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High Value Opportunity - Tanzania


Oil & Gas

Tanzania is a growing market with on-going exciting discoveries, including 19 exploration blocks and US
$10-20bn investment projected for exploration and production in the coming decade. Over the past two
years, exploration activities in Tanzanias deep offshore waters have led to the discovery of 50.5 trillion
cubic feet (tcf) of natural gas. More discoveries are likely to come as drilling campaigns continue to unfold.
It is estimated that the recoverable reserves will double to 100 tcf by the year 2015.
3

Presentation title - edit in the Master slide

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Table of contents
Section 1. Background to Tanzania
Section 2. Oil & Gas overview of Tanzania
Section 3. Opportunities in Tanzania LNG Project
Section 4. Doing Business in Tanzania

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1. Background to Tanzania
1.1. Country Overview
1.2. Political Framework
1.3. Economic Overview
1.4. Performance Indicators
a. Foreign Direct Investment (FDI)
b. Corruption

c. Competitiveness
d. Risks

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1.1. Country Overview


The United Republic of Tanzania
Tanganyika and Zanzibar merged on 26 April 1964 and on 29 October of the same year, the country was
renamed United Republic of Tanzania ('Tan' comes from Tanganyika and 'Zan' from Zanzibar).

Dodoma is the official capital and seat of Tanzania's Union Parliament. Dar Es Salaam is a commercial
city, and home to government ministries and major institutions, including diplomatic missions.
Jakaya Mrisho Kikwete
President of Tanzania

Key Information1
Population
GDP in USD billions

47 Million
**

34.9

GDP Growth Rate **

7.2%

Inflation **

5.8%

Key Languages

Swahili & English

Religions

Christianity and Muslim

Currency

Tanzanian Shilling (TZS)

Ali Mohamed Shein


President of Zanzibar

Mohamed Gharib Bilal


Vice President of Tanzania

Mizengo Kayanza Pinda


Prime Minister of Tanzania

** 2014 forecast

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1.2. Political Framework


Country Political Framework:
The United Republic of Tanzania has a two Government framework; The Union and The Revolutionary
Government of Zanzibar.
Tanzania is a one party dominant state with the Chama Cha Mapinduzi (CCM) in power currently headed by
president Jakaya Mrisho Kikwete.
Opposition party in the Republic of Tanzania is Civic United Front (CUF) which was formed in 1992
The Zanzibar Government consists of members from CCM and CUF.
Zanzibar is are currently pushing for a three Government framework for Tanzania, Zanzibar and the Union.
Government:
The parliament of Tanzania consists of two parts; the President and the National Assembly.
The president and the members
of the 1National Assembly are elected concurrently by direct popular vote for
Key Information
five-year terms.
~48 Million
Population
The vice-president is elected for a five-year term at the same
time as the president and on the same ticket.
GDP
Neither
the
president
nor
the
vice-president
may
be
a
member
of the National Assembly.
(USD billions)
28.25
The president appoints a prime minister to serve as the government's leader in the assembly. The president
GDP
Growth
Rate
2013)assembly members.
6.8%
selects
his or
her(estimate
cabinet from
Inflation (estimate 2013)

9.8%

Administration:
Languages
Swahili 3&on
English
Key
Tanzania
is divided into 26 regions; 21 on the mainland,
Zanzibar, and 2 on Pemba.
Religions
Ninety-nine districts have been created to further
increase
local
authority. These districts are also now referred
Christianity and Muslim
to as local government authorities.
Currently there are 114 councils operating in 99 districts, 22 are urban and 92 are rural. The 22 urban units are
classified further as city (Dar Es Salaam and Mwanza), municipal (Arusha, Dodoma, Iringa, Kilimanjaro, Mbeya,
Morogoro, Shinyanga, Tabora, and Tanga), and town councils.
Tanzania General Elections: The fifth general elections are scheduled to take place in October 2015. Voters will
elect the President, Members of Parliament and the local government. The incumbent president, Jakaya Kikwete, is
ineligible to be elected to a third term due to term limits.

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1.3. Economic Overview


Economic Overview: Year 2000 - 2010
Over the past decade, Tanzanias economy has become significantly more open. The real GDP over the past
decade shows a steady rise (Figure 1). In other terms the trade-to-GDP ratio has increased from 13.5% in 2000
to more than 30% in 2011, the highest rate among the East African Community countries, with the value of
Tanzanias merchandise exports multiplying by a factor of five over this period. (Figure 2). The largest
contributors to the export basket continue to be primary commodities, particularly gold, coffee, tea, cashew nuts
and cotton. At the same time, the volume of manufactured exports has surged in recent years, with the lions
share of these exports going to markets within the region.
Key Information1
Population

~48 Million

GDP (USD billions)

28.25

GDP Growth Rate (estimate 2013)

6.8%

Inflation (estimate 2013)

9.8%

Key Languages
Religions

Swahili & English


Christianity and Muslim

Fig 1 - Tanzania GDP: 2000 2010

Fig 2 - Tanzania Exports: 1977 2010

Source: Enterprise Map of Tanzania by John Sutton & Donath Olomi & World Bank

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1.3. Economic Overview


Economic Overview: Year 2010 to date
In 2012 and into 2013, the Tanzanian economy expanded at an annualized rate of approximately 7%. The main
drivers of Tanzanias rapid economic growth continue to be a small number of fast growing, capital intensive
sectors, particularly the communications, financial services, construction, manufacturing and retail trade
sectors.
The inflation rate continued to decline in 2013, reaching a rate of 6.3% by October 2013.The Tanzanian
Government has implemented a relatively tight monetary policy to reduce monetary expansion and has
increased guiding interest rates. While this helped to reduce inflation, it resulted nevertheless in increases to
the cost of credit, imposing increased burdens on borrowers and thereby negatively impacting the expansion of
1
the real economy. However,Key
theInformation
magnitude of this negative impact may not be dramatic.
Population

~48 Million

The overall fiscal deficit for 2012/13 is estimated to reach a value equivalent to 6.8% of GDP. This represents a
GDP (USD billions)
28.25
significant
increase compared to 2011/12, when the deficit stood
at a value equivalent to only 5% of GDP.
GDP Growth Rate (estimate 2013)

6.8%

An accelerated drive for the development of social and physical infrastructure is underway on the recently
Inflation (estimate 2013)
9.8%
launched Big Results Now initiative (BRN).
Key Languages

Swahili & English

The most significant transformative factor on the economy is the large natural gas reserves that were recently
Religions
Christianity and Muslim
discovered. If managed well, these gas reserves have the potential to transform Tanzanias economic future.
No major changes are expected in the countrys growth trajectory over the next few years.

Source: World Bank

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1.4. Performance Indicators Foreign Direct Investment (FDI)


FDI:
Generally, the Government of Tanzania (GoT) has a favourable attitude towards Foreign Direct Investment
(FDI) and has made significant efforts to encourage foreign investment. Inflows of FDI continued to grow in
2013, according to the United Nations Conference on Trade and Development (UNCTAD). Tanzania is ranked
2nd in East Africa after Uganda for all FDI. In the more recent years the FDIs in the Oil & Gas sector are
steadily increasing. BG reports indicate that BG Group contributions to Tanzania from 2010 have been over
USD 1.1 billion for exploration & appraisal activities.
Percentage of
flow (1999 -2008)

Percentage of
Stock

UK

22.6

13.42

Canada

15.8

17.28

Mauritius

15.5

3.4

South Africa

14.0

22.27

United Arab Emirates

5.3

3.57

Kuwait

5.3

3.53

Norway

4.2

2.91

Country

Million USD

2000
1500
1000
500
0

2005

2007

2009

2011

Fig 3 FDI into Tanzania

2013

Fig 4 FDI Stocks & Flow by Country of Origin 2

There are 11 countries that account for over three-quarters of the total FDI stock. Three of these 11 countries
play a dominant role: South Africa, Canada and the UK together account for over half of the total FDI stock.
1

UNCTAD World Investment Report -2014


Map of Tanzania by John Sutton & Donath Olomi

2 Enterprise

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1.4. Performance Indicators - Corruption


