Tanzania, with a population of around 45 million, has sustained high economic growth over the past decade, according to the World Bank. Structural reforms, increasing exports, and financial deepening, has led to a GDP growth of between 5% and 7% in recent years. However, doing business in Tanzania is not always straightforward. The country has been ranked in 134th place out of 185 countries worldwide in the 2013 Doing Business report recently released by the IFC and World Bank.
Godfrey Mosha is the 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. Here is what Mosha has identified as some of the pros and cons of doing business in Tanzania.
“Doing business in Tanzania can be very challenging but at the same time accommodative,” said Mosha. Here are some of the challenges that one could encounter:
- Tanzania depends on hydro electricity as its main source of power hence affecting manufacturing businesses whenever there is a failure or breakdown.
- Leads to high costs of transportation of raw materials and finished goods.
- Businesses lose revenue and waste operating time on the road due to massive traffic jams caused by poor roads hence limiting their ability to meet consumers’ demands on time.
- There is too much documentation which leads to the delay in obtaining various permits.
Difficulties in securing financial support
- Many entrepreneurs fail to secure sufficient capital mainly due to lack of substantial collateral hence posing a threat to new and upcoming ventures and also hampering their investment commencement.
- Sometimes businessmen fail to get enough capital due to banks issuing limited amounts as loan for investments.
Lack of raw materials
- Despite Tanzania owning a number of resources, raw materials are still inadequate thus failing to meet the demand of businesses for production purposes.
High inflation rate
- The fluctuation of the inflation rate affects the Tanzanian shilling and the purchasing power of the consumers.
“Besides facing challenges, opportunities do exist in Tanzania that encourage new investments and motivate new and upcoming entrepreneurs,” said Mosha. Some of the opportunities found in Tanzania include:
- With Tanzania being amongst the developing countries, the market is full of opportunities for investments ranging from agribusiness, tourism, manufacturing to importation.
- The Tanzanian government provides various investment incentives to local and foreign investors through the Tanzania Investment Centre.
- Unlike other neighbouring countries, Tanzania is very peaceful and it also offers a very conducive environment for businesses to operate and prosper in the near future.
- Tanzania has plenty of uncultivated arable land for agricultural investment.
Plenty of untapped natural resources
- Tanzania is rich in natural resources such as gas, minerals and uranium that are yet to be fully exploited.
- Tanzania is gifted with a lot of tourist attractions such as mount Kilimanjaro, Ngorongoro Crater, Serengeti National Park and many others, but does not have enough hotels to accommodate tourists creating room for hotel industry investment.
Availability of man power
- The labour market in Tanzania is readily available with skilled and semi-skilled workers who are ready and available to work in various industries like manufacturing, agribusiness, mining and many others.
Low cost of importation
- Entrepreneurs enjoy the benefit of low importation costs since Tanzania is a hub for landlocked countries through its Dar es Salaam, Tanga and Mtwara ports.
Room for further expansion