THE STATE OF THE STARTUP ECONOMY IN TANZANIA

Written by Nice Msangi & Rose Urassa

How do we build a disruptive and exponential startup economy in the context of dominant traditional economic systems and relatively unsupportive startup environments? This is important that featured strongly during Sahara Sparks 2022.

In dissecting the question, prominent individuals who attended the Sahara Sparks 2022, including Retired Ambassador. Ami Mpungwe and Dr. Hassan Mshinda, retired Director General of COSTECH, argued that:

“Just keep moving, don’t wait until things have stabilized, use any and every resource you have, and make a change, however hard it gets. But, in the long run, the government must intervene; it must step in to help these young developers and innovators because they lack venture capital funds or private equity funds. The state should have a role in this.” AMI MPUNGWE

While Mpungwe’s focus was on encouraging innovation and technology champions and youth to keep pushing the frontiers, echoing the above view, Dr. Mshinda expressed that:

“We need to have a matured ecosystem that can move things forward. If we really need not leave anyone behind, we need to build an ecosystem that will support the startups.” DR. MSHINDA

In light of the lessons from Sahara Sparks 2022, “Potential Unleashed,” let us discuss aspects that need improvements to create a conducive environment for startups to thrive, drawing wisdom from the panel discussion featuring DR. Hassan Mshinda, former Director General of COSTECH, Ami Mpungwe, former Ambassador, and Zahoro Mohaji, Founder of Startup Association Tanzania on the state of startup economy in Tanzania.

Startups are the continent’s future; With African governments and traditional businesses struggling to create employment, startups can solve that problem. Studies have shown that 450 million jobs will be needed by 2035 to cater to young people looking for work.

Hence we must build resilient startup ecosystems and capitalize on the Startup Economy to address unemployment issues. This can be achieved by understanding and supporting the potential of startup companies in terms of job creation, attracting investment, and, most importantly, solving our current and future challenges.

Therefore some things need to be set right for startups to thrive in Tanzania. Several issues that must change were highlighted during the panel discussion. These include:

Political and environmental issues

The matters of good governance, democracy, the rule of law, and human rights have nothing to do with politics but rather with unleashing human potential and exchanging the context of human freedom, and that’s where flexibility comes in. In an environment where all this is suppressed, it doesn’t allow the space for creativity to kick off and thrive. What is needed is for the political climate to enable people to have the freedom to think, create, innovate and imagine beyond the impossibilities.

Embracing disruption

Digital transformation is a paradigm shift that we need to embody. . One of the best ways of leveraging the change brought up by the digital era is by capitalizing on the startup economy because this incorporates new companies, businesses, and processes enabled by technology. Most of these companies have business models that can be scaled up both in Tanzania and outside Tanzania. These companies operate in a very different structure from the traditional companies we are accustomed to. Therefore, we as a country must leverage the dawn of the digital era and all the disruptions it embodies.

The legal and regulatory environment

One of the barriers to the growth of the Tanzania Startup ecosystem is the rigidity and conservative nature of our legal and regulatory frameworks on essential issues facing startups. As a country, we have to revisit our legal and regulatory frameworks to remove obstacles that hinder the further growth of the ecosystem and also furnish the startup ecosystem with an amalgamated legal framework that regulates it. The needs of startups are cross-cutting, sometimes requiring interventions from multiple ministries and public agencies; hence it’s imperative to have an enabling law/s.

Local investor and mentor network

One of the biggest challenges facing the startup ecosystem in Tanzania is the need for more involvement of local investors in the early stage of the business when a startup needs seed-stage funding support. We must encourage solid local mentors and investor networks by creating incentives for high-net-worth individuals and Corporate Venture Capital (CVC) to invest in startups. Corporate involvement in the local startup ecosystem is crucial for developing enterprise-quality-level startups.

Summing up, there was a notable agreement between and among the panelists that to create an environment that enhances the growth of startups, we as a country need to work on the following.

1. A comprehensive policy framework that accepts and embraces the 4th Industrial Revolution as a reality.
2. Establishment of the legal and regulatory framework that facilitates startup growth.
3. Create sustainable social and economic infrastructure and the education system that respond to current and future needs.

One should be encouraged by this because, as much as there is a lot to be done to improve the quality of the startup ecosystem in Tanzania, the country still provides a unique and fertile space for startups to emerge, grow and sustain their operations. For instance;

• The startup ecosystem terrain still needs to be developed in terms of numbers, innovative ideas, coverage, awareness, and a broader understanding of the values of startups. Such provides unique opportunities for startups to capitalize on the uncultivated startup ecosystem.
• Tanzania has a rich natural resources endowment, particularly in sectors that have yet to attract startups. A case in point is the agriculture, tourism, and energy sectors, which have great potential to allow youths to build startups around them.
• With an aggressive industrialization plan, Tanzania has evolved into a middle-income economy. We must tap into potential such as the rapid growth of commercial hubs such as Dar Es Salam. It is projected that by 2030 Dar es Salaam will become a “megacity” with a projected population of 10 million. This will offer unique and expansive opportunities for innovators, tech experts, and entrepreneurs to create opportunities for themselves and others in terms of job creation, employment, and national economic growth.

As a community and as a country, it is imperative for us to leverage the 4th industrial revolution and the opportunities it embodies to attain sustainable social-economic improvements.