What Zanzibar’s New Investment Law entails

Over 100 developing and emerging economies have embraced the Investment Act approach as a fundamental component of their legal framework for investment, serving as a primary point of reference for potential investors and a signaling mechanism to foster transparency. Additionally, it enables host governments to convey expectations regarding responsible conduct by imposing specific obligations on investors.

In a significant development, Zanzibar, along with the global community, has entered a new era poised to catalyze economic growth following the enactment of the Zanzibar Investment Act, 2023. His Excellency, Dr. Hussein Ali Mwinyi, President of Zanzibar and Chairman of the Revolutionary Council, ratified this legislation in February 2024, marking a pivotal moment for the region.

“The Zanzibar Investment Act, 2023 is designed to stimulate investment in the Isles and is recognized as one of the premier pieces of legislation in Africa. It offers a plethora of incentives for prospective investors,” remarked the President during the ceremonial signing event, which brought together stakeholders and citizens at the Zanzibar State House grounds.

Previously, the Zanzibar Investment Promotion and Protection Authority Act No. 14 of 2018 governed the operations of ZIPA. However, this statute has been supplanted by the newly enacted Act. Consequently, the preceding legislation, which broadened ZIPA’s mandate to encompass economic development and the regulation and administration of investment activities and Free Economic Zones with an emphasis on openness, competitiveness, and transparency, has undergone substantial enhancements under the freshly endorsed law.

Objectives of the Act

The world is changing, so are the investment promotion policies and strategies that aims to woo more investors for economic prosperity. Thus, the objectives of the Zanzibar Investment Act, 2023 intends to position Zanzibar to be among the best investment destinations in East and Sub-Saharan region by providing the best services, competitive fiscal and non- fiscal incentives packages and diversification of investment opportunities by introducing Special Economic Zones.

Further, the Act outlines obligations of the investor on local content and corporate social responsibility for the social and economic development of Zanzibar. It further aims to bring in investments, create jobs for the people of Zanzibar and improve social well-being, the same to country economy.

Encouragement for more Investment

The new Act encourages local and international investment among local Tanzanian, diaspora and foreigners to grab the abundance of opportunities available in Zanzibar.

With this Act there are different categories of investments: General Investment and Strategic Investment. The category of the investment is determined by the investment capital threshold, in which the minimum investment capital requirement for foreign investors is US $2.5 million for hotel and real-estate investments, and US $500, 000 for other sectors, while for citizen is US $100, 000 across all sectors.

The new Act has kept consideration to Tanzanian diaspora that are required to have a minimum capital of US $ 200,000 across all sectors.

The Investment Act of 2023 has revised the criteria for attaining Strategic Investment status, streamlining the process compared to the previous legislation. Under the new framework, the criteria are categorized separately for Unguja and Pemba.

On Unguja, investments meeting the following conditions are eligible for Strategic Investment status: (i) a minimum investment of fifty million United States Dollars for both Foreign Investors and Tanzanians; (ii) an investment of ten million United States Dollars, accompanied by the creation of at least five hundred direct employments for Tanzanians in sectors other than hotels; or (iii) investment in small islands as stipulated by the Act.

For Pemba, a region that has historically attracted limited investments across all priority sectors, including tourism and related activities, the Act has relaxed the criteria for obtaining Strategic Investment status.

The requirements for Pemba include: (i) a minimum investment of five million United States Dollars for both foreign investors and Tanzanians; (ii) an investment of two million United States Dollars, coupled with the creation of five hundred direct employments for Tanzanians in sectors other than hotels; or (iii) investment in small islands as outlined in the legislation.

Lucrative Investment Incentives Packages

In regard to benefits to investors, President Dr. Mwinyi said “the new investment law also provides more favorable conditions for investors which helps to attract more investments in the isles.” Through this Act investors may enjoy both fiscal and non-fiscal lucrative investment incentive packages.

The Act represents a significant milestone in the country’s efforts to attract and promote investment, offering a comprehensive range of fiscal and non-fiscal incentives to prospective investors. This ground breaking legislation aims to enhance the competitiveness of Zanzibar as an investment destination, with tailored incentive packages designed to stimulate investment across various sectors of the economy.

One of the key features of the Act is the establishment of fiscal incentives, which include tax breaks, customs duty exemptions, and other financial incentives aimed at reducing the cost to investors. These incentives are available to both domestic and foreign investors and are designed to promote investment in priority sectors.-

One notable aspect of the Act is the enhancement of incentives for general, strategic, and special economic zones (SEZs). These zones are designated areas with specific incentives and infrastructure provisions aimed at attracting investment and promoting economic development. By improving incentives for SEZs, the Act seeks to unlock the potential of these zones as engines of Zanzibar’s growth.

For the first time, the Act introduces incentives packages for investments in high-tech industries and the blue economy. Recognizing the importance of innovation and sustainable development, these incentives aim to attract investment in cutting-edge technologies and industries that have the potential to drive economic transformation and create new opportunities for growth.

