Driving Economic Growth

Tanzania's tourism industry is experiencing a resurgence, with revenues seeing a significant boost, soaring from $1.95 billion in July 2022 to $2.99 billion in July 2023. The number of tourists visiting the country surged by 37.2%, reaching a historic high of 1,658,043 visitors.

The primary sources of tourists visiting Tanzania for leisure and holidays continue to be Europe and the United States. This revival in Tanzania's tourism industry is indeed remarkable, marking a recovery nearly four years after its revenues plummeted due to the COVID-19 pandemic.

Recent data from the Bank of Tanzania reveals the impressive rebound of the tourism sector, contributing $2.99 billion to foreign exchange earnings in July 2023, compared to $1.95 billion in July 2022. According to the Bank of Tanzania, this signifies a 33% increase in service receipts, amounting to $5.49 billion in July 2023, up from $4.12 billion in July 2022.

The bank also noted that this resurgence in tourism, along with increased earnings from gold, has played a pivotal role in propelling Tanzania's service earnings to exceed $5 billion for the first time in its history. In 2019, Tanzania's tourism sector generated approximately $2.52 billion, but by December 2020, its earnings had significantly dropped to just $1 billion. Gold emerged as the primary foreign exchange earner for the country during this period, generating $2.958 billion in December 2020.

The recovery in the tourism sector is highlighted by a remarkable 37.2% increase in foreign arrivals, totaling 1,658,043 visitors for the year, reaching an all-time high. The previous record for tourism earnings in Tanzania was $2.5 billion, achieved in 2019 when the country welcomed 1,527,230 tourists. According to the National Bureau of Statistics (NBS), Europe and the United States continue to be the main sources of tourists visiting Tanzania for leisure and holidays.

The government of Tanzania can work to sustain and further boost its tourism industry, attracting more visitors and generating increased revenues while ensuring the long-term sustainability of this vital sector, Hence the government should consider implementing several strategies and initiatives:

1. Infrastructure Development: Invest in infrastructure development, including improving roads, airports, and public transportation systems. This will make it easier for tourists to access various parts of the country, including remote and less-visited areas.
2. Promotion and Marketing: Allocate resources to robustly promote Tanzania as a tourist destination both domestically and internationally. Marketing campaigns, participation in international travel fairs, and partnerships with travel agencies can help increase awareness and attract more tourists.
3. Sustainable Tourism Practices: Emphasize sustainable tourism practices to preserve the natural beauty and cultural heritage of Tanzania. Encourage eco-friendly accommodations, wildlife conservation efforts, and responsible tourism activities to attract conscientious travelers.
4. Diversification of Offerings: Diversify the tourism offerings beyond wildlife safaris. Develop cultural tourism, adventure tourism, beach destinations, and niche markets like birdwatching, hiking, and culinary experiences to cater to a wider range of travelers.
5. Streamlined Visa Processes: Simplify visa application and entry procedures to make it easier for tourists to visit Tanzania. This can include visa-on-arrival options, e-visas, or visa waivers for certain countries.
6. Safety and Security: Maintain a safe and secure environment for tourists by investing in law enforcement and safety measures. A secure destination is more likely to attract travelers.
7. Training and Skills Development: Invest in training and capacity-building programs for the tourism workforce. Well-trained and knowledgeable guides, hospitality staff, and service providers enhance the overall visitor experience.
8. Quality Accommodations: Encourage the development of high-quality accommodations that cater to various budget levels. This includes upscale resorts, mid-range hotels, and budget-friendly options.
9. Partnerships and Collaboration: Collaborate with international organizations, travel agencies, airlines, and neighboring countries to create packages and itineraries that encourage longer stays and regional tourism.
10. Regulatory Environment: Create a favorable regulatory environment for tourism investment, ensuring that regulations are clear, transparent, and conducive to business growth in the sector.
11. Community Involvement: Involve local communities in the tourism industry by promoting community-based tourism initiatives. This can help distribute the economic benefits of tourism more widely.
12. Research and Data: Continuously gather data and conduct market research to understand changing tourist preferences and emerging markets. Use this information to adapt strategies accordingly.
13. Crisis Management: Develop a comprehensive crisis management plan to address any future challenges such as pandemics, natural disasters, or security concerns, with a focus on minimizing disruptions to tourism.

A Beacon in East Africa's Investment Horizon

The economic landscape of East Africa is marked by Kenya's dominant position, which accounts for 69% of transactions and a staggering 74% of deal values. However, Uganda, Tanzania, Ethiopia, and Rwanda also wield significant influence in fostering the region's economic growth.

