Tanzania’s economy is estimated to have grown by 4.9% in 2021, compared to 4.8% in 2020. The key growth drivers are agriculture, construction, mining and quarrying, manufacturing, trade and repair, and transport and storage. The introduction of a COVID-19 vaccine and the opening up of borders contributed significantly to the economy growth. It is reported that the fastest growing sectors in 2021–2022 include arts and entertainment, mining and quarrying; accommodation and restaurant activities also improved due to the resumption of tourism activities.

The external sector experienced economic challenges globally, due to the war in Ukraine and the residual effects of the COVID-19 pandemic, as well as the resurgence of variants of COVID-19 in some parts of Europe and Asia, which ultimately led to an increase in commodity prices and supply chain disruptions globally and in Tanzania as well.

The past five years have seen many oscillations in the financial sector that have affected not only commercial banks and financial institutions as providers of loans but also borrowers and service providers. However, there has recently been a reduction in non-performing loans. According to official reports, non-performing loans declined to 8.2% in April 2022 from 9.3% in June 2021.

This was bolstered by measures taken by the Bank of Tanzania, including increased monitoring of banks in the implementation of strategies to reduce non-performing loans by directing banks to submit credit information to the credit reference bureaus and adhere to the code of conduct to enhance staff integrity. Other measures included enforcing risk-based prudential requirements and requiring banks to improve credit underwriting standards by using reports from credit reference bureaus in loan application assessment.

Policy Shift

On 19 March 2021, Samia Suluhu Hassan (SSH) ascended to power as the sixth president of Tanzania and the successor to the late President John Magufuli (JPM). The change in administration led to an abrupt policy shift. The SSH administration has not only called for foreign direct investment through improvements in the regulatory and investment environment, but has also increased regional co-operation in free markets and trade.

The government has once again begun to utilise the local private sector by procuring professional services from private service providers such as lawyers, engineers, architects and building contractors.

Tax Revenues

As part of its efforts to create a business-friendly environment, the government has taken measures to ease the restrictions on foreign investors retaining earnings from disposals or dealings in extraction, exploitation or acquisition and the use of natural wealth and resources to only banks and financial institutions established in Tanzania, creating certainty in the market. The measures have increased voluntary tax payments, as evidenced by the statistics available in the public domain.

Tax Assessments and Claims

The government has put in place policies and measures that have improved positive tax assessments and the lodging of claims. Tax refunds covering areas such as value added tax (VAT) and other taxes for businesses are now payable on time.

The COVID-19 vaccination and the attendant easing of travel for most countries has led to an increase in trade volume. The government is still running campaigns to encourage citizens to get vaccinated as a way to shield themselves against infections or, if they are infected with the virus, to reduce the risk of death or serious illness. These campaigns have led to notable improvements in the economy.

The government continues to improve revenue collections, encouraging public-private partnership (PPP) projects in order to receive interest on government papers such as treasury bills and bonds. The moves have led to a stabilisation of lending interest rates by banks to the private sector. There have also been measures to reduce the amount of borrowing by the government in order to improve fund availability for the private sector.

In order to improve governance in private companies, a number of measures have been adopted by the regulatory bodies, with which public companies must comply, such as the mandatory online registration of shareholders, directors and beneficiaries of private companies. Such measures aim to create transparency in the ownership and management of private companies as a way towards achieving corporate governance, which is lacking in most companies in Tanzania.

The loan market is a work in progress in Tanzania. Commercial banks and conventional financial institutions continue to be the dominant lenders. Of late, developments by savings and credit co-operatives (SACCOs), private investment funds and mobile telephone companies have introduced credits for their various customers. This move has created alternative lending and credit availability for the Tanzanian public.

Mobile Banking

The Tanzania market continues to undergo a digital transformation in mobile banking. Based on the available data, traditional or conventional banking sector coverage has been surpassed by digital mobile transactions, leading to increased regulations by the Central Bank.

An increase in taxes on mobile transactions had a negative reaction among the general public. The outcry led to the government rescinding, reducing and/or removing some of the newly established taxes on mobile banking transactions.

There have been no new developments in this area over the past year.

Climate finance is a new concept in Tanzania. A number of banks are now receiving climate funds under the United Nations Framework Convention on Climate so as to support their lending structures, especially in the agriculture sector. Since the concept is still in the infancy stage, few commercial banks qualify for such funding.

