Addressed Infrastructure, Regulatory Efficiency, and Public Service Challenges

The Business Ready 2024 report provides an assessment of Tanzania's business environment based on three key pillars: Regulatory Framework, Public Services, and Operational Efficiency

1. Regulatory Framework: Tanzania scored 65.00 points, placing it in the third quintile, meaning its regulatory environment is moderately favorable. This includes regulations that govern business entry, labor, taxation, and financial services, though there is room for improvement in areas like market competition and insolvency.

What it Means: The Regulatory Framework pillar focuses on the laws, rules, and regulations that businesses must follow in Tanzania. A score of 65.00 indicates that while the regulatory environment is moderately favorable, it still has areas that need improvement.

• Strengths: Tanzania has made progress in areas like business entry, taxation, and labor regulations. These areas provide businesses with a stable set of rules for operation.
• Areas for Improvement: The score suggests that Tanzania could enhance regulations governing market competition and business insolvency, where businesses might face difficulties related to anticompetitive behavior or delays in resolving insolvency matters.

What is Measured: This pillar assesses the rules, laws, and regulations that businesses must follow as they enter, operate, and exit the market. It focuses on whether these regulations are clear, fair, and supportive of entrepreneurial activity.

Key Areas Measured:

• Business Entry: The ease with which businesses can register and start operating.
  • Indicator: Time, cost, and complexity involved in starting a business.
• Labor: The flexibility and protections offered by labor laws, including hiring, firing, and worker protections.
  • Indicator: Availability of paid leave, overtime regulations, and worker dismissal processes.
• Financial Services: Regulations governing financial transactions, credit access, and investment opportunities.
  • Indicator: Laws governing credit access, ease of securing loans, and the stability of financial services.
• International Trade: The regulatory environment that affects import/export activities and cross-border transactions.
  • Indicator: Time and costs involved in clearing customs, and regulations around cross-border electronic payments and contracts.
• Taxation: The rules governing business tax obligations.
  • Indicator: Clarity of tax laws, time to file, and availability of tax services.

What It Tells About Tanzania:

• Score: 65.00 points
  • Tanzania performs moderately well here, showing that the country has a decent legal framework to regulate business activities, but there is room for improvement in areas like market competition and business insolvency.
    • Example: While it’s fairly easy to start a business in Tanzania, there may still be inefficiencies in accessing financial services or dealing with labor regulations that slow down business growth.

2. Public Services: Tanzania's score for public services is 51.56 points, placing it in the fourth quintile. This reflects challenges in public service provision that support businesses, including utility services and government institutions related to business regulation.

What it Means: This pillar evaluates the quality of government-provided services that help businesses comply with regulations, such as utility services (electricity, water), online tax services, and other government support structures.

• Challenges: Tanzania’s low score in this area reflects inefficiencies or gaps in public services. For example, businesses may struggle with frequent power outages or delays in obtaining permits, which can slow down operations.
  • Examples: The time to obtain a construction permit could be long, and delays in utility services (like electricity) could further hinder business activities. In some economies, businesses face multiple power outages each month, and this might be contributing to Tanzania's lower score in public services.

What is Measured: This pillar looks at the quality of public services provided by the government that are necessary for businesses to function, including utility services, government transparency, and the infrastructure that supports business compliance with regulations.

Key Areas Measured:

• Utility Services: Access to essential services such as electricity, water, and internet.
  • Indicator: Frequency and duration of power outages, reliability of water services, and internet availability.
• Taxation: Availability and accessibility of online tax services for businesses.
  • Indicator: Whether businesses can file taxes electronically, access support via online tools, and comply with tax obligations efficiently.
• International Trade: Efficiency of customs and border management systems.
  • Indicator: Whether coordinated border management systems are in place and how easily businesses can trade across borders.
• Financial Services: Availability of credit registries and bureaus that collect business-related data.
  • Indicator: How well businesses can access credit and how transparently financial data is managed.

What It Tells About Tanzania:

• Score: 51.56 points
  • Tanzania faces challenges in the quality of its public services, particularly in providing reliable utility services and modernized government support.
    • Example: Frequent power outages or delays in obtaining construction permits could hinder businesses, while limited online tax services might add to compliance costs.
  • Utility Services: Businesses in Tanzania likely deal with infrastructure challenges, such as power reliability, which impacts operational efficiency.

3. Operational Efficiency: Tanzania performed better in operational efficiency with a score of 62.15 points, placing it in the third quintile. This category measures how efficiently businesses can comply with regulations and access public services.

What it Means: The Operational Efficiency pillar measures how easy it is for businesses to comply with regulations and access services. Tanzania’s score in this pillar suggests that businesses face some challenges but generally have moderate success in navigating the regulatory landscape and accessing the services they need.

• Strengths: Tanzania’s operational efficiency score is stronger than its public services score. This suggests that, while services may be lacking, businesses are still able to function reasonably well. Examples of operational challenges might include delays in filing and paying taxes or resolving commercial disputes, which could affect day-to-day business activities.
• Areas for Improvement: The time to settle a commercial dispute in Tanzania could be a challenge. In some economies, resolving disputes can take up to five years, while top-performing economies resolve them in a fraction of the time. Tanzania likely faces inefficiencies in this regard, impacting overall business operations.

What is Measured: This pillar evaluates how easy it is for businesses to comply with the regulatory framework and access public services. It measures the practical implementation of the rules and services described under the first two pillars.

