Microfinance Institutions (MFIs) are pivotal in driving financial inclusion and economic growth in Tanzania, particularly for Micro and Small Enterprises (MSEs). A recent study by the Tanzania Investment and Consultant Group Ltd. (TICGL) titled "The Contribution of Microfinance Services to the Development of Small and Medium Enterprises in Tanzania" provides comprehensive insights into how MFIs support SMEs, the challenges they face, and opportunities for growth. This article explores key findings from the 2025 TICGL report, highlighting the transformative role of microfinance in Tanzania’s SME ecosystem.

The Importance of MFIs for Tanzanian SMEs

MFIs bridge a critical gap in Tanzania’s financial landscape, offering accessible credit, savings products, and financial literacy training to MSEs that traditional banks often overlook due to perceived risks. According to the Tanzania National Bureau of Statistics (NBS, 2022), MSEs contribute over 35% to Tanzania’s GDP and employ more than 5 million people. By providing tailored financial services, MFIs empower these enterprises to expand, create jobs, and reduce poverty.

Key Services Provided by MFIs

• Micro-loans: Small-scale loans (often below TZS 5 million) for working capital and business expansion.
• Group Loans: Peer-guaranteed loans, particularly effective for women-led and rural businesses.
• Financial Literacy Training: Programs to enhance budgeting, loan management, and business planning skills.
• Digital Financial Services: Mobile banking and payment platforms for improved accessibility.

Key Findings from the TICGL Study

The TICGL study, conducted between November 2024 and January 2025, surveyed 420 MFIs across Tanzania, providing a detailed analysis of their operations, challenges, and opportunities. Below are some key insights:

Loan Portfolio Allocation

MFIs allocate their loans strategically to support various sectors critical to Tanzania’s economy. Figure 1 illustrates the distribution of MFI loan portfolios:

Figure 1: Loan Portfolio Allocation by Business Sector (2025)

Source: TICGL, 2025

Trade and retail dominate with 30% of loan allocations, reflecting the prevalence of small trading businesses. Agriculture (22%) and manufacturing (18%) also receive significant funding, aligning with national priorities for food security and industrialization.

Loan Size Trends

The study found that 62% of MFI loans are below TZS 5 million, catering primarily to micro-enterprises with quick-turnaround needs. Figure 2 shows the distribution of loan sizes:

Figure 2: Loan Size Distribution Among MSEs (2025)

Source: TICGL, 2025

This trend highlights MFIs’ focus on small, low-risk loans, which are easier to approve and manage.

Default Rates and Risk Management

Loan default rates remain a significant concern for MFIs. The study found that 49% of MFIs report default rates between 5–10%, while 27% face higher risks with rates exceeding 10%. Figure 3 outlines the default rate distribution:

Figure 3: Default Rates for MSE Loans (2025)

Source: TICGL, 2025

To mitigate risks, MFIs employ strategies such as:

• Credit Risk Assessment and Scoring (26%)
• Group Lending and Social Collateral (23%)
• Loan Portfolio Diversification (17%)
• Strict Loan Monitoring (19%)
• Credit Guarantee Schemes (15%)

Challenges Facing MFIs

MFIs face several barriers that limit their ability to serve MSEs effectively. Figure 4 summarizes the key challenges:

Figure 4: Main Challenges in Providing Loans to MSEs (2025)

Source: TICGL, 2025

High borrowing costs (44%) and stringent collateral requirements (29%) further complicate MFIs’ ability to secure capital, while regulatory constraints, such as interest rate caps, limit operational flexibility.

Opportunities for Growth

Despite these challenges, the TICGL report identifies significant opportunities to enhance MFI support for MSEs:

• Government-Backed Funding (28%): Access to credit guarantee programs and concessional loans can expand lending capacity.
• Digital Financial Services (25%): Mobile banking and fintech partnerships can reduce costs and improve accessibility.
• MFI Collaboration (27%): Knowledge sharing and joint initiatives can enhance service delivery.
• Fintech Partnerships (20%): Advanced technologies like AI-driven credit scoring can improve risk management.