Overall, the Act represents a bold and forward-thinking approach to investment promotion, with a comprehensive set of incentives designed to attract investment across diverse sectors of the economy. By improving incentives for general, strategic, and special economic zones, as well as introducing incentives for high-tech and blue economy investments, the Act positions Zanzibar as a competitive and attractive destination for investment in the region.

Diversifiaction of Investment Opportunities

The Zanzibar Investment Act, 2023 in Zanzibar signifies a strategic move towards establishing Special Economic Zones (SEZs) tailored to attract diverse investment opportunities, thereby positioning the archipelago as a prime investment destination in East Africa and the Sub-Saharan region.

These designated zones, ranging from Free Ports Zones to Industrial Zones, provide favorable operating conditions and guarantee stable business sites to the investors, expedite technological development of special skills and boost production for export.

Other provisions include: the availability of lands for investment and attraction of international services seeking to capitalize on Zanzibar’s unique geographical and economic landscape. By leveraging the inherent benefits of each zone type the Investment Act, 2023 provides a conducive environment for businesses to thrive and flourish.

Furthermore, the establishment of SEZs underscores Zanzibar’s commitment to diversifying its economy and fostering sustainable growth across multiple sectors. Through initiatives like Export Processing Zones, Digital Free Zones, and Logistic Zones, the Investment Act, 2023 promotes innovation, technology adoption, and global competitiveness. These specialized zones serve as catalysts for economic transformation, driving job creation, skills development, and value addition.

By harnessing the potential of Small Islands Zones and Convention Centers, Zanzibar aims to capitalize on its unique tourism and hospitality sector, attracting international conferences, exhibitions, and events.

Overall, the designation of SEZs under the new Investment Act underscores Zanzibar’s proactive stance towards becoming a dynamic and diversified investment destination, poised to lead the way in East Africa’s economic resurgence.

Excellency in Services Delivery

While the Zanzibar Investment Promotion and Protection Act No.14 of 2018, enabled all government departments and agencies to collaborate with ZIPA, under the Zanzibar Investment Act, 2023 all government agencies work with ZIPA under one roof, as One-Stop Center.

The establishment of a One-Stop Center, by the Investment Act, 2023, in service delivery demonstrates the government’s commitment to facilitating investment and supporting business growth by creating an enabling environment for investment to enhance the Zanzibar’s competitiveness on the global stage.

The OSC serves as a platform for cross-sector collaboration and coordination among government agencies, private sector stakeholders, and other relevant entities. This collaboration fosters synergies, promotes best practices sharing and facilitates holistic and integrated approaches to investment promotion.

A One-Stop Center consolidates various administrative processes, licensing procedures, and regulatory approvals into a single platform. This streamlined approach reduces bureaucratic red tape, eliminates duplication of efforts, and simplifies the overall investment process, saving time and resources for investors. The President said, “This enables more investments to take place in Zanzibar while helping to do away with bureaucracy.”

By providing a centralized hub for all investment-related services, the Investment Act, 2023 enhances convenience for the current and prospective investors whereby they can access information, submit applications, and obtain approvals in one location, reducing the need for multiple visits to different government agencies or departments.

The efficient processing of investment applications and approvals through the OSC enables investors to bring their projects to market more quickly. This accelerated timeline allows businesses to capitalize on market opportunities, generate returns on investment sooner, and contribute to economic growth and job creation in Zanzibar.

With regards to technology, the new Act authorizes digital transformation to facilitate all process of investment so that anyone interested to invest in Zanzibar from around the world can do so without having to travel to Zanzibar.

GOVERNMENT GUARANTEE FOR THE PROTECTION OF APPROVED INVESTMENT

Confirming its readiness to enhance investment, the government of Zanzibar has ensured that the new investment Act takes into account the interests of existing and prospective investors in the country against potential risks.

The investment Act, 2023 acknowledges bilateral and multilateral agreements relating to investment protections and the right of investors in foreign countries where The United Republic of Tanzania has ratified or is part of it. By recognizing and incorporating these sections into domestic law, it demonstrates the government’s willingness to abide by international standards of investment protection and ensures that investors are treated fairly and equitably under the law.

Some of guarantee includes: guarantee for the protection of approved investment, guarantees against expropriation, fair and equitable treatment and the right of repatriation of profit, proceeds and salaries.

Incorporation of ‘the right of repatriation of profit, proceeds and salaries grants investors the entitlement to transfer their earned profits, proceeds from asset sales, and salaries to any other designated location outside of Zanzibar. This provision assures investors that they have the freedom to repatriate their earnings without undue restrictions or delays.

Further, the inclusion of provisions for ‘dispute resolution’ communicates to investors that Zanzibar is committed to providing a fair and transparent legal framework for investment. This ensures that investors have access to established dispute resolution mechanisms, which enhances legal certainty and investor confidence. It also provides additional assurances to investors regarding the guarantee of their investments with mechanisms in place to address disputes in a timely and efficient manner.

ZiBi Team