Tanzania’s business environment has changed dramatically over the past 15 years. Ahmed Abdi, country manager of DHL Express in Tanzania, has first-hand experience of this transformation. Kenyan-born Ahmed worked for DHL in Tanzania for three years in the mid-1990s as a finance manager, and has recently returned to take up his current position.
“There is a huge transformation that has taken place. Even though Tanzania currently has many challenges, the situation was significantly worse in the ’90s. We had electricity outages four days a week. The roads were very poor. In Dar es Salaam there was only one decent hotel that visitors and business executives could stay in.
“These days the economy is opening up. Infrastructure is improving. Mobile phone penetration is growing. If Tanzania continues on this path the country should be in a very good position in the next decade,” he explains.
Ahmed says Tanzania is fast catching up with neighbouring Kenya which currently has a bigger economy. “Over the last decade Tanzania has been growing consistently. The business tempo is picking up, so it is rapidly modernising, but compared to Kenya we still have some way to go.”
The promise of natural gas
There is currently a lot of excitement around the discovery of huge gas fields off the coast of Tanzania. BG Group and Ophir Energy have found major gas deposits, as have Statoil and its partner ExxonMobil. Tanzania has the potential to become a significant exporter of liquefied natural gas (LNG).
“Recent discoveries indicate that Tanzania has got trillions of cubic feet of gas reserves. There is a lot of focus and a lot of activity going on there. Although these new gas fields are still in development stages, there is a lot of optimism around them,” says Ahmed.
There are, however, many risks that could put a damper on Tanzania’s gas prospects. The country needs to build a LNG plant to convert the natural gas into liquid form for ease of transport to export markets. That will require significant investment.
According to Eliot Pence, an advisor at McLarty Associates, Tanzania will also face strong competition from gas fields currently being developed in other regions, such as those off the coast of Australia. “I think in general the narrative about East Africa’s gas finds has tended to underestimate the influence parallel projects will have on demand for East African gas.
“If you assume that the primary markets for East Africa’s gas will be India, Japan, South Korea and maybe China, each country has multiple potential other suppliers, or are themselves potential suppliers. For example, if Russia gets around to building an undersea pipeline to Japan, that knocks out almost half the global demand,” Pence explained.
Doing business in Tanzania
Ahmed says despite the friendly and welcoming perception that foreigners have of Tanzania, doing business in the country can be challenging. He says businesspeople often have to contend with bureaucracy and red tape.
The pace of business in Tanzania can also be annoyingly slow. “You need to be very patient. This can be very frustrating for a company like DHL Express where our mantra is speed.”
He says it can also be a challenge to find highly skilled employees, such as engineers, in Tanzania. It is for this reason that there are currently many expats from Kenya, South Africa and Europe working in the country.
Ahmed advises foreign companies to seek out local business partners when establishing operations in Tanzania. “It will be helpful to have a local partner with local expertise and knowledge to effectively manage the company’s affairs on a day-to-day basis.”
In addition to the commercial hub Dar es Salaam, Ahmed says Tanzania has a number of other cities that are important from a business perspective. Arusha, situated in the north of the country, is close to many of Tanzania’s safari destinations and also houses the headquarters of the East African Community. The port city of Mwanza, located on the shores of Lake Victoria, is a trading hub and also close to many of Tanzania’s mines. Ahmed says companies should also consider establishing a presence on the island of Zanzibar, a popular tourist destination.
Ahmed says he enjoys working in Tanzania. “Dar es Salaam is a nice place to work. Although it is a bit humid, the surrounding nature is great: there are a lot of beaches and you can travel through the countryside. Safety is also not a major concern.”