Recommendations for a Stronger Microfinance Ecosystem

To maximize the impact of MFIs on SME development, the TICGL study proposes several actionable recommendations:

For MFIs

1. Adopt Digital Lending Platforms: Invest in mobile-based loan systems to streamline operations and reach underserved areas.
2. Enhance Financial Literacy Programs: Offer structured training on budgeting, loan management, and digital tools to reduce default rates.
3. Diversify Funding Sources: Engage with impact investors and development finance institutions to secure sustainable capital.

For Regulators

1. Introduce Tiered Compliance: Reduce compliance costs for smaller MFIs to encourage growth.
2. Flexible Lending Guidelines: Allow alternative credit assessments to include informal businesses.
3. Streamline Reporting: Implement digital reporting systems to reduce administrative burdens.

For Stakeholders

1. Strengthen Public-Private Partnerships: Facilitate collaboration between MFIs, banks, and government agencies.
2. Promote Fintech Innovation: Support regulatory sandboxes to test new financial products.
3. Focus on Gender Inclusion: Develop targeted financial products for women-led enterprises.

Conclusion

Microfinance Institutions are indispensable to Tanzania’s economic growth, empowering MSEs through accessible credit and capacity-building programs. The TICGL 2025 study underscores the need for innovative lending models, digital transformation, and regulatory reforms to overcome challenges like high default rates and limited capital access. By leveraging government support, fintech partnerships, and financial literacy initiatives, MFIs can strengthen their role in fostering sustainable SME growth and driving financial inclusion across Tanzania.

Tanzania has received significant Official Development Assistance (ODA) over the years, with disbursements peaking at $761M in 2013 before gradually declining to $389M in 2024 and a projected $118M in 2025. ODA accounted for 8.55% of GNI, with major donors including the World Bank ($1.095B) and the United States ($429.5M). As Tanzania's GNI reached $79B (2024) and tax revenue stood at 11% of GDP, the decline in aid signals a transition towards economic self-reliance.

An overview of official development assistance (ODA) disbursements to Tanzania in U.S. dollars, showing the financial support received from international donors over the years:

1. Disbursements Overview

• Definition: Disbursements represent the actual funds paid by federal agencies in a fiscal year to fulfill government obligations.
• Trends: The total ODA received by Tanzania has fluctuated over the years, peaking in 2013 at $761M, followed by a decline and recovery in later years.

2. Key ODA Donors to Tanzania

These organizations and countries provided the highest amounts in recent years:

• World Bank Group: $1.095B (largest donor)
• United States: $429.5M
• Global Fund: $225.0M
• France: $132.4M
• Canada: $101.8M

3. Economic and Social Indicators

• Population: 70.5 million (with 38.9% urban and 61.1% rural)
• Gross National Income (GNI): $79 billion
• GNI per capita: $1,200
• ODA as % of GNI: 8.55% (Tanzania's economy is significantly supported by foreign aid)
• ODA per capita: $41.13 (per person aid distribution)
• Government Tax Revenue: 11% of GDP (shows the domestic revenue generation capacity)

4. Trends in ODA Disbursements to Tanzania (2001-2025)

• 2001-2005: Disbursements ranged between $44M - $98M, showing slow but steady growth.
• 2006-2013: Rapid increase from $121M in 2006 to a peak of $761M in 2013.
• 2014-2019: Decline and fluctuation, reaching $647M in 2019.
• 2020-2024: Decline in disbursements, dropping to $389M in 2024.
• 2025 (Projected): A sharp decline to $118M, indicating a possible reduction in ODA support.

5. Insights

• The significant peak in 2013 suggests major funding projects or increased donor confidence.
• The decline post-2014 suggests changes in donor priorities, Tanzania’s economic status, or governance reforms.
• The projected drop in 2025 could indicate Tanzania’s transition away from dependency on foreign aid.

Key figures and trends for Tanzania’s ODA disbursements, economic indicators, and donor contributions:

Table: Tanzania’s ODA Trends and Economic Indicators (2001-2025)

ODA disbursements to Tanzania reveals several key insights about the country's economic reliance on aid, fiscal trends, and potential shifts in donor priorities:

1. Tanzania's Economic Dependency on ODA

• ODA as a Percentage of GNI (8.55%): This indicates that a significant portion of Tanzania’s economy still depends on foreign aid. A high ODA-to-GNI ratio suggests limited domestic revenue generation capacity.
• ODA Per Capita ($41.13): Each Tanzanian receives an average of $41.13 in aid, reflecting Tanzania’s classification as a low-income country.