This research delves into East Africa's vibrant economic milieu, exploring the interplay of various factors that have catapulted specific nations to the forefront of the region's economic expansion.

Drawing on data from the East Africa Venture Capital Association (EAVCA) report, we analyze how private capital has played a pivotal role in propelling pioneering enterprises, reshaping industries, and forging new trajectories for East Africa's future.

Private Capital Distribution: According to the EAVCA report, Kenya traditionally maintains its supremacy in the realm of private capital, accounting for 69% of all transactions. In comparison, Uganda, Tanzania, and Ethiopia each constitute 6%, while Rwanda commands 5%. The remainder of deals involves transactions spanning multiple countries. Kenya's dominance is equally pronounced in deal values, representing a staggering 74% of the total disclosed deal value. Uganda and Ethiopia follow at 8% and 7%, respectively, while Rwanda garners 5%. The rest of the capital flows stem from multi-country transactions. In total, there have been 427 investments valued at approximately USD 7.3 billion, accompanied by 51 exits with a combined value of USD 1.3 billion.

1. Kenya: The Economic Powerhouse Kenya stands as the economic epicenter of the region, characterized by a diverse economy that exhibits lower susceptibility to commodity risks compared to its African counterparts. Boasting a substantial market, a robust commercial legal framework, and a skilled workforce, Kenya magnetizes private equity and DFI investments. Additionally, Nairobi serves as the regional headquarters for many firms operating within the East African region.
2. Uganda: Holding Steady Uganda solidifies its position as a pivotal player, contributing to 12% of investments. Its strategic location and burgeoning market render it an enticing destination for investors, particularly within the financial services and agriculture sectors.
3. Tanzania: Emerging Promise Tanzania's 6% share underscores its emergence as a promising private equity and venture capital market. Recent shifts in government policies enhance its appeal to investors, with investments in agriculture, natural resources, infrastructure, tourism, and the financial sector gaining momentum.
4. Ethiopia: A Rising Giant With its rapidly expanding economy and expansive market, Ethiopia garners increasing investor attention. Despite challenges posed by political instability and currency regulations, its potential remains notably high.
5. Rwanda: Niche in Venture Capital Although Rwanda boasts a smaller market, it excels in the realm of venture capital. The nation has emerged as a hub for innovative startups and smaller investments, setting itself apart in the East African landscape.

Other East African Countries: Enriching Diversity Collectively, other East African countries constitute a 2% share. While they may not command the same spotlight, they enrich the diversity and dynamism of the East African investment landscape.

Country Share of Investments (2013-2023):

1. Kenya: 69%
2. Uganda: 12%
3. Tanzania: 6%
4. Ethiopia: 6%
5. Rwanda: 5%
6. Other: 2%

Hence, achieving economic transformation is a long-term process that requires commitment, careful economic planning, and consistent implementation of these strategies, but also Tanzania can learn from Kenya's experiences and adapt approaches to its unique context while addressing specific challenges and opportunities.

Tanzania can consider the following strategies and actions:

1. Investment in Infrastructure: Tanzania can focus on improving its infrastructure, including transportation, energy, and telecommunications. This will enhance connectivity, reduce logistics costs, and attract more businesses and investors.
2. Economic Diversification: Encourage economic diversification by promoting various sectors such as agriculture, manufacturing, technology, and tourism. This will reduce dependency on a few sectors and create a more resilient economy.
3. Investment Promotion: Implement policies and incentives to attract foreign and domestic investment. Tanzania can create a more business-friendly environment, simplify regulations, and reduce bureaucracy to make it easier for businesses to operate.
4. Education and Workforce Development: Invest in education and workforce development to ensure a skilled and adaptable labor force. This includes improving access to quality education and vocational training programs.
5. Stable Political Environment: Maintain a stable political environment to instill investor confidence. Address political instability and policy uncertainties to create a conducive climate for investments.
6. Access to Finance: Improve access to finance for small and medium-sized enterprises (SMEs) and startups. Encourage the growth of venture capital and private equity to support innovative businesses.
7. Trade and Regional Integration: Strengthen regional trade and integration efforts within the East African Community (EAC) to expand market access for Tanzanian goods and services.
8. Tourism Promotion: Leverage Tanzania's natural beauty and tourist attractions by investing in tourism infrastructure and marketing. This sector has the potential for significant growth.
9. Investment in Research and Development: Encourage innovation and research by investing in R&D facilities and supporting technology-driven enterprises.
10. Policy Reforms: Continuously review and update policies to align with economic development goals. Ensure that regulations are transparent and consistent.
11. Public-Private Partnerships: Foster collaboration between the government and the private sector to facilitate large-scale infrastructure projects and promote economic growth.
12. Access to Capital Markets: Develop and deepen capital markets to provide businesses with alternative sources of financing beyond traditional banking.
13. Regional Collaboration: Collaborate with neighboring East African countries to develop regional value chains, expand trade, and promote shared economic development goals.

