Banking & Finance 2021

Last Updated October 05, 2021


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.

On 1 July 2020 the World Bank officially categorised Tanzania as a middle-income country. The main economic growth drivers being the mining industry, tourism, the financial services industry and the gaming industry, among others. However, despite the growth of the economy, there has been an increase in non-performing loans in commercial banks due to the failure of businesses to yield returns; this has been partly caused by various social-economic policies adopted in 2015-19. 

Apart from the direct impact of COVID-19 on the financial markets, the United Republic of Tanzania (Tanzania) had, since 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 

In 2015, Tanzania witnessed a policy shift whereby the then government made it clear that it did not want to utilise the private sector in providing services. Instead, the government was more inclined to utilise its own finances and service providers in its various projects and/or services. Since then, each sector has been negatively affected by this policy which, 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 rates 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 to be deposited only in the Central Bank, and those already deposited in commercial banks to be moved immediately to the Central Bank, saw casualties in the banking sector following the squeeze for cash. The move continues to have a negative impact on commercial banks as these deposits were traditionally utilised for lending to the private sector. There have been measures by the Central Bank of Tanzania to ease pressures on commercial banks by, among others, reducing the statutory minimum reserves, reducing the discount window rate and allowing more flexibility for commercial banks to negotiate with their defaulters on the restructuring of bad loans.  

The government has of late eased strict restrictions for foreign investors 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. Lately, we have also seen the government allowing foreign investors who source offshore financing being allowed to retain their earnings in offshore banks during the pendency of the loan until repayment, in line with the Foreign Exchange Act of Tanzania. The Act requires that after repayment of the loan, the respective account must be closed within 30 days and all the residue on the account be repatriated to Tanzania. This action goes hand in hand with the government's policy to encourage foreign investors, especially in the extractive industry, to utilise local banks’ financial facilities wherever possible, and as a result, we have witnessed increased syndication deals in the market.  

To enjoy offshore banks retention of proceeds an investor in the extractive industry especially in mining requires the approvals of both the Mining Commission and the Central Bank of Tanzania.  

Tax Assessments and Claims 

There have been changes in the government's position on tax assessments and enforcement. Following the death of President John Joseph Pombe Magufuli (JPM) on 17 March 2021 and the accession to power of his Vice President, Madame President Samia Suluhu Hassan (SSL) on 19 March 2021, she has made it very clear that she wants tax authorities to treat tax payers and private businesses with dignity. In her own words, she expressed that her government did not want to extort money from tax payers and that tax collectors should be professional and collect what is due and right for the government. She is only six months in office, and therefore it is not appropriate to judge her government's performance. However, following her public rhetoric, we have seen more appetite and buoyancy from the private sector, both local and foreign. 

According to official reports, the COVID-19 pandemic does not seem to have any negative effect on the loan market. What prevailed prior to the COVID-19 pandemic still remains today. The stance of the fifth government, led by the late JPM, was to play down the pandemic scare and, as a result, there was no lockdown. Two main reasons underlined this government stance: 

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

Following the death of President JPM and the coming into power of SSL, the government reconsidered its position by acknowledging that COVID-19 was a national and global pandemic that needed to be taken seriously. In light of the global restrictions on travel and lockdowns in various countries, tourism, export and importation of goods among others had been negatively affected. Following the provision of vaccines around the world, there was a need to utilise the vaccines in order to mitigate the ravages of the virus. SSL led the campaign to vaccinate Tanzanians by being publicly vaccinated herself. All these measures, coupled with the intervention of the Central Bank, have mitigated a huge negative impact on the economy. Although the expected economic growth has not been attained, the impact of COVID-19 is not worse than in other Sub-Saharan countries. 

Interest rates on treasury bills in Tanzania continue to be high and, as a result, affect lending rates to the private sector due to the fact that commercial banks and/or financial institutions in Tanzania peg their rates on the weighted average of rates charged on treasury bills auctioned monthly by the Central Bank. The overall lending interest rate averaged 16.63% for the quarter ending June 2021 compared with 16.70% in the quarter ending June 2020. There has not been a big change in the lending rate by commercial banks. 

For companies, a lack of governance continues to contribute towards lenders pricing their loans at higher margins than should be 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 have contributed to this uncertainty and, taken together with long procedures of recovery in cases of defaults by the borrowers, made lenders charge higher margins to compensate for anticipated losses.  

The loan market has not developed in Tanzania. Commercial banks and financial institutions continue to be dominant lenders. Of late, mobile telephone companies have introduced credits for their various customers. This is a new product in the market. 

Mobile Banking 

The Tanzania market continues to undergo a digital transformation of mobile banking. Based on 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 the majority of Tanzanians accessing financial services via their mobile phones.  

