COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE TANZANIA

Transcription

1 COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE TANZANIA

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3 COTTON, TEXTILE AND APPAREL SECTOR INVESTMENT PROFILE TANZANIA 2016

4 FOREWORD Experience Tanzania s development pace by investing in Cotton, Textile and Apparel sector. Agricultural sector is and will continue for some time to remain the backbone of the economy for Tanzania. It accounts for 28.7 per cent of the GDP, provides about 95 percent of food requirement; employs 74 per cent of the population and provides raw materials for industries. The sector has potential to lift many of the poor people out of poverty and contribute to achieving our national development goal of graduating into middle income economy status by Cotton, Textile and Apparel sector profile is meant to harness the potential for investment, trade and socio-economic development in the respective sectors. The sector profile intends to review the investment outlook of Cotton, Textile and Apparel sector and unveil investment opportunities and economic potentials that are offered by the sector. Tanzania is the fourth largest global producer of organic cotton after Turkey, Syria and India and cotton is the second largest export crop in the country after coffee. This sector if promoted effectively has a very high potential to immensely contribute to the economy in terms of foreign earnings, jobs creation, incomes and poverty reduction. Promotion of this sector will also encourage development of industries as Tanzania is moving towards industrialization. Tanzania has access to various markets under different preferential trade agreements like African Growth Opportunity Act (AGOA) and the European Union s Everything But Arms (EBA). Through Special Preferential Tariff Agreement with China, over 4000 goods originating from Tanzania can be exported to China free of tariff. This sector profile will provide all the necessary information required by investors interested to invest in the country especially in the cotton sector. We anticipate the information provided in this profile will encourage and strengthen high investment for cotton, textile and apparel sector. We acknowledge the support of International Trade Centre (ITC), Strengthening India s Trade with Africa (SITA) and the Government of United Kingdom through UKAID for their support in developing this profile. Their initiatives will benefit TIC tremendously in the promotion of the sector and its value chain effectively. Clifford Tandari, Acting Executive Director, Tanzania Investment Centre ACKNOWLEDGEMENTS This profile has been produced under the framework of Supporting Indian Trade and Investment for Africa (SITA) project, funded by the Department for International Development, Government of the United Kingdom and implemented by the International Trade Centre. SITA is a South-South Trade and Investment project aimed at improving competitiveness of select value chains; and increasing investment in five Eastern African countries through partnerships with institutions and businesses from India. Special contributions to writing this report have been provided by: Textile and Garment Manufacturers Association of Tanzania Quality Assurance: International Trade Centre (ITC), Trade Facilitation and Policy for Business Section (TFPB) TCA Ranganathan, External consultant, Rajesh Aggarwal, Chief (TFPB), Andrew Huelin, Associate Programme Advisor (TFPB) Author: Marco Mtunga Design: Iva Stastny Brosig, Design plus Editor: Vanessa Finaughty and Guillaume Lamothe The views expressed in this report are those of the authors and do not represent the official position of the International Trade Centre, Tanzania Investment Centre and the Government of the United Kingdom. The images used in this profile may not always reflect accurately the country context. 4 International Trade Centre 2016

5 Table of Contents TANZANIA: AN OVERVIEW 7 TAXATION 8 BANKING SERVICES 9 WHY TANZANIA? 11 MAJOR REGIONAL INTEGRATION AND TRADE POTENTIAL 11 EXTERNAL SECTOR DEVELOPMENTS 11 FOREIGN DIRECT INVESTMENT (FDI) 12 LABOUR CONDITIONS AND WAGE RATES 13 TAXATION POLICIES 13 ACCESS TO CONVENTIONAL AND ORGANIC COTTON 15 COTTON AND TEXTILE SECTOR PERFORMANCE 16 COTTON PRODUCTION 16 TANZANIA S GINNING INDUSTRY 17 TANZANIA S TEXTILE SECTOR 17 THE AFRICAN GROWTH AND OPPORTUNITY ACT (AGOA) 19 INVESTMENT INCENTIVES AND INSTITUTIONAL SUPPORT 20 FOREIGN TRADE ZONES/FREE PORTS 21 LAND: AVAILABILITY, TENURES, OWNERSHIP ACQUISITION PROCEDURES AND PROCESSES 21 PROJECT IMPLEMENTATION SUPPORT SYSTEMS AVAILABLE FOR AGRICULTURE SECTOR 22 PROCEDURES FOR INVESTMENT 23 INVESTMENT PROMOTION AGENCIES AND SUPPORTING INSTITUTIONS 25 TANZANIA INVESTMENT CENTRE (TIC) 25 EXPORT PROCESSING ZONES AUTHORITY (EPZA) 26 INDUSTRIAL UTILITIES 26 SMALL INDUSTRIES DEVELOPMENT ORGANIZATION (SIDO) 27 VOCATIONAL EDUCATION AND TRAINING AUTHORITY (VETA) 27 COLLEGE OF ENGINEERING AND TECHNOLOGY (COET) 27 THE TEXTILE DEVELOPMENT UNIT 27 THE NATIONAL INVESTMENT STEERING COMMITTEE (NISC) 27 LABOUR CONDITIONS AND WAGE RATES 29 LOGISTICS AND TRANSPORT FACILITIES 29 LOGISTICS 29 INVESTMENT OPPORTUNITIES 31 USEFUL CONTACTS 32 ANNEXES 33 ANNEX I: Status of the textile and garment industry in May ANNEX II: Investment facilitation and service delivery 34 5

6 List of Figures FIGURE 1: EXPORTS OF GOODS AND SERVICES AS % OF GDP ( ) 12 FIGURE 2: FDI NET INFLOWS (US$) ( ) 13 FIGURE 3: TANZANIA S SEED COTTON PRODUCTION (2008/ /15) (TONS) 16 FIGURE 4: TANZANIA S KEY MARKETS 18 FIGURE 5: TANZANIA S EXPORTS BY MARKET DESTINATION 18 FIGURE 6: TANZANIA S REVEALED COMPARATIVE ADVANTAGE 18 FIGURE 7: FDI INFLOWS TO TANZANIA 25 FIGURE 8: TREND OF PROJECTS REGISTERED WITH TIC 25 List of Tables TABLE 1: TANZANIA S NON-TRADITIONAL EXPORT PERFORMANCE 11 TABLE 2: MAJOR TRADING COUNTRIES DURING 2013/14 12 TABLE 3: COMPOSITION OF EXPORT COMMODITY DURING 2013/14 12 TABLE 4: FOREIGN DIRECT INVESTMENT, NET INFLOWS (MILLION US$) ( ) 13 TABLE 5: TANZANIA S WITHHOLDING TAX RATES 14 TABLE 6: INCOME TAX RATES FOR RESIDENT INDIVIDUALS 14 TABLE 7: TANZANIA COTTON, TEXTILE AND APPAREL EXPORTS ( ) 17 TABLE 8: TANZANIA S TOP 5 EXPORTED COMMODITIES (2013) 17 TABLE 9: INVESTMENT TAX INCENTIVES 20 TABLE 10: COMPARISON OF KILOWATT HOUR CHARGES BETWEEN TANZANIA AND SELECTED SUB-SAHARAN AFRICAN COUNTRIES 26 Abbreviations & Acronyms GDP US$ WCGA ECGA MT ITMF VETA USA EPZA GSP SSA AGOA SIDO Gross Domestic Product United States Dollar Western Cotton Growing Area Eastern Cotton Growing Area Metric Ton International Textile Manufacturers Federation Vocational Education Training Authority United States of America Export Processing Zones Authority Generalized System of Preferences Sub-Saharan Africa African Growth and Opportunity Act Small Industries Development Organization DAWASCO Dar es Salaam Water and Sewerage Corporation TANESCO Tanzania Electric Supply Company EU EPA MIGA ATIA COMESA SADC EAC VAT ACP SME CET European Union Economic Partnership Agreement Multilateral Investment Guarantee Agency Africa Trade Insurance Agency Common Market for Eastern and Southern Africa Southern African Development Community East African Community Value Added Tax African, Caribbean and Pacific Small and Medium-Sized Enterprise Common External Tariff 6

