Banking & Finance 2020

Last Updated October 05, 2020


Law and Practice


IMMMA Advocates has a banking and finance practice that offers services in relation to various financial products to local and international clients. The firm's services cover syndicated lending, asset finance, derivative products, trade and commodity finance, insolvency and restructuring of non-performing loans, regulatory compliance, mergers and acquisitions, capital and money markets. IMMMA Advocates has advised in a range of sophisticated financing transactions for both local and international lending and borrowing clients.

The United Republic of Tanzania (Tanzania) had, from October 2015, seen many oscillations in the financial sector that have not only affected commercial banks and financial institutions as providers of loans but also borrowers and service providers.

Policy Shift

Tanzania has witnessed a policy shift whereby the government of the day has made it clear that it does not want to utilise the private sector in providing services. Instead, the government has been more inclined to utilise its own finances and service providers in its various projects and or services. Each sector has been negatively affected by this policy that, for example, prohibits government officials from holding meetings in private hotels or buildings. This move has seen most buildings in major cities in Tanzania becoming empty, hotel occupancy rate plummeting, etc, and has also negatively affected professional services providers such as lawyers, engineers, architects and building contractors.

As a result of the policy, there have been increases in non-performing loans in commercial banks due to a failure by borrowers to service their loans, most of which were dependant, among others, on revenues from services offered to the government and its various departments.

Tax Revenues

The abrupt decision by the government in 2016 to order all tax revenues from the central governments, independent departments and state-owned enterprises be deposited only in the Central Bank, and those already deposited in commercial banks be moved immediately to the Central Bank, saw casualties in the banking sector following the squeeze for cash. The move had a negative effect on commercial banks as these deposits were traditionally utilised for lending to the private sector.

The requirement to retain earnings from disposal or dealings in extraction exploitation or acquisition and use of natural wealth and resources to only banks and financial institutions established in Tanzania has reduced the appetite of offshore lenders. This has added yet more of a squeeze to the private sector, especially on projects that require intensive capital, particularly the extractive industry. This, coupled with local banks that are characterised by weak capitalisations, poses a big challenge for credits available to the private sector.

As a result of the foregoing, banks and financial institutions have been preoccupied with recoveries thus making lending to private sector very difficult. One notable and glaring piece of evidence of difficulties experienced in the economy is the real estate sector. Prices and rentals charges of properties have been reduced substantially and everywhere in the city of Dar es Salaam, which is the business capital of Tanzania, there are signs showing properties for sale or to let. The emptiness of the buildings has also been contributed to by the governments' abrupt move of all its administrative offices to the long-time designated capital of Tanzania, Dodoma. The government and its independent departments were the biggest landlords in Dar es Salaam, especially regarding office premises.

Tax Assessments and Claims

There have been unreasonable or arbitrary tax assessments and claims by the tax authorities against private businesses. Cases of freezing taxpayers’ accounts at commercial banks or financial institutions and closure of businesses by the tax authorities have had a negative effect on the business community. As a result, there has been a migration of Tanzania private capital to neighbouring countries such as Zambia, Kenya, Uganda, South Africa and even Botswana. Following this negative impact of flight by local business people to neighbouring countries, the government reviewed its aggressive approach towards businesses when it comes to payment of past taxes by adopting modest way of negotiating with the businesses while they continue operating. 

The foregoing policies and regulatory environment have created uncertainties in the market. All these actions have had negative impact on the loan market in Tanzania.

According to official version, COVID-19 pandemic seems not to have any negative effect on the loan market. What prevailed prior to the COVID-19 pandemic still holds water. The government stance from day one was to play down the pandemic scare and, as a result, there was no lockdown. Two main reasons underline this government stance:

  • there is no cure or vaccine for the infection and, therefore, locking down people indefinitely would hurt the economy more than keeping it open so that people can be accustomed to the infection depending on their immune systems; and
  • the economic reality is that the country could not support lockdown as the government had no money to feed the needy during a lockdown.