Lending activities are highly regulated in Tanzania. Any player in the market that wants to engage in banking business or otherwise accept deposits from the general public, including for purposes of using such funds to provide finance, must apply for and obtain a banking licence from the Bank of Tanzania.

There are generally no restrictions on foreign lenders granting loans to borrowers residing in Tanzania, except in the mining sector, where mining companies are restricted from using the financial services of foreign banks and financial institutions without approval from the Mining Commission. However, there has been good co-operation between the Mining Commission and investors in the mining sector when it comes to requests for the approval of offshore borrowings.

There are generally no restrictions on the granting of security or guarantees to foreign lenders. However, in February 2018 a restriction was introduced on the granting of mortgages over land as security for loans. The amendments to the Land Act restrict an occupier of land in Tanzania from mortgaging their land to secure the payment of monies borrowed from local or foreign banks, unless the money secured is used solely for investment purposes in Tanzania. Furthermore, if the land to be mortgaged is undeveloped or underdeveloped, the proceeds of the loan must be used, in part or wholly, to develop the land.

Residents and non-residents are not restricted from opening and operating a foreign currency account in a bank in Tanzania. The mandate includes conducting foreign exchange transactions on the account.

In 2019, the regulatory authority – the Bank of Tanzania – took a drastic measure to undertake inspections and, as a result, closed almost all bureaus de change that were not operated by licensed banks in Mainland Tanzania. Following the conclusion of the inspection of bureaus in early 2020, the Bank of Tanzania has again started to issue licences to operate bureaus.

There are controls when it comes to payments or offshore remittances. There are regulations that require compliance with certain conditions before the transfer is done. This is mostly done through licensed banks. Capital accounts are yet to be fully liberalised. For instance, the opening and operation of offshore accounts by residents requires approval from the Central Bank, whereas companies engaged in extractive industries are prohibited from maintaining offshore accounts.

Official reports by the Central bank provide that the exchange rate of the shilling against major trading currencies remained stable throughout 2022.

In addition to the restrictions imposed on borrowers that secure their loans by mortgage (see 3.2 Restrictions on Foreign Lenders Granting Security), lenders are also required to make sure that they conduct a thorough credit review ("Know Your Client") to make sure that funds are utilised for a lawful purpose. Banks are required to comply with money laundering laws to make sure the funds do not fall into usage for criminal or corrupt purposes, and to avoid the financing of terrorism.

For the purpose of complying with the anti-money laundering laws in Tanzania, banks or financial institutions report persons. Accordingly, in dealing with various borrowers, they are required to take reasonable measures to establish the identity of the borrower and the purpose of the loan, to ensure the borrower is not acting as a front for another person. Reporting is vigorously enforced by the Financial Intelligence Unit, which is part of the ministerial department under the Ministry of Finance. Scrutiny is tighter when it involves politically exposed persons.

In addition to performing normal due diligence measures, banks or financial institutions are also required to:

• have appropriate risk management systems to determine whether the customer is a politically exposed person;
• obtain senior management approval for establishing a business relationship with such customer;
• take reasonable measures to establish the source of wealth and source of funds; and
• conduct enhanced, ongoing monitoring of the business relationship.

These two concepts are part of the laws of Tanzania.

It is common for banks and/or other lenders to come together, finance a project and appoint one of the banks to be a lead bank. Of course, each lender retains its authority over its loan, but the role of a lead banker in loan syndication has always been an organising role for the purpose of collecting funds from the borrower(s) and encouraging them to repay the loan as agreed in the loan agreement ("syndication"). Sometimes, there are situations that require the appointment of a security agent to maintain security documents on behalf of the syndicated lenders.

Any transfer of a loan agreement must be authorised by the parties to the agreement. Most loan agreements and facility/banking agreements ("loan agreements") contain clauses on how loans may be transferred.

In most cases, borrowers are prohibited from transferring their rights and obligations under a loan agreement and lenders require clearance of the debt by the transferee bank before a transfer takes place. This will apply whether the loan is clean or secured. There is no secondary market for loans in Tanzania and, as a result, the arrangement is between the transferor and the transferee bank.

Notable transfers involve, for example, the borrower requiring greater financial facilities and the current lender not being in a position to provide this increase. In other cases, there are issues where a borrower defaults and the transferee bank is ready to assume the current liability and provide fresh funds to the business. All these require the extinction of the current debt in the transferor bank before the release of collateral or otherwise.

