TPSF marks key milestones in two years of President Samia’s leadership

 

H.E Dr Samia Suluhu Hassan, President of Tanzania.

By TPSF Secretariat

On March 19, 2023, H.E. Samia Suluhu Hassan, president of the United Republic of Tanzania, marked two years in

office with stellar performances in maintaining political stability, economic recovery and resilience, enhancing socio-economic development and branding Tanzania as a safe and ideal investment destination.

As the apex and umbrella organization of the private sector in the country, the Tanzania Private Sector Foundation (TPSF) has been the government’s strategic partner representing over 6 million businesses through its member associations. TPSF actively engages with the government in formulating and reviewing policies, advising and advocating for a conducive business and investment climate, in order to attract more investors and improve the country’s economy.

The sixth phase government has been instrumental in ensuring that the private sector becomes the engine of economic growth. In the last two years, the Tanzania private sector has become an important strategic partner for the government in achieving Tanzania Development Vision 2025 that aims to achieve a middle income country. As such the performance of the banking and financial markets, access to credit, the business and investment climate and related reforms, and government priorities in productive sectors like agriculture, transport and logistics, tourism, ICT, mining, and industries are all good indicators of economic growth and more specifically, the growth of the Tanzania private sector.

Hastening economic recovery through increased credit to the private sector

President Samia initiated the Policy Measures to increase Credit to Private Sector and Lower Interest Rates in order to increase credit to the private sector and lower interest rates, thereby hastening recovery of the economy. These included

1. Reduction of Statutory Minimum Reserve (SMR) requirement. This measure intended to increase lending to agriculture, which is the mainstay of Tanzanians. It has enabled interest rates to the agriculture sector to go below 10% spurring economic growth.

2. We also saw relaxation of agent banking eligibility criteria by abolishing the regulatory requirement of business experience of at least 18 months for applicants of agent banking business to only require a National ID Card. This policy measure has led to an increase in loanable funds to banks through deposit mobilization.

3. The introduction of the special loan of TZS 1.0 trillion to banks and other financial institutions for on-lending to the private sector whereby, Banks and other financial institutions are able to lend at 3 percent per annum for pre-financing or refinancing of new loans to the private sector. This measure has increased liquidity to banks and reduced lending rates.

As of February 2023, we saw credit growth to the private sector at an all-time high of 21% compared to a growth rate of 3.2% in Q3 of 2021. This will have significant growth to the economy as more businesses will access finance for expansion.

Record breaking profits from the banking sector

The banking sector touches almost all areas of our economy, therefore its performance is one of the best economic indicators. Tanzania banks play an important role in capital formation, which is essential for the economic development of a country. An analysis of leading commercial banks in Tanzania, which make up over 95 percent of the banking sector’s profitability, showed a significant increase from over Sh760 billion in 2021 to Sh1.16 Trillion in the year ending 2022. The increase in profitability – coupled with a reduction in levels of Non-Performing Loans (NPLs), increase in mobile money transactions and an increase in both customers’ deposits and loans and advances is a testimony of a growing economy and financial inclusion that lies on the basis of the good business environment currently experienced in the country.

Tanzania as an investment destination through improved investment climate

Under her leadership, President Samia Suluhu Hassan has focused on implementing various reforms to improve the business and investment climate which has regained investor confidence.

Among the investment reforms included the enactment and the gazzetting of the new Tanzania Investment Act. Which among other things reduced the capital investment threshold requirement from 100,000 to USD 50,000 for local investors; this move will enable more local companies in all sectors of the economy whether starting, expanding or rehabilitating their businesses to access the certificate of Incentives provided by TIC. These incentives include both fiscal relief of import duty on a project deemed capital at 75 percent and 0 percent of import duty on capital goods and non-fiscal such as using TIC investment facilitation services.

The new law further shortened the time for obtaining an investment licence from 14 to 7 working days; and granted access to international arbitration to the parties to settle disputes either in accordance with Tanzanian arbitration laws or the International Centre for the Settlement of Investment Disputes. This has given the much needed confidence to international investors.

Other reforms on investments included speedy acquisition of permits, investment licences specifically from 24 days to currently 3 days and resolved land acquisition issues by putting systems in place. Work permit issuance process for foreign workers and investors; streamlining Tanzania Investment Center (TIC) operations.

Another great move taken by president Samia was to move the investment portfolio (TIC) under the president’s office. This move will enhance efficiency and fast track a lot of investment decisions.

These initiatives have contributed significantly to the increase of registered investment, for instance for the year 2021 TIC registered 256 investment projects worth 3.8 billion from 203 projects worth 1.1 billion in the year ending 2020.

This increase translates into widening the tax base and enabling implementation of social economic development, and transfer technology and skills.

Improved Business environment and leading to increased Tax Collection

In implementing the Blueprint for regulatory reforms in enabling the business environments, a number of milestones have been recorded so far which included; removing over 232 nuisance taxes and levies that were thwarting growth of businesses.

Section 7(1) of the Tanzania Shipping Agencies Act has been amended to limit TASAC’s former exclusive authority on clearing and forwarding of import and export of minerals, machinery, equipment, and petroleum, which severely impacted business operations by causing input delays in our industries. It also put many clearing and forwarding agents out of business. Since the amendment, we have seen a recovery of business as well as new entrants into the market.

So far the Sixth Government has already concluded and signed agreements with 10 countries on Avoidance of Double Taxation and Prevention of Tax Evasion. These agreements also serve to promote foreign investment, which might otherwise be discouraged if companies were forced to pay locally and in their country of fiscal residence for taxable activities. They reduce the tax burdens of foreign investors and provide legal security to investors.

TPSF has witnessed improved efficiency and professionalism in revenue collection and administration. These include enhancing fairness and efficiency in tax assessment; ensuring timely VAT refunds and digitalization of tax system including the online self-service platform that allows the taxpayers to file returns, initiate payments and access other tax services; cargo tracking system; electronic single window that allows taxpayers to lodge their trade transactions quickly and also the use the Electronic Fiscal Management Systems for verification of claims.

The government amended the Tax Revenue Appeals Act (CAP 408) to accommodate alternative dispute resolution mechanisms and hence reducing bureaucracy in addressing tax appeals.

“As Tanzania’s private sector, we applaud H.E Samia Suluhu Hassan and her government for spearheading measures to strengthen the business and investment climate. We have seen a record-breaking performance in all the sectors of the economy, from the banking sector which has made over Sh1.16 trillion in profits, to an increased performance on the capital markets, recovery of the tourism sector, to a record increase in investment projects, and other social economic achievements.” Ms Angelina Ngalula Chairperson of TPSF