2. Trends in Foreign Aid

• 2001-2005: Low Disbursement ($44M - $98M)
  • Aid was relatively low, likely due to limited donor commitments or governance concerns.
• 2006-2013: Rapid Increase in Aid ($121M - $761M)
  • This period saw a significant increase in aid, peaking in 2013 ($761M), possibly due to large-scale development projects or donor confidence.
• 2014-2019: Decline and Fluctuation ($599M - $647M)
  • Aid dropped post-2013, which could indicate a shift in donor priorities towards other regions or sectors.
• 2020-2024: Continuous Decline ($588M - $389M)
  • This drop might reflect Tanzania’s economic growth, reducing eligibility for certain types of aid.
• 2025 (Projected): Sharp Decline ($118M)
  • If this projection holds, it suggests that donors are reducing their financial commitments significantly.

3. Shift in Tanzania’s Financial Landscape

• Government Tax Revenue (11% of GDP)
  • Relatively low compared to international benchmarks (15-20%), showing limited domestic revenue collection.
• GNI ($79B) & GNI Per Capita ($1.2K)
  • As GNI improves, Tanzania may move towards middle-income status, leading to reduced ODA eligibility.

4. Implications for Tanzania

• Reduced Future Aid: Tanzania may need to increase domestic revenue generation through better tax policies and private sector growth.
• Economic Independence: Declining aid could push Tanzania towards self-reliance, but it requires stronger public finance management.
• Donor Shifts: The decline could mean donors are redirecting funds to other priority countries or investing in different economic sectors.
• Public-Private Partnerships (PPP): To fill the funding gap, Tanzania must attract private sector investments for infrastructure and development.

Final Thought

Tanzania is transitioning away from heavy aid dependence, which is a sign of economic progress. However, the country must strengthen its domestic revenue base, improve fiscal policies, and attract private investment to sustain growth without relying on ODA.

Table: Tanzania’s ODA Disbursements (2001-2025)

Tanzania’s National Development Plan for 2025/26 outlines strategic priorities to sustain economic growth, enhance infrastructure, and improve social services. With a projected GDP growth of 6.0%, the plan emphasizes industrialization, investment, agriculture, and public-private partnerships (PPP) to drive development. Key focus areas include energy expansion, transport modernization, job creation, and food security, ensuring a resilient and self-sufficient economy while preparing for Vision 2050.

Key Highlights and Figures:

1. Economic Performance (2024/2025)

• Global Economy: Growth was 3.2% in 2024 and is projected to be 3.3% in 2025. Growth is slowing due to aging populations, reduced productivity in developed countries, and geopolitical tensions.
• Regional Economy:
  • SADC: Growth declined from 5.2% in 2023 to 5.1% in 2024, expected to reach 4.1% in 2025.
  • EAC: Growth slowed from 3.9% in 2023 to 3.4% in 2024, projected to recover to 5.7% in 2025.
• Tanzania’s GDP Growth:
  • Grew by 5.6% in 2024 (Jan-Sept) vs. 5.1% in 2023.
  • Expected to grow 6.0% in 2025 and 6.1% in 2026.
• Inflation:
  • Fell to 3.1% in 2024 (vs. 3.8% in 2023).
  • Tanzania’s inflation target is 3.0%-5.0%, within EAC limits (below 8%).

2. Development Achievements (2019/20 – 2024/25)

3. Budget for 2025/26

• Total Budget: TZS 57.04 trillion
• Development Budget: TZS 19.47 trillion (34.1% of total budget)
• Sources:
  • Domestic funds: TZS 13.32 trillion
  • External funding: TZS 6.15 trillion
• Private Sector Role: Emphasizing Public-Private Partnerships (PPP) to fund development projects.