Borrowers are free to buy back their debts, subject to the agreed procedures. In certain cases, a borrower may be allowed to buy back a certain portion of the debt subject to fulfilling certain conditions as agreed in the loan agreement. In other cases, the borrowers may decide to group the loan as a single credit or to restructure the debt subject to an agreement.

In cases where the debt buy-back is made by the sponsors or shareholders of the borrower, depending on the amount to be bought back, there may be total control of the business or security. In cases of partial debt buy-back, the original lenders will normally retain control.

For example, if the shareholders purchase or buy part of the debt, the common clauses found in loan agreements are to compel the shareholders or sponsors to subordinate their rights to the existing lenders. Conditions such as restrictions on declarations of dividends, further charges of their shares without the consent of the original lender, etc, will normally apply.

There are no rules regarding public acquisition finance. The most common modes of acquiring public companies are through initial public offering or buying shares in those companies in the security market once listed on the stock exchange. For these public listed companies, there are guidelines covering substantial acquisitions, takeovers and mergers under the capital markets and securities laws of Tanzania.

Tanzania tax laws require borrowers to pay 10% withholding tax on interest payable on their loans in Tanzania, unless the lender is a bank or financial institution licensed by the Bank of Tanzania. It is also a requirement under the foreign exchange laws.

Lenders in Tanzania are subjected to:

• the payment of corporate tax out of their profits, capped at 30%;
• a skill development levy (SDL), which is 4.5% of the wage bill;
• workmen compensation, which is 1% of the wage bill; and
• withholding tax at the rate of 10% of the fee paid to the lender (bank or financial institution).

There are no laws or regulations that limit the amount of interest charged by lenders in Tanzania. As a monetary policy tool, the regulator (the Bank of Tanzania) conducts monthly auctions of treasury bills, and normally publishes indicative interest rates to the general public on its website. The indicative rates are not binding on lenders, either local or foreign. It is the policy of the regulator to leave the market to determine interest rates, and moral suasion is the principle adopted to manage interest rates.

However, in respect of foreign loans, the Bank of Tanzania requires interest rates to reflect prevailing market conditions for the relevant currency of borrowing.

Debentures

Movable and immovable assets are available as collateral to lenders. Lenders may decide to take floating assets, in most cases in the form of a debenture. These floating assets will crystallise in the event of default. This manner of taking security allows the borrower to continue utilising the charged assets in whatever manner, including further charging to another lender, subject to adhering to any restrictive covenants in the loan agreement or debenture instrument.

The debenture may also include fixed charges, even for movable assets, whereby the borrower will be restricted in making any charge on the assets unless the debt is discharged. Lenders may opt for taking a fixed charge by way of a mortgage on immovable or movable assets. These normal restrictions for further charge will touch on priority of payment in cases of default, unless consent is obtained from the prior chargee that its debt can take precedence over the previous charge. A cash deposit may also be security for a loan. Secondary charges include personal and corporate guarantees that are offered by the shareholders, the borrower and/or related companies.

Registering Collateral

Some collateral is mandatorily registered under the Companies Act of Mainland Tanzania as company matters and not Union (ie, Mainland Tanzania and Tanzania Zanzibar) matters, and therefore each part of the Union has its own laws on company matters. Charges that must be registered once taken as collateral for a loan include:

• those for the purposes of securing any issue of debentures;
• uncalled share capital of the company;
• a bill of sale, mortgage or interest therein (land);
• book debt;
• a floating charge on undertaking or property of the company;
• calls made but not paid;
• a charge on a ship or aircraft, or any share in a ship; and
• a charge on goodwill or any intellectual property.

Other charges are registrable voluntarily and, in most cases, are registered in order to have evidential value upon a dispute.

The law in Mainland Tanzania requires mandatory registration to be carried out within 42 days from the date the document or the security was created. Where a mandatory security or charge is not registered, it becomes automatically void against any liquidator, administrator or creditor of the company.

The period taken to register such charges will vary depending on whether the company concerned is up to date on its statutory filings at the Companies Registry. If the company is in compliance with the company statutory filings, it takes between three and five business days to register a charge. If it is in default, it may take months, and registration may be stalled. Companies are encouraged to comply with statutory filings, and lenders should conduct proper due diligence before approving the loan facility and the taking of the collateral. Given the level of digitalisation taking place at the Companies Registry, it is likely that delays in registration will soon be a thing of the past in Mainland Tanzania.

