Tanzania's economy continues on a robust growth trajectory. The IMF projects real GDP growth of 6.1% in 2025 and 5.9% in 2026, supported by strong performances in tourism, agriculture, and natural resources. The 2025/26 national budget of TZS 56.49 trillion underscores ambitious public expenditure — with the proposed 2026/27 budget of TZS 61.9 trillion representing a 9.6% expansion, within which SOE efficiency improvements are expected to reduce subsidy burdens significantly.

Tanzania's 253 SOEs (35 commercial entities) contributed a record TZS 1.028 trillion in dividends and contributions to the government in FY2024/25 — a 68% increase from prior years — primarily driven by profit-generating entities in banking and ports. However, utility SOEs in energy, water and telecommunications continue to be net fiscal drains.

State-owned enterprises (SOEs) are enterprises controlled by the State — sometimes branded as public enterprises or parastatals. In most third-world countries, they are principally charged with delivery of electricity, water, transportation, telecommunications, and healthcare. Globally, the OECD estimates that SOEs represent more than 20% of total investments and 5% of total employment in most jurisdictions.

The rise of New Public Management (NPM) in the 1980s and 1990s proposed that the public sector adopt private-sector management practices — performance-based incentives, customer orientation, and accountability for results. One key NPM-inspired measure is corporatisation: restructuring public enterprises to operate as independent commercial entities, with the state retaining ownership, while introducing hard budget constraints and profit-oriented management — without full privatisation.

Tanzania's SOEs have been central to national economic development since independence, a direct consequence of the 1967 Arusha Declaration's socialist policies. By the 1980s, structural reforms revealed deep-rooted inefficiencies, with many SOEs depending on government subsidies. In 2022/23, a cohort of Tanzania SOEs posted combined losses of nearly TZS 400 billion due to operational inefficiencies and governance weaknesses.

Global examples provide compelling evidence for the efficacy of corporatisation. In China, SOEs underwent corporatisation in the 1990s–2000s, resulting in significantly raised profitability and productivity through governance reforms alone — without transferring ownership to the private sector. In Singapore and New Zealand, public utilities were transformed into efficient, financially sustainable entities through independent boards and performance agreements.

These examples show that the key success factors are: legal separation from government, professional management, independent boards, and performance-based accountability — not necessarily ownership transfer.

According to IMF (2025), SOEs in Tanzania and other developing countries have generally maintained a negative trend of financial results despite their vital economic role. This trend is characterised by repeated losses, high debt levels, and reliance on government rescues. The CAG (2025) highlights losses at entities such as Air Tanzania Company Limited (TZS 99.8 billion in subsidies) and TTCL (TZS 27.7 billion loss) as significant fiscal risks.

Traditional bureaucratic management in SOEs focuses on political objectives at the expense of efficiency, producing agency problems where managers face little incentive to improve profitability. Although partial reforms have been undertaken since 2020, service-providing SOEs remain in a deep crisis of inefficiency due to insufficient implementation of sound corporate governance practices. The budget deficit is targeted to narrow to 3.0% of GDP in 2025/26 from 3.4% in 2024/25 — but this requires material improvements in SOE financial performance.

General Objective: To examine how the adoption of corporate governance models can transform state-owned enterprises in Tanzania towards greater financial sustainability.

Three strategically important Tanzania SOEs were selected because they represent critical infrastructure services, have rich reform histories, and allow examination of different governance arrangements — fully public, partially privatised, and failed PPP — while remaining under ultimate government control.

This research contributes evidence-based insights to the debate on public sector reform in the developing world, providing actionable recommendations for Tanzania's policymakers. If implemented successfully, corporatisation reforms could increase SOE revenue generation — moving from the current TZS 1 trillion dividend baseline toward the government's target of TZS 1.7–2 trillion annually by 2025/26, and a projected TZS 2 trillion+ by 2035.

The study is aligned with Tanzania's National Five-Year Development Plan (FYDP III, 2021/22–2025/26) and the longer-term Dira 2050 vision — which targets a US$1 trillion economy by 2050 and explicitly calls for SOEs to adopt transparent, merit-based governance frameworks as a prerequisite for economic transformation.

The research focuses on secondary data from 2015 to 2026 covering energy, transport, and telecommunications SOEs. Key limitations include reliance on publicly available financial reports, potential data gaps in less transparent entities, and the inherent challenges of primary data collection in politically sensitive reform areas.