Key Areas Measured:

• Business Entry: Time and effort required to navigate business registration processes.
  • Indicator: The time, number of procedures, and costs involved in registering a business.
• Dispute Resolution: Efficiency of the legal system in resolving commercial disputes.
  • Indicator: Time and cost to resolve business-related disputes in court.
• Labor: How easily businesses can comply with labor regulations, including wage reporting and health and safety compliance.
  • Indicator: Time to process payroll and ensure compliance with labor laws.
• Financial Services: Ease with which businesses can secure loans and financial products.
  • Indicator: Time to secure a loan or access other financial services.
• International Trade: Time and cost to comply with trade regulations, including import/export processes.
  • Indicator: Time and number of documents needed to import/export goods.

What It Tells About Tanzania:

• Score: 62.15 points
  • Tanzania’s operational efficiency score indicates that while businesses face some challenges, they are still able to operate within the regulatory framework.
  • Example: The time required to resolve commercial disputes may be longer than average, but businesses can generally navigate labor laws and financial services without excessive delays. The average number of power outages might also be an issue, but businesses find ways to work around these challenges.

Tanzania's scores in the Business Ready 2024 report provide valuable insights into the country's economic development by highlighting strengths and challenges in its business environment. Here's a breakdown of what these figures reveal about Tanzania's economic development:

1. Regulatory Framework (Score: 65.00)

• Moderately Supportive Regulations: With a score of 65.00, Tanzania has a moderately favorable regulatory environment for businesses. This indicates that the country has established a basic legal framework for business operations, but there are still obstacles that prevent optimal economic performance.
  • Impact on Economic Development: The regulatory framework is crucial for promoting investment and entrepreneurship. Tanzania’s score shows that businesses can operate under fairly stable regulations, but inefficiencies, especially in market competition and insolvency laws, could slow business expansion and investment.
  • Challenges: The legal infrastructure needs to improve to make the economy more competitive and resilient, particularly in handling market disputes and allowing businesses to recover from financial distress. A stronger regulatory environment could lead to increased investor confidence, which is key to fostering long-term economic growth.

2. Public Services (Score: 51.56)

• Weak Infrastructure and Public Services: Tanzania’s score of 51.56 in the Public Services pillar reflects significant challenges, particularly in the quality and reliability of government services and infrastructure like electricity, water, and internet.
  • Impact on Economic Development: Weak public services hinder business productivity. Frequent power outages, delays in obtaining construction permits, and limited access to digital public services all contribute to higher operational costs for businesses, which, in turn, reduces overall economic efficiency and growth.
  • Challenges: Tanzania’s economic development is constrained by the inefficiency of its public services, which affects business sustainability and the ease of doing business. Improving public service delivery, especially infrastructure and digital services, is essential for boosting productivity and attracting both domestic and foreign investment.
  • Potential for Growth: Investments in infrastructure, especially utilities, could unlock greater productivity in sectors like manufacturing and agriculture, leading to job creation and improved economic growth.

3. Operational Efficiency (Score: 62.15)

• Moderate Operational Effectiveness: A score of 62.15 suggests that while businesses in Tanzania can function within the regulatory framework, they face delays and inefficiencies, such as resolving commercial disputes and securing public services like permits.
  • Impact on Economic Development: Delays in resolving disputes and inefficiencies in business procedures directly affect the cost of doing business. While Tanzania has made some progress in enabling business operations, the remaining inefficiencies reduce business competitiveness and slow down economic expansion.
  • Challenges: The slow pace of dispute resolution and challenges in accessing public services mean businesses spend more time and resources complying with regulations, which could otherwise be used to expand their operations or innovate. For Tanzania's economy to grow faster, it needs to improve judicial efficiency, simplify regulatory processes, and make it easier for businesses to access financing and other services.
  • Potential for Growth: Enhanced operational efficiency would attract more businesses and investors, facilitating economic diversification and boosting sectors like trade, technology, and financial services.

Overall Economic Development Insights:

• Moderate Progress but Room for Improvement: Tanzania’s scores show that while there has been progress in developing a business-friendly environment, significant challenges remain. Improvements in public services and operational efficiency are crucial to creating an environment where businesses can thrive, which would in turn drive economic growth.
• Infrastructure and Service Delivery are Key Bottlenecks: Weaknesses in public services, particularly infrastructure like electricity and water, are limiting business productivity and deterring investment. Addressing these challenges would have a substantial positive impact on economic development, particularly in industrial and agricultural sectors, which rely heavily on reliable infrastructure.
• Regulatory and Judicial Reforms: The regulatory framework provides a foundation for economic growth, but further reforms are needed, particularly in market competition and insolvency laws. Accelerating dispute resolution and making regulations clearer and more predictable will foster a more dynamic and competitive private sector, driving economic expansion.

Strategic Recommendations for Economic Development:

1. Invest in Infrastructure: Improving utility services, especially reliable electricity and internet access, will lower operational costs and improve productivity across sectors, boosting overall economic growth.
2. Strengthen the Legal and Regulatory Environment: Enhancing regulations related to market competition, insolvency, and business disputes will create a more favorable environment for entrepreneurship and innovation, encouraging more domestic and foreign investment.
3. Improve Public Service Delivery: Streamlining processes such as tax filing, permit issuance, and customs procedures through digitalization would significantly reduce the cost of doing business and improve Tanzania’s global competitiveness.