Tanzania is attracting growing regional and international investment across sectors, including energy, mining, infrastructure, logistics, manufacturing, technology, financial services, agriculture, hospitality and real estate. At the same time, investors entering the Tanzanian market are increasingly recognising that successful investments depend on more than identifying the right opportunity.
The manner in which an investment is structured, regulated, taxed and operated from the outset can materially shape timelines, project economics, returns and long-term stability. Many of the issues that later prove costly or disruptive are both identifiable and manageable at the entry stage. Investing time in early planning can help avoid significant costs and complexities further down the line. In this first edition of our Investing in Tanzania: Investor Insights Series, we outline ten “big picture” issues that investors should consider carefully when investing in Tanzania. Look out for subsequent editions, which will delve deeper into these 10 issues.
Choose the Right Holding Jurisdiction
The choice of holding jurisdiction is one of the most consequential decisions an investor will make when entering Tanzania.
It directly affects treaty access, withholding tax exposure, substance requirements and the ability to repatriate returns efficiently. Despite this, many investors give insufficient attention to jurisdictional analysis at the outset, often defaulting to familiar structures without assessing whether they are fit for purpose in the Tanzanian context.
International tax developments, including increased scrutiny of treaty shopping and economic substance requirements, make jurisdictional planning more important than ever. By way of example, an investor that establishes a holding vehicle in a jurisdiction without an applicable double taxation agreement with Tanzania may face significantly higher withholding tax on dividends and interest payments, materially eroding returns over the life of the investment. These are considerations that are far easier to address before capital is deployed than after.
Investors that assess jurisdictional options carefully at the outset, taking into account treaty networks, substance requirements and the broader international tax landscape, are generally better positioned to protect and maximise the value of their investment over the long term.
The choice of holding jurisdiction is one of the most consequential decisions an investor will make when entering Tanzania.
Get Your Investment and Financing Structure Right from the Start
Beyond jurisdictional planning, the ownership and financing structure of the investment itself requires careful consideration. The choice between equity and debt financing, the layers of ownership between the ultimate investor and the Tanzanian operating entity, and the degree of structural flexibility built into the arrangement from the outset can each have a material impact on tax efficiency, cash flow management and future transaction optionality.
Investors that defer structural planning often find that restructuring an investment that is already in place can trigger regulatory approvals, adverse tax consequences and operational disruption. By way of example, an investor that initially capitalises its Tanzanian subsidiary entirely through equity, without considering whether a blend of equity and shareholder debt might offer greater flexibility for repatriating returns, may find itself locked into a less efficient structure that is costly and complex to unwind. Getting the investment and financing structure right from the start is materially easier and less expensive than attempting to retrofit it once operations are underway.
Understand Sector-Specific Rules and Local Participation Requirements
Whilst Tanzania encourages foreign investment across multiple sectors, certain industries are subject to sector-specific regulation, licensing requirements or local participation expectations that can materially affect how an investment is structured and operated. By way of example, the insurance sector requires a minimum of one-third local shareholding, the mining sector imposes local listing and free-carried interest requirements, and the telecommunications sector has its own local participation thresholds. Investors that assume they can replicate ownership structures used in other jurisdictions without adapting to these requirements risk delays, enforcement action or the need for costly post-entry restructuring.
Investors entering regulated sectors should assess licensing frameworks, sector-specific approvals, local content rules and ownership restrictions at an early stage, and should ensure that their proposed investment structure is compatible with the applicable requirements before capital is deployed.
Early regulatory assessment helps investors avoid delays, restructuring costs and implementation difficulties that are significantly harder to resolve once the investment is already in place.
Understand and Secure Your Land Rights Appropriately
Real estate, infrastructure and project-based investments in Tanzania require careful attention to land rights, project rights and underlying ownership structures. Investors that fail to address land-related issues appropriately and at an early stage frequently encounter delays, financing difficulties and, in some cases, fundamental obstacles to project implementation.
Foreign investors should understand that land rights in Tanzania operate within a distinct legal framework. All land is public land vested in the President as trustee, and foreign investors cannot hold land directly but may only access land through derivative rights, typically a granted right of occupancy or a derivative right obtained through the Tanzania Investment and Special Economic Zones Authority (TISEZA (formerly TIC)). This requires careful structuring and thorough due diligence to ensure that the intended use and tenure are properly secured. By way of example, an investor that acquires an interest in land without verifying whether the underlying title supports the intended use, or without confirming that the necessary consents and approvals are in place, may find that its rights are defective or unenforceable, potentially undermining the entire investment.
Land rights and ownership structures should be reviewed carefully at an early stage, as land-related issues can materially affect financing, bankability and long-term project stability. Lenders in particular will scrutinise the quality and enforceability of land rights before committing to project financing, and deficiencies identified at a later stage can be significantly more difficult and costly to remedy.
Factor in Employment and Immigration Requirements
Operational timelines are often affected by employment and immigration requirements to a greater extent than investors initially anticipate. Tanzania imposes specific requirements on the employment of foreign nationals, including work permit and residence permit obligations, quota restrictions on the number of expatriate staff, and expectations around the progressive localisation of key roles. Businesses entering Tanzania should give careful consideration at the outset to work permit categories and processing timelines, staffing structures, localisation plans and employment law compliance.
