9 March 2014

Tanzania: EPZA Out to Foster Country's Industrialisation


EXPORT Processing Zones Authority (EPZA) is all out to fast-track the industrialization in the country and promote exports. The Authority's Director General, Dr Adelhelm Meru reveals more about the institution's plans and ambitions in this interview with our correspondent...

QUESTION: Tell us briefly about the history of Export Processing Zones Authority (EPZA)

ANSWER: The Export Processing Zone scheme was established in 2002 as one of the Government strategies to fast-track the industrialization process and to promote exports.

Immediately after its inception, the scheme was placed under the supervision of the National Development Corporation (NDC).

NDC supervised the EPZ programme up to 2006, when the government realized that the EPZ programme needed an independent authority to speed up its implementation. At that time, NDC had two bureaus: NDC itself, which had its own legal framework and functions, and the EPZ scheme which also had its own legal framework and functions.

In 2006 the government made a decision to place the EPZ scheme under its own governing body, as such, the Export Processing Zone Authority (EPZA) was established.

In view of this background, although the EPZ Act was established in 2002; when we consider the effectiveness of the EPZ scheme in Tanzania, we count from the EPZA's establishment in 2006.

Q: What is the difference between EPZ and SEZ?

A. The Special Economic Zone scheme (SEZ) was established by the SEZ Act No. 1 of 2006 as a strategy to implement the "Mini-Tiger Plan 2020" aiming at enhancing productivity, competitiveness, economic growth, export promotion and employment generation.

The SEZ scheme was officially placed under EPZA in 2011. The difference between the EPZ and SEZ schemes is in that, EPZs are oriented towards manufacturing for exports. The condition for EPZs is to export 80% of the products produced.

SEZs have no condition for export. SEZ investors are allowed to sell part or all goods in the local market without restriction. Another difference is in that, SEZ goes beyond manufacturing; it can be in trading, agriculture, tourism or any other sector.

Q: How big is the authority in terms of land allocated for investment country wide?

A: EPZA started with only three privately owned EPZs, namely Millennium Business Park and Hifadhi EPZ in Dar es salaam, as well as Kisongo EPZ in Arusha.

In 2008, three more zones were established; these were Kamal EPZ in Bagamoyo, Global EPZ in Mkuranga and Benjamin William Mkapa Special Economic Zone which is the only Government owned zone located at Mabibo External Dar es Salaam.

In order to ensure that the zones are scattered all over the country, EPZA has set aside investment land in almost all Tanzania Regions. The sizes of land range from 500Ha to 9000Ha. These areas are at different stages of development, some of them have already been acquired by the Authority, while others are still at the acquisition stage.

Q: Who qualifies to invest into EPZA Special Zones?

A: The EPZ and SEZ eligibility criteria are simple and straight forward. They have been made simple in order to attract as many investors as possible. The first criteria are that, the investment must be new.

Both the EPZ and SEZ schemes do not register already existing investments unless the Company intends to completely deviate from producing for the local market to exporting. Secondly, for EPZ investors, 80% of the goods produced should be exported, with only a mere 20% to be sold in the local market.

This condition does not apply for SEZ investors. It is also a requirement that the annual export turnover for EPZ investors should exceed US dollars 500,000 for foreign investors and US$ 100,000 for local investors; whereas for SEZ investors the investment capital should exceed US$ 500,000 for foreign investors and US$ 100,000 for local investors.

As it may be seen, these eligibility criteria do not discourage SMEs in joining the EPZ scheme; in fact, the threshold of US$ 100,000 was deliberately set low to enable SME operators join the scheme.

Q: What incentives do you offer for those interested to invest in your areas?

A: The EPZ and SEZ schemes provide World Class incentives and state of the art infrastructure to investors. The schemes also provide facilitation and aftercare services to new and existing investors.

The fiscal and procedural incentives lower operational costs, thereby enabling investors to be internationally competitive. The incentives are in two categories, namely EPZ incentives and SEZ incentives as follows: EPZ incentives Exemption from corporate tax for 10 yrs.

Exemption from withholding tax on rent, dividends and interests for 10 years. Exemption from custom duty, VAT and other taxes on raw materials, construction materials and goods of capital nature related to production in EPZs. Exemption from taxes and levies imposed by Local Government Authorities on products produced in EPZs.

Exemption from VAT on utility and wharfage charges. On site customs inspection of goods SEZ incentives. Exemption Remission of custom duty, VAT and other taxes on raw materials and construction materials and goods of capital nature related to production in the zones.

