“The only strategy that is guaranteed to fail is not taking risks.” – Mark Zuckerberg. When a foreign business has reached a decision to enter the Tanzanian market, there is a range of possibilities open to it. These possibilities fluctuate around cost, risk and the amount of control which can be exercised over them. Especially in difficult economic downturns, many foreign businesses tend to cut down on expansion costs.
Nevertheless, there is generally an immense promise of opportunities in downturns for foreign businesses that are able to identify and seize the opportunities.
Therefore, this first part of our five-part Tanzania market entry strategies series provides high-level guidance on some of the most important initial legal considerations that foreign businesses need to consider when launching operations or arrangements in the Indian Ocean littoral country of Tanzania—projected to reach a population of 100 million people in 2035 and 200 million by the end of this century, according to the World Bank.
Although not all the considerations that will be discussed in the series may be encountered, chances are some will arise and one may stay or upset operations or arrangements if the consideration is not properly addressed.
In gauging the most suitable mode of representation when penetrating the Tanzanian market, the question of whether the proposed mode of representation is permitted by Tanzanian law and/or practice is a very paramount consideration. A simple and relatively easy way to arrange for representation for foreign-manufactured goods is to find a distributor or an agent in Tanzania.
To gain more control, however, a foreign manufacturing business needs to establish its own separate legal entity through the Business Registration and Licensing Agency (Brela) with a view to establishing a corporate presence in Tanzania and to acquire market production capacity.
A distributorship arrangement is easier to set up than a separate legal entity, but with this arrangement the foreign manufacturing business may lose control of the way its products are marketed and priced in Tanzania.
Several products must be registered, certified or licensed by the relevant Tanzanian authority prior to manufacturing, importing, distributing, and selling them in Tanzania. A person (natural person and business entity) is prohibited from applying a standard mark approved and registered by the Tanzania Bureau of Standards (TBS) to its products unless the business holds a license granted in accordance with the TBS-framed standards (Standards (Certification) Regulations, 2009).
Further, in no less than seven days before the arrival of the import shipment in Tanzania, an importer of products covered by Tanzania Standards is required to apply for the Batch Certificate (Standards (Compulsory Batch Certification of Imports) Regulations, 2009).
It is advisable that a foreign business ascertains, in relation to its specific industry, the applicable Tanzanian laws, regulations, guidelines, and institutional bodies governing quality supervision, inspection, quarantine, certification, accreditation, and registration. For example, if the foreign business manufactures medicines and medical devices, the Tanzanian ministry of Health and the newly created Tanzania Medicines and Medical Devices Authority (TMDA) are the pertinent authorities to confirm if a registration, certification or license requirement applies to a specific medicine or medical device.
In a new legal development, Tanzania recently passed the Finance Act No. 8 of 2019, which amended the Standards Act, 2009, to require all importers of food to register with the TBS before food can be imported into the country.
Every entity in Tanzania has specific business objectives comprising the gamut of commodities/services that the entity is mandated to produce/offer and are stipulated in the entity’s registration documents, such as the memorandum of association for a company.
The objectives should be prudently cogitated about to ensure that future operations in Tanzania will not be deemed outside the entity’s mandate. Brela will not approve registration of an entity if its objectives don’t closely track the ISIC—the international reference classification of productive activities.
And what’s more, a foreign business entering the Tanzanian market through a distributor should be mindful of the distributor’s business objectives as may be stated in its registration documents to avoid the risk of the distributor importing and distributing products that are outside the scope of its mandate.
This five-part Tanzania market entry strategies series continues next Saturday, 20 July 2019 to its second part.