The effect in totality has not been negative according to official statements. However, and in order to mitigate the economic effect on the banking sector, the government – through the Central bank – reduced both the statutory minimum reserves and discount window rates and allowed moratorium on defaulters based on negotiations with their lenders among other measures.

Interest rates on treasury bills in Tanzania have been reducing due to accommodative monetary policy pursued by the government through the Bank of Tanzania. Interest rates charged by lenders in Tanzania are calculated based on the indicative weighted average on treasury bills. Given the downward trend of the treasury bills, it would be expected that overall lending rates by commercial banks to private sector would also go down. This is not the case, due to a range of factors.

Part of the reason for this unexplained trend is, of course, illiquidity in the market as already stated in 1.1 Impact of Regulatory Environment and Economic Cycles.

The COVID-19 pandemic has added wounds to the economy, the most affected sectors being the tourism and hospitality industries. Following lockdowns across the world that restricted global travelling, the tourism sector has been hit hard and the hospitality industry is suffering due to the emptiness of hotels and other entertainment places. All this is to the detriment of the economy and has negatively affected lenders, witnessed by a growing number of defaulters on loans.

For companies, a lack of governance has contributed towards lenders pricing their loans at higher margins than should have been the case if the information on a particular borrower were publicly available and reliable. Most private companies in Tanzania are family owned and, due to a lack of understanding of the need to embrace modern corporate governance principles, lenders are not in a position to obtain reliable information when it comes to credit appraisal. Further, erratic policy statements by senior public officials has contributed to this uncertainty and, taken together with long procedures of recovery in cases of defaults by the borrowers, makes lenders charge higher margins to compensate for anticipated issues.

This segment of the market has not developed in Tanzania. Dominant lenders are licensed commercial banks and financial institutions. Of late, banks have teamed up with mobile telephone companies to provide mobile credits to their various customers. This is a new product in the market.

As a way to encourage digital transactions following COVID-19 pandemic, the regulatory authority (the Bank of Tanzania) has increased daily limits on mobile transactions.

The Tanzania market continues to witness a mobile banking digital transformation. Going by the available data, traditional or conventional banking sector coverage has been surpassed by digital mobile transactions leading to increase by the regulator of daily limits. With the digital transformation, financial inclusion has seen a majority of Tanzanians accessing financial services via their mobile phones.

It is normal in Tanzania to process all payments for various services, whether to the government or to private persons, via mobile phones. This has triggered a huge transformation in mobile financial transactions and Tanzania is said to be a leader in the East African region.

The Registrar of Companies continues to have powers to deregister a company. The powers granted under the law do not indicate the fate of the affected company’s assets, liabilities and third-party rights, such as assets or properties held in trust. Prudent lenders will take into account this factor while appraising risk profiles of borrowers.

In order to create more transparency, in July this year, there has been introduced online mandatory registration of all beneficial owners of companies, trusts to enable lenders access to information as quickly as possible. Also witnessed has been more digitalisation of the various registries including the companies and land registries', among others. 

Lending activities are highly regulated in Tanzania. Any player in the market that wants to engage in the banking business or otherwise accept deposits from the general public, including for purposes of using such funds to provide finance, must apply and obtain a banking licence from the Bank of Tanzania.

There are generally no restrictions on foreign lenders granting loans to borrowers residing in Tanzania, save in the mining sector. In the mining sector, mining companies are restricted from using the financial services of foreign banks and financial institutions without approval from the Mining Commission. However, good co-operation between the mining commission and investors has been seen in the mining sector when it comes to request for approval of offshore borrowings.

There are generally no restrictions on the granting of security or guarantees to foreign lenders. However, since February 2018, restrictions have been introduced on the granting of mortgages over land as security for loans. The amendments to the Land Act now restrict an occupier of land in Tanzania from mortgaging their land to secure the payment of monies borrowed from local or foreign banks, unless the money secured is used solely for investment purposes in Tanzania. Further, if the land to be mortgaged is undeveloped or underdeveloped, the proceeds of the loan must be used, in part or wholly, to develop the land.

