Tanzania stands at a crossroads, poised to become East Africa’s trade powerhouse but held back by systemic barriers that stifle small and medium enterprises (SMEs), which drive 35% of GDP and employ 60% of the workforce (ILO, 2020). High taxes, fragile startup ecosystems, and outdated infrastructure limit Tanzania’s competitiveness within the East African Community (EAC) and African Continental Free Trade Area (AfCFTA). A new study by the Tanzania Investment and Consultant Group Ltd. (TICGL) offers a bold vision to transform this landscape through targeted reforms, drawing on regional models like Rwanda and Nigeria.

The Challenges: Taxation, Startups, and Infrastructure

SMEs, comprising over 90% of Tanzania’s businesses, face a 30% corporate tax and 25% import duties, far above Rwanda’s 15% SME tax rate, draining profits and curbing growth (World Bank, 2020). Registering a business takes 26 days—six times longer than Rwanda’s 4 days—while tax compliance consumes 195 hours annually. These burdens contribute to Tanzania’s 141st global Ease of Doing Business ranking, lagging behind Kenya (56th) and Rwanda (38th).

Startups fare worse, with 60-70% failing within three years due to limited credit access (only 15% of SMEs secure formal loans) and weak support systems (Tanzania National Bureau of Statistics, 2020). Historical policies like Ujamaa (1967-1980s) stifled private enterprise, leaving a legacy of unclear partnership roles and low entrepreneurial skills.

Infrastructure gaps further erode competitiveness. Dar es Salaam port, handling 95% of Tanzania’s trade, suffers 10–14-day dwell times, compared to Mombasa’s 7-10 days, inflating logistics costs to 16-20% of export value. The Tazara Railway operates at 20% capacity (0.5 million tons annually vs. 2 million tons potential), hampering trade with landlocked EAC countries (EAC, 2023).

A Blueprint for Transformation

TICGL proposes three actionable strategies to unlock Tanzania’s potential:

1. Tax and Regulatory Reforms: Reducing corporate tax to 20% and import duties to 15% could boost SME profits by 5-7%, saving $2,000-5,000 annually per business and creating 20,000-30,000 jobs across 10,000 SMEs. Streamlining registration to 7 days, inspired by Rwanda’s one-stop shops, could improve Tanzania’s Ease of Doing Business rank by 10-20 positions.
2. Entrepreneurship Hubs: Investing $8 million to establish incubators in Dar es Salaam ($5M) and Arusha ($3M), plus $20 million in seed funding, would support 400 startups annually with $20,000-$50,000 grants. Modeled on Nigeria’s $2 billion Lagos tech hub, these hubs could cut failure rates to 40-50%, create 14,000 jobs, and add $2 billion to GDP by 2030.
3. Infrastructure Upgrades: A $1.05 billion investment—$500M for Dar es Salaam port, $300M for Tazara Railway, $200M for roads, and $50M for digital logistics—would reduce port dwell times to 5-7 days and logistics costs to 10-12%. This could boost EAC trade by $1-1.5 billion, create 35,000 jobs, and add $0.5-1 billion to GDP annually, mirroring Kenya’s Standard Gauge Railway success.

The Path Forward

TICGL’s roadmap, informed by Rwanda’s tax reforms, Nigeria’s tech ecosystem, and Kenya’s infrastructure gains, calls for partnerships with the Tanzania Revenue Authority, private banks like CRDB, and EAC bodies. By 2026, tax reforms and hub pilots should launch, with infrastructure upgrades phased through 2030. These efforts could add $2.5-4 billion to GDP annually, cementing Tanzania’s role as an EAC trade leader.

Tanzania’s strategic location, with Dar es Salaam as a gateway for landlocked neighbors, offers immense potential. By addressing these challenges, Tanzania can transform its business landscape, empower SMEs, and build a resilient economy for the future.

Introduction

Tanzania is accelerating its economic transformation by leveraging Public-Private Partnerships (PPPs) as a key strategy for sustainable development. With a total development budget of TZS 54.575 trillion for 2021/22 to 2024/25, the government is focusing on infrastructure, energy, and social service projects. Notably, TZS 33.794 trillion of this budget is sourced domestically, showcasing Tanzania’s commitment to reducing reliance on external funding.

