UK and Tanzania - an important relationship!

Earlier this month during the COP26 meeting in Glasgow President Samia Suluhu Hassan expressed the commitment to forge even stronger ties with the UK so as to further promote mutual trade and investment.  Today a UK Tanzania business forum takes place in Dar es Salaam, with the Prime Minister Hon Kassim Majaliwa and the UK’s trade envoy to Tanzania, Lord Walney, both in attendance.

For both sides the meeting presents opportunities.  For the UK, there is the post-Brexit momentum to further deepen ties with global trading partners - and as a Commonwealth country we are a natural focus area given the shared background in terms of language, and legal systems.  For Tanzania, it is another opportunity to demonstrate that we are “open for business” for inbound investors - bearing in mind that the UK is important not just because of existing historical ties, but also given its role as a global financial centre; Tanzania will also hope to generate more exports to the UK.

Inbound investment from the UK (with whom Tanzania has a Bilateral Investment Agreement) has always been strong – indeed recent statistics from the Tanzania Investment Centre (“TIC”) put cumulative investments from the UK since 1990 at USD 5.42bn! Whilst many of the investor names will be familiar (for example, Associated British Foods (Kilombero Sugar), Diageo (Serengeti Breweries), Shell, Standard Chartered Bank, Unilever), others will not be (for example, newer “kids on the block” such as Helios Towers, Shanta Gold and Wentworth Resources).  It is the experience of these newer investors that is perhaps most important in showcasing Tanzania to others thinking of “dipping their feet in the water”.  The current focus on improvement of the business environment is therefore timely.

As to the state of the current trading relationship, the latest trade and investment factsheet on Tanzania from the UK’s Department of International Trade shows total trade in goods and services (exports plus imports) between the UK and Tanzania of £218 million in the year to June 2021 - roughly half what it was a decade ago - comprising UK exports to Tanzania of £137 million (with vehicles, and electronic machinery and goods being significant), and UK imports from Tanzania of £81 million (with agricultural products, including coffee, tea, cocoa, vegetables & fruit, being significant).  The UK is also an important source of tourism to Tanzania, which is not included in the statistic above.

Whilst the natural focus in relation to cross border trading relationships is at the macro level, in terms of the large corporates, not to be underestimated is the importance of such relationships at the more micro level, in terms of individuals whose connections span both countries and who can be a conduit to identify and realise opportunities for trade and investment. 

Three fortuitous meetings with Tanzanians I did not know, during a recent visit to the UK, opened my eyes to how much more significant the Tanzania diaspora now is.  The first was in a local supermarket in Cardiff where following a phone call (in Swahili) to my wife to reconfirm a meat order, the gentleman next to me introduced himself as a Tanzanian (from Lindi area) who had been living in Cardiff for about twenty years; a week later I am in a shoe shop in London, and  someone walks to the counter and asks if an order has been received in the name of Tarimo - so I had to introduce myself, but whilst a namesake he was no relative; a few days later getting into an Uber in Manchester I suspected the driver might be from East Africa, so on entry I exchanged a couple of words in Swahili with my mother - turned out the driver was from Zanzibar! 

The UK diaspora is just one part of the wider Tanzanian diaspora, but clearly a very significant component of that diaspora.  If we are to properly leverage the diaspora, it will be important to minimise practical barriers to their economic engagement with their country of origin - and in this regard, it is good to see that the question of some form of dual citizenship is again being discussed.  Hopefully, this will see some form of agreement as to a right for diaspora to work, live and invest in Tanzania.

One anomaly - that impacts both corporates and individuals - is the lack of a double tax agreement (“DTA”) between Tanzania and the UK.  The benefit of a DTA is that it clearly delineates taxing rights in respect of income between the two relevant jurisdictions; conversely, the absence of such an agreement does cause risks of double taxation (i.e. the same income tax being taxed twice) which can therefore act as an impediment to trade and investment. 

The absence of a DTA with the UK is somewhat unusual given that the UK has a DTA with almost all other African Commonwealth countries (including Botswana, Cameroon, Ghana, Kenya, Malawi, Mauritius, Namibia, Nigeria, South Africa, Sierra Leone, Sudan, Uganda, Zambia, Zimbabwe). In fact, a DTA between Tanzania and the UK used to be in place - however, it was terminated by Tanzania in 1979 (apparently following unsuccessful negotiations on amendment of the taxing rights on international transport and in particular shipping).  Hopefully, a way forward can be found to agree a new DTA between Tanzania and the UK, and so send a further signal of encouragement to business activity between the two countries.