This article was written by Oluwakemi.
The ability to come up with a business idea can be transformed into a viable business, where ideas supported by feasibility and a business plan can then be sold to interested investors, firms and interested parties for a lump sum or a management contract or as agreed. According to Phil Harding (2000), “a sustainable business is resource efficient, respects the environment and is a good neighbour”.
Business has a responsibility beyond its basic responsibility to its shareholders; a responsibility to a broader constituency that includes the key stakeholders; customers, employee, NGO’s, Government, the people of the communities in which it operates- Courtney Pratt, former CEO Toronto Hydro.
Tanzania which its capital is Dodoma, but in practice Dares Salaam still functions as the capital is located on the Eastern part of Africa bordering the Indian ocean between Kenya and Mozambique. Its economy has performed reasonably well in the recent past with GDP annual growth rates averaging above 6% and still relies heavily on agriculture and the agro-processing remain a prima focus of the Government. Nevertheless other sectors have increasingly come to the forefront as investment possibilities including energy and mining, financial services, telecommunications and tourism.
When focusing on the process and costs for starting a business, Tanzania is more bureaucratic compared to the rest of Sub-Saharan Africa and high income Countries whilst those procedures take less time than Sub-Saharan Africa, it is more than twice as long to start a business as in high income Countries. Cost wise Tanzania is more favourable than the rest of Sub-Saharan Africa but over five time as much as high income Countries.
Businesses in Tanzania include kiosk business, holiday apartments, cottages and villas, hotels, automotive, motorcycle and marine, business equipment and supply, business services such as recruitments and HR, security services, media, internet service providers, Tanzania newspapers, instruction and classes, beauty wellness, fitness and sporting centres, education and schools, phones, computers, business machines and electronics, mental, dental and veterinary, banking, finance and insurance, home and garden, creative services, tea pickers, farmers (which also includes women), furniture and home decoration, generator sales, rental services, movers and removal companies, tiles, carpet and flooring, bed and breakfast or self-catering cottages, apartments and villas and the best prospect sectors telecommunications and information technology, construction and real estate development ranging from 250,000 to 9,000,000, tourism, petroleum, gas and energy, aviation infrastructure, agric business and food processing, mining of gold, diamonds, gemstones and other minerals (which Tanzania is the third largest gold producer in Africa after South Africa and Ghana and it has managed to attract unprecedented amounts of Foreign Direct Investment (FDI) during the last fifteen years. Hence, Zoom Tanzania is where locals go to find the accurate and up to date information ranging from business and tourism, directories to classified ads and entertainment information.
Recently in the year 2013, Microsoft launched a special campaign for Windows 8 hardware and services to University of Dares Salaam students as well as internet access using a technology TV white spaces Uhuru one, a local internet service provider. Also, the Rwemondo School started a tree planting business to generate income, train the students to become skilled entrepreneurs, protecting the environment by planting seeds and selling it to the members of the community. Ilowala Secondary School from Njobe region also launched a beekeeping enterprise producing organic honey.
Tanzania’s main trading partners are the EU, China, India and neighbouring Southern African Development Community (SADC) and East African Community (EAC) Countries. Exports to the USA are dominated by agricultural commodities, minerals and textiles while imports from the USA include wheat, agricultural/transport equipment, chemicals, used clothes and machinery.
Denmark has also provided support in the area of business via the broad Danish Sector approach is moreover unique among the donors in Tanzania and it has contributed to a solid insight into the conditions and challenges of the business sector. It supports the Government’s efforts to improve the framework conditions for the Country’s business development, the reform of the business legislation, strengthening of the trade and legal system, strengthening of the working environment service, development of business organisations and initiatives to promote foreign investments.
In recent years, Tanzania has slipped in the World Bank’s Doing Business Report 2011. Out of 183 Countries, its ranking dropped from 125th to 128th for 2010 and 2011 respectively. The drop is attributed to the worsening ranking in major areas – starting a business, dealing with construction permits, registering property, getting credit, protecting investors, paying taxes, enforcing contracts, trading across borders and closing a business. Challenges faced are poor infrastructure example underdeveloped transport system, unreliable power, limited availability of skilled labour, difficulties in accessing land, high interest rates, difficulties enforcing contracts through courts, bureaucratic red tape and widespread corruption.
On corruption, the Tanzanian environment thus seems to be one of the scariest for foreign investors and this may become one of the explanations of the extremely low levels of foreign investments in the Country. There is also a perception that it is more risky to pay bribes in Tanzania. The system is more complex than that of its neighbours, so one cannot be sure that the recipient of the bribe really can deliver what is promised. (Bigsten and Danielson, 2001:95). Tanzanian businesses identify corruption as the most problematic factor for doing business (World Economic Forum, Global Competitiveness Report 2012/13) and the World Bank’s control of corruption indicator suggests corruption has reduced since 1996 but that progress has stagnated in recent years. (World Bank Worldwide Governance Indicators).
There are also tax related problems under the Income Tax and The Value Added Tax (VAT). The new Income Tax Act was passed by Parliament in April 2004 and became operational in July 2004. This is a success story of the partnership between the Government and the private sector which has led to a friendly tax regime. The challenge now is to finalize the regulations to make the income tax operate more smoothly. For VAT, the 2004/05 budget has increased the threshold at which VAT registration becomes compulsory from Tshs 20.0 million (US $ 20,000) to Tshs 40.0 million (US $ 40,000). The purpose was to remove small businesses from VAT threshold taking into account compliance and administrative costs involved in collection of this tax. Nevertheless, there is more room for the Government and the private sector to dialogue on the VAT structure rates, which stands at 20%.
