COURSE INSTRUCTOR:

MR. PETER H.

ST. AUGUSTINE UNIVERSITY

OF TANZANIA

SCHOOL OF LAW

SLW 343

INVESTMENT LAW

TEACHING MANUAL FOR

LL.B-3

PREP. BY: MR. HENRY PETER

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TOPIC NO 1: INTRODUCTION TO INVESTMENT LAW

1.1. WHAT IS AN INVESTMENT?

An investment is an asset or item acquired with the goal of generating income or

appreciation. Appreciation refers to an increase in the value of an asset over time. When
an individual purchases a good as an investment, the intent is not to consume the good
but rather to use it in the future to create wealth.

OR

An investment is essentially an asset that is created with the intention of allowing money
to grow and it is all about putting your savings into assets or objects that become worth
more than their initial worth or those that will help produce an income with time.

An investment always concerns the outlay of some capital today time, effort, money, or
an asset in hopes of a greater payoff in the future than what was originally put in.

For example, an investor may purchase a monetary asset now with the idea that the
asset will provide income in the future or will later be sold at a higher price for a profit.

HOW AN INVESTMENT WORKS

The act of investing has the goal of generating income and increasing value over time.
An investment can refer to any mechanism used for generating future income. This
includes the purchase of bonds, stocks, or real estate property, among other examples.
Additionally, purchasing a property that can be used to produce goods can be
considered an investment.

In general, any action that is taken in the hopes of raising future revenue can also be
considered an investment. For example, when choosing to pursue additional education,
the goal is often to increase knowledge and improve skills (in the hopes of ultimately
producing more income).

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Because investing is oriented toward the potential for future growth or income, there is
always a certain level of risk associated with an investment. An investment may not
generate any income, or may actually lose value over time.

For example, it's also a possibility that you will invest in a company that ends up going
bankrupt or a project that fails to materialize. This is the primary way that saving can be
differentiated from investing: saving is accumulating money for future use and entails no
risk, whereas investment is the act of leveraging money for a potential future gain and it
entails some risk.

THINGS TO REMEMBER

I. An investment involves putting capital to use today in order to increase its value
over time.

II. An investment requires putting capital to work, in the form of time, money,
effort, etc., in hopes of a greater payoff in the future than what was originally
put in.

III. An investment can refer to any medium or mechanism used for generating future
income, including bonds, stocks, real estate property, or a business, among other
examples.

CATEGORIES OF INVESTMENTS

1. Ownership Investments

Ownership investments, as the name clearly suggests, are assets that are purchased and
owned by the investor. Examples of this kind of investment include stocks, real estate
properties, and bullion (gold and silver), among others. Funding a business is also a kind
of ownership investment.

2. Lending Investments

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When you invest in lending instruments, you’re essentially behaving like the bank.
Corporate bonds, government bonds, and even savings accounts are all examples of
lending investments. The money you park in a savings account is basically a loan that
you give the bank. This money is used by the bank to fund the loans it gives out to its
customers.

3. Cash Equivalents

These are investments that are highly liquid and can easily be converted into cash.
Money market instruments, for instance, are excellent examples of cash equivalents. Cash
equivalents generally offer low returns, but correspondingly, the risk associated with
them is also negligible.

Cash includes legal tender, bills, coins, checks received but not deposited, and checking
and savings accounts. Cash equivalents are any short-term investment securities with
maturity periods of 90 days or less. They include bank certificates of deposit, banker’s
acceptances, Treasury bills, commercial paper, and other money market instruments.

TYPES OF INVESTMENTS

1. Stocks

This includes shares of ownership of any company and helps you earn dividends in
return. An equity investment is money that is invested in a company by purchasing shares
of that company in the stock market.

2. Bonds

It means lending your money to an institution or government, for which you receive
fixed interest at regular intervals and also the face value upon maturity.

3. Mutual Funds

In this, funds are collected from different investors and put in a company’s bonds or
shares, which are managed by fund managers. On understanding what is investment

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meaning and your investment objectives, you may choose equity funds or debt funds,
depending on your risk capacity.

4. ULIP

ULIPs or Unit Linked Insurance Plans are a type of investment that provides both
investment and life insurance benefits. A portion of the money invested into ULIPs is
allocated for investment, meaning in this plan a part of your premium is invested in
different funds and helps you earn market linked returns.

5. Public Provident Fund (PPF)

Understanding investment meaning of PPF is simple. It is governments offered saving

scheme that invests your funds for a specific period and helps you earn returns on the
same. It provides an 8% interest rate

HOW SHOULD YOU INVEST?

1. Analyze Your Financial Needs

Firstly, analyze your financial situation concerning risk tolerance, investment

objectives and other factors like family size, number of earning members and life goals.

2. Investment Diversification

Build a diversified financial portfolio according to your investment objectives by putting

your funds in different instruments for maintaining the right balance between risk and
returns.

Also, consider giving priority to those instruments that offer security to your loved ones.
It may include life insurance policies like term plan, ULIP (Unit Linked Insurance Plan)
and other such instruments. You may consider the objectives for investment to generate
appropriate returns from it.

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3. Time Period

You should also know what time you have before turning your investments into cash.
This is a crucial element that determines your investment objectives. Depending on your
requirements, you may choose short-term or long-term funds.

4. Periodical Reassessment

Since funds are influenced by market forces, it is imperative that you closely monitor
them periodically. You may also consider readjustment if your portfolio is not generating
good returns.

WHAT ARE THE OBJECTIVES OF INVESTMENT?

Before you decide to invest your earnings in any one of the many investment plans
available, it’s essential to understand the reasons behind it and the investment meaning.
While the individual objectives of investment may vary from one investor to another,
the overall goals of investing money may be any one of the following reasons.

Reasons to Start Investing Today

1. to Keep Money Safe

Capital preservation is one of the primary objectives of investment for people. Some
investments help keep hard-earned money safe from being eroded with time. By parking
your funds in these instruments or schemes, you can ensure that you do not outlive your
savings. Fixed deposits, government bonds, and even an ordinary savings account can
help keep your money safe. Although the return on investment may be lower here, the
objective of capital preservation is easily met.

2. to Help Money Grow

Another one of the common objectives of investing money is to ensure that it grows into
a sizable corpus over time. Capital appreciation is generally a long-term goal that helps
people secure their financial future. To make the money you earn grow into wealth, you

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need to consider investment objectives and options that offer a significant return on the
initial amount invested. Some of the best investments to achieve growth include real
estate, mutual funds, commodities, and equity. The risk associated with these options
may be high, but the return is also generally significant.

3. To Earn a Steady Stream of Income

Investments can also help you earn a steady source of secondary (or primary) income.
Examples of such investments include fixed deposits that pay out regular interest or stocks
of companies that pay investors dividends consistently. Income-generating investments
can help you pay for your everyday expenses after you have retired.

4. To Minimize the Burden of Tax

Aside from capital growth or preservation, investors also have other compelling
objectives for investment. This motivation comes in the form of tax benefits offered by
the Income Tax Act, 1961. Investing in options such as Unit Linked Insurance Plans
(ULIPs), Public Provident Fund (PPF), and Equity Linked Savings Schemes (ELSS) can be
deducted from your total income. This has the effect of reducing your taxable income,
thereby bringing down your tax liability.

5. To Save up for Retirement

Saving up for retirement is a necessity. It is essential to have a retirement fund you can
fall back on in your golden years, because you may not be able to continue working
forever. By investing the money you earn during your working years in the right
investment options, you can allow your funds to grow enough to sustain you after
you’ve retired.

6. To Meet your Financial Goals

Investing can also help you achieve your short-term and long-term financial goals
without too much stress or trouble. Some investment options, for instance, come with
short lock-in periods and high liquidity. These investments are ideal instruments to park

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your funds in if you wish to save up for short-term targets like funding home
improvements or creating an emergency fund. Other investment options that come with
a longer lock-in period are perfect for saving up for long-term goals.

THE DIFFERENCE BETWEEN INVESTIMENT AND OTHER CONCEPTS

HOW IS AN INVESTMENT DIFFERENT FROM SPECULATION?

Speculation is a distinct activity from investing. Investing involves the purchase of assets
with the intent of holding them for the long term, while speculation involves attempting
to capitalize on market inefficiencies for short-term profit. Ownership is generally not a
goal of speculators, while investors often look to build the number of assets in their
portfolios over time.

Although speculators are often making informed decisions, speculation cannot usually be
categorized as traditional investing. Speculation is generally considered a higher risk
activity than traditional investing (although this can vary depending on the type of
investment involved). Some experts compare speculation to gambling, but the veracity
of this analogy may be a matter of personal opinion.

Is Investment the Same as Speculation?

Not really. An investment is typically a long-term commitment, where the payoff from
putting that money to work can take several years. Investments are typically made only
after due diligence and proper analysis have been undertaken to understand the risks
and benefits that could unfold. Speculation, on the other hand, is a pure directional bet
on the price of something, and often for the short-term.

HOW IS AN INVESTMENT DIFFERENT FROM A BET OR GAMBLE?

In an investment, you are providing some individual or entity with funds to be put to
work growing a business, starting new projects, or maintaining day-to-day revenue
generation Investments, while they can be risky, have a positive expected return.

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Gambles, on the other hand, are based on chance and not putting money to work.
Gambles are highly risky and also have a negative expected return in most cases (e.g., at
a casino).

HOW IS AN INVESTMENT DIFFERENT FROM SAVINGS?

Savings simply mean putting aside a part of your earnings over time. The saved amount
of money is subject to no risk and, therefore, does not help you earn any profits or
returns. However, its value appreciation remains more or less stagnant, as there is no
addition over and above what you add each month.

On the other hand, investment is based on the concept of earning returns or profit on
the money you first put in a fund or spent on an asset purchase. Remember here that the
involvement of risk is what makes them profitable.

Why invest when you can save money with zero risk?

As mentioned, when understanding ‘what is investment meaning,’ remember that there

is a direct relation between returns and risk, meaning more significant the risk involved,
higher are the chances of earning greater returns. That’s why investing is putting money
to work in order to grow it.

When you invest in stocks or bonds, you are putting that capital to work under the
supervision of a firm and its management team. Although there is some risk, that risk is
rewarded with a positive expected return in the form of capital gains and/or dividend &
interest flows. Cash, on the other hand, will not grow, and may very well lose buying
power over time due to inflation.

When Should You Invest?

Some people waste many years of their life thinking over ‘what is investment’ and
figuring out the investment objectives and how it is beneficial. They hesitate to consider
investment meaning for wealth creation because of the involvement of risk. However,
many investments are also risk-free, and some carry only little to moderate risk.

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When you are young, it is best to fully understand about ‘what is investment meaning’
and its role and then start. At an early age, you have few responsibilities and, thus, have
a better tendency to experiment with different investment and leverage those, which suit
your requirements best.

Investing early is also better because of the compounding benefits on investments that
help grow your money. With more years ahead, you can reap maximum benefits on
your investments, provided you first understand and evaluate different aspects of ‘what
is investment meaning’ and then start early.

1.2. FOREIGN INVESTMENT

What Is Foreign Investment?

Foreign investment involves capital flows from one country to another, granting the
foreign investors extensive ownership stakes in domestic companies and assets.

Foreign investment denotes that foreigners have an active role in management as a part
of their investment or an equity stake large enough to enable the foreign investor to
influence business strategy. A modern trend leans toward globalization, where
multinational firms have investments in a variety of countries.

THINGS TO REMEMBER
I. Foreign investment refers to the investment in domestic companies and assets of
another country by a foreign investor.
II. Large multinational corporations will seek new opportunities for economic
growth by opening branches and expanding their investments in other countries.
III. Foreign direct investments include long-term physical investments made by a
company in a foreign country, such as opening plants or purchasing buildings.
IV. Foreign indirect investment involves corporations, financial institutions, and
private investors that purchase shares in foreign companies that trade on a
foreign stock exchange.

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V. Commercial loans are another type of foreign investment and involve bank loans
issued by domestic banks to businesses in foreign countries or the governments of
those countries.
HOW FOREIGN INVESTMENT WORKS?

Foreign investment is largely seen as a catalyst for economic growth in the future.
Foreign investments can be made by individuals, but are most often endeavors pursued
by companies and corporations with substantial assets looking to expand their reach.

As globalization increases, more and more companies have branches in countries around
the world. For some multinational corporations, opening new manufacturing and
production plants in a different country is attractive because of the opportunities for
cheaper production and labor costs.

Additionally, these large corporations frequently look to do business with those

countries where they will pay the least amount of taxes. They may do this by relocating
their home office or parts of their business to a country that is a tax haven or has
favorable tax laws aimed at attracting foreign investors.

Some of the more popular tax haven countries that attract foreign investors include the
Bahamas, Bermuda, Monaco, Luxembourg, Mauritius, and the Cayman Islands.
CLASSIFICATION OF FOREIGN INVESTMENT

Foreign investments can be classified in one of two ways: direct and indirect.

Indirect investment

Foreign indirect investments involve corporations, financial institutions, and private

investors buying stakes or positions in foreign companies that trade on a foreign stock
exchange. In general, this form of foreign investment is less favorable, as the domestic
company can easily sell off their investment very quickly, sometimes within days of the
purchase. This type of investment is also sometimes referred to as a foreign portfolio

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investment (FPI). Indirect investments include not only equity instruments such as stocks,
but also debt instruments such as bonds.

Direct investment

Foreign direct investments (FDIs) are the physical investments and purchases made by a
company in a foreign country, typically by opening plants and buying buildings,
machines, factories, and other equipment in the foreign country. These types of
investments find a far greater deal of favor, as they are generally considered long-term
investments and help bolster the foreign country’s economy.

Other Types of Foreign Investment

There are two additional types of foreign investments to be considered: commercial

loans and official flows.

Commercial loans are typically in the form of bank loans that are issued by a domestic
bank to businesses in foreign countries or the governments of those countries.

An official flow is a general term that refers to different forms of developmental

assistance that developed or developing nations are given by a domestic country.

Commercial loans, up until the 1980s, were the largest source of foreign investment
throughout developing countries and emerging markets. Following this period,
commercial loan investments plateaued, and direct investments and portfolio
investments increased significantly around the globe.

Multilateral Development Banks

A different kind of foreign investor is the multilateral development bank (MDB), which
is an international financial institution that invests in developing countries in an effort to
encourage economic stability. Unlike commercial lenders who have an investment

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objective to maximize profit, MDBs use their foreign investments to fund projects that
support a country's economic and social development.

The investments which typically take the form of low or no-interest loans with
favorable terms might fund the building of an infrastructure project or provide the
country with the capital needed to create new industries and jobs. Examples of
multilateral development banks include the World Bank and the Inter-American
Development Bank (IDB).

1.3. FOREIGN DIRECT INVESTMENT (FDI)

A foreign direct investment (FDI) is a purchase of an interest in a company by a company

or an investor located outside its borders.

Generally, the term is used to describe a business decision to acquire a substantial stake in
a foreign business or to buy it outright in order to expand its operations to a new region.
It is not usually used to describe a stock investment in a foreign company.

I. Foreign direct investments (FDI) are substantial investments made by a company

into a foreign concern.
II. The investment may involve acquiring a source of materials, expanding a
company's footprint, or developing a multinational presence. As of 2020, the U.S.
is second to China in attracting FDI.

HOW FOREIGN DIRECT INVESTMENTS (FDI) WORK

Companies considering a foreign direct investment generally look only at companies in

open economies that offer a skilled workforce and above-average growth prospects for
the investor. Light government regulation also tends to be prized.

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Foreign direct investment frequently goes beyond capital investment. It may include the
provision of management, technology, and equipment as well.

A key feature of foreign direct investment is that it establishes effective control of the
foreign business or at least substantial influence over its decision-making.

In 2020, foreign direct investment tanked globally due to the COVID-19 pandemic,
according to the United Nations Conference on Trade and Development. The total $859
billion global investment compares with $1.5 trillion the previous year. And, China
dislodged the U.S. in 2020 as the top draw for total investment, attracting $163 billion
compared to investment in the U.S. of $134 billion.

SPECIAL CONSIDERATIONS

Foreign direct investments can be made in a variety of ways, including opening a

subsidiary or associate company in a foreign country, acquiring a controlling interest in
an existing foreign company, or by means of a merger or joint venture with a foreign
company

The threshold for a foreign direct investment that establishes a controlling interest, per
guidelines established by the Organization of Economic Co-operation and Development
(OECD), is a minimum 10% ownership stake in a foreign-based company.

That definition is flexible. There are instances in which effective controlling interest in a
firm can be established by acquiring less than 10% of the company's voting shares.

TYPES OF FOREIGN DIRECT INVESTMENT

Foreign direct investments are commonly categorized as horizontal, vertical, or

conglomerate.

I. With a horizontal direct investment,

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Company establishes the same type of business operation in a foreign country as it

operates in its home country. A U.S.-based cell phone provider buying a chain of phone
stores in China is an example.

II. In a vertical investment,

A business acquires a complementary business in another country. For example, a U.S.

manufacturer might acquire an interest in a foreign company that supplies it with the raw
materials it needs.

III. In a conglomerate type of foreign direct investment,

A company invests in a foreign business that is unrelated to its core business. Since the
investing company has no prior experience in the foreign company's area of expertise,
this often takes the form of a joint venture.

EXAMPLES OF FOREIGN DIRECT INVESTMENTS

Foreign direct investments may involve mergers, acquisitions, or partnerships in retail,

services, logistics, or manufacturing. They indicate a multinational strategy for company
growth.

FDI in China and India

China's economy has been fueled by an influx of FDI targeting the nation's high-tech
manufacturing and services.

Meanwhile, relaxed FDI regulations in India now allow 100% foreign direct investment
in single-brand retail without government approval.

The regulatory decision reportedly facilitates Apple's desire to open a physical store in
the Indian market. Thus far, the firm's iPhones had only been available through third-
party physical and online retailers.

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Other Examples of Foreign Direct Investment (FDI)

One of the largest examples of Foreign Direct Investment (FDI) in the world today is the
Chinese initiative known as One Belt One Road (OBOR).

This program sometimes referred to as the Belt and Road initiative, involves a
commitment by China to substantial FDI in a range of infrastructure programs
throughout Africa, Asia, and even parts of Europe.

The program is typically funded by Chinese state-owned enterprises and organizations

with deep ties to the Chinese government.

Similar programs are undertaken by other nations and international bodies, including
Japan, the United States, and the European Union.

WHAT IS THE DIFFERENCE BETWEEN FDI AND FPI?

Foreign portfolio investment (FPI) is the addition of international assets to the portfolio
of a company, an institutional investor such as a pension fund, or an individual investor.
It is a form of portfolio diversification, achieved by purchasing the stocks or bonds of a
foreign company.

Foreign direct investment (FDI) requires a substantial investment in, or the outright
acquisition of, a company based in another country.

FDI is generally a larger commitment, made to enhance the growth of a company.

Both FPI and FDI are generally welcome, particularly in emerging nations. Notably, FDI
involves a greater responsibility to meet the regulations of the country that hosts the
company receiving the investment.

WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF FOREIGN DIRECT

INVESTMENT (FDI)?

I. FDI can foster and maintain economic growth, both in the recipient country and
in the country making the investment.

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II. Developing countries have encouraged FDI as a means of financing the

construction of new infrastructure and the creation of jobs for their local workers.
III. On the other hand, multinational companies benefit from FDI as a means of
expanding their footprints into international markets.

DISADVANTAGES

I. A disadvantage of FDI, however, is that it involves the regulation and oversight of

multiple governments, leading to a higher level of political risk.

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TOPIC NO 2: GENERAL OVERVIEW OF THE LEGAL FRAMEWORK FOR REGULATION

OF INVESTIMENT (LEGAL ASPECT)

The Laws Governing Investment in Tanzania

The Laws and Regulations Governing Investments in Tanzania are:

1. Constitution of the United Republic of Tanzania of 1977 [CAP 2 R.E. 2008] as

amended from time to time

The Constitution of the United Republic of Tanzania5 is the mother of all laws of the
country. It has set up an independent judiciary, among other organs of the State and
does recognize the sacred right of individuals to acquire and own property. Legislations
passed since 1990 to improve the investment climate in Tanzania.

2. Tanzania Investment Act of 1997, [CAP 38 R.E. 2002]

This is an act to guide investment activities in Tanzanian, to provide for more favorable
conditions for investor. It provides definitions for inter alia local investors, foreign
investors and local capital. This Act does not, in terms of Article 2 of Investment Act (Act
of 1997, [CAP 38 R.E. 2002]), apply to: “Investment in mining and oil exploration
currently covered under the Petroleum (Exploration and Production) Act, of 1980 and
the Mining Act of 1998 Investment in Zanzibar, which are administered under a separate
legislation applicable in Zanzibar only, Investment below US$ 300,000 and US$ 100,000
for foreign investors (wholly owned or joint venture) and local investors respectively.”

3. Financial Laws (Miscellaneous Amendments) Act, Act no. 27 of 1997

Aimed at amending certain financial laws, in order to address areas in affected legislations
that had potential conflict with some provisions in the Tanzania Investment Act; The
legislation which were affected by this Act are some sections of the Income Tax Act of
1973, Customs Tariff Act of 1976, Sales Tax Act of 1976 and the Immigration Act of 1995

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4. Capital Markets and Securities Act, 1994 (Act No.5 of 1994)

This Act provides for the establishment of a Capital Markets and Securities Authorities
(CMA) for the purpose of promoting and facilitating the development of capital markets
and securities in Tanzania.

5. Mining Act, 1998 (Act No.5 of 1998)

Provides for minerals mining, trading and any other relevant matters.

