Foreign firms hit by tax demands rethink Tanzanian expansion

Some of Tanzania’s biggest foreign investors say they could scale back their operations or expansion plans because of tougher demands placed on companies, including higher tax bills, as part of the president’s drive to overhaul the economy.

At least six companies are rethinking their business and investment plans, according to Reuters interviews with senior executives at a dozen of the biggest foreign firms operating in Tanzania, or their local arms, in sectors including mining, telecoms and shipping.

Three said they could scale back operations in the East African nation, two said they planned to expand in other countries on the continent instead, while one said it was in the process of withdrawing from Tanzania altogether.

The companies asked not to be named due to the sensitivity of the matter and because their plans have not been made public.

One firm had not yet made a decision on how to respond to the government reforms, while five companies said their plans were unaffected – including two involved in giant projects, a $30bn LNG plant and a $3bn fertiliser plant.

Tanzania is more reliant on foreign direct investment than many other regional countries, given the size of its economy. It received just over $1.5bn last year, into an economy valued at under $45bn, according to figures from the U.N. Conference on Trade and Investment and the World Bank.

Neighbouring Kenya – with a $61bn economy – received slightly less than Tanzania, while South Africa – with a $313bn economy – received $1.7bn.

President John Magufuli, nicknamed “the Bulldozer” for his infrastructure projects and pugnacious leadership style, launched his reform drive after he was elected last year, promising to transform an economy hobbled by red-tape and corruption and carry out a major building programme.