THE DIFFERENCE BETWEEN REGULATORY APPROVAL AND REGULATORY COMFORT

(A Zanzibar Perspective)

Challenging a Common Assumption

In Zanzibar, foreign investors often treat regulatory approval as the end of regulatory risk. Once an investment certificate is issued by the Zanzibar Investment Promotion Authority (ZIPA), the assumption is that the project has crossed the most difficult hurdle.

In practice, this assumption is misplaced.

Regulatory approval grants legal permission to operate. Regulatory comfort determines whether that operation is trusted, supported, and allowed to proceed without friction.

The two are related, but they are not the same.

Regulatory Approval Is Only the First Layer

For foreign investors, ZIPA approval is typically the first and most visible regulatory milestone. It confirms the legality of the investment, the approved sector, and the general scope of activities.

However, ZIPA approval does not operate in isolation.

Once a project becomes operational, it enters a broader regulatory framework that includes, among others:

• Quarterly investment progress updates to ZIPA to ensure the terms under which the investment was issued are met.
• environmental assessment and ongoing compliance under the Zanzibar Environmental Management Authority (ZEMA),
  
  
• tax registration, filing, and reporting obligations to the Tanzania Revenue Authority (TRA) and the Zanzibar Revenue Authority (ZRA),
  
  
• sector-specific oversight such as:
  
  
  • the Zanzibar Commission for Tourism (ZCT) for tourism-related businesses,
    
    
  • the Zanzibar Utilities Regulatory Authority (ZURA) for energy and utilities,
    
    
  • and other authorities depending on the nature of the investment.
    
    

Many projects encounter difficulty not because approvals were missing, but because post-approval obligations were underestimated or poorly governed.

Where Regulatory Discomfort Begins

From a legal standpoint, most compliance challenges do not immediately amount to licence revocation or formal enforcement.

Instead, they create regulatory discomfort.

This often arises where:

• Quarterly investment progress updates to ZIPA are neglected.
• Environmental Impact Assessment (EIA) conditions issued by ZEMA are treated as procedural requirements rather than ongoing operational obligations.
  
  
• Statutory filings or reports to TRA or ZRA are delayed, incomplete, or handled reactively.
  
  
• Sector regulators receive inconsistent or outdated information about operations.
  
  
• There is a misalignment between what was approved during the ZIPA process and what is occurring on the ground.
  
  
• Investors rely exclusively on local partners or consultants without sufficient oversight.
  
  

On paper, the project appears compliant. In practice, regulatory confidence begins to weaken.

The Legal and Commercial Consequences

Regulatory discomfort in Zanzibar rarely presents itself as an immediate legal sanction.

Instead, it manifests quietly and cumulatively:

• prolonged processing of renewals or amendments,
  
  
• additional “clarifications” being requested without clear timelines,
  
  
• increased inspections framed as routine compliance checks,
  
  
• slower approvals for expansion or restructuring,
  
  
• reduced regulatory goodwill over time.
  
  

By the time legal disputes arise, the issue is often framed not as lack of approval, but as non-compliance with conditions, misrepresentation, or failure to meet ongoing statutory obligations.

At that stage, the cost is no longer merely administrative , it becomes commercial and reputational. The examples are endless.

A More Accurate Regulatory Framework for Investors

Sophisticated investors distinguish between transactional compliance and regulatory governance.

The relevant question is not simply:

“Do we hold the required approvals?”

But rather:

“Are we consistently meeting the conditions, reporting obligations, and inter-agency expectations that arise from those approvals?”

In the Zanzibar context, regulatory comfort is built through:

• timely and accurate statutory reporting,
  
  
• alignment between ZIPA approvals and sector regulators,
  
  
• direct investor visibility over compliance functions,
  
  
• treating environmental, tax, and sector compliance as core operational risks rather than outsourced tasks.
  
  

Approval opens the door. Comfort determines how freely a project is able to operate and grow once inside.

Closing Reflection

Regulatory comfort is rarely documented, but it is always observed.

Investors entering Zanzibar would benefit from recognising that long-term project stability depends not only on securing approvals, but on how compliance is governed after those approvals are granted.