6. Banking and Financial Institutions Act, 1991 (Act No. 12 0f 1991)

An Act intended to harmonies the operations of all financial institutions in Tanzania to

foster sound banking activities, to regulate credit operations, and to provide for other
matters relating to these purposes.

7. Bank of Tanzania Act, Act No. 4 of 2006

The Act expressly specifies functions and objectives of the regulations and supervision of
banks and financial institutions in Tanzania.

8. The Land Act, of 1999 [CAP 113 R.E. 2002]

The Act expressly specifies functions and objectives of the regulations and supervision of
land in Tanzania

9. The Village Land Act, of 1999 [CAP 113 R.E. 2002]

Provides for the management and administration of land in villages and for related
matters

10. Value Added Tax Act, 1997 (No.24 of 1997)

Provides for the imposition of Tax to be known as Value Added Tax on supplies of
goods and services and for related matters

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11. Immigration Act, 1995 (No.7 of 1995)

Aimed to provide for the enactment of one law for controlling of immigration in the
United Republic of Tanzania and for matters incidental to or connected with
immigration.

12. Foreign Exchange Act, 1992 (No. 1 of 1992)

Act provide for the administration and management of dealing and others acts in relation
to gold, foreign currency, securities, payments, debts, imports, exports, transfer or
settlement of property.

13. Customs Tariffs Act, 1976 (Act No.1 of 1976)

Provides for imposition of duties on goods imported into Tanzania

14. Business Licensing Act, (No.25 of 1972)

Provides for Licensing of business operations; No firm or business entity can enter into
business activities before getting a business license.

15. Employment Ordinance Act, Cap 366

Ordinance intended to amend and consolidate laws relating to labor, and to regulate
conditions of employment and employees.

16. Severance Allowances Act, Cap 574, No.62 of 1962

This was enacted to guide the payment to all employees on the termination of their
employment in certain circumstances.

Other laws and regulations include:

1. Security of Employment Act, Cap 574, No.62,

2. Zanzibar-Investment Promotion Act, 1986 (Act No. 3 of 1986),
3. National Environmental Act, 2004,
4. Special Economic Zones Act, 2006,
5. Export Processing Zones Act, 2006 and
6. Business Names (Registration) Ordinance, Cap 213
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TOPIC NO 3: INTERNATIONAL REGULATION OF INVESTMENT

3.1. MULTILATERAL LEGAL FRAMEWORK ON INVESTMENT

There have been a number of attempts by various players in the international community
to come up with a multilateral legal framework for regulating investments generally, if
not an outright multilateral investment treaty. But many of these attempts did not
succeed. It is important for us to explore these failed initiatives first and just by few to
explore, because by doing so, it is possible to understand better and unearth the issues
that emerge. It is important also to mention that, most of the failed initiatives to
construct a multilateral framework on investments came from the Organization for
Economic Cooperation and Development (OECD), a platform of developed countries.

3.1.1. PARIS CONVENTION FOR THE PROTECTION OF INDUSTRIAL PROPERTY OF

1883

The Paris Convention for the Protection of Industrial Property, it was the convention for
the protection of industrial property signed in Paris France on 20th March 1883. The
convention covers industrial property in its widest services. For stance Article 1 of this
convention define and highlight the term Industrial property to mean patent, trademark,
industrial designs, utility models, service marks, trade names and indications of source.

The substantive provisions of the convention fall into three main categories

1. National treatment, under the provisions on national treatment, the convention

provides that as regards the protection of Industrial property each contracting state must
grant the same protection to nationals of other contracting states that it grants to its own
nationals

2. Right of priority, in patent, industrial design rights and trademark laws, a priority right
or right of priority is a time - limited right, triggered by the first filing of an application
for a patent, an industrial design or a trademark respectively. The right of priority
belongs to the applicant or his successor in title.

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3. The convention lays down a few common rules that all contracting states must follow
the most important are;

a. Patents b. Mark a. Patent is an exclusive right granted for an invention which is a

product or a process that provides in general, a new way of doing something or offers a
new technical solution to a problem. Patent granted in different contracting states for the
same invention are independent of each other. The granting of a patents in one
contracting state does not oblige other contracting states to grant a patent, a patent
cannot be refused, annulled or terminated in any contracting state on the ground that it
has been refused or annulled or has terminated in any other contracting state.

b. Marks, the Paris Convention does not regulate the conditions for the filing and
registration of mark which are determined in each Contracting State by domestic law.
Consequently, no application for the registration of a mark filed by a national of a
Contracting State may be refused, nor may a registration be invalidated, on the ground
that filing, registration or renewal has not been affected in the country of origin.

Why Paris Convention of 1883?

1. The convention or treaty marked a significant turning point in intellectual property

development as it was one of the first intellectual property treaties of its kind. One
reason why the Paris Convention has stood the test of time is that it applies to
intellectual property protection in a broad sense.
2. Another reason why the treaty remains significant is that the Paris Convention for
Intellectual Property was the first step towards intellectual property protection not
only in the country of origin but also in other countries.
3. Nationals of countries outside the union who are domiciled or who have real and
effective industrial or commercial establishments in the territory of one of the
countries of the Union shall be treated in the same manner as nationals of the
countries of the union.

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Under article 12 it provides for the union and scope of industrial property the However
article 33 of Paris convention it stipulates for the same treatment for certain categories of
persons as for nationals of countries of the union.

3.1.2. CONVENTION ESTABLISHING THE MULTILATERAL INVESTMENT GUARANTEE

AGENCY (MIGA)

The MIGA was established as an institution that provides guarantees in some form of
insurance to investing companies, in respect of non-commercial risks on matters of
investment, also established under the auspices of the World Bank

Convention establishing The Multilateral Investment Guarantee Agency MIGA

encourages the flow of investment for productive purposes among member countries
thus supplementing the activities of the international bank for reconstruction and
development

Article 2 of the Convention speaks about the issuance of guarantees, including co-
insurance and re-insurance, against non-commercial risks in respect of investments in a
member country which flow from other member countries. The MIGA also operates on
the presumption of some concluded investment or commercial agreement between the
company seeking the guarantee and the country hosting the investment, which means
agreement between a state and a company.

INVESTMENT PROMOTION, ARTICLE 23 OF MIGA

The agency shall carry out research, undertake activities to promote investment flow and
disseminate information on investment opportunities in developing member state with a
view of improving environment for foreign investment flows to such counties. The
agency may, upon the request of member, provide technical advice and assistance to
improve the investment conditions in the

territories of that member , while performing these activities the agency shall be guided
by the relevant investment agreements among member states, and secondly shall seek to

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remove impediments, in both developed and developing member state, to the flow of
investment to developing member state. And thirdly the agency shall coordinate with
other agencies concerning with the promotion of foreign investment and in particular the
international finance cooperation.

The agency also shall encourage the amicable settlement of dispute between investors
and hosting countries. Also, the agency shall endeavor to conclude agreement with
developing member countries with the prospective host countries which assure that the
agency with respect to investment guarantee by it has treatment at least as favorable as
that agreed by the members concerned for the most favored investment guarantee
agency or state in an agreement relating to investment, such agreement to be approved
by special majority of the board.

Agency also shall promote and facilitate the conclusion of agreement among its
members, on the promotion and protection of investment

The Agency shall give particular attention in its promotional efforts to importance of
increasing the flow of investment among developing member states

3.1.3. MULTILATERAL AGREEMENT ON INVESTMENT (OECD)

The OECD is a negotiations or an agreement which was held in Paris for the common
purposes reaching the multilateral agreement on investment and increase international
investment and protecting the FDI foreign direct investment among the member state
during such particular meeting in Paris the Member country agreed that the investing
person should acquire the same treatment as that of the National.

Negotiations on a proposed multilateral Agreement on Investment (MAI) were launched

by government at the annual meeting of the OECD council at Ministerial.

The background of the multilateral Agreement on Investment (MAI) was draft agreement
negotiated in secret between members of the Organization for Economic Cooperation
and Development (OECD) between 1995 and 1998.

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The basic principles was discussed under the Economic co-operation and Development
(OECD) instrument

1. National treatment, both before and after that the foreign investor should not be
treated less favorably than the National investor in like situation
2. Repatriation of profit, dividends, rents and the proceeds of liquidate investment
3. Transparency of regulations
4. A mechanism of consultation to deal with complaints and
5. Peer review to promote rollback of remaining restrictions

Under the OECD instrument on investment there are various convention include the
following

The draft convention on the protection of private property

The convention dealing with the protection and promotion of private property on
investment which was established in 1967 for the common objectives of protecting the
investor property especially under the foreign direct investment

The declaration and decisions on international investment and multinational Enterprises

Adopted in 1976 the declaration on international investment and multinational

Enterprises contain distinct element on investment first national treatment principles that
the investor in a hosting state should be treated equally as to such of national in terms of
tax or any investment incentives provided by the hosting state so as to observe the
equality among the member state the guidelines for multinational that establish
voluntary standard of conduct representing the collective of OECD government as to the
behavior of such enterprises.

Another element under the instrument is investment incentives and disincentive that
encourages transparency and review. And another element under the instrument is that
of conflicting requirements is another important element under the instrument in order
to avoid the imposition by the OECD government of conflicting requirements.

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Another instrument under the OECD is that of codes of liberalization of capital

movement and current invisible operation. Which provide that the decision of OECD
member is binding decisions in order to promote progressive liberalization of capital
movements and current transaction.

Also the Multilateral Agreement on investment allows the movement of people from
one country to another country and this supported by regional and domestic laws. In
another hand the Multilateral Agreement on investment aimed on the facilitating the
form of capital among investors with the particular regions. In which involves in
investing with free conditions such free faxes on the importing and exporting Goods and
assets.

The multilateral Agreement on investment lead to attempt to establish a framework for

the protection of foreign investment dates back to the 1920's most notably negotiating
on a league of Nations draft Convention in 1994 the Energy Charter Treaty provided an
Example of multilateral investment Agreement, though limited to the energy sector

Why multilateral Agreement on investment failed?

This agreement failed with the major elevated factors behind these include, the lack of
NGo investment or the absence of global public policy network is obviously not the only
reason for the failure of the multilateral Agreement on the investment (MAI).

Other issues like the lack of added value, the lack of Political backup an over ambitious
agenda or diverging views among the member states are often considered as well. The
establishment of Multilateral Agreement on investment worked together with various
laws, Treaties and Conventions which are....

1. The Energy Charter Treaty of 1994.

2. Tanzania Investment Act.

3. Export processing zones Act

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3.1.4. THE GENERAL AGREEMENT ON TARIFFS AND TRADE (GATT/WTO)

The General Agreement on Tariffs and Trade (GATT), is an agreement between countries
whose objective was to govern International trade by reducing/eliminating trade barriers
like tariffs and quotas. This instrument was signed in 30th October 1947 by 23 Nations at
Geneva and it came into force on 1stJanuary 1948.

GATT remained in effect until January 1st 1995 where the World Trade Organization
(WTO) was founded in Marrakesh on 15th1994 as part of Uruguay Round agreement. In
that sense, it’s clear that WTO is the successor to the GATT. Hence even currently the
original GATT is still on existence and well effective under the WTO framework
(umbrella).

The evolution of International Trade through the years

a) The pursuit for Trade without barriers and the arrival of the General Agreement on
Tariffs and Trade (GATT)

After the occurrence of the Second World War, the leaders of the Western world namely
Britain and U.S.A wanted to rectify the mistakes of the eastern economic isolationism
that existed during the years before the First and Second World Wars. It was believed
that the freer trade would be, it would result into a long term effect and advantages for
Economic reasons.

Therefore the United Kingdom and the United States of America began discussing the
establishment of a form of trade organization which would kick starts the enforcement of
a uniform set of trade rules agreed upon by its member states. Moreover, the goal of this
was to increase the promotion of Trade across international borders with Limited
government interference.

In 1945, the United States of America (U.S.A) had submitted a document to the United
Nations (U.N) calling out for the construction of what was then called "The International
Trade Organization" (ITO). This plan led to the commencement of a long string of

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negotiation rounds of which would later form the World Trade Organization (WTO) all
with the motive of facilitating "Trade without Barriers".

The International Trade Organization (ITO) did not reach fruition and all what was done
in the process of materializing it was encoded, and accommodated it into the General
Agreement on Tariffs and Trade (1947).

Originally the GATT was controlled by the most industrialized of nations and did not
address the needs of developing countries and this is evidenced whereby the only
countries represented were from the Middle East namely Lebanon and Syria while others
included recently independent at the time Burma, India and Pakistan.

Between 1947 and 1979, the GATT'S contracting parties undertook 7 rounds of
negotiations and this included the 1947 round whereby through the aforementioned
years, contracting parties increased from a meager 23 to 102.

b) The World Trade Organization (WTO)

This was brought into existence during the "URUGUAY ROUND" of 1986 which was the
most round which commenced in a town in Uruguay named Punta del Este. The round
led to the creation of an International Organization which was devoted to trade.

The Marrakech Agreement of 1994 marked the end of the Uruguay negotiations and
marked the beginning of the establishment of the WORLD TRADE ORGANIZATION
(WTO). It also marked the halt of the GATT although it ought to be expressed that the
GATT was no longer the eminent International Trade Organization as all the suitable
rules, agreements and concessions were all adapted by the World Trade Organization
(WTO).

The Marrakech Agreement was the one that established the World Trade Organization
(WTO) as it was signed on the 15th of April 1994. But aside from calling out for the
creation of the organization, the agreement also defines its scope, its functions, its

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structure along with its relations with other International Organizations through Article
II, III, IV and V respectively.

Moreover, Annex 1 of the World Trade Organization Agreement provides an exhaustive

list of all the agreements and treaties that govern and work hand in hand with the
Organization and treats them as "INTEGRAL PARTS" of the agreement as they are
considered to be binding as well.

GATT/WTO as an international trade instrument regulates investment through its

provisions which brings about fair treatment on the issue concerning with international
trade as follows;

i. Prohibiting discrimination between the local goods and imported goods from
members

Herein, the contract members of GATT/WTO shall not apply intentionally the
discriminatory measures towards the Domestic and imported goods from members. In
that sense Trade activities international trade gains the conducive environment and easier
flow of trade from one-member state to another since there’s no Discrimination of trade
goods hence attracts investment activities intern of trade goods. Though far members are
prohibited from performing discrimination to the domestic and abroad goods, there are
some circumstances which when happens/appears then members may have allowed
performing the discriminatory measures towards the domestic and abroad discrimination.

Herein there are two exceptions which are General exception and security exception.
General exception provides that “Permission for non-arbitrary and non-discriminatory
measures against a certain import for reasons including public moral ground, health,
prison Labor and National Historic/cultural treasures”. Another is security Exception
which provides that nothing I’m this agreement is construed to commit members to
actions etc. contrary to their National security.

ii. Elimination of quantitative restrictions

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Herein, quantitative restriction refers to the Specific limits on the quantity or value of
goods to be imported or exported during a specific period of time. so. Herein trade
restrictions should not base on limiting the member states from importing and exporting
their goods, instead other measures can be employed inform of duties, taxes and other
charges, whether effective through quotas, import and export licenses and other
measures, ultimately requiring the ratification of all quantitative restrictions. All new
trade measure to be in the form of Tariff

iii. Non-discrimination in Administration of quantitative restrictions

No discrimination to be applicable between members in the application of quantitative

restrictions and the allocation of such restrictions should go aside with their trade shares.
In case there’s any restriction, its details must be made transparently and must negotiate
with affected members. This provision provides for the fair treatment for all members’
interns of administering the quantitative restriction, but also it provides for the fair
Capital determination when applying the quantitative restriction by making reflection
between the quantitative restriction allocation and the members’ shares. In that case, the
trade and investment activities become strengthened since the business conducted fairly.

iv. Assistance to economic development

The developed countries should support the infant industries from the infant countries so
as to make the infant industries to have the good capacity on the industrial production so
as to speed up the industrial as well as to the investment sector. These Economic
assistances from the developed countries also may target on the construction of
infrastructures which may use to speed up the rate of industrial growth and makes easier
all the business activities.

v. Anti-dumping Right

The contracting parties have been given the right to apply the anti-dumping measures
against imports of a product at an export price below its normal value. The criteria to

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this aspect to be implemented must look on the price of the product in the domestic
market of the exporting country.

Normally this Right is applied when it seems the dumped exports caused injury to the
industry of the domestic country. So, contract parties enjoying this Right under specific
conditions as provided, “Members may apply duties and other measures can be applied
to goods originating in other Members which are dumped and/or enjoy export subsidies
subject to specific conditions”

3.1.5. NEW YORK CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF

FOREIGN ARBITRAL AWARDS OF 1958

The convention also called the New York convention, the convention is bedrock upon
which international Arbitration is founded. It is the most important international treaty in
the recognition and the enforcement of foreign arbitral award. Most countries have
ratified the convention or enacted legislation that substantially echoes it is provision.

The principle aim of the convention is to ensure, that foreign and non-domestic arbitral
award will not be discriminated against and it obliges parties to ensure such award are
recognized and generally capable of enforcement in their jurisdiction in the same way as
domestic awards.

Article III of the convention, recognize arbitral award as binding and enforce them in
accordance with the rules of procedures of the territory were the award is relied upon
and that there shall not be imposed substantially onerous conditions or higher fees or
charges on the recognition or enforcement of arbitral award to which this convention
applies than are imposed on the recognition or enforcement of domestic arbitral award.

The New York convention has paved the way to arbitration as an innovative and more
appropriate procedure to settle economic disputes (investment disputes included) and
more it has set up a global procedure to contracting parties on the basis of foreign
arbitral awards.

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This to mean that wherever there is an international trade as well as international

investment thus to say the dispute will arise too, the convention came up with the
binding power of the foreign arbitral awards to the contracting state except as specified
under Article V where the party can make a request to invoke the recognition and
enforcement of the award to the competent authority where the recognition and
enforcement is sought.

3.1.6. THE CONVENTION ON THE SETTLEMENT OF INVESTMENT DISPUTES

BETWEEN STATES AND NATIONALS OF OTHER STATES OF 1965

This is one of the multilateral legal frameworks where the convention put much emphasis
or put it effort of the settlement of investment disputes between states and nationals of
other states. The convention entered into force on October 14, 1966, when it had been
ratified by 20 countries. As at April 10, 2006, 143 countries have ratified the convention
to become Contracting States.

The convention was formulated by the executive Directors of the international Bank for
reconstruction and Development (the World Bank)

The Convention established the ‘International Centre for the Settlement of Investment
Disputes’ (ICSID). The Convention and the corresponding Centre are mechanisms under
the auspices of the World Bank, and the two provide conciliatory and arbitral
mechanisms for the settlement of investment disputes between states and nationals of
other states.

Under Article 1(2) provide for the purposes of the Centre which is to provide facilities for
conciliation and arbitration of investment disputes between contracting states and
nationals of other contracting states.

Chapter II provide for the jurisdiction of the Centre from the provision of Article 25, 26,
and Article 27, whereby the jurisdiction extends to any legal disputes arising directly out
of an investment, between the contracting states or any constituent subdivision or agency
of a contracting states designated to the Centre by that state and nationals of other
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contracting states, which the parties to the disputes consent in writing to submit to the
Centre. The concept of jurisdiction of the tribunal was discussed in various cases as
follows with regard to the interpretation of investment treaties, i.e. case of AES Corp VS
Argentina.

However, as per the general principles of arbitration, this mechanism presupposes the
existence of a valid investment or commercial agreement between the litigants. This is an
investment treaty between a state and a company. Then any country which becomes
party to the treaty automatically agrees to have disputes between it and investors
referred to the ICSID.

Further, although the Convention is a mechanism for dispute settlement only, the arbitral
proceedings carried out under the Convention have had the opportunity to develop the
jurisprudence on the substantive issues of international law on investment. The
Convention was concluded on 18th March 1965 under the auspices of the World Bank,
and entered into force on 14th October 1966.

As we have observed already, the purpose of the ICSID is to provide a platform and
facilities for conciliation and arbitration of investment disputes between Contracting
States and nationals of other Contracting States, in accordance with the provisions of the
Convention.

The available dispute settlement mechanisms under the Centre consist of conciliation and
arbitration. Before the convention came into force, investment disputes between
sovereigns and companies from other states were almost impossible to undertake because
only states have standing before the International Court of Justice (ICJ). But, even when
states were ready to stand in for their companies at the ICJ against other states, under the
principle of diplomatic protection to companies, such proceedings were usually
overshadowed with politics.

Thus, it was deemed necessary to have another forum which would hear disputes
between states and nationals of other states, including companies. Further, the expression

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‘nationals of other states’ entails: “...any natural person who had the nationality of a
Contracting State other than the State party to the dispute on the date on which the
parties consented to submit such dispute to conciliation or arbitration as well as on the
date on which the request was registered”.

The Convention on the Settlement of Investment Disputes between States and Nationals
of Other States has its foundations on the logic of the principle of pacta sunt servanda in
respect of investment agreements between host states and investors, as well as Bilateral
Investment Treaties (BITs); the doctrine of state responsibility; the doctrine of fair and
equitable treatment; the doctrine of respect for acquired rights; and the doctrine of good
faith and prohibition of abuse of rights. On the other side, it contradicts the principle of
exhaustion of local remedies which requires disputes to be submitted to domestic
mechanisms before approaching international ones.

3.2. WORLD BANK DIRECTIVES

The World Bank is an international organization declared to providing financing advice

and research to developing nations to aid their economic advancement. The bank
predominantly acts as an organization that attempts to fight poverty by offering
developmental assistance to middle- and low-income countries.

The policy and procedures frame work are a frame work which provides a new structure
for developing and managing policy procedures, directives and guidance type documents
(P&P documents) issued by the board and management.