Corruption:
Tanzanian businesses identify corruption as problematic factor for doing business 1 . Tanzania ranks 111th
out of 177 countries in Transparency Internationals Corruption Perceptions Index 2013 (where 1st is least
corrupt).
Other African Country

Fig 5 - Corruption Perception


Index 2013

Rank 2013

Change

Ghana

63/177

-1

Mozambique

91/177

+ 32

Gabon

106/177

-4

Tanzania

111/177

-9

Kenya

136/177

+3

Uganda

140/177

- 10

Nigeria

144/177

-5

Angola

153/177

+4

Prevention and Combating of Corruption Bureau (PCCB), is the Tanzania law enforcement institution
established and mandated by the Prevention and Combating of Corruption Act No. 11 of 2007 to prevent
corruption, educate the society on the effects of this problem, and enforce the law against corruption. The
mandate and operations of PCCB are limited to Tanzania Mainland. In the endeavor to combat corruption the
Bureau adopts the three-prong approach, namely by prevention, public awareness, investigation and
prosecution of offenders.
1 World

11

Economic Forum, Global Competitiveness Report 2013-2014


Source: Transparency International The 2013 Corruption Perceptions Index

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1.4. Performance Indicators - Corruption


Corruption: British High Commission in Tanzania (DFID6 and FCO7) is supporting Tanzania in
tackling corruption through:
Maintaining anti-corruption is a top priority in dialogue between international partners and the Government of
Tanzania. The FCO will provide political support through active engagement at all levels of the Tanzanian
Government to strengthen enforcement of legal frameworks and improve effectiveness of institutions to
combat corruption.
Influencing the business community on integrity and anti-bribery standards. DFID 1 and the FCO 2 will work
to encourage businesses to uphold high standards on anti-corruption, in line with the Bribery Act 2010.
Intensifying work to address international aspects of corruption including money laundering. DFID is already
working to strengthen the ability of the Government of Tanzanias Financial Intelligence Unit to monitor
suspicious financial transactions, with a view to helping the country to remove itself from the Financial Action
Task Force (FATF) list of jurisdictions with strategic anti-money laundering deficiencies.
Supporting programmes to strengthen domestic institutions which address corruption, such as the National
Audit Office, the Prevention and Combating of Corruption Bureau, the Directorate of Public Prosecutions,
and Parliament. DFIDs programmes, backed up by FCO political support, seek to enhance the ability of
these institutions to detect and sanction corruption, and to improve the way they work together.
Continuing to drive improvements in Public Financial Management, such as simplification of financial
management information systems, strengthening of payroll controls, procurement compliance audits, and
strengthened action by parliamentary accounts committees.
Department for International Development in Tanzania
FCO Foreign and Commonwealth Office in Tanzania

1 DFID
2

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1.4. Performance Indicators - Competitiveness


Competitiveness:
Although government regulation is not seen as overly burdensome, corruption and transparency in
policymaking are issues. Infrastructure in Tanzania is underdeveloped, with poor roads and ports and an
unreliable electricity supply. Although primary education enrollment is commendably high, providing universal
access, enrollment rates at the secondary and university levels are among the lowest in the world.
TANZANIA
2013 -2014
-5

Rank
125/148

Problematic Factors for Doing Business1

% of Responses

Access to Finance

24

Corruption

17

Inadequate supply of Infrastructure

12

Inefficient government bureaucracy

10

Inflation

Tax rates

Inadequate educated workforce

Fig 6 WEF Global Competitiveness Index

The adoption of new technologies is high in Tanzania, with high uptake of ICTs 2 such as the Internet and
mobile telephony. The basic health of its workforce is also a concern; the country is ranked 125th in this area,
with poor health indicators and high levels of communicable diseases.
1
2

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Source WEF Global Competitiveness Index 2013 -2014


ICTs Information and communication technologies

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1.4. Performance Indicators - Risk


Risk:
Tanzania has a stable economy with a relatively low political risk.

TANZANIA
Trend

Rank
46/179

LOW

Fig 7 WEF Global Competitiveness Index

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MEDIUM

HIGH

Fig 8 Risks at Glance

Source Maplecroft Risk Scorecard 2014

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2. Oil & Gas Overview of Tanzania


2.1. Timeline of Key Activities
2.2. Current Producing Assets in Tanzania
2.3. Current Projects in Tanzania
2.4. Major Players in Tanzania Offshore
2.5. Major Discoveries
2.6. Opportunities in Tanzania
2.7. Regulatory Structure

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2.1. Timeline of key activities


1952 -1962: BP and Shell were awarded
concessions along the coast, including the
large islands of Mafia, Zanzibar and
Pemba. Although 4 wells were drilled they
did not encounter significant commercial
hydrocarbon, however hey confirmed the
presence of hydrocarbons.

1969 : Tanzania Petroleum


Development Corporation (TPDC) was
established and the first Production
Sharing Agreement (PSA) was signed
with AGIP on former BP/Shell
concessions.

1980: The Petroleum (Exploration and


Production) Act of 1980 introduced.

1974: AGIP discovers


Songa Songa gas fields.

1950

1960

1970

1990

2000

2010

Set technical agreements for


the development of the Songo
Songo gas field.
Tanzania venturing into deepsea exploration.

1980

2000 : 1st Tanzania Deepwater licensing round


6 blocks on offer in the Mafia Basin
PetroBras awarded Block 5 (signed 2004)

2010: ExxonMobil purchased a 35% stake from Statoil in its


deepwater Block 2 offshore Tanzania. Statoil previously
owned the entirety of the block. BG farmed in to Blocks 1, 3
and 4. BG acquired 60% interests in the blocks from Ophir
Energy.

2002 : 2nd Tanzania Deepwater licensing round


7 blocks on offer
Shell awarded Blocks 9,10,11 & 12 but no PSA
signed till date

2011: BG assumed operatorship of Blocks 1, 3 and 4 after


obtaining approval from the government.

2004: 3rd Tanzania Deepwater licensing round


7 blocks on offer
Ophir awarded Block 1 & Statoil awarded Block 2
2004: 1st commercial production from Songa-Songa
2006 : Ophir awarded Block 3 & 4
2007: Statoil awarded Block 2

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1981: Agip discovers Mnazi Bay gas


field.

2011 & 2012: Many gas discoveries have been made in


Blocks 1, 2, 3 & 4 supporting the case for developing an
onshore LNG plant.
2012: Statoil began talks with the Tanzanian government to
discuss the development of an LNG export plant. The
government requested that Statoil and BG, who has also
proposed building an LNG export plant in Tanzania, consider
combining their proposals to build a single LNG plant.
2013: 4th Tanzania Deepwater licensing round
7 blocks on offer & Lake Tanganyika North

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2.2. Current Producing Assets in Tanzania


Songo Songo Gas fields
4 onshore & 3 offshore natural gas wells, of which 3 onshore and 1 offshore
currently operational
Gas from the wells is processed by two 35Mmscf/d processing units (dehydration
and refrigeration) since May 2011, the plant has been temporarily re-rated to
deliver up to ~100 MMscfd, current typical daily delivery is 90-95 MMscfd
Processed gas transported through a 225 km pipeline to Dar Es Salaam
The first tranche of gas is used at Songas Ubungo power plant, the largest gasfired power station in East Africa (with a smaller portion used at the Tanzania
Portland Cement Company )
Songas Ubungo power plant comprises 2 Siemens industrial turbine (~20MW
each) and 4GE aero-derivative turbines (~35MW each) which together generate
180 megawatts (MW) of electricity (approximately 25% of Tanzanias electricity
needs) and is supplied to the national electricity grid and distributed to end users
by TANESCO
Additional gas from Songo Songo Island (SSI) is used by Tanesco and Tanescocontracted generators, so that overall the gas from SSI powers ~50% of
Tanzanias usable power capacity

PanAfrican Energy Tanzania & TPDC also supply gas from SSI for industrial and
commercial use to approximately 35-40 industrial and commercial consumers
17Source: Songas, offshore-technology.com, PanAfrican Energy