7 Tanzania: An Overview The United Republic of Tanzania was established in 1964 when the sovereign states of Zanzibar and Tanganyika united. Tanzania is 947,300 km 2, which includes 54,337 km 2 of inland water. The island of Pemba is roughly 984 km 2 and the island of Zanzibar is 1,657 km 2. One of the five countries in East Africa, Tanzania is located south of the equator. Mainland Tanzania is situated between the area of Tanganyika, the Great Lakes of Victoria, Nyasa and the Indian Ocean. It boasts roughly 1,400 kilometers of coastline and is bordered by eight countries: Uganda, Burundi, Kenya, Rwanda, Zambia, Malawi, the Democratic Republic of the Congo and Mozambique. Due to six of these countries being landlocked, Tanzania provides natural access to the region. Tanzania s population is million in Of the total population, around 97% live in mainland Tanzania and 2% live in Zanzibar. The population is growing at a rate of 3.2%, with the youth under the age of 15 years accounting for 45%. According to the current population prospects of the United Nations, the population of Tanzania in the year 2050 will rise to 129,420,000 and, in the year 2100, to 275,620,000. The life expectancy in Tanzania is 61.4 years. Between the years 2006 to 2014, Tanzania s GDP grew at an average rate of 6.4%. This growth record has been outstanding. It has ranked among the top 20 fastest-growing world economies and has been above the Sub-Saharan average of 5.2%. Capital: Key facts Dodoma Area: 947,300 km 2 Population: mm (2014) 0 14 years: 45.00% years: 52.00% Labour force (over 15 years): mm (2014) Population growth: 3.2% (2014) Youth literacy rate (15 24 years): 86% (2012) Urban population: 31% (2014) Male: 87% (2012) Female: 85% (2012) GDP (nominal): US$ bn (2014) FDI inflow: US$ 2.04 bn (2014) Exports: 19.5% of GDP (2014) Imports: 29.9% of GDP (2014) Exchange rate (per US$): Govt. expenditure: TZS 2,039.4 (2015 est.) US$ 8.43 bn (2015 est.) The overall picture points to a Govt. revenue: US$ 6.82 bn (2015 est.) prosperous future where the per capita GDP per capita (nominal): US$ (2014) income is growing at an average rate of GDP growth: 7% (2014) 7%, thus raising the level of consumptive expenditure. Foreign reserve: US$ mm (2014) Inflation rate: 6.1% (consumer price) (2014) The deficit balance of trade informs Currency: Tanzania shilling (TZS) prospective investors that there is a huge potential to exploit and utilize available duty-free market opportunities in the European Union (EU), the United States of America and South Africa, to Other major cities: Language: Religion: Dar es Salaam English, Swahili (official languages) Christians, Muslims, and Indigenous beliefs mention a few. For a period of 10 years, export value has grown by about 90% Source: TIC, 2014; World Bank, 2015; WEF, 2015; CIA, 2016 while imports recorded a growth of 70%. The headline inflation rate remained a single digit in 2014 and the first quarter of The inflation rate averaged 6.1% in 2014 compared to 7.9% in shutterstock.com 7

8 Analysis of the sectoral contribution to the GDP in 2014 indicates that services had the highest share of 41.3%. Agriculture also continues to contribute strongly to the GDP, accounting for 28.9%. Manufacturing and construction sectors combined accounted for 21.7%, of which manufacturing had 5.6%. The small percentage contribution from manufacturing is an indication that Tanzania is still untapped. To offer greater security to the local textile manufacturing sector, a higher duty rate (~50%) is applicable to sensitive items like imported kitenges, kikois and kangas, both as made-ups and fabrics, and on woven cotton home textiles (table, toilet and bed linen). The duty rates for other sensitive textiles are 35% or US$ 0.20 per kilogram (whichever is more) for worn articles and clothes, and 45% per bag for bags and sacks of jute and other textile bast fibres. 1 TAXATION Tanzania s fiscal regime is predictable and stable, offering all investors a soft landing. It is the type of regime that recognises that investors need to recoup their investment costs before they pay corporate tax. Taxes under the domestic revenue department are as follows. VAT, % rate of 18 (Importation or supply of goods and services); rate of 0 (Export of goods and certain services); Corporate tax, % rate of 0-30; Income tax, % rate of 0-30 (for more detail, please find Tanzania Revenue Authority, Taxes and Duties at a Glance 2015/ 2016); Skill and development levy, % rate of 5 of employees total gross remunerations; Withholding tax (for pension, royalties, dividend payments, transport, insurance premium, and disposal of assets). As an East African Community (EAC) member state, Tanzania enjoys a customs union that has the following key aspects: duty-free trade between member states; a common external tariff (CET) on imports from third countries; and common customs procedures. Generally, EAC import duty on finished products is 25%, with 10% applicable for intermediate products and 0% applicable for raw materials. No duties are applicable to any type of fibre, because raw materials like cotton can be imported duty-free, with no restrictions. All yarn fibres have a duty rate of 10%, except for sewing thread imports, which have a duty rate of 25%. Usually, the 25% rate is also applicable to all woven and knitted conventional fabrics, ready-made home and garment textiles, and carpets and other textile floor coverings. 8 1 Source: ACTIF (2013). Policy Research on the Kenyan Textile Industry: Findings and Recommendations.

9 BANKING SERVICES The banking industry in Tanzania has more than 30 banks. Credit availability is an ongoing debate in Tanzania, citing high interest rates of up to 17% and the need to reduce them to a level that will encourage investors to invest in the country. Forex transactions are fully liberalized and investors face no restrictions in importation of raw materials. In Tanzania, investors enjoy unconditional transferability of funds in the following areas: 2 Payment relating to foreign loans; Investment s net profits or dividends; Remittance of net earnings of all taxes and other requirements; Payment of salaries and fees and other benefits to foreign employees; Royalty fees and other charges. shutterstock.com 2 The transactions must be through any approved dealer bank and in freely convertible currency. shutterstock.com CTA SECTOR INVESTMENT PROFILE: KENYA 9 shutterstock.com

10 CTA shutterstock.com

11 Why Tanzania? Strategic location Peace and political stability Appealing investment regime Investment guarantees Investment incentives Abundant natural resources Member of bilateral trade agreements High growth potential Special economic and export processing zones Strong public-private partnerships Impressive leisure and business destinations shutterstock.com MAJOR REGIONAL INTEGRATION AND TRADE POTENTIAL With its abundance of natural resources, stable political climate and strong macroeconomic policies, Tanzania has plenty to offer foreign investors. The country is the perfect starting point for accessing the East African Community s (EAC s) growing market. Tanzania is a member of the EAC, along with Uganda, the Republic of Kenya, Burundi and Rwanda. As a Southern African Development Community (SADC) member, Tanzania has access to 13 member trading blocs, which have a population in excess of 215 million people. The country is eligible for the USA s African Growth and Opportunity Act (AGOA), which offers duty-free exports to the USA from certain sectors, including textiles. The European Union s (EU s) Everything But Arms (EBA) initiative enables Tanzania to export some goods to the EU tariff-free. Tanzania s special preferential tariff agreement with China allows it to export in excess of 400 products made in Tanzania to China tariff-free. EXTERNAL SECTOR DEVELOPMENTS Tanzania s exports to foreign and neighbouring countries maintain a positive growth trend and are expanded towards non-traditional exports, such as horticultural products, manufactured products and minerals. For example, the performance trend of non-traditional exports has continually grown during the period 2009/10 to 2013/14 as shown in table 1. Table 1: Tanzania s non-traditional export performance Year Amount in million US$ 2009/ / / / / Source: Bank of Tanzania Issue No A hefty share of the growth derived from rising investment in mining, together with high production, mainly of gold. Major trading countries in which commodities were traded during 2013/14 are listed in table 2 and table 3. 11