The World Bank Group board of directors refers to four separate boards of directors
namely: The Board of International Bank for Reconstruction and development (IBRD)
the international Development Agency (IDA), the international Finance Corporation
(ICF) and the multilateral investment guarantee agency (MIGA), each board is
responsible for the general operation of their respective organization.

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The executive directors as individuals cannot exercise any power nor commit or
represent the Bank unless specifically directors are appointed or elected by governors.
Separate election is selected to the banks and MIGA Board of Directors.

The current Board of the World Bank Group consists of 25 Directors, in line with the
Bank’s Articles; the Executive directors select the World Bank president who is the
chairman of the Board of Directors.

Scope of Application Where the Bank is jointly financing a project with other
multilateral or liberal funding agencies the Bank will cooperate with such agencies and
the borrower in order to agree on a common approach for the assessment and
management of environmental and social risks and impacts of the project a common
approach will be acceptable to the Bank provided that such an approach will enable the
project to achieve objectives materially consistent with the environmental service system
service (ESSS).

The bank will require the borrower to apply the common approach to the project. This
Bank will also be coordinated with such agencies so that the Bank and the borrower may
be able to disclose. This policy and the environmental service system service apply to all
projects supported by the Bank through investment project financing.

The Bank will only support projects that are consistent with and within the boundaries of
the environmental service system service (ESSS) in a manner and within a time frame
acceptable to the Bank.

Objectives and principles

The Bank is committed to supporting borrowers in the development and implementation

of projects that are environmentally and socially sustainable and enhancing the capacity
of borrower’s environmental and social frame work to assess and manage the
environmental and social frame work.

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To carry out this policy the Bank will undertake its own due deliquesce of proposed
projects, proportionate to the nature and potential significance of the environmental and
social risks and impacts related to the project. Projects supported by the Bank through
investment projects financing are required to meet the environmental & social standard.

World Bank Guidelines on the Treatment of Foreign Direct Investment

The World Bank adopted, since September 1992, Guidelines on The Treatment of
Foreign Direct Investment. The Guidelines, unlike treaties, are not binding on
governments, but are intended to influence those governments in the formulation of new
laws and treaties. The Guidelines cover three out of the four traditional main areas
regulation of investment, which are: admission and treatment of investments;
expropriation of foreign investments; and settlement of investment disputes.

Guideline II deals with the issue of admission or entry of foreign investments. Section 1 of
Guideline II makes an emphasis on the encouragement of foreign investments. The
section states provide that foreign investments are a useful tool in financial terms and in
terms of transfer of technology and managerial skills.

Section 2 of the same Guideline envisages that states will facilitate the admission and
establishment of foreign investment and will avoid over regulation and inception of
unnecessary bureaucratic hurdles to admission.

However, Section 3 of the same Guideline clearly recognizes the fact that, states have
rights to regulate the entry of foreign investments, and the only thing that the Section is
against is restrictive approaches such as minimum local ownership and staffing. Minimum
local ownership is sometimes called local content.

But, sections 4 and 5 of Guideline II state important types of exclusions that States may
make, e.g.; under very exceptional circumstances states may exclude from their territories
foreign investments which threaten national security or which belong to sectors legally
reserved to its nationals on account of the state’s economic development objectives or

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national interest requirements, or exclusions against investments which are contrary to

the public order, or affect the environment or public health.

Section 6 of Guideline II encourages the publishing and accessibility of information about

a host nation’s legislations, regulations and procedures relevant to foreign investment.

Guideline III is about general standards for the treatment of Foreign Direct Investments
by host countries, particularly covering issues of transfer of capital and returns on
investment capital. The section calls for fair and equitable treatment of foreign
investment, in line with the national treatment principal. However, it qualifies the ‘fair
and equitable principle’ even further by stating that, foreign direct investments deserve
the right to full protection and security regarding ownership, control and the substantial
benefits over property ownership and protection, including intellectual property.

It also calls for timely and effective transfer of capital, referring to the currency and the
exchange rate at which the transfer is made. Guideline III further recommends that, host
states should permit and facilitate the re-investment of returns and liquidation proceeds.

It requires all states to take all necessary measures to prevent and control corrupt business
practices. The same caution is given also against granting of tax exemptions and other
fiscal incentives, which very often represent unjustified sacrifices on the host states and
serve as poor substitutes for appropriate investment policies. The Guideline postulates
that, reasonable and stable tax rates provide better incentives to investors.

Guideline IV deals with the question of expropriation. It gives a broader interpretation of

the term ‘expropriation’ to include both partial as well as total expropriation of foreign
investments.

Where expropriation is done it must not be discriminatory on the basis of nationality and
must be in good faith and appropriate compensation must be paid, and that,
compensation must be adequate, effective and prompt based on fair market value as
agreed between states and foreign investors.

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Guideline V deals with the question of investment disputes. The Guideline encourages
conciliation or binding arbitration as a possible alternative to adjudication before
national courts.

3.3. REGIONAL LEGAL FRAMEWORK

These are legal princes that are contracted between states of the same geographical
position or location. They are treaties that regulate the relationship among the members
of the same geographical extraction and on this subject regulate the investment,
commercial and trade among the members

I. AFRICAN UNION INTEGRATION (AUI)

Starting with African Union (AU) Integration which emphasize the investment by
adopting good directives and principles of developed integrations and from World Bank
IMF so as to achieve higher economically of member state, African Union established the
Draft pan African investment code of 2016 through economic affair department of
African Union, which marked as the main guider on investment matters among member
state of AU who adopt the code through domestication in their states.

The objective of this Code is to promote, facilitate and protect investments that foster
the sustainable development of each Member State, and in particular, the Member State
where the investment is located. And this code applies as a guiding instrument to
Member States as well as investors and their investments in the territory of Member
States and also the cider defines the rights and obligations of Member States as well as
investors, and in order to protect and promote investment among the member state this
code establish the principal of national treatment so as to create fairness and equality of
all foreign investors.

Generally, this code interim of disputes settlements Member States is encouraged to

resolve any disputes regarding the interpretation and application of this Code initially
through consultations, negotiations or mediation.

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II. SOUTHERN AFRICA DEVELOPMENT COMMUNITY (SADC)

Then, in SADC, Investment policy framework from the southern Africa development
community traced back in 2012, the 15 members states of the southern African
development community (SADC) identified the OECD’s policy frame work for
investment (PFI) as a reference for developing an investment policy frame work specific
to the SADC region.

This frame work is a key input to the SADC regional action plan on investment and it
builds in national level analytical assessment, peer-learning and best practices from OECD
and non- OECD countries. The SADC investment policy frame work (IPF) aims to
facilitate original co- ordination and exploit economies of scale in improving investment
frame work and policies across SADC member states. It also provided a mechanism for
knowledge sharing and policy dialogue around good practices. The policy framework for
investment (IPF) was endorsed during the 6th SADC investment policy framework
meeting in July 2016.

This work is taking place within the context of the OECD African investment initiative
and also draw a on the OECD tax and development program. On the treaty
establishment of southern African development community (SADC) of 1992, particularly
stipulates scope of cooperation. Article 21, of the same treaty stipulate that “member
states shall cooperate in all areas necessary to faster regional development their fore
Article 24(1)41 of the same treaty reveals that, members states shall maintain good
working relations and other forms of co- operation owned may enter into agreement
with other states”.

In this sphere the aspect of regional framework under investment purpose regulated and
reviled nude Article 21 and 24(1)42 of this treaty; whereas the Purpose of this is to
incorporate the OECD’s policy in regional level.

III. ECONOMIC COMMUNITY OF WEST AFRICAN STATES (ECOWAS)

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A major objective of the ECOWAS Commission under the Revised ECOWAS Treaty is to
promote regional co-operation and integration that can propel the veritable
establishment of an economic union in West Africa. The purpose of this economic union
is to raise the standards of living of the people of West Africa, maintain and enhance
economic, social, and political stability in the region, foster stronger commercial
relationships amongst all of the Member States, and contribute to the economic, social,
and political progress and development of the African continent.

The need for creating an ECOWAS investment market came to the fore following the
commencement of the negotiations between the ECOWAS Member States and the
European Union (EU) in October 2003 to agree on the terms of the Economic
Partnership Agreement (EPA).

These negotiations provided the impetus, as well as the platform, for the elaboration of a
specific regional position on investment. In May 2008, the ECOWAS Commission
presented a draft proposal on investment-policy and investment-climate harmonization
to the ECOWAS Council of Ministers.

The purpose of this proposal was to create a single ECOWAS investment-and-trade space
that could ensure similar treatment of private investments in the ECOWAS region, trigger
increased intra-regional and extra-regional investments in West Africa, and enhance the
competitiveness of enterprises doing business in the region.

ECOWAS has been preparing a draft regional Investment Code that is based on the
ECOWAS Investment Policy or ECOWIP as set out in this document. The fundamental
purpose of the ECOWIP is to lay the foundation for a harmonized, secure, transparent,
stable, and predictable legal, regulatory, and institutional framework for national
investment and FDI, including intra-regional and extra-regional investment, that is
applicable in the ECOWAS region. To this end, the ECOWIP, as based in part on the
OECD Framework, but adapted to West African economic realities.

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3.4. BILATERAL LEGAL FRAMEWORK

Bilateral trade agreements are agreements between countries to promote trade and
commerce. It is an agreement made by negotiations between two parties, established in
writing and signed by representatives of the parties. On investment agreements are
signed between two countries and which state the desired conditions under which
investment can take place between them.

Bilateral agreements on investment can be traced after second world war where the first
Agreement between West Germany and Pakistan, was signed in 1959.Today almost
every country has signed Bilateral agreements With other states.

1. Purpose or objective of the agreement in relation to promotion of investment and

development

It is expected that providing strong protection standards will create a favorable

investment regime and therefore promote investment. Investment promotion aspects are
weak in BITs and many new BITs have not addressed the possibility of strengthening the
promotion provisions with concrete commitments.

In some "old generation" BITs promotional measures are included such as holding
economic and commercial fairs or the establishment of mixed commissions to promote
economic development. There are however, no provisions to support the efforts to
promote private investment in the host countries or to encourage the dissemination of
information that is of importance for developing countries.

None of the BITs studied so far make any distinction between the rights and obligations
applicable to developed or developing countries regardless of the asymmetry in
economic development.

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2. Definition of investment under UNCTAD, Bilateral Investment Treaties in the Mid-

1990s, 1998

The more recent BITs use in general an asset-based definition of investment that is broad
and open-ended, covering tangible and intangible assets which include portfolio
investment, shares and bonds, intellectual property rights, licenses and concessions
(example the right to exploit natural resources). This applies to all sectors and to existing
as well as new investments.

A few BITs have a narrower definition focusing on Foreign Direct Investment, example in
the BIT between Denmark and Lithuania, operational from 1993 onwards, defines
investment as "every kind of asset connected with economic activities acquired for the
purpose of establishing lasting economic relations between an investor and an
enterprise".

3. Coverage of pre and post-establishment investment

In most BITs, entry and pre-establishment are subject to the national law of the host
country although entry of investments is encouraged. BITs signed with Canada and the
US go beyond the practice of most BITs by granting Most Favored Nations and National
Treatment related to the entry and pre- establishment of investments.

This practice was already the case in the BIT signed in December 1983 between the US
and Senegal, and which entered into force in October 1990.

This pre-establishment right is limited by a list of exceptions (top down approach) which
allows countries to treat potential investors (in sectors of the exception list) in the same
way as national investors or those from other countries. This means that BITs signed with
Canada and the US include investment liberalization provisions except where exceptions
are made.

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4. Performance Requirements

Most BITs, including the most recent ones, do not include a clause that prohibits host
countries to impose certain performance requirements, with the exception of the US and
Canada.

Other countries might use other instruments than BITs to limit performance requirements
such as the TRIMs agreement under the World Trade Organization, which sets out
several limitations for the use of performance requirements.

If the performance requirements are imposed following the admission of an investment,

they may violate a BITs guarantee of national treatment when national companies are
not subject to performance requirements. Performance requirements imposed as a
condition for the entry of an investment escape the national treatment restriction of most
BITs.

Prohibition of performance requirements does not normally preclude the granting of

some specific types of incentives to obtain a certain performance by foreign investors.

5. Investor-to-state dispute settlement and state-state dispute settlement

BITs include provisions for the resolution of disputes between a particular state and
investors of the other state, and between the state parties to the treaty. With regard to
disputes between a host country and investors, many BITs provide for recourse to agreed
international dispute-settlement mechanisms.

While there are several variations in current practice, the general trend is to give investors
the choice of arbitral mechanisms through institutions such as the International Centre for
Settlement of Investment Disputes (ICSID) and the affiliated Additional Facility, the
International Chamber of Commerce or various regional arbitration centers. The
methods and procedures for resolving disputes between state parties to BITs involving
the application of the treaty are spelled out in a rather elaborate set of provisions.

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6. Application of 'national treatment' principles and the Most Favored Nation principle:

Most BITs prohibit measures which foreign investors consider discriminatory once an
investment has been established. Recent BITs provide treatment no less favorable than
that which includes national and MFN treatment. There are also a number of
standardized exceptions to the treatments relating to taxation instruments and to special
privileges granted by reason of the countries' membership of free trade areas and
regional integration frameworks.

i. National Treatment

Most BITs include standard national treatment of foreign investors but not all BITs do,
example the BITs which China concluded before the 1990s did not include national
treatment. The coverage of national treatment obligations may also vary depending on
exceptions relating to public order and national security. Specific exceptions to national
treatment may also be granted to allow for special treatment (example incentives) to be
provided to local companies or on sectoral basis.

In "older generation" BITs, example between the Netherlands and Kenya (signed in
1970), the application of national treatment was limited to certain areas; the payment of
taxes, the enjoyment of fiscal deductions or to the protection of intellectual property.

In some "older generation" BITs, national treatment has been defined as "equal to, and
the same treatment as" that given to local investors. This implies that foreign investors
cannot be Favored over domestic industries. The definition of national treatment in later
BITs as “not less favorable as" gives the home country the ability to favor foreign
industries above home industries

Nation treatment can have far reaching consequences for economic development policy
because national companies cannot be favored over foreign company’s example for
incentives, subsides etc.

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ii. Most Favored Nation clause (MFN)

The application of the MFN standard has also been broadened through the years.
Because not BITs include an MFN provision, any form of favorable treatment given to
foreign investors by a host country should be extended, in principle, to investors of every
other country with which the host country has concluded a BIT containing an MFN
clause.

This means that if national treatment provisions have been included in later BITs, such
treatment should also be given to investors from countries with which earlier BITs even if
these earlier BITs have no national treatment provisions. In general, many differences
regarding post-establishment treatment between BITs implemented by a country may
become irrelevant, except if the BIT includes exceptions about MFN status.

7. Expropriation rules and compensation

In most current BITs, the terms "expropriation" and "nationalization" include, explicitly or
implicitly, measures tantamount or equivalent to expropriation (also called "indirect"
expropriations or "creeping" expropriations). Most BITs adopt the traditional rule of
international law that a state may not expropriate the property of another state except
for public purpose in a non-discriminatory manner in accordance with due process of law
and payment of compensation. All BITs require the compensation for expropriation,
which is an important aspect of the BITs and their provisions relating to expropriation.
However, the standards for determining the amount of compensation have been much
debated and differ among BITs.

Some "old generation" BITs did not cover indirect expropriation. Also, the standards used
for compensation have been broadened and specified through the years. Initially it was
"adequate, justified and fair", but recent agreements refer to just compensation that
represents the genuine value of the Investment affected. A more development-friendly
wording would be that the transfer should be made without undue delay, transferable
and convertible.

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However, because of MFN treatment provisions are included in most BITs, most investor
friendly provisions in a BIT have to be applied to all investors from countries with whom
a country has signed a BIT.

8. Minimum standards of treatment rules:

Common in current BIT practice are standards of:

i. Fair and equitable treatment,

ii. Full protection and security, and
iii. Prohibition of arbitrary and discriminatory measures by the host country

A number of recent BITs include general exceptions (example cultural exceptions, sectoral
exceptions or exclusion of certain types of Investments, such as portfolio transactions)
which limit the substantive scope of the treaty.

9. Capital controls

The great majority of BITs has a provision concerning the transfer of payments which is
an important element of BITs. Current BITs guarantee the free transfer of payments
related to, or in connection with, an investment. They often include a list of the types of
payments covered by the transfer provisions. In some instances, BITs include an
exception on a temporal basis for balance-of-payments (Bop) problems (which can result
from sudden repatriation of large profits or the proceeds from sale or liquidation) and
stipulate the conditions when this exception can be invoked.

10. Duration of the BIT

In recent BITs the roll back clause, it has generally been agreed that protection is
provided to investments which had been established prior to the entry into force of the
treaty. Host countries are often reluctant to provide this provision but they want to
emphasize their commitment to protect investors in the hope that this will attract new

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investors. A BIT text can include provisions that this does not automatically mean that
prior investors can resort to the dispute settlement mechanisms allowed for in the BIT.

The most common minimum term is 10 years but some BITs provide for 20 years or
more. After the fixed term has ended, the treaty may be terminated by either party,
usually with one year's notice but if it is not terminated, it still remains in force. Many
BITs specify the additional fixed terms which stipulates that the treaty continues to be in
force, which tends to give more stability to investors. In some cases, the treaty protection
continues for the life of an investment, even if the treaty is terminated.

11. Regulations

A few recent BITs include a provision allowing for national measures aimed at protecting
the environment.

12. Transparency

Most BITs do not explicitly address the problem of transparency. A few BITs, including
those signed by the United States, provide for making public those laws, regulations and
administrative practices that affect Investments. Some BITs have a provision that obliges
each party to provide information about Investment regulation.

Other means of promoting transparency in some BITs are consultative mechanisms such
as the requirement that two parties meet periodically. Some developing countries
included transparency clauses in BITs to demonstrate the credibility of their commitment
to provide a favorable Investment climate.

Tanzania has entered into many bilateral agreements such as;

a) Agreement between the Government of Canada and the Government of the United
Republic of Tanzania for the Promotion and Reciprocal Protection of Investments signed
17/5/2013 entered into force in 9/12/2013. This agreement was entered for the purpose
of creating favorable conditions for greater investment by nationals and companies of

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one State in their territory Article 3 provide for the promotion and protection of
investment Article 4 and 5 provide for the principle of most favored Nations and
national treatment. Section C provides for the settlement of disputes between Investor
and host state which will be By ICSID and Ad hoc Tribunal formed under UNCITRAL
arbitration Rules. Section D provide for settlement of disputes between contracting states.

b) Agreement between the Government of the People’s Republic of China and the
Government of the United Republic of Tanzania concerning promotion and Reciprocal
Protection of Investments entered into 24/3/2013 enter into force in 17/4/2013. This
agreement was entered for the purpose of creating favorable conditions for greater
investment by nationals and companies of one State in the territory. Article2 provide for
the promotion and protection of investment. Article3 and 4 provide for the principle of
Most favored Nations and national treatment Article 12 provide for the settlement of
disputes between contracting parties which will be on arbitral tribunal. Article 13 provide
for settlement of disputes between States and investors.

c) Agreement between the Government of the United Kingdom of Great Britain and
Northern Ireland and the Government of the United Republic of Tanzania for the
Promotion and Protection of Investments signed 7/1/1994 entered into force in 2/8/1996.
This agreement was entered for the purpose of creating favorable conditions for greater
investment by nationals and companies of one State in their territory. Article 2 provide
for the promotion and protection of investment. Article 3 provide for the principle of
most favored Nations and national treatment. Article 9 provide for the settlement of
disputes between contracting parties which will be on arbitral tribunal.

Machinery for Settlement of Investment Disputes

Investment disputes can sometimes be resolved in local courts, or through state- state
dispute settlement. However, the most common way in which breaches of an investment
treaty are enforced is via investor-state arbitration.

a) International Centre for settlement of investment disputes (ICSID)

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b) UNCITRAL Arbitration Rules

c) International Chamber of commerce
d) Permanent Court of arbitration at the Hague

a) international Centre for settlement of investment disputes (ICSID)

The International Centre for Settlement of Investment Disputes (ICSID) is an international

arbitration institution established in 1966 for legal dispute resolution and conciliation
between international investors and States. ICSID established by ICSID Conventionunder
the auspices of World Bank. This means the ICSID is a member of the World Bank
Group, from which it receives funding. Article 25 (1) of the Convention provide
jurisdictions of the ICSID which states thus:

“The jurisdiction of the Centre shall extend to any legal dispute arising directly out of an
investment, between a Contracting State (or any constituent subdivision or agency of a
Contracting State designated to the Centre by that State) and a national of another
Contracting State, which the parties to the dispute consent in writing to submit to the
Centre…”.

Laws applicable in settling disputes are ICSID convention, Regulations, Rules which is
used to disputes between the members states and ICSID additional Facility rules which is
when one party is not a member state. All ICSID contracting member states, whether or
not they are parties to a given dispute, are required by the ICSID Convention to
recognize and enforce ICSID arbitral awards.

ICSID is main and leading institution in resolving investment disputes. The ICSID provides
administrative and technical support for a number of international dispute resolution
proceedings through alternative facilities such as the Permanent Court of Arbitration in
The Hague, Netherlands, the London Court of International Arbitration, and the
International Chamber of Commerce in Paris, France. ICSID administers proceedings
under the ICSID rules, as well as arbitration cases under other rules, such as the
UNCITRAL Arbitration Rules and ad hoc investor-State and State-State cases.