4. Key Priority Areas for 2025/26

1. Competitive and Inclusive Economy – Infrastructure (transport, ICT, energy), improving business environment.
2. Manufacturing and Services – Boosting industrial productivity.
3. Investment and Trade – Improving regulatory frameworks, tax policies.
4. Human Development – Education, health, water, land planning, youth skill development.
5. Human Capital Development – Strengthening technical and vocational training.

5. Major Government Plans

• Malaria Eradication Campaign: Government to intensify control using locally produced chemicals.
• Reduced Foreign Aid Dependence: Strengthening AIDS Trust Fund, leveraging PPP models for funding.

The plan aligns with Tanzania’s Vision 2025 and is part of the Third Five-Year National Development Plan (2021/22 – 2025/26). The government aims to complete ongoing projects while preparing for Vision 2050. The focus remains on sustaining economic growth, improving social services, and enhancing private sector involvement.

Tanzania’s National Development Plan for 2025/26, outlining the country’s economic performance, achievements, budget allocations, and strategic priorities.

1. Economic Growth & Stability

• Tanzania’s economy is growing steadily, with GDP increasing from 5.1% in 2023 to 5.6% in 2024, and projected at 6.0% in 2025.
• Inflation has remained low and stable at 3.1%, which is within the government’s target range of 3.0% - 5.0%.
• The East African Community (EAC) and SADC economies are slowing due to inflation, global debt, and geopolitical instability, but Tanzania is expected to maintain growth.

2. Development Achievements (2019 – 2024/25)

The government has made significant progress in infrastructure, energy, agriculture, health, and education:

• Electricity production increased from 1,602 MW to 3,077 MW.
• Villages connected to electricity: 8,587 → 12,318 (100% target met).
• Food security remains strong (114% in 2019 → 128% in 2024).
• Tourism has recovered, with tourist numbers growing from 1.03 million (2019) to 4.24 million (2024), boosting foreign exchange earnings.
• Irrigated agriculture expanded to 983,466 hectares, supporting food production.

3. Budget Priorities for 2025/26

• The total budget is TZS 57.04 trillion, with 34.1% (TZS 19.47 trillion) dedicated to development projects.
• Funding sources:
  • TZS 13.32 trillion from domestic revenue.
  • TZS 6.15 trillion from external financing.
• Public-Private Partnerships (PPP) will be expanded to reduce dependence on foreign aid.

4. Key Priorities for 2025/26

• Infrastructure Development: Completion of SGR railway, road networks, ports, and energy projects.
• Agriculture & Food Security: Expanding irrigation, mechanization, and agribusiness investment.
• Industrialization & Investment: Encouraging local and foreign investment in manufacturing and services.
• Health & Education:
  • Expanding public health services and strengthening malaria eradication programs.
  • Enhancing vocational and technical training to improve youth employment.

5. Future Outlook

• Tanzania is on track to maintain strong economic growth and complete Vision 2025 goals before transitioning to Vision 2050.
• Self-sufficiency in key sectors like food, energy, and healthcare will be prioritized.
• Private sector involvement will be key to funding national projects through PPPs.

Overall Message

• Tanzania is making solid progress toward economic transformation and social development.
• The government is reducing dependency on foreign aid while boosting domestic investment.
• Key focus areas in 2025/26: Economic growth, infrastructure, agriculture, manufacturing, education, and healthcare.

Introduction
Public-Private Partnerships (PPPs) are central to Tanzania’s strategy for achieving sustainable development and economic transformation. Through innovative financial models and collaboration, the government aims to address infrastructure, energy, and social challenges while leveraging private sector efficiency and capital. These partnerships are aligned with Tanzania’s Vision 2025, focusing on inclusivity and growth.

Development Budget and Cost-Sharing Model
From 2021/22 to 2024/25, Tanzania allocated 54.575 trillion TZS to development projects, with 33.794 trillion TZS sourced domestically. The government employs an 80-20 cost-sharing model, where 80% of project funding is contributed by the private sector, significantly reducing the government’s financial burden. This model not only minimizes upfront costs but also allocates risk, with the private sector absorbing potential project overruns.

The development plan is expected to create approximately 10,000 jobs, with 8,000 positions in the private sector. Moreover, it is anticipated to boost annual economic output by 1 trillion TZS, enhancing Tanzania’s position as a regional economic hub.