Inflation Rates:

• The inflation rate has dropped from 3.6% to 3.3% last month, and further analysis reveals a reduction to 3.1%.
• Inflation rate for all products has decreased by -0.1% in one month.
• Notable decreases were observed in food and nonalcoholic beverage inflation (-1.2% in one month, but up by 6.1% in a year), while alcoholic beverage and tobacco inflation increased by 2% in one month and by 3.8% in a year.
• Clothing and footwear prices increased by 0.1% in one month and by 3.4% overall.
• Household maintenance costs grew by 0.5% in one month and 2.7% in a year.
• Transport prices rose by 0.9% in a month and 0.4% over a year.

Money Supply:

• Money circulation surged by 68.2% in one month, increasing from 38.7% the previous month, but decreased from 64% last year.
• The rise in money supply is attributed to the Bank of Tanzania increasing circulation from -11.5% last month to 0.2% this year.
• Currency circulation increased by over 15.5% this month and narrow money supply (M1) expanded by 19.3%.

Import Rates:

• Over a year, import rates increased by 739%, but in one month, it plummeted by 70%.
• Several items had varying import rates in a year, such as machinery and mechanical appliances (increased by 38% in a year but decreased by 29% within the year).
• Import rates for some products like petrol, lubricants, wheat grain, and pharmaceutical products exhibited varying trends.

Export Rates:

• Export rates grew by 4% in one year and 13% within two years.
• Notable changes were seen in the export rates of manufactured goods, traditional goods, horticultural products, and cereals.

National Debts:

• The national debt has exceeded USD 42 billion, with domestic debt increasing by 2% in a month and 20% in a year.
• External debt increased by 1% in a month and 8% over a year.

Budget Analysis:

• The government's expenditures are surpassing the budget estimate, leading to a 36% increase in expenditures compared to estimated revenue.

• Interest costs have exceeded the budget projection by 151%, and income tax revenue has declined by 5%.

• This has contributed to a growing government deficit, exceeding 36%.

Challenges and Opportunities Confronting Small Businesses in Tanzania

In this research, we examine the challenges and opportunities that small businesses in Tanzania face, outlining potential solutions to foster their growth and sustainability. The analysis encompasses a range of sectors, from agriculture and finance to technology and marketing.

Challenges:

Small businesses in Tanzania confront several significant challenges. A substantial proportion, approximately 83 percent, believe that businesses fail to deliver anticipated financial returns. Equally concerning is the consensus among 83 percent that sales and marketing pose considerable hurdles. Moreover, over 83 percent express doubts about managerial capacity to strategically expand and adapt resources. These challenges collectively contribute to a less-than-five-year lifespan for more than 89 percent of new businesses, highlighting the urgency for intervention.

Additional obstacles include difficulties in accessing financing, embracing new technology, and navigating government regulations. Despite acknowledging government hindrances, more than 85 percent believe existing laws and procedures inadequately support small businesses.

Opportunities:

Amidst these challenges, opportunities are evident. Over 83 percent recognize the availability of investment prospects for enterprises within the region. Notably, more than 82 percent associate small business ownership with happiness and enhanced social status.

Solutions:

Addressing these challenges requires a holistic approach:

1. Financial Support: Government-backed loan programs and microfinance initiatives can provide crucial capital to fuel growth.
2. Skills Development: Training, workshops, and incubators can enhance business management skills and innovation.
3. Regulatory Reforms: Simplifying regulations and implementing supportive policies can reduce barriers to growth.
4. Technology Adoption: Establishing technology hubs, partnerships with research institutions, and providing access to innovative resources can drive technological advancement.
5. Market Access: Trade fairs, business networks, and marketing support can help small businesses expand their reach.
6. Financial Literacy: Financial education programs and advisory services empower small business owners to make informed decisions.
7. Government-Private Sector Collaboration: Public-private partnerships and consultative forums foster collaboration, resource allocation, and sustainable solutions.

