Tanzania market entry strategies (5)

Saturday August 10 2019



PAUL KIBUUKA

paul.kibuuka@isidoralaw.co.tz

PAUL KIBUUKA paul.kibuuka@isidoralaw.co.tz 

It is rare to find a business partner who is selfless. If you are lucky it happens once in a lifetime.”–Michael Eisner.

In this fifth and last article of our Tanzania market entry strategies series, we discuss albeit at high-level how foreign investors can develop the right business partnerships in Tanzania.

Certainlywhile it is conceivable that a foreign investor can start, grow and run a businessin Tanzania on his own, there are circumstances in which the foreign investor may well needa Tanzanian business partner to attain his goal.

One such circumstance is exemplified in one of my favourite hobbies. Soccer. Just like business, soccer typically entails working with the right team.

Mbwana Ally Samatta is an amazing Tanzanian footballer who plays as a striker for a club abroad and captains Tanzania’s national team, Taifa Stars.

He won the Ebony Shoe, 2019, the prize for the best African footballer in Belgium.

Yet for all his achievements, Mr. Samatta depends on his teammates, some of whom pass the ball and others form the team’s defense in a quintessentially partnership manner.

In this sense, it is vital to build and nurture trust-based working relationships with Tanzanian business partners and keeping regular contact, as well as visiting Tanzania.

Finding the right business partners in Tanzania is also important because, although there are no general restrictions on establishing a business in Tanzania, there are some restrictions on foreign investments in certain sectors.

For example, the Insurance Act, 2009 provides that out of the issued share capital of an insurer, not less than two-thirds of the shareholding must be owned by Tanzanian citizens.

Media houses like Mwananchi Communications Limited—the publishers of The Citizen—must maintain a minimum of a 51 percent local shareholding.

In the shipping sector, licences to conduct shipping agency business are only granted to companies where more than 51 percent of the share capital is held directly or indirectly by Tanzanian citizens.

In the shipping sector, licences to carry out shipping agency business are only granted to companies where more than 51 percent of the share capital is held directly or indirectly by Tanzanian citizens.

Moreover, a non-citizen or a private company in which the majority of shareholders are not Tanzanian citizens cannot own land in Tanzania unless granted with a Certificate of Incentives under the Tanzania Investment Act, 1997.

By limiting the level of foreign ownership of companies in Tanzania as indicated above, specific regulatory requirements oblige foreign investors to partner with their Tanzanian counterparts.

But while foreign investors may be required to partner with Tanzanians, they are free to select the right Tanzanian partner for their business model. A wrong partner choice could wreak havoc for a business.

So, how can foreign investors go about choosing the “right” business partners in Tanzania? We should remember that the relationship a foreign investor has with a Tanzanian partner is a two-way street: the two parties undecoratively desire success in business.

Against this backdrop, one of the best ways in which foreign investors can select the right business partners in Tanzania is by identifying a corporate lawyer or business consultant who is working with Tanzanian businesses to secure trusted and reliable foreign investors and one who is also working with foreign investors interested in finding Tanzanian business partners.

If a foreign investor is able to find such a lawyer or consultant, then the chance of finding the right Tanzanian business partner is heightened.

The other option would be to search for business owners in the foreign investor’s home country who are from within the Tanzanian diaspora community.

Such business owners have a good knowledge of Tanzanian culture and business practices.

This proficiency is one of the fundamental conditions for a foreign investor to successfully consummate business transactions in Tanzania—a country I find to be so unique after all. With this being the last article of our five-part Tanzania market entry strategies series, what can we expect next Saturday, 17 August 2019? Until then, thanks a ton The Citizen readers for your comments, suggestions and feedback on the series.

Paul Kibuuka is the managing partner of Isidora & Company Advocates. Email: paul.kibuuka@isidoralaw.co.tz Twitter: @tzpaulkibuuka