Major Projects and Their Impact

1. Infrastructure Development
   • The Standard Gauge Railway enhances regional connectivity, fostering trade and reducing transport costs.
   • The Kigongo-Busisi Bridge facilitates commerce in the Lake Zone by improving accessibility.
   • The Msalato International Airport expands international connectivity, promoting tourism and trade.
2. Energy Projects
   • The Julius Nyerere Hydropower Project, with a capacity of 2,115 MW, stabilizes Tanzania’s energy supply, supporting industrial growth.
   • Rural electrification initiatives aim to provide universal energy access, particularly benefiting underserved rural communities.
3. Social Investments
   Investments in education and healthcare infrastructure are improving access to essential services. The government’s commitment to fee-free basic education and enhanced healthcare services highlights its dedication to uplifting the quality of life for citizens.

The Julius Nyerere Hydropower Project alone is projected to generate 31.725 billion TZS in annual revenue, showcasing the financial efficiency of PPP initiatives.

Comparative Insights from Africa
Tanzania’s PPP model mirrors successful regional practices. For instance, Kenya’s Nairobi Expressway, funded 80% by the private sector, has significantly reduced traffic congestion while generating $25 million in annual toll revenue. Similarly, Rwanda’s Kigali Innovation City has created 50,000 digital jobs, boosting the country’s tech ecosystem. Morocco’s Noor Solar Power Complex demonstrates the environmental benefits of PPPs, powering two million homes and reducing carbon emissions by 760,000 tons annually.

These examples highlight the potential for Tanzania to replicate such successes, particularly in renewable energy, transportation, and technology sectors.

Recommendations for Strengthening Tanzania’s PPPs

1. Sectoral Priorities:
   Focus on critical areas such as transportation, renewable energy, water supply, and digital transformation to ensure long-term sustainability and social impact.
2. Regulatory Enhancements:
   Establish clear frameworks and standardized contracts to improve project consistency and build investor confidence.
3. Public Awareness:
   Engage communities through education campaigns on PPP benefits to foster acceptance and reduce resistance to development projects.
4. Risk Management:
   Allocate risks effectively between public and private partners, ensuring stability and balanced collaboration.

Conclusion
Tanzania’s strategic use of PPPs is transforming its economic landscape, fostering job creation, enhancing infrastructure, and improving access to essential services. Flagship projects like the Standard Gauge Railway and Julius Nyerere Hydropower Project underscore the potential of PPPs to drive economic growth and inclusivity. By addressing challenges such as regulatory gaps and expanding partnerships to sectors like healthcare and education, Tanzania can solidify its position as a regional leader in sustainable development.

Between 2015 and 2021, TANROADS has strategically increased infrastructure investments, focusing on high-value projects to drive Tanzania's economic growth. Over this period, the total investment reached 3,264.173 Billion TZS, with a peak average project value of 119.40 Billion TZS per project in 2019. In 2021, despite only 4 projects, the average remained high at 81.41 Billion TZS per project, emphasizing a shift toward impactful, large-scale infrastructure that strengthens national and regional connectivity.

Yearly Breakdown

2021

• Projects: 4 (Kasulu-Manyovu, Kanyani-Mvugwe, Mvugwe-Nduta, Nduta-Kabingo)
• Total: 325.64 Billion TZS
• Average per project: 81.41 Billion TZS

2020

• Projects: 9 (Nala-Ihumwa Dry Port, Nachingwea-Ruangwa, Sanzate-Natta)
• Total: 431.64 Billion TZS
• Average per project: 47.96 Billion TZS

2019

• Projects: 6 (J.P. Magufuli Bridge, Kazilambwa-Chagu, Kibondo Town Link)
• Total: 716.412 Billion TZS
• Average per project: 119.40 Billion TZS

2018

• Projects: 4 (BRT Phase 2, Songea Airport, Wami Bridge)
• Total: 434.72 Billion TZS
• Average per project: 108.68 Billion TZS

2017

• Projects: 10 (Key examples: Chunya-Makongolosi, Mtwara Airport, Shinyanga Airport)
• Total: 688.561 Billion TZS
• Average per project: 68.86 Billion TZS