Residents and non-residents are not restricted from opening and operating a foreign currency account in a bank in Tanzania. The mandate includes conducting foreign exchange transactions on the account.

Following the mushrooming of the foreign exchange bureaus de change earlier in 2019, the regulatory authority, the Bank of Tanzania, took a drastic measure to undertake inspections and, as a result, closed almost all bureaus de change that were not operated by licensed banks in mainland Tanzania. Following the conclusion of the inspection of bureaus early in 2020, the Bank of Tanzania has again started to issue licences to operate bureaus.

There are controls when it comes to payments or offshore remittances. There are regulations that require compliance with certain conditions before the transfer is done. This is mostly done through licensed banks. Capital account is yet to be fully liberalised. For instance, the opening and operation of offshore accounts by residents requires approval from the Central Bank whereas companies engaged in extractive industries are prohibited from maintaining offshore accounts.

Apart from the restrictions imposed on borrowers that secure their loans by mortgages, see 3.2 Restrictions on Foreign Lenders Granting Security, lenders also are required to make sure that they conduct a thorough credit review, know your client, to make sure that funds are utilised for a lawful purpose. Banks are required to comply with money laundering laws to make sure the funds do not fall into usage for criminal or for corrupt purposes, and to avoid the financing of terrorism.

For the purpose of Anti-Money Laundering laws in Tanzania, banks or financial institutions are reporting persons. Accordingly, in dealing with various borrowers, they are required to take reasonable measures to establish the identity of the borrower and the purpose of the loan to ensure the borrower is not acting as a front for another person. Reporting is vigorously enforced by the Financial Intelligence Unit, which is part of the Ministerial Department under the Ministry of Finance. This scrutiny is tighter when it involves politically exposed persons.

Apart from performing normal due diligence measures, banks or financial institutions are required to:

  • have appropriate risk management systems to determine whether the customer is a politically exposed person;
  • obtain senior management approval for establishing business relationship with such customer;
  • take reasonable measures to establish the source of wealth and source of funds; and
  • conduct enhanced, on-going monitoring of the business relationship.

These two concepts are part of the laws of Tanzania.

It is common for banks and/or other lenders to come together, finance a project and appoint one of the banks to be a lead bank. Off course, each lender retains its authority over its loan, however, the role of a lead banker in loan syndication has always been an organising role for purpose of collecting funds from the borrower(s) and encouraging them to repay the loan as agreed in the Loan Agreement ("Syndication"). Sometimes, there are situations that require the appointment of a security agent to maintain security documents on behalf of the syndicated lenders.

Any transfer of a loan agreement must be authorised by the parties to the agreement. Most loan agreements and facility/banking agreements ("Loan Agreements") contain clauses on how loans may be transferred.

In most cases, borrowers are prohibited from transferring their rights and obligations under a loan agreement and lenders require clearance of the debt by the transferee bank before a transfer takes place. This will apply whether the loan is clean or secured. There is no secondary market for loans in Tanzania and as a result, the arrangement is between the transferor and transferee bank.

Notable transfers involve, for example, the borrower requiring greater financial facilities and the current lender is not in a position to provide this increase. In other cases, there are issues whereby a borrower defaults and the transferee bank is ready to assume current liability plus provision of fresh funds in the business. All these require extinction of the current debt in the transferor bank before the release of collaterals or otherwise.

Borrowers are free to buy-back their debts subject to agreed procedures. In certain cases, a borrower may be allowed to buy-back a certain portion of the debt subject to fulfilling certain conditions as agreed in the loan agreement.

In cases whereby the debt buy-back is made by the sponsors or shareholders of the borrower, depending on the amount to be bought back, there may be total control of the business or security. In cases of partial debt buy-back, the original lenders will normally retain control.

For example, if the shareholders purchase or buy part of the debt, the common clauses found in loan agreements are to compel the shareholders or sponsors to subordinate their rights to the existing lenders. Conditions such as restrictions on declaration of dividends, further charges of their shares without the consent of the original lender, etc, will normally apply.

