TSA POLICY BRIEF 01/2022

A COMPARATIVE BASELINE STUDY ON

THE ESTABLISHMENT OF A STARTUP
POLICY IN TANZANIA
Authors: Prof. Samuel Wangwe, Prof. Louis Cyril Henry Fourie, Mrs. Margareth Nzuki, Dr. Flora Ismail
Tibazarwa, Eng. Dr Dugushilu Mafunda Mlilwa, Mr. Ayoub Mtafya, Mr. John Kajiba, Mr. Mussa Mayala
Martine, Mr. James Kasindi, and Mr. Abel Songole.

PREAMBLE:

The current situation of the startup environment in Tanzania is presided by lack of a

specific law or policies on startups. The existing laws of Tanzania are not expressly
defining the term “startups”, as there is no specific law or policy on startups. In
addition, there is no single definition for startup provided by literature; however, in
the context of this study, the term “startup” is used to refer to new entrants in
business with high growth potential and knowledge-driven, regardless of whether
they are termed as startups or small and medium enterprises (SMEs). A new firm
or entrant with “high growth potential, mostly based on the perceived potential for
growth and innovation”, is therefore the adopted definition for this report. Startups
can contribute to Tanzania's industrialisation and Development Vision 2025 (TDV
2025) by accelerating growth and development in a supportive environment.
Based on the success of startup policies and Acts in Africa to create a conducive
environment for startups, as well as economic growth in the benchmarked
countries, it is highly recommended that Tanzania establishes a startup policy to
align the current fragmented and dispersed startup regulations and laws and
streamline current processes. In formulating a new startup policy, Tanzania should
simultaneously address the gaps and weaknesses in current policies (and
legislation).

The Study was prepared by the Economic and Social

Research Foundation (ESRF) on behalf of the Ministry of
Investment, Industry, and Trade (MIIT) and the
Tanzania Startup Association (TSA). Supported by The
Kingdom of The Netherlands

+255-655 780233  Website: www.esrf.or.tz

STUDY OBJECTIVES: METHODOLOGY:

The main objective is to present key The study employed mixed methods
challenges that influence the startup and approaches. These included a
business environment in Tanzania and review of existing policies, laws,
present clear and feasible reports/publications, and primary data
recommendations for policy and collection through consultations with
legislative reforms. The study has relevant stakeholders.
developed a framework for reviewing
the business climate for startups by The research team developed and
comprehensively reviewing existing