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Tanzania. Battling for Attention in East Africa? Future Watch Report, May 2015

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The most significant transformative factor on the economy of Tanzania is the large natural gas reserves that were recently discovered. Dar es Salaam is one of the fastest growing cities on earth yet infrastructure to support this growth is poor.

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Tanzania. Battling for Attention in East Africa? Future Watch Report, May 2015

  1. 1. Tanzania – Battling for Attention in East Africa An Introduction, May 2015
  2. 2. Contact information dfasdf Amatka (Pty) Ltd www.amatka.com info@amatka.com +27 (0)79 618 6570 Unit 608, 6th Floor 76 Regent Road (The Point Tower) Sea Point 8060 Cape Town, South Africa Amatka – Insight Africa Services Amatka (Pty) Ltd is a South African company founded and owned by Finnish entrepreneurs based in Cape Town. Amatka provides knowledge and views of business opportunities in Africa with focus on Southern and Eastern Africa. Insight Africa also supports networking in these countries. Tekes – the Finnish Funding Agency for Innovation Tekes is the main public funding organisation for research, development and innovation in Finland. Tekes funds wide-ranging innovation activities in research communities, industry and service sectors and especially promotes cooperative and risk-intensive projects. Tekes’ current strategy puts strong emphasis on growth seeking SMEs.
  3. 3. Contents Introduction...........................................................................................................2 Background .......................................................................................................2 Purpose.............................................................................................................2 Recommended Use and Liability Disclaimer ......................................................2 Tanzania in a Nutshell .......................................................................................3 Political Economic Climate: Business Point of View...............................................5 Trade and Investments ......................................................................................5 Growth: Drivers and Challenges ........................................................................6 Political Economy: Supporting Factors and Challenges......................................7 Key Areas of Potential Growth ...........................................................................8 Innovation Ecosystems .......................................................................................10 Innovation Hubs...............................................................................................10 Research.........................................................................................................10 Large Companies ............................................................................................11 Sectors in Focus .................................................................................................13 Energy and Environment .................................................................................13 Healthcare and Wellbeing................................................................................15 Education ........................................................................................................16 ICT, Digitalisation and Mobile Solutions ...........................................................17 Future.................................................................................................................20 SWOT: Tanzania.............................................................................................20 Scenarios ........................................................................................................21 Information Sources............................................................................................22 Front cover picture: Traffic on the Maktaba Street/Azikiwe Street in Dar es Salaam. The white tower on the left belongs to the St. Alban Angican Church by Jojona (Wikipedia)
  4. 4. 2 Introduction Background This report provides, in a nutshell, facts of Tanzania and insights into future business opportunities. The report is based on statistics, recent articles and publications, and expert views. The report has been prepared by an international team coordinated by Amatka (Pty) Ltd, a private company owned by Finnish entrepreneurs, based in Cape Town, South Africa. The report is part of Team Finland’s Future Watch Program in Africa, called “Strategic Partners for Innovation Actives Africa Services”, and coordinated by Tekes, the Finnish Funding Agency for Innovation. The focus of the process is on the four most promising (defined by size, growth and ease of doing business) Sub-Saharan African countries: Kenya, Nigeria, South Africa and Tanzania. Sectors in focus are: ICT, mobile & digitalisation, education, health & wellbeing, energy & environment. Elements of Strategic Partners for Innovation Activities Africa Services are: Continent Report Sub-Saharan Africa, Country Reports (Kenya, Nigeria, South Africa, Tanzania), Alerts: arising signals for the future, Updates: frequent summaries of alerts and Contact Database. Purpose The reports, and this service, focuses on issues, facts, signals and insights that are likely to play a role in doing business in, for example, Tanzania’s medium term future (2-5 years). This report DOES NOT provide sales leads or provide a picture of how to establish operations in Tanzania. Using present facts and information, combined with future insights, signals, and scenarios, the report suggests possible futures and the related implications for Finnish SMEs interested in doing business in Tanzania. Recommended Use and Liability Disclaimer Before reading this report, it is recommended to get familiar with the Sub-Saharan Africa Continent report. Additionally, it is strongly recommended that the readers always check the latest information; situations in Africa can change overnight. Amatka has made every attempt to ensure the accuracy and reliability of the information provided in this report. However, the information is provided "as is" without warranty of any kind. Amatka does not accept any responsibility or liability for the accuracy, content, completeness, or reliability of the information contained in this report. No warranties, promises and/or representations of any kind, expressed or implied, are given as to the nature, standard, accuracy or otherwise of the information provided in this report nor to the suitability or otherwise of the information to any particular circumstances. Amatka shall not be liable for any loss or damage of whatever nature (direct, indirect, consequential, or other), which may arise as a result the use of this report, or from use of the information in this report.