Conclusion:

Tanzania's small businesses play a pivotal role in economic growth and job creation. Addressing their challenges and seizing opportunities requires concerted efforts from the government, private sector, and civil society. By implementing these solutions, Tanzania can pave the way for a thriving small business ecosystem, contributing to economic stability, innovation, and social well-being.

Enhancing Tanzania's Business Landscape

This executive summary encapsulates the findings and recommendations derived from a comprehensive study focused on refining Tanzania's business environment. The study, which involved 450 businesses across various scales, aimed to identify key challenges and propose actionable solutions to foster economic growth, facilitate trade, and empower entrepreneurs.

Key Insights:

1. Starting a Business: Respondents indicated a need to simplify and expedite business initiation procedures. While 75% found the environment unfavorable, over a quarter perceived it favorably, emphasizing the need for streamlined registration processes.
2. Government Contracting: Although 74% disagreed that contracting with the government is unfavorable, more than 9% recognized its benefits. Addressing transparency and negotiation bottlenecks can facilitate smoother engagement.
3. Workforce Engagement: 75% acknowledged the ease of recruiting from a surplus of informal workers, hinting at untapped potential. A significant percentage found hiring challenging, necessitating innovative approaches to connect available talent with opportunities.
4. Insolvency Resolution: The alarming 88% who considered insolvency resolution detrimental emphasize the urgent need for strategies to support struggling businesses, from debt management to fostering sustainable practices.
5. Cross-Border Trade: With a mix of sentiments, cross-border trade requires immediate attention. By enhancing infrastructure and streamlining procedures, trade can be made more efficient and conducive to growth.
6. Taxation and Financing: The majority perceived taxation as a hindrance, highlighting the necessity for a balanced system that takes into account genuine growth and regional dynamics. Similarly, credit access remains an issue, warranting tailored solutions to match business stages and economic realities.

• Tanzania's inflation rate has dropped from 4% to 3.6%, although this has not resulted in lower costs for essential goods.
• Although this has not yet resulted in lower prices for necessities and products. The pricing for essential items within one month has not decreased, while the cost for goods within one year has not yet decreased.
• In one month, money circulation increased from 10.4% to 13.4%, while net foreign assets fell from -20.8% to -25.9%.
• Although the Bank of Tanzania has not reduced or increased money circulation in a single month, the situation looks to have improved from -5.5% to -11.5 percent in a year.
• In one-month, net domestic assets surged from 21% to 36%, while import rates increased by more than 1612% in one month but reduced by more than 629 percent in one year.
• The rate of export of products and services climbed for the five year in a row, with gold and travel and transportation rates rising.
• In one month, the national debt reduced by Tsh.40,360 million, yet climbed by Tsh.10,136,340 million in one year.
• Government spending has continued to climb, resulting in a deficit of more than 49% of the year's planned budget.
• Import taxes have been cut by more than 8% compared to the budget estimate, while other tax projections have been cut by more than 6%.

In May, inflation rates lowered from 4.3% to 4%, owing mostly to lower prices for major commodities. Food and non-alcoholic beverages surged by more than 8% year on year, while alcohol and cigarette expenditures increased by 2.2% and 0.70%, respectively, in a month. Clothing and footwear prices increased by 0.25% and 3.3%, respectively, while housing, water, electricity, and other energy prices increased by 0.50% and 1%. Health expenditures increased by 0.04%, transportation costs by 0.33%, and communication costs by 0.16%. Education service costs increased by 0.34% in one month, but remained expensive for the majority of society.

Tanzania's money supply went down from 12.6% in April to 10.4%, with foreign currency deposits increasing by 23.3%. The narrow money supply has also climbed to 14.3%, as have net foreign assets. In one month, the Bank of Tanzania cut money in circulation from -11.8% to -11.5 percent.

Tanzania Economic Updates

Tanzania's inflation rate fell from 4.7 percent in March to 4.32 percent in April, owing to a drop in the cost of living for a number of goods and services. This decrease is due to a decrease in the cost of living for transportation, housing, water, energy, gas, furniture, household equipment, and routes.

Money supply surged by 58.8% in the preceding month, up from 33.7% the previous month, while net foreign assets increased by -24.4%. Currency in circulation increased by 12.6 percent from 11.9 percent the previous month, but is 15.8 percent lower than last year. Net foreign assets increased by -26.4 percent, up from -40.1 percent previous month, while the same period last year gained by 4.5 percent.