Fig 9 Songo Songa Gas Field

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2.3. Current Projects in Tanzania


National Natural Gas Infrastructure Project (NNGIP)
512 km long and 36 inch pipeline linking the Mnazi Bay field to Dar es
Salaam with a 24 inch spur line to Songo Songo
The pipeline will have a capacity of 784 MMcf/d of gas, to be used for
the production of 3,900 MW of electricity.
This includes two new processing plants; one at Mnazi Bay and other at
Songo Songo Island.
PanAfrican Energy is negotiating with the government the terms on
which it will double gas production capacity from 100 million to 200
million cubic feet per day in order to provide enough gas for the NNGIP.
It is estimated that a further USD 150 million is required in order to drill
new wells, service some of existing ones, and install additional
infrastructure.
Pipeline construction has commenced and approximately 120 km of
pipeline has now been fabricated and laid by six welding teams working
onshore. A seventh welding team and a pipe barge have been mobilized
to lay the offshore spur from Songo Songo Island to Somanga Funga.
Skid mounted modular plant and processing equipment is being
fabricated in several international locations and initial site preparation
has commenced on Songo Songo Island for the two 70 million cubic feet
per day (MMcfd) gas processing plant trains.
Fig 10 Tanzania Gas Pipeline Project
Source: Pipelines International, CPTDC, PanAfrican Energy,

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2.4. Major Players in Tanzania Offshore


Shell Blocks (9-12)
Under Application
(Near Zanzibar Island)
Petrobras Blocks (6 & 8)
PSA Exploration License
Block-8: Petrobras-50% &
Shell-50%
Block-6: Petrobras-38%,
Statoil-12% & Shell-50%
BG Blocks (1, 3 & 4)
PSA Exploration License
(BG-60%, Ophir-20% &
Pavilion-20%)

Statoil Block (2)


PSA Exploration License
(Statoil-65% & ExxonMobil35%)

Source: TPDC, Ophir, BG, Statoil, Petrobras

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Tanzania Offshore Activity Map (April 2014)


Source: Tanzania Petroleum Development Corporation

Source: TPDC

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2.5. Major Discoveries


Name

Block 1, 3 & 4

Partners

BG: 60%(Operator)
Ophir :20%
Pavilion Energy: 20%

Status

Discoveries

Reserves

Block 1: Jodari,
Jodari N, Chaza,
Mzia & Mkizi
Discovery

Block 2: Papa

~ 15 -17 TCF

Block 4: Chewa,
Pweza & Ngisi
Lavani, Zafarani,
Tangawizi, Piri&
Mronge

Block 2

Statoil: 65% (Operator)


ExxonMobil: 35%

Discovery

Block 6

Petrobras: 38% (Operator)


Statoil: 12%
Shell: 50%

Exploration

Not Available

Not Available

Block 7

Ophir: 80% (Operator)


Mubadala Petroleum: 20%

Exploration
1st Well drilled (Mlinzi
Mbali-1)

None

None

Block 8

Petrobras: 50% (Operator)


Shell: 50%

Exploration

Not Available

Not Available

~ 17 - 20 TCF

Source: HIS-PFC Energy, Ophir, BG, Statoil, Deloitte

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2.6. Opportunities in Tanzania

Industrial Sector
Songo Songo Gas fields
already supply gas to 37
industry users)

Compressed Natural
Gas (CNG)

Fertilizer
Natural Gas used as
feedstock for ammonia
production

(PanAfrican invested TZS


7.4 billion to construct a
pilot CNG facilities)

Opportunities

Power Generation

(~50.5 TCF Gas


Discoveries in TZ)

LNG

(Major offshore discoveries

(Songo Songo Gas fields


already supplying gas for
power generation)

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to enable LNG exports)


DOMESTIC
MARKET

EXPORT
MARKET

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Tanzania LNG Opportunity:

By 2025 global LNG demand will increase to 400 mtpa compared to the current supply of 270 mtpa
Demand located in Pacific Basin (east of Suez) Japan, China, South Korea & India
Tanzania has enough gas to supply both Domestic Market and LNG Exports
Tanzania is well positioned geographically to supply LNG to the demand centers east of Suez
Typically around 10 TCF of gas is sufficient to set up a 2 x 5 MPTA LNG facilities; so enough gas is
available in Tanzania to set up a 4 x 5 MPTA LNG facility in Tanzania

Fig 12 Global LNG Supply Demand Profile

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Fig 11 TZ Domestic Gas Requirements

Source: BG Copyright: BG 2nd Tanzania Oil & Gas Conference October 2013
Opportunities and Challenges for the Development of a Local Gas Market in Tanzania
, EY Copyright: EY - Global LNG Will new demand and new supply mean new pricing?

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2.7. Regulatory Structure Key Legislation

The key legislation regulating the Tanzanian upstream oil & gas sector
is the Petroleum (Exploration and Production) Act 1980, which vests
title to all petroleum within Tanzania and its territorial waters to the
United Republic of Tanzania.

Government of Tanzania (GoT)

Under the Petroleum Act 1980, the oil & gas industry in Tanzania is
regulated by the Ministry for Energy and Minerals (MEM), which sets
industry-specific policies, strategies and laws.

MEM implements its petroleum exploration and development policies


through Tanzanian Petroleum Development Corporation (TPDC).

NOC1 - TPDC

The National Natural Gas Policy of Tanzania 2013 to provide


guidance for utilization of natural gas resources domestically before
exported (Domestic Supply Obligations)

IOCs2 via PSA

Ministry for Energy & Minerals


(MEM)

Local Content Policy of Tanzania for the Oil & Gas Industry 2014 (not a
legislation yet) ambitious, and addresses five key focus areas
a) Capacity Building and technology transfer

Exploration License

b) Participation of Tanzanians and Tanzanian owned entities


c) Procurement and usage of locally produced goods and services
d) Fabrication and manufacturing in-country

Development License after


commercial discovery

e) Socio-economic responsibilities
1

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NOC National Oil Company


IOC International Oil Companies

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2.7. Regulatory Structure Taxation


The current legislation governing income taxation in Tanzania is the Income Tax Act, Cap 332 (ITA). Currently Tanzania does
not have a specific tax regime for oil and gas rather it uses existing tax laws to tax the oil and gas industry. The Income Tax,
VAT, Excise Duties and Customs are administered by the Tanzania Revenue Authority (TRA). The tax rates and commentary
below are applicable at the time of publishing this report, but are subject to change in the future.
Summary of Taxes (source: Deloitte)

Tax Rate (%)

Corporate Income Tax - applicable for resident companies & foreign company
branch

30

WHT on dividends applicable for resident companies

10

Branch Profit Tax applicable to branches of International Companies


(repatriated income on a deemed basis)

10

WHT for non-residents taxable only on income with a source in TZ


Payment for goods are not subject to WHT
Long standing dispute over whether payment for services provided outside TZ to
TZ residents should be subject to WHT
Employment Tax consists of 3 elements; personal income tax, skills &
development levy and social security payments
Resident employees taxed on their worldwide income, while non-residents (less
than 2 years during their whole life in TZ) are taxed on TZ income only
Employer can deduct 10% from employee towards the social security payments

up to15

Residents on escalation scale

30

Non-residents at flat rate

15

Skills & Development - paid by employer


Social Security - paid by employer
Employee Compensation Fund Levy- paid by
employer

VAT applied to all goods & services supplied within TZ


Exemption for goods & services used in oil & gas Exploration phase
Excess input VAT can be claimed back every 6 months

25

5
20
1

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3. Upcoming Opportunities in Oil & Gas


3.1. Tanzania LNG Project (TLNG)
a. Overview
b. Structure & Participants
c. Value Chain
d. Project Development Plan
e. Project Profile
f. Project Schedule
3.2. Supply Chain Opportunities
a. Offshore - Block 1 & 2

b. Onshore - LNG Plant

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3.1 Tanzania LNG (TLNG) - Overview


