Tanzania

Tanzania Corruption Report

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Snapshot

Tanzania_250x166.pngCorruption is pervasive throughout Tanzanian society and is a serious problem across all sectors of the economy. The most affected sectors are government procurement, land administration, taxation, and customs. Petty corruption in dealings with traffic, customs, and immigration officers deters investment. Corruption is criminalized under the Prevention and Combating of Corruption Act (PCCA), which covers attempted corruption, extortion, passive and active bribery, money laundering and bribery of a foreign official. A range of legislation cover other corruption offenses, but anti-corruption laws are applied inconsistently and are poorly enforced. Gift-giving and the use of facilitation payments for the purpose of inducing corrupt behavior are illegal under the PCCA. However, companies should note these practices can be commonly encountered when doing business in Tanzania.

Last updated: October 2016
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Judicial System

The Tanzanian judicial system is tainted by corruption and is subject to executive influence. The judiciary is underfunded, corrupt and inefficient, especially in the lower courts (HRR 2015). Court clerks and magistrates are known to accept bribes to open/misdirect cases or to altogether determine a case’s outcome, respectively (HRR 2015). Companies also report that irregular payments are often exchanged in return for favorable court decisions (GCR 2015-2016). Accordingly, the degree to which the system can provide an expeditious and fair trial is questionable (BTI 2016). Despite widespread perceptions of judicial corruption and susceptibility to political interference, the institution has proven its autonomy with the prosecution of two former government officials for corruption in 2015 and upholding the ruling despite subsequent appeals (GI 2016).

Companies should be aware the corruption and inherent inefficiency within the judiciary pose a hindrance for settling commercial disputes in Tanzania (ICS 2016). Equally, companies do not consider the Tanzanian legal framework to be efficient in settling disputes or in challenging government regulations (GCR 2015-2016). More than a third of firms perceive the courts to be a major constraint to doing business (ES 2013). Tanzania is a member of the International Centre for Settlement of Investment Disputes (ICSID) and is a signatory to the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.

Police

Corruption and impunity are pervasive in the Tanzanian police force (HRR 2015). Foreign companies have identified petty corruption among traffic police as an obstacle to investment (ICS 2016). Additionally, companies identify Tanzania as performing insufficiently in relation to the reliability of police services to protect from crime (GCR 2015-2016). Half of surveyed households in Tanzania believe that the police is corrupt and there were several reports of police corruption and impunity during 2015 (GCB 2015, HRR 2015). There are legal mechanisms in place to prosecute corruption among police officers, however, these were not effectively implemented by authorities (HRR 2015). The mainland police reportedly act as prosecutors in lower courts, in nine out of the country’s 30 regions (HRR 2015).

Public Services

The public service sector carries high corruption risks for companies in Tanzania. Bureaucratic procedures for licenses and permits are burdensome, time-consuming and prone to corruption. Administrations suffer from a lack of resources and weak capacities, poorly trained staff and political interference (BTI 2016). Public officials are furthermore, poorly paid making them even more susceptible to corruption (BTI 2016). Indeed, gifts and other bribes are perceived to be widespread when applying for public utilities and permits (ES 2013, GCR 2015-2016). In fact, businesses consider the prevalence of irregular payments and bribes within public utilities in Tanzania as one of the worst in the world (GCR 2015-2016). Likewise, more than a third of households report paying a bribe to obtain public utilities in Tanzania (GCB 2015).

The Tanzania Investment Center (TIC) acts as a one-stop-shop for investors such as helping them obtain permits, licenses, visas among other (ICS 2016). Starting a business in Tanzania requires 9 procedures and 26 days, which is approximately the same as the regional average (DB 2016). Obtaining a construction permit, on the other hand, is more time-consuming compared to neighboring countries (DB 2016).