Exemption from payment of withholding tax on interest on foreign sourced loan and On site inspection of goods in the Zone Both EPZ and SEZ investors enjoy privileged procedures on: A One-Stop-Service Centre facility at EPZA for setting up, facilitation and aftercare services to EPZ investors. Rapid project approvals.

Transferability of profits, dividends and loyalties. Lower port charges compared to other cargo box rate (transit cargo). Accessing the export credit guarantee scheme. On site customs inspection at the Export Processing Zones.

Q: How do you see the importance of EPZs and SEZs to Tanzania

A: The importance of EPZs and SEZs to Tanzania is in several aspects. Firstly, in promotion of export-led industrialization which is key to our economic development.

The Tanzania Development Vision 2025 assigned the industrial sector a specific role of transforming Tanzania from an agricultural to semi-industrialized economy. In realizing this objective, the contribution by EPZs and SEZs is crucial.

Secondly, EPZs and SEZs are important measure in promoting exports and international competitiveness as well as expanding foreign exchange earnings.

Currently, Tanzanian exports are 50% of the imports. This is not healthy for our economy and needs to be reversed! Thirdly, EPZ creates employment and enhances development of skilled labour. Also, EPZ promotes processing of local rawmaterials for export and enhances transfer of new technologies.

Q: Is it true that the EPZ and SEZ schemes are mainly for foreign investors?

A: I know some local people have the perception of aligning the EPZ and SEZ schemes to foreign investors; others do not even approach our offices thinking that they have no merit.

This is absolutely not true! The two schemes are not discriminative, they are meant for any investor, local or foreign. In fact our statistics show that, out of the 98 presently EPZA registered investors, 47% are Local companies, 39% are Foreign companies and 14% are Joint Ventures.

EPZA's strategy is to attract in the scheme as many local companies as possible.

Q: EPZA has gone a long way since its establishment. How much has the authority managed

A: EPZA was established in 2006, and it started operations in 2007. Within the 6 years in which EPZA has been in operation, a total of 98 companies have been registered by the Authority and most of them are already operating. The 98 Companies have invested a total capital of more than US$ 1.01 billion, and have created hundreds of new direct jobs.

This is in our view, a considerable achievement. We continue to receive a number of applications from various companies aspiring for EPZ and SEZ licences. Our projections are to register over 150 companies by the end of this year.

In short, the two schemes are so far doing very well. If this trend continues, then the noble objective stated in the Tanzania Development Vision 2025 of transforming Tanzania from an agricultural to semiindustrialized economy will be realized very fast.

Q: Recently, a score of media outlets reported that EPZA surpassed its 2013 targets of attracting investments into your zones. What did you accomplish and what was the secret behind this achievement?

A: It is true that last year, EPZA made a considerable achievement as follows: - The authority had planned to get 25 big investors, but by December 2013 they exceeded the target and attracted 31 investors.

- The authority also had a target to obtain USD 300 million investment capital in 2013, but again bettered the target bringing the country capital to a total of USD 498 million by December last year.

- Authority had planned to create 5,200 new jobs last year and end up doubling the target by creating 10,200 new jobs through new investments that took place in the authority areas. -

Earlier aimed to export products totaling USD 100 million last year, but surpassed this target as well by exporting USD 105 million worth of products The successes had been a result of a number of factors; first is the hard work of the EPZA staff who worked tirelessly to promote the EPZ and SEZ schemes nationally and internationally resulting into attracting a substantial number of investors.

Two, is the government support to the authority, especially on investment promotion, allocating areas for investment and in provision of the necessary infrastructure required by investors.

Three is cooperation with other investment promotion agencies in the country, namely Tanzania Investment Centre (TIC), Zanzibar Investment Promotion Authority (ZIPA), Tanzania Trade Authority (TANTRADE) and the Tanzania Private Sector Foundation (TSPF). EPZA is now increasing efforts in 2014, to ensure that the achievements attained last year will be surpassed by far.

Q: What are EPZ priority sectors?

A: In general, EPZA promotes investment in different sectors provided the investment involves manufacturing for exports. But of course, there are sectors to which we put more emphasis depending on the national economic priorities. Currently, priority number one is on agro-processing.

The reason for choosing agro-processing is obvious; Tanzania produces a wide range of agricultural products, most of which are being exported in their raw form.

This is exactly what we are trying to eliminate now! We extensively encourage companies and prospective investors to come and add value to our agriculture products. It can be anything, coffee, cotton, cashewnuts, tea, sisal, fruits, vegetables, etc.