The discovery of ~32-37 TCF of recoverable gas in Blocks 1, 3, 4 (BG
Operated) & Blocks 2 (Statoil Operated) has prompted proposals for a LNG
Project
The project is likely to be a joint development of an Onshore LNG Plant at Lindi
and two independent offshore gas filed development projects in Block 1 &
Block 2
It is expected that the LNG plant will be a shared infrastructure model (like the
Nigerian LNG project), however there is no clarity yet on the ownership elements

It is expected that initially the LNG plant will consist of 2 trains with the options to
expand to 4 trains at a later stage
Lindi has been identified as the site for the LNG plant but the exact site details have
not been announced
It is expected that TPDC will also have a stake in the LNG plant, however no further
details are available at this stage
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3.1 TLNG - Structure & Participations


OFFSHORE FACILITIES
Source of Gas

Gas Supply Agreement

ONSHORE FACILITIES
LNG Plant

BLOCK 1
BG: 60%
Ophir :20%
Pavilion Energy: 20%

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Statoil:32%
JV Supply
Agreements
to be Finalized

BG: 30%
ExxonMobil: 18%
Ophir Energy: 10%

BLOCK 2:

Pavilion Energy: 10%

Statoil: 65%
ExxonMobil: 35%

TPDC: TBC

LNG Plant Ownership Structure is based on PFC Energy assumptions and is calculated from the equity partnership for the
upstream licenses, though the final ownership structure will likely change (Source: PFC Energy). It is also likely that TPDC will also
have a stake in the LNG plant.

Ophir has expressed an intention to further farm down its stakes in Blocks 1, 3, and 4 prior to an LNG development, but since no
specific divestment plans have been announced, it is represented in the current partner structure. (Source: PFC Energy)

Heads of Agreement has been signed by Block 1 & Block 2 partners in April 2014 and BG will lead the development phase of the
LNG project. BG and its partners have set up an integrated project team at their Dar Es Salaam offices in July 2014. (Source:
ExxonMobil)

The upstream facilities will be developed independently by BG & Statoil in Block 1 & Block 2 respectively, however no agreements
have been reached on the feedstock commitments. It is understood that GoT has set a minimum target to each of the PSA holders
to supply 10% of the total gas produced towards Domestic Market requirements. (Source: ExxonMobil)

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3.1 TLNG - Value Chain


OFFSHORE FACILITIES

Gas Production

ONSHORE FACILITIES

Gas Reception & Treatment

Gas Liquefaction

Gas transport Pipeline


For Domestic Market
Usage

Primary
gas/liquid
separation

LNG storage

LNG TRAIN 1

Feed Gas

Acid Gas
Removal

Dehydration
& Mercury
Removal

Hydrocarbon
Separation &
Liquefaction

LNG TRAIN 2

(Subsea lines)

Condensate
Stabilization

Source:
Block 1 & Block 2
Condensate
storage

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Fractionation

LNG Loading
Facility for Export

Condensates
C5+

Typical CAPEX Investment c. 35-45%

Typical CAPEX Investment c. 55-65%

Tanzania LNG Project Estimate


Offshore Facilities CAPEX: $ 7 9 Billion

Tanzania LNG Project Estimate


LNG Facilities CAPEX: $ 11 -13 Billion

LNG Carrier

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CONTENTS

3.1 TLNG Indicative Development Plan


Block 2

Block 4

Block 1
Block 3

Lindi Bay

Block 2

Offshore Development

LNG Plant at Lindi

Block 1

TANZANIA

Lindi

Mtwara

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Mtwara Port Offshore Supply Base

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CONTENTS

3.1 TLNG Project Profile


Offshore
Development Blocks:

Block 1 (BG Operated) + Block 2 (Statoil Operated). Two totally


independent projects will be executed by BG & Statoil respectively

Number of Wells:

Between 24 48 wells in total across both Blocks

Water Depths:

1800 2000 meters

Drilling & Completions:

Development wells through 12 inch big-bore

Offshore Facilities:

Subsea separation and boosting systems with Subsea Well stream


Compression systems (WSC)

Onshore LNG Plant

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Location:

Lindi

Development Concept:

Two x 5.0 mmtpa onshore trains

Output Capacity:

10 mmtpa

Feedstock Gas:

Block 1 (BG Operated) and Block 2 (Statoil Operated)

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CONTENTS

3.1 TLNG Indicative Project Schedule


Activity

2014

2015

2016

Commercial

Host Government
Agreements

Subsurface

TZ General
Elections
October 2015**

(Block 1 & 2)

Offshore
(Block 1 & 2)

LNG Site

2017

2018

2020

2021

2022

2023

2024

Development Wells

Pre-FEED
(1-2 Years)

FEED
(1-2 Years)

Execute - EPC
(4-5 Years)

Pre-FEED
(1-2 Years)

FEED
(1-2 Years)

Execute - EPC
(4-5 Years)

Site
Access
Site MoU
Signed
April 2014

LNG Train 1
Pre-FEED
Contract Award

FEED
Contract Award

EPC
Contract Award

LNG Train
2, 3 etc

Critical
Milestones

2019

1st LNG Cargo


Execute - EPC
(4-5 Years)

Concept Select

Final Investment
Decision (FID)

** 32
The general elections scheduled for October 2015 could potentially delay the project due to a) lengthy process of negotiating the Host Government Agreements, b) Land Acquisition
(for LNG plant) and Resettlement requirements

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CONTENTS

3.2 Supply Chain Opportunities Offshore

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Rigs
Single rig drilling champions for
development wells in Blocks 1 & 2
Development drilling anticipated
between Q4 2019 & Q3 2021

Engineering & Design


Basic Engineering Design
Front End Engineering Design
(FEED)
Detailed Engineering

Casings & Piping


Conductor Casing
Surface Casing
Intermediate Casings
Production Casings

Manifolds
Cluster manifolds, template
manifolds, pipeline end manifolds
(PLEMs), subsea distribution units
(SDUs)

Well Completions Equipment


Sub-surface Safety Valves (SSSV)
DH gauges, Packers, etc

Jumpers & tie-in spools


Termination heads, breakout
connectors, etc

Wellhead System Equipment


Wellheads (low/high pressure)
Rigid Lock Seal Assy (RLSA)
Casing Hangers & Seal assembly
Spacer Sleeves

Umbilicals
Infield & extension

Xmas tree Equipment


Production tree
Tree caps
Subsea tree modules
Tubing Hangers

Valves & Fittings


Isolation, control, anti-surge valves,
flanges & pipe fittings

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CONTENTS

3.2 Supply Chain Opportunities - Offshore

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EPC Contracts
The engineering, procurement,
installation and commissioning of
subsea umbilicals, flowlines and
structures.

Pre-commissioning and
Commissioning Services

Flexible Pipe
Flexible pipes

Subsea Separation Modules

Clad Pipes& Fittings


Mechanical cladding, Pipe weld
cladding, cladding of fittings &
flanges

Subsea Compression Modules

3rd Party Inspection & Expediting


Manufacturing & testing inspection,
field expediting

3rd Party Project Review Services


Project evaluation & project system
benchmarking

Offshore Equipment Rentals


Winches, Marine Cranes, Pumps,
Rigging equipment, umbilical reels,
hydraulic power packs, power tools,
mobile workshop & deck equipment

Offshore Vessels
Construction Support vessels (CSV),
Barges, Platform Supply Vessels
(PSV), Anchor Handling Tug Supply
(AHTS)

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CONTENTS

3.2 Supply Chain Opportunities - Offshore


Life-of-Field
The inspection, maintenance, repair
and integrity management of subsea
infrastructure.
Logistics & Freight Forwarding

Special Forgings
Mechanical joints, clamps, hubs,
thermowell, blinds & rings

Training
HSSE, Technical & vocational

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CONTENTS

3.2 Supply Chain Opportunities LNG Plant

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LNG Process Train 1


Pressure vessels, heat exchangers,
pumps, refrigeration compressors,
air coolers, cold boxes, pumps and
cryogenic piping products

Boil Off Gas (BOG) compressor &


flare facilities
BOG compressors & flare stack

LNG Process Train 2


Pressure vessels, heat exchangers,
pumps, refrigeration compressors,
air coolers, cold boxes, pumps and
cryogenic piping products