12 Exports by country of destination Table 2: Major trading countries during 2013/14 Imports by country of origin Country Percentage share Country Percentage share The Republic of South Africa 17.3 The Republic of India 18.4 India 17 The Swiss Confederation 12.9 Switzerland 9.2 China 12.7 China 7 The United Arab Emirates 9.5 The Democratic Republic of the Congo 5.4 South Africa 5.8 Kenya 5.2 Japan 4.1 Japan 5 Kenya 2.7 The Federal Republic of Germany 3.6 The United Kingdom of Great Britain and Northern Ireland Zambia 2.1 The United States of America 1.9 The Kingdom of Belgium 2 The Kingdom of Saudi Arabia 1.8 Source: Bank of Tanzania Others 26.2 Others Table 3: Composition of export commodity during 2013/14 Product Percentage of share Gold 33.9 Manufactured goods 26.5 Tobacco 7.3 Re-export 3.5 Fish and fish products 3.4 Other minerals 2.7 Cashew 2.7 Coffee 2.6 Cotton 1.9 Tea 1 Cloves 1.2 Horticulture 0.6 Sisal 0.4 Other export products 12.2 *Source: Bank of Tanzania The wide gap between exports and imports (figure 1) and the need to minimise the same is motivating policy to attract exports promoting investment, including FDI. Exports 20.8 Figure 1: Exports of goods and services as % of GDP ( ) FOREIGN DIRECT INVESTMENT (FDI) In general, the Tanzanian Government has a favourable approach to foreign direct investment (FDI) and has had significant success in attracting FDI. This is reflected in table 4 and figure 2, which show the trend for FDI inflows in East African countries. Top countries for the source of FDI in Tanzania include China, Canada, South Africa, Kenya and the United Kingdom. FDI is still growing, especially in the tourism and hotels, energy infrastructure, telecommunications services, breweries, road construction, agriculture and mining sectors Year 2011 Year 2012 Year 2013 Year 2014 Source: Factfish, 2016 Imports 12

13 Table 4: Foreign direct investment, net inflows (million US$) ( ) Year Tanzania Kenya Uganda Rwanda Burundi *Source: World Bank World Development Indicators, 2016 Figure 2: FDI net inflows (US$) ( ) Tanzania Kenya Burundi Rwanda 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000, ,000, LABOUR CONDITIONS AND WAGE RATES Uganda Source: World Bank World Development Indicators, 2016 The law allows private sector collective bargaining, but the Tanzanian Government sets wages administratively in the public sector. The country has a vast quantity of experienced human capital and invests much in education compared to other countries in Sub-Saharan Africa. Furthermore, Tanzania has put into practise advanced immigration policies and encourages skilled people from across the globe to apply for residence in Tanzania and contribute to its economic growth. Under the EPZ Act, the government can offer work permits for technical staff and management if these skills are not on hand locally. Importing machinery is fairly expensive, which makes labour more appealing. Minimum wage in Tanzania is set by categories that encompass 12 sectors of employment. During the 2013/14 financial year, the minimum wage ranged from TSh 100,000 (US$ 58.63) a month for agriculture labourers to TSh 400,000 (US$ ) a month for labourers in the mineral sector (businesses with prospecting and mining licenses) (U.S. Department of State, 2015). More than 45 working hours a week is permissible if overtime work is required. The typical overtime pay is 1.5 times the employee s usual pay. All established companies have to register with the National Social Security Fund (NSSF) or any other fund; there are six social security funds. Foreign employees can be exempt from the NSSF scheme if they can prove that they are participating in another pension programme, but Tanzanian employees cannot be exempted, and the payable contribution is 10% of the basic wage bill. In Tanzania, the law stipulates a yearly leave of 28 calendar days. TAXATION POLICIES Tanzania s fiscal regime is predictable and stable, providing all investors with a soft landing. It is the type of regime that acknowledges investors need to recoup their investment costs before they pay corporate tax. The administration of several tax laws is assigned to the Tanzania Revenue Authority (TRA), which is a semi-independent government agency established by Act No.11 of Parliament in It is in charge of a number of non-tax revenues and central government taxes. The 2015/16 financial year applicable taxes are detailed in the following subsections. CORPORATE TAX The corporate tax rate is 30% for non-resident and resident businesses alike. A company is a resident if it is included under the Tanzanian Companies Act or if, at some point in the tax year, control and management of its affairs are effected in Tanzania. Resident company 30% Non-resident company (branches) 30% Income from investments exempted under Economic Processing Zones Act Company newly listed on DSE with at least 30% of equity shares issued to the public N/A 25% 13

14 Table 5: Tanzania s withholding tax rates Hs code Residents Non-residents Dividends from the Dar es Salaam Stock Exchange listed corporations, % Dividend from resident corporation to another resident corporation where the corporation receiving the dividend holds 25% or more of the shares in the corporation, % N/A Dividends from other corporations, % Commission on money transfer through mobile phones, % 10 N/A Interest, % Royalties, % Management and Technical services fees (mining, oil and gas), % 5 15 Transport (Non-resident operator/ charterer without permanent establishment), % N/A 5 Rental Income: Land and building, % Rental Income: Aircraft lease, % Rental Income: Others assets, % 0 15 Transport across borders, % N/A 5 Insurance Premium, % 0 5 Natural Resources Payment, % Service Fees (Taxpayers with or without TIN), % 5 15 Directors Fees (Non-full time Directors), % Payments for goods supplied to Government and its institutions by any person, % 2 of gross payment N/A Other withholding payments, % Source: Tanzania Revenue Authority, 2015 INCOME TAX (i) Income tax rates for individuals (the marginal rate ranges from 11% to 30%) are categorized in table 6 depending on the income generated. Table 6: Income tax rates for resident individuals Taxable income (TSh) Rate (%) Cumulative tax payable (TSh) N/A and more 30 *Source: BDO, Tanzania Budget Highlights 2015/ and more (ii) Income tax rate for non-resident persons: A flat rate of 20% is applicable to total income, comprised of employment and non-employment income. However, a non-resident s employment income is taxed at a rate of 15% and the employer of a nonresident is obliged to deduct PAYE at a rate of 15% from the payroll, which is final tax. Non-resident employees are employees from foreign countries whose tax is withheld at a flat rate of 15% of the total employment income. The sum withheld meets the employee s income tax obligation with regards to employment. CAPITAL GAINS TAX The loss or gain upon sale of an asset is included in investment and business income and taxed at the general rate. In the case of buildings and land, one instalment is to be paid at the time of the sale transaction at a rate of 10% for residents and 20% for non-residents. SKILLS AND DEVELOPMENT LEVY The employer has to pay a skills and development levy to the Commissioner of Income Tax by the seventh day after month-end and is worked out at 5% of cash emoluments, payable once a month. This is an employer expense and is exempted for farm workers. 14