  5. 5. 3 Tanzania in a Nutshell Tanzania’s economy has continued to perform strongly, with current growth at around 7%. This is driven largely by communications, transport, financial intermediation, construction, agriculture and manufacturing. In the medium term, growth will be supported by the ongoing investments in infrastructure and the projected good weather conditions. Also, these medium-term growth projections are backed by continued investments in the recently discovered natural gas reserves in Tanzania and the expansion in public investments, as well as the related investments aimed at stabilising power generation in the country. History in Brief Before Europeans arrived in 1498 (Vasco Da Gama), Bantu people, Persians, Romans, Arabas and Masai people had migrated to Tanzania. During the 16th century the Portuguese took control of the coast but in the 17th century they were driven out by Arabs from Oman. In 1885 the Germans began taking over the region and the British had taken control of the island of Zanzibar. After the First World War Tanzania was handed over to the British and it was called Tanganyika. Tanzania became independent in 1961 with Julius Nyerere as prime minister. In 1962 Tanzania became a republic and Nyerere became president. In 1967 Nyerere adopted a policy of socialism. The cornerstone of that policy was called Ujamaa (family hood). Nyerere planned to create huge collective farms. The people were encouraged to move into large villages in which food and other goods would be produced collectively for the whole community. However the policy proved disastrous for Tanzania, agricultural production slumped and the Tanzanian economy was wrecked. In 1985 Nyerere resigned. He was replaced by Ali Hassan Mwinyi who privatized business and tried to purge corruption. He also encouraged foreign investment. As a result, the economy of Tanzania began to grow steadily. In 1992 Tanzania became a multi-party democracy and in 1995 Benjamin Mkapa became president. In 2005 Jakaya Kikwete was elected president of Tanzania. Tanzania is a one party dominant state with the Chama Cha Mapinduzi (CCM) party in power. Tanzania Today While poverty has declined over the past 10 years, Tanzania is still a very poor country. Approximately 40% of Tanzania’s adult population earns less than $1.25 per day, while nine out of 10 Tanzanians earn less than $3 per day.
  6. 6. 4 Overall, there have been improvements related to the agriculture, construction, mining and tourism. The overall value of both exports and imports has been increasing. An increasingly high proportion of capital inflows has been derived from private capital, with a correspondingly lower proportion from official aid. The most significant transformative factor on the economy is the large natural gas reserves that were recently discovered. The ‘Big Results, Now’ initiative (BRN) took off in 2013. The BRN initiative is inspired by a similar Malaysian programme with the aim of facilitating the achievement of Tanzania’s Development Vision 2025. Government is focusing their efforts’ on accelerating the attainment of results in six priority areas, with emphasis on leveraging private sector investment through Public Private Partnerships (PPPs). Figure 1 provides some of the figures at a glance as well as distances between commercial capital Dar es Salaam and some other cities. Figure 1. Key Indicators - Tanzania
  7. 7. 5 Political Economic Climate: Business Point of View Trade and Investments According to the World Bank the overall value of Tanzania’s exports increased by 9.4% in 2014. Increases in the total value of manufactured exports and service exports compensated for the decline in the value of traditional agricultural exports. Over the same period, the total value of imports increased at a similar rate of 9.2%, in part driven by increases in both oil and construction-related imports. Tanzania’s largest export partners in 2012 were South Africa, Switzerland, India, China and Kenya. Figure 2. Tanzania’s export destinations and import origins 2012 (source: Observatory of Economic Complexity/United Nations COMTRADE) Figure 3. Trade between Finland and Tanzania 2012 (source: Observatory of Economic Complexity/United Nations COMTRADE) According to the International Monetary Fund (IMF), the slump in oil prices is expected to further buoy Tanzania's economy in 2015 following a GDP expansion of more than 7% in 2014.
  8. 8. 6 Of the four focus countries (Kenya, Nigeria, South Africa and Tanzania) Tanzania is the least developed and highly aid dependent. Official development assistance (ODA) to Tanzania increased from $1.6 billion in 2000 to $3 billion in 2010, which amounted to 14% of GDP. More than 40 development partners provide support to Tanzania and aid inflows represented only 40% of total capital inflows. Growth: Drivers and Challenges The capital, Dar es Salaam, is rapidly becoming a hub city for businesses, with a rapidly growing population and market place. Discoveries of significant offshore natural gas offer huge potential rewards. Dar es Salaam’s port is relatively efficient but feeling the strain of increased traffic. There are significant transportation and logistics upgrades to lessen cargo waiting times, including a new port at Bagamoyo, along with a handful of other similar investments. Infrastructure is critical for Tanzania and its neighbours: Malawi, Zambia, Democratic Republic of Congo, Rwanda, Uganda and Burundi. The development of the transport sector will offer new opportunities for public-private partnerships in the region. Future economic growth will, as in almost every African country, depend on the ability of the government to remove existing constraints on businesses. The most significant constraints are electrical, energy, transport, infrastructure, and economic diversification. What Tanzania needs is competitive labour-intensive sectors to absorb the growing youthful labour force. Growth in employment has so far largely come from domestically-oriented industries with the exception of tourism. There is a need to promote competitiveness gains in labour-intensive sectors such as manufacturing and services. The agricultural sector still contributes to approximately one quarter of GDP and provides employment to approximately 75% of all Tanzanian workers. CASE: FIRST TANZANIA-BASED PRIVATE EQUITY FIRM Private equity flows into East Africa have increased significantly in the last five years. Some PE funds have sealed deals with Tanzanian companies but they mostly operate out of Nairobi or Johannesburg. Mkoba was co-founded by a team of Tanzanian professionals led by former World Bank vice-president Frannie Léautier and businessman and economist Jitesh Ladwa. “In Tanzania, and in most post-socialist countries, we are faced with a triple problem of capital. One is that the state banks, where we used to get money, are gone because of liberalisation of the banking sector,” says Ladwa. “Foreign banks are primarily from South Africa and their cultural affinity is to lend money to their own people. Third is that even European financial institutions don’t give significant [amounts of] money to African-owned businesses.” Ladwa explains that business people who did well in the 1970s and 80s in Tanzania relied on “political patronage” and connections to land their first job, and then earn enough money to grow their businesses. Mkoba wants to prove business people can receive funding and support from a PE firm to grow their businesses, based on their potential and not their social connections. Although Tanzania has a group of successful family-owned businesses, Ladwa says most of these were established decades ago and are headed by older businessmen
