The Great Debate: Why Tanzania may be the Best Country to Launch and Scale Your Tech Startup!

This post was written by Nadine Antoun for MEST.

The Great Debate

How do African countries rank when it comes to creating the enabling environment for technology startups to thrive? Do tech entrepreneurs fare better on the West, East, or South of the continent? And, if a founder is looking to launch a tech venture in which African country can one find a startup ecosystem with the right balance to jump-start startup success? This is the Great Debate!

The Tanzanian edition of the Great Debate is part of a larger series of articles that explores startup ecosystems in the nine 2020 MEST Africa Challenge markets, also including Kenya, South Africa, Senegal, Rwanda, Ethiopia, Nigeria, Ghana, and Cote D’Ivoire. These African countries have some of the most developed tech startup ecosystems on the continent. Where some markets have the right culture, and mature capital markets, others can leverage stronger networks and ICT Infrastructure. Check out the entire series and decide which African country you think is the best market for tech startups!

Why Startup in Tanzania

Entrepreneurs who are keen to start a business in Sub-Saharan Africa should seriously consider Tanzania. Even though the country was ranked 141/190 by the World Bank for its ease of doing business, which makes it intimidating to some entrepreneurs, it can be very rewarding. There are many good reasons to start a business in this free-market economy, including its untapped potential and vibrant and booming market, stable economy and political environment, and strategic geographic position.

Untapped Potential with a Vibrant and Booming Market

• In 1973, Dodoma was named the new capital of Tanzania, but the relocation was only announced in 2016. Up until now, Dodoma still doesn’t have the capacity to accommodate the significant influx of people. In the near future, Dodoma’s local economy is expected to grow and the city will urbanize. This will create important business opportunities for small and medium enterprises, particularly in the service sector.
• With an aggressive industrialization plan, Tanzania has plans to evolve into a middle-income economy by 2030. By the same year, Dar Es Salam, Tanzania’s commercial hub should reach the “megacity” status. With a projected population of 10 million people, this will make it an attractive consumer base for tech entrepreneurs. Companies already established in the area will have a huge advantage of being the first movers.
• According to Sahara Ventures Founder Jumanne Rajabu Mtambalike, “Tanzania’s innovation ecosystem is among the most diverse [with] Data Labs, Arts Spaces, Living Labs, Community Spaces, Makerspaces, Creative Spaces, Incubators, Accelerators, and Technology Hubs [who] are distributed across the country even in extremely rural areas”.
• The demand for communication services has risen at a rate of 50% per year with consumers demanding services such as fixed-line telecom, broadcast, and data. However, Tanzania still lacks a cost-effective telecom service and a strong fiber-optic network. This will create opportunities for telcos and telecom engineering companies, as well as for technology entrepreneurs in education and training and in systems to support information flow.

About two-thirds of the Tanzanian population is under 25 years old. Teenagers are the most valuable customers in tech since they usually haven’t developed brand preferences and are early adopters.

Economic and Political Environment

• The United Republic of Tanzania boasts good macroeconomic policies, a stable political environment, structural reforms and is resilient to external shocks. As a result, the country has kept a steady Gross Domestic Product (GDP) growth of around 6 to 7 % each year since the end of the 1990s, making it one of Africa’s fastest-growing economies.
• Even though corruption remains a serious challenge for Tanzania, President John Magufuli, who has been elected in 2015 has been working on suppressing it. He has also pledged to remodel the public sector, making it leaner and overall more efficient. He also plans to build Private-Public Partnerships (PPPs), and attract investments in the industrial sector development.
• The Tanzania Investment Center is a one-stop destination for business permits, licenses, and approvals.
• Tanzania is a member of the World Bank Foreign Investment Insurance wing, MIGA (Multilateral Investment Guarantee Agency) which promotes foreign direct investments in developing countries. The country is also a member of The International Centre for Settlement of Investment Disputes (ICSID) for arbitration, conciliation, and fact-finding cases.