There are no rules regarding public acquisition finance. The most common mode of acquiring public companies are through initial public offering or buying shares in those companies in the security market once listed on the stock exchange. For these public listed companies, there are guidelines covering substantial acquisitions, takeovers and mergers under the Capital markets and Securities laws of Tanzania.

Tanzania tax laws require borrowers to pay 10% withholding tax on interest payable on their loans in Tanzania unless the lender is a bank or financial institution licensed by the Bank of Tanzania. It also a requirement under the Foreign Exchange laws.

Lenders in Tanzania are subjected to:

  • the payment of corporate tax out of their profits, capped at 30%;
  • skill development levy (SDL), which is 4.5% of the wage bill;
  • workmen compensation, which is 1% of the wage bill; and
  • withholding tax at the rate of 10% of the fee paid to the lender (bank or financial institution).

There are no laws or regulations that limit the amount of interest rate charged by lenders in Tanzania. As a monetary policy tool, the regulators (the Bank of Tanzania), through its bi-monthly auctions of treasury bills, normally publishes indicative interest rates to the general public on its website. The indicative rates are not binding on lenders, either local or foreign. It is the policy of the regulator to leave the market to determine interest rates, and moral suasion is the principle adopted to manage interest rate.

However, in respect of foreign loans, the Bank of Tanzania requires interest rates to reflect prevailing market conditions for the relevant currency of borrowing.


Movable and immovable assets are available as collateral to lenders. Lenders may decide to take floating assets, in most cases in the form of a debenture. These floating assets will crystallise in the event of default. This manner of taking security allows the borrower to continue utilising the charged assets in whatever manner, including further charging to another lender, subject to adhering to restrictive covenants, if any, in the loan agreement or debenture instrument.

The debenture may also include fixed charges, even for movable assets, whereby the borrower will be restricted in making any charge on the assets unless the debt is discharged. Lenders may opt for taking a fixed charge by way of a mortgage on immovable or movable assets. This normal restrictions for further charge will touch on priority of payment in cases of default, unless consent is obtained from the prior chargee that its debt can take precedence over the previous charge. Cash deposit may also be security for a loan. Secondary charges include personal and corporate guarantees that are offered by the shareholders, the borrower and/or related companies.

Registering Collaterals

There are collaterals that are mandatorily registered under the Companies Act of Mainland Tanzania as company matters are not Union matters, and therefore each part of the Union has its own laws on companies matters. Charges that must be registered once taken as collateral for a loan include those for the purposes of securing any issue of debentures, uncalled share capital of the company, bill of sale, mortgage or interest therein (land), book debt, floating charge on undertaking or property of the company, calls made but not paid, charge on a ship, or aircraft, or any share in a ship and a charge on goodwill or any intellectual property.

Other than these charges, others are registrable voluntarily and, in most cases, in order to have evidential values upon a dispute.

The law in Mainland Tanzania requires that mandatory registration be carried out within 42 days from the date the document or the security was created. Where a mandatory security or charge is not registered, it becomes automatically void against any liquidator, administrator or creditor of the company.

Timing perfection or period taken to register such charges will vary depending on whether the concerned company is up to date on its statutory filings at the Companies Registry. If the company is in compliance with the company statutory filings, it takes between three to five business days to register a charge. If it is in default, it may take months and registration may be stalled. Companies are encouraged to comply with statutory filings, and lenders should conduct proper due diligence before approving the loan facility and the taking of the collateral. Given the level of digitalisation taking place at the companies registry, we are confident that delays in registration may soon be a thing of past in Mainland Tanzania.

Cost Involved

The fees charged on these collaterals by the Registrar of Companies for registration is negligible, charged at TZS22,000, equivalent to approximately USD10. The charges also attract stamp duty currently at TZS10,000, an amount which is negligible.

In most cases lenders in Tanzania utilise private attorneys to draft, review, conduct searches at fees agreed between the lender, borrower and the attorney.

Tanzania laws allows floating, as already stated in 5.1 Assets and Forms of Security.

