THE Tanzania Investment Centre (TIC) recently announced that the country expects receive increased inflow of foreign direct investment (FDI) within a couple of years, driven by energy and mining sectors, but there are many challenges that must be addressed more aggressively.
The TIC Executive Director, Ms Juliet Kairuki, was recently quoted as saying that FDIs are expected to grow by about six per cent in 2012 to 1.8 billion US dollars in 2013, boosted by ongoing oil and gas exploration activities.
Tanzania is Africa's fourth-largest gold producer and following big discoveries of natural gas off its southern coast, the country is likely to become a major energy hub. Ms Kairuki said the United Kingdom is by far the biggest source of FDI for Tanzania, followed by Canada, Switzerland and the United States.
Top UK companies investing in the country's mining and energy sectors include African Barrick Gold, Anglogold Ashanti and BG Group. According to government officials the country's natural gas reserves are estimated to be over 40 trillion cubic feet (tcf), the amount that could last more than 100 years.
The government is finalising its natural gas policy, while debate continues over how much gas should be sold to foreign investors and what safeguards should be put in place to ensure development of the country's own gas and electricity sector. Experts say that gas production from deep sea offshore gas discoveries is expected to start as early as 2018.
Energy and oil companies were recently urged by President Jakaya Kikwete to consider domestic and regional demand for natural gas for power generation and fertiliser production.
Britain's BG Group and Ophir Energy have been at the forefront of exploration in Tanzania, while energy majors Exxon Mobil and Statoil have also found gas.
BG and Statoil said in March they planned to build a $10 billion liquefied natural gas (LNG) terminal. The Tanzania National Business Council (TNBC) earlier this month organised a one-day forum that addressed challenges in investing in the country, which include bureaucracy and cumbersome procedures.
The government is roundly accused of high level of unpredictability in its fiscal and other policies, making it difficult for investors to predict returns on their investment.
There is a tendency to change policies regularly, sometimes without thorough consultations with investors before making decisions on shifting the goal posts.
Other complaints are on cumbersome and costly procedures that involve multiple regulators who are supposed to be paid fees. For example,there are transactions that involve the Tanzania Bureau of Standards (TBS), Tanzania Food and Drugs Authority (TFDA) and weights and Measurers Authority (WMA).
These institutions should be reviewed and their operations harmonised for the purpose of attaining maximum efficiency and reduce costs by doing away with multiple testing.
It was proposed that in the long-term the government should review the structure, business models and viability of regulatory bodies with a view to having a regulatory regime that is efficient and funded in a way that does not suffocate the private sector.
Other challenges that the private sector faces include unfair tax administration for various reasons, corruption and lack of competence. Poor or unfair tax administration undermines the survival of the private sector and its capability to create jobs.
For example, investors in the mining sector, complain bitterly on failure by the Tanzania Revenue Authority (TRA) to refund value added tax (VAT) in time.
Participants at the forum called upon TRA to ensure that VAT refunds are completed within 30 days after submission of the claim. Land is a big headache for many investors in Tanzania.
It is not a secret that most land offices from district, regional and national levels are infested with corrupt elements. The forum called for review of human resources capacity for land administration in local government agencies in areas that are rapidly growing, including Dar es Salaam, Arusha and Mwanza.