  9. 9. 7 who may not be as innovative and nimble as the emerging crop of entrepreneurs in their 20s and 30s. However, he notes a “cultural bias against giving money to locals” is making the entry into business of young entrepreneurs difficult. “A decade ago we wouldn’t complain because there was not much economic opportunity in Tanzania. But today Tanzania is booming. There are a lot of young people with ideas but they can’t get money. We want to give money to local enterprises. We want to build African equity and African management experience.” The fund is focused on various sectors including agribusiness, services and manufacturing, urban renewal, financial services and innovative ventures in renewable energy and ICT. Ladwa says Mkoba has already shortlisted more than 20 companies for funding it hopes to start in June 2015. “Surely in a city of five million people you can find trustworthy young Africans who are enterprising and who will look after the money and make profits. If we make an example of 20 people whom we fund, and they grow into something bigger, then other investors will join in and they will give more money [to local businesses],” he says. Source: How we made it in Africa Political Economy: Supporting Factors and Challenges The ‘Big Results, Now’ initiative (BRN) took off in 2013. The BRN initiative is inspired by a similar Malaysian program with the aim of facilitating the achievement of Tanzania’s Development Vision 2025. The government is focusing its efforts on accelerating the attainment of results in six priority areas, with emphasis on leveraging private sector investment through PPPs. Priority areas named in the BNI initiative are:  Energy and Natural Gas  Agriculture  Water  Education  Transport  Mobilization of Resources The most significant transformative factor on the economy is the large natural gas reserves that were recently discovered. The most significant impacts of this discovery on the local economy will not be felt for at least seven to ten years. Careful management of the revenues derived from these natural resources will be required to ensure the optimal use of these revenues and to achieve inclusiveness. However, despite some positive developments, there are a number of challenges to business that are prohibiting the Tanzanian entrepreneurial environment and activity:  Insufficient and unreliable infrastructure  Protectionist economy  Prohibitive requirements to access capital  Insufficient supply of equity capital  Income taxes perceived to be prohibitively excessive
  10. 10. 8 Key Areas of Potential Growth Of the four focus countries (Kenya, Nigeria, South Africa and Tanzania) Tanzania is by far the least developed. Whereas Kenya has recently gained a lot of attention as the Eastern African entry hub, Tanzania has drawn only fractions of this. For instance, Kenya has largely been conquered by foreign investors and large multinational companies. Tanzania still has some potential areas of growth. Tanzania may be a good choice for companies and investors looking for a home base for their Eastern African operations. For example, a large, underdeveloped formal sector enables small businesses to pursue new opportunities without being blocked by large, established firms. The property market in the capital, Dar es Salaam, is booming with office buildings, shopping centres and residential buildings. The increasing appetite for real estate in Tanzania is partly driven by a thriving agricultural industry and recent oil and gas discoveries that have led to an influx of expatriates into the country. Trade is also a key driver as traders from Zambia, Nigeria, Congo and Mozambique come to buy goods. CASE: SELLING COSMETICS IN TANZANIA In 2011, when Swedish entrepreneur Marie Englesson approached global cosmetics brands to distribute their products in Tanzania, many indicated they were not interested in the market. “Getting suppliers on board was much harder than I thought. They felt it was a little too early,” she recalls. Undaunted, she opened the first outlet of her business Atsoko in May 2012 in Dar es Salaam. The tide is gradually changing and more international brands are now eyeing Tanzania. “One advantage I have now is being three years ahead of everyone else,” says Englesson. Englesson attributes the entry of more global brands to rising demand for high-quality make- up and beauty products among urban women. She notes global brands were initially hesitant to enter the market because there were few formal retailers. But this too is changing with the entry of Kenyan supermarket chains Uchumi and Nakumatt, and construction of more shopping malls. She notes that Mlimani City mall, one of the oldest in Dar es Salaam, is being expanded, while a new facility, called Mkuki House Shopping Mall, is under construction close to the city centre. “Dar es Salaam is still three or maybe five years behind Nairobi, but urban Tanzanian women are trendy and have an eye of fashion. They are a very into cosmetics.” “The average spend per client is about US$15 to $20 per occasion for one or two products. But then we have sometimes women who come in and buy a whole kit for $100 or even $150,” she says. Englesson attributes the success of Atsoko to the fact that its products are sold at the same prices as offered in Europe. The stores also have make-up artists who advise and help clients pick the right products. In fact, one of the critical roles for Atsoko staff is educating customers. “There is not much knowledge on cosmetics and make-up, so we need to educate customers on what’s a genuine or a fake product. We have to teach them the benefits of buying real brands and not going to the Kariakoo [informal] market to buy something they don’t know what its origins are.” But, she adds, it’s hard to find staff who have the necessary experience because the formal retail sector is undeveloped. And another challenge is registering new products with the Tanzania Food and Drugs Authority (TFDA) – a process that can take six to nine months.