There are no limitations in the law that restrict companies to grant downstream, upstream and/or cross-stream guarantees, except to secure loans made to directors of the company or any person connected to the directors. What the law requires is that a company must have the mandate to grant guarantees under its memorandum and articles of association. Therefore, lenders should, as part of credit analysis, conduct a review of the memorandum and articles of association of the borrower to determine whether the borrowing company has mandate to borrow and issue the collateral required, including guarantees of whatever nature.

The Companies Act specifically prohibits public companies from providing financial assistance to anyone, whether directly or indirectly and whether by means of a loan guarantee or the provision of security or otherwise, for the acquisition of or purchase of its own shares. This also applies to a public company giving financial assistance for the purpose of acquisition of shares in its private holding company, or a private subsidiary company giving financial assistance for purposes of acquiring shares in its public holding company.

Exceptions that apply to this limitation are where the company is in the business of lending money (a bank or financial institution), where the shares to be bought support a scheme for the benefit of the employees or former employees of the company’s salaried directors, any other similar company and bona-fide loans to employees (other than directors) to enable those employees purchase or subscribe for fully paid shares in the company or its holding and the lawful distribution by the company of any of its assets by way of dividends or otherwise. In case of default, the company and every officer of the company shall be liable to a fine.

Companies are also restricted from making loans, guarantees or providing security to its directors or persons connected with such directors. Connected persons include companies in which a director has at least a 20% equity stake.

Other than the restrictions mentioned in 5.3 Downstream, Upstream and Cross-Stream Guarantees and 5.4 Restrictions on Target, there are no other restrictions on companies granting guarantees or security or financial accommodation for the acquisition of its shares, and there are no consents required apart from the usual corporate compliance, such as board of directors’ resolutions, etc.

Once the repayment of the loan is completed by a borrower, the Lender prepares a deed of discharge in cases of charges created by companies. The deed of discharge and the relevant company form (signed by the chargor) is then filed with the Companies Registry and the loan on the company concerned is cancelled or discharged.

Additionally, if the collateral is a mortgage over land, the relevant land forms that are signed by both the mortgagor and mortgagee must also be filed with the relevant Land Registry in Tanzania.

Charges created by a company and which are mandatorily registerable under the Companies Act will attain priority according to the date of their creation, save that fixed charges and mortgages have priority over floating charges even if the fixed charge or mortgage is created after the floating charge. The order of priority follows the first registration and the subsequent registration will be inferior unless permitted by the first chargee. Tanzania laws recognise subordination of rights among lenders by agreement. This is done through security sharing or intercreditor agreements, where the rights of lenders and how they will share the proceeds of disposal of the collateral shared, mode of appointing an administrator, receiver and manager and or liquidator is clearly stated and can extend to include the subordination by shareholders of their rights as lenders.

It is important, therefore, to make sure that due diligence and company searches are conducted on the borrower’s assets as offered security to determine whether there is a prior charge.

Except in cases of mortgages over land, there are no laws in Tanzania which set out the rights of enforcement available to lenders following default by a chargor. Thus, the manner and procedures of enforcement of collateral by secured lenders are normally governed by the security documents. The enforcement is mostly triggered by events of default indicated in the facility agreements and as restated in various security documents such as debentures, mortgages, etc.

Contractual rights of lenders include taking physical possession of the charged assets, leasing the assets, appointing a receiver and manager to manage and/or the release of the charged assets and the selling of the charged assets. The law does not, however, allow a lender or its appointed agent to enter into possession when there is a resistance by the borrower that may result in breach of peace. In case of physical resistance by the borrower against the lender exercising its rights under the security documents, the lender must seek and obtain a court order to affirm its rights of enforcement.

Following the enactment of the Natural Wealth and Resources (Permanent Sovereignty) Act (No 5), 2017 (the Permanent Sovereignty Act), the application of foreign law application and jurisdiction of foreign Courts and Tribunals have been specifically ousted or outlawed in Tanzania for disputes arising from extraction, exploitation or acquisition and use of natural wealth and resources. Such matters must mandatorily be adjudicated by judicial bodies or other organs established in the United Republic of Tanzania and in accordance with laws of Tanzania. This restriction on natural wealth applies whether the arrangement is between private investors and/or with the government.

