Many people ask me the question: Why does business fail in Tanzania? The country is one of the fastest developing countries in Africa and has a lot of potential. However, there are many factors that contribute to the survival of a business in Tanzania. There are three primary factors. These factors are lack of capital, poor management and poor quality products or services.
Tanzania has a lack of adequate sources of capital. Most of the people are from agricultural backgrounds and most of them do not have a regular source of income. This makes it difficult for them to access capital for setting up a small business or for purchasing raw materials to employ others to work. They also face problems in finding customers. They do not have enough demand to make it worthwhile for merchants to open their shops.
Tanzania has many challenges, especially when it comes to managing small businesses. The government and private sector need to cooperate and make the task easier for businesspeople. Tanzania's inefficient administration system and shoddy performance render many businesses insolvent. The unstable political situation, the poverty-ridden rural background and the high rate of unemployment combine to make running a small business very challenging. Lack of effective finance management is the biggest hurdle.
Another reason why a business fails in Tanzania is poor management. With a limited understanding of the market, entrepreneurs often neglect to implement processes needed to improve performance and maximize productivity. They spend most of their time trying to improve productivity instead of checking how things are being managed inside the company.
Lack of quality service is another reason why a business fail in Tanzania. The government cannot provide adequate infrastructure to support any business, whether big or small. This forces entrepreneurs to seek help from external agencies or companies that are already established in the country.
Tanzania's natural resources are also a major constraint on business growth. Water, gas and minerals are in great supply and are in short supply. This forces businesses to seek help from companies that have established operations in the area. However, these agencies are not always able to operate with much professionalism and quality control, leading to major failures in delivery.
A final reason why small businesses fail in Tanzania is because the government is often unable to deliver. Most governments aspire to be like China, which concentrates on expansion at the local level. Unfortunately, most governments focus on building hospitals, roads and education facilities at the municipal level before they think about how to develop communities. Communities in Tanzania face many problems such as insecurity, poverty and poor health. Since most governments are unable to provide basic services, they have to turn to NGOs and foreign companies that can provide quality services at a reasonable cost. Many African countries also depend on donations from various developed countries.
The above reasons clearly demonstrate that the usual reasons that cause a business to fail in any country, be it developed or developing, are not applicable in Tanzania. Tanzania has been able to overcome the problems by improving its government policies and implementing policies that promote business development. Its development strategy was modified in 2021 to encourage businesses to set up shop in areas outside the tourist belt. This policy has had an important impact on Tanzania's tourism sector. In fact, the number of tourists visiting Tanzania has increased dramatically since this policy was implemented. In fact, the number of foreign tourists visiting Tanzania has increased by almost 40 percent since the implementation of this policy.
Tanzania's development plan was controversial from the start, since the majority of the critics were from the opposition party that governed the country for the previous five years. However, this was mainly due to poor leadership as opposed to corruption in the government. The introduction of a transparent and competitive environment for businesses was the single most important policy change implemented by the Tanzania government. This was followed by tax incentives and improved infrastructure to attract larger businesses.
Why Small Business Fail in Tanzania is because small businesses are unable to compete on a level playing field with established multinational companies due to lack of resources and infrastructure. Since most governments do not give grants and other forms of financial aid, most businesses are forced to operate on a tight budget. Moreover, since most governments do not provide clear information on the eligibility requirements for receiving grants or other types of financial assistance, most potential entrepreneurs are deterred from starting a business. One might argue that a country should adopt a policy which allows everyone to participate in economic activity since businesses are vital to the national economy. However, if a country allows only big businesses to participate in its economic development, it will become impossible to create jobs for the millions of small businesses which remain inactive.
Tanzania has made great progress in its agriculture sector. However, the lack of agricultural development leads to a major food export problem. Tanzania is one of the world's poorest countries in terms of per capita income. A recent report by the World Trade Organization stated that there is a dearth of growth in infrastructure in Tanzania. Lack of progress in education, health, electricity, transport, and business led to a decline in tourism revenue. Experts opine that Tanzania needs to address these root causes if it wants to prevent a 'why small businesses fail in Tanzania' scenario.
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