Taking an example of cotton; out of the 600,000 bales of cotton produced annually; it is hardly 20% that is processed locally, the remaining 80% is being exported in its raw form. Investment is therefore sought in setting up spinning and weaving plants as well as garments manufacturing factories.

Second on the list is mineral processing. Tanzania is endowed with a lot of mineral resources, that include gold, diamond, Manganese, etc and a variety of gemstones including the famous Tanzanite, only found in Tanzania. We therefore promote investments in gemstone cutting, polishing, jewellery and other mineral processing operations.

Other priority sectors include leather processing, fish processing, processing of wood products, as well as Information and Communication Technology (ICT) related investments. But of course, we encourage investors from any sector provided the investment involves manufacturing for export.

What I have outlined here are just the key areas of interests depending on the Country's potential in terms of the available raw materials.

Q: To what extent does EPZA differ from TIC?

A: Tanzania has two investment promotion agencies; one is the Tanzania Investment Centre (TIC) and the other is the Export Processing Zones Authority (EPZA).

TIC coordinates investment in its totality and facilitates investments in different sectors and at different locations; whereas, EPZA registers investors who intend to invest in special zones only i.e Export Processing zones (EPZ) and Special Economic Zones (SEZ).

An investor who prefers to invest in Agriculture, Mining, Tourism or manufacturing outside the zones goes to TIC; however, investors who would like to locate in special zones especially those who would like to manufacture for export, register with EPZA.

The two investment agencies complement one another. The unique features with EPZA are in that, EPZA offers industrial land to investors, offers licenses which are equivalent to business licenses issued by other licensing Authorities and offer special incentives. EPZA also has fast facilitation services including issuing building permits to investors in EPZs and SEZs.

Q: What are the ambitions and challenges ahead?

A: Our main ambition is to increase the number of developed zones to be able to accommodate as many investors as possible. So far the country has only six zones which are small in size and most of them can no longer accommodate new investors.

We have for that matter planned to develop three new zones at Bagamoyo, Mtwara and Kigoma in the next five years. In Bagamoyo we have earmarked 9000 Hectares in which we intend to develop a modern industrial cum commercial township.

The zone will consist of a new port at Mbegani and a railway connection to the central railway line. The major component of the zone will be an industrial area, but will have a Free Trade Zone, a Logistic centre, an ICT park, a tourist park, residential areas and areas for other social activities.

The master plan for the area is already in place and preparations are underway to start development of basic infrastructure in the zone. Mtwara zone is next on the list. Following the gas and oil exploration activities in Mtwara, the area has become a potential to investment attraction.

EPZA has declared an area of 110 Ha to be a Free Port Zone at Mtwara port and already 18 companies have expressed interest to invest in this zone. Apart from the 110 Ha, EPZA has as well earmarked 2600 Ha for development of a modern SEZ.

The last zone is Kigoma were EPZA has earmarked 700 Ha for development of a Trade Hub and Industrial zone that will capture the cross border trade between Tanzania and the neighbouring countries of Burundi, DRC and Zambia. We believe that if the three zones are successfully completed, Tanzania will become a true industrial cum commercial hub for East and Central Africa.

The only challenge is availability of funds to develop basic infrastructure; we however, plan to join hands with the private sector to develop the areas through Public Private Partnership (PPP) arrangements.

Q: What are the challenges facing the authority in day to day activities?

A: The major challenge facing EPZA is lack of well developed infrastructure for EPZ operations. Experience has shown that, many investors need to invest in locations where the basic on-site infrastructures (electricity, water, sewage system, communication etc.) are in place.

Others would like to get ready made industrial buildings where they install machines and start production straight away. Unfortunately, the existing developed zones are few and most of them are full. This situation poses a serious challenge to EPZ/ SEZ investment in Tanzania.

The other challenges are erratic supply of utilities especially power and water; availability of skilled labour force in some areas eg. mining, garments making and ICT; and congestion at the port which poses a serious impediment to exporters of manufactured goods.

Q: What is your special appeal to local and foreign investors?

A: Tanzania is an ideal investment destination. It has several untapped resources and abundant raw materials for production of various products. It is one of the countries that have the most conducive investment climate in the region.

The best facilitation services offered by EPZA, availability of world class industrial infrastructures, coupled with a lucrative package of incentives under both the EPZ and SEZ Acts make EPZA an investment destination of choice. EPZA welcomes investors from all parts of the world to come and grow with us.

In a very special way I appeal to the local investors not to lean back and watch others, but to instead come forward and grab the available investment opportunities thus, take the lead in fostering our socio-economic development.

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