Tanzania’s bureaucracy stalls pharmaceutical investment worth Euro 150 million for two years

President Magufuli - File photo

WHILE the President of Tanzania, John Magufuli, recently insisted that an investment permit for foreigners seeking to invest in Tanzania must be OK-ed within 14 days, his government has been sabotaging an investment worth Euros 150m for two years.

The stalled investment belongs to the family of Jamal Hassan Abdullah Alawadhi of Kuwait who wants to set up an essential pharmaceutical factory, SAUTI KUBWA has learnt. This investor is famous for investing in factories in various countries around the world.

All the while, the money is allegedly held by the government of Tanzania in a special account at the Bank of Tanzania (BoT), without investors being given legitimate reasons for the withholding of their money.

The source of the stalemate

Our research reveals that wealthy family entered into a joint venture with Tanzania-based pharmaceutical company, Pharmaceutical Investment Limited (PIL), which has 60% of the shares of the Tanzania Pharmaceutical Industries Limited (TPI) company in Arusha. The Tanzanian government retains 40% of all shares.

In addition, it has been established that after the completion of the initial share purchase process, the investor was finally satisfied and decided to invest in the factory, subject to the agreement that necessary repairs should be made and completed as soon as possible so that pharmaceutical production can begin immediately.

The funds were received by the Bank of Tanzania (BoT) on 12 September 2018 – being the capital for establishing the factory of essential medicines for human consumption.

From BoT, the funds were supposed to be credited to the PIL company’s account at CRDB Bank, Holland House branch, in Dar es Salaam.

As SAUTI KUBWA publishes this story, the funds have not yet been deposited in the PIL’s account. The reasons for the stalemate are unclear.

A source from Jamal Alawadhi’s family members told SAUTI KUBWA that the investment is legitimate and that the investor has undergone a series of interviews with the Tanzania Investment Center (TIC) and the BoT, and has submitted several documents showing the sources of his money, to no avail.

BoT informed SAUTU KUBWA, through a source that asked to remain anonymous, saying: “Jamal has come to Dar es Salaam many times and held meetings with TIC officials, and there is no concern about the legitimacy of his personal or family income. We are doing legitimate business and we are often helping the community.”

Calling for President Magufuli’s intervention

Sceptical of BoT’s promise to credit the funds, the PIL management wrote a letter to President John Magufuli on 15th January 2019, seeking his intervention to speed up the process.

The State House responded by phone the following day, advising the management of PIL should contact the CEO of TIC to reach an agreement.

What happened at the TIC offices?

On 17th January 2019, the PIL management arrived at the TIC offices and met with the then Director General, Geoffrey Mwambe who told the investors that their case would be resolved as soon as possible.

In a meeting with the CEO, Geoffrey Mwambe, PIL’s management was required to provide a summary and analysis of the funds to show its legitimacy. They were instructed that all investors, including Alawadhi family members, should arrive in the country to meet with “relevant authorities.”

Ten days after the end of the session, one of Alawadhi’s family members, Engineer Jamal arrived in the country. The next day, on 28th January 2019, accompanied by Tanzanian shareholders they held another meeting with Mwambe, in Dar es Salaam, and agreed to meet again after two days to conclude the talks.

On 30th January 2019, Engineer Jamal and other shareholders arrived at TIC and held a long-awaited meeting as Mwambe told the investors not to “worry,” as their case was nearing completion.

However, after the session, Engineer Jamal was heard complaining about the presence of many sessions without a new agenda while expressing frustration over not knowing when the factory would be allowed to start production.

Desperate investors persuaded to move to Kenya

There are reports that the investors are considering to withdraw the funds as some brokers from a neighbouring country, Kenya are persuading Engineer Jamal to establish the same factory in Mombasa.

“Jamal has been followed by Kenyans, they are asking him to invest in their country, but he has said he still has no intention of doing so,. But if he fails completely, he will have to withdraw his money and go to some other destination,” says a family member.

It has been revealed that the Kenyans he met in Dar es Salaam have promised to give him a large investment area in Mombasa or his preferred location to start the construction of the factory, and  

that he will be given a unique opportunity in the implementation of his investment.

Benefits of a factory built in Tanzania

It is believed that the production of the essential drugs in Tanzania would further reduce the cost of importing drugs from abroad and save more than 900 billion Shillings spent annually to import drugs.

In addition to saving money, the factory would create employment for Tanzanians and reduce the rate of unemployment.

Apart from these benefits, the prospective industry would still be a source of tax, a development catalyst by complementing the budget for the construction of roads, schools and hospitals.

The New TIC Chief speaks

The CEO of TIC, Maduhu Kazi, commenting on the matter, said the potential investors should visit his office to explain where they are stuck. Kazi said his office is open and that it has no substantive or procedural barriers to any genuine investors, as long as they follow and fulfil the legal requirements related to investment. If everything is completed, the decision will be issued shortly, he said.

President Magufuli with a commitment to improve the investment climate

In his address during the inauguration of the Parliament in Dodoma after the just-ended general election, President Magufuli said he would place TIC under the Office of the President.

He said the move was aimed at speeding up the decisions related to active investors, as Tanzania needs more investors to strengthen its growing economy. He promised that the investors would be able to complete the legal processes for the issuance of all investment permits within a maximum of fourteen days.