The government should take steps to considerably reduce inflation while remaining genuine to daily life. Tanzania's economy grew by more than 1046% in a year, and import taxes increased by more than 3%.

The country's economy is propelled by export rates, and high export rates result in more foreign currency. In one year, imports of machinery and mechanical appliances climbed by more than 44%, but by 57% in one month. Fertiliser import rates increased by 88 percent in a year, despite a 17 percent fall in output.

In a year, food and beverage import rates for industrial use increased by 55%, but only by 33% in a month. Sugar import rates for industrial use increased 310 percent in a year, but only 304 percent in a month.

In the March-April budget, the government projected to spend 3097.1 billion shillings, but actually spent 2932.4 billion shillings, or 5% less.

The national debt has climbed by more than 7 trillion Tsh in a year and more than 800 million Tsh in a month, totaling more than 94 trillion Tsh.

A profitable enterprise requires time, consistency, focus and work, but there are additional (and required) principles that need to be added to the mix.

Living off of your great business idea: that’s the dream, right? And if you’ve got a dream market concept, you’ve already completed the first step. Of course, getting to success takes time, consistency, focus and work, and the truth is that even those companies that describe themselves as overnight miracles usually aren't.

A step-by-step guide to turning your startup into a viable enterprise.

1. Emphasize market research

The inescapable reality is that if you want to see a startup succeed, you must do rigorous (and ideally early) market research. This will help you determine a target market and identify the most significant competitors. Once you gather all that information, it’s time to engage in thorough analysis to see how you can gain a competitive advantage. Validating an idea is also vitally important: It's folly to not test a product or service idea with the people you want to become loyal customers.

2. Build a solid business plan

There is no way of operating a business without a killer plan, and the reason is simple: In writing the steps needed to establish and grow, you’ll also address a variety of critical issues on the journey, and there are many (including hiring, seeking investors, mapping out expansion and accounting for the inevitable obstacles). Having a proper plan also helps you win investors’ trust: They need to feel assured that there will be an appreciable return on their investment, so take your time and plan.

3. Always be organized

Successful entrepreneurs must stay on top of a myriad of details — need to be able to wake in the middle of the night and know product/accounting/staffing essentials as a reflex. The surefire way of getting to that level of expertise is to create to-do lists, and be fanatical about keeping them current (including checking off every task the moment it’s completed). Trust me, this will give you much-needed peace of mind.

4. The power of conviction

How can you sell what you don't believe in? It’s not possible, so believe in yourself and your company product, but also make a rigorous accounting of your strengths and weaknesses, as well as your chances to progress. As any capable salesperson will attest, confidence is compelling, and essential in turning potential customers into loyal buyers.

5. Commit fully, and be consistent

As a rule of thumb, there is no success without commitment. The latter, along with efficient teamwork, are two of the most critical factors in creating a thriving company. Nearly as vital is its whole team genuinely believing in the core values of your idea. Without shared beliefs among employees, reaching success is a wildly harder endeavor.

6. Build a loyal relationship with customers

If you've managed to build it, and they actually came, congratulations! Now, think long and hard about how you can make those buyers loyal, repetitive customers. One surefire way of doing that is to listen to them and show them you care, in part by conducting surveys and rewarding loyalty.

7. Be flexible and patient

Be prepared for setbacks and changes in your business journey. While it's perfectly normal to trust an initial idea, don't turn a deaf ear to criticism or other observations, especially if they come from customers. The resulting flexibility means you’ve carefully thought about feedback and prioritized ideas and critiques above ego.

Success won't come overnight, so prepare to train your patience. On the positive side, you'll be glad to know that it will become one of your most potent and reliable character builders.

8. Stay proactive

Real growth comes from advancement in every dimension, so stay on top of the game by carefully and consistently analyzing data, competitors, customer insights and all the other forms of feedback you’re sure to get.

Tanzania Economic Updates'

Tanzania's inflation rate has fallen from 4.8% in February to 4.7% in March, with a decrease in insurance and financial services expenses and an increase in prices of basic commodities and services. Food and nonalcoholic beverage prices, alcohol and tobacco costs, housing, water, electricity, gas and other fuels, furniture, domestic equipment, and routes have all grown by 0.38 percent in one month, but by 1.10 percent in a year. Healthcare and education expenses have increased by 2.73 percent and 3.35 percent respectively, while transportation costs increased by 5.69 percent in twelve months.