  11. 11. 9 Englesson was inspired to start the business after working for telecommunications company Tigo in Tanzania and Rwanda. “I had a number of female colleagues at Tigo and whenever I went to Europe they’d ask me to bring them products they couldn’t get hold off,” she recalls. But she notes that it would probably have been easier to start a business in Sweden because she knew how things work there compared with Tanzania, and as a result progress has taken much longer than she expected. “You need to consider five to 10 years before you have a steady stable business. I am in my third, and only now am seeing things fall to place. In the first two years we had to formulate the business model and one needs to understand it takes time to find the right concept. “The one thing I can say for sure: it is never boring.” Source: How we made it in Africa
  12. 12. 10 Innovation Ecosystems Innovation has the potential to be the catalyst to change economic development in Tanzania. There is a need to increase the quality of services and the quality of outcomes in order for Tanzania to reduce poverty and further its development. Compared to the other focus countries in Sub-Saharan Africa, the Tanzanian ecosystem is lacks private actors and is heavily government and donor managed. Thus, the innovation ecosystem framework used for the Sub-Saharan Africa continent and other focus countries cannot be applied to Tanzania as many framework actors are completely missing. Examples of missing actors include: private investors including multinational corporations, philanthropists and large scale events and competitions. Innovation Hubs According to IST-Africa (2014) Tanzania’s innovation hubs are:  Dar Teknohama Business Incubator (DTBi), established in 2011 as a Publi, Private Partnership between InfoDev and COSTECH.  Buni Hub (previously known as Innovation Space), established at COSTECH in October 2011 within the TANZICT, bilateral project between the Finnish government and Tanzanian government.  KINU, established in July 2012 as “a Social Enterprise with the mission of concentrating, growing and accelerating the Tanzanian tech and social landscape”, founded by individuals (funded by Google and The Indigo Trust) who started Tanzania’s tech community with events such as BarcampDar, Hackathon and Apps4Africa.  University of Dar es Salaam ICT Incubator (UDICTI). Research Tanzania has 11 Public Universities, 17 private universities and 26 private institutions of Higher Education. The list of TOP 10 Tanzanian Universities is presented in Figure 4.
  13. 13. 11 Figure 4. List of TOP 10 Universities in Tanzania (source: Webometrics Ranking of World Universities) Large Companies As of November 2014 there were twenty-two listed companies in the Dar es Salaam Stock Exchange. Among notable companies in Tanzania, according to Wikipedia (2015), are:  Air Tanzania, airline  MIC Tanzania Limited (Tigo), telecommunications  Mwananchi Communications, media  Precision Air, airline  Quality Group Limited, conglomerate  Tanga Cement, cement  Tanzania China Friendship Textile Company, originally founded as Friendship Textile Mills Limited  Tanzania Electric Supply Company Limited (TANESCO), electricity supply utility  Tanzania Railways Corporation, state-owned enterprise  Tanzania Telecommunications Company Limited, telecommunications  Tanzanian and Italian Petroleum Refining Company Limited, refinery  Vodacom Tanzania, mobile Additionally there are several large, family-run, conglomerates in Tanzania:  MeTL (self-declared annual turnover: $1bn): Trading in 200-plus items, manufacturing of a wide range of goods including bicycles and textiles, agriculture, insurance, transport and logistics, mobile telephony, infrastructure and distribution.
  14. 14. 12  Bakhresa Group (self-declared annual turnover: more than $600m): manufacturing and distributing dozens of products, from ice-cream and biscuits to fizzy drinks and flour, trading agricultural commodities, ferrying passengers, and fuel distribution.  Sumaria Group (self-declared annual turnover: $130m): At least 25 companies since 1975, in plastics manufacturing, cotton ginning, drinks bottling, food processing, pharmaceuticals, soaps, cement, flour and, more recently real estate, biogas and finance.  MAC Group: growing and processing tea and sisal; manufacturing cosmetics, toiletries, electrodes, detergents, slippers, pharmaceuticals and more; shipping, mining and insurance. It is expanding in east and southern Africa.  MM Integrated Steel Mills, Motisun Holdings Industrial manufacture of steel sheeting and pipes, rubber, paint, fizzy drinks and hotel operator.