15 VAT Value-added tax is a consumption tax that VATregistered traders charge on all taxable services and products at a standard rate of 18%. VAT is a multistage tax imposed at each production and distribution stage up to the retail stage. Any company is required to register for VAT if it has a turnover of more than TZS 40 million a year or TZS 10 million in a period of three successive months. These businesses are required to submit an application for registration to the Commissioner for Domestic Revenue. Taxpayers have to submit a monthly VAT return and the payments to the closest local VAT office by the final working day of the month after the month of business. VAT rates are categorized as follows. Zero rate 0% Standard rate 18% Reduced rate 10% VAT as a fraction 1/6.55 of the inclusive price (standard rate) Annual turnover threshold for registration VAT schedules: TSh 100 million p.a. Special relief: This includes provisions to or importation of services or goods by diplomats or diplomatic missions; importation or supplies of services or goods under a donor-funded or technical aid; provision of certain goods to the armed forces; and provision to a registered medical practitioner, dentist, optician, clinic, hospital or patient, of equipment intended solely for prosthetic or medical, including mobile health clinics and ambulances. Supply or importation of capital goods to any individual; supply or importation to a registered water drilling company of commodities to be used only for water drilling; supply or importation of railway locomotives, parts and accessories, and rolling stocks to a registered railways corporation, company or authority. Additionally, supply or importation of fire-fighting vehicles to the government or its agencies, etc. (Third Schedule). CUSTOMS DUTY For products imported from countries outside the EAC, import duty rates are 25% for finished goods, 10% for intermediate goods and 0% for raw materials. EXPORT DUTY Export duty is applicable on some items, like skins and hides. Several services and goods are zerorated, like exports (First Schedule). VAT exempt or exempt supplies include health supplies, books and newspapers, fertilizers, pesticides, livestock, educational services, agricultural implements, unprocessed agricultural products, petroleum products, financial services, aircraft, aircraft engines and other parts, liquid elevators and wind generators, computers, solar thermal and photovoltaic equipment, heat-insulated milk cooling tanks and aluminium jerry cans utilized for collection and storage of milk in the diary industry, and farm services such as cultivation, land preparation, planting and harvesting (Second Schedule). ACCESS TO CONVENTIONAL AND ORGANIC COTTON Tanzania is one of Sub-Saharan Southern Africa s larger producers of conventional cotton, and it is the largest African producer of organic lint. Having the raw material resource nearby presents opportunities for firms that want to invest in textile production. The decision of the Tanzania Cotton Board to develop concession areas in the Eastern Cotton Growing Area (ECGA) provides the opportunity for textile manufacturers to set up operations that are directly linked to farming and ginning operations. 15

16 Cotton and Textile Sector Performance COTTON PRODUCTION Approximately 40% of the population relies on cotton for income. Typically, 400,000 hectares are used to sow cotton by roughly 350,000 to 500,000 smallholder farmers. The crop typically yields 260 kilograms of lint per hectare and is completely rain-fed. Cotton is cultivated in 45 out of 127 districts and 15 out of 25 regions. In excess of 70% of cotton production is exported as lint, a situation that provides a big potential for a thriving spinning industry. The Western Cotton Growing Area (WCGA), which comprises the nine areas of Mara, Singida, Simiyu, Kigoma, Geita, Mwanza, Shinyanga, Tabora and Kagera, produces 99% of the total production. The rest is cultivated in the Eastern Cotton Growing Area (ECGA) in Kilimanjaro, Manyara, Coast, Iringa, Tanga and Morogoro. The ECGA has higher potential for escalated cotton production than WCGA. Due to WCGA s sustained cultivation, together with insufficient use of fertilisers, the region has largely become too exhausted to sustain a productive crop. Tanzania is the fourth biggest global producer of organic cotton after Turkey, Syria and India. Organic cotton farming is undertaken in Meatu district and fetches a premium when compared to conventional cotton. This presents an opportunity to conquer the organic textile products niche market. Through the COMPACI project, Tanzania has started trading identity cottons in the brand of Cotton made in Africa (CmiA), where many retailers associate themselves with this brand. Cotton in Tanzania is characterized in this way: More than 50% is roller ginned with short fibre and low nep content; staple length is between 11/16 and 11/8 ; more than 95% falls in the prime micronaire range of ; more than 82% of the grade is middling and above; has a high uniformity ratio of between 81% and 85%, which is perfect for high-speed spinning technology; and fibre strength is between 25 gms/tex and 29 gms/tex, which is equally perfect for high-speed spinning technology. Spin counts from 16 nm to 45 nm. Figure 3: Tanzania s seed cotton production (2008/ /15) (tons) Seed Cotton Production 2008/ /15 (tons) 368, , , / / /11 225,938 *Source: OTEXA, US Trade under AGOA 357, , , / / / /15 The cotton industry is working around the clock to raise crop productivity and quality through adoption of good agricultural practices and adequate provision of inputs to farmers under contract farming arrangements. shutterstock.com 16

17 TANZANIA S GINNING INDUSTRY Tanzania has 83 ginneries with installed capacity to gin 1.8 million bales within six months. Below is a summary of the ginning capacity. Number of ginneries: 83 Number of cooperatives: 21 Number of private firms: 62 Number of gins: 1, 571 Number of roller gins: 1, 453 Number of saw gins: 118 Installed ginning capacity: 1.8 million bales of 200 kg each Ginning equipment: 50% roller; 50% saw Average ginning outturn: 34% The majority of ginners have oil mills as a vital part of their cotton business operations. Currently, 32 ginneries have oil mills processing roughly 20 MT of cotton oil per annum. This represents only 17% of the installed capacity, which is 115,150 MT. These mills produce roughly 52,000 MT of cotton cake. TANZANIA S TEXTILE SECTOR Tanzania s textile sector comprises three standalone spinning mills and a number of integrated businesses. The industry chiefly spins cotton yarns for woven and knitted fabric. Some fabric mills focus on making printed and woven women s khangas and kitenges, along with home textiles, dyed-yarn woven kikoi fabrics and bed linen. The bulk of these traditional fabrics are retailed in Tanzania, but some are exported to its neighbouring countries. According to data from the International Textile Manufacturers Federation (ITMF), Tanzania s installed capacity is around 16,000 open-end rotors and 415,000 ring spindles. The bulk of the spun yarn manufactured in Tanzania is 100% local carded cotton, with counts ranging between 1/12 Ne and 1/30 Ne. The country has some combing capacity that enables counts of up to 1/40 Ne to be manufactured, but there is not much demand for it. Most of the spun yarn manufactured is 1/24 Ne, which is made use of in the base fabric for sheeting and for printed kangas and kitenges, the national dress for women. (US$ million) Table 7: Tanzania cotton, textile and apparel exports ( ) Fibre/filament Yarn Fabric Apparel Home textiles Others* Total Table 8: Tanzania s top 5 exported commodities (2013) Commodity Export value (US$ mn) Share Cotton, not carded or combed 87 35% Misc. furnishing articles of textile materials 50 20% Sacks & bags of textile material for packing goods 19 8% Jute & other text bast fibres, raw & tow, etc. 18 7% Cotton, carded or combed 16 6% *Source: WTO 17

18 Figure 4: Tanzania s key markets Figure 5: Tanzania s exports by market destination ( 000 US$) Others 50% 5% *Source: OTEXA, US Trade under AGOA 15% 8% Vietnam China 12% 10% Mozambique Kenya Indonesia 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 *Source: ITC trade map database Figure 6: Tanzania s revealed comparative advantage World Kenya Mozambique Uganda United States South Africa Sudan (North+ South) Malawi Burundi Nigeria DR Congo Cotton by-products Cotton products Sythetic thread and fabrics Manmade staple fibers Wadding, non-wovens, twine. etc. Home textiles Impregnated/coated fabric Knitted/crocheted fabric Apparel, accessories, knit or crochet Apparel, accessories, not knit or crochet Other textiles Total *Source: ITC trade Map database NRCA.5 1 RCA, RCA, Cotton product manufacturing is in a better position to compete in the international market today, but apparel needs improvement. 18