By way of example, an investor that mobilises expatriate personnel to Tanzania without having first secured the necessary work and residence permits may face enforcement action, fines or the inability of key staff to operate lawfully in-country, directly impacting project timelines and operational readiness. Work permit processes can take materially longer than anticipated, and requirements around supporting documentation, labour market testing and localisation commitments add further complexity.
Investors that develop a clear staffing and localisation strategy aligned with Tanzanian regulatory requirements from the outset are generally better placed to avoid unnecessary delays, compliance exposure and operational disruption during the critical early stages of the investment.
Engage with Regulators Early and Proactively
Successful investments in Tanzania depend not only on sound legal and commercial structuring but also on effective, proactive and sustained engagement with regulators, government authorities and other key stakeholders. Tanzania’s regulatory environment involves multiple agencies with overlapping or sequential approval requirements, and the practical reality of navigating these processes is often more nuanced than the formal legal framework alone would suggest.
Investors that engage with regulators at an early stage are generally better placed to navigate approvals, manage implementation timelines and anticipate regulatory expectations before they crystallise into obstacles. By way of example, an investor pursuing a project requiring approvals from multiple agencies, such as TISEZA, the relevant sector regulator and local government authorities, that engages with each body only sequentially and reactively may find that conditions imposed by one authority conflict with the requirements of another, resulting in significant delays and the need to revisit aspects of the project structure that could have been aligned from the outset through coordinated early engagement.
This is particularly important in regulated sectors, strategic projects and large-scale investments where regulatory expectations and execution requirements frequently evolve alongside the project itself. Investors that build constructive, transparent relationships with regulators from the outset, and that maintain those relationships throughout the life of the investment, are consistently better positioned to resolve issues efficiently and to adapt to regulatory developments as they arise.
Manage Foreign Exchange and Currency Risk
Foreign exchange and currency risk is a consideration that many investors underestimate when entering Tanzania. The availability of foreign currency for repatriation of profits, debt service and import payments can be subject to regulatory controls and practical liquidity constraints that are not always apparent at the outset.
Investors should consider at an early stage how currency exposure will be managed across the life of the investment, including the currency in which revenues are generated, the currency of key cost obligations and the mechanisms available for converting and remitting funds.
By way of example, an investor that generates revenue predominantly in Tanzanian Shillings but has significant US Dollar-denominated debt obligations may face material cash flow pressure if currency availability tightens or the exchange rate moves adversely. Structuring revenue arrangements, financing terms, and hedging strategies with currency risk in mind from the outset can materially reduce exposure and improve the investment’s resilience over time.
Structure Your Local Partnerships and Joint Ventures Carefully
Many investments in Tanzania involve some form of local partnership, joint venture or co-investment arrangement, whether driven by sector-specific local participation requirements, commercial strategy or a combination of both. Whilst local partnerships can provide significant advantages, including market access, regulatory relationships and operational capability, they also introduce risks around governance, control and alignment of interests that require careful management from the outset.
Investors should ensure that the terms of any partnership or joint venture are clearly documented, with particular attention to governance and board composition, decision-making rights and reserved matters, funding obligations and capital call mechanics, deadlock and exit mechanisms, and the allocation of economic returns.
By way of example, an investor that enters into a joint venture with a local partner holding a 30% interest but agrees to equal board representation and unanimous decision-making on operational matters may find that the local partner holds an effective veto over key business decisions, creating a governance imbalance that is difficult to resolve once the venture is operational. Structuring and documenting the partnership properly at the outset, including clear provisions on deadlock resolution, tag-along and drag-along rights, and pre-emption on share transfers, is materially easier and less costly than attempting to renegotiate terms after disputes have arisen.
Get Your Financing and Security Arrangements Right
The financing and security arrangements underpinning an investment in Tanzania require careful attention to local law requirements, registration formalities and enforcement considerations. Investors and their lenders should not assume that security packages and financing structures that are standard in other markets can be replicated without adaptation in the Tanzanian context.
Key considerations include registration of foreign loans, the types of security that can be created and perfected under Tanzanian law, the registration requirements applicable to different forms of security, the priority rules governing competing claims and the practical enforceability of security in the event of default. By way of example, an investor that takes security over land or project assets without ensuring that the relevant registrations have been completed in accordance with Tanzanian law may find that its security interest is unenforceable or subordinate to other claims. Investors and their financiers that engage local counsel at an early stage to advise on the structuring, documentation and perfection of security arrangements are generally better positioned to protect their interests and to ensure that their financing arrangements are robust and enforceable.
Plan for Dispute Resolution and Enforcement
Dispute resolution is an area that investors frequently overlook during the structuring phase, often assuming that disputes can be dealt with if and when they arise.
However, the choice of dispute resolution mechanism, governing law and seat of arbitration, and the enforceability of any resulting award or judgment in Tanzania are all matters that should be addressed before commitments are made. Investors should also be aware that certain sectors impose restrictions on the dispute resolution mechanisms available to parties, including governing law requirements.
Tanzania has its own legal framework governing arbitration and the enforcement of foreign arbitral awards, and investors should not assume that arrangements that are standard in other jurisdictions will operate in the same way in the Tanzanian context.
By way of example, an investor that includes an arbitration clause providing for a seat of arbitration outside Tanzania should consider at the outset whether any resulting award will be readily enforceable against Tanzanian assets, and whether the structure of the investment provides adequate protections in the event of a dispute with a local counterparty or a government entity.
Addressing these issues at the structuring stage allows investors to build appropriate protections into their agreements and to avoid being caught without effective remedies when they are most needed.