Strategic Geographic Position

• Tanzania is actively working on cross-border activities and projects, such as the Ethiopia-Kenya Power Interconnector and the Zambia-Tanzania-Kenya Power Interconnector. Those large Power Pools will create a bigger regional electricity market.
• The Dar Es Salaam port is an international gateway, with worldwide connections to the Middle and the Far East, Europe, Australia, and America. It also serves landlocked countries such as Malawi, Zambia, Democratic Republic of Congo, Burundi, Rwanda, and Uganda.
• Tanzania has many airports, with the three main ones being Dar es Salaam International Airport, Kilimanjaro International Airport, and the Zanzibar Airport. Several international airlines provide direct flights to Tanzania, while the national airline, Air Tanzania, offers routes inside the country as well as internationally to Zambia, South Africa, India, and China.

Ecosystem Players

Tanzania’s startup ecosystem has a variety of stakeholders that offer non-financial business support, mentoring, and co-working spaces. Key ecosystem players located in this market include Sahara Ventures, Seedstars Dar Es Salaam, Robotech Labs, Vodacom Digital Accelerator, and Ennovate Hub.

Sahara Ventures offers a wide range of services including project management, events management, and support for post-revenue and early-stage startups with an accelerator program.

Seedstars Dar Es Salaam is a global network of coworking spaces for tech entrepreneurs to collaborate and innovate to solve current issues.

Robotech Labs is an innovation hub that provides STEM and robotics workshops to children in order to accelerate their learning curve.

Vodacom Digital Accelerator helps innovative businesses to grow by giving them access to mentors, co-working spaces, hosting assistance, staff advisors, and business development training. The program chooses startups from various industries including Fintech, E-commerce, Telecom, Health, Mobile, Education, Agriculture, and Media.

Ennovate Hub is a 6 months tech-driven incubation program that was created to support entrepreneurs with creating, building, and launching prototypes that can solve problems in the community. Ennovate Hub helps entrepreneurs from the idea stage to when “they start gaining sustainable business traction for their product.”

Jenga Hub is a learning space for children and young people to develop digital fluency. The hub uses technology to deliver “memorable learning experiences that improve learning outcomes and make learning more engaging and inventive.”

Investors

For financial services — smart money for startup growth in Tanzania, entrepreneurs have access to grants, angel investors, pre-seed, debt, and equity investment. Some of them include AHL Venture Partners, Atraxx Group, Beyond Capital Fund, TBL Mirror Fund, and Lundin Foundation.

AHL Venture Partners invests in cutting-edge, scalable businesses that have a high impact on Africa’s social and environmental challenges. AHL offers minority equity, quasi-equity, and debt investments to early-stage companies.

Atraxx Group supports small to medium-sized companies with growth investments and consulting services. The Group is mainly focused on companies offering solutions in the agro-industrial, light manufacturing, and logistics sectors.

Beyond Capital Fund invests in seed-stage companies that target poverty-stricken communities in East Africa and India. Their portfolio companies offer “critical goods and services” in the sectors of healthcare, sanitation, food security, financial inclusion, and energy access.

TBL Mirror Fund is a Private Equity Fund for Small and Medium Enterprises in East Africa. The fund managers and investors come from various backgrounds and are greatly involved in the companies they invest in. The TBL Mirror Fund targets high potential and high-growth companies.

The Human Development Innovation Fund, which is financed by UKAid, provides grants to businesses, NGOs, and research institutions in the education, health, and water, sanitation and hygiene sectors.

Startup Spotlight

A shining example of how startups are thriving in Tanzania is Sheria Kiganjani. The online legal digital platform “enables people to access various legal services, materials as well as connecting people with nearby advocates. An end-user can access various legal articles, materials, news, reported cases, Acts, legal documents, and information by using his mobile phone.” In 2019, Sheria Kiganjani was named Seedstars winner of the Seedstars Dar Es Salaam competition.

MEST Africa Challenge Country Finals: Tanzania

Join MEST and Microsoft on July 8th, 2020, for the online Tanzania Country Finals of the MEST Africa Challenge. Startup finalists will pitch their business ventures virtually to a panel of expert judges made up of leaders, investors, and ecosystem partners. The best from the Tanzania finals will go on to compete against winners from eight other countries including Nigeria, Senegal, South Africa, Ghana, Côte D’Ivoire, Ethiopia, Rwanda, and Kenya for $50,000 in equity investment and a chance to join MEST’s Africa-wide startup support network. Register to join, here.