  15. 15. 13 Sectors in Focus Energy and Environment Tanzania has a wide variety of energy resources, which include natural gas, biomass, hydropower, geothermal, coal, solar and wind power. Much of this energy potential remains unexploited. The vast majority of people do not have access to electricity. The rural population is nearly completely excluded from this source of modern energy: 2% of rural people and 39% of urban people have access to electricity while 94% of the rural population use biomass. Only 10% of households have access to the national grid, and only 1% is able to use electricity for cooking. According to the United Nations Development Programme (UNDP), petroleum, hydropower, and coal are the major sources of commercial energy in the country. Electricity generation, transmission and distribution in Tanzania have been through the Tanzania Electric Supply Company (TANESCO). The company is wholly Government-owned and is responsible for 98% of the country's electricity supply. Two-thirds (381 MW) of Tanzania's installed capacity is hydro-powered. Blackouts and power rationing as a result of low water levels in the hydro dams have forced TANESCO to rely on gas-powered generators and to look increasingly at thermal and gas projects for future capacity increases. Hence, the government is encouraging investment to expand generating capacity, distribution systems and developing indigenous sources of energy. The electricity generation system contains two private independent power projects (IPPs), which are connected to the TANESCO grid: Independent Power Tanzania Ltd (IPTL) and Songo Gas (SONGAS). Opportunities in the energy sector include: 1. Wind energy. This is used to pump water for irrigation and to meet domestic and livestock water needs. There are two project developers planning to establish 50 MW and 200 MW projects in Makambako and Singida areas respectively. 2. Solar energy. This is a proven technology and various actors have been trying to commercialize the technology in rural areas. Solar photovoltaic (PV) systems have been used for telecommunication, lighting, refrigeration, water pumping and powering electronic equipment at individual residences, schools and health centres/rural dispensaries. 3. Biomass. The country has considerable resources from forest and agricultural residues with an economic possibility of establishing CDM project activities, by producing electricity for industrial and cooking for domestic purposes. 4. Micro/mini hydro. Tanzania has an estimated 3,800 MW of economic hydro potential capacity. Only 15% of installed capacity has been developed. The country's hydro potential is estimated at 4,500 MW of which only around 563 MW is developed. It is estimated that 100 GWh/yr could be produced from micro/mini systems. Currently only around 32 GWh/yr is produced from these smaller systems, many of which are private schemes run by religious missionaries.
  16. 16. 14 5. Solid Waste. Urban waste is a fast growing problem driven by rapid urban population growth. This is generally at least twice rate of national population growth. This is evidenced by the increasing illegal dumpsites, irregular collection of garbage, and rising garbage piles and dumps in city alleys, streets and residential areas. Most cities and municipalities have failed to cope with the increasing growth of waste production. In early 2015, the Tanzanian national government announced, "One Million Solar Homes," an energy commitment to ensure that a million Tanzanian homes have access to solar electricity by the end of 2017. This project is expected to provide solar electricity for 10% of the nation's population and generate over 15,000 solar jobs. Currently, 86% of Tanzanians depend on kerosene and candles for light, which are known to be inefficient, dangerous and polluting. The plan sets a model for other nations working towards the Power Africa initiative announced by President Obama in 2013. This Initiative aims to double the number of people with access to electricity in sub-Saharan Africa. The One Million Solar Homes initiative will be implemented by Off Grid Electric Ltd., a rapidly growing solar company in the developing world. Known in Tanzania as "M-POWER," Off Grid is leveraging the leasing model of their equity investor, and the largest US solar provider, SolarCity, is bringing families in the developing world solar at radically affordable costs. Monthly payments are as little as twenty cents per day. CASE: SOLAR PIONEER ON ADAPTING ENERGY MODELS TO MEET RURAL NEEDS In 2014 Tanzanian solar solutions company Rex Energy launched a solar powered charger for mobile phones to address the needs of people living off the grid. Depending on the package, the solar chargers can cost between US$15 and $50, but Rex Energy believes the way forward is to allow flexible payment plans. “We know capital is always a challenge for rural villages, but if we give them renting charges where a person can pay a few cents of a dollar a day, or even say $1 a week, then they can afford it because we spread the cost over a length of time.” The system is portable and can also charge laptops and other appliances in remote areas not linked to the national grid. “We have a number of solutions, including for fishermen who can use a solar powered system instead of kerosene lanterns. We have a solar lantern that even attracts fishes to the nets… which besides cutting fuel costs also helps them catch more fish, and at the same time helps reduce carbon emissions.” The company also has a mini-grid, pay-as-you go energy solution where a solar system is installed in a community. Households can pre-set a time to access electricity and thus only pay for the electricity they use. “We actually learnt about this from what is happening in Bangladesh. There they have quite good models and we are working with them to see how we can bring it to Africa, in particular Tanzania. Instead of people having to buy big solar panels, they only pay for electricity… at a very affordable cost.” Source: How we made it in Africa