Land Administration

The land administration in Tanzania can be subject to corrupt behavior and thus pose high risks to businesses. More than three in every ten companies expect to offer gifts and irregular payments to government officials to obtain construction licenses (ES 2013). Furthermore, the cost of dealing with red tape and regulations in the construction sector is perceived by businesses to be the highest compared to other sectors (Tanzania Private Sector Foundation 2015). There are different laws in Tanzania that recognize and enforce secured interests in property, both movable and real, but there is no single comprehensive law to secure property rights (ICS 2016). Even though property rights and property acquisition are legally guaranteed in principle under different laws, corruption and inefficiency within the land administration and the judicial system limit their enforceability (BTI 2016). There also exists an informal system of land distribution in urban areas, leading to increasing numbers of disputes (BTI 2016). This environment can potentially trigger opportunities for corruption in this sector (BTI 2016).

Ownership of land is restricted in Tanzania. The processes for obtaining a lease or a certificate of occupancy are complex and lengthy: Foreign investors have to obtain a government-granted right of occupancy or partner with a Tanzanian leaseholder to have access to land (ICS 2016). Investors can lease land through the TIC which has designated specific plots available for investors (ICS 2016). In early 2016, the government inaugurated the Land Tenure Support Program to increase transparency and efficiency in the land administration (ICS 2016). Registering property in Tanzania is more time-consuming compared to the average in neighboring countries (DB 2016).

Tax Administration

Officials in the Tanzanian tax department reportedly solicit bribes when assessing taxes. Companies single out irregular payments and bribes in annual tax payments as a significant issue in Tanzania, with the country ranking among the worst in the world in the category (GCR 2015-2016). The tax rates and the tax administration were also ranked by companies as the second and third most important deterrents to investment, respectively (Tanzania Private Sector Foundation 2015).

The Tanzania Revenue Authority (TRA) has recently stepped up anti-corruption efforts through the development of strict and practical controls to improve revenue collection and service delivery (Daily News, Mar. 2015). In 2014, Tanzania made paying taxes more complicated for companies by introducing an excise tax on money transfers (DB 2015). Paying taxes in Tanzania requires 49 payments and takes 179 hours per year on average; which is almost half the regional average (DB 2016).

Customs Administration

Customs clearance in Tanzania is marred by corruption, and foreign companies have identified petty corruption among Tanzanian customs officers as an obstacle to investment (ICS 2016). In effect, bribes and irregular payments are often exchanged when importing and exporting in the country (GCR 2015-2016). Tanzanian transport companies pay almost USD 13,000 a month in bribes to authorities such as police and customs officials to avoid unnecessary delays, harassment and payment of penalties (TI & EAT 2012). Customs procedures are burdensome to business and companies should note that time-consuming bureaucracy related to trade across borders opens the way for public officials to demand bribes in Tanzania (GCR 2015-2016, GETR 2014).

Trade is impeded by customs procedures that lack efficiency and importing and exporting requires time-consuming paperwork to clear goods at the border (GCR 2015-2016). Tanzania ranks among the worst performing countries in the world in relation to trading across borders (DB 2016). The average cost and time related to exports and imports are higher in Tanzania compared to the regional average and significantly higher than OECD averages (DB 2016). Notwithstanding, Tanzania has managed to reduce the time required to deal with exports and imports by implementing the online Tanzania Customs Integrated System (TANCIS) for downloading and processing customs documents (DB 2016). Furthermore, in 2014 Tanzania made trading across borders easier by upgrading infrastructure at the port of Dar es Salaam (DB 2016).

Public Procurement

Tanzanian public procurement is rife with corruption presenting businesses with high risks. Businesses point to government officials often favoring well-connected companies and individuals when awarding contracts, and public funds being often diverted to companies, individuals or groups due to corruption (GCR 2015-2016). Furthermore, almost seven in every ten companies expect to offer gifts to obtain a public contract (ES 2013). Bribes and other irregular payments are also widely exchanged in the tender process (GCR 2015-2016). Companies or investors bidding on government tenders are required to submit a written commitment to comply with anti-bribery policies (ICS 2016). To combat corrupt and counterproductive practices, the Tanzanian government joined the Construction Sector Transparency Initiative (CoST) to enhance accountability and transparency within the sector.