Inlet gas facilities & solvent


storage
Filtration skid, solvent storage tanks
& pipe track in unit

Power Generation, Distribution &


Fuel Gas Facilities
Emergency diesel generator, fuel
gas system & power plan substation

LNG Storage tanks


LNG storage valves structure &
storage systems

Effluent Collection and Firewater


Facilities
Fire water system, service water
system, drainage & effluent systems

Refrigerant Storage & Water


System Facilities

Instrument air, Inert Gas and


Cooling Water Facilities
Air separation, cooling water
systems, etc

Interconnection Pipe Rack

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CONTENTS

3.2 Supply Chain Opportunities LNG Plant

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LNG Supporting Facilities


Administrative building, maintenance
facility, ancillary buildings

3rd Party Project Review Services


Project evaluation & project system
benchmarking

Temporary Facilities & Services


Construction camp, catering,
communications, temporary power
equipment, scaffolding

Pre-commissioning and
Commissioning Services

LNG Loading Corridor


Loading line/rundown header drain
pump etc

Site Civil Works


Concrete supply and placing,
Formwork supply and install, Site
preparation (Clearing, Grubbing and
Rough Grading)

LNG Jetty & Mooring Facilities


Berths, vapour loading arms, costal
protection, etc

Modules Setting & Heavy Lifts

Engineering & Design


Basic Engineering Design
Front End Engineering Design
(FEED)
Detailed Engineering

Logistics
Logistics, freight forwarding

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CONTENTS

3.2 Supply Chain Opportunities LNG Plant

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Piping & Valves


Control valves, pipes

Maintenance, Repair & Operations


Maintenance contractors, Spares &
Consumables

Electrical & Instrumentation


Electrical and instrument cable,
control systems (distributed control
systems, safety systems)

Professional & Administrative


Services
Legal, Accounting, Cleaning, office
administration, facilities
management, etc

Bulk Procurement
Structural steel, bolts, fuel, PPE,
tools, construction equipment , etc

IT & Communication
Computer, telecom & conference
systems

Training
HSSE, Technical & vocational

Catering Services

Waste Management Services


Sanitation & Sewage, NonHazardous & Hazardous waste,
Pollution control activities

Security
LNG Plant, Camps

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CONTENTS

4. Doing Business in Tanzania


4.1. Barriers/Issues & Recommendations
a. Overview
b. Government of Tanzania (GoT) initiatives
c. Recommendations
4.2. Market entry strategies
4.3. Setting up Companies
4.4. Tanzania Investment Centre

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CONTENTS

4.1. Barriers/Issues - Overview


Barriers & Issues
Legislative &
Regulatory

Capability &
Capacity

Financial

Others

Legal system and


Judiciary

Limited Supporting
Industries

Access to Finance

Poor Infrastructure

Setting up
Companies

Skilled Labor &


Technical
Manpower

High Interest Rates

Corruption

Access to Land

Local Content

Value Added Tax


(VAT)

Customs &
Shipment R

Labour &
Employment

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CONTENTS

4.1 Barriers/Issues - GoT initiatives


Long-Term Perspective Plan (LTPP)
a vehicle for implementing TDV 2025

3 x Five Year Development Plans (FYDP)


Tanzania Development Vision (TDV) 2025
A Long-term Development Philosophy
introduced in the year 2000

1st (2011-15)

2nd (2016-20)

3rd (2021-25)

Unleashing Growth
Potential

Nurturing Industrial
Economy

Export-led Growth

- Objectives Social & Economic progress


Political Development
Institutional Development
Technological Development
Environmental Sustainability

Big Results Now (BRN)


a vehicle for prioritizing

Initiative of the government aimed at establishing a strong and effective system to


oversee, monitor and evaluate the implementation of its development plans
(particularly the 1st FYDP)

6 priority areas have been identified in collaboration with the private sector to improve the business environment
1. Realigning
Regulations &
Institutions

2. Access to
Land & Security
of Tenure

3. Taxation,
Multiplicity of
Levies & Fees

4. Curbing
Corruption

5. Labor Law &


Skill set

6. Contract
Enforcement,
Law & Order

132 legislative amendments targeted in the next 12 months to simplify and speed up administrative processes

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4.1. Legislative & Regulatory Legal System and Judiciary


Issue/Barrier
Legal system and
Judiciary

Background
Tanzania is part of the Commonwealth; its legal
system is based on the English Common Law
system
The existing constitution includes the principles of
the Rule of Law, separation of powers and a
pluralistic political system
The court system is hierarchy with hierarchical
Primary Courts as lowest courts in the land followed
by Subordinate Courts (Magistrates, District and
Resident Magistrates), High Courts and the Court of
Appeal as the highest
o All appeals from Subordinate Courts go to the High Court
o The High Court of Tanzania has three main divisions; the
Commercial, Labour and Land divisions of the High Court,
which were established to provide for specialization and
ideally more streamlined case management

Recommendations
The judiciary is often criticized for its lack
of speed and efficiency. However in recent
years the Commercial Division of the High
Court of Tanzania has been established
for the sole purpose of addressing
disputes arising from commercial
transactions
Tanzania has in place the Arbitration Act,
Cap 15 R.E 2002 (Arbitration Act) and is
also a contracting state of the Convention
on the Recognition and Enforcement of
Foreign Arbitral Awards (New York
Convention)

Parties may elect to submit to foreign


arbitration and arbitration awards are
enforceable in line with the New York
Convention and the arbitration act
In line with common law principles, the
parties are free to choose the applicable
law, including foreign law and English law
is an obvious choice in Tanzania

Source: DLA Piper & IMMMA Advocates

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Issue/Barrier
Legal system and
Judiciary

Background
Although the Court of Appeal of United Republic of
Tanzania has jurisdiction in Zanzibar and mainland
Tanzania, Zanzibar has its own distinct and
separate legal system, including commercial laws
and regulations
There are currently around 4100 advocates
registered with the law society of Tanzania
compared to 166,423 registered solicitors in
England and Wales

CONTENTS

Recommendations
The Arbitration Act allows the Tanzanian
courts to stay proceedings if (including
foreign) arbitration was agreed but they
have discretion to assume jurisdiction if
they believe arbitration is an unreasonable
venue for the matter

Source: DLA Piper & IMMMA Advocates

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4.1. Legislative & Regulatory Setting up Companies


Issue/Barrier
Setting up
Companies

Background

Recommendations

Generally there are no restrictions for nonTanzanian citizens to incorporate a company and/or
own shares and interest in a company in Tanzania

Currently there are (compared to other


countries in Sub-Saharan Africa) few
sectors where foreigners cannot freely
open businesses. However, the increased
interest in the Oil & Gas sector has
triggered a political and social debate
about local content provisions and
restrictions

Foreign companies or non-Tanzanian individuals


wishing to establish a business presence in
Tanzania can establish an onshore entity as a
branch office, as a private limited company or as a
public limited company (See section 4.3 for more
information on different types of companies)

It is not unlikely that as the sector


develops, the legislator will introduce more
local content requirements, which may
include mandatory shareholdings and
ownership stakes in oil & gas industry
related businesses
In addition, it is likely that tenders and
other procurement approaches may have
to favour Tanzanian businesses with an
increased local content

Source: DLA Piper & IMMMA Advocates, ASCO

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Issue/Barrier
Setting up
Companies

Background
In order to have a limited liability company
incorporated under the Companies Act, the
prospective shareholders will first be required to
conduct a name clearance with the Registrar of
Companies in order to establish the availability of
the name under which it wishes to register
Once this is done, the company is required to
present its Memorandum and Articles of Association
(MEMARTS) to the Registrar of Companies
accompanied with the requisite forms and filing
fees. The filing fees for incorporation of a limited
liability company range from 45,000 TZS up to
300,000 TZS depending on the share capital of the
company
Once registered, the envisaged limited liability
company must obtain from Tax Payer Identification
Number (TIN) from Tanzania Revenue Authority
(TRA). In order to obtain the TIN, the company must
fill in the requisite forms and deliver the same to the
TRA