  17. 17. 15 Healthcare and Wellbeing Tanzania’s health system can be described “complex and pluralistic”. It’s comprised of public, private, and donor stakeholders, operating at several different levels including national, regional, district and community levels. According to the latest National Health Accounts report, 8.2% of the GDP is invested in health care and 6.5 % of government expenditure is spent on health. Donor dependency for health care financing typifies Tanzania’s health system. Tanzania mainland has approximately 237 public and private hospitals, of these, 57 are district hospitals owned by the government and 35 are designated district hospitals, owned by faith based organisations. Statistics show that qualified health workers in the health sector fill only 35% of positions. This leaves the country with a severe human resources crisis. This crisis, together with other challenges facing the sector, has led to formulation and implementation of an eHealth strategy as a way of supporting progress. As a result, in 2013 Tanzania launched an eHealth Strategy (2013-2018). There are many eHealth and mHealth projects in Tanzania, most of them under the umbrella of Public Private Partnership (PPP). The country's health sector is characterised by a fragmented landscape of ICT pilot projects and numerous data and health information system silos. There are significant barriers to the effective sharing of information between healthcare participants. The challenges with eHealth adoption include:  low ICT budgets  poor infrastructure to support health services  unreliable electricity supply  lack of ICT skills CASE: WAZAZI NIPENDENI (parents, love me): AN SMS SERVICE PROVIDING INFORMATION FOR PROSPECTIVE PARENTS Through the innovation, more than 125,000 pregnant mothers have had access throughout the country. “More than five million messages have been sent under the initiative, which began in 2012,” “Messages include time sensitive reminders for such events as antenatal clinic visits and taking of malaria prevention medication. The system also sends health tips when the information is relevant to the subscriber,” The text messages incorporate a broad range of complementary topics, including prevention of Mother to Child Transmission of HIV/Aids, antenatal care; family planning, malaria prevention and nutrition. A new mother says the text messages she kept receiving from her mobile phone were her lifeline during the entire pregnancy. “I enrolled to the service (when I was one month pregnant after hearing it advertised on the radio”. “I only sent a message titled, mtoto, (child) to the number 15001 as per the advert instructions and after giving details on my pregnancy, I started getting short messages first on a daily basis and later at least four times a week on my pregnancy status and advice on nutrition, when to go for my antenatal clinic visits, when
  18. 18. 16 to take my malaria prevention drugs, and general health care.” Juanita Ferentinos, Partnership Director mHealth Tanzania Partnership CDC Foundation says that providing high quality antenatal care information during pregnancy to keeping mothers and babies healthy has had a tremendous impact on reducing maternal and new born mortality rates in Tanzania. Source: The East African, 2014 Education According to UNICEF, USAID and Borgen Project, Tanzania has seen tremendous growth and progress in the education sector over the last decade. However, despite rapid expansion in primary and secondary school enrolment, the country’s education system continues to struggle to deliver quality education and to keep its children in school. Below are some facts about education in Tanzania:  Growth in Education. According to a census report, 94% of children aged 7 to 13 were enrolled in primary school in 2011. Only 59% of children were enrolled in primary school in 2000.  No Fees. This jump in enrolment is due in part to Tanzania’s abolition of primary school fees in 2001.  Class Size. Due to rapid enrolment numbers, Tanzania faces extreme overcrowding within its classrooms. The average government primary school classroom holds 66 pupils. In some areas of the country, there can be as many as 200 pupils in a single classroom.  Student: Teacher Ratio. While the number of enrolled students continues to grow, a corresponding increase in qualified teachers does not.  Student: Latrine Ratio. The pupil to latrine ratio is an even larger culprit when it comes to factors that hinder Tanzanian children’s education, for girls, especially.  Drop Out Rates. In 2010, 68,000 children dropped out of primary school.  Pregnancy. In 2010, 7000 girls dropped out of primary and secondary schools due to pregnancy.  Exams. Only 53% of students passed the primary school’s leaving examination in 2010; the majority of children who passed the examination were boys. Though the statistics that reflect the enrolment growth are impressive, the system supporting education in Tanzania is decrepit, if not dysfunctional. CASE: HOW TANZANIA’S UBONGO MEDIA BUILT A BUSINESS BY MAKING MATHS COOL A Tanzania social enterprise is changing perceptions by helping children in East Africa improve their understanding of the subject through an interactive educational cartoon show that combines mathematical concepts with fun animated and catchy songs. Established mid-2013, Ubongo Media produces a 30-minute cartoon series called Ubongo