In a 2015 crackdown, the director of Tanzania’s port authority was suspended for violating procurement procedures (Africa Report, Feb. 2015). Additionally, in late-2014, Tanzania’s Public Procurement Regulatory Authority (PPRA) barred 19 firms from competing for government contracts after the firms were found to have engaged in corrupt practices (All Africa, Oct. 2014). Another 2014 corruption case rocked the Tanzanian government following revelations that over USD 180 million in public funds were siphoned off and directed to off-shore accounts held by businesspeople and public officials (The Guardian, Jan. 2015). The case led to the resignation of a quarter of senior politicians from the government, including the energy minister, Sospeter Muhongo, the attorney general, the energy secretary and housing minister who lost her post for transferring USD 1 million to her private bank account (The Guardian, Jan. 2015). The chairs of three parliamentary committees; energy and minerals committee, the budget committee and the legal affairs and governance committee also resigned in connection with the case (The Guardian, Jan.2015). The Prevention and Combating of Corruption Bureau’s (PCCB) investigation has dragged on, reportedly, due to the involvement of high-ranking officials in the case (GI 2016). The case led international donors to withhold funding to Tanzania (BTI 2016). Firms are recommended to use a specialized public procurement due diligence tool to mitigate corruption risks associated with public procurement in Tanzania.

Natural Resources

The mining sector in Tanzania, closely tied to matters over land and investment, is prone to corruption (BTI 2016). Most corruption investigations by the Prevention and Combating of Corruption Bureau (PCCB) have been into government involvement in the mining and energy sectors (HRR 2015). Tanzania’s regulatory capacity in the mining sector is undermined by state functionaries who are involved in rent-seeking networks (U4, Mar. 2014). In addition, there is a significant lack of transparency around the confidential Mining Development Agreements between foreign companies and the government, often involving preferential treatment (U4, Mar. 2014).

Two former ministers were found guilty of abuse of office in connection with a gold-auditing contract causing the loss of USD 5.2 million of government funds. The ministers were sentenced to three years’ imprisonment (FitW 2016).

Legislation

Tanzania’s comprehensive legal framework to counter corruption is poorly enforced. The Anti-Money Laundering Act combats capital flight and financing of terrorist activities. The Prevention and Combating of Corruption Act (PCCA) criminalizes attempted corruption, extortion, passive and active bribery, money laundering and bribery of a foreign official. Corruption is designated as an economic offense, and provisions exist for imprisonment, but there are no financial penalties for economic crimes except for the recovery of assets. Other legislation also regulates against corruption, including the National Elections Act, the Political Parties Act, the Public Finance Act and the Election Expenses Act. The Public Leaders Code of Ethics Act and the Economic and Organized Crime Control Act attempt to curb abuse of power by public officials. Government officials are required to disclose their assets upon assuming and leaving office and annually while in office (HRR 2015). Tanzania does not have a right to information act, which is paramount for transparency of government through free public access to information (HRR 2015). The Public Services Act requires, among other, every institution to make enforceable codes of conduct for its employees (LHRC 2011). Whistleblowers are protected under the Whistleblower and Witness Protection Act.

Tanzania has ratified the United Nations Convention against Corruption and the African Union Convention on Preventing and Combating Corruption.

Civil Society

The Constitution of Tanzania provides for freedom of speech but does not explicitly provide for freedom of the press (FitW 2016); a wide range of laws encourage self-censorship and limit the ability of the media to function effectively (FotP 2016). Some instances of harassment towards journalists investigating sensitive subjects have been reported (HRR 2015). Furthermore, some journalists accept bribes either to publish or to ignore certain information. However, the media on the mainland is active and is said to express a wide range of views, while most media outlets on Zanzibar are controlled by the government (HRR 2015). Tanzania’s press environment is considered ‘partly free’ (FotP 2016).

Freedom of assembly is guaranteed under the law in Tanzania, however, the government didn’t respect these rights in practice (HRR 2015). 17 NGOs reported facing frequent threats and intimidation during late 2014 and in 2015, the government revoked the licenses of 24 international NGOs with no clear justification (GI 2016).

Sources

The site provides a wealth of practical anti-corruption resources to support a solid preventative approach, covering subject such as processes, due diligence, practical tools to support compliance program implementation and also compliance and integrity training.

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