Costs

The fees charged on the collateral by the Registrar of Companies for registration are negligible, charged at TZS22,000, equivalent to approximately USD10. The charges also attract stamp duty, currently at the negligible amount of TZS10,000.

In most cases, lenders in Tanzania utilise private attorneys to draft, review and conduct searches at fees agreed between the lender, the borrower and the attorney.

Forms of Security

The forms of security taken can generally be grouped in the following way:

• mortgages;
• charges;
• liens; and
• pledges.

Tanzanian law allows floating charges – see 5.1 Assets and Forms of Security.

There are no limitations in the law that restrict companies granting downstream, upstream and/or cross-stream guarantees, except to secure loans made to directors of the company or any person connected to the directors. The law requires a company to have the mandate to grant guarantees under its memorandum and articles of association. Therefore, as part of credit analysis, lenders should conduct a review of the memorandum and articles of association of the borrower to determine whether the borrowing company has a mandate to borrow and issue the collateral required, including guarantees of whatever nature.

The Companies Act specifically prohibits a public company from providing financial assistance to anyone for the acquisition or purchase of its own shares, whether directly or indirectly and whether by means of a loan guarantee or the provision of security or otherwise. This also applies to a public company giving financial assistance for the purpose of the acquisition of shares in its private holding company, or a private subsidiary company giving financial assistance for purposes of acquiring shares in its public holding company.

Exceptions that apply to this limitation are where the company is in the business of lending money (a bank or financial institution), where the shares to be bought support a scheme for the benefit of the employees or former employees of the company’s salaried directors, any other similar company and bona fide loans to employees (other than directors) to enable those employees to purchase or subscribe for fully paid shares in the company or its holding, and the lawful distribution by the company of any of its assets by way of dividends or otherwise. In case of default, the company and every officer of the company shall be liable to a fine.

Companies are also restricted from making loans or guarantees or providing security to their directors or persons connected with such directors. Connected persons include companies in which a director has at least a 20% equity stake.

Other than the restrictions mentioned in 5.3 Downstream, Upstream and Cross-Stream Guarantees and 5.4 Restrictions on Target, there are no other restrictions on companies granting guarantees or security or financial accommodation for the acquisition of their shares, and there are no consents required apart from the usual corporate compliance, such as board of directors’ resolutions, etc.

Once the repayment of the loan is completed by a borrower, the lender prepares a deed of discharge in case of charges created by companies. The deed of discharge and the relevant company form (signed by the chargor) is then filed with the Companies Registry and the loan on the company concerned is cancelled or discharged.

Additionally, if the collateral is a mortgage over land, the relevant land forms that are signed by both the mortgagor and mortgagee must also be filed with the relevant land registry in Tanzania.

Charges that are created by a company and are mandatorily registerable under the Companies Act will attain priority according to the date of their creation, albeit that fixed charges and mortgages have priority over floating charges even if the fixed charge or mortgage is created after the floating charge. The order of priority follows the first registration, and the subsequent registration will be inferior unless permitted by the first chargee.

Tanzania laws recognise subordination of rights among lenders by agreement. This is done through security sharing or intercreditor agreements, where the rights of lenders and how they will share the proceeds of disposal of the collateral shared are clearly stated, alongside the mode of appointing an administrator, receiver and manager and or liquidator, and can extend to include the subordination by shareholders of their rights as lenders.

It is important, therefore, to make sure that due diligence and company searches are conducted on the borrower’s assets offered as security to determine whether there is a prior charge.

Except in cases of mortgages over land, there are no laws in Tanzania that set out the rights of enforcement available to lenders following default by a chargor. Thus, the manner and procedures of enforcement of collateral by secured lenders are normally governed by the security documents. The enforcement is mostly triggered by events of default indicated in the facility agreements and as restated in various security documents, such as debentures, mortgages, etc.

Contractual rights of lenders include taking physical possession of the charged assets, leasing the assets, and appointing a receiver and manager to manage and/or facilitate the release and the selling of the charged assets. The law does not, however, allow a lender or its appointed agent to enter into possession when there is resistance from the borrower that may result in a breach of peace. In case of physical resistance by the borrower against the lender exercising its rights under the security documents, the lender must seek and obtain a court order to affirm its rights of enforcement.

