Africa and the Middle East

Overcoming Barriers to Propel Tanzania’s Economy

November 25, 2014  • Michael (Mickey) Bergman, Vanessa Zuabi, Guest Blogger

*This piece was originally published on The Huffington Post.

“Zanzibar” elicits images of sandy beaches, clear calm waters, private resorts, and idyllic vacations filled with great food, spices, music, and culture. However, this is only one side of the famous island. Outside Zanzibar’s resorts and sandy beaches, poverty and a lack of running water, electricity, and jobs is a reality for the majority of the local population. Zanzibar, together with Tanganyika, form the country we know as Tanzania. Both share these similar challenges, and they are not alone.

The challenges faced by those at the bottom of the economic pyramid are vast and unique in every country. There are, however, many business models and innovations designed to solve these obstacles that can be applied in communities around the globe. A new wave of entrepreneurs are entering these developing economies and creating market-driven solutions that not only generate profit, but provide products and services critically needed by bottom-of-the-pyramid consumers to improve quality of life and access to resources and services.

Tanzania in particular, while underdeveloped, is full of potential and opportunity largely untapped. Tanzania’s GDP is expected to grow by 7 percent in 2014, particularly in areas of transport, communications, manufacturing, and agriculture, and supported by public investment in infrastructure. With an abundance of natural resources and steady reforms over the last decade, Tanzania is well positioned to be the next big market in East Africa.

Tanzania, while underdeveloped, is full of potential and opportunity largely untapped.

Many entrepreneurs have already entered the Tanzanian market to take full advantage of the country’s potential, and target the still significant number of bottom-of-the-pyramid consumers. For example, Greenlink, an enterprise bringing affordable solar energy powered computer labs to schools has been operating in Tanzania for almost six years. With a shortage of electricity particularly in impoverished rural areas, students lacked access to computers and computer skills training. Greenlink equips schools with solar paneled energy to power computer labs. Parents pay small additional fees each year to ensure their children receive access to these educational resources.

Greenlink attests to the enormous opportunity to do business in the country. As Greenlink co-founder Pepijn Steemers states, “If you expect to make large returns in two years, you’re in the wrong market. But, if you’re patient and willing to persevere for five to six years, you’ll be successful here.”

Greenlink is a great model for how social enterprises can have an impact in the Tanzanian economy and take advantage of the enormous opportunities for businesses interested in targeting the bottom-of-the-pyramid market. As Greenlink illustrates, expansion into the Tanzanian market provides many benefits for businesses, but there are barriers of entry.

The barriers to entry vary widely, and depend on the political, legal, and business environments in each county. However, doing business, particularly in these emerging economies, is largely based on who you know. Almost all entrepreneurs highlight the importance of having good local partners that can help navigate the often-unpredictable environment for launching or expanding your business in such a country.

To address these barriers and help businesses and investors find opportunities and the right local partners, the Aspen Institute Global Alliance Program (GAP), in partnership with the US Department of State’s Global Partnership Initiative, led a Partnership Opportunity Delegation (POD) to Tanzania October 27th through November 1st. The mission of POD is to help lower the barriers of engagement for small-to-medium sized enterprises and investors, thus encouraging business, investment, and partnership expansion in emerging and developing economies like Tanzania. In partnership with local entities such as Costech and DTBi, based in Dar Es Salaam, Tanzania, the delegation was able to meet with relevant government ministries, business leaders, local entrepreneurs, and investors interested in bringing market-driven solutions and new enterprises into the Tanzanian market. While it’s relatively easy for large companies and multinational institutions to expand into such markets, the small and medium sized enterprises and investors have the most opportunity for impact in the local communities.

For example, Wello, based in India, solves a key issue of access to water for families, and helps individuals, particularly women, that travel miles to collect water. With limited access to running water, women waste valuable time spent away from work and school to complete this daily chore. Wello has specially designed a “water wheel” that women can easily fill and roll with a handle rather than carrying 20 kilos of water on their head for many miles. It saves time, energy, and resources that women in rural areas of India can spend elsewhere. As Wello gains traction in India, they’re looking to new markets that could see value in such a product. The water needs are comparable in Tanzania, and during meetings with local partners, the response to Wello was immense.

Our delegation allowed the opportunity for Wello to connect with relevant local partners to assess how they could expand into the Tanzanian market.

“Over the course of a single week, I received a crash course in how to do business in East Africa,” said Wello Water Founder and CEO Cynthia Koenig. “The POD offered a rare and valuable opportunity to develop relationships with a wide variety of stakeholders with an interest in the region — potential partners, investors, government officials, and entrepreneurs. We candidly shared success stories and lessons learned.

Thanks to insights and advice gained on the ground, Wello was able to evaluate potential opportunities quickly; by the end of the week, I had developed our initial market entry strategy, drafted a distribution agreement, and identified three viable local partners.”

Lowering the barriers of engagement and facilitating strategic local partnerships brings innovation, jobs, and investment into countries that have enormous opportunity to grow in the next decade, particularly on the African continent. Making sure that small and medium sized enterprises and investors have access to these less known and less developed economies is key to creating the access to resources, tools, and jobs so critically needed on the ground, as well as supporting the entrepreneurs targeting these key markets.

Mickey Bergman is the executive director of the Global Alliances Program at the Aspen Institute. Vanessa Zuabi is the founder of JSR Consulting.