2016

• Projects: 4 (Lusitu-Mawengi, Kidatu-Ifakara)
• Total: 378.878 Billion TZS
• Average per project: 94.72 Billion TZS

2015 and Earlier

• Projects: 12 (Kikusya-Ipinda-Matema, Nyakanazi-Kibondo)
• Total: 288.322 Billion TZS
• Average per project: 24.03 Billion TZS

Insights

1. Peak Year: The highest average project value was in 2019, highlighting significant investments in high-value infrastructure.
2. Earlier Projects: Projects before 2015 had much lower average values, reflecting either smaller scopes or older pricing trends.
3. Consistent Growth: Recent projects (2020–2021) show a steady increase in total project values with relatively fewer but higher-value contracts.

The figures reveals key insights about TANROADS' project trends and priorities over the years:

1. Investment Growth Over Time

• Increasing Project Value: The significant jump in total and average project values from earlier years (2015 and before) to recent years highlights growing investment in infrastructure. This may indicate:
  • Prioritization of large-scale projects.
  • Increased funding availability or enhanced budget allocation for road infrastructure.
• Strategic Focus on High-Value Projects: 2019 was a peak year with the highest average project value, showing TANROADS' focus on impactful projects.

2. Recent Trends (2020–2021)

• Fewer Projects, Higher Value: Despite fewer projects in 2021, the average value per project (81.41 Billion TZS) is high, reflecting a shift toward:
  • Strategic planning for major regional or national connectivity.
  • Enhanced quality and scope of individual projects.
• Funding Efficiency: A reduced number of projects but higher value per project suggests a deliberate focus on impactful and sustainable infrastructure.

3. Earlier Years (2015 and Before)

• Smaller Scopes and Budgets: Lower average project values likely indicate:
  • Smaller-scale or regionally focused road projects.
  • A phase of laying foundational infrastructure rather than ambitious nationwide connectivity goals.

4. Long-Term Trends

• Focus on Key Transport Corridors: Many projects link significant trade hubs or regions, such as:
  • Kasulu-Manyovu for international trade with Burundi.
  • Nala-Dry Port, enhancing transport and logistics efficiency in central Tanzania.
• Economic Growth Impact: Infrastructure development aligns with Tanzania’s broader economic goals, such as improving trade, reducing transport costs, and enabling regional integration.

What This Means

• Economic Development: Increased spending on high-value projects reflects efforts to bolster Tanzania’s economic growth by improving transport and logistics.
• Global Investment Attraction: The upward trend in project scope and value may help attract international investors, particularly for Public-Private Partnerships (PPPs).
• Strategic Planning: Recent years demonstrate a focus on fewer, well-targeted projects to maximize infrastructure impact.

The top 10 projects by contract value.

Key observations:

• The J.P. Magufuli Bridge is significantly more expensive than any other project
• BRT Phase 2 Lot 1 is the second most expensive project
• Most of these top 10 projects were signed between 2017-2020
• Infrastructure projects (bridges, roads, and transit) dominate the highest-cost projects

To promote sustainable economic growth, Tanzania is increasingly leveraging Public-Private Partnerships (PPPs) to improve financial efficiency and boost investment in key sectors. Over the 2021/22 to 2024/25 fiscal years, Tanzania allocated a total of 54.575 trillion TZS to its development budget, with 33.794 trillion TZS sourced domestically. By implementing PPPs under an 80-20 cost-sharing model, the government aims to reduce its financial burden, enhance service delivery, create jobs, and increase revenue through private sector collaboration. This article explores the impact and strategic approach of PPPs in Tanzania’s economic development.

1. Development Budget Allocation and Funding Trends

Across four fiscal years, Tanzania’s development budget reveals a structured approach to funding large-scale infrastructure, energy, social services, and economic development projects. The allocation data highlights the prioritization of domestic financing over external funds, underscoring a commitment to fiscal responsibility and self-reliance.

This budget structure, with over 60% sourced domestically, signals Tanzania’s shift towards utilizing internal revenue for growth, allowing foreign financing to focus on specific, large-scale projects.