CONTENTS

Recommendations
The process of incorporating a limited
liability company requires a number of
steps and approach different offices
The process is not automated but if all
documents are provided and steps are
followed diligently the process may take
between 1-3 months depending on the
nature of the business
However, the involvement of a number of
steps and offices may lead to delays,
especially if the process is not followed
correctly. Any delays may lead to
difficulties in obtaining work permits,
entering into leases, tendering for
contracts and it is thus recommended to
follow the process diligently or seek
professional legal advice
In addition to the business registration,
companies will need to have a business
license which will have to be renewed on
an annual basis

Source: DLA Piper & IMMMA Advocates, ASCO

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Issue/Barrier
Setting up
Companies

CONTENTS

Background

Recommendations

The initial directors of the company must also hold


personal TINs and in the event they do not already
hold the same, they must also acquire personal
TINs from the TRA. Part of the process for acquiring
the personal TIN is for the directors to have their
fingerprints taken by the local TRA offices which in
turn will require physical presence of the directors

The business license fees vary by sector


and business activities (categories are
predefined and determined at the time of
application), are payable annually and are
notably higher for foreign owned
companies

After receiving the TIN, a business licence must be


obtained. A business licence is obtained from either
the municipal council or from the Ministry of Industry
and Trade depending on the nature of the business
conducted by the newly incorporated company
Subsequently the new company will also have to
register with the TRA to obtain a Value Added Tax
Certificate in the event their turnover exceeds TZS
40 Million, a social security fund and such other
regulatory approvals as may be required depending
on the nature of the companys business

Source: DLA Piper & IMMMA Advocates, ASCO

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CONTENTS

4.1. Legislative & Regulatory Access to Land


Issue/Barrier
Access to Land

Background

Recommendations

According to Section 4 of the 1999 Land Act, all


land is public land and is vested in the President as
trustee for and on behalf of all the citizens of
Tanzania

If a foreign investor decides to enter into a


lease agreement with a Tanzanian, it
should be a lease contract that shall be
ten days less then the period for which the
right of occupancy has been granted to
the lessor

Non-Tanzanian citizens are not permitted to acquire


rights over land for any purpose unless it is by way
of derivative rights for investment purposes through
the Tanzania Investment Centre (TIC), a lease from
a Tanzanian citizen or through a joint venture
company
Investors can be granted derivative rights to occupy
and use land from a superior title held in the name
of the TIC for investment purposes under the Land
Act

Leases that are longer than 5 years must


be registered in the Land Registry
If a valid long-term lease exists it can be
mortgaged and banks will usually accept
this security

o Essentially it is similar to a long-lease, the derivative right


allows the holder to deal with the land granted to them
including mortgaging the same with the prior approval of the
TIC
o The holder of a derivative right can only use the land for the
approved investment purpose and it shall not exceed 99
years

Source: DLA Piper & IMMMA Advocates

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Issue/Barrier
Access to Land

Background

CONTENTS

Recommendations

Tanzanian citizens, in contrast, have the right to


acquire rights over land whether for residential,
industrial, commercial, social or cultural and
scientific purposes (known as a right of occupancy),
but are restricted by the Land Act from transferring
their rights to non-citizens
A foreigner can enter into a sub-lease agreement
with a Tanzanian who has been granted a right of
occupancy
Foreign investors may also incorporate companies,
in which one or more Tanzanian citizens are major
shareholders and are able to acquire land, by a joint
venture agreement and use the acquired land for
company purposes

Source: DLA Piper & IMMMA Advocates

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CONTENTS

4.1. Legislative & Regulatory Customs & Shipment Regulations


Issue/Barrier
Customs &
Shipment
Regulations

Background

Recommendations

Tanzania is a member of the East African


Community (EAC) customs union along with Kenya,
Burundi, Rwanda, and Uganda

The Customs Department under the


Tanzania Revenue Authority is vested with
the responsibility of collecting duties and
taxes on imports and exports

o Customs tariffs, rules of origin, import prohibitions, and


trade remedy regulations have been harmonized through
the EAC
o In this single customs territory, duties and other restrictive
regulations have been removed and internal border
customs controls on goods moving among the partner
states have been minimized to realise a free circulation of
goods

o All goods being imported into Tanzania can only


be cleared through the ports of Tanzania by a
clearing and forwarding agent licensed by the
Tanzania Revenue Authority
o The documentation process is to be effected
online and can be done before the arrival of the
goods

o The applicable customs rules and regulations distinguish


between goods originating from inside and outside EAC as
well as goods for export from EAC
o Imported goods from non-EAC countries are formally
treated as transit goods and are liable to customs duty at
the point of entry into Tanzania, at the rates published in
the EAC Common External Tariff

Source: DLA Piper & IMMMA Advocates

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Issue/Barrier
Customs &
Shipment
Regulations

Background

CONTENTS

Recommendations

The taxes and duties vary depending on the good


and its origin but the following taxes and duties may
be payable for import into Tanzania:
o Excise duty which ranges from 0%-50% depending on the
items imported
o Value added tax at the rate of 18% which is payable on the
importation of goods or services from any place outside
mainland Tanzania

Source: DLA Piper & IMMMA Advocates

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CONTENTS

4.1. Legislative & Regulatory Labour & Employment


Issue/Barrier
Labour &
Employment

Background

Recommendations

The Employment and Labour Relations Act of 2004,


governs labour matters in Tanzania, and sets, inter
alia, minimum standards for employment and grants
certain rights and protection

The labour laws and regulations are often


described as employee friendly by foreign
investors but in principle wouldnt exceed
any protection that companies would find
in the UK or continental Europe

Key features are, the need to have a written


employment agreement, minimum requirements for
breaks, vacations, sick leave and pay
Any labour disputes will be instituted at the Council
for Mediation and Arbitration (CMA) and all appeals
arising out of any awards from the CMA are referred
to the High Court Labour Division

The labour courts are described as being


employee friendly and favouring
Tanzanian especially in relation to foreign
investors, but often foreign investors
struggle with their cases since they have
not applied the same diligence they would
have applied in relation to contracts and
procedures in other jurisdictions
It is therefore highly recommended to
understand the local labour laws and
regulations and follow and manage the
business (including HR matters)
accordingly

Source: DLA Piper & IMMMA Advocates, ASCO

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Issue/Barrier
Labour &
Employment

Background
Visa Requirements & Permits:
Prior to commencing work in Tanzania, a foreigner
must obtain a permit to do so. There are 4 main
classes of permits:
CTA (Carrying on Temporary Assignment) permit
usually granted to those conducting a temporary
assignment in Tanzania but are not employed here;
this includes meetings, business development
activities. CTA is also usually obtained at the initial
stages when a company is setting up its branch or
subsidiary in Tanzania
A Residence Permit Class A, can be granted to an
investor making at least USD 300,000 worth of
investment in Tanzania
The Residence Permit Class B, is the most
common work permit and is usually granted to a
foreigner undertaking specific employment in
Tanzania
o The Residence Permit Class B, has to be applied for by the
employer for the prospective employee

CONTENTS

Recommendations
The Residence Permit Class B is the
most common permit
o The Director of Employment (Ministry of Labour
and Employment) must review whether there are
no Tanzanian citizens that could otherwise be
employed
o Once this test has been completed, the Principal
Commissioner of Immigration Service (Ministry
of Home Affairs) will issue the Residence Permit
Class B

The increasing number of foreigners


entering Tanzania has created a backlog
on approvals
o In addition a political and public debate about the
need for foreigners has commenced which led
recently to more scrutiny when reviewing the
applications
o As a result the approval times can be up to 3
months and the outcome is not always
predictable
o It is therefore highly recommended to plan any
such recruitment and application carefully in
advance and to follow the process and
requirements diligently

Source: DLA Piper & IMMMA Advocates

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Issue/Barrier
Labour &
Employment

Background
o The Residence Permit Class B will be granted if the
employer can show that there are no Tanzanian citizens that
could perform the duties of the employment and that it is
therefore justified to employ a foreigner for a limited period of
time
The maximum duration of a Residence Permit Class B
is 3 years but it has become standard that these permits
are being issued for a maximum of two years
The Residence Permit Class B can be extended but at
each application for extension is subject to a similar test
as to whether a Tanzanian citizen could be employed
instead