Natural wealth and resources as defined under the law to mean “all materials and or substances occurring in nature such as soil, subsoil, gas and water resources, and flora, fauna, genetic resources, aquatic resources, micro-organisms, air space, rivers, lakes, and maritime space, including the Tanzania’s territorial sea and the continental shelf, other living and non-living resources in the exclusive Economic Zone which can be extracted, exploited or acquired and used for economic gain whether processed or not”.

The Reciprocal Enforcement of Foreign Judgments Act provides modalities of enforcement in Tanzania, without retrial of judgements given by superior courts in certain foreign countries that accorded reciprocal treatments to judgments given in Tanzania. Unless there were specific reciprocal treatments to judgements given in Tanzania to a foreign country that desires to enforce its judgements in the Republic, enforcement is impossible.

Foreign courts whose judgments are enforceable in Tanzania without retrial include judgments made by the High Court of England and the Supreme Court of New South Wales. Such judgments can be enforced in Tanzania provided:

  • application for their registration in Tanzania is made within six years from the date of the relevant judgment;
  • are final and conclusive and for a specific sum of money as compensation for damages or loss (and not in respect of fines or taxes);
  • the originating Court had jurisdiction to determine the original claim; and
  • the original claim was not obtained by fraud.

Judgments made by foreign courts which are not recognised by the Reciprocal Enforcement of Foreign Judgments Act can only be enforced in Tanzania by way of a suit on the judgment provided such judgments are conclusive. A foreign judgment will be considered conclusive unless:

  • it has not been pronounced by a court of competent jurisdiction;
  • it has not been given on the merits of the case;
  • it appears, on the face of the proceedings, to be founded on an incorrect view of international law or a refusal to recognise the law of Tanzania in cases in which such law is applicable;
  • the proceedings in which the judgment was obtained are opposed to natural justice;
  • it has been obtained by fraud; or
  • it sustains a claim founded on breach of any law in force in Tanzania.

As long as security has been created, registered and perfected in accordance with the mandatory laws applicable in Tanzania, a foreign lender will ordinarily be able to enforce its rights. For loans provided to borrowers secured against land which is undeveloped or underdeveloped as collateral, the law requires evidence that the loan has been used in whole or partly to develop that land. This requires a lender in such circumstances to monitor the borrower to ensure the loan amounts are utilised accordingly rather than diverted to other activities not stated in the loan facilities.

Foreign lenders must also be aware of the requirement to register their loans (other than short-term loans) with the Central Bank of Tanzania and obtain a debt reference number. Although the requirement is said to be for statistical purposes, without fulfilling this requirement it is impossible for a foreign lender to realise its collateral and repatriate its proceeds.

Apart from powers granted to lenders by virtue of the security agreements, insolvent or illiquid companies may seek the protection of the courts by seeking a compromise or arrangement as proposed between a company and its creditors, a certain class of creditors, or its shareholders. The application is by way of summary suit. This proposal is normally voted by the creditors, a specific class of creditors, shareholders, or a specific class of shareholders.

Once the proposed arrangement has been voted and agreed, the court issues an order confirming the arrangement. This order is then submitted to the Registrar of Companies for registration to give its legal effect.

Generally, court ordered administration and winding up affect the rights of creditors to enforce their security. In respect of the former, from the time a petition is filed in Court for an administration order against the collateral provider and until it is determined (provided no administrative receiver has been appointed), a secured creditor will not be able to take any steps to enforce their collateral. The powers of the secured creditor to enforce their collateral will also be stayed in the event an administrator is appointed by the Court in respect of the collateral provider.

In the event the High Court of Tanzania makes an order appointing a liquidator in respect of the collateral provider, although there is no freeze on the enforcement of security, there will be a stay on commencing or continuing with proceedings against the collateral provider without the leave (consent) of the Court. This means that the secured creditor will not be able to enforce the collateral without the consent of the High Court.

