Faraja Mgwabati:
ATUL Mittal, an agro-processing businessman, represents many
of the victims of the politics of Africa’s special Economic Zones (ASEZ). Mr
Mittal, the owner of Arusha based Mount Meru Millers Limited, quit business
under EPZ after what he calls, “Two years of frustrations and problems
with TRA and local authorities.”
The company had invested over 15 million US dollars (about
23bn/-) in buying sunflower seeds from 70,000 contracted farmers in Singida and
Arusha regions.
After quitting, the company moved to Uganda where a 30
million US dollar (about 46bn/-) plant was set up and the company now is in the
process of setting up other plants in Rwanda and Zambia.
“TRA (Tanzania Revenue Authority) and Local Government
Authorities are only concerned with their revenue collection targets, without
caring about the welfare of the 70,000 contracted farmers in Singida and Arusha
who depended on our factories,” laments Mr Mittal.
He says had it not been the problems encountered, the firm
could have expanded its investments in Tanzania and exporting to Zambia and
Rwanda, “But, now we are investing directly there (Zambia and Rwanda)-the
Tanzania government has to be pro-industry and pro-investment.”
Mount Meru still maintains relationship with Tanzanian
farmers from whom it buys sunflower seeds but the problem is in that– all
other processing activities are done in Uganda, implying that Tanzania has
surrendered hundreds of direct jobs to Ugandans.
Mr Mittal accuses TRA of mistreating his firm despite being
an EPZ investor with tax exemptions, “Our consignments used to be stranded
at the port for up to 60 days despite all documents being in good order… EPZ
Authority interventions to have our consigment cleared were in vain.”
According to the EPZ Act, 2002, as part of incentives,
investors operating under the zones are entitled to remission of customs duty,
VAT, and any other taxes charged on raw materials and goods of capital nature.
The law also exempts pre-shipment or destination
inspections. Instead, the investors who operate under EPZ, Customs inspection
of goods is done at the site of the investor and goods destined to EPZs are
treated as transit cargo.
“The essence of conducting on-site inspection is to
speed-up clearing procedures because EPZ investors mostly produce goods for
export; when the customs people delay them, they subject investors to undue
delays and missing of export orders,” says EPZA Director General Dr
Adelhelm Meru.
Dr Meru regrets the quitting of Mount Meru Millers, calling
for all government agencies handling investors in the country to facilitate
instead of frustrating businesses.
He warns that countries all over the world are competing for
investors and that a slight mishandling of one investor could go a long way
tainting the image of the country. He accuses some defiant government officials
who refuse to recognize the EPZA Act and subject EPZ investors to payment of
taxes that are exempted under the Act.
“Let us hope this incident (of Mount Meru) won’t
reoccur in future, it’s a shame, let us learn from our mistake,” says Dr
Meru, arguing without broadening the tax base through opening doors for more
industries and businesses, revenue collection targets will always remain
unachievable.
But, TRA Director for Taxpayer Services and Education Protas
Mmanda says he had no information about the incidents and required complain
letters from Mr Mittal for proof.
“I cannot comment until I see there was any official
communications between either EPZA and TRA or Mr Mittal and TRA,” he says,
adding that under normal circumstances his authorities would not frustrate
investors because they are the source of foreign currency for the country.
Currently Tanzania has a total of 25 free Zones (EPZ and
Special Economic Zones), including 6 industrial Parks, 19 Stand alone plants
and 44 companies operating under EPZ. Locals represent 44 per cent of companies
in EPZ, 41 are foreign and 15 are joint ventures.
EPZ officially started five years ago in Tanzania. A total
of 640 million USD has been invested to-date, generating 11,512 direct jobs,
with exports reaching 350 million US dollars.
Minister of Industry, Trade and Marketing Cyril Chami,
speaking at the African Free Zones Association (AF ZA) convention in Dar es
Salaam last month, said the government was satisfied with the performance of
EPZA, stressing for further government support to EPZA to enable EPZ and SEZ
schemes succeed.
Prime Minister Mizengo Pinda affirmed government support to
the Free Zones (EPZ, SEZ), conceding however that infrastructure was still a
big challenge, “Infrastructure remains the big challenge but we are facing
it headon.”
So far, Mount Meru Millers and Tsubasa Ltd have quitted EPZ.
Tsubasa Ltd left for reasons best known to them. However, there are investors
not satisfied with the services–poor water supply and erratic electricity in
the zones.
Major challenges for EPZA include insufficient funding
infrastructure development, with the reportedly receiving as little as 50m/- in
annual budgetary allocation, the amount that can hardly finance one investment
promotional activity abroad. ‘
‘So far EPZA suffers a deficit of 19.6bn/- for compensating
land at Mara, Ruvuma and Bagamoyo EPZ/ SEZ sites,” says the statement from
the authority.
Other challenges includes delays of clearance of goods at
the port and issuance of work permits, contradictions between statutory EPZ/SEZ
incentives and TRA regulations, lack of skilled labour in some fields.
However, the challenges faced by Tanzania EPZ investors are
similar to those their counterparts face in other African countries. During the
presentation at AF ZA conference in Dar es Salaam, officials from Kenya and
Ethiopia raised challenges similar to those echoed by Tanzania.
It is clear that EPZ have benefits to the economy that’s why
many governments in Africa have embarked on the strategy after borrowing leaf
from the Asian four Tigers- HongKong, Singapore, Taiwan and Malaysia.
But given dozens of incentives provided to investors, what
does the country benefits? Dr Meru says mostly Tanzania benefits from direct
and indirect jobs.
“Most incentives are just for ten years because
investors heavily put in their capital, it may take eight to ten years for them
to start getting profits. After that they will not take out their machines,
they will continue with business and pay taxes,” says Meru.
Tanzania ranks 128 in ease of doing business out of 183
economies in the world, according to the World Bank’s Doing Business 2011
report.
Surely, if this is happening to investors within EPZ, it is
likely that those outside the EPZ have more challenges that need to be
addressed by authorities.