With respect to receivership, liquidation and winding-up, the Companies Act provides that the interest of the secured creditors takes precedence over unsecured creditors. However, the risk is that the secured lender's right is also subject to the satisfaction of government debts such as taxes and rent arrears with not more than one year in arrears.

Following the enactment of the Natural Wealth and Resources (Permanent Sovereignty) Act (No 5), 2017 (the Permanent Sovereignty Act), the application of foreign law and the jurisdiction of foreign courts and tribunals have been specifically ousted or outlawed in Tanzania for disputes arising from the extraction, exploitation or acquisition and use of natural wealth and resources. Such matters must mandatorily be adjudicated by judicial bodies or other organs established in the United Republic of Tanzania and in accordance with the laws of Tanzania. The restriction on natural wealth applies whether the arrangement is between private investors and/or with the government.

The government has recently indicated that it will consider amending the law to allow these matters to be adjudicated in third countries not hosting any of the parties to the contract, including the government of Tanzania. The government recently entered into an agreement that allows parties to have a seat of arbitration outside Tanzania.

The Reciprocal Enforcement of Foreign Judgments Act provides for methods of enforcing a foreign judgment in Tanzania, without a retrial, for judgments given by superior courts in certain foreign countries that accord reciprocal treatment to judgments given in Tanzania. Enforcement in possible, unless there are specific reciprocal treatments to judgments given in Tanzania to a foreign country that desires to enforce its judgments in the Republic.

Foreign courts whose judgments are enforceable in Tanzania without retrial include the High Court of England and Wales and the Supreme Court of New South Wales. Such judgments can be enforced in Tanzania if the following conditions are met:

• application for their registration in Tanzania is made within six years from the date of the relevant judgment;
• the judgments are final and conclusive and for a specific sum of money as compensation for damages or loss (and not in respect of fines or taxes);
• the originating court had jurisdiction to determine the original claim;
• the original claim was not obtained by fraud;
• the enforcement of the judgment would not be contrary to public policy; and
• the rights under the judgment are actually vested in the person who applied for registration.

Foreign court judgments that are not recognised by the Reciprocal Enforcement of Foreign Judgments Act can only be enforced in Tanzania by way of a suit on the judgment, provided such judgments are conclusive. A foreign judgment will be considered conclusive unless:

• it has not been pronounced by a court of competent jurisdiction;
• it has not been given on the merits of the case;
• it appears, on the face of the proceedings, to be founded on an incorrect view of international law or a refusal to recognise the law of Tanzania in cases in which such law is applicable;
• the proceedings in which the judgment was obtained are opposed to natural justice;
• it has been obtained by fraud; or
• it sustains a claim founded on breach of any law in force in Tanzania.

As long as security has been created, registered and perfected in accordance with the mandatory laws applicable in Tanzania, a foreign lender will ordinarily be able to enforce its rights. For loans provided to borrowers secured against land that is undeveloped or underdeveloped as collateral, the law requires evidence that the loan has been used in whole or in part to develop that land. This requires a lender in such circumstances to monitor the borrower to ensure the loan amounts are utilised accordingly rather than diverted to other activities not stated in the loan facilities.

Foreign lenders must also be aware of the requirement to register their loans (other than short-term loans) with the Central Bank of Tanzania and obtain a debt reference number. Although the requirement is said to be for statistical purposes, it is impossible for a foreign lender to realise its collateral and repatriate its proceeds without fulfilling this requirement.

Apart from the powers granted to lenders by virtue of the security agreements, insolvent or illiquid companies may seek the protection of the courts by seeking a compromise or arrangement as proposed between a company and its creditors, a certain class of creditors, or its shareholders. The application is by way of summary suit. This proposal is normally voted by the creditors, a specific class of creditors, shareholders, or a specific class of shareholders.

Once the proposed arrangement has been voted and agreed, the court issues an order confirming the arrangement. This order is then submitted to the Registrar of Companies for registration to give its legal effect.

Generally, court-ordered administration and winding-up affect the rights of creditors to enforce their security. In respect of the former, from the time a petition is filed in court for an administration order against the collateral provider and until it is determined (provided no administrative receiver has been appointed), a secured creditor will not be able to take any steps to enforce their collateral. The powers of the secured creditor to enforce their collateral will also be stayed if an administrator is appointed by the court in respect of the collateral provider.