See 6.1 Enforcement of Collateral by Secured Lenders.

Provided that the lender’s charged assets have been duly registered and perfected as discussed above already, any subsequent insolvency processes will be subject to the rights of secured creditors. In Tanzania laws, claims that take precedence over a secured creditor holding floating charges in insolvency proceedings are:

  • all governments taxes, local rates and customs and excise duties due from the company at the relevant date and having become due and payable within twelve months before the insolvent or winding up date;
  • all government rents not more than one year in arrears;
  • all wages or salary (whether or not earned wholly or in part by way of commission) of an employee not being a director in respect of services rendered to the company for four months before the relevant date; and
  • all amounts due in respect of any compensation or liability for compensation under any law for the time being in force in Tanzania relating to compensation of employees, being amounts which have accrued before the insolvency process date.

The foregoing priority of payments on floating assets do not apply in relation to assets subject to fixed charges. The order of priority of payments in respect of such assets is generally as follows:

  • costs incurred in the insolvency proceedings and or fees of the administrator, receiver or liquidator;
  • interest payable to the secured creditor(s) and in order of priority as per the security sharing arrangement/agreement;
  • principal sum outstanding; and
  • the balance, if any, to the collateral provider.

Equitable subordination is not a concept in Tanzania law. Shareholders rights are governed by the articles of association and/or shareholders' agreements.

In addition to the risks mentioned in 6.1 Enforcement of Collateral by Secured Lenders, lenders should be aware of entering into transactions that may be challenged by administrators or liquidators in insolvency proceedings as transactions at an under value, preferences, or invalid floating charges. If it is proved to the court that a transaction is an under value, preference or invalid floating charge, the court may make orders upon application by the administrator or the liquidator to vacate the transaction and require the lender to compensate the company so that the company is restored to the rightful position it would have been if that under value transaction or floating charge had not been entered or the company had not given that preference.

This mode of finance in capital intensive projects in areas of infrastructure and energy. Majority players continue to be the government or government-owned institutions such as pension funds. This mode of finance is also seen in education funding as some of the government owned universities and shopping malls have been financed by way of the project financing technique.

The desire of the government of Tanzania to utilise its own resources to fund various projects. However, given the position of the economy, it has not been easy to fully fund these projects and, as a result, it has resorted to combining debt with its own funds. There are notable syndication loans to the government, from commercial banks, development regional banks and export-import banks, to fund various infrastructure objects.

There are notable footprints in the extractive industry, especially in mining, that have attracted private investors to utilise this financing technique to fund their investment. However, there is a lot of room for improvement with respect to the investment climate in order for this financing technique in Tanzania to have positive impact, given the current low appetite of financiers and sponsors.

In 2019, Tanzania enacted the Public Partnership law providing for public-private partnership policy, institutional frameworks for the implementation of public-private agreements between public sector and private sector entities, set rules, guidelines and procedures governing the procurement, development and implementation.

Despite having this law in place for the last nine years at time of writing, there has never been any transaction or activity befitting recognition in this area. There have been subsequent amendments to this law in 2018, aimed at creating more transparency and easy way of doing business in the industry. Time will tell.

To engage in operations in various sectors or industries requires government approvals. These approvals cover environment, health and occupational safety and general licensing. There are regulatory authorities overseeing electricity, water and utilities, namely EWURA, on environment management NEMC, surface and marine transport (SUMATRA), electronic communications (TCRA) and air transport and civil aviation (TCAA), to mention a few.

All these regulatory authorities are responsible for the management and granting of approvals for various players in their respective sectors. The approval and management process attracts various fees or other charges that mostly are regulated by statute.

The taxes, fees or other charges levied on various projects take into account other laws that grant investors tax breaks in certain sectors. The tax breaks or incentives are provided in, among other laws, the Tanzania Investment Act, the Income Act, various tax laws and, in some areas, specific government approval of these tax breaks or incentives. Of late, we have seen the apathy of the Government in these tax exemptions given the fact that they have reduced revenues to the Government coffers.