  19. 19. 17 Kids which uses stories to help learners understand basic maths concepts as opposed to memorising the methodology. The series is based on three kids who attempt to solve problems in their community using their maths skills. The three get help from talking, and singing, animal friends. The edu- cartoon series airs every weekend on the national TV station TBC, and across the region via Chinese Pay TV company, Star Times. “Maths is seen by many children as a boring, hard subject. This attitude has a lot to do with how teachers teach maths. We wanted to make it cool and easier to understand,” says Cleng’a Ng’atigwa, co-founder of Ubongo Media. The Tanzanian artist started working on the concept a few years ago after studying animation at a local college. He partnered with a maths teacher to produce one animated story that was viewed by children in his community. When he met Thai-American documentary filmmaker, Nisha Ligon, they decided to set up Ubongo and scale their reach to a wider audience. Every Saturday about 600,000 watch the show in Tanzania. “Our research shows there is a 4% improvement in maths among kids who watch compared with those who don’t,” says Doreen Kessy, chief operations officer at Ubongo Media. The company makes revenues from corporate sponsorships, licensing to broadcasters and SMS interaction with kids. “We also realise the potential in licensing characters’ rights. For instance, Mama Ndege is very popular. We could make money by giving licences to companies that would want to use those characters,” says Kessy. Kessy says Ubongo receives positive feedback from children and parents with demands for longer episodes. However, doing business in Tanzania is “not easy,” she adds. “There is a lot of corruption and bureaucracy. For example, children have been asking for Ubongo Kids DVDs. So we manufactured DVDs in Thailand because it was more affordable. We shipped 10,000 copies and they arrived at the port last August. “They were released six months later, because of bureaucracy. Obviously we will never do that again. It has been a time- consuming process with people asking for bribes every step of the way.” Ubongo Media sees growth potential for its cartoon series across the continent. “We now have Ubongo Kids in Swahili and English available to viewers in East Africa. And we intend taking the English version across the continent. There are 440 million children in Africa and we are bringing them a fun new way to learn. And that opens the door to a future of digital learning,” says Kessy. The company is also developing a new edutainment show targeted at learners aged seven and below. It will focus on teaching English as a second language. Source: How we made it in Africa ICT, Digitalisation and Mobile Solutions Tanzania recognises the importance of ICT and Innovation to support socio- economic development as part of the realisation of Development Vision 2025. Two of the three main policies supporting innovation and entrepreneurship are currently (2015) under revision: the updated Science Technology and Innovation (STI) Policy will incorporate Entrepreneurship and the National ICT Policy of 2003 is under review as part of the development of a new implementation strategy.
  20. 20. 18 The digital infrastructure in Tanzania has improved with the fibre-optic network, investment in local Internet Exchange Points, migration to IPv6, and construction of the National ICT Backbone (NICTBB). The eGovernment Strategy was put in place in September 2012. National Priorities (source: IST-Africa 2014) include:  eInfrastructures  Cloud Computing/ High Performance Computing  Cyber Security  Mobile Computing  ICT for Creativity and Learning  eHealth  eAgriculture CASE: PROVIDING SOFTWARE SOLUTIONS IN TANZANIA Fayaz Valli, 25, is the founder of Tanzania-based software development company GetCore Group. The business provides solutions such as web designing, mobile applications, software development and graphic designing. Valli started his business while studying software engineering at a Tanzanian college. Initially he developed mobile apps for businesses, government agencies and NGOs. In 2013 GetCore formally began operations. Elevator pitch Our goal is to enable businesses to trade efficiently using technology. We have built a web- based point of sale product called GetPOS, after conducting research in areas like Dar es Salaam’s bustling central market Kariakoo, where thousands of businesses operate. The system is simple to use and affordable compared to software which comes with a hardware terminal. We have a lot of power outages in Dar es Salaam, and when they occur terminals don’t work. So most traders now use my software as back-up since it’s accessible, even on their phones. Finance I saved money from small jobs I did while still in college. Last year I got US$14,000 funding from Tanzania Commission for Science and Technology (COSTECH). Looking for investors here can be tough. It is difficult to convince them to invest in a start-up. Any investor would ask you to show them your three year financials. Now, where would I get that? Risks The biggest risk is that Tanzania is not tech-savvy yet. Most business owners prefer face-to- face trading and will need a while to get used to e-commerce. Although smartphone usage is increasing, people’s knowledge in technology is still low. Most successful form of marketing I tried using flyers but it just did not work. From my experience what’s best is when I demonstrate to a potential client how the service works. I joined the global business networking organisation BNI through which I have met many other businesses who are now our clients. I also attend many networking sessions where I meet potential clients. Most exciting entrepreneurial moment
  21. 21. 19 I get excited when I face new challenges. I like to build software that solves a particular problem then move on to the next challenge. I have found this journey in entrepreneurship very inspiring. I am a very technical person but am now looking to invest in businesses outside the IT industry. I recently went into agribusiness. I have a 10 acre farm in Morogoro where I am growing oil seeds, and am looking to go large-scale with additional crops such as sisal and cashew nuts. Biggest mistake, and key learnings When I started the business I trained three junior developers with the hope they’d improve their skills and eventually work with the company for a couple of years. But they all gave up at some point and I’d spent a lot of time training them. Human resources is challenging here, but I have learned how to operate within the environment. When I get large projects now I sub-contract to people in both India and China who have better expertise and good work ethics. Source: How we made it in Africa