If the High Court of Tanzania makes an order appointing a liquidator in respect of the collateral provider, although there is no freeze on the enforcement of security, there will be a stay on commencing or continuing with proceedings against the collateral provider without the leave (consent) of the court. This means that the secured creditor will not be able to enforce the collateral without the consent of the High Court.

Provided that the lender’s charged assets have been duly registered and perfected as discussed in 6.1 Enforcement of Collateral by Secured Lenders, any subsequent insolvency processes will be subject to the rights of secured creditors. In Tanzanian law, the following claims take precedence over a secured creditor holding floating charges in insolvency proceedings:

• all government taxes, local rates and customs and excise duties due from the company at the relevant date and having become due and payable within 12 months before the insolvent or winding-up date;
• all government rents not more than one year in arrears;
• all wages or salary (whether or not earned wholly or in part by way of commission) of an employee who is not a director in respect of services rendered to the company for four months before the relevant date; and
• all amounts due in respect of any compensation or liability for compensation under any law in force for the time being in Tanzania relating to the compensation of employees, being amounts that have accrued before the insolvency process date.

The priority of payments on floating assets does not apply in relation to assets that are subject to fixed charges. The order of priority of payments in respect of such assets is generally as follows:

• costs incurred in the insolvency proceedings and/or fees of the administrator, receiver or liquidator;
• interest payable to the secured creditor(s) and in order of priority as per the security sharing arrangement/agreement;
• principal sum outstanding; and
• the balance, if any, to the collateral provider.

Equitable subordination is not a concept in Tanzania law. Shareholders' rights are governed by the articles of association and/or shareholders' agreements.

In addition to the risks mentioned in 6.1 Enforcement of Collateral by Secured Lenders, lenders should be wary of entering into transactions that may be challenged by administrators or liquidators in insolvency proceedings as transactions at an under-value, preferences, or invalid floating charges. If it is proved to the court that a transaction is at an under-value, a preference or an invalid floating charge, the court may make orders upon application by the administrator or the liquidator to vacate the transaction and require the lender to compensate the company so that the company is restored to the rightful position it would have been in if an under-value transaction or floating charge had not been entered or the company had not given that preference.

This mode of finance is seen in capital-intensive projects in the areas of infrastructure and energy. The capability to provide funding in such projects is subject to the lenders’ ability and prerogative. The majority players continue to be the government or government-owned institutions such as pension funds. Project finance is also seen in education funding, as some of the government-owned universities and shopping centres have been financed via the project finance technique. The desire of the government of Tanzania is to utilise its own resources to fund various projects.

However, given the position of the economy, it has not been easy to fully fund these projects and, as a result, the government has resorted to combining debt with its own funds. There are notable syndication loans to the government, from commercial banks, development regional banks and export-import banks, to fund various infrastructure objects. Commercial banks have recently been financing development projects, such as the Julius Nyerere Hydro Power Project, which was partly financed by CRDB Bank Plc.

There are notable footprints in the extractive industry, especially in mining, that have attracted private investors to utilise this finance technique to fund their investment.

Since SSH came into power, there has been massive growth in the mining sector, with financing from foreign entities serving to expand and improve the sector. Recently there has been massive funding in nickel mining, which is the new top-notch mining area, given its lucrative use in jet engines, power generation facilities and offshore installations. However, there is a lot of room for improvement with respect to the investment climate in order for this mode of project finance to have a positive impact in Tanzania, given the current low appetite of financiers and sponsors.

In 2010, Tanzania enacted the Public-Private Partnership Act, which provides a policy for PPPs, institutional frameworks for the implementation of public-private agreements between public sector and private sector entities, and the setting of rules, guidelines and procedures governing procurement, development and implementation.

Despite this Act being in place for the last nine years at the time of writing, there has never been any transaction or activity befitting recognition in this area. The only transactions in place are small risk profile projects such as city parks, bus terminals and municipal infrastructure. The Act was amended in 2018, and subsequent regulations in 2020 aimed to create more transparency and easier ways of doing business in the industry. However, only time will tell if the amendments will attract any PPP project investments.

Engaging in operations in various sectors or industries requires government approvals, variously covering the environment, health and occupational safety and general licensing. There are regulatory authorities overseeing electricity, water and utilities (EWURA), environment management (NEMC), surface and marine transport (SUMATRA), electronic communications (TCRA) and air transport and civil aviation (TCAA), to mention a few.

