This content is from: Local Insights

Construction investment

The construction industry in Tanzania has evolved over the years to include more and more capabilities, such as all kinds of civil works (roads, bridges) and more advanced forms of residential and commercial buildings, as well as electrical and specialist fields. Between 1997 and 2005 the number of registered construction contractors grew from about 100 to about 1400.

Certain firms involved in particular types of investment in Tanzania may obtain incentives, such as tax incentives, when carrying out their projects. The criteria differ depending on the public body responsible for handling the kind of firm seeking incentive. For firms falling under the Tanzania Investment Centre, the main criterion is that the investment project exceeds $300,000 for projects wholly owned by foreign investors and $100,000 for projects wholly owned by local investors. Infrastructure (for example, road construction, bridges, airports, railways, electricity generation, telecommunication, water services and export processing zones) and commercial buildings are relevant to the construction industry. As many construction firms are often not the owners of the final projects, it is often difficult for contractors to get incentives under the Tanzania Investment Act because of the way wholly owned is interpreted by the authorities. However the Tanzania Revenue Authority exempts generic plant and equipment used in construction from VAT as well as duty on importation into the country.

Many mandatory requirements are placed on construction firms, ranging from registration requirements to operating requirements. However, these regulations have been hampered by poor monitoring and weak enforcement by the regulatory bodies, which has permitted many contractors to ignore several laws. Government capacity and willingness to police and punish offenders is set to increase.

Nimrod E Mkono and Patrick Ache

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