Tanzania: The Public Private Partnership (Amendment) Act 2018

The highly anticipated Public Private Partnership (Amendment) Act, No. 9 of 2018 (the PPP Amendment Act) was gazetted and came into force in September 2018. Earlier in the year in June 2018, we circulated a briefing analysing the proposed changes to the Public Private Partnership Act, No. 19 of 2010 (as amended in 2013 and 2014) (the PPP Act). The majority of the proposed changes have been incorporated in the final PPP Amendment Act however there have been further amendments in some clauses.

This updater will explore:

  • the key changes to the PPP Act;
  • changes to other related legislation; and
  • the impact of the changes to investors.

Summary of key amendments

Key highlights of the PPP Amendment Act include:

  • PPP agreements will be subject to local arbitration under the arbitration laws of Tanzania. This provision augments the existing governing law provision which provides that the PPP agreement will be governed by Tanzanian law. Therefore, in the event of a dispute, the parties must select a local arbitral forum i.e. the National Construction Council or the Tanzania Institute of Arbitrators;
  • exemption from competitive bidding for unsolicited projects subject to fulfilment of specific prescribed conditions. This amendment is likely to encourage more international investors to propose PPP projects;
  • removal of the National Steering Investment Committee from approving PPP projects. This has reduced the number of entities involved with reviewing PPP projects hence will increase efficiency in relation to the timelines and required approvals;
  • adherence to the Natural Wealth Laws which allows Parliament the right to review the PPP agreement at a later point and to modify it if there are deemed to be any unconscionable terms;
  • reduction of the threshold for small scale projects from US $70 million to US $20 million;
  • consideration of local content and empowerment of Tanzania citizens in the PPP evaluation; and
  • public funding for PPPs to be carried out under the Government Loans, Guarantees and Grants Act, whereas other government support will be at the discretion of the Minister.

Table of Key Highlights

PPP Act - old provisions PPP Amendment Act - new provisions
Section 3: Definitions "Ministry" means the Ministry responsible for investment.

"Ministry" responsible for finance.

"National Investment Steering Committee" means the National Investment Steering Committee established under the Tanzania Investment Act.

"small scale PPP project" not defined.

Public Private Partnership Technical Committee.
"Ministry" means the Ministry responsible for PPP.

"Ministry "responsible for finance" has been substituted for "Ministry" as defined above whenever it appears in the PPP Act.

Definition of National Investment Steering Committee has been deleted.

"small scale PPP project" means a PPP project approved under this Act of an amount not exceeding twenty million US dollars.

The definition has been substituted with Public Private Partnership Steering Committee (PPP Steering Committee) whenever it appears in the PPP Act.
Section 4: PPP Centre The PPP Centre was vested in the Office of the Prime Minister. Amendment of Section 4(2) to vest the PPP Centre under the general supervision of the Ministry.

Addition of Section 4(2A) which provides for other departments as may be determined by the Executive Director.

Substitution of Section 4(6) to include the contracting authority's mandate to submit to the PPP Centre a concept note and prefeasibility study of potential PPP projects at the beginning of every budget cycle. The section further provides that the proposed PPP projects must comply with the national development priorities and must be approved by the respective Minister.

Addition of Section 4(6A) which provides that the PPP Centre should analyse the potential PPP projects within 21 working days of submission and afterwards forward to the PPP Steering Committee.
Section 5: Functions of the PPP Centre (3) Subject to provisions of subsection (2) the Ministry responsible for finance shall undertake an analysis of fiscal risks, affordability and other financial matters and submit the projects to the PPP Centre within fifteen working days from the date of receiving such projects.

(4) The PPP Centre shall, after receiving recommendation from the Ministry responsible for finance, within seven working days, submit the projects to the Public Private Partnership Technical Committee.
Amendment of Section 5(2) by deleting reference to the analysed projects being forwarded to the Ministry responsible for finance. However, the amended section provides that the PPP Centre shall analyse the projects within 30 working days from the date of receipt, which contradicts the new Section 4(6A) which provides for the analysis to take place within 21 working days. This discrepancy may be resolved at a later amendment.

Section 5(3) has been deleted and Section 5(4) has been renumbered and replaced with a provision to give the PPP Steering Committee mandate to approve the feasibility study reports, selection of preferred bidders and PPP agreements.

Further, the Minister, together with the Minister responsible for investment, shall prepare programmes for the development and maintenance of favourable environment for investment through PPPs.
Section 7: PPP Steering Committee Composition of the PPP Technical Committee comprised of the Executive Secretary of the President's Office - Planning Commission (the Executive Secretary) among others. Amendment of Section 7(1)(e) by removing the Executive Secretary from the PPP Steering Committee and replacing them with the authority responsible for national planning.
Section 7A: Functions of the PPP Steering Committee Section 7A(c): consider and approve Public Private Partnership projects, agreements and any amendment to the agreements. Amendment of Section 7A by replacing the PPP Technical Committee's function to approve PPP projects, agreements and amendments with the PPP Steering Committee's power to approve feasibility study reports, selection of preferred bidders and approve PPP agreements and amendments thereto.

It further extends the period of analysing the feasibility studies, detailed project reports and design, selection of preferred bidder and PPP agreements and amendments from 15 working days to 21 working days due to the detailed scope and complexity of analysing PPP projects.
Section 7B: Public Funding and Other Support of PPP Projects This section highlighted the procedure for submission of projects to the National Investment Steering Committee after the PPP Technical Committee had reviewed them. Repeal and replacement of Section 7B to provide that where the project requires public funding or any other government support, the PPP Steering Committee shall refer the matter to Minister for determination and be dealt with within 21 working days from date of receipt.