The oil and gas and power and mining sectors are highly regulated in Tanzania. These sectors do not fall under Union matters, therefore each part of the Union (Mainland Tanzania and Tanzania Zanzibar) has own regime regulating the sector. Though, upon review, it can be found that the laws of both sides of the Union look similar with comparable clauses and powers.

The Ministers responsible for petroleum affairs in each part of the Union have the overall mandate to supervise the petroleum industry. The mandate covers almost every aspect of this industry. The mandate to supervise include inter alia, to develop and implement policies and plans, and the granting, reviewing, suspending and cancelling of petroleum exploration and development licences, subject to advise from the Petroleum Upstream Regulatory Authority (PURA). PURA is a regulatory authority established under the Petroleum Act, mandated to regulate and monitor the petroleum upstream subsector for Mainland Tanzania. There is a similar authority with the same mandate established for Tanzania Zanzibar. The Ministers responsible for petroleum matters have, therefore, general administrative powers over this sector.

The Mining Commission established under the Mining Act of Mainland Tanzania is responsible for administration of the Mining Act. The functions of the Mining Commission include licensing, supervision, regulating compliance with the law and dealing with issues of health and safety and environment. It also has the duty to advise the Government in matters related to revenue generated from mining activities and resolution of disputes arising out of mining activities.

EWURA is responsible for the administration and regulation of the power, water and utility sector. Its powers include, granting licences, tariff review, monitoring performance and standards with regards to quality, safety, health and environment.

Given frequent changes of laws and regulations in Tanzania, offshore lenders specifically are advised to retain a qualified Tanzania legal advisor to advise on the legal requirements specific to the sector the lender is providing finance. There are restrictions, for example, on certain sectors, especially on the extractive industry on ownership of products, opening and maintenance of offshore accounts, shareholding in companies, etc.

Investors may have bankable projects, but if their projects are in variance with the laws in place at the time of investment, it becomes a nonstarter.

Stated in 8.3 Government Approvals, Taxes, Fees or Other Charges and 8.4 The Responsible Government Body are the various regulatory bodies and approvals that are required in specific sectors.

There are stringent rules regarding acquisition and export of natural resources in mainland Tanzania. Major natural resources that are being exploited at the moment are minerals. The laws of the country require every player to be licensed and no export of raw minerals is allowed unless a permit is sought and obtained from the Mining Commission. The governing rule is that all minerals must be refined in the country.

The Environmental Management Act of 2004, as amended from time to time, read together with relevant regulations made are the most exhaustive legislation on environmental matters, health and safety. The law provides for legal and institutional framework for sustainable management of environment, impact and risk assessments, prevention and control of pollution, waste management and environment quality standards, among others. The National Environment Management Council (NEMC) is a statutory body established under the law charged with the duty of advising the Minister responsible for Environmental matters or any sector Ministry on any matter brought to it. The Minister responsible for environment matter is the overall supervisor of all matters relating to environment.

The Occupational Health and Safety law of 2003, as amended from time to time, and the regulations made thereto cater for matters of safety, health and welfare of persons at work in factories and other places of work. The law also caters for protection of personal other than persons at work hazards to health and safety arising out of, or in connection with, activities of persons at work.

The law provider for the appointment of the Chief Inspector who has executive powers line with the Executive Agencies law of 1997.

IMMMA Advocates

Plot No. 357
United Nation Road

+255 22 22 11080/1/2/3
Author Business Card

Law and Practice


IMMMA Advocates has a banking and finance practice that offers services in relation to various financial products to local and international clients. The firm's services cover syndicated lending, asset finance, derivative products, trade and commodity finance, insolvency and restructuring of non-performing loans, regulatory compliance, mergers and acquisitions, capital and money markets. IMMMA Advocates has advised in a range of sophisticated financing transactions for both local and international lending and borrowing clients.

Compare law and practice by selecting locations and topic(s)


Select Topic(s)

loading ...

Please select at least one chapter and one topic to use the compare functionality.