19 THE AFRICAN GROWTH AND OPPORTUNITY ACT (AGOA) The African Growth and Opportunity Act (AGOA) is a non-reciprocal trade preference programme that offers certain commodities from eligible Sub- Saharan African countries duty-free preference benefits to the United States of America s imports. There are 49 candidate SSA countries, of which 39 are presently eligible for these benefits. In 2000, Congress first authorized AGOA to boost economic development and export-led growth in SSA and develop US economic relations with the area. Its current authorization was due to expire on 30 September 2015 and has been extended for 10 years until With regards to general eligibility criteria and tariff benefits, AGOA is comparable to the Generalized System of Preferences (GSP), which is a USA trade preference programme applying to more than 120 developing countries. However, AGOA covers more commodities and includes extra eligibility criteria over and above those in GSP. Furthermore, AGOA includes development and trade provisions over and above its duty-free preferences. This huge market opportunity has not been utilized to the level it is supposed to be and investors will benefit immensely from this preference programme. Below is an indication of Tanzania s textile and apparel exports to the US under AGOA between 2011 and to the value of US$ 5, to the value of US$ 11, to the value of US$ 10,403 shutterstock.com shutterstock.com 19

20 Investment Incentives And Institutional Support Tanzania s fiscal regime is very predictable and stable, which offers all investors a soft landing. It is the type of regime that acknowledges that investors must recover their investment costs before paying corporate taxes. The country recognizes the value of investment in fuelling economic development and growth in the country and fostering a potential for maintainable future revenue generations. Several tax incentives are granted to foreign and local investors alike in a number of sectors in an attempt to boost investment. In 1990, an investment policy was established when the government passed the National Investment Promotion and Protection Act (NIPPA) 1990, which gave investors tax incentives in the form of tax holidays for a defined time period. The NIPPA 1990 was repealed and the Tanzania Investment Act 1997 replaced it and is now in operation. The Tanzania Investment Act (TIA) 1997 passed on all tax incentives to the East African Community Customs Management Act 2004, the Income Tax Act 2004, and the Value-Added Tax Act 1997 as revised in This incentive s key purpose was to make the tax structure less complex and more transparent to taxpayers. Subsequently, income tax holidays have been abolished and investors are now offered tax incentives in the form of greater capital deductions and allowances, including 100% capital expenditure to the agricultural and mining sectors. The income tax laws permit 50% capital allowances in the first year of usage for plant and machinery fixed in a factory and utilized in manufacturing processes, for fish farming, or for delivering services in a hotel and to tourists. The investment tax incentives are summarized in table 9. In Tanzania, investors are guaranteed against expropriation and nationalization. The country has signed a number of bilateral and multilateral agreements on promotion and protection of investments. For example, Tanzania is an African Trade Insurance Agency (ATIA) and Multilateral Investment Guarantee Agency (MIGA) member. Table 9: Investment tax incentives Item Duty VAT All capital goods 0% Relieved Agricultural machinery/ equipment 0% Exempt Fertilizers and pesticides 0% Exempt Farm implements and inputs 0% Exempt Corporate tax 0-30% Capital allowance 100% Withholding tax on interest 10% Withholding tax on dividends 0-10% Losses carried forward. Companies with perpetual unrelieved losses for three consecutive years are charged 0.3% of annual turnover. *Source: Tanzania Investment Guide 2014/15 20

21 Nick Fox / shutterstock.com FOREIGN TRADE ZONES/FREE PORTS The Government of Tanzania makes use of the World Trade Organization s (WTO) Trade-Related Investment Measures (TRIMs) to encourage development aims and investments in alignment with national priorities, and draw and regulate foreign investment. Trade development tools implemented by Tanzania include export development and promotion, export processing zones (EPZs), export facilitation, and investment code and rules. The 2002 EPZ Act created EPZs, which are open to foreign and domestic investors alike.. The Export Processing Zones Act of 2006 sanctioned the formation of special economic zones (SEZs) to foster Greenfield investments in the agro-processing industry, light industry and agriculture sector. The Government of Tanzania s Export Processing Zones Authority (EPZA) encourages EPZs to attract investments in electronics, textiles and agribusiness. EPZA has allocated 4,000 hectares for export clusters. Six zones are already established, one of which is owned by the Government of Tanzania, while the rest are owned by the private sector (85 businesses are registered under EPZA to work in two categories manufacturing and infrastructure development). Investors in EPZs are entitled to certain incentives, such as prime sites close to main roads and ports, duty-free importation of capital goods, 10-year exemption on dividend taxes and interest, exemption on local taxes and VAT exemption for utilities. EPZA took the following measures toward developing the investment climate: Making bureaucratic requirements and procedures more effective, EPZA has decreased the time needed to license and register new investors from a reported sevenday maximum in 2010 to two to three days in 2012; The creation of a one-stop shop at the Benjamin William Mkapa Special Economic Zone has several procedures from separate departments under one roof (for example, licensing applications and work permit applications); EPZA has earmarked further land, with infrastructure, for EPZ endeavours in Mkuranga and Bagamoyo. EPZA has allocated another 16 sites across Tanzania for development. Wares going to EPZA-registered companies are given special exemptions and treatment, and are handled like transit cargo. This leads to reduced clearance costs and quicker clearance. The Government of Tanzania aims to set up free trade zones at the Kigoma and Tanga ports. In foreign trade zones, foreign-owned companies and host country entities have the same investment opportunities. Multiple incentives exist for special economic zone (SEZ) investors, including: Exemption from paying duties and taxes for equipment, machinery, construction and building materials, heavy duty vehicles and any other goods of a capital nature to be utilized for developing SEZ infrastructure; Exemption from paying corporate tax for a starting period of 10 years, after which corporate tax will be levied at the rate stated in the Income Tax Act; Exemption from paying withholding tax on dividends, interest and rent for the first 10 years; Exemption from paying property tax for the initial 10 years. LAND: AVAILABILITY, TENURES, AND OWNERSHIP ACQUISITION PROCEDURES AND PROCESSES The Land Act of 1999 stipulates that all land will be public land and be vested in the president as trustee on behalf of and for all Tanzanian citizens. Land can be owned in three ways: (i) TIC derivative rights; (ii) Subleases established out of granted rights of occupancy by the private sector; (iii) Governmentgranted rights of occupancy. Foreign investors are also able to partner with Tanzanian leaseholders in order to access land. Derivative rights and rights of occupancy are granted for a maximum period of 99 years depending on the nature of investment activities and the term is renewable, but not for more than 99 years. In collaboration with the Ministry of Lands, TIC has started a process of establishing areas for investment (plots and farms). To start with, TIC has been issued with a Certificate of Title on Mkulazi measuring 63,227 hectares, which is earmarked for cultivation of sugarcane and rice. 21