CONTENTS

Recommendations
In the oil and gas sector, the review of the
need to employ foreign workers may be
undertaken by the TPDC and TPDC may
have de facto powers to approve or reject
the application, however this only applies
to some of the businesses in the sector
and it is recommended to prepare any
submissions accordingly

Residence permit Class C usually granted to


foreign students, researchers, volunteers, persons
attending court cases or persons awaiting to leave
the country following the expiry of a Class A or B
permit
Permits for dependents: The Residence Permits
Class A, B, and C include the possibility to grant
dependents permits for the duration of the
Residence Permits for family members. These
dependent permits can be applied for at the time of
the application for the main permit or thereafter. The
dependent permits usually do not allow the
dependents to work in Tanzania
Source: DLA Piper & IMMMA Advocates

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CONTENTS

4.1. Capability & Capacity Limited Supporting Industries


Issue/Barrier
Limited
Supporting
Industries

Background
Tanzanias major contribution to GDP comes from
Agriculture, Mining, Wholesale & Retail sectors
The Manufacturing sector contributes marginally to
the GDP compared to agriculture.
About 65 percent of manufacturing sector consist
food processing industries, beverages and tobacco
followed by rubber and plastic.

Tanzanias top 5 companies operate in Food


processing, Beverages, Plastic, Glass and Paper

Recommendations
Opportunity to work in collaboration with
local companies & government agencies
to develop joint infrastructure projects
Companies can further benefit from the
Special Economic Zone (SEZ) which has
been designated for the establishment of
a industries as part of the new economy
linked to gas exploitation

Opportunity to set up logistics clusters that


employs readily available TZ low-skilled
workforce. The logistics clusters has the
potential to attract assembly
manufacturing plants
DFID is currently co-funding a World Bank
study on local content analysis to identify
areas for local capacity development.
DFID will be allocating some funds for
local capacity development, budgets are
not confirmed yet, but it be around GBP 2
million over a 5 year time period.

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4.1. Capability & Capacity Skilled Labor & Technical Manpower


Issue/Barrier
Skilled Labour &
Technical
manpower
availability

Background
Sizeable skills gaps include engineers (civil, mining,
chemical and production) as well as project
managers and graduates of earth sciences
(geologists, physicists, and chemists).
Skills gaps are also pervasive in skilled trades, such
as electricians, machine operators, bricklayers,
carpenters, and various forms of technicians

Recommendations
Some UK companies have started
internship programs to attract and train
labor force. Some companies have also
initiated graduate development programs
for technical & management roles
Opportunity for in-direct service providers
in the oil & gas sector to set up training
institutes in partnership with local
companies or with the government &
government agencies (e.g. TPDC) to
ensure a match between the supply and
demand for skills, including through
curriculum development and certification
DFID is currently co-funding a World Bank
study on local content analysis to identify
areas for local capacity development.
DFID will be allocating some funds for
local capacity development, budgets are
not confirmed yet, but it be around GBP 2
million over a 5 year time period.

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CONTENTS

4.1. Capability & Capacity Local Content


Issue/Barrier
Local Content

Background
Local Content Policy of Tanzania (currently under
draft) measures local content through 2 main
attributes:
1. Local workforce development, training and
employment
2. Local supplier development and procurement
through local suppliers & contractors

Challenges:
The levels of unemployment (youth in particular) are
high combined with low level of attendance at
secondary and higher education institutions

Current training capacity: educational, vocational is


limited, the capacity in-place is underfunded with a
lack of suitable candidates
Curricular for the training programmes that are inplace do not fully reflect oil & gas sector demand
and future funding is uncertain
There are few established enterprises that could be
adapted to oil & gas supply with the possible
exception of: agricultural product supply, cement,
selected basic commodities, building supplies
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Recommendations
Develop capacity through training of semiskilled labor in-country by partnering with
institutions like Vocational Educational and
Training Authority (VETA)

Development of high-skilled workforce


through overseas training by funding
scholarships for higher studies in
specialist areas like geosciences,
petroleum or mechanical engineering
disciplines
World Bank in partnership with
Department for International Development
(DFID) has identified 15 industry clusters
that can support the oil & gas industry and
have high local content potential. Part of
the Phase II activities World Bank will be
undertaking supplier gap analysis to
understand the key activities & skills that
drive each of the 15 industry clusters, map
the market of local firms, and diagnose the
biggest constraints that must be overcome
to increase local capture
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CONTENTS

4.1. Financial Access to Finance


Issue/Barrier

Background

Recommendations

Access to Finance

The market is highly collateral driven with most of


the financial institutions requiring security to offer
financial assistance that include land title and other
fixed assets

UK Companies: Support available from


UK export credit agency that helps
exporters and investors by providing credit
insurance policies, political risk insurance
on overseas investments and guarantees
on bank loans. UK Export Finance is the
operating name of the Export Credits
Guarantee Department (ECGD)

Small and Medium enterprises (SMEs) have limited


access to finance due to lack of collateral to provide
to Banks and as a result fail to significantly
contribute to TZ economy and expand
Lengthy (3-6 months) process for registration and to
obtain title deeds of fixed assets.
Poor infrastructures discourage commercial banks
and financial institutions to operate in the rural
areas
Statistics show that 75 per cent of money in the
market circulates in an informal system

TZ Companies: Support available from


Small and Medium Enterprises Credit
Guarantee Scheme (SME-CGS) 2005
o The Scheme issues credit guarantees to
financial institutions lending to SMEs
o The objective is to cover shortfalls in the
collateral thereby facilitating granting of credits
to SMEs

The Banked population is under 15%


With holding tax (WHT) is payable on the interest
amount for non-resident companies

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4.1. Financial High Interest Rates


Issue/Barrier

High Interest Rates

Background

Interest Rate in Tanzania averaged 12.65 % from


2002 until 2014, reaching an all time high of 21.42
% in June of 2007 and a record low of 3.70 % in
October of 2009
Governments bonds offer a return of around 14% at
no risk. Commercial banks factor administrative
cost, profits and risk factors on top of the
government bond rates before lending to
commercial sector

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Recommendations

Factor in the cost of finance into business


plans
Consider alternative financing sources, but
note the restrictions under foreign
currency issues. Outward capital
payments still subject to restrictions and
must be submitted to Bank of Tanzania
through commercial banks for approval

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4.1. Financial Value Added Tax (VAT)


Issue/Barrier
Value Added Tax
(VAT)

Background
Oil & gas companies are entitled to special relief
from VAT on supplies of goods or services used
exclusively in exploring or prospecting for oil & gas.
Companies are however required to pay input VAT
on their costs during the development and
production phases, which can be claimed back
where the company is in a refund position

Recommendations
In order to claim VAT refunds, companies
need to submit a claim that has been
certified by an audit firm

VAT refunds claims can only be made every six


months and can take a significant amount of time to
be paid back by TRA

The new VAT bill, anticipated to come into effect in


2015, presents a number of potential challenges, for
example with regards to imported services, VAT
treatment of exports and importation of capital
goods

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4.1. Others - Infrastructure


Barrier/Issue
Infrastructure

Background
Roads:
Low road density (55 square km of road for 1000
square km of land)
Poor quality of roads - 40% of the trunk roads are
paved. Less than 9% of classified network is paved
Roads overburdened due to poor railway system

Recommendations
Evaluate additional cost of doing business in
Tanzania arising from:
Shipment delays
Transportation cost - limited public
transportation

Inadequate integration of the road networks to


markets and productive areas

Capital & Operating cost for back up


power systems (generator sets)

Unplanned urbanization and traffic congestion in


urban areas

Uninterrupted Power Supply (UPS)


requirements
Alternative sources of energy (Solar)

Power:
It is estimated that the demand for electricity will
triple by 2020, of which the planned projects will not
be able to meet the demand unless other strategies
are used to increase the supply of power

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Poor service quality, power cuts without notice,


unplanned power stoppages and interruptions,
voltage fluctuations, phase failures and unbalanced
voltages
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4.1. Others - Corruption