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b) UNCITRAL Arbitration Rules

UNCITRAL Arbitration Rules are set of procedural rules aimed at the resolution of
international disputes. They apply when parties have specifically agreed to and chosen
the UNCITRAL Arbitration Rules to resolve their dispute. UNCITRAL Arbitration Rules
were adopted in 1976 and have been used for the settlement of a broad range of
disputes, including disputes between private commercial parties where no arbitral
institution is involved, investor-State disputes, State-to-State disputes and commercial
disputes administered by arbitral institutions

c) International Chamber of commerce (ICC)

The International Chamber of Commerce (ICC) is the largest business organization in the
world, with 45 million member companies from more than 100 countries. It was formed
in 1909. The ICC performs a number of functions for businesses, including the
establishment of rules, dispute resolution.
Advocateandtraining.ICCisreferredasaforumforinvestorStatedisputesinseveralInternational
InvestmentAgreements. ICC Arbitration is a private procedure that leads to a binding and
enforceable decision through ICC International Court of Arbitration.

The International Court of Arbitration (ICC Court) is the world’s leading arbitral
institution. It was established in 1923 and its main function is to resolve commercial and
business disputes to support trade and investment. The services of the ICC Court are
often used by individuals, businesses and governments to solve their disputes. The Court
mainly serves for commercial disputes and, to a lesser extent, investor-State disputes. The
ICC Court does not make formal judgments on disputed matters. Instead, the Court
exercises judicial supervision of arbitration proceedings.

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d) Permanent Court of Arbitration

Permanent Court of Arbitration is an intergovernmental organization located in The

Hague, Netherlands. It was formed in The Hague Peace Conference of 1899 by the
Conventions for the Pacific Settlement of International Disputes of 1899 and 1907. It
provides services of arbitral tribunal to resolve disputes that arise out of international
agreements between member states, international organizations or private parties. It
resolves disputes arising in territorial and maritime boundaries, sovereignty, human
rights, international investment, and international and regional trade

In the beginning PCA administered on interstate disputes; in 1934, the PCA

Administrative Council approved a request for the administration of arbitration between
the Radio Corporation of America and the Republic of China, holding that the founding
conventions permitted the administration of cases between a State and a private party.
The PCA is currently acting as registry in 5 interstate proceedings, 107 investor-state
arbitrations and 69 cases under contracts or other agreements

Other instruments which are also important under disputes settlement include
‘Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958
which the main purpose is to create a framework for the recognizing and enforcing
foreign arbitral awards, which are awards made in the territory of another State,
provided that the other state is also a party to the Convention. Also disputes settlement
mechanism under GATT is also applied.

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TOPIC NO 4: HISTORY OF INVESTIMENT IN TANZANIA

4.1. INVESTMENT DURING THE COLONIAL PERIOD

This period can be traced back to the Berlin Conference in 1880’s where scramble for and
petition of African Continent took place. Under this conference Tanzania (TANGANYIKA
by that time) was handed over to German. However the occurrence of First World War
1914-1918 brought new thing where by the German had to handover her territory under
the League of Nation and TANGANYIKA was put under British government.

In these years the European scrambled to acquire territories in Africa since they wanted
to invest in different sectors mainly agricultural sector. Investments in these years were
implemented thorough ‘Acquisition of Land’ as well as ‘the Administration’.

In Tanzania (former Tanganyika), the colonial period concerning investment were

divided two periods namely; The German Rule Period and the British Rule period

Tanzania witnessed the regime of Germany and British. Germany regime started in 1905
up to the end of the First World War then; Tanganyika was placed under trust ship
council in 1919 by the League of Nations. Therefore Regime of British existed from 1919
up to 1961 where Tanganyika becomes an independent state.

GERMAN RULE 1905-1918

Under the German domination, Tanzania (former Tanganyika) was known as German
East Africa Territory, the territory was under the rule of investors inform of a charted
company which was found in Berlin in 1885, the company rule was inconformity with
the rule of OTTO VON BISMARK (German Chancellor at that time). It is in the same
period that, Karl Peters signed a number of agreements together with other merchants
which formed a SOCIETY OF GERMAN COLONIZATION.

The objective of the society was to find Germany plantation and commercial colonies.
Later in the same year (1885) Karl Peters arrived in Zanzibar, then Tanganyika (now
Tanzania), Usagara and signed a number of treaties with native chiefs. The treaties were
entailed about to give control to the society of Germany Organization so as to protect

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their interest agreed with the native Chiefs. But also the treaties allowed the traders to
come in those areas so as to conduct trading activities.

Later Karl Peters went back to German with these treaties asking for government support.
The government did provide support and hence the establishment of Royal Charter
which failed to operate, then the takeover of Imperial government of Germany. The
Royal Charter as a company failed due to opposition from the Costal Arabs also they
hugely based on commerce and not administration.

So from 1890 the Imperial Government of Germany investors played a fundamental role
in shaping investment hence the birth of public investment. As a result, infrastructural
development took place; this includes the construction of Kigoma to Dar-es-Salaam
railway which facilitates easy transportation of cheap labors and raw materials.

Under the Germany rule, the major investments were concentrated in plantation and
other agricultural related businesses. Sisal seemed as the major cash crop prevailing in
most areas of Tanganyika such Morogoro, Kilimanjaro and Tanga.

The problem with Investing in Agriculture under German rule was availability of land to
create a Land bank (land reserved for investment purpose). This problem forced
Germany to introduce new Land Tenure which involved the alienation of land from the
natives.

In 1895 the German colonial government established land tenant system. This was done
by passing German imperial decree which provided equal to occupancy and use the land
to the people .This is encouraged agricultural Investment.

The Germans also invested in financial sectors where they established Deustch Bank
which had branches in Dar-es-Salaam and Tabora. In 1911 another bank was formed, as
the Germans needs financial reforms. These banks become essential roots for financing
multiple investments for example, supporting of industrial and infrastructural
undertaking.

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Due the outbreak of the First World War in 1914 to 1918 the colonial investment of
Germany was interrupted. After 1918 Tanganyika placed under British mandate.

BRITISH RULE 1919-1961

After the end of the First World War German handed over His all colonies includes
Tanzania (Tanganyika by then) AND Britain did the following in encouraging investment
in Tanzania. British gained control of Tanganyika through the League of Nations to
prepare her for independence. During the British rule, they used same approach as that
of German especially on three sectors including Financials

Also through passing land Ordinance 1923.This ordinance dealt with securing the right to
occupy and use land to the natives. Here people were given land to use and occupy. This
was introduced by sir Homage Hyatt sir Donald Cameroon influenced a new vigor in
Tanzania in 1925-1931 to build up local government on the basis of traditional authority.

Also the British introduced the ground nuts scheme (5 million acres) this plan was cost
€25 million and €45 million would be necessary for the construction of rail way in
southern part of Tanganyika.

4.2. INVESTMENT IN THE PERIOD OF 1961 TO THE ARUSHA DECLARATION 1967

Investment under this period of 1961 to the 1967 focused on growth of National
economy where by some of state policies particularly after independency of Eastern
Countries formulated. In Tanzania (Tanganyika by then) investment policies and plans
were under colonial rule, that all means of production controlled by colonialists. Plans
and policies favored them.

Tanganyika get her independence in 9th December 1961 and from there a Government
never made a clear policy that address investment due to anti private ownership
ideologies led by the ruling party at that time TANU (Tanganyika African National
Union).

After independency Tanzania in the early 1960s, the National economic agenda was
introduced which targeted on the growth of economy with little attention to structural

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change of ownership. This was anticipated from the colonial pattern of Import
Substitution Industrialization (ISI) whereby it was continued to largely processing and
simple consumer goods.

However just prior to independence, the British government invited the World Bank to
send a mission to Tanzania “to assess the available resources for future development; to
consider how best these might contribute to a balanced program of social and economic
development and to make recommendations for practical measures to further such
developments.

The Bank mission also advised the incoming government to create more attractive
incentives and formulate liberal investment policies. Also called the government to
establish a development corporation to deal with promotional aspects of investment
provide loans to investors and enter into partnership as a means of attracting them. In
1962 the state proceeded to establish a legal and political framework to facilitate the
inflow of investments.

The Tanganyika Development Corporation was established in July 1962. It served as the
government arm for promoting economic development through joint venture activities
with foreign firms. Then in 1964 the Tanganyika Development Corporation was changed
to National Development Corporation and its functions were broadened. It continued to
function as an investment promotional body and providing equity and loans to
investors.

It was also given a lot of freedom to raise money locally or internationally, allowed to
enter into partnership with any agency, and was free to dispose of the surpluses in a
manner it deemed fit. All these were provided in its enabling Act (National Development
Corporation Act of 1964)

The investment activities of the National Development Corporation were supplemented

by the Tanganyika Development Finance Company. Together with National
Development Corporation, the Tanganyika Development Finance Company stimulated
private investments by providing equity capital, loans, debentures and managerial
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services. The company also carried out feasibility studies and post-investment consultancy
services.

After creating development corporations, the government went forward to pass requisite
investment law/Act (The Foreign Investment (Protection) Act of 1963) which assured
investors of full and fair compensation in case of nationalization or any other
compulsory forms of state expropriation. The investors could, on application, repatriate
their investment profits, dividends, interests and royalties in accordance with current
regulations under the law. Moreover, refund and custom duties, excise and other taxes
could be claimed, subject to fulfillment of stipulated conditions under the law.

The Foreign Investment Protection Act,1963 was designated to attract foreign direct
investment (FDI) to fill the capital gap; however all that time there were no known
public investment policies which led to a disappointing performance in the investment
arena and this response was not encouraging and therefore as a result of The Arusha
Declaration of 1967

The Arusha Declaration 1967 was formulated with socialism and self-reliance policies.

At this period of 1961 to 1964, there was industrial development determination which
was defined by the plan known as The three-Year development Plan (TYP) and at for
The First Five Year Plan (FFYP) from 1964 to 1969.

The Three-Year Development Plan aimed at promoting growth of State economy mainly
through increasing investment in those activities that were expected to bring quick and
high returns.

A relatively low degree of regulatory control was exercised to promote private domestic
and international investment in the economy. Tax incentives were provided and existing
investment opportunities published in a bid to expand the pool of capital flows.

The Three-Year Development Plan was successful in promoting basic consumer goods
processing industries through the incentives as well as providing a public injection of
funds from the government through the Tanganyika Development Corporation.

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In 1965, there were almost 569 manufacturing establishment employing ten persons or
more of which over one-third came into existence after independency. Also the TYP
succeeded for road-mapping and shaping the industrialization of Tanzania for the next
five years as well as to raise the per capita incomes from Tshs 392 to 900 Tshs.

However, all plans and implementations made in Tanzania did not grown up rapidly
with outmost greater development since investment education was not provided. The
gains in manufacturing the level of industrial output remained comparatively low.

At large context, foreign investment by foreigners owned companies concentrated in

capital intensive production of such items as non-metallic mineral products, repair of
machinery and manufacture of metal products, tobacco, textile and sisal products Also
soon after the end of the period of Arusha declaration in 1967, Tanzania was introduced
the debates on various economic development theories have argued the gradual
transformation from primary production to secondary production this stage realize the
development of trade, this period categorized as a industrialization period .

In 1967, prior to the occurrence of the Arusha Declaration, the government under the
Late Mwalimu; Julius K. Nyerere declared Socialism and Self Reliance policy. Under the
policies the major means of production were placed under the government control
through nationalization. The policy strongly rejected the domination that usually
accompanies foreign investment. it added that,” we shall not depend upon overseas to
the extent of bending our political, economic and social policies in the hope of getting it.
But we shall try to get it in order to hasten our economic progress...”

The performance of Tanzania’s industrial sector in terms of growth, structural change and
absorptive capacity has historically logged behind that of other regions.

To effect/implement nationalization measures, the Parliament passed several laws to

formalize the takeover of banks, insurance companies, large import-export firms and
major manufacturing industries. An Act was passed to formalize the nationalization of all
foreign commercial banks and also to formalize the nationalization of assets of major
wholesale import and export firms.
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In Tanzania industrialization has been characterized by shifts roles of the state and private
sector. In this period investment starting with largely private sector driven industrial
development up to the mid 1960’s as reflected in the first mid 1980’s as reflected in the
second and third five years development plans (1969-1974) and 1976-1981, it shifted
back to private sector driven industrialization after 1986 as reflected in the economic
recovery programme of 1986-1989 and the economic and social action programme of
1989-1992 in which libelization and privatization were practiced followed by initiatives
to reverse back to industrialization.

4.3. INVESTMENT IN THE PERIOD FROM 1968 TO 1985

Despite the Arusha Declaration of 1967 and thereafter, foreign capital continued to
dominate the national development budget. Also the investment policy issues were left
unresolved. Due to this the Government at that time prepared for the second five-year
plan which took place in 1969-1974 picked up some of these issues but not in a
comprehensive and systematic manner.

Therefore, the second five-year plan which was launched two years later after the Arusha
declaration contained further amplification of the socialist policy;

It divided the national economy into four investment categories which are;

1. Wholly state controlled industries,

2. partly controlled industries,
3. Joint ventures and
4. Open industries

It also divided four general criteria and left the specifics to be operationalized by sectoral
ministries. The criteria were;

1. Net foreign exchange effect,

2. real net contribution to domestic product,
3. budgetary impact and
4. Social impact

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Besides these two ‘innovations’, an industrial licensing board was created by the Ministry
of Commerce and Industry for the purpose of evaluating new investment proposals as
well as registering and licensing industries.

So from here, foreign investment in Tanzania were done in form of joint venture.
Particularly in manufacturing sector, state majority ownership emerged as the standard
practice. For example, Tanzania Tanneries (25 percent Kloeckner of West Germany);
General Tire (26 percent of the USA)

Basing on those changes in the investment pattern, the profit-making in the state had
improved.

In 1974, the Finance Act was passed which required all state enterprises to submit over
and above annual cash flows. This kind of information became more important,
particularly with the need to improve the annual budget-and-planning exercise. As if that
law were not enough, hence another Act were passed this empowers the minister of
treasury with the President’s consent to direct any state enterprise to pay governments
dividends, loans, contributions or portion of net profit.

This given rise to the new patterns of foreign investment in a country, for example in the
textile industry, all six multi-million dollar complexes were initiated between the year
1975-1978

In 1979, Tanzania entered into war with the dictatorial regime of Uganda under Idd
Amin-Dadaa, and that caused all the Investment strategies and efforts to be destroyed as
the state focused much in that war.

The war made the economy of Tanzania to collapse as they spent more than producing,
hence later, the state faced a lot of misery including hunger which forced the government
to ask for loans from the international organizations such as the World Bank and the
International Monetary Fund so as to revamp the situation that prevailed.

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Also due to the collapse of the Soviet Union in early 1980’s, as the external supporters of
“Socialism Ideology” the President of Tanzania at that time resigned in 1985 by saying
“…. nang’atuka” as he failed to proceed with such ideology.

4.4. INVESTMENT IN THE PERIOD FROM 1986 - 1994

This was the period when a state continued to struggle for repairing the Economy.
Among the major reforms which the government took to repair the economy was
eliminating some restrictions which were previously made under the laws. The state
shifted from state control economy to market economy where by the government sold
out majority of his shares to the private sectors or investors, this took place from 1986 to
1990.

In Zanzibar the basic legislation covering foreign direct investment is investment

promotion Act which enacted in 1986 passed the local economy was centrally planned in
Tanzania mainland and also in Zanzibar, the Zanzibar investment promotion Agency was
established in the same year, subsequent legislation enacted/ established the free
economic zone and the tourism commission which work closely with ZIPA to attract
foreign direct investment to develop tourist sector. It is expected that the 1986 Act will
shortly be revised.

In 1990 the government enacted the National investment (Promotion and Protection)
Act No. 10 of 1990 as a result of report on the subject of investment in Tanzania.

The Act had 45 sections which listed the priority areas, activities reserved for local
investors and it introduced an agency called Investment Promotion Center (IPC) for the
purpose of promoting investment in the country.

The objectives of the Investment Promotion Centre was to promote, coordinate regulate
and monitoring of local and foreign investments in Tanzania under Section 5.

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The functions of the Investment Promotion Centre were;

1. To identify and advice potential investors possible areas of Investment and to

provide them with available feasibility report and market studies
2. To collect, collate, analyze and disseminate information of local partners for
foreign investors.
3. To assist where appropriate in the identifications of local of partners for foreign
investors.
4. To act as link between local investors and possible investors or manufacturers.
5. To keep under review and advise the Government periodically on policies and
strategies and procedures relating to promotion and regulation of investment and
mattress connected there with and recommend action necessary for the
encouragement of private investment including simplification o procedures
affecting investment and legislative measures.
6. To assist holders of Cervantes of approval in securing all licenses authorization,
approvals and permits required to enable any approval granted by the centre to
have put effect and so many.

Also the Act provides for the application procedures together with the issue of dispute
settlement and transfer of foreign currency. In addition, it was from this period where
various “Investment Promotion Laws” started to be enacted.

The economic crisis forced the government to secure a loan from IMF in 1986, the loan
conditions required the elimination of subsidies and price controls as well as some social
services and stiff position in state run enterprises. In 1990’s and 2000’s the government
continued to implement measures intended to create mixed economy and reduce the
extent of the untaxable, inefficient market.

4.5. INVESTMENT IN THE PERIOD FROM 1995 TO 2005

In 1996 the government launched the new investment policy of Tanzania which shortly
resulted in the Tanzanian investment Act of 1997.

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The Act introduced number of important changes to the investment framework which it;
Established a Tanzania Investment centre (TIC) to replace the Investment Promotion
Center (IPC) which was established in 1990, roles was to coordinate, encourage and
facilitated to invest in Tanzania and to advice government on investment policy and
related matter.

Other purposes of creating the TIC was; to initiate and support measures that will
enhance the investment climate for investors, to advice investors upon the availability or
suitability of partners in joint venture project and to identify investment sights or land for
investment. The government continued to enact some laws which will assist the Tanzania
Investment Act on matters concerning investment such as the Land Act in 1999.

This Act was very important in Investment Sector as far as Land ownership is concerned,
for example, under this Act it provides for the requirement necessary for a non-citizen to
own land in Tanzania that a non-citizen shall not be granted land unless it is for
investment purposes, and that investment must be under The Tanzania Investment
Center (TIC).

Lastly, a number of “investment promotion laws” proceeded to be drafted for the aim of
promoting investment together with other laws assisting the Tanzania Investment Act
such as the Tax laws, the Mining Act of 1998, Environmental laws (the Environmental
Management Act of 2004) and others. On the other hand, the National policy for
investment also proceeded to operate until 2005 where it ceased.

The legislation governing investment as stipulated in the Tanzania investment policy do

not apply to Zanzibar. Zanzibar has therefore been using her own legislation to
coordinate investment activities in the island and has recently developed its own
investment policy document, which will be put into operation started in 2003. In this
spirit the provision of the 1997 Tanzania investment Act is applicable to Zanzibar.

In Zanzibar, the government permits 100 percent foreign ownership in most activities
except in some small retail areas and small tourist services. Zanzibar has also enacted

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legislation for the creation of port processing Zones (EPZ'S) and provides support services
and other incentives for businesses that export 80 percent or more their output.

Among the legislation that governs investment in Zanzibar are;

1. Zanzibar Free Port Authority (ZFPA)

2. Zanzibar Investment Promotion Act of 1986
3. Zanzibar Free Economic Zone Authority Act No 17/1992
4. Zanzibar Free Port Authority Act No.9/1998
5. At the moment, institutions that plan and implement policies that are deemed
necessary in tackling Zanzibar socio-economic problems in general and Investment
in particular are;
6. Zanzibar investment promotion Authority (ZIPA)

In 1998 the government enactment enacted the Mining Act which liberalizes
opportunities for foreign Investment and provides special incentives for investors in the
mineral sector.

The Mining Act of 1998 and accompanying incentive are an example of what good
regulation can do to encourage increased FDI inflows as well as their beneficial.

At the same time the government should address the long-term challenge of making
Tanzania an attractive location for foreign direct investment (FDI) in east and southern
Africa.

The internal market though rapidly growing is small infrastructure is meager. The labor
force is unskilled and its competitiveness threatened by relatively high wages. The private
domestic enterprise sector is fragile over coming those weaknesses will require continued
support by the international community through bilateral and multilateral official
development assistance (ODA).

Debt relief from multilateral source such as the highly indebted poor countries (HIPC)
initiative for which Tanzania has become eligible or bilateral source, will also help the
board types of actions to develop Tanzania’s location advantages includes;

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I. Completing the privatization programme, especially in the area of utilities and other
infrastructure. This will bring additional foreign direct investment (FDI) and
implemented properly should improve infrastructure and reduce the cost of doing
business.
II. Improving infrastructure, in additional to privatization, new investment will
encourage the development of infrastructure through financial instrument such as
concession and build-operate transfer (BOT) arrangements.
III. Expanding and consolidating international market access including through regional
integration within EAC and SADC. Exploitation of the SADC market would require
improvement in the transport, infrastructure in the southern part of the country.
IV. Enhancing competitive of human resources, maintaining competitive skills or wage
ratios requires attention to worker productivity and training and adopting labor law
and the education system to the need of the market economy .
V. Building a dynamic private enterprise sector by re directing the focus of technology
policy and institutions to the need of enterprises. These are essential conditions for
enhancing the long term technology impact of foreign direct investment including
through linkages and the technology learning.

4.6. INVESTMENT IN A PERIOD FROM 2005 TO THE PRESENT

In the year 2005 the planned policy known as twenty five year sustainable industrial
Development policy for Tanzania (SIDP) begun to be implemented with the aim of
enhancing sustainable development of industrial sector. For the period 2005-2020 the
government aimed at achieving sustainable industrial sector growth in order to create
favorable levels of employment, economic transformation, equitable development,
import substitution industrialization (ISI), and export promotion.

Despite the fact that, this period was characterized by a different Investment approach or
policy, but the purpose for promoting the Investment sector was never abandoned. The

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private sector was recognized as the main vehicle for making direct investment in the
sector while the government would provide an enabling environment.

