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Benefits outweigh costs of tax incentives under EPZ, SEZ
TANZANIA offers generous fiscal incentives under the Export Processing Zone/Special Economic Zone (EPZ/SEZ) schemes to attract Foreign Direct Investments (FDIs) and Domestic Direct Investments (DDIs).
However, the incentives have sparked heated debate in the country, with some dissidents mocking the packages as mere wastage of potential government earnings for the country's social and economic development.
But, Tanzania is not an exception in the use of tax exemptions to lure private capitals. And, statistics show that the country reaps more benefits than the earning it forgoes under EPZ/SEZ schemes.
Tanzania Tooku Garments Co. Limited is one of the FDIs under EPZ regime with huge benefits to the country. The Chinese company produces and supplies high quality garments--jeans and t-shirts--to the United Kingdom, United States of America, German and Czech Republic markets.
Tooku Assistant General Manager Rigobert Massawe says the firm whose production as of December 2015 stood at 70,000 pieces, has created 1,360 jobs for Tanzanians.
"Our plan is to expand production to five industries, with between 5,000 and 6,000 employees by 2018," says Mr Massawe, adding that the investment has had far-reaching multiplier effects in the economy.
Paid port charges, procured transport services and food services for employees, packaging materials, paid skills development levy (SDL), pay as you earn (PAYE) and value added tax (VAT) payable to the government are some of the benefits that the country accrues from the six million US dollar (over 12bn/-) investment.
"We train our employees as well to have a highly skilled labour force for our operations," says the Assistant GM, describing the skills that the investment imparts to Tanzanians as a sustainable investment for the country.
The Exports Processing Zones Authority (EPZA), in its 2015 Net Economic Benefit (NEB) analysis, says in three years--2012 to 2014--the government forfeited 4.6bn/- in tax exemptions but received 9.5bn/- import taxes from the company.
"The government would not have received the amount had the project not been attracted to the country through the EPZ incentive package," says EPZA in its analysis.
During the period under review, the Chinese investment generated 11.4bn/- in export earnings, helping the country to stabilise exports and improve balance of trade.
Computed employment related costs--salaries, pensions, SDL, PAYE and training--were about 4bn/- while direct costs spent in the economy--invested capital (local component), salary, port charges, local transport, utilities, local costs of raw materials and other direct costs--were estimated at 18bn/- during the first three years of the company operations.
"The amount that Tooku spent directly to the economy had significant multiplier effects on the economy through jobs creation, capital-reinvestment, consumption and savings...of great interest is the 1.2bn/- in the procurement of raw materials from the local market," writes Zawadia Nanyaro who conducted the analysis.
The Chinese firm that operates under incentive-rich EPZ scheme within Benjamin William Mkapa Special Economic Zones along Mandela road at Ubungo external however decries lack of raw material supplier from the domestic market.
"We would wish to procure all our raw materials from the domestic market but unfortunately there is no supplier," charges Mr Massawe, hinting that the company explores suppliers of the fabric and garment accessories from Ethiopia.
The Chinese investor has partnered with the government on an ambitious project to train over 2,000 Tanzanian youth on garment making. Under the project, the government pays a 90,000 monthly allowance to the trainees while the company offers the three-month training.
"We will be recruiting trainees in batches of 400 each..." said Mr Massawe, hinting that company will retain some of the best trainees for employment.
Tanzania Tooku Garments, one of many investors that EPZA has successfully lured to invest in the country, boasts of advanced and modern equipment, proven techniques of production processes and highly trained and experienced team of professionals.
Available data show that since EPZA opened doors for business in 2008, the country has received 1.27 billion US dollars (about 2.7trn/-) in capital investments, with about 800 million US dollars (over 1.6bn/-) generated in export revenues. The 130 registered firms have so far created 31,923 jobs for mostly Tanzanians.
EPZ/SEZ programmes seek to attract and encourage new technology transfer, lure and promote investment for export led industrialisation, create and expand foreign exchange earnings as well as increase jobs and develop skilled labour.
EPZA Director General Joseph Simbakalia snubs critics opposed to tax  incentives under the EPZ/SEZ schemes, saying under the environment where the entire world is competing for same investors, incentives are inevitable.
"Investors are 'flying birds'...they always go where there is friendly environment to support their businesses," says Mr Simbakalia, charging that the benefits accrued from new investments under EPZ/SEZ schemes are far higher than the forfeited tax revenues.

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       Export Processing Zones Authority,

       Benjamin William Mkapa SEZ,
       Mabibo External.
       P.O.Box 12112
       Dar es Salaam - Tanzania.

      Tel :   +255 (0)22 2925058-60
      Fax :  +255 (0)22 2925061