TANZANIA, one of the most peaceful and politically stable African countries, offers an attractive investment climate; a rich and diverse natural resource base; and a growing consumer market, thanks to the country’s burgeoning population growth – standing at 47.4 million people in 2014 (National Bureau of Statistics data). It’s these widely acknowledged factors that have made the country a darling of foreign investors and multinational companies.
Nevertheless, foreign investors and multinational companies looking to Tanzania to expand their footprint need to know and understand the issues and challenges of the Tanzanian business environment, from a labour and employment law standpoint.
One of the key challenges is tied to the impact of the ambitious workforce localization programs being implemented by the Government of Tanzania through the Ministry of Labour and Employment. There’s is also concern about immigration policies, laws and regulations to support intra-country and intra-regional labour mobility; managing risks relating to benefits and non-salary rewards; and safeguarding confidential information and/or trade secrets that expatriate employees have handled during the course of their employment.
Workforce localization policies in Tanzania are, according to the outgoing Minister for Labour and Employment, Hon. Gaudensia Kabaka, intended to cut down on the employment and engagement of expatriate employees with the aim of providing more job opportunities to the citizens. And that is why we have recently seen the enactment of the Non-Citizens (Employment Regulations) Act, 2015.
This new Act, which was passed by the Parliament of Tanzania during its April - June 2015 session, introduces tougher rules for Tanzanian subsidiaries of multinational companies recruiting expatriate employees. It is hoped that the Act will aid the Government’s efforts to increase the employment of youth across mainland Tanzania, where immigration authorities are cracking down on illegal expatriate employees.
A key provision in the Act restricts the hiring of expatriate employees to job positions for which there are no local experts. In fact, the Labour Commissioner is required to satisfy himself that every possible effort has been explored to get a local expert prior to approving an application for a work permit. However, expatriate employees on short-term assignments (whose period of validity ranges from one month to one year) may apply to be exempted from the condition that they obtain a letter of recommendation from the Labour Commissioner.
Succession planning is another key provision in the Act. Tanzanian subsidiary or branch entities of multinational companies intending to recruit expatriate employees must prepare succession plans for local employees to finally take over the positions, including establishing effective training programmes to equip local employees with the skills necessary to carry out the duties of expatriate employees.
Perhaps, it’s important to note that an expatriate employee is expected to stay with one employer during the employment contract, but if under special circumstances the expatriate must terminate the contract prematurely and wishes to move to another employer, then he/she is required to leave Tanzania and; while outside the country, apply by producing a letter of no objection from the previous employer agreeing to the move.
Besides these challenges around workforce localization, multinational companies are coming to grips with keeping their internal policies as consistent as possible with Tanzania’s changing labour and immigration requirements and standards; and contracting out of the local statutory benefits regime, especially for expatriate employees on long-term assignments in Tanzania who hold on to their employment status with their headquarters entity.
Mainly for immigration purposes, expatriate employees intending to live and work in Tanzania must enter into an employment contract (required to be attached to the work permit application) with a subsidiary or branch entity in the country. Because of this, some expatriate employees will acquire the right to bring claims against both their headquarters entity and the subsidiary or branch entity they work for in Tanzania; hence, the need to seek specific legal advice on how to avoid double payment of statutory benefits in both entities.
From the perspective of the wider East African Community (EAC) labour market, there’s also an issue arising from the regional roles some expatriate employees are given and tasked with working in the entire EAC region (comprising of 5 countries; namely, Tanzania, Kenya, Uganda, Rwanda and Burundi), but cannot obtain one work permit to work across the region. This is the case today, since it’s currently not possible to hold a single work permit for all the EAC-member countries.
Prior to mulling over relocation plans for Tanzania, multinational companies should circumspectly ensure that their expatriate employees apply for the correct immigration permits, to allow them the peace of mind of working as freely as possible. Multinational companies should also exercise caution when preparing expatriate employment contracts to avoid giving rise to duality of rights and claims. To this end, HR directors, Compensation and Benefits Managers, and in-house lawyers should, at the start of the engagement process, give careful thought to the structure of such contracts in order to assuage these risks and the challenges discussed above.
All in all, if the targeted outcomes are to be attained, the Government of Tanzania needs to adopt a holistic and comprehensive approach to workforce localization, and that calls for active involvement of all stakeholders that can help Tanzanian firms tackle the serious challenges faced by businesses in today’s globalized economy. Needless to say, as a country, Tanzania should increase funding to improve its education and vocational training system by developing and managing its talent in the fields of industry and commerce. This would help close the education, skills and competencies gaps; scale the utmost height for attracting FDIs and attaining a higher rank for ease of doing business (Tanzania ranks 131 out of 189 economies in the World Bank’s 2015 ease of doing business index); and, ultimately, ensure that Tanzania prospers.