Tanzania: Who’s laughing now?

Timid emergence
In 1986, Tanzania emerged somewhat timidly from a socialist background and embraced a policy of growth that was to be driven primarily by the private sector on the back of economic liberalisation.

“There was a genuine will by the government in Tanzania [to develop through the private sector] but there has to be a will and a way,” said Marcus Watson, Strategy Consultant at development advisory group Dalberg. “At the moment, there are a lot of the challenges.”

It is a viewpoint that is echoed by Munjal Shah, Director of Marketing at TechnoBrain, a leading software application provider in Tanzania. TechnoBrain ranked among the top 15 in an annual survey of the top 100 mid-sized companies in Tanzania, conducted by Nation Media Group and PricewaterhouseCoopers.

Shah believes that while the nation quickly realised that the structural adjustment programmes of the 1980s were not beneficial to the economy, it had unrealistic expectations on the transition to an open market economy and how fast it would fix the country’s woes.

“People are now learning that building a new sustainable open market economy is extraordinarily difficult and complex,” he says.

But with it came a gradual acceptance of the role that a flourishing private sector would play in increasing Income levels and eradicating poverty.

Some of the ways in which the Tanzanian government has attempted to kick-start private sector involvement include the 1997 Investment Act (supported by various public and private bodies such as the Tanzania Investment Centre and the Tanzania Private Sector Foundation); the 2003 National Health Policy; and the 2009 Kilimo Kwanza (“Agriculture First”) initiative.

All three policy frameworks have achieved a level of success, and today, Tanzania’s private sector employs close to 80% of its population, according to Vimal Parmar, Head of Research for sub-Saharan Africa at finance advisory firm Burbidge Capital.

The country has recorded strong growth in the past five years, averaging real GDP growth of 6.7% annually, significantly higher than Kenya’s 5% (World Bank statistics). In 2012, key contributions to GDP growth stemmed from trade (16.4%), agriculture (13.6%), manufacturing (11.5%), real estate (8.1%), and mining (2.6%), collectively accounting for 52.2% of GDP, says Parmar.

Some of the larger names that dominate these sectors include the Bakhresa Group which recently added a media division to its successful milling, transport, packaging and manufacturing lines; MeTL which is a $1.3bn business with interests in manufacturing, real estate, trading and haulage; and the Quality Group which has 17 companies spanning industries such as automotive, engineering, trade, real-estate, food processing.

These key sectors, Parmar said, will retain their lead going forward since, with the exception of agriculture, they all recorded an average annual GDP growth rate of over 7%.

TechnoBrain’s Shah sees the telecommunications, ICT and financial institutions as spearheading private sector growth, based on the success of companies like Airtel and CRDB Bank.

“The wider adoption of technologies such as mobile payments and online document processing have given larger opportunities for private sector to flourish,” he added.