Barrier/Issue

Corruption

Background

Recommendations

There are several laws in Tanzania to fight


corruption, i.e. the Prevention and Combating
Corruption Act (PCCA) of 2007, the Anti Money
Laundering Act, the 2004 Public Procurement Act,
the Election Expenses Act of 2010, the Economic
and Organized Crime Control Act and the Criminal
Procedure Act

In addition to the Tanzanian laws and


regulations extraterritorial anti-bribery and
corruption as well as anti-money
laundering laws may apply to foreign
investors and these laws and regulations
should be equally followed when doing
business in Tanzania

In 1999 the Government of Tanzania launched the


National Anti-Corruption Strategy and Action Plan
(NACSAP) I, followed by the NACSAP II in 2006 to
expand anti-corruption initiates further to local
council level and establishing closer collaboration
with civil society

As a rule of thumb, when following either


UK or USA laws and regulations it is
unlikely that the Tanzanian laws and
regulations would be breached but it is
recommended to review these on a caseby-case basis as compliance with these
laws and regulations would not excuse a
breach of Tanzanian laws and regulations

In 2009, Tanzania joined an Extractive Industries


Transparency Initiative (EITI). EITI is a global
standard for revenue transparency in the extractive
industries and consist of a global coalition of
governments, companies and civil society
organisations
Source: DLA Piper & IMMMA Advocates

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Barrier/Issue
Corruption

Background

CONTENTS

Recommendations

In Tanzania, the Prevention and Combating of


Corruption Bureau (PCCB) is mandated with the
authority to investigate allegations or occurrences of
corruption
o The PCCB, is an independent law enforcement institution
established and mandated under section 5 and 7 of the
PCCA of 2007 to prevent corruption, to raise awareness and
guide government on anti-corruption issues as well as
arrest, investigate, initiate proceedings and prosecute cases
of corruption
o The office of the Director for Public Prosecutions is
responsible for charging offenders of offences related to
corruption in line with the anti-corruption laws
o The PCCB mandate and operations are limited to Tanzania
mainland

Zanzibar's core anti-corruption laws and institutions


are the Zanzibar Anti Corruption and Economic
Crimes Act (ZACECA), the Auditor General (CAG),
the Office of DPP, the Ministry of Justice and
Constitutional Affairs, the judiciary, the police, the
KMKM and mechanisms under the Money
Laundering Act, as well as the Anti Corruption
Authority
Source: DLA Piper & IMMMA Advocates

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4.2. Market Entry Strategies


The most effective way of moving goods and services from UK producers to industrial and consumer users in
Tanzania is through an agent, distributor and/or by being on the ground. In general, finding a reliable agent or
distributor requires an on-the-ground visit to meet with local business people in person. British companies
wishing to approach the Tanzanian market are advised to undertake market research assisted by UK Trade and
Investment (UKTI) post in Dar Es Salaam located at the British High Commission.

Companies wishing to set up a local base may also benefit from support and advice by the UKTI Section of the
British High Commission in Tanzania. The Tanzania Investment Center (TIC) can also help with useful advice
and contacts.
There are several ways in which British companies can enter the Tanzanian Market:
Key Information1

Population
Export direct
Set up an agency
(USD
billions)
GDP
Appoint
a distributor
GDP
JointGrowth
Venture
Rate (estimate 2013)
Selling to the government
Inflation (estimate 2013)

~48 Million
28.25
6.8%
9.8%

In the
of direct export to Tanzania, UK companies
advised to have a local agent in Tanzania.
Key case
Languages
Swahili & are
English
Appointing a local agent /distributor is the best way for initial entry in the Tanzania Market; however this will
Religions
and Muslim
depend
on the nature of the business itself. Christianity
Sometimes
personal relationships in the Tanzania market do
dominate. Initially it might require a personal presence.
There is a need for product training for the agent's workforce especially if your products are very technical. It
may be required to regularly visit the market especially during the early stages of an interaction with an
agent/distributor.

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4.3. Setting up Companies


Registered Branch:
A foreign branch may be opened by applying for a Certificate of Compliance from the Registrar of Companies
The company must submit the full address of their place of business for the branch in Tanzania as well as
names and residential and postal addresses of one or more persons resident in Tanzania authorised to
accept, on behalf of the company, service of notices required to be served on the company
The office in Tanzania then is treated as a branch of a foreign company and is taxed in Tanzania to the extent
that the income has been sourced in the United Republic of Tanzania
Limited Liability Company:
This is the most common Key
typeInformation
of company1 used in Tanzania and would create a new and separate legal entity
locally
Population
~48 Million
The number of shareholders for a limited company cannot be less than 2 and must not be more than 50. Each
GDP (USD billions)
28.25 the companys memorandum of
shareholder
is only liable to the extent of his liability as subscribed-in
association
GDP Growth Rate (estimate 2013)
6.8%
The limited liability company must have a minimum of 2 directors and a company secretary. There are no
Inflationrestrictions
(estimate 2013)
9.8% or company secretary
general
as to the nationality of the shareholder, directors
Key Languages

Public Limited Company:


Religions

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Swahili & English


Christianity and Muslim

A company which has 7 or more members, which does not restrict the transfer of shares and offers the public
to purchase its shares
Prior to commencing business as a public company, approval must be sought and obtained from the Capital
Markets and Securities Authority (CMSA), this being the relevant regulator for Public Companies
In Tanzania there is only one stock exchange this being the Dar Es Salaam Stock Exchange (DSE) as a
market place for shares is monitored and supervised by the CMSA
It is not however mandatory for a Public Company to be listed on the DSE

Source: DLA Piper & IMMMA Advocates

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4.4. Tanzania Investment Centre (TIC)


The Tanzania Investment Centre (TIC) was established in 1997 by the Tanzania Investment Act to be the
Primary Agency of the Government to coordinate, encourage, promote and facilitate investment in Tanzania
and to advise the Government on investment policy and related matters.
Tanzania Investment Centre (TIC) is the first point of call for potential investors. It issues a Certificate of
Incentives to qualifying firms. Qualifying applicants must show that the project is of the requisite fiscal
investment, this being a minimum USD 300,000 for non-Tanzania investors and a minimum of USD 100,000 for
Tanzanian citizens.
TIC offers a one stop shop to investors who wish to apply for fiscal and non-fiscal incentives. Enterprises
engaged in mining and petroleum must follow the approval process contained in their respective laws for
1
Key
Information
securing similar incentives as
those
provided
by the TIC.
Population

~48 Million

Some of the fiscal incentives provided by TIC include investment allowance on infrastructure expenditure,
GDP (USD
billions)
reduced
import
tariff on project capital items, preferential tax 28.25
rates for withholding tax on dividends, royalties
andGDP
interests
and
preferential
tax
rates
on
personal
income
tax.
Growth Rate (estimate 2013)
6.8%
Inflation (estimate
2013)
Non-fiscal
incentives
include assistance in the process of 9.8%
incorporation, registration with tax authorities,
obtaining
business
licence
and
application
for
immigration
quota.
Key Languages
Swahili & English
Religions
and Muslim
Furthermore
TIC offers a fast track service to Christianity
obtain residence
and work permits. The recognition by TIC may
also include the automatic granting of permits for employing an initial quota of five foreign nationals during the
start up period.

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Source: DLA Piper & IMMMA Advocates and TIC

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Acknowledgements
UKTI gratefully acknowledges the contributions towards this report from the following companies:
African Development Bank

KCB Bank Tanzania

ASCO Group

Ophir Energy

Baker Hughes

PanAfrican Energy

Bechtel

Shell

BG Tanzania

Songas Limited

Deloitte

Statoil

DLA Piper & IMMMA Advocates, part of


DLA Piper Africa

Tanzania Private Sector Foundation

European Commission

World Bank

ExxonMobil

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Contact details:
Misbah Mughal

Head of UK Trade & Investment


Dar es Salaam, Tanzania

Email:
Misbah.Mughal@mobile.ukti.gov.uk
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Presentation title - edit in the Master slide

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