By Dr. Bravious Felix Kahyoza PhD, FMVA CP3P, Email: braviouskahyoza5@gmail.com

Just after sunrise, when the light begins to stretch across the roofs of Dar es Salaam, the city feels like it’s already negotiating with the day ahead. Shop owners pull up their shutters, daladala conductors start calling out routes, and the early hum of business begins long before the formal sector signs in.

 It’s in these small morning rituals that you can sense how deeply the country depends on its entrepreneurs, formal and informal, to keep the economy alive. And yet, beneath this bustle sits a quiet tension: businesses trying to stay afloat in a tightening fiscal climate, and a government under pressure to raise more domestic revenue without crushing the very engine it needs for growth.

President Samia’s acknowledgment that Tanzania’s borrowing space has narrowed was received with a mix of relief and anxiety. Relief, because it was honest; anxiety, because it confirmed what many suspected.

The domestic debt stock has grown rapidly, averaging double-digit annual increases, and banks have been steering more credit toward government securities than private lending. Private sector credit is stuck around 16–17 percent of GDP, far below the levels seen in countries that have broken into upper-middle-income status.

 When the government announced its plan to raise domestic revenue to 16.7 percent of GDP in 2025/26, many business owners wondered quietly how much of that burden would fall on them.

Yet the country can’t ignore the numbers. The CCM Manifesto’s first implementation phase carries a price tag of Sh 477 trillion, four times the previous cycle. Vision 2050, which imagines Tanzania as a trillion-dollar economy, isn’t built on slogans; it needs infrastructure, energy, modern agriculture, digital systems, and competitive industries.

 All of that requires money, and with global financing tightening, domestic collection becomes the unavoidable frontier. But the challenge, and this is where the debate becomes human rather than technical, is figuring out how to raise that revenue without squeezing businesses until they break.

Spend a morning walking through Kariakoo or Samora Avenue and you’ll hear business owners talk about costs rising faster than sales. Electricity tariffs pinch their margins; new taxes, even when justified in theory, feel heavy when cash flow is thin; and bank loans remain out of reach for many.

The 10 percent tax on retained earnings, for instance, was meant to increase fairness and close loopholes, yet some firms quietly admit it makes them think twice about expanding or hiring. Small and medium enterprises, which make up more than 90 percent of Tanzania’s businesses, often feel these changes more sharply than anyone writing policy anticipates.

And yet, from the government’s side, the view is equally complicated. September 2025 revenue collection reached 87.2 percent of targets, not terrible, but not enough. Budget execution has hovered around 72 percent, especially for development spending, which limits how much progress can be made on the ground.

Exemptions have cost the country hundreds of billions in potential revenue over the years. The decision to remove the 10-year income tax holiday for Export Processing Zones selling locally wasn’t just political; it was a response to an imbalance that had tilted for too long.

The difficulty is that both sides, the state and the business community, are telling the truth from where they sit. The question becomes how to bridge these truths, not pit them against each other.

One place where this balancing act is beginning to show promise is through more targeted incentives rather than blanket holidays. For example, accelerated depreciation for machinery, or tax credits tied to reinvestment, can soften the impact of the retained-earnings tax without weakening the overall revenue base.

 When firms reinvest in equipment or training, productivity rises, and the state benefits later through higher VAT, PAYE, and corporate tax. That kind of long-view thinking is what many economists argue Tanzania needs now.

Digital revenue systems are another area reshaping the landscape. The expansion of e-invoicing and real-time verification hasn’t been universally celebrated; some traders complain about the learning curve, but the long-term benefits are hard to dispute.

Faster processing times, fewer physical audits, and a reduction in arbitrary enforcement make it easier for businesses to plan. The TRA’s own data shows a noticeable bump in compliance when digital tools replace manual processes. And businesses, especially mid-sized ones, often say they’d rather deal with a predictable system than a maze of officers whose interpretations vary.

The third arena where the balance becomes clearer is in public-private partnerships. Tanzania’s infrastructure ambitions, ports, railways, power systems, and industrial parks are simply too large for the public purse alone. Private capital is not a luxury; it has become a necessity.

 When a firm operates a toll road and pays concession fees, the government earns revenue without borrowing. When energy companies partner on transmission lines or gas processing, the state gains both revenue and technological expertise.

 And when mining firms contribute through production-sharing arrangements or royalties, typically around 16 percent, the country receives a steady stream of income without assuming operational risk.

What often gets overlooked is how these partnerships filter back into daily life. A more reliable transmission line reduces power outages for factories; a port operating at global standards cuts shipping costs for traders; an upgraded rural water system frees families from hours spent collecting water, boosting productivity indirectly. These aren’t abstract gains; they ripple across multiple layers of the economy.

Still, none of this works without trust. And trust is built through fairness in enforcement. When the government focuses on chronic large-scale evaders rather than the small shop struggling to stay afloat, businesses notice.

When the state offers reasonable windows for compliance or structured settlement plans, firms are more willing to cooperate. SMEs, in particular, respond better to support than punishment. The idea of pairing enforcement with education, through business clinics, youth-focused tax training, or digital-literacy programs, creates compliance rooted in understanding rather than fear.

There’s also the emerging conversation around youth-led enterprises, which are growing quickly in tech, creative industries, and agri-processing. Offering them modest tax breaks or startup-friendly compliance tools is less about generosity and more about strategy. A vibrant young business sector widens the future tax base, distributes economic opportunity, and reduces dependence on a narrow set of large taxpayers.

All these shifts, digital reforms, strategic incentives, PPPs, and compliance education form a pathway through the country’s current fiscal crossroads. And while none offer a magic solution, together they shape a more balanced approach than relying solely on new taxes or sharp spending cuts.

You can sense the stakes in the way people talk in markets, factories, and offices. Business owners want to grow; they simply don’t want to feel punished for trying. Government officials want to fund development; they want businesses to meet them halfway.

Somewhere between those needs lies the possibility of a more mature economic relationship, one that sees the private sector not as a target but as a partner, and the government not as an adversary but as an enabler of long-term prosperity.

If Tanzania can deepen that relationship, the country stands a far better chance of turning today’s fiscal pressure into tomorrow’s growth story. The path won’t be tidy, and there will be missteps, but the direction matters.

And right now, the direction points toward collaboration rather than confrontation, toward shared responsibility rather than suspicion, and toward a future where business vitality and government revenue rise together rather than at each other’s expense.

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. Read More: What's Next for Tanzania's Economy? A 2026 Outlook Amid Political Turbulence

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.