The government may make direct investment in industries (these which the private sector
may not find it profitable to invest in) to encourage activities of critical importance for
overall development.

The strategy had to be implemented in two phase.

1. Phase I (2005-2010)
2. Phase II (2010-2020)

Phase I (2005-2010) was for short term programme to rehabilitate and consolidate
existing industrial capacities and also for medium –term programme to create new
capacities in areas with potential for creating competitive good and light capital so as to
facilitate investment in Tanzania.

For example in 2006 the government enacted the Banking and Financial Institution Act,
No. 2 of 2006; for the purpose of assisting the investors (local investors) financially.

In 2008 the Tourism Act was enacted, which set out for the areas to be invested and the
areas not to be invested in tourism sector. For example,

In this period, Investment seemed to flourish in private sector more than in public sector,
and thus the private sector became stronger than the public sector. This caused for the
enactment of Public-Private Partnership in 2010 whose objective was to promote private
sector participation in the provision of public services through public-private partnership
projects in terms of Investment Capital, managerial skills and technology. Such projects
include major projects of infrastructure, Agriculture, energy and transportation.

Phase II (2010-2020) is for a long term programme to achieve major investment in basic
capital goods industries to ensure consolidation of the industrial structures developed in
the previous phase.

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From 2015, the government under the late Hon. John Magufuli, revised several laws
including the Public-Private Partnership (Act No 18 of 2015), the Mining act but also
enacting two laws that placed ownership of natural wealth and resources to the people
and these were:

 The natural wealth and resources (Permanent sovereignty) Act (No. 5 of 2017)
which provides that the people of the United Republic shall have permanent
sovereignty over all natural wealth and resources (Section 4(1) of the Act (The
Natural Wealth and Resources (permanent sovereignty) Act No. 5 of 2017). Also it
continues entailing that, the president shall be the trustee and prohibit the
exploitation of natural wealth and resources except for the benefit of the people
(Section 5(2) of Act No. 5 of 2017). Later it became argued that Act Number 5 of
2017 weakened Investment specifically in Mining Sector up to date.
 The Natural Wealth and Resources Contracts (Review and Recognition of
Unquestionable terms) Act No 6 of 2017. This Act empowers the National
Assembly to review any arrangement made by the government concerning with
natural resources.

Also Tanzania has signed various Bilateral Investment Treaties (BITS) and Bilateral Trade
Agreement Brass for purpose of Investment and trade protection. In addition, the
country is signatory to multilateral investment Guarantee Agency MIGA for protection of
Investment against non-commercial risk

Generally, due to the review made by the government in various laws during this period
a number of Investors who did not comply with the requirements evade and thus foreign
investment decreases.

In addition, during 2019 investment particularly foreign investment continued to

decrease and this is due to the pandemic which spread all over the world named COVID-
19, for example, from 2019 to 2021 a number of tourism companies were shut down due
to the lack of clients from abroad. From here Investment has never been the same
despite the effort made by the government up to now. Thus, the government is trying to

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take all necessary measures so as to fight against the pandemic in order to set favorable
environment for investment especially foreign investment.

To date, the government of the United Republic of Tanzania has continued with the
efforts of improving investment climate and promotes both foreign and domestic
investment with the view to consolidate macro-economic gain in the recent few years
including the vision of 2025 is fulfilled. Efforts are also made to expand market under the
investment and enhance regional integration within EAC and SADC regions and continue
to participate in both bilateral and multilateral cooperation negations so as to facilitate
investment particularly foreign investment.

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TOPIC NO 5: REGULATION OF INVESTIMENTS IN TANZANIA (LEGAL FRAMEWORK)

Tanzania has an open investment environment with adequate standards of investor

treatment and protection. This is, however, a characterization of policy and current
conditions and practices, rather than of the statutory regime. The investment code,
introduced in 1990 and modernized in 1997, has not kept pace with the rapid changes in
the country.

There is a need to overhaul the regulatory regime and enact new and modern legislation
reflecting current conditions inside and outside Tanzania. Investment in Tanzania is a
national and subnational concern.

Zanzibar has separate legislation that governs investment promotion. However, the
regime established in Zanzibar is subject to the Constitution and has many features in
common with the provisions applicable in the Union. It must also be remembered that
many important fiscal incentives can only be granted in Zanzibar under, and in
accordance with, Union legislation (example. legislation relating to customs and excise
and income Tax).

5.1. INVESTMENT PROMOTION LAWS

Investment promotion laws are targeted to both domestic as well as foreign companies;
these are laws which stipulate principles, regulations and measures regarding the
promotion and management of domestic and foreign investments. Investment
promotion actively seeks to bring investment opportunities to the attention of potential
investors, provides capital, jobs, skills, technology and exports increases productivity,
innovation and wages in a city or country.

5.1.1. CONSTITUTION OF UNITED REPUBLIC OF TANZANIA OF 1977 [CAP 2

R.E. 2008]

The constitution of the united republic of Tanzania, 1977 is the mother of all laws of the
country under Article 64 (5). It has set up an independent judiciary, among other organs

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of the state and does recognize the sacred right of individuals to acquire and own
property.

Basically the constitution promotes investment by providing right which have direct
effect in investment activities to include; right to work and right to own property as per
Article 22 & 24. The constitution also provide for procedure to be followed by any
person in case his right has been, is being or is likely to be violated by any person
anywhere in the united republic, may institute proceedings for redress in the high court as
per Article 30.

5.1.2. TANZANIA INVESTMENT ACTS

Investments regimes in Tanzania are categorized into two due to the fact that Tanzania is
made up of Mainland Tanzania and Zanzibar. As the result the country has the following;

i) Two investment policy:

 The National Investment Policy (1996), this policy was in effect to improve the
investment climate in Tanzania mainland and one of the objectives of the policy is
to “enhancement of transparent legal framework that facilitates the promotion
and protection of all investment.”
 Zanzibar Investment Policy (2004), this policy promotes investment in Zanzibar.
ii) Two regulatory frame works:
 The National Investment Act (1997) CAP 38, this is an Act to guide investment
activities in Tanzania, to provide for more favorable conditions for investors. It
provides definition for local investors, foreign investor and local capital (Section 3
of The National Investment Act (1997) CAP 38).

The law provide for procedure in which foreign investors can own land and provide for
procedure for registration and acquisition of certificate of incentive. (Section 17 of The
National Investment Act (1997) CAP 38)

Also The National Investment Act has established the Tanzania investment center (Section
4 of The National Investment Act (1997) CAP 38). The center or (TIC) which shall be a

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one-stop center for investors, shall be the primary agency of the government to co-
ordinate, encourage, promote, and facilitate investment in Tanzania and to advise the
government on investment policy and related matters (Section 5 of The National
Investment Act (1997) CAP 38).

 The Zanzibar Investment Promotion and Protection Authority Act (2018), the Act
have established the Zanzibar Investment and Promotion Authority (ZIPA)
(Section 4 of the Zanzibar Investment Promotion and Protection Authority Act of
2018), to act as a focal point for promotion and facilitation of investment and
trade in Zanzibar, the purpose was to make Zanzibar an attractive and
competitive investment destination regional and globally. (Section 5 of the
Zanzibar Investment Promotion and Protection Authority Act of 2018)

Both of the two Tanzania investment center (TIC) and Zanzibar investment and
promotion authority (ZIPA) they are called as investment promotion agencies.

5.2. BUSINESS AND TRADE LAWS

These are one of amongst laws in Tanzania which regulate investment in Tanzania.
Business and Trade laws are such as The Law of Contract Act Cap 345 R.E 2019,
Companies Act Cap 212 R.E 2019, Business Names Registration Act Cap 213 R.E 2019,
Business Licensing Act Cap 208 R.E 2019, Trade and Service Marks Act Cap 326 R.E 2019,
The Board of External Trade of 1978 Cap 155, The Board of Internal Trade of 1973 Cap
154 among others.

Those are some of Business and Trade Laws which regulates investment in Tanzania as
follows;

5.2.1. The law of Contract Act [CAP 345 R.E. 2019]

It regulates investment in Tanzania as it provides for the Formation of Contract as per

Section 10 also Partnership and its relationship with one another as per Section 190-226
which in investment it concerned with partnership.

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So Contract Act is one of the laws which regulate investment in Tanzania. Where the Law
of Contract dealing with agreement between persons either natural or artificial persons
where in investment agreement is concerned with it as it is a business between people
(citizen and noncitizen)

5.2.2. Companies Act [CAP 212 R.E. 2019]

It regulate investment in Tanzania as it provide for the organization of companies

including mutual funds that engage primarily in investing reinvesting, and trading in
securities, and whose own securities are offered to the investing public.

The regulation is designed to minimize conflicts of interest that arise in these complex
operations The Act requires these companies to disclose their financial condition and
investment policies to investor. Such as it provide for the registration of companies
Section 14-20, contract Section 30 - 34., share, capital and debentures Section 35-78,
management and administration Section 110 – 114 where on investment one can invest
on companies, among other things.

Certificate of compliance

Certificate of compliance is issued to companies incorporated outside Tanzania mainland

and they come in the country as brunches of such foreign companies. Even if all
subscribers and or shareholders are nationals of the United Republic of Tanzania, the
company regarded as the foreign. They are registered under part XII of the company
Act.

It shall apply to all foreign companies, that is, companies incorporated outside Tanzania,
which, after the appointed day, establish a place of business within Tanzania and
companies incorporated outside Tanzania which have, before the appointed day,
established a place of business within Tanzania and continue to have a-place of business
within Tanzania on and after the appointed day (Section 434)

Delivered to Registrar for Foreign companies which, after the appointed day, establish a
place of business within Tanzania

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Certificate of registration and power to hold land

On the registration of the documents specified in the Registrar shall certify under his
hand that the company has complied with the provisions of that section and such
certificate shall be conclusive evidence that the company is registered as a foreign
company under this Act. (Section 435)

(2)From the date of registration under this Act and so long as it is registered, a foreign
company shall have the same power to hold land in Tanzania as if it were a company
incorporated under this Act. (Section 435)

5.2.3. The Business Activities Licensing Act [CAP 208 R.E. 2019]

It regulates investment in Tanzania which as a business law it provides for the licensing of
a business and for the related matters. Such as section 3 provide for the Prohibition on
carrying on business without license. Also on the license fee under Section 8 of this Act
provides that the business fee should be paid under the amount that calculated and that
payment can be twice in a year before thirty first day of July and before thirty first day
of December.

And there is penalty for failure to take out license in time under Section 10 of this Act
provides that for any person who fails to pay business license within twenty one days on
the point of expired license shall be liable for addition business fee on penalty of fifty
percent of such fee.

5.2.4. Business Names Registration Act [CAP 213 R.E. 2019]

It regulates investment in Tanzania as it provide for the registration business names and
this is because Investment is all concern with business, such as section 4 provide for the
firm and person to be registered, section 5 registration by nominees, section 6 names and
particulars of registration, section 7 statement to be signed person registering, section 8
time for registration, section 9 restriction on registration of certain business names.

This shows how investment is regulated in Tanzania through this Act.

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5.2.5. Trade and Service Marks Act [CAP 326 R.E. 2019]

It regulate investment in Tanzania as it provide for the procedure on receipt as applied

on for registration of a trade or service marks Section 26- 64, Section 5 also provide for
the re-classification of good or service, Section 7 provide for signature of document by
partnership, companies among others and this shows that this law in Tanzania regulates
investment.

5.2.6. The Board of Internal Trade Act of 1973

It regulates investment in Tanzania as it provide or establish Board of Internal Trade to

supervise and coordinate the activities and management of certain parastatal companies
such as section 3 there must be establishment of internal Board, section 5 the function of
a board. Where the purpose of an internal board is to supervise, to ensure and carry out
and advice the government on internal matters in trade include internal investors and
searching of markers. This proves that it regulate investment in Tanzania.

5.2.7. The Board of External Trade Act Cap 155 of 1978

Which can applies to both mainland Tanzania and Zanzibar which regulate investment in
Tanzania as it provide for the establishment the Board of External Trade and to provide
for the functions and powers of the Board in relation to external trade such section 4
provide for establishment of external trade, section 5 provide for the function of the
external board established which one of the function of it is to ensure, to carry and
provide for consultancy and advisory to the government on external matters including
foreign investors or investment section 5(b)19 this shows that it also regulate investment
in Tanzania.

5.2.8. Zanzibar Business and Property Registration Agency Act No 13 of 2012

The Business and Property Registration Agency (BPRA) this is the office headed by Mr.
Abdulla Wazir Ramadhan is the one of the oldest Government offices, which works
under Ministry Of Trade and Industrial Development Zanzibar (MT).

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BPRA Office is responsible for registration activities ranging from registration of

commercial/business entities as well as property registrations. All registrations are done
under the provision of their respective legislation such as

 the societies Acts No. 6 of 1995,

 The Business Names Registration Decree Cap. 168,
 The Succession Decree Cap. 21,
 The Zanzibar Industrial Property Act No. 4 of 2008,
 The Registration of Documents Decree Cap. 99,
 The Companies Decree Cap 153

5.3. LAND LAWS

Are the laws which govern the issue related or connected to the land aspect. The law
relates to the issue of ownership, transfer, inheritance, acquisition and compensation on
the land (real property).

There are many laws connected to land issues just to mention few of them are;

 The Land Act [CAP 113 R.E. 2019]

 Village Land Act [CAP 114 R.E. 2019],
 Land (Registration) Act [CAP 334 R.E. 2019],
 Land Acquisition Act [CAP 118 R.E. 2019], and
 Land Disputes Court Act [CAP 219 R.E. 2019]

Then, the important thing to note is that “all investment is done on the land and not on
air either being directly or indirectly” thus land laws become an important regime in
investment aspect.

And such regimes tend to govern both either foreign or local investors when comes to
question on land. For example, under section 19 (3) (a) to (c) and section 20 of the Land
Act tend to restrict and prohibit non- citizen to own the land serves only for the purpose
of investment, thus means the foreign has no capacity to own the land serves as per

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section 19(3) and section 20. And this can be more evaluated by the case of EMMANUEL
MARANGAKIS AS ATTORNEY OF ANASTASIOS ANAGNOSTOU Vs THE
ADMINISTRATOR GENERAL

In his evaluation and reasoning of Dr. Fauz Twaib, J., he confirmed such restrictions
while interpreting section 20(1) and 19 (3) of Land act where judge said:

“…it is obvious that the dispute in this suit revolves around the interpretation of
subsection (1) of section 20 of the Land Act. It restricts the occupation of land by non-
citizens in the following terms:

(1) For avoidance of doubt, a non-citizen shall not be allocated or granted land
unless it is for investment purposes under the Tanzania Investment Act [Cap 38, R.E.
2002]. [Emphasis mine]

Clearly, section 20 (1) prohibits the allocation and granting of land to a non- citizen.”

Also, this concept was held in the case of SHAFIQ DIYED V PSRS where the court was on
the views of interpreting section 19 and 20 of the land Act to mean the non-citizen is
restricted to own the land in Tanzania unless for the purpose of investment.

However, on other hand the land laws become important regimes in investment aspect
when investment become connected with the issue of mortgage security, and this is
usually when the investment is related to banking of financial institutions. Since, in case
of any maters relates to mortgage security with investors then, through PART X of the
Land Act and other laws like the Mortgage Financing Act and its regulations related e.g.,
the Land (mortgage) Regulation of 2005, the land (mortgage financing) regulation (no
335 of 2009)etc. become prevail over and applicable to such matter. Thus, through
those laws (land laws) provides both the right and duties of the investor (as mortgagee)
and mortgagor.

The laws tend to describe on how both investors (mortgagee like banks and financial
institutions) and mortgagor should deals with mortgage security and procedures to be

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followed, for example how should investors deals with mortgage of matrimonial homes
his rights, duties and procedures to be followed in creation and recovery of such security.

This can be witnessed with the case SIKUDHAN ABDALLAH MSHANA and RAJABU
ABDALLAH MSHANA vs. BANK OF AFRICA TANZANIA LIMITED (BOA) and 2
OTHERS LAND CASE NO. 5 OF 2018 (HIGH COURT OF TANZANIA AT ARUSHA) the
judgement delivered on 12/5/2021, where the fact was that, it was alleged that 2nd
defendant is alleged to have mortgaged the said matrimonial land properties to the 1st
defendant (BOA) in obtaining loan facility in the favour of the 3rd defendant without
the 1st plaintiff's consent. Also, on other hand, the 2nd plaintiff (a son) claims that, he is a
lawful owner of the one of landed property.

Then, in decision before Gwae, J., in his reasoning he reproduced section 161 of the land
Act in connection with section 59(1), (2) and 60(a) of the Law of Marriage Act [CAP 29]
where court invalidated the mortgage created by the bank(investor) with his respondent
on the ground that the mortgage was created on absence of consent from claimant as
law required being as matrimonial property.

Thus, mortgagee didn’t take necessary steps as responsibility imposed by laws to ensure
the mortgage is created in accordance with the law.

(Also case of Idda Mwakalindile vs. NBC Holding Corporation Civil appeal no. 59 of
2000 (unreported), of Hadija Issa Arerary Vs Tanzania Postal Bank Civil Appeal No. 135
of 2017, In the Court of Appeal of Tanzania at Iringa, etc.)

As well stated above; In Tanzania Land law like other laws its support the investment for
both citizen of Tanzania and those who are not citizens. From 1999 Grant Right of
occupancy were regulated by Land Act. Land Act also provide for who may occupy Land
under the Granted Right of occupancy as it provides that the right to occupy land which
a citizen, a group of two or more citizens whether formed together in association ,
partnership or a corporate body they may enjoy; Granted Right of Occupancy.
Derivatives rights of occupancy(Section 19 (1) of the Land Act Cap 113 R.E 2019).

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Granted Right of occupancy may categorize into two groups as shown below;

 On the basis of use or function;

 On basis of duration or time;

Person given land under Granted Right of Occupancy is given a certificate. It is known as
a certificate of Right of occupancy that is Certificate of Title or Title deeds.

The grant or allocation is done under land form No. 22 certificate of Title. Certificate is
come with the name of president, it shall indicate maximum period of occupancy.

In case of Non-citizens; the procedure for occupying land is differ from those of native
citizens of Tanzania. Under Land Act it provides Procedures in which non – citizens may
occupy land, where it provided that a non-citizen may occupy land in Tanzania if it is for
investment purposes in Tanzania (Section 19 (2) of the Land Act Cap 113 R.E 2019) as it is
regulated by investment Act of 1997 or Export processing zone Act or it could be any
other law which could approved to be investment Law in Tanzania.

The Laws provide three possibilities to the non-citizens to occupy Land in Tanzania as
shown hereunder

(I) A non-citizen may apply for granted Right of occupancy for investment
purpose and the application must be approved by the Tanzania Investment
center or Export processing zone. Section 19(2)(a) Regarding to the case of
EMMANUEL MARANGAKIS AS ATTORNEY OF ANASTANSIO
ANAGANOSTU VS THE ADMISTRATOR GENERAL. High court of Tanzania at
Dar es salaam civil case no. 1 of 2011(unreported).
(II) Apply for a lease derivative Right for purpose of investment approved under
the Tanzania investment Act or issued under the Export Processing zone.
Section 19(2)(b)
(III) A partial transfer from the citizen to non-citizen from joint venture basis with
citizens will own 51% and non-citizen 49%. Section 19(2)(a) There is no other
way of you are non-citizen the application must go through Land Act.

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Customary Right of Occupancy ; Means a right of occupancy created by giving issuance a

certificate of customary right of occupancy. Further Deemed Right of occupancy under
village Land Act provide the same meaning of customary right of occupancy as those
provided by village Land Act.

5.4. FINANCIAL AND BANKING LAWS

Financial and banking laws under Investment in Tanzania are regulated by the following
laws;

i. BANKING AND FINANCIAL INSTITUTIONS ACT CAP 342 OF 2006

ii. THE BOT ACT OF 2006
iii. THE MICROFINANCE ACT CAP NO.10 OF 2018

“Bank” has the meaning ascribed to it by the Bank of Tanzania Act; “bank” means an
entity that is engaged in the banking business; “banking business”

means the business of receiving funds from the general public through the acceptance of
the deposits payable upon demand or after a fixed period or after notice, or any similar
operation through the frequent sale or placement of bonds, certificates, notes or other
securities, and to use such funds, in whole or in part, for loans or investments for the
account of and at the risk of the person doing such business (Section 3; BANKING AND
FINANCIAL INSTITUTIONS ACT)

Since banking business is an Investment by virtue of varieties of laws, there are also
INVESTMENT BANKS; which are types of financial institutions that normally are
established for the purpose of investment growth and promotion. These investment
activities however are done at the domestic level of certain individual state, Therefore
the Bank among other things work hand in hand with the government for the purpose of
stimulating investment in that particular individual state.

Investment Banks give loans to investors plus investment guidelines to the same investors
it offers the loans to. In Tanzania a good example of an investment bank is the T.I.B
TANZANIA INVESTMENT BANK. Moreover there are investment banks that also
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operate at international levels so to mean, for instance a Merchant Bank is connected to

the FDI FOREIGN DISTRICT INVESTMENT were investors from another state who want
to make investment to another state than his home state may be provided with financial
services including the capital and investment guidelines by the Merchant Bank and a
good example of such banks is like the MIGA MULTILATERAL INVESTMENT
GUARANTINE AGENT. In Tanzania there is a legal rule under Regulation No.5 of GN
NO.290 of 2014 were the minimum capital of the Merchant Bank is 25 Billion.

