A Study of Joint Venture Formation between Construction Organizations in Tanzania

Abstract

Formation of joint ventures between construction companies is one of the recent efforts in combating contractors problems in Tanzania and addresses one of the key challenges facing the construction industry today in the country especially when large and complex projects are involved. The main objective of the research is to examine the formation of joint ventures in Tanzania, specifically to: study joint ventures formation procedures; identify criteria in selection of joint venture partner; and identify risks associated with and challenges facing joint venture undertakings in Tanzania. The study adopted a descriptive research design and purposive sampling. Multiple sources of evidence was used to collect information mainly literature review, questionnaires and interviews. Key findings reveal that legal and statutory requirements in the formation of joint ventures include registration by Business Registration and Licensing Agency (BRELA), Contractors Registration Board (CRB) and under Registration of Documents Act (RDA). All JV respondents were registered by BRELA and CRB which are mandatory but only 7 were registered by RDA. Most important factors considered during formation of JVs are: contract agreement, financial stability and commitment while key risks associated with JVs are cultural and social differences, delays in approvals and financial risks. In addition, main challenges facing joint ventures are: identification of possible risks and joint venture agreement interpretation. The study concludes that formation of JVs have been addressing some of emerging challenges facing local construction organizations despite the risks and challenges that exist. The study recommends that firms entering joint ventures should explore the benefits of registering with RDA and ensure risks associated with their JV are properly assessed. The study also recommends introduction of an incentive scheme through Tanzania Investment Centre to grant tax relief for foreign contractors going into joint venture with local construction firms.