In the case of public funding, the Minister shall process the matter in accordance with the Government Loans, Guarantees and Grants Act, Cap 134 [R.E. 2002] (as amended). Whereas for any other government support or determination of matters of policy, the Minister makes the determination and directs the PPP Steering Committee accordingly.
Section 7C: Powers of the Minister generally This section did not exist. Addition of Section 7(C) which provides for the Minister's powers to notify the general public of all approved projects under the PPP Act as well as monitoring and managing fiscal risk and other financial matters relating to the implementation of PPPs. Further the Minister shall issue directives to accounting officers on the analysis and approval or disapproval of small scale PPP projects.
Section 10(4A): Feasibility Study This subsection did not exist. Addition of Section 10(4A) which provides that the Minister may, by regulations, prescribe additional or detailed contents of a concept note and feasibility study as may be required under PPP project.

This section aims to dispel any ambiguity as to the specific contents required for a particular PPP project.
Section 10A: Facilitation Fund Section 10A (2) provides that "the PPP Centre shall open an account with a reputable investment bank into which shall be kept all moneys constituting the Facilitation Fund." Replacement of the words "an account with a reputable investment bank" appearing at the end of Section 10(2A) with the words "a bank account". This amendment has removed the restriction for the Facilitation Fund to only be deposited in an investment bank and has opened up the possibility of the funds being in any retail bank, presumably a local Tanzanian bank.
Section 15: Procurement Process All PPP projects, whether solicited or unsolicited, shall be procured through competitive bidding process. Amendment of Section 15 to empower the Minister to exempt some unique unsolicited PPP projects from being subjected to the competitive bidding process subject to conditions such as:
  • the project being of priority to the Government strategy;
  • the private party does not require Government guarantee or funding;
  • unique nature of the project to warrant departure from competitive bidding;
  • the project is of significant size, scope and financing;
  • a value for money and affordable project which transfers significant risk to private party;
  • social economic element of the project including employment, improved services and taxation; and
  • the private party undertakes cost of a feasibility study.

Further, the section has been amended to include provision for local content matters to be considered in the procurement process such as inclusion of local firms in consultancy contracts, use of local goods and works in non-consultancy contracts, preference of local goods in evaluation, capacity building of local firms and generally empowering Tanzanian citizens.

Section 20: Amendment of Agreements This section provides that "an agreement may be reviewed and amended by the parties if the review or amendment is consented to by the PPP Technical Committee." Deletion and replacement of Section 20 which now provides that any review or amendment by the parties to the PPP agreement must be consented by the PPP Steering Committee and vetted by the Attorney General.
Section 22: Dispute Resolutions The section provides that disputes shall be resolved through negotiation, mediation and arbitration. Repeal and replacement of Section 22 to now provide that any dispute arising during the course of the PPP agreement shall in case of mediation or arbitration be adjudicated by judicial bodies or other organs established in Tanzania and in accordance with its laws. Therefore no international arbitration will be permitted in PPP Agreements. This is to ensure the government is not subject to international arbitration forums.
Section 23A:Periodic Performance Reports Section did not exist. Addition of Section 23A which requires the accounting officers of the contracting authorities to submit mid-year performance reports to the PPP Centre on the implementation of the PPP projects. The section further requires the PPP Centre to consolidate the mid-year performance reports and submit them to the Minister.
Section 25A: Projects relating to natural wealth and resources Acts No.5 of 2017 and No.6 of 2017 Section 25A did not exist. Addition of Section 25A which makes provision for PPP projects relating to natural wealth and resources to recognise the provisions under the Natural Wealth and Resources (Permanent Sovereignty) Act, 2017 and the Natural Wealth and Resources (Review and Re-Negotiation of Unconscionable Terms) Act, 2017 (collectively the Natural Wealth Laws). These provisions include only local arbitration under Tanzanian law will be recognised as well as the right for Parliament to review any agreements in relation to, but not limited to, natural wealth and resources.
Section 27: General Penalty Any person who commits an offence under this Act to which no specific penalty is prescribed shall be liable to a fine not exceeding five million shillings or to imprisonment for a term not exceeding three years. Amendment of Section 27 which provides the penalty for an offence under the PPP Act not to be less than five million Tanzanian Shillings and not exceeding fifty million Tanzanian Shillings or imprisonment for not less than three months and not exceeding three years, or both the fine and imprisonment.
Section 28: Regulations Provided for the content of regulation to be made by the Minister. Amendment of Section 28(2) which adds paragraph (g) with the view to empower the Minister to make Regulations on the empowerment of citizens including the provision of goods and services by Tanzanian entrepreneurs, training and technology transfer, employment of Tanzanians and taking part in corporate social responsibility.

Additionally, the regulations should also provide for a procedure of scrutiny and analysis of projects that require Government support.

Amendments to other laws

The PPP Amendment Bill has also provided for the amendment of the following laws:

  • Section 5(4)(c) of Tanzania Investment Act, Cap 38 has relieved the National Investment Steering Committee of the mandate to scrutinise the approved PPP projects. This will instead be done by the PPP Steering Committee.
  • Section 9(1)(c) of Public Procurement Act, Cap.410 has been amended to give Public Procurement Regulatory Authority (PPRA) the mandate to regulate the procurement of consultants, transaction advisors and private party in relation to PPP projects in accordance with the regulation under the PPP Act and guidelines issues by the PPRA in collaboration with the PPP Centre..
  • Section 7(3) of Budget Act, Cap.439 has been amended so as to include PPP projects in the Government budget. The objective is to require the contracting authorities to consider PPP projects during preparation of Government budget so as to enhance implementation of PPP projects.
  • Section 9(2) of Petroleum Act, Cap.392 has been amended for the purpose of differentiating projects implemented through joint venture approach and projects implemented under PPP arrangement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Peter Kasanda
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