Alike any Business that requires CAPITAL for investment to take place; Under the
Provision of Section 17 (1)-(3) of The Banking and Financial Institutions Act, A bank may
only commence its operation after maintaining a minimum core capital of 5 billion
shillings.

Also for the purpose of encouraging provision of banking services to underserved

communities whether rural or urban, the Bank may establish categories of financial
institution, it shall direct such bank or financial institution to increase its capital above the
requirements of this section and the regulations thereunder, to such level as the Bank
may determines that such capital above the requirements of this section and the
regulations thereunder, to such level as the Bank may determine.

The Microfinance act refers to the Regulations on the minimum capital requirement
(Section 9 of THE MICROFINANCE ACT NO.10 OF 2018), whereby approximately Two
billion Tanzanian shillings is a capital requirement for investment in financial institutions.

Genuinely, Financial Institutions and Banking laws are inevitable in regulating Investment
in Tanzania simply because they enhance the entire tilling and circulation of money for
generation of not only the citizens’ earnings or incomes but also for the Government’s
mobilization of development projects for the welfare of the country at large. Banking
business is amongst the major investments any country has for its up keepings.

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5.5. TAX LAWS

As required by section 4(1) of the Income Tax Act, Cap 332 R.E 2019, every person shall
be charged income tax and pay such tax in accordance with the procedure prescribed by
law, it is here where we get to realize Tax Laws regulate investment in Tanzania because
also in investment, investors become potential by reason of carrying out an investment.
The following are the Tax Laws that regulate investment in Tanzania;

5.5.1. Tax Administration Act, CAP 438

The Act requires that any person who becomes potentially liable to tax by reason of
carrying out a business or investment shall apply for Taxpayer Identification Number
(TIN) within 15 days from the date of commencing the business or investment (Section
22(1) of Cap 438 R.E 2019), It also provide how the application shall be,, where by the
application shall be in the prescribed form, supported by documentary evidence of the
applicant's identity and shall be filed in the prescribed manner (Section 22(1) of Cap 438
R.E 2019) This goes to all business persons as well as investors, therefore this Act regulates
Investment in Tanzania.

5.5.2. Income Tax Act, CAP 332 R.E. 2019

This Act provide for chargeable income from business or employment and investment. It
provide chargeable income for a Tanzania resident person, non-resident person and a
resident corporation (Section 6(1) of Cap 332 R.E 2019). It is provided as follows;

i. For a resident person, the chargeable income shall be irrespective of the source
income; However, chargeable income of a resident individual who at the end of a
year of income has been resident in the United Republic for two years or less in
total during the whole of the individual’s life shall be determined as that of the
non-resident person; (Section 6(2) of Cap 332 R.E 2019)
ii. For a non-resident person, the chargeable income shall be to the extent that the
income has a source in United Republic of Tanzania;

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iii. For a resident corporation which have perpetual unrelieved losses as referred to
section 4(1) of the same Act, the chargeable income shall be the turnover of such
corporation for a year of income (Section 6(1)(a) – (c) of Cap 332 R.E 2019)

It should be noted that, the aforementioned Tax Laws apply to Tanzania mainland as
well as Tanzania Zanzibar as provided under sections 2 of both Laws (Cap 332 R.E 2019
and Cap 438 R.E 2019); therefore they regulate investment on the aspect of payment of
tax for both Tanzania mainland and Tanzania Zanzibar.

5.6. EMPLOYMENT LAWS

Employments laws includes all laws which regulate investment in respects of employment
issues these includes but not limited to the employment and labour relation Acts (The
employment and labour relation Act Chapter 366 RE 2019) and it is related regulations
(The Employment and labour relation {code and practice} 2007 /Government Notice no
42 of 2007).

Although in defining what employment is clearly provided under Section 4, the

employment and labour relation Act means the performance of a contract of
employment by parties to the contract, under employer and employee relation, although
terms employee and employer defined under the same section.

Moreover, investment always linked with labour and employers whom always work in
accomplishing vision, mission and the objectives of investment, thus these people are
protected under this law specifically under part II which provide for fundamental rights
and protection a good example is prohibition of child labour (Child Act, no 21 of 2009,
section 172) also prohibition forced labour also the issue of discrimination in work place.

The employment laws regulate investment in Tanzania through means to resolve dispute
as provided under section 3 also the objectives of investment and what is provided
under the employment and labour relation Act also are compatible.

The mechanism to invest need a good management and operational systems of

regulating these affairs and employers should be always protected under the employment

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laws not only this but also the whole process of investment accompanied by the
employment laws. Investment involves both profit and liabilities also to the workers
involves right and obligation the mechanism to regulate this must be this law, often the
occurrence of disputes must be controlled by the law thus why employment laws are
very important when it comes on the issue of investment though the main purpose of
investment is making profit but in the process of making profit liabilities can associate
because the labour are the one accomplish the project this employment laws are very
important to regulate.

General overview is that there is a relationship between the investment laws and
employment laws through it is implication under the spheres in which investment take
place the employment and labour relation Act chapter 366 and it is regulations are
always fundamental rights, oligation and protection of labour and employers are
indicated also the mechanisms to resolve disputes are provided under the employment
and labour relation Act.

5.7. INTELLECTUAL PROPERTY LAWS

Intellectual property refers to creations of the mind which involve a product of human
labor and creativity, such as inventions; literary and artistic works; designs; and symbols,
names and images used in commerce. This is the legal right which results from human
brain .Therefore Intellectual property arises where the writer, an inventor, artist would
transform ideas, knowledge, and information into tangible property.

In Tanzania mainland Intellectual property are govern by Copyright and Neighboring Act
,Cap 218, The Patent (Registration) Act, Cap 217, and Trade and Service Mark Act, Cap
326 and in Zanzibar there is The copyright Act of 2003, Zanzibar Industrial Property Act,
2008 and the Industrial Property Regulations, 2014, and Zanzibar Business and Property
Registration Agency (BPRA).

5.7.1. Copyright and Neighboring Act, Cap 218

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Copyright mean the sole legal right to print, publish, perform, record a literally, artistic
and musical work; Copyright law gives authors of original works a bundle of exclusive
rights. Section 46 of Copyright and Neighboring Act, establish Copyright society in
Tanzania as regulatory authority.

Under Copyright and Neighboring Act, the investors in Tanzania are protected in the
circumstance when the investor wants to invest on literary, artistic, musical and dramatic
work. Therefore Copyright Act, secure the interest of the original

Owners including the investors, protect the consumers by consuming a pure product, and
to protect the authors of the work itself. Investors has a legal rights both economic rights
and moral rights. The application of the Act is within Tanzania mainland as provided
under section 3(1)(a)(b) of the Act.

5.7.2. The copyright Act of 2003

Protects literary and artistic works irrespective of their form of expression, their quality
and the purpose for which they were created ,therefore in Zanzibar the investors are also
protected from infringement of the literally, dramatic ,musical and artistic work for the
interest of the original owner as per section 3(1) of the Act. In Zanzibar there is COSOZA
as Copyright Society in Zanzibar as regulatory authority.

5.7.3. The Patent (Registration) Act, Cap 217

Patent mean the sole right to exclude others from making, using, or selling an invention
for a limited period of years in exchange for publishing an enabling disclosure of the
invention. Patent Act regulate investment in circumstances including the right to exclude
others from exploiting the patented technology, to provide incentive to investors by
recognizing their creativity and to protect the consumers by consuming an original
product also investors who is inventor has a legal right to enjoy its pecuniary significance.

Protection of patent does not come from the blues you need to file application before
register of patent as per section 3 and 4 of the Act. Patent is available for any invention
that is a product or a process in the field of technology under section 7(1)of the Act and

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in question of the non-patentable subject matter are under section 7(2) of the Act. Also a
patent may be transferred by way of mortgage, assign, license subject to the provision of
section 14 of the Act and patent may be revoked as per section 12 of the Act, when it
appears in Prohibition by law, public order and morality.

5.7.4. Zanzibar Industrial Property Act, 2008 and the Industrial Property
Regulations, 2014

An Act deals with the protection that gives the creator of an invention the exclusive legal
right to market, sell, manufacture, and profit from that invention, a patent protects
inventions and designs, like engines or a phone casing.

Protection of investors:

Rights enjoyed by owner of the patent are proprietary in nature and the patentee or his
agent or licensees has the exclusive right to use and have the benefits of patented
invention and prevent unauthorized use, during the period of patent protection.

5.7.5. Trade and Service Mark Act, Cap 326

Trade and service mark refers to mean a visual symbols or sign which may be a word,
name or device that indicate the source, quality and ownership of a good or service.
Trade and Service Mark uses specialized symbols and signs that distinguish a product or
service from another product or service as per section 2 of the Act, a person acquires
ownership upon filling an application before the office of the government (Registrar of
the Trade and Service Mark) section 3, 4, and 14 of the Act.

Trade and Service Mark Act, regulate Investment in the sense that, after investor
complete registration of his or her trade or a service mark its automatically protected by
law and no one else may use the mark which is already registered, therefore an investors
product or a service is distinguishing from another product or a service, so Trade and
Service Mark Act ,safeguard the exclusive rights of investor, it secure the service and
product of investor also it protect the consumers.

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5.7.6. The Zanzibar Business and Property Registration Agency (BPRA)

The exclusive right to use the trademark is limited to a use of the trademark in the exact
configuration or way in which it was filed and registered. The registration of a trademark
gives the owner the exclusive right to the use of the trademark in relation to the goods
or services in respect of which the mark is registered and may seek the relief of
infringement in appropriate courts in the country.

5.8. ENVIRONMENTAL LAWS

Environment law refer to enforceable rules and principles regulating the activities of
persons natural or legal which have an impact on any of the aspect forming part of the
environment. Environment law has four major institutions that regulate use of the
environment in consideration to its safety. The following are the environmental laws and
institutions that regulate investment in Tanzania;

5.8.1. The Constitution of the United Republic of Tanzania 1977, as amended

time to time

The constitution of the united republic of Tanzania as amended from time to time
provide for the bill of right states that every person has a right to life and to the
protection of life by society, thus the environment should be harnessed and preserved in
order to prevent harm to the life of people.

In article 9 of the constitution requires the government to ensure that the national
resources are harnessed, preserved and applied toward common good. This portrays the
commitment of the government to ensure sustainable development for instance in
Tanzania investment Act provides that one of the function of the investment promotion
center is to work with appropriate agencies to ensure investment projects use
environmentally friendly sound technologies and restore, preserve and protect the
environment.

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5.8.2. The Environmental Management Act, Cap 191 R.E. 2019

This legal framework was established and passed by the national assembly in 2004; this
Act is a legislation governing environment aspect in Tanzania. The Act

include provision for legal and institutional framework for sustainable management of
environment (Section 49 of Cap 191 R.E 2019), principles for environment management
(Section 50 of Cap 191 R.E 2019) impact and risk assessment (Section 51 of Cap 191 R.E
2019) prevention and control of pollution (Section 52 of Cap 191 R.E 2019), waste
management (Section 53 of Cap 191 R.E 2019) Also the Acts provides for Environmental
Impact Assessment where by before the commencement of the project, the investor is
required to comply with the provisions of Part VI of the Act, where by it is mandatory to
carry out the assessment so that to analyze the advantages and disadvantages of the
project to the environment.

Therefore for people interested in investment are required to operate their programs and
conduct in consideration to the Environmental Management Act, Cap 191 R.E 2019.

5.8.3. The National Environment Policy 1997

Provides a framework for making fundamental changes that are needed to bring
environmental consideration into mainstream of decision making in Tanzania. The
general objective of national environment policy is to ensure sustainable and equitable
use of resources without degrading the environment. (Section 18 of Cap 191 R.E. 2019)

Thus the national environment policy provide set of principles and objectives for an
integrated and multi-sectional approach addressing the totality of the environment, with
the enunciation of the policy the main challenge is to ensure that all sectors and
interested group take priority action in safeguarding environment.

5.8.4. The National Environment Management Council (NEMC) 1993

This institution has a major purpose that is to act as an advisory body to the government
on all matters relating to the environment. In addition, the Director General of the

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Council was given specific duties to ‘consider means and initiate the steps for the
protection of the environment and for preventing, controlling, abating or mitigating
pollution, carrying out investigations into the problems of environmental management,
obtaining advice from experts to review progress of attainment of purposes of the Act
and to promote and carry out short and long-term planning and projects in
environmental management and protection.

5.9. MINING LAWS

Mining is the extraction of valuable minerals or other geological materials from the
Earth, usually from an ore body, lode, vein, seam, reef, or placer deposit. Exploitation of
these deposits for raw material is based on the economic viability of investing in the
equipment, labor, and energy required to extract, refine and transport the materials
found at the mine to manufacturers who can use the material. Tanzania enacted a series
of mining laws that significantly erode protection for existing and future investments in
the mining industry.

These changes are of deep concern for companies with investments in Tanzania because
the new laws heighten the government's role and power in investment contracts, increase
the costs of foreign investment in Tanzania, and significantly reduce investment
protections that investors have enjoyed, such as international arbitration.

The Tanzanian mining laws have drastically changed the investment climate in the
country, including removing the right to international arbitration in the future. As such,
investors must evaluate available options to ensure access to international arbitration to
protect their investments.

The laws that govern mining investments in Tanzania include but not limited to;

5.9.1. Mining Act, 2010

Through this act has manifested the need of mining industry investments for the country
development as it grants, tenure, terms and conditions, renewal and termination of

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mineral rights, payment of various taxes, fees, duties, royalties and other applicable
charges.

i. As per section 28 and 29 grants the application for licensing and Prospecting
license by tender of any applicant that want to invest in a particular area for
mining activities. Grant, renewal and relinquishment of prospecting license as per
section 32 of the act where a successful applicant may be grant license as a right
owner of a particular tenure.
ii. Any mineral right holder shall undertake to participate in the growth of the
Tanzanian economy by investing a portion of the returns from the exploitation of
the country’s mineral wealth (Section 100F (1)-(4) of the Mining Act, 2010). This
hypes the country's economy as it mandates the investor to give details upon the
investment done within the state due to the extraction in the mines done by the
investor.
iii. “local content” means the quantum of composite value added to, or created in,
the economy of Tanzania through deliberate utilization of Tanzanian human and
material resources and services in the mining operations in order to stimulate the
development of capabilities of indigenous of Tanzania and to encourage local
investment and participation (Section 4 of the Mining Act, 2010);

Tanzanian everlasting objective is to develop its states in different aspects, in the mining
sector it tries to develop the indigenous people hence the mining sector emphasize on
local content development in which it urges the investors to invest so that these local
individuals are liberated.

A push toward local content strives to ensure that a company is hiring local labor and
procuring local goods and services from the host country. This reader discusses how
governments try to promote local content and some of the challenges they face in
fostering lasting benefits.

i. The mining act promotes investment as it establishes the functions of commission

as audit capital investment and operating expenditure of the large and medium

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scale mines for the purpose of gathering taxable information and providing the
same to the Tanzania Revenue Authority (TRA) and other relevant authorities;
Section 22 of the Mining Act, 2010
ii. The Act also recognizes the mining license that indicates the amount of capital to
invest. “mining license” means a mining license for medium scale mining
operation, whose capital investment is between US$100,000 and US$
100,000,000 or its equivalent in Tanzanian shillings; Section 4 of the Mining Act,
2010
iii. Through the mining law has the demonstration of administrative systems role by
the minister concerned to provide support for the creation of a favorable
environment for private investment in the mining industry. Section 19(f) of the
Mining Act, 2010

5.9.2. Natural Wealth and Resources Act No. 5 of 2017 and Natural Wealth
and Resources Contracts (Review and Renegotiation of Unconscionable
Terms) Act No. 6 of 2017.

As stated above, the Natural Wealth and Resources Act No. 5 make provisions on the
permanent sovereignty of natural resources. The Natural Wealth and Resources Contracts
Act No. 6 provides for the powers of the National Assembly to review agreements
concluded by the government and for the right of the government to renegotiate the
terms that it considers unacceptable in agreements that it has already signed (Section 4
and 5 of Cap 191 R.E. 2019) this act it persuades investments in terms of assessing
contracts of their investors.

5.9.3. Environmental Management Act, Cap 191 R.E. 2019

This Act monitors the preparation, review and approval of Environmental impact
assessments for local investment (Section 32 of Cap 191 R.E 2019) also to overseeing the
preparation and implementation of Environmental Impact Assessments required for
investments in the sector (Section 31 of Cap 191 R.E 2019) This Act ensures protection

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and favorable environment for investment that tend to support the mining investors in
proper areas for extraction. The environmental act assured the strategies of
environmental assessment to asses where the environment are ready for extraction or
not to which gives assurances to the investors as per section 104 and 105.

5.10. FORESTRY LAWS

According to Section 2 of the Forest Act No 14 of 2002 the term Forest can be referred
to means an area of Land with at least 10% tree crown cover naturally grown or planted
and or 50% or more shrubs and tree generation cover includes all or gazette under this
Act and all plantation. See section 2 of the Forest Act No 14 of 2002

The term Forestry can be referred to mean the science and craft of creating, managing,
planting, using, Conservation and repairing forests, and woodlands and associated
resources for human environmental benefits. Forestry is practiced in plantations and
natural stands. The science of Forestry has elements that belong to the Biological,
Physical, Social, Political and managerial sciences. Forest management Play essential role
of creation and modification of habitats and affect ecosystems services provisioning.

Basically the craft of creating, managing, planting, using, conservation and repairing used
to generate income because they are made for economic purpose. In Tanzania a person
can legally invest in forestry the paramount laws used for investment are stipulated
hereunder:-

5.10.1. Forest Act No 14 of 2002

The Act provide for the requirements that a person should have when he intend to invest
in Forestry, Whereby after holding a right of occupancy a right holder My enter into
conversant with the Director of Forest to the effect that the land or any part thereof
which is subject to the right of occupancy shall not, without the previous consent in
writing of the Director be used otherwise than growing of good Forestry for the
commercial production of Forest produced or for water or soil conservation or for the
preservation of wild as Provided under section 19 of the Forest Act No 14 of 2002

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(Section 19 of Forest Act No 14 of 2002) Therefore in regard to the Forest Act, in order
for a person to invest in Forest should be a holder of right of occupancy.

5.10.2. Land Act Cap 113 R: E 2018

The Act provided for the procedure for a person to acquire a right of occupancy, Section
of the Act defines the term right of occupancy to mean a title to the use and occupation
of Land and includes the title of Tanzania Citizen of Africa descent. Refer Section 2 of the
Land Act Cap 113 R.E. 2018

An exception to this has been provided under section 20(2) of the Same Act that a
Foreign investor can invest through a derivative right which is granted by Tanzania
Investment Center whereby the Center acquire a right of occupancy then it grant a
derivative to foreign investor through Certificate of Incentive. Refer Section 20(2) of the
Land Act Cap 113 R.E. 2018

Therefore the right of occupancy which is required to be hold for person to invest in
Forest is governs by this Act. Further right of occupancy can be either Granted right of
occupancy or Customary right of occupancy The procedure for a person to apply for
right of occupancy are provided under section 25 of the Act. Refer Section 25 of the
Land Act Cap 113 R.E. 2018

5.11. LAW ON SETTLEMENT OF INVESTMENT DISPUTES IN TANZANIA

In 2017 Tanzanian government turns back theirs eyes and ears on international
arbitration by arguing that it was inherently biased against developing countries, with no
neutral ground in international arbitration for that purpose of course The Tanzania
government introduced a raft of legislative reforms to the natural resources sector.

Through the reforms the new government looked to ensure that investor disputes were
resolved locally and that the Tanzanian government would not be subjected to
international arbitrations. In response, by early 2020 the Tanzanian National Assembly
passed a bill to enact a new Arbitration Act

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The legislative reforms included limiting the use of international arbitration to resolve
disputes in respect of Tanzania’s natural resources. Especially in the mining and oil and
gas sectors)

The Following are the laws on settlement of investment disputes in Tanzania and how
they regulate investment in Tanzania;

5.11.1. Public-Private Partnership Act (Amendment) Act 2018 Act No. 9 of 2018

The Tanzanian government also passed legislation in September 2018 prohibiting

international arbitration as a method for resolving investor-state disputes. Under Section
22 of the Public-Private Partnership Act (Amendment) Act 2018 (Act, No. 9 of 2018), any
disputes arising under a PPP contract “shall in case of mediation or arbitration be
adjudicated by judicial bodies or other organs established in Tanzania and in accordance
with its laws.”

5.11.2. Natural Wealth Resources (Permanent Sovereignty) Act, Act No. 2017

Under the above Act under Section 11 prohibited investors from resorting to international
dispute resolution mechanisms, such as international arbitration, where the subject matter
of the dispute concerned natural resources:

a) Pursuant to Article 27(1) of the Constitution, permanent sovereignty over natural

wealth and resources shall not be a subject of proceedings in any foreign court or
tribunal.
b) For the purpose of subsection (1), disputes arising from extraction, exploitation or
acquisition and use of natural wealth and resources shall be adjudicated by judicial
bodies or other organs established in the United Republic and accordance with
laws of Tanzania.
c) For the purpose of implementation of subsection (2), judicial bodies or other
bodies established in the United Republic and application of laws of Tanzania shall
be acknowledged and incorporated in any arrangement or agreement.”

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5.11.3. The Natural Wealth and Resources Contracts (Review and Re-
Negotiation of Unconscionable Terms) ACT (Act No. 6 of 2017)

This is another law enacted in the year 2017 for the purpose of affirms Tanzania’s
permanent sovereignty over all natural wealth and resources.

The Act among other things mandates the review of all contracts relating to extraction,
exploitation, acquisition, and use of natural wealth and resources for the purpose of
rectifying or expunging any unconscionable terms. An investment contract shall
accordingly be deemed as unconscionable if it contains any provision or requirement,
inter alia, which subjects the state to the jurisdiction of foreign laws and fora.