The PPP cost-sharing model, where the private sector contributes 80% while the government covers 20%, plays a pivotal role in financing major projects such as the Standard Gauge Railway (SGR), Julius Nyerere Hydropower Project, and rural electrification initiatives. These projects aim to create 10,000 jobs and add TZS 1 trillion annually to the economy, reinforcing Tanzania’s position as a regional economic hub.

Tanzania’s Development Budget and Key PPP Projects

The table below outlines the development budget allocations across fiscal years:

1. Infrastructure Projects

• Standard Gauge Railway (SGR): Enhancing regional trade and connectivity.
• Kigongo-Busisi Bridge & Road Networks: Reducing transport costs and boosting trade in the Lake Zone.
• Msalato International Airport: Supporting tourism and international business.

2. Energy Sector

• Julius Nyerere Hydropower Project (2,115 MW): A game-changer in energy stability.
• Rural Electrification Program: Targeting universal energy access.

3. Social Services

• Education Investments: Improving school infrastructure and student loans.
• Healthcare & Water Projects: Strengthening public health and clean water access.

4. Economic Development

• Agricultural Modernization: Expansion of irrigation and agribusiness.
• Dodoma City Development: Strengthening government operations and investment climate.

Economic Impact of PPPs

1. Job Creation:
   • PPP projects are projected to create 10,000 jobs, with 8,000 in the private sector and 2,000 in government-related roles.
2. Economic Growth:
   • Infrastructure development is expected to boost Tanzania’s economic output by TZS 1 trillion annually.
   • Trade efficiency could improve by 5%, enhancing Tanzania’s regional competitiveness.
3. Financial Efficiency:
   • Government capital savings of 80%, reducing reliance on state funding.
   • Private sector absorbs 80% of risks, ensuring cost-effective project implementation.
   • The Julius Nyerere Hydropower Project alone could generate TZS 31.725 billion annually, with a 15% efficiency increase expected from private-sector involvement.

Regional PPP Comparisons

Tanzania’s PPP model aligns with successful strategies in other African nations:

Success Factors in PPP Implementation

1. Clear Regulatory Framework:
   • Strengthening PPP laws and procurement processes ensures efficiency and investor confidence.
2. Risk Allocation:
   • Construction risk is managed by the private sector.
   • Political risk is absorbed by the government to maintain stability.
   • Market risk is shared to balance incentives and mitigate uncertainties.
3. Financial Structuring:
   • A 70:30 debt-to-equity ratio is common in PPPs.
   • Government-backed guarantees reduce investor risk.
   • Revenue-sharing mechanisms ensure sustainable returns for both public and private players.

Recommendations for Tanzania’s PPP Strategy

1. Optimize Cost-Sharing Models:
   • Maintain a 70-30 private-public cost-sharing structure to align with successful regional practices.
   • Focus on revenue-generating sectors like toll roads and renewable energy to enhance sustainability.
2. Prioritize Strategic Sectors:
   • Transportation: To boost trade efficiency.
   • Renewable Energy: To ensure sustainable power supply.
   • Technology & Digital Economy: To foster innovation and job creation.
   • Water & Sanitation: To enhance public health.
3. Strengthen Risk Mitigation Mechanisms:
   • Establish a dedicated PPP unit for project monitoring.
   • Standardize contracts and legal frameworks to attract investors.
   • Improve public awareness to gain community support for PPP projects.

Conclusion

Public-Private Partnerships are indispensable in Tanzania’s journey toward achieving Vision 2025. With infrastructure, energy, and social services at the core of PPP investments, Tanzania is reducing government financial burdens, improving public service delivery, and stimulating long-term economic growth.

By expanding PPPs into healthcare, education, and emerging industries, Tanzania can maximize economic resilience, enhance investor confidence, and create sustainable development pathways. With an annual economic output increase of TZS 1 trillion, Tanzania’s PPP-driven model positions the country as a leading economic hub in East Africa.