  22. 22. 20 Future SWOT: Tanzania The services sector is likely to continue to be a major driver of Tanzania’s economic expansion, and communications and banking are expected to do particularly well. Further, the completion of the pipeline transporting gas from Mtwara to Dar es Salaam should ease electricity constraints. Tanzania’s economic policy is centred on its Poverty Reduction Strategies, namely MKUKUTA II in Mainland and MKUZA II in Zanzibar. The broad goal of the 2025 Development Vision is to become a middle-income country by the end of this period. The MKUKUTA document is highly ambitious and has a wide range of objectives. However actual implementation has been disappointing. Partly in response to this, the ‘Big Results Now’ initiative was launched in 2013, modelled on the Malaysian development model. Tanzania is in many ways lagging behind Kenya, which is in the same region. However prices (e.g. property) have skyrocketed in Nairobi (Kenya). Dar es Salaam (Tanzania) – has become one of the fastest growing cities in the world – and could reasonably be an alternative point-of-entry for newcomers in the Eastern African region. This SWOT matrix below provides an investors’ viewpoint of Tanzania. Strengths Weaknesses  Strong economic growth performance over the past decade, and good prospects for future growth.  Relatively cheap (in a regional context) to start and do business.  Healthy levels of foreign direct investment (FDI) and a continued good outlook for this indicator, capital market is gradually being liberalised.  Rich in minerals, significant amount of natural gas reserves.  Political risk is relatively low in an African context.  One of the top tourist destinations in Africa.  The level of socio-economic development is very low.  Very small middle class.  Development very aid-dependent.  Struggles with the basic infrastructure related challenges (schools, healthcare etc.) that are necessity for economic growth.  Small-scale agriculture prevailing – to large degree substance farming.  Government’s national development plans are (too) ambitious and execution can be described as disappointing. Opportunities Threats  Tourism sector has significant room for expansion, especially if tourism infrastructure is improved.  Benefiting from the concerns about terror attacks in Kenya.  “Big Results Now” initiative, or parts of it, become reality.  Niche industries: as small economy is able focus and attract investments.  Finds synergies with the regional “powerhouse” Kenya and is able to benefit from Kenya’s success.  Poor governance, red tape and corruption hinder development and keep private investors away.  Ease of doing business remains weak.  No improvement in education.  Dar es Salaam is one of the fastest growing cities on earth yet infrastructure to support this growth is poor.  Gas turns into curse.
  23. 23. 21 Scenarios Figure 5 provides four potential scenarios for Tanzania 2020. These are based on various sources of information and signals and information available. The two main components of the scenarios are: 1. Level of economic diversification 2. Openness of the economy Any of the scenarios, or combinations of the scenarios, could come true. Much depends on local government policies and actions of international players, and other uncontrollable factors. Figure 5. Scenario framework The scenarios for Tanzania in more detail are described in Figure 6.
  24. 24. 22 Figure 6. Four Scenarios for Tanzania 2020
  25. 25. 23 Information Sources Publications: African Development Bank: Tracking Africa’s Progress in Figure 2014 African Development Bank, Development Centre of the Organisation for Economic Co- Operation and Development, United Nations Development Programme: African Economic Outlook 2014, Global Value Chains and Africa’s Industrialisation The Economist: Africa is the horizon 2015 African Business Outlook Survey KPGM: Tanzania Snapshot 2014 International Energy Association: Africa Energy Outlook, 2014 World Bank: World Development Report 2015 Internet: http://www.worldbank.org/en/country/tanzania http://www.afdb.org/en/countries/east-africa/tanzania/tanzania-economic-outlook/ http://www.tekes.fi/en/programmes-and-services/grow-and-go-global/team-finland-future- watch/ https://atlas.media.mit.edu/en/ http://www.theafricareport.com/East-Horn-Africa/tanzanias-2015-economic-growth-to-exceed- last-years-7-per-cent.html http://blogs.worldbank.org/africacan/is-tanzania-s-economic-growth-an-urban-phenomenon http://www.howwemadeitinafrica.com/making-sense-of-africas-middle-class/43318/ http://www.howwemadeitinafrica.com/private-equity-firm-wants-to-propel-tanzanian- businesses-to-greater-heights/47230/ http://www.ist-africa.org/home/files/IST- Africa_ICTInitiatives_ResearchCapacity_v1_281114.pdf http://www.webometrics.info/en/Africa/Tanzania%2C%20United%20Republic%20of?page=0 http://en.wikipedia.org/wiki/List_of_companies_of_Tanzania http://www.ft.com/cms/s/0/7d166be4-1ebe-11e3-b80b-00144feab7de.html http://www.undp.org/content/undp/en/home/ourwork/environmentandenergy/strategic_themes/ climate_change/carbon_finance/CDM/tanzania.html http://www.howwemadeitinafrica.com/tanzanian-solar-pioneer-on-adapting-energy-models-to- meet-rural-needs/42750/ http://allafrica.com/stories/201310010076.html http://www.theeastafrican.co.ke/news/Tanzania-best-in-e-health-uptake-/-/2558/2246082/- /2eqj91/-/index.html http://borgenproject.org/education-tanzania-10-important-facts/ http://www.tdcf.org.uk/education-in-tanzania-facts.html http://www.howwemadeitinafrica.com/how-tanzanias-ubongo-media-built-a-business-by- making-maths-cool/46814/ http://tanzict.or.tz/

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