This provision provides the flexibility to consider an agreement that refers investment
disputes to international adjudication as an unconscionable agreement that must as a
result be renegotiated. Refusal or failure to do so would render the applicable investor
state dispute settlement clause ineffectual under Tanzanian Law. Such clauses will further
be treated as having been expunged, (Section 5(1), (2) of The Act No.6 of 2017)

5.11.4. Investment Law Act, 1997 (Act No. 7 of 1997)

The Tanzania Investment Act, 1997 regulates the settlement of investment related
disputes between the Tanzanian government (and its institutions and departments) and
the investor, but it does not shed light on how disputes with local communities will be
dealt with. According to this law, disputes between government and investors should be
resolved amicably - that is, through discussion and negotiation.

If amicable settlement fails, investors can bring disputes to arbitration in accordance with
arbitration laws of Tanzania, the rules of the International Centre for the Settlement of
Investment Disputes or any bilateral or multilateral agreement on investment between
Tanzania and the host country of the investor, The Tanzania Investment Act does not
provide for specific mechanisms for the determination of investment disputes between
local communities and investors. Those disputes would need to be determined by
national courts on the basis of applicable national law

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5.11.5. Land Act of 1999

Disputes relating to land can be taken to the dispute settlement mechanism that was
established by the land laws of 1999, namely the Land Act and the Village Land Act, the
hierarchy of courts in land disputes, that is to say- the Court of Appeal; the High Court;
The District Land and Housing Tribunal; Ward Tribunals; Village Land Council (Section
167 of Cap 113 R.E 2019). Any aggrieved person can take a dispute to this court system

5.11.6. The Convention Establishing the International Centre for the Settlement
of Investment Disputes between States and Nationals of other States of
1965

In 1992, Tanzania acceded to the Convention Establishing the International Centre for
the Settlement of Investment Disputes between States and Nationals of other States of
1965, which establishes the International Centre for the Settlement of Investment
Disputes (ICSID). It is important to note that, by acceding to the ICSID Convention,
Tanzania generally gave its consent to have investment disputes between Tanzania and
investors who are nationals of other states, referred to the ICSID (Article 25(1), ICSID
Convention, 1965). This covers investors and corresponding investments in the extractive
industries

NB. Investment is primarily a non-Union matter, the mainland and Zanzibar have
independent laws, rules, and practices except for international investment treaties and
tax which are treated as Union matter, and hence apply to both areas

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THE FOLLOWING ARE THE LAWS ON SETTLEMENT OF INVESTMENT DISPUTE IN

ZANZIBAR

The Constitution of Zanzibar, 1984

The Zanzibar Constitution of 1984 was introduced with a chapter of Bill of Rights. On
the issues of investments in Zanzibar, the Bill of Rights is very important to encourage the
investors to invest. The investors use their money for investing their properties in
Zanzibar, therefore the Bill of Rights are in the Constitution to protect the property of
the people including the investors For instance, Article 17 of the Zanzibar Constitution
provides that no person shall be deprived of his property interest or right in that
property except and upon compliance with certain conditions

The Zanzibar Investment Promotion and Protection Act, 2004

The most important investment law is the Zanzibar Investment Promotion and
Protection Act of No. 11 of 2004. Section 3 of the Act, established an Autonomous
Government Organ which is called Zanzibar Investment Promotion Authority (ZIPA). It is
a body corporate with perpetual succession with a common seal and

is capable in its name of suing and being sued, borrowing and lending money, taking
purchasing, or otherwise acquiring, holding, charging and disposing of movable and
immovable property. Also it is doing or performing all such other things or acts necessary
for proper performance of its functions which may lawfully be done by a corporate.

NB. The International Centre for Settlement of Investment Disputes (ICSID or the Centre)
is established by the Convention on the Settlement of Investment Disputes between
States and Nationals of other states. Also used in Zanzibar for Settlement of Investment
Disputes is not an International Court or Tribunal but merely provides an institutional
framework that facilitates conciliation and arbitration. The actual settlement of disputes
takes place mainly through arbitral tribunals that are constituted on an ad hoc basis for
each dispute.

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TOPIC NO 6: PARTINENT/RELEVANT ISSUES ON INVESTMENT IN TANZANIA

6.1. CREATION OF SUPERVISORY AND REGULATORY BODIES

6.1.1. TANZANIA INVESTMENT CENTRE (TIC)

TIC is the Primary agency of the Government responsible for coordinating, encouraging,
promoting and facilitating investments.

 The ‘Vision’ of the TIC; “To become a world class Investment Promotion Agency
Promoting Tanzania as Africa’s premier investment destination”
 The ‘Mission’ of the TIC; “To contribute to the sustainable economic development
of Tanzania through attraction of new investment and maximizing its impact on
the economy”

There is hereby established a ‘body’ to be known as the Tanzania Investment Centre

(TIC), which is an Agency of the Government and shall be under the general ‘supervision’
of the Minister. The current Minister of Investment is Hon. Godfrey Mwambe. Currently
the Centre is under the Board Members of Prof. Longnus K.Rutasitara-Board Chairman,
Prof.Wineaster Anderson-Board Member, Khatib M. Kazungu-Board Member and
Mr.Godfrey Simbeye-Board Member.

TIC shall be a body corporate with perpetual succession and a common seal and, shall in
its own name be capable of acquiring and holding movable and immovable property,
suing and being suing, as stipulated under section 4(1-3) of the Investment Act (1977 Cap
38 R.E 2015). The Centre contains and coordinates information’s from other Bodies like
NEMC, NBS, THE CENTRAL BANK,

6.1.1.1. THE LAWS CREATING/ESTABLISHING TIC

Section 4 of the Investment Act establish and Create a body to be known as Tanzania
Investment Centre (TIC).

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6.1.1.2. TYPES OF INVESTMENT TIC SUPPORTS

The TIC supports the following types of Investment: (a) Foreign Owned Investments-the
minimum Capital Requirement is US$ 500,000, (b) Locally Owned Investments-
Minimum Capital Requirement is US$ 100, 000 and (c) Industries/Sectors not included
are Mining, Oil and Gas-are under…..Board?

6.1.1.3. THE OBJECTIVES OF THE TIC INVESTMENT

1. The Centre, shall be a one-stop Centre for investors shall be objectives the Primary
agency of Government to Coordinate investment in Tanzania
2. The Centre, shall be a one-stop Centre for investors that promotes investment in
Tanzania
3. The Centre, which shall be a one-stop Centre for investors, shall facilitate
investment in Tanzania
4. The Centre shall facilitate investment in Tanzania and advise the Government on
investment policy and related matters.
5. Therefore, according to the Section 5 of the Investment Act, through the
mentioned function the TIC enable and it help to the prosperity of the Investment
development in Tanzania.

6.1.1.4. THE FUNCTIONS OF THE TIC

For the purpose of the section 5 of the Investment Act, the TIC shall:-

a) Creating and maintaining a positive climate for private sector investment

b) TIC initiate and support measures that will enhance the investment

Initiate and support measures that will enhance the investment in the country for both
local and foreign investors. As provided under Section…

c) Providing and disseminating up-to-date information on investment opportunities and

incentive available to investors

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The ‘TIC’ Collect, collate, analyses and disseminate information about investment
opportunities and sources of investment capital, and advise investors upon request on
the request on the availability, choice or suitability of partners in joint- venture projects.

d) The TIC assist all investors to obtain all necessary permits, licenses approval consents,
authorizations, registrations and other matters required by law

Assist all investors, including those who are not bound by the provisions of this Act, to
obtain all necessary permits, licenses approval consents, authorizations, registrations and
other matters required by law for a person to set up and operate an investment; and to
enable certificate issued by the Centre to have full effect. As per section…… read
together with the policy …..And the principle established in the case of….

e) The Centre (TIC) identify investment sites, estates land for investment

In consultation with Government institutions and agencies identify investment sites,

estates, or land together with associated facilities of any sites, estates or land for the
purposes of investors and investment in general.

f) The TIC Provide, develop, construct, alter, adopt, maintain and administer
investment sites, estates or land for investment

It Provide, develop, construct, alter, adopt, maintain and administer investment sites,
estates or land together with associated facilities or land together with associates facilities
of those sites, estates, land and subject to relevant law, the creation and management of
export processing zones.

g) ‘TIC’ provide information on benefits or incentives available to investors

The Centre provides and disseminate up to-to-date information on benefits or incentives

available to investors.

The ‘Centre’ support, encourage local investments

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“The Centre Facilitating foreign and local investors” It carry out and support local
investment promotion activities which are necessary to encourage and facilitate increased
local investments, including entrepreneurial development programmers.

h) Stimulating and supporting the growth of Entrepreneurship and SMEs in Tanzania

The TIC stimulating local and foreign investments

i) Monitoring the Tanzania business environment and growth of Foreign Direct

Investment (FDI) in the Country.

The ‘Centre’ perform other functions attainment investment objectives. The TIC
performs any other functions which are incidental to the attainment of the objectives of
the Investment Act.

j) Promoting advice to the Government on investment related matters

6.1.1.5. TIC SERVICES AND COMMITMENT TO INVESTORS

TIC One Stop Center Services in which its commitment to the investors are:

i. Meeting with TIC staff

ii. Arranging appointments
iii. Preparation and confirmation of itinerary for potential investors

TIC One Stop Center Services in which its services to the Investors are:

i. Assists investors to obtain all permits, licenses and visas

ii. Granting land derivative rights to investors
iii. Assists investors to navigate administrative and regulatory handles
iv. Provides an ‘aftercare’ service to TIC registered investors

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6.1.1.6. THE ‘BOARD’

There is hereby established a Board of the Centre which shall be responsible for the
discharge of the functions of the Centre. The Board consists of a Chairman who shall be
appointed by the President, two members appointed by the Minister from the private
sector and public sector, and two other member appointed by the Minister. That
appointment of the said members should consider only person with sound knowledge
and experience in public or private sector investment and management issues.

Zanzibar Investment Promotion Authority

This Board operates under the Zanzibar Investment promotion and protection Authority
Act. (No.14 of 2018) It’s the main government institution responsible for promotion and
facilitation investment in Zanzibar.

APPLICATION FOR CERTIFICATES AND REGISTRATION FOR INVESTMENT IN

TANZANIA

Applications for certificate and issue for certificate

All applications for certificates of incentives and protection under the Investment Act
shall be made to the Tanzania Investment Centre, and the Centre shall, issue certificates
in accordance with the provisions of the section 17 of the Investment Act.

Application for new investment

i. Where an application is for new investment, it shall contains-

ii. The name and address for the proposed business enterprise
iii. The qualifications and experience of project management
iv. The nature and location of the proposed business activity
v. The capital structure or amount of investment
vi. Financed investment
vii. Sufficient capital for investment
viii. The project should be implemented as indicated in the projection

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Application For Rehabilitate or Expand an Existing Enterprise

i. The name of the existing enterprise

Its Articles of Association and Memorandum of Association or partnership agreement

ii. A statement of audited accounts

A statement of audited accounts for the three previous year, this requirement that should
be adhered to.

iii. The nature of the rehabilitation or expansion

iv. The capital structure and projected growth

The capital structure and projected growth over the next five year should be stated
clearly by the project management through the paper based that is submitted to the
Centre.

v. Financing of the rehabilitation and availability of finance

The financing of the rehabilitation or expansion project together with evidence of

availability of finances.

vi. Rehabilitation shall be implemented as indicated in the projection

There should be an undertaking that the expansion or rehabilitation shall be

implemented as indicated in the projection.

Application For equity investment, shares or stock in an enterprise

Where the application is for equity investment, shares or stock in an enterprise, it shall
contains-

i. The name of the enterprises in which equity/shares investment is made

The name of the enterprise in which the equity investment is made or the shares held.

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6.1.2. THE OTHER BODIES THAT LINKS WITH THE TANZANIA INVESTMET CENTRE
TIC

One Stop Centre links with the following Ministries and Bodies:-

6.1.2.1. THE BANK OF TANZANIA (B.O.T),

Bank of Tanzania is mandated to license, regulate, supervise and de-license banks,

financial institutions and Bureaus de change. Currently is under Governor; Prof: Florens
D.A.M.Luoga. The proposed established investment projects should comply with the
requirements of the B.OT on the Minimum Investment Capital Requirement.

Which should be not less than Tanzania shillings equivalent to five hundred thousand US
dollar (US$ 500,000) if the business wholly owned by a foreign investment or if a joint
venture and if locally owned, the minimum investment capital requirement is less than
Tanzania shillings equivalent to one hundred thousand US Dollars (US$ 100,000), as per
section 5(1) of the Bank of Tanzania Act, read together with section 2(2) (a) and (b) of
the Investment Act.

6.1.2.2. NATIONAL ENVIRONMENT MANAGEMENT COUNCIL (NEMC)

There shall be a ‘Council’ to be known as the National Environment Management

Council, also to be known by acronym “NEMC”. This also deemed to be a Supervisory
and Regulatory Body that deals with as well contribute into the growth of the
Investment in Tanzania. The council shall be a body corporate with perpetual successes
ion and common seal, as provided under section 16(1) and (2) of the Environmental
Management Act of 2004. NEMC is under the Board of Directors, that the Council is
managed by the Board, which consist of (a) the Chairman who shall be appointed by the
President. (b) The Director of the Environment (c) Seven members appointed by the
Minister. The current NEMC Board Chairman is known as Prof Esnati Chaggu.

Objective for the establishment of the Council (NEMC) are: The object and purpose for
which the Council is established is to undertake enforcement, compliance, review and
monitoring of Environmental Impact Assessment and in that regard shall facilitate public

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participation in environmental decision making, exercise general supervision and

coordination over all matters relating to the environment assigned to the Council, under
this Environmental Management Act or any other written laws.

FUNCTION OF THE NEMC:

(i) May carry on activities in that behalf either alone or in association with any other
person or body of person. The Council may, for the purposes of carrying out its
functions under this Act, do all such acts as may appears to it be requisite, advantageous
or convenient for or connection with the carrying out of these functions or to be
incidental to their proper performance and may on any activities in that behalf either
alone or in association with any other person or body of persons.

(ii). Identify projects and programmers or type of projects. The Council shall, in
collaboration with relevant sector identify projects and programs or types of projects and
programmers, for which environmental audit or environmental monitoring must be
conducted under the Environmental Management Act, as provided under section 18(1)
and (2) of the Environmental Management Act of 2004.

6.1.2.3. THE NATIONAL BUREAU OF STATISTICS (NBS)

“Bila kuwa Na takwimu huwezi kushughulikia changamoto za ajira, uwekezaji,

kushughulikia matatizo ya watu wenye mahitaji maalum, kutoa huduma za kijamiii wala
kufanya maendeleo;”Rais wa Jamhuri ya Muungano wa Tanzania Mhe.Samia Suluhu
Hassan.

Tanzania Investment Report of 2018 on “Foreign Private Investment”

“The 2015/16 National Bureau of Statistics (NBS) Business Plan will accomplish the
corporate objective aiming at providing of equality statistics and statistical services in the
country”, as said by Dr. Albina Chuwa Director-General.

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The Vision and Mission of the NBS

The Vision of the NBS is to become a one-stop Centre for official statistics in Tanzania
and the Mission is to produce quality official statistics and services that meet needs of
national and international stakeholders for evidence-based planning and decision
making. The mission statement which is the direction taken by the National Bureau of
Statistics (NBS) will be accomplished through application of its core value; which are
Customers Focus, Report and Integrity, Transparency, Services Excellence,
Professionalism, Confidentiality, Impartiality, Accountability, Teamwork and being
Outcome Oriented.

6.1.2.4. THE NATIONAL LAND USE PLANNING COMMISSION (NLUPC)

Appointment of Commissioner for Lands

A commissioner for Lands shall be appointed by the President. A person of proven

probity with qualifications skills and practical experiences in land management or law in
the public or private sector; The Board of Commissioners of the National Land Use
Planning Commissions is under Ndg. Fedelis Kashumba Mutakyamilwa who is the
Chairman of the Board also is the Chairman of the National Land Advisory Council of
the United Republic of Tanzania.

Purpose of the National Land use Planning Commission (NLUPC)

1. To have sustainable land management systems which address issues of land

management systems which address issues of land degradation and conflicts in
order to maintain peace and harmony.

This can only be achieved through coordinated participation of all stakeholders in land
resources management at all levels such as national sectors (ministries, non-governmental
organizations, and companies), regions, districts and villages.

2. The Commission as a central body to perform the role of co-ordination, policy

and law formulation, and build capacity of land use planning at levels.

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Procedures for Application for Right of Occupancy

If an application for a right of occupancy or a derivative right, which is made by a non-

citizen or a foreign company, is for residential purposes, the use of such land shall be
secondary or ancillary to the investment approved under the Tanzania Investment Act, as
per section 25(1A) and (2) of the Land Act.

6.2. INVESTMENT INCENTIVES

The concept of investment incentive ‘Incentives’ means tax relief and concessional tax
rates which may be accessed by an investor under the Income Tax Act, the customs
Tariffs Act, the Tanzania Revenue Authority Act, the Value Added Act, and any other law
for the time being in force, and includes additional benefits that may be accessed by an
investors under sections 19 and 20 of the Investment Act.

The Tanzania investment Act of 1997 defines “Incentives” as tax relief and concessional
tax rates which may be accessed by an investor under the income Tax Act, the customs
Tariff Act, the Tanzania Revenue Authority Act, the value added Act, and any other law
for the time being in force, and includes additional benefits that may be accessed by an
investor under section 19 and section 20 of the Tanzania Investment Act 1997 as so
provided under section 3 of the Investment Act of 1997.

The government-implemented incentive policy aimed to encourage investors into its

domestic market or to promote expansion of existing businesses? Investment incentives
encompass creating an environment that enables foreign business to operate profitably
and decreases risks.

6.2.1. Different types of Investors and Their Incentives

It is incredibly important to understand the incentives of investors when you are raising
money. This used to be fairly easy-you raised money from Venture Capitalist who
wanted to see a big return on their investment. The best of these investors were
incredibly focused on doing the one thing they did well: investing in technology
companies.

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There are a lot of different approaches to investing and different incentives for doing so.
While they would all prefer not to lose money, the differences in how their incentives
and expectations are structured are critical in understanding how to decide whether or
not to work with them, how to negotiate with them, how to interact with them over
the lifetime of your relationship.

6.2.2. The key motivations and structures of each of the investors you are likely to
encounter
a) VC Firm

This is the classic startup investor that is primary working to achieve returns for the funds
they have raised from a set of Limited Partners. The partners at these funds are usually
paid in two ways: they earn a % of the funds that they have raised and they earn a % of
the return they make on total fund from which they invest in you. These firms generally
raise further funds based on the performance of earlier investments. VCs generally invest
only in deals which they believe will return all or most of their returns.

b) Angels

Usually a wealthy individual who invest their own money in startups. Sometimes these
are people that made money through their own startups. Angles have become hugely
important to early stages startups as the number of companies have grown beyond the
financing ability of traditional funds. There are a lot different incentives at play for
Angels. While many of them are hoping for huge financial returns, many also want to be
able to brag about having invested in a hugely successful startup.

Most Angels invest as a part time actively. There is a wide range in the amount of time
and effort they devote to investing. Knowing that they have other things on their minds
should change how you approach and interact with them. You also need to understand
how experienced they are, the size at which they invest, and how much time and energy
they will actually spend on their investing.

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c) Accelerator

Accelerators are, for the most part, a subset of VC firms where there are professional
investors who raise funds from outside parties to invest in startups. They usually fund
more companies than classic VC firms, and do so in batches. Most accelerators need to
demonstrate return to investors to continue to raise funds. Accelerators also have a non-
financial incentive-they need breakout success to prove that they are providing
operational help to companies and actually “accelerating them”.

d) Syndicate

Syndicates come in a number of different flavors, but are generally groups of angels who
come together to invest in a single deal.

e) Family and Friends

While your friends and family are probably hoping to get a huge return from their
investment, they are more likely motivated by wanting you to get a chance to succeeded
and be happy. They are unlike to try to negotiate terms, though in contrast you will feel
the worst for losing their money.

f) Family office

These are the private investment vehicles for super high net worth individuals and
families. Some family offices are structured like single limited partner hedge funds with a
high tolerance for risk, and other are structured more conservatively.

g) Corporate investor (director)

These are a lot of corporations that like to talk about investing in startups. Some of them
actually do this, and some do not. When an investment comes directly from the
company’s balance sheet at the direction of a particular business line. The corporation is
usually looking for strategic value from the investment.

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6.2.3. INVESTMENT INCENTIVES IN TANZANIA

6.2.3.1. What are investment incentives Tanzania?

Incentives’ means tax relief and concessional tax rates which may be accessed by an
investor under the Income Tax Act, he customs Tariffs Act, the Tanzania Revenue
Authority Act (TRAA), the Value Added Act, and any other law for the time being in
force, and includes additional benefits that may be accessed by an investors under
sections 19 and 20 of the Investment Act.

6.2.3.2. What are benefits for investment incentives in Tanzania?

a) The benefits which are applicable to that enterprise’; A business enterprise in
respect of which a certificate is granted under this Investment Act shall be entitled
to the benefits which are applicable to that enterprise under the provisions of the
Income Tax Act, the Customs Tariffs Act, the Value Added Tax, or of any other
written law for the time being in force.
b) When Certificate of incentives has been issued, shall be entitled to the benefits
conferred under subsection one which is (Read the tax Acts).

That, for the purposes of creating a predictable investment climate, a strategic or a major
investment identified shall not, during a period of five years from the date of issuance
of such certificate be amended or modified to be determinant such investor, as stipulated
under section 19(2)of the Investment Act.

