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
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
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
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
"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