All these regulatory authorities are responsible for the management and granting of approvals for various players in their respective sectors. The approval and management process attracts various fees or other charges that are mostly regulated by statute.

The taxes, fees or other charges levied on various projects take into account other laws that grant investors tax breaks in certain sectors. The tax breaks or incentives are provided in, among other laws, the Tanzania Investment Act, the Income Act, various tax laws and, in some areas, specific government approval of these tax breaks or incentives. Of late, the government has been apathetic in these tax exemptions as they have reduced revenues to the government coffers.

Oil and Gas Sector Approval

The oil and gas and power and mining sectors are highly regulated in Tanzania. These sectors do not fall under Union matters, so each part of the Union (Mainland Tanzania and Tanzania Zanzibar) has its own regulation regime. However, upon review, it can be found that the laws of both sides of the Union look similar, with comparable clauses and powers.

The ministers responsible for petroleum affairs in each part of the Union have the overall mandate to supervise the petroleum industry. The mandate covers almost every aspect of this industry, including:

• the development and implementation of policies and plans; and
• the granting, reviewing, suspending and cancelling of petroleum exploration and development licences, subject to advice from the Petroleum Upstream Regulatory Authority (PURA).

PURA is a regulatory authority established under the Petroleum Act, mandated to regulate and monitor the petroleum upstream subsector for Mainland Tanzania. There is a similar authority with the same mandate established for Tanzania Zanzibar. Therefore, the ministers responsible for petroleum matters have general administrative powers over this sector.

Mining Sector Approval

The Mining Commission established under the Mining Act of Mainland Tanzania is responsible for the administration of the Mining Act. The functions of the Mining Commission include licensing, supervision, regulating compliance with the law and dealing with issues of health and safety and environment. It also has the duty to advise the government in matters related to revenue generated from mining activities and the resolution of disputes arising out of mining activities.

Given the frequent changes of laws and regulations in Tanzania, offshore lenders are advised to retain a qualified Tanzania legal adviser to advise on the legal requirements specific to the sector in which the lender is providing finance. There are restrictions – for example, in certain sectors, especially the extractive industry, there are restrictions on the ownership of products, the opening and maintenance of offshore accounts, shareholdings in companies, etc.

Investors may have bankable projects, but they will be non-starters if they do not comply with the laws in place at the time of investment.

Generally, both local and foreign commercial lenders continue to be the sources of financing in the country. The structures of projects differ depending on whether the project is 100% government-owned, a PPP and/or 100% private sector. The promoters of the project will normally structure the project to make it bankable. The main applicable financing structures are as follows.

Debt Financing

Debt financing can be arranged between project owners or sponsors and the financiers or the financial institutions, such as the domestic and foreign commercial banks.

Equity Capital

Equity capital is implemented by a project consortium, which can be either between the private parties (entities) or a PPP arrangement with the government as a shareholder. Parties to the special-purpose vehicles can agree to finance the project from their own sources as equity contribution. In the majority of cases, the project will be funded in a quasi-equity manner, whereby part of the funding will be by debt financing from international development funds or specialised investment funds.

In Tanzania most of the natural resources belong to the people, and they are held by the President in trust. The extraction of natural resources is required to be transparent and carried out for the benefit of the people by generating economic growth and enhancing the wellbeing of the people, through corporate social responsibilities, taxes and royalty or through local content structures.

The Environmental Management Act of 2004, as amended from time to time, read together with the relevant regulations is the most exhaustive legislation on environmental, health and safety matters. It provides for a legal and institutional framework for the sustainable management of the environment, impact and risk assessments, prevention and control of pollution, waste management and environmental quality standards, among others.

In terms of the regulatory framework in place, the National Environment Management Council (NEMC) is a statutory body established under the Act charged with the duty of advising the minister responsible for environmental matters or any sector ministry on any matter brought to it. The minister responsible for the environment is the overall supervisor of all matters relating to the environment.

The Occupational Health and Safety Act of 2003, as amended from time to time, and the regulations thereto provide for the safety, health and welfare of persons at work in factories and other places of work. The Act also makes provision for the protection of personnel, other than persons at work, and for hazards to health and safety arising out of, or in connection with, activities of persons at work. It also provides for the appointment of the chief inspector, who has executive powers under the Executive Agencies Act of 1997.