Tanzania: Tough New Rules See Multinationals Give Up Majority Stakes in Tanzania

Changes in law and tax demands see multinationals give up majority stakes in Tanzania.

In a span of four months, two major international firms in Tanzania have changed shareholding, with the majority stake going to influential ex-government officials.

Analysts are seeing this as a sign of the future of multinationals in the country as the President John Magufuli administration seeks a new business order that will see Tanzanians benefit more from foreign investments.

MultiChoice Tanzania Ltd, the country's first and top pay TV company which has recently had run-ins with the telecommunications sector regulator, Tanzania Communications Regulatory Authority over its operations, is facing a takeover by its chairman, former Tanzanian ambassador to South Africa and businessman Ami Mpungwe.

Mr Mpungwe submitted a notification to acquire majority shares in MultiChoice Tanzania last December.

Analysts say this gives the company a lifeline, especially with the threat of suspension still hanging over its head even though the details of the shareholding status still remain unknown.

MultiChoice Tanzania has been a joint venture between Mr Mpungwe, Fabio and Marco Tramontano (represented by Franco Tramontano) and MultiChoice Africa.

If the Fair Competition Commission (FCC) allows the deal, Mr Mpungwe will be its majority shareholder.

A notice by the regulator says: "FCC is currently investigating the intended acquisitions in line with the provisions of the Fair Competition Act, No. 8 of 2003, and the Fair Competition Commission Procedure Rules, 2013.

"Pursuant to Rule 49 of the said Rules, parties (both legal and natural) who deem themselves as having sufficient interest in this merger, or, if the merger is not objected to, it will have or is likely to have material effect on their interests."

MultiChoice Tanzania provides subscriber management services solely to MultiChoice Africa Ltd, including managing subscriber relationship, attending to customer queries, selling subscriber equipment such as decoders and marketing and promotion of DStv bouquets.

Last August, the government threatened to suspend the licence of MultiChoice Tanzania, DStv and GOtv services provider, for charging clients to access free-to-air television channels.

The TCRA accused the pay TV service provider of failing to comply with its licence condition to exclude the free-to-air stations from its pay TV services. This forced MultiChoice to remove free-to-air channels from its subscription list.

The merger notice by Mr Mpungwe to the country's competition authority comes barely three months after ownership changes in the troubled airline FastJet Tanzania, after the parent company exited the market.

The majority shareholding of the now independent airline is controlled by former Tanzania home affairs minister, Lawrence Masha.

Smooth business operations

By controlling more than half the voting interest, the majority shareholder is a key stakeholder and influencer in the business operations and strategic direction of the company and this could be a good reason why multinationals in the country are selling down their stake, to allow Tanzanians to engage with the government and its agencies to assure smooth business operations.

Last November, Mr Masha, who was Fastjet Tanzania chairman upped his stake in the carrier from the previous 4 per cent holding to 68 per cent after he bought 47 per cent of the company's shares owned by Tanzanian nationals and 17 per cent owned by Fastjet Plc, becoming the majority shareholder and owner of the unit. His other partner remains South African Hein Kaiser.

Fastjet Plc said it was disposing of its 49 per cent stake in the loss-making Tanzanian subsidiary, Fastjet Airlines Ltd, on the back of an increasingly difficult operating environment, which will leave the Dar operator with little muscle and wiggle room to fight off the government-backed Air Tanzania.

"We are now an independent Tanzanian unit and are looking for strategic investors to continue and expand within the country," the firm's public relations and marketing executive Lucy Mbogoro said.

The changes in law and tax demands provide an array of difficult operating environment, which some of the affected companies call "unreasonable demands" meant to hurt business.

However, the government insists that the shake-up will create a "fairer economy."

New regulations

For most companies, a strict new tax regime, introduced in 2016 tops the list of their worries, after the government increased taxes in 2016 touching on banking, mobile money transfers, tourism services and cargo transit services, with the businesses expected to shoulder the costs.

Last December, the Tanzania Civil Aviation Authority announced that Fastjet Tanzania had lost its qualifications to operate in the country due to frequent cancellation of flights, and the authority suspended its flights within Tanzania until the end of January this year.

The airline is yet to announce a date for its resumption of service. It has however openly accused the government of creating a difficult operating climate for business.

See What Everyone is Watching

More From: East African

Don't Miss

AllAfrica publishes around 700 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.