The Government of Tanzania in collaboration with Private sectors and four development partners namely SIDA, DFID, DANIDA and Royal Netherlands Embassy have established the BEST (Business Environment Strengthening Tanzania) programme an initiative to improve the business environment which was launched in December 2003 for the Private sector by improving administrative, legal and regulatory policies. It sort to achieve its objectives via improving commercial dispute resolution, strengthening the Tanzania Investment Centre, achieving better regulation, changing the culture of Government and empowering private sector advocacy. Other initiatives include the Tax modernization program and an on-going second generation financial sector reform program. Efforts to simplify business entry operation and exit are also underway and a one stop non pre-approved business registration was scheduled to come on line in 2011.
Reforms were made as well as difficulties encountered and agents of reforms were also initiated. In 2008, Tanzania made starting a business easier by decentralizing business registration, creating a business activity registration system, business regulation centres in all the local authorities and the Company seal became optional. In 2012, it made trading across borders faster by implementing the pre-arrival declaration (PAD) system and electronic submission of customs declaration and in 2013, it made starting a business easier by eliminating the requirement for inspections by health, town and land officers as a prerequisite for a business license and importing more difficult by introducing a requirement to obtain a certificate of conformity with technical regulations before the imported goods are shipped.
Agents of reforms include the Tanzania National Business Council (TNBC) established in Africa in collaboration with the World Bank for consultative mechanism between the public and private sector with the objective of promoting a conducive investment for the private sector growth; Business Associations like TCT- Tanzania Confederation of Tourism, TBA- Tanzania Bankers Association, CTI- Confederation of Tanzania Industries, TCCIA- Tanzania Chamber of Commerce, Industry and Agriculture, TCM- Tanzania Chamber of Mines which have been sectorial in nature and the Tanzania Investment Centre (TIC) established as a “one stop shop” for investment advice and facilitation and is the primary agency of Government to co-ordinate, encourage, promote and facilitate investment and advise the Government on investment policy related matters. Also there are incentives for Companies in Tanzania under the Tanzania Investment Centre (TIC), Export Processing Zones (EPZ’S) and Special Economic Zones (SEZ’S).
The business set up in Tanzania is conservative and hierarchical and to ensure successful cross cultural management it is important to remember that strictly defined roles exist. Older people and those in senior positions should be deferred to and treated with the utmost respect. The business environment has seen major changes since the Government moved away from socialism towards an Open market driven economy. Many former States owned (parastatal) enterprises have been privatised.
Tanzania offers a wealth of market opportunities for Foreign Companies with a population of over 34.5 million consumers, a rapid growing economy and high levels of domestic investment. Spending the Tanzanian market will remain an important target destination for local and foreign products and services.
Example of companies in Tanzania who are into various businesses. Godfrey Mosha, founder of Principal Company, a Tanzanian-based business that imports and sells baking ingredients to industries in many parts of the country. Having been in operation since 1995, the company has experienced some of the challenges and opportunities of operating in Tanzania. Challenges include power crisis, poor infrastructure, bureaucracy, difficulties In securing financial support, high inflation rate, lack of raw materials and opportunities include Government support, Political stability, market potential, agricultural land , plenty of untapped natural resources, availability of manpower, low cost of importation and room for further expansion. According to him doing business in Tanzania can be very challenging but at the same time accommodative and opportunities do exist in Tanzania that encourage new investments and motivate new and upcoming entrepreneurs.
For Roots Marketing Communications which started small and it is now one of the Tanzania’s top ad agencies. The owner Ulric Chateris a Creative Director is heavily reliant on his Tanzanian born staff to come up with marketing concepts that will work in the market. The major challenge He says is protecting their market share from goods- identical products that enter the country through unofficial channels and the only way something is going to work in Tanzania specifically in communications is to have an owner-manager’s culture where you have someone on ground who is responsible for the product and who has a share in the business.
It is also seen that Tanzanian people love Pizza. Deenesh Ghosh is the finance and administration manager for the Company owning the Debonairs as well as quick service hamburger restaurant steers in the East African Country. He has learnt a lot despite the challenges of language which was a big one for him and tax and license procedures are totally different. He says that around 70 suppliers also survive because of the business and the Company employs close to 100 workers most of whom are locals.
Other opportunity is for international investors looking for farmland in Tanzania should also consider Joint Ventures with the Tanzania Prisons Service (TPS) which owns large area of unexploited land.
In other to succeed in business in Tanzania, it is imperative that you network with other business people. Tanzanians will spend a fair amount of time on the getting to know you part of relationship building since friendship and mutual trust are highly valued in their society.
Patience hence will be a necessary cross cultural attribute.
- doing business guide Tanzania January 2008
- best-ac.antenna.nl/business-environment/starting a business the process procedures compared to the rest of Sub-Saharan Africa and high income Countries.
- Country-commercial guide-2011
- The political economy of the investment climate in Tanzania
- www.howwemadeitinafrica.com/tanzania-a-land-of-obstacles and untapped-opportunities-for-business/21565/
- www.howwemadeitinafrica.com/from-small-startup-to-one-of Tanzania’s top-ad-agencies/13360/