6.2.3.3. Exception to the provided benefits

Section 19(2A) of the Investment Act53benefits under subsection (1) shall not extend to
(a) a motor vehicle manufactured more than eight years before importation. (b) Non-
utility vehicle classified under HS Code 8702. 0.19, 8702.90.19 and t tariffs heading 8703
providing that the restriction imposed shall not extend to an investor whose certificate of
incentive was issued on or before 30th June, 2006; or (c) office equipment, stationaries,
furniture’s, sugar, beverage, spirits, tiles, non-utility motor vehicles, air conditions, fridges,
petroleum products, cutleries, beddings, cement, steel reinforcement bars and roofing
sheets, PVC and HDPE, pipes with HS Code 3917.23.00 and HS Code 3917.21.00
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respective, and imported trailers classified under HS Code 8716.40.90 and electronic
equipment; Read together with section 19(2A) of the Investment Act, provides that
benefits under subsection 1 shall not extend to non-utility vehicle classified under HS
Code 8702. 0.19, 8702.90 and tariff heading 8703, imported trailer classified under HS
Code 8716.31.90 and 8716.40.90, the benefits conferred under subsection (2) shall not
apply to a major vehicles manufactured more than eight year before import

The most preferable incentives available to the investors are fiscal and non-fiscal
incentives whereby. Fiscal incentives refers to monetary benefits offered to investors or
enterprises like discounts, tax savings, fiscal incentives usually are usually guaranteed by
the government that help to make investment with less risky so that to encourage
business creation and expansion. While Non-Fiscal incentives are those benefits that are
simply “non-monetary” values. Most of the Fiscal incentives and non-fiscal incentives are
provided under the laws as follows

Incentives provided under the value added Tax Act of 1997

a) Zero rated exports and exemption supplies where by in order to encourage export of
locally produced goods from Tanzania all exports are zero rated under the VAT law.

b) VAT refunds3 it’s made either within 30days or 6 months from the due date
depending on the type of the Tax payer whereby regular tax payer can claim their VAT
refunds within 30 days and an authorized auditor must certify a VAT claim whereby the
trader claiming for a VAT refund must possess the Fiscal receipts or customs receipts
showing that he/she has been approved for VAT refund. As per section 55 (1) and (2) of
the Act of 1 3 See section 66 of the Act

(c). VAT exemption and 1977 pecial relief; under the VAT law, there are certain goods
and services which are exempted from VAT such goods or services are like, food crops
and livestock supplies, Equipment’s used for storage, transportation and distribution of
natural gas, health supplies and hospital equipment, education services, sale or lease of
an interest in land and tourist services.

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Tax incentives granted under the income Tax Act of 2004.

a) 100% capital allowance is agriculture; where by investors in agriculture enjoys 100%

capital allowance expenditure incurred on plant and machinery, including windmills,
electric, generators and distribution equipment used solely in agriculture.

b) Withholding tax exemption; The law provides of withholdings tax chargeable by

foreign banks on interests payable to strategic investors as defined by Tanzania
investment Act, this also encourage investment in the country.

c) Income Tax exemption under export processing zone (EPZ); whereby as per income
tax Act of 2004 the following are exempted from income tax. Income derived from
investment or business conducted within the export processing zone and special
Economic zone, during the initial period of ten years Payment of withholding tax in
respect of foreign loan granted by investors licensed under the export processing zone
and special Economic Zone during the initial period of ten years.

Payment of withholding Tax on dividend arising from investment in the export

processing zone and special Economic zone during initial period of ten years. Payment of
withholding Tax on rent payable by an investor licensed under the export processing
zone and special economic zone during initial period of ten years. As per section 4 See
section 15 of Act 5 See section 9 (3) (a) & (b) of Tax Act 6 See section 15 (1) (a)-(i) 7
Section 15 (1) (b) of Tax Act.

Tax incentives under the Zanzibar investment promotion and protection Act of 2004

Its provides those incentives followed-; Section 8

a) 10 years withholding Tax holiday on dividends to non-residents.

b) Duty and VAT exemption on raw materials machinery, equipment and other
inputs.
c) Stamps duty exemption.
d) 100% investment dedication on capital expenditure within 20 years.
e) Duty and Tax free import of goods from domestic area permissible

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f) Duty free export of goods produced.

g) Exemption of income tax on interest on borrowed capital.
h) Exemption from payment of all taxes and levies imposed by local governments
for goods and services produced in free Economic Zones.

Tax incentives granted under the East Africa Community Customs Management Act of
2004, Provides;

a) Imports duty Draw backs whereby import duty charged on imported inputs used for
producing goods for export and goods sold to foreign institutions like United Nations in
Tanzania, is refunded the aim of this scheme is to maximize products and minimize the
cost of production for local industries and enable them to compete in the world market.

b) Export Processing Zone (EPZ); under the Export Processing Zone Act, all goods
processed and manufactured in the area designated as EPZ are exempted from import
duty or raw materials.

Incentives provided under Land Law Cap 113 of 1999 in Tanzania-mainland.

Where through land Act foreign investors can obtain land Act for investment through
Tanzania Investment center (TIC), where a derivative Right of Occupancy is granted
while domestic investors own land directly through the certificate of Right of Occupancy.

Tanzania Investment Centre has established a land bank registry where land suitable for
various investment sectors including manufacturing and agriculture has been identified,
surveyed and availed with key infrastructure. As per section 8 See part iii of the Act 9 See
section 19 (2) and section 20 (1) of Land Act. (Act No.4 of 1999 Cap 113 R.E 2019) Other
incentives which are non-fiscal incentives may be categorized into political incentives,
Economic and social incentives and here in are some of the explanations on such kind of
non-fiscal incentives.

Political incentives, these are the incentives arises from the political field or atmosphere in
the sense that, in areas where there is a political stability most of the investors are
attracted to invest there too will be safe and protected due to the stabilization of the

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politics in the said areas, for example Tanzania has been recently reported to be among
the countries with a good political stability compared to other Eastern African countries,
that being the case that Tanzania is best area for investors to invest due to presence of
peace and other assures the investors with a safety to their capitals upon their investment
therein.

Economic incentives, these may be due to the goods investment policies of the countries
presence of huge population which assures the market to the investors for example the
Zanzibar investment policy of 2004 adopted all incentives offered by Zanzibar
investment Act under the Part III which provides for incentives which must be offered to
the investors also currently Tanzanians are approximately 59 million population
according to the 2012 censure, these being the case therefore Tanzania seems more
vulnerable for investment than Burundi or Rwanda which their population are less
compared to that of Tanzania because the investors may be sure of the inter and market
where they can sell their products after productions.

Social incentives these base on all aspects of social services like good roads facilities,
availability of water, electricity and many others which may encourage the investors to
invest in a certain, the based on the notion that whenever such social services possible to
invest in such areas compared to the areas without such social services.”

The Ceases and expire of the Certificate of Incentives

Where the holder of a certificate ceases, for any reasons to operate the investment to
which the certificate relates, he shall notify the Centre in writing and he shall be entitled
to all rights and be liable to all obligations incurred under investment Act up to the date
he ceased to operates and on the date his certificate shall be deemed to have expired.
Generally, a certificate of incentives shall not be transferred, or assigned or amended
without the approval of the Tanzania Investment Centre

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6.3. REPATRIATION OF CAPITAL AND PROFITS ON INVESTMENT IN TANZANIA

Under Section 21 of the Investment Act FDI projects holding Certificates of Investment
are guaranteed unconditional transferability of FDI payment abroad through any
authorized dealer bank in freely convertible convictable currency. This covers FDI
remittances of net profits and dividends, services charges for foreign loans, royalties and
technology transfer charges, the proceeds of FDI Liquidations or sale of capital assets in
Tanzania and salary payments to expatriate staff employed in Tanzania by a registered
foreign company.

Tanzania is at present largely free of exchange control restrictions and the foreign
exchange payment framework is held by most FDI executives to have operated relatively
efficiently over the past five years, especially with the privatization of previously State-
owned dealer banks. In the respect Tanzania is approaching best practice within the
region delivering a foreign exchange regime that is strongly supportive of FDI.

This is probably the most important single factor contributing to striking improvement in
the investment climate that has taken place in recent years. However, it should be kept in
mind that in the mining and petroleum sectors where there are long-term projects with
licenses and agreement extending over 20 or 30 years, major investors will seek
contractual undertakings from the Government which could give protection in the event
that a more rigorous exchange control regime is reintroduced at some time in the future.

Repatriation’ simply means the act or process of return or restoring something to the
country of it origin and capital means all cash contribution, plant, machinery, equipment,
buildings, spare parts and other business assets other than good will which are not
consumed in the regular operation of the business and have a life of less than twelve
months (Section 3 of the Investment Act of 1977), also “capital” can be defined as money
or assets invested or available for investment, in a business. Thus repatriation of capital is
about return of capital and profit earned in the foreign county through investment to the
country of origin of the investor.

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The investment policy of Tanzania provides that foreign investors should be treated same
as or equal to domestic investors thus The Investment Act of 1977 apply to both foreign
and local investors without discrimination between the two. But the benefits and
protection provided by the Investment Act to foreign and local investors can be enjoyed
only if they comply with the Requirement under section 2(2) (a) and (b) of the
Investment Act, which for a foreign investor requires a minimum capital investment of
USS 300,000 and for local investors is USS 100,000.

Hence local and foreign investors are granted same or equal benefits under The
Investment Act such as; fiscal stability clause under section 19(2) which provides that
benefits provided to a holder of a certificate under applicable fiscal legislation will not be
amended or modified to the advantage of the investors enjoying those benefits. Others
include repatriation of funds and employment of expatriates under section 21 and section
24 which provide for immigration quota of labour. Repatriation of capital is among the
benefits provided in the Investment Act especially for foreign investors in order to
facilitate them to conduct their business smoothly and efficiently.

In Tanzania Foreign Direct Investment projects through their business enterprises which
hold certificate of Investment from Tanzania Investment Centre according to section 17
of the Investment Act and which fulfil the requirements under section 2 (2) (a) of The
Investment Act are guaranteed Unconditional or unlimited transferability or movement
of Foreign Direct Investment payments abroad through any authorized dealer bank in
any freely convertible currency of;

i. Net profit/ dividends; net profit means the money made by a company or a part
of a company for a particular period after all costs, taxes have been paid. And
dividends means profit of a company’s earnings or profit distributed pro rata/ in
proportion/equal portion to its shareholders usually in the form of cash or
additional shares.
ii. Service charges for foreign loans where a foreign loan has been obtained; a
foreign investor may obtain credit from domestic bank and financial institutions

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for the purpose of carrying out the activities specified in his loan application up to
the limit established by the Bank of Tanzania consulting with the Tanzania
Investment Centre by considering the amount of foreign capital invested in the
business enterprise.
iii. Royalties/ technology transfer charges; royalties means a payment made to a
writer, musician, inventor. every time something they have created or invented is
brought or used by others, and technology transfer chargers is all about foreign
investors that meet the maximum requirements provided under section 2 (2) (a)
and 17 of The Investment Act can import machinery, capital equipment, vehicles (
especially in investment in mining and agriculture), installation material and as for
mining investment, explosive, lubricants and industrial items that are free of
import duty or that import duty is of a rate not more than five percent. An
investor with an enterprise may enter into technology transfer agreement for the
purpose of importing machinery, vehicles and other equipment’s for his business
with the guarantee of freedom of transfer ( the technology) in freely convertible
currency of royalties, fee, and charges for the transfer of technology( transfer
agreement) and also payment of salary or fee.
iv. Foreign direct investment liquidation; when a foreign investor with a business
enterprise wants to sell his capital assets in Tanzania he is guaranteed repatriation
of his sold capital made out from his investment.
v. Salary payment to expatriates staffs who are employed in Tanzania by a
registered foreign company; business enterprises having certificate of incentives is
entitled to automatic initial immigration quota of up to five non- Tanzanians
persons during the start-up period of the business (Section 24 of The Investment
Act of 1977). Thus salary payment to those expatriate employees is subject to
remittance because that expatriate staffs are non- Tanzanians thus they will be
paid with their own currency not the currency of Tanzania.

Repatriation of capital involves foreign exchange because when the business enterprises
which have invested in Tanzania wants to conduct repatriation of capital from Tanzania

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to their home country foreign exchange is necessary whereby Tanzania is free of

exchange control restriction and the foreign exchange payment is mostly held by foreign
investors executives. Repatriation of capital is important because it facilitate investors to
do business freely because they are not limited to make transaction with their own
currency in circumstances such as; payment of salary to expatriate staff employed by a
foreign company, they are also not limited to transfer the profit That they earn from
their business.

Thus repatriation can also be among investment incentives because through repatriation
as provided under section 21 of the Investment Act, the investors are attracted to
conduct business in Tanzania because repatriation of capital is not limited it is free.

Repatriation means return of capital from abroad to the country of its origin by transfer
to the Homeland of capital invested abroad as well as the profits on it and by the
transfer of foreign currency earned from the sale of goods and services.

Repatriation of capital and profits are risk, in case a same companies operate in more
than one country generally accept local, currency of the economy that they Trans tract
business. When earns income in foreign currencies the earnings subjected to foreign
exchange risk as to fluctuation of value or fluctuations in the exchange rate hence
become risks to the repatriation of profits. “

6.4. THE CAPITAL MARKERTS AND SECURITIES AUTHORITY

The securities market in Tanzania emerged in the 1990s as a result of the government’s
policy to liberalize the Tanzanian financial sector; For the purpose of ‘promoting and
facilitating the development of an orderly, fair and efficient capital market and securities
industry in Tanzania’. Alongside the Capital Markets and Securities Act of 1994 (which
applies to both Tanzania Mainland and Zanzibar) (Section 1 (2) of the capital markets
and security Act No 5 of 1994 as amended in 2010).

The Banking and Financial Institution Act of 2006 [CAP 342] (BFIA) has also been
enacted with the aim of maintaining the stability, safety and soundness of the financial

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system. The provisions of the BFIA apply to all banks and financial institutions, and
where there is a conflict between the BFIA and any provision of any law establishing a
bank or financial institution, the provisions of the BFIA prevail.

A capital market is a market where both the capital market investment makes the
investor to buy or sell securities. The stocks markets and bond markets are types of
capital markets where investor can trade in stock and bonds. Investing in the stocks or
bonds may be either investing in the new issues or in the existing securities which can be
primary capital which handled the trading and investment in the new issues and
secondary capital markets takes care of trading of existing securities.

The examples of securities in Tanzania are The Dar es Salaam Stock Exchange (DSE),
which is responsible for the trading of shares and bonds, is regulated by the Rules of the
Dar es Salaam Stock Exchange of 2014 and the Capital Markets and Securities Act.5 It was
established in 1996 as a secondary market for both equity and debt securities and its
primary aim is to provide a responsive security that will advance and liberalize
Tanzania’s economic and financial sectors.

As of 15 September 2015, the DSE had 21 listed companies and seven cross-listed
companies worth over US$5 billion. The seven cross-listed companies are Acacia Mining,
East Africa Breweries, Jubilee Insurance, Kenya Airways, Kenya Commercial Bank.

The capital markets and authority in Tanzania is established by an Act called THE
CAPITAL MARKETS AND SECURITY ACT NO 5 OF 1994 AS ARMENDED IN 2010.
Provide that There is hereby established an authority to be known as the Capital Markets
and securities Authority (Section 6(1) of capital market and security Act).

Section 6(2) of Capital market and Securities Act, The Authority shall be a body
corporate with perpetual succession and a common seal and shall be capable in its
corporate name of;

a) Suing and being sued;

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b) Taking, purchasing or otherwise acquiring, holding, charging and disposing of both

movable and immovable property
c) Borrowing and lending money;
d) Entering into contracts; and
e) Doing or performing all such other things or acts necessary for the proper
performance of its functions under this Act which may lawfully be done by a body
corporate

The function of the capital markets and security authority are provided by Section 10 of
Capital markets and Security Act of 2010.

The acquisition of an interest of more than 90 per cent triggers the mandatory takeover
and delisting sections of the Regulations. This means that the acquirer must either make a
mandatory public takeover offer to all shareholders of the target or disinvest through an
offer for sale or by a fresh issue of capital to the public to fall below the threshold.

On 19 September 2014 the limitations on foreign ownership of listed stocks were

removed. The Capital Markets and Securities Authority (Foreign Investor) Regulations
2014 have lifted the restrictions on the foreign participation in government securities to
the extent of 40 per cent and completely removing restrictions on foreign investors with
regard to listed securities. The amended regulations under Regulation 3(1) & (2) of
Capital markets and security of 2014

6.5. IMPORT AND EXPORT REGULATIONS ON INVESTMENT IN TANZANIA

Import procedures must be followed to clear goods as per the East African Community
Customs Management Act (EACCMA) 2004. Imports to Tanzania are subjected to
different stages whereby the importer is advised to make declaration through his Clearing
and Forwarding Agent by lodging documents at least 7days before arrival of the vessel.

The importer is required to appoint a Licensed Clearing and Forwarding Agent (CFA) to
clear goods. Document process is done online through Tanzania Customs Integrated

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System (TANCIS) for imports and exports and can be completed before arrival of the
goods.

Customs agents lodged the documents in the clearance system, i.e. Tanzania Customs
Integrated System Mainland and Zanzibar, teaching all other relevant import supporting
documents. The Agents are urged to lodge such documents at least 7 days before arrival
of the goods. Detailed information on current taxes, including import tariff lists and
procedures, can be found at the Tanzania Revenue Authority website.

6.5.1. IMPORT REGULATIONS:

Free import by passengers older than 17 years includes:

(i) One packet of Cigarette containing 200 sticks, cigars, tobacco and snuff not
exceeding 250 grams, One liter of Whisky and liquors,
(ii) Two liters of Wine,
(iii) Perfume and toilets water not exceeding half liter of which not more than a
quarter may be perfume,
(iv) Personal and household effects includes Wearing apparel, personal and
household effects, Goods up to 500 dollars,
(v) all goods manufactured in Burundi, Kenya, Rwanda or Uganda.

Arms and Ammunition regulations:

It includes; (i) It is advisable to obtain an import permit from the police in advance

Wild Fauna Flora

It includes: For plants and plant products a phytosanitary certificate is required. For fruits
an additional declaration that Xanthomonas citric (Hasse) Downson does not occur in
the country of origin is required.

6.5.2. EXPORT REGULATIONS:

Free export of a reasonable quantity of tobacco products and alcoholic beverages

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(i) Pets: Health Certificate of competent veterinary surgeon is required. All pets are
subject to inspection on arrival and will be kept in quarantine for a certain period.
Dogs and cats must have been vaccinated against rabies. Digs: less than year and 6
months at the latest prior to arrival. Casts: less than 1 year and 1 month at latest
prior to arrival.
(ii) Baggage Clearance regulations: Baggage is cleared at the first airport of entry in
Tanzania. Export: baggage of transit passengers with a destination outside of
Tanzania. The Tanzania Revenue Authority (TRA) launched a World Customs
Organization and World Trade Organization-compliant Imports/ Exports
Commodity Database to compel standard customs values for an exhaustive listing
of import and export goods. TRA expects this to be a boon to port productivity,
shortening clearance times and increasing transparency on valuation decisions.

Import Documents Includes:

Final Invoice, Agent’s Authorization Letter from the importer, Importer permits from
TMDA, TBS, TASAC, Exemption documents 9If applicable), Transport documents. Bill of
Loading/ Airways Bill/Road Consignment note. Cross Border Declaration of Currency
and Bearer Negotiable Instruments.

6.6. COMMERCIAL DISPUTE SETTLEMENT MECHANISM ON INVESTMENT IN

TANZANIA (SETTLEMENT OF DISPUTES) as per section 23 of the Investment Act.

For investors, according to the Amici, the duty of an investor to act in good faith exists as
a general principle of law, which is not necessarily tied to any specific treaty provision.

6.6.1. The disputes to be settled through negotiations for an amicable settlement

Where a dispute arises between a foreign investor and the Centre or the Government in
respect of a business enterprise, all efforts shall be made to settle the dispute through
negotiations for an amicable settlement.

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6.6.2. The disputes which is not settled through negotiations may be submitted to
arbitration

A dispute between a foreigner investor and the Centre or the Government in respect of a
business enterprise which is not settled through negotiations may be submitted to
arbitration in accordance with any of the following methods as may be mutually agreed
by the parties, the is to say:-

(i) In accordance with arbitration laws of Tanzania for investors

(ii) In accordance with the rules of procedure for arbitration of the International
Centre for the Settlement of Investment Disputes Example of those rules.
(iii) within the framework of any bilateral or multilateral agreement

On investment protection agreed to by the Government of the United Republic of the

United Republic and the Government of the Country the Investor originates.

Investment can sometimes be resolved in local courts or through state-state dispute

settlement .However, the most common way in which breaches of an investment treaty
are enforced is via investor state arbitration.

Investor state arbitration is a form of dispute settlement where a dispute between an

investor and a host state is heard by an ad hoc tribunal of arbitrators .It is a hybrid of
similar procedures developed in the context of commercial and state to state by disputes.

Essentially under an investment treaty which provides for investor state arbitration the
parties to treaty have each agreed that they will resolve disputes with the other party’s
investors through an ad hoc panel of party ported arbitrators who will issue a binding
judgment based on law.

There is no centralized set of procedural rules in investor state arbitration instead parties
choose the procedural rules that will apply to the dispute, either via the treaty or
individually for each dispute.

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Sometimes rules that will apply to an arbitral disputes are specified in the treaty. Other
treaties provide that the parties can choose the rules for each dispute. Examples of the
rules that can be used are the UNICTRAL rules. Remedies that are mostly provided are
monetary compensations mostly”

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