22 PROCEDURES FOR ACQUIRING LAND FOR FOREIGN INVESTORS Land can be identified by the Ministry of Lands, local government authorities (LGAs), Tanzania Investment Centre (TIC) or an investor. Under the Tanzania Investment Act 1997, non-citizens occupation of land is limited to lands for investment purposes. Under the Land Act 1999, land can be occupied by a foreign investor via: Licenses from the government; Subleases from private sector; Derivative rights under the Land Act 1999, section 20(2); Purchase from other holders of granted right of occupancy; Request to the Commissioner for Lands for a grant of right of occupancy under the Land Act 1999, section 25(1)(h) and (i). Land allocated for investment purposes will be identified, gazetted and assigned to TIC, which will establish derivative rights to investors. Occurrences of grant of right of occupancy to a non-citizen are recognized under the Land Act 1999, section 19(2). Section 22(1) (ii) permits the granted right of occupancy to be able to be a subject of disposition. This means that right of occupancy can be disposed from one holder to another, as long as the land is sold to a non-citizen for investment purposes approved by TIC. In the latter case, a right of occupancy can be disposed of from one holder to another as long as the land is sold to a non-citizen for investment purposes approved by TIC. Another means by which non-citizen investors can secure land is by acquiring subleases through government licenses or from the private sector. Following are the procedures that foreign investors must follow when submitting an application for grant of right of occupancy. It is applicable to farmland and urban alike: i. Application submitted to the Commissioner for Lands, along with a photograph of the applicant(s) and a certified copy of the Certificate of Incentives issued by TIC; ii. The Commissioner for Lands rejects or approves the application and investor(s) notified; iii. Note: The procured land, either for urban land or farmland, is dependent on payment of the registration fee, survey fee, stamp duty, land rent charges and preparation fee. These fees will change with location and time. The prevailing land rent charges for a farm outside a township is TZS 5,000 (US$ 3.11) per acre per year, and TZS 10,000 (US$ 6.22) per acre per year for a farm within a township. PROJECT IMPLEMENTATION SUPPORT SYSTEMS AVAILABLE FOR AGRICULTURE SECTOR Various support programmes for the agriculture sector have been initiated by different institutions, including the government, private sector and development partners. Some of them include: i. At the district level, the Agricultural Sector Development Programme II (ASDP II), funded by development partners and implemented by the central government, is facilitating infrastructure and public irrigation schemes; ii. The US$ 25 million Danida-backed Private Agricultural Sector Support (PASS) facility offers local currency finance to new agriculture companies with competent management and a watertight business plan; iii. AGRA/NMB and AGRA/Standard Bank s US$ 25 million guarantee facility is meant to aid commercially viable and established agriculture businesses that include smallholder farmers; iv. The US$ 5 million Africa Enterprise Challenge Fund (AECF) window for Tanzanian agribusiness is made available to established agriculture businesses that are looking to expand their operations and incorporate smallholder farmers, and are able to provide matching funding; v. Traditional non-governmental organization and development partner support programmes that assist in increasing smallholder farmers ability to participate in modern supply chains, such as through institutional and certification strengthening, and extension and training services. 22

23 PROCEDURES FOR INVESTMENT New investors must follow certain steps in applying for entry, registration and business approval, and thus obtaining access to the fiscal incentives available to investment projects meeting the eligibility criteria. All applications are managed by TIC, where officers are placed from the Tanzania Revenue Authority (TRA), the Ministry of Lands and Human Settlement Development (MLHSD), Business Registration and Licensing Agency (BRELA), the Ministry of Industry, Trade and Marketing, Directorate of Trade, and immigration and labour departments, thereby making the approval and registration procedures simple and straightforward. The papers (certificates, permits and licences, etc.) required for setting up a business are: Certificate of incorporation (local) or compliance (foreign); Certificate of incentives (projects approved by TIC); Business licence; Taxpayer identification number (TIN) certificate; Income tax clearance certificate. TIC is investors first point of contact. All applications are formally submitted to the Registry Department, which requires the following fundamental documents in order to process each application: Three copies of the venture s feasibility study or business plan; Three copies of the TIC application form (issued by the centre for US$ 100); In the case of rehabilitation or expansion, a copy of audited accounts for the last three years; A brief profile of investor(s); Project implementation schedule; A copy of the business memorandum and articles of association; A certified copy of the certificate of company incorporation for local companies and certificate of compliance for foreignbased companies; Proof of adequate financial capital to carry out the venture; Proof of land ownership for the project site; Company executive board resolution to register the project with TIC; Cover letter accompanying all of the above; Upon registering with TIC, both foreign and local investors receive a certificate of incentives; The TIC business licensing desk receives investors applications, presents them on behalf of the investor and follows up on the issuing of permanent licenses and temporary business permits. shutterstock.com 23

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25 Investment Promotion Agencies and Supporting Institutions Investment promotion in Tanzania is championed by two institutions, namely the Export Processing Zones Authority (EPZA) and Tanzania Investment Centre (TIC). Supporting and implementation institutions include the National Development Corporation, Vocational Education Training Authority (VETA) and the Small Industries Development Organization (SIDO). TANZANIA INVESTMENT CENTRE (TIC) The TIC offers investors a one-stop shop to help them with a variety of services, from business registration to project profile preparation, licensing and enabling understanding of the laws that affect doing business in Tanzania. Furthermore, by issuing a certificate of incentives, the TIC helps investors to register for and benefit from a number of investment incentives. These incentives are not the same as those obtainable from the EPZA; the biggest difference is that no exemption is offered for corporate taxation or the withholding of tax on interest and dividends. In the case of investments deemed to be strategic, the National Investment Steering Committee (NISC) is able to offer further incentives to major or strategic investment projects, so there is some flexibility. The TIC is responsible for promoting investment in all parts of industrial and commercial activity, but some sectors, like petroleum, mining, explosives and chemicals, are facilitated together with the Ministry of Energy and Minerals, and exportorientated productions with the EPZA. The investment threshold for working with the TIC is US$ 100,000 for Tanzanian nationals and US$ 300,000 for foreigners. 3 STRATEGIC INVESTOR STATUS Whether the investment is in a geographically disadvantaged region or the Special Economic Zone. Due to a predictable fiscal regime, there have been an increasing number of foreign direct investments, as illustrated in figure Figure 7: FDI inflows to Tanzania *Source: UNCTAD (US$ millions) In East African Community, Tanzania ranks second in Foreign Direct Investment attraction and this attests to the fact that there is an appropriate investment climate in the country. Figure 8 shows the trend of projects registered with Tanzania Investment Centre. Besides standard investment incentives, potential investors with projects of great or specific impact to economy or society can request strategic investor status for further investment incentives from the government, as provided for in Rule 49 of the Tanzania Investment Regulations Criteria used to grant strategic investor status include: The total capital to be invested (normally above US$ 50 million); The degree to which the project creates capacity to manufacture goods for export and the earning of foreign exchange; The project s contribution to generating employment opportunities; New and innovative technology that will be brought in by the potential investors project; Figure 8: Trend of projects registered with TIC *Source: UNCTAD 3 Tanzania Investment Centre (2014). Tanzania Investment Guide, Available from 25

26 26 EXPORT PROCESSING ZONES AUTHORITY (EPZA) In 2006, the EPZA was founded as an independent government agency operating under the guidance of the Ministry of Industries and Trade. It is the primary government agency fostering investments in the Tanzanian strategic economic zones (SEZ) and it manages six industrial parks (export processing zones, EPZ) situated at strategic sites countrywide, with obtained land for further parks around Mwanza. EPZA is responsible for infrastructure development in the SEZs and EPZs, and for making business facilitation services available in this way, it serves as a one-stop shop for investors. The EPZA actively assists companies to establish themselves within the EPZ, and enables licensing, taxation issues, land allocation, and raw materials and sourcing. In some estates, it offers land on a lease basis at good rates, and it provides improved infrastructure like dedicated power lines and water reservoirs, which are considered more reliable. Businesses within the EPZ also get cheaper power, because the EPZ buys in bulk and charges it to the businesses. Only export-oriented businesses can work with the EPZA. The assessment criteria are that they have to have a yearly export turnover of more than US$ 50,000 (for foreign investors) or US$ 10,000 (for local investors), and they must export a minimum of 80% of products. Most of the textile and garment industries participating in exports are registered as individual EPZs and enjoy the same treatment as those in the industrial park. Businesses operational within an EPZ are offered these investment incentives: Corporate tax exemption for an initial 10-year period; VAT, customs duty and other tax exemption on capital goods and raw materials; Withholding tax on rent, interest and dividends exemption for the first 10 years; Exemption from taxes levied by local government for services and goods manufactured in the EPZ for the first 10 years; Admission to the export guarantee scheme. Financial constraints limit the EPZA s ability to improve infrastructure. Therefore, it promotes third parties developing infrastructure in its zones, such as industrial parks with utilities and services. Businesses making these types of investments are offered the same incentives as manufacturers operational within the zones. INDUSTRIAL UTILITIES WATER The government is the main supplier of clean water. Dar es Salaam Water and Sewerage Corporation (DAWASCO) is the state utility company that provides water in the Dar es Salaam area. Tap water s price is presently TZS 1,119 (US$ 0.70) per 1,000-litre unit. An alternative to making use of the public water service is to dig a borehole, which cost is typically negotiable between the receiver and service provider, and is usually TZS 60,000 (US$ 37) per metre depth. 4 ELECTRICITY The Government of Tanzania supplies electricity to the country through Tanzania Electric Supply Company Limited (TANESCO), which is the state-owned utility company. Many businesses, like Aggreko, Independent Power Tanzania Limited (IPTL) and Symbion Power, generate power and send it to TANESCO, which distributes it across the country via its national grid power lines. 5 Tanzania has an installed capacity of 2,290 MW where hydropower accounts for 25% and fossil fuel (gas; oil; diesel) accounts for 75%. Commissioning of two gas plants at Kinyerezi in Dar es Salaam and Mtwara this year, with a combined 540 MW, is expected to change the dynamics of power supply in the country. The cost of power in Tanzania is cheaper than in the majority of Sub-Saharan African countries. Table 10 depicts Tanzania s power cost advantage over these countries. Table 10: Comparison of kilowatt hour charges between Tanzania and selected Sub-Saharan African countries Current Power Charges Tanzania 0.12 Uganda 0.24 Kenya South Africa *Source: World Economic Outlook database 2015, IMF 4 Tanzania Investment Centre (2014). Tanzania Investment Guide, Available from 5 Ibid.