2. Key Recurring Projects and Economic Impact

Tanzania’s development agenda targets large-scale projects in infrastructure, energy, social services, and economic development to achieve comprehensive growth.

• Infrastructure Projects: Major projects, such as the Standard Gauge Railway (SGR) and the Kigongo-Busisi Bridge, will enhance connectivity within East Africa and reduce trade costs. With a total expected investment of 5 trillion TZS in infrastructure, these projects will elevate Tanzania as a regional logistics hub.
• Energy Projects: The Julius Nyerere Hydropower Project (2,115 MW) and rural electrification initiatives will improve energy security and support industrial growth, contributing over 1 trillion TZS annually to the economy.
• Social Services: Education and healthcare investments, including infrastructure expansion and student loans, aim to improve Tanzanian human capital, essential for economic resilience.
• Economic Development: Investments in agriculture, industrial development, and Special Economic Zones (SEZs) are expected to create jobs and attract foreign investment, boosting economic diversification.

3. Financing Strategies for Development

To finance these ambitious projects, Tanzania adopts a diversified approach, with the following methods:

• Domestic Revenue: Emphasis on internal revenue collection to fund projects, which minimizes reliance on external debt.
• Concessional Loans and Grants: Collaborations with international donors and development banks support specific projects.
• Public-Private Partnerships (PPPs): By mobilizing private sector investment in critical sectors, PPPs significantly reduce the government’s financial burden and improve efficiency.

4. Economic Benefits of Public-Private Partnerships (PPPs)

PPPs offer a unique model for maximizing resource utilization while minimizing financial risks to the government. The 80-20 cost-sharing model illustrates substantial economic benefits:

a) Cost Savings

Through PPPs, project costs are shared, reducing government expenditure. For instance:

• On a 500 billion TZS infrastructure project, the government only contributes 100 billion TZS, with the private sector covering 400 billion TZS.
• This model also introduces efficiencies that can lower project costs by 20%, saving an additional 20 billion TZS.

b) Increased Investment and Economic Output

By leveraging PPPs, Tanzania’s 54.575 trillion TZS development budget could attract an estimated 43.66 trillion TZS from the private sector, enabling increased investments in other critical areas.

c) Risk Mitigation

With an 80% private sector contribution, the government’s risk exposure is substantially reduced. For example, in a 200 billion TZS project, a cost overrun of 30 billion TZS would mean the government only covers 6 billion TZS, transferring the remaining 24 billion TZS risk to private investors.

d) Enhanced Revenue Sharing

Infrastructure projects like the Julius Nyerere Hydropower Project can enhance revenue through efficient PPP implementation. With a 2,115 MW capacity, an estimated revenue of 10 million TZS per MW annually could see a 15% efficiency increase under PPPs, yielding an additional 31.725 billion TZS in revenue.

e) Job Creation and Economic Stimulation

PPPs can create approximately 10,000 jobs, injecting 10 billion TZS into the economy annually. This job creation benefits local economies and provides citizens with employment opportunities, improving livelihoods and increasing domestic consumption.

f) Long-term Economic Growth

By facilitating infrastructure development, PPPs can increase trade efficiency by 5%, which translates to a 1 trillion TZS boost in annual economic output. This growth benefits both the government and private sector through improved services and a broader tax base.

5. Strategic Advantages of PPPs for Tanzania’s Development Goals

• Reduced Capital Outlay: The government’s 20% contribution allows for optimal allocation of public funds, supporting other essential services.
• Enhanced Service Delivery: PPPs bring private sector expertise, accelerating project timelines and improving quality.
• Long-term Sustainability: By integrating private sector investment, Tanzania ensures the longevity and adaptability of its infrastructure and energy assets.
• Competitive Regional Positioning: Improved infrastructure and energy resources strengthen Tanzania’s position as a leading trade and logistics hub in East Africa.

The strategic implementation of Public-Private Partnerships in Tanzania is driving sustainable economic growth, enhancing service delivery, and creating employment opportunities. By balancing risk, leveraging private investment, and focusing on key sectors, Tanzania is building a resilient economy that benefits both the public and private sectors. Through continued collaboration, PPPs will play a crucial role in realizing Tanzania’s long-term development goals.