Following increased mobile money transactions, in July 2021 the government of Tanzania introduced various taxes on these mobile financial transactions through its budget. Although we are not in a position to evaluate the effect of this move, the negative public reception of the move speaks volumes. 

The Registrar of Companies continues to have powers to deregister a company. The powers granted by 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 this factor into account while appraising the risk profiles of borrowers. 

In order to create more transparency, in July 2020, the online mandatory registration of all beneficial owners of companies and trusts was introduced so as to enable lenders to access information as quickly as possible. There has also been more digitalisation of the various registries, including company and land registries, among others.    

There are no notable developments in this area. 

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 requests for approval of offshore borrowings. 

There are generally no restrictions on the granting of security or guarantees to foreign lenders. However, from February 2018, a restriction was introduced on the granting of mortgages over land as security for loans. The amendments to the Land Act 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.  

In 2019, the regulatory authority, the Bank of Tanzania, took a drastic measure to undertake inspections and, as a result, closed almost all bureaux de change that were not operated by licensed banks in mainland Tanzania. Following the conclusion of the inspection of bureaux 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 a business relationship with such customer; 
  • take reasonable measures to establish the source of wealth and source of funds; and 
  • conduct enhanced, ongoing 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. Of 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 the 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 where 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 collateral 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 where 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 modes 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 charged by lenders in Tanzania. As a monetary policy tool, the regulators (the Bank of Tanzania), through its 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 rates. 

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. These 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. A 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 Collateral 

There is collateral that is mandatorily registered under the Companies Act of Mainland Tanzania as company matters and not Union matters, and therefore each part of the Union has its own laws on company 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.  

The 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. 


The fees charged on the collateral 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 and conduct searches at fees agreed between the lender, borrower and the attorney. 

Tanzania law 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 a 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 to 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 case 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 are 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 facilitate 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 and the 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. The restriction on natural wealth applies whether the arrangement is between private investors and/or with the government. 

Natural wealth and resources are defined in 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 enforcing a foreign judgment in Tanzania, without a retrial of judgments given by superior courts in certain foreign countries that accorded reciprocal treatments to judgments given in Tanzania. Unless there were specific reciprocal treatments to judgments given in Tanzania to a foreign country that desires to enforce its judgments 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; 
  • the judgments 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 in part 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, it is impossible for a foreign lender to realise its collateral and repatriate its proceeds without fulfilling this requirement. 

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.  

Provided that the lender’s charged assets have been duly registered and perfected as discussed at 6.1 Enforcement of Collateral by Secured Lenders, 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 government taxes, local rates and customs and excise duties due from the company at the relevant date and having become due and payable within 12 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 does 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 in if an under value transaction or floating charge had not been entered or the company had not given that preference. 

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

The desire of the government of Tanzania is 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 finance technique to fund their investment. However, there is a lot of room for improvement with respect to the investment climate in order for this mode of project finance to have a positive impact in Tanzania, given the current low appetite of financiers and sponsors. 

In 2010, Tanzania enacted the Public-Private Partnership Act providing for public-private partnership policy, institutional frameworks for the implementation of public-private agreements between public sector and private sector entities, and the setting of rules, guidelines and procedures governing procurement, development and implementation. 

Despite this Act being in place for the last nine years at the time of writing, there has never been any transaction or activity befitting recognition in this area. There have been subsequent amendments to this Act in 2018, aimed at creating more transparency and easy ways of doing business in the industry. However, only time will tell if the amendments will lure any PPP project investments.

To engage in operations in various sectors or industries requires government approval. Government approvals cover environment, health and occupational safety and general licensing. There are regulatory authorities overseeing electricity, water and utilities (EWURA), 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. 

Oil and Gas Sector Approval 

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 includes, inter alia, to develop and implement policies and plans, and the granting, reviewing, suspending and cancelling of petroleum exploration and development licences, subject to advice 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. 

Mining Sector Approval 

The Mining Commission established under the Mining Act of Mainland Tanzania is responsible for the 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 the resolution of disputes arising out of mining activities. 

Given the frequent changes of laws and regulations in Tanzania, offshore lenders 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 non-starter.  

Both local and foreign commercial lenders continue to be the sources of financing in the country. Structures of the projects differ depending whether the project is 100% government owned, PPP and/or 100% private sector. The promoters of the project will normally structure the project to make it bankable. 

There is no applicable information in this jurisdiction.

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

The Occupational Health and Safety Act of 2003, as amended from time to time, and the regulations thereto provide for matters of safety, health and welfare of persons at work in factories and other places of work. The Act also makes provision for the 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. It also provides for the appointment of the chief inspector who has executive powers line with the Executive Agencies Act of 1997. 

IMMMA Advocates

Plot No 357
United Nation Road
Upanga 72484
Dar es Salaam

+255 22 22 11080

+255 22 211 1621
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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.

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