27 SMALL INDUSTRIES DEVELOPMENT ORGANIZATION (SIDO) Founded in 1973, the Small Industries Development Organization (SIDO) is a parastatal organization that operates under the Ministry of Industries and Trade. SIDO s main development aim is to contribute to the development of SMEs and the elimination of poverty by establishing and maintaining an indigenous entrepreneurial base through the promotion and support of SMEs by providing them with Business Development Services and Specific Financial Services. 6 SIDO prioritizes productive economic sectors that add to the creation of wealth, including the textile sector, particularly the garment, hand and powerloom manufacturing sectors. In this regard, SIDO provides support in these key areas: COLLEGE OF ENGINEERING AND TECHNOLOGY (COET) Founded in 2001 through the transformation and integration of the Institute of Production Innovation (IPI) and the existing Faculty of Engineering (FoE), the College of Engineering and Technology (CoET) is a semi-independent College of the University of Dar es Salaam. The college provides four-year undergraduate training, leading to Bachelor of Science degrees in engineering disciplines BSc (Eng.). It also has Doctor of Philosophy (PhD) in Engineering disciplines and postgraduate degree programmes, leading to postgraduate Diplomas or Masters of Science (MSc). CoET provides a full BSc degree course in Textiles and Clothing, with support from the University of Manchester s Department of Materials. Business development services (technical training courses, and business management and entrepreneurship training, among others); Technology development services (product and technology development, including the development and support of design skills, and the application of new technologies); Marketing and information services (development of linkages and promotion of subcontracting, gathering and dissemination of information, identification of new technologies and markets, network development with other national and international organizations, and organization of trade and exhibition fairs in Tanzania); Financial services (with the linkage of SMEs to financial institutions and a SMEs Credit Guarantee Scheme). VOCATIONAL EDUCATION AND TRAINING AUTHORITY (VETA) In 1994, the Vocational Education and Training Authority (VETA) was formed under the Vocational Training Act as an independent government agency, responsible for overall regulating, coordinating, financing, promoting and providing for vocational training and education. With the aim of supplying trained people to textile manufacturers, VETA runs courses on textile fashion design and trains lower levels of the textile mill workforce. THE TEXTILE DEVELOPMENT UNIT (TDU) The Textile Development Unit (TDU), a specialist unit in the Ministry of Industry and Trade, began its activities on 1 August It is able to provide information on and links to the textile and garment industry in the country. The unit is in constant touch with the industry and other important stakeholders, and is staffed by experienced industry specialists with international experience and knowledge. The TDU has a close working relationship with the Export Processing Zones Authority (EPZA) and the Tanzania Investment Centre (TIC). Would-be investors in the sector are referred to the TDU by the TIC, so as to get first-hand and up-to-date information about the industry. THE NATIONAL INVESTMENT STEERING COMMITTEE (NISC) In an attempt to develop the business environment and promote economic growth by means of increased investment, the Government of Tanzania established the National Investment Steering Committee chaired by the Hon. Prime Minister. Other committee members are the Attorney General, Minister for Investment and Empowerment, Minister of Finance, Minister of Lands, Minister of Agriculture, Minister of Industry and Trade, the Executive Director TIC (Secretary) and the Governor of the Bank of Tanzania. This committee s roles are to solve investors problems quickly and to formulate investment policies. 6 SIDO (2014). Corporate Strategic Plan (2014/ /2017). Available from 27

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29 Labour conditions and wage rates The law allows private sector collective bargaining, but the Tanzanian Government sets wages administratively in the public sector. The country has a vast quantity of experienced human capital and invests much in education compared to other countries in Sub-Saharan Africa. Furthermore, Tanzania has put into practise advanced immigration policies and encourages skilled people from across the globe to apply for residence in Tanzania and contribute to its economic growth. Under the EPZ Act, the government can offer work permits for technical staff and management if these skills are not on hand locally. Importing machinery is fairly expensive, which makes labour more appealing. Minimum wage in Tanzania is set by categories that encompass 12 sectors of employment. During the 2013/14 financial year, the minimum wage ranged from TSh 100,000 (US$ 58.63) a month for agriculture labourers to TSh 400,000 (US$ ) a month for labourers in the mineral sector (businesses with prospecting and mining licenses) (U.S. Department of State, 2015). More than 45 working hours a week is permissible if overtime work is required. The typical overtime pay is 1.5 times the employee s usual pay. All established companies have to register with the National Social Security Fund (NSSF) or any other fund; there are six social security funds. Foreign employees can be exempt from the NSSF scheme if they can prove that they are participating in another pension programme, but Tanzanian employees cannot be exempted, and the payable contribution is 10% of the basic wage bill. In Tanzania, the law stipulates a yearly leave of 28 calendar days. Logistics and Transport Facilities LOGISTICS The overall score of the Logistics Performance Index indicates perceptions of a country. The foundations of logistics are ease of organizing competitively priced shipments, customs clearance process efficiency, frequency with which shipments arrive at consignee within the planned time, quality of transport- and trade-related infrastructure, ability to track consignments, and quality of logistics services. The index range is between one and five, with a higher score representative of better performance. During the year 2014, Tanzania was ranked 141 with a score of 2.33, indicating there is larger room for improvements. The government is keen to improve logistics in the quest to decrease the cost of doing business in Tanzania. PORT SERVICES Tanzania is served with three sea ports, namely Tanga, Dar es Salaam and Mtwara, and three lake ports, namely Mwanza, Kyela and Kigoma. Dar es Salaam port is the second largest in East Africa and its basic capacity is 11 million tons per year. The port handles more than 90% of the total maritime ports throughput, and serves the landlocked countries of Rwanda, Zambia, Malawi, the Democratic Republic of the Congo, Uganda and Burundi. These countries link to the port by means of two railway systems (TAZARA cape gauge and TRL-1.0 metre gauge), a road network and TAZAMA pipelines to Zambia. During the years 2012 and 2013, the port handled a total of 12,531,000 tons of cargo equivalent to 114% of its capacity utilization. Out of this, 4,063,000 tons was transit cargo. Tanzania Ports Authority has embarked on several initiatives to improve efficiency at the port of Dar es Salaam, including reducing ship turnaround time from 4.8 to 3.1 days, providing service 24 hours per week, and container dwell time at present stands at 9.5 days. In order to ensure speedy clearing and forwarding of cargo, the port is completing installation of an electronic single-window system where all related service providers will use the platform. Integrated Security has been installed to ensure goods are secure. The government, in collaboration with all stakeholders, will continue to improve the services at the port in order to decrease the cost of doing business in the country. 29

30 RAILWAY SERVICES Tanzania has a railway network of 2,600 km. Tanzania Railways Limited has embarked on projects to revive the railway services and the capacity has now been enhanced to handle 24,000 tons per month; a substantial increase from the previous 12,000 tons per month. AIRPORTS Tanzania has four international airports, namely Kilimanjaro International Airport (in Kilimanjaro), Julius Nyerere International Airport (in Dar es Salaam), Mwanza International Airport (in Mwanza) and Songwe International Airport (in Mbeya). Of these airports, Dar es Salaam is the busiest. ROADS Based on the Road Act 2007, Mainland Tanzania s total classified road network is assessed to be 86,472 km. The Ministry of Works, via Tanzania National Roads Agency (TANROADS), is administering the national road network of roughly 33,891 km, encompassing 21,105 km of regional roads and 12,786 km of trunk roads. The remaining 53,460 km (roughly) network of feeder, district and urban roads is the responsibility of local government, the prime minister s office and regional administration. shutterstock.com 30

31 Investment Opportunities Market demand for Tanzanian organic cotton is much greater than current production. This, combined with land and labour availability in the country, offers potential to expand production to exploit market profitability. (I) PRODUCTION OF GOOD QUALITY YARN Due to aged spinning mills, production of good-quality yarn is a challenge in Tanzania, as many textile mills that target export markets import fabrics. Investment in modern spinning machineries will revolutionize and broaden the scope of textile manufacturing in the country, thus allowing mills to diversify the products base. (II) EXPANSION OF KNIT GARMENTS Tanzania needs to expand its knit garment exports in order to fully exploit AGOA, EU and South African markets. Investors interested in producing knit garments are welcome, because this is the area in which backward linkage is most likely to happen. (III) DEVELOPING AN ETHICAL VALUE CHAIN Being the fourth producer of organic cotton and now trading Cotton made in Africa (CmiA) lint, Tanzania is better positioned than other East African countries to develop an ethical value chain from where retailers will source their textile requirements. shutterstock.com 31

32 Useful contacts Below are the key contacts in Tanzania for the ICT sector and for investment facilitation: Tanzania Investment Centre (TIC) Telephone: /32 Website: Ministry of Industry and Trade Telephone: /97 Website: Business Registration and Licensing Agency (BRELA) Telephone: / Website: Ministry of Agriculture, Food Security and Cooperatives Telephone: Website: Tanzania Bureau of Standards (TBS) Telephone: / Website: Tanzania Ports Authority (TPA) Telephone: /9 or Website: Tanzania Revenue Authority (TRA) Telephone: /4 Website: Prime Minister s Office Magogoni Street Telephone: /58 ps@pmo.go.tz Website: Ministry of Foreign Affairs and International Cooperation Kivukoni Front Telephone: /12 nje@foreign.go.tz Website: Textile Development Unit Ministry of Industry and Trade Telephone: /97 info@tdu.or.tz Website: Export Processing Zones Authority Telephone: /9 info@epza.go.tz Website: Ministry of Energy and Minerals Telephone: /9 info@mem.go.tz Website: National Development Corporation Telephone: or /3 info@ndc.go.tz Website: Governor Bank of Tanzania (BoT) Telephone: /51 info@hq.bot-tz.org Website: Fair Competition Commission Ubungo Plaza Telephone: info@competition.or.tz Website: 32

33 Annexes ANNEX I: STATUS OF THE TEXTILE AND GARMENT INDUSTRY IN MAY 2015 Status of the textile and garment industry in May 2015 Mills CONTACT PERSON Location Product Status 1 A TO Z LTD Tejas Shah tejas@hiragro.com 2 SUNFLAG (T) LTD Ajay Shah Managing Director ajay@sunflag-tz.com Arusha Arusha Mosquito nets Other (mainly packaging) Knitting of cotton fabrics Tees and polos for export and local Yarn, fabrics and garments for local and export sales. Has organic option. Active Active 3 21 ST CENTURY LTD/ METL AFRITEX LTD MUSOMA TEXTILE (MUTEX) Sudhesh Maheshwari - CEO textiles sudesh@metl.net Morogoro, Musoma, Tanga, Dar es Salaam Yarn and woven fabrics for local and export sales Started knitting Active Polytex 4 FRIENDSHIP TEXTILES LTD (URAFIKI) Wu Bin General Managing Director wubin616@sohu.com Dar es Salaam Local fabrics for domestic use Active jointly owned by Chinese and Tanzanian Governments 5 MWANZA TEXTILES MILL LTD (MWATEX) Amin Ladhani Director aminladhani2004@yahoo.com Mwanza Local fabrics for domestic use Active Looking for joint venture partner 6 KARIBU TEXTILES MILL LTD Adil Jetha Managing Director ajetha101@hotmail.com Dar es Salaam Printing fabrics for local sales Active 7 NAMERA LTD/NIDA TEXTILES LTD Shibu Varughees Finance Manager shibu@nidatex.com Dar es Salaam *2 Producing fabrics for local and export sales Active Rasheed Khatri 8 MAZAVA GARMENTS LTD 9 TANZANIA TOOKU GARMENTS LTD nidatex.rasheed@gmail.com William Deus Human Resource Manager wdeus@windsxgroup.com Rigobert Massawe Asst G. Manager rigobert38@yahoo.com Morogoro Dar es Salaam Producing sportswear for AGOA Men s jeans, T-shirts and polo shirts for AGOA Active HQ in Hong Kong and Mauritius Active HQ in China 33

34 10 MBEYA KNITWEAR LTD Status of the textile and garment industry in May 2015 Mills CONTACT PERSON Location Product Status 11 DAHONG LTD Jing Lin 12 OPEN SANIT ENTERPRISE 13 MOSHI TEXTILES LTD (MOTEX) 14 JAMBO SPINNING LTD Elizabeth Mwakatobe Managing Director Anastasia Kihonda Public Relations Officer Arjun Joshi Managing Director Salum Khamis Salum CEO Mbeya Shinyanga Dar es Salaam Moshi Acrylic knitwear for domestic use Cotton yarn for export to China Other plans TBA Trading in security products and workwear with some sewing and also boot-making Knitting and some sewing facility Active Active HQ in China Active Inactive Arusha Yarn Inactive Looking for joint venture partner Looking for joint venture partner/ outright buyer ANNEX II: INVESTMENT FACILITATION AND SERVICE DELIVERY *Source: TIC, 2014 Investment facilitation and service delivery Services provided Delivery time frame Fees TIC application form Immediately US$ 100 Investment guide Immediately Free Provision of Investment Act Immediately Free Certificates of incentives 7 days US$ VAT registration 7 days Free Tax clearance 1 day Free Tax identification number 1 day Free Customs approval import list 14 days Free Business name search 1 day Free Business licensing 1 day Fee varies Company registration 3 days TZS TZS Residence permit class A 14 days US$ Residence permit class B 14 days US$ Special pass for classes A & B 1 day US$ 660 Work permit class A Self-employed investors (owner of the business, Directors) Work permit class B non-citizen employees who posses prescribed profession including medical and health care professionals, experts in oil and gas, teachers and University Lecturers in Science and Mathematics Work permit class C non-citizen employees who are in possession of such other profession apart from those in category B days US$ 1, days US$ days US$ 1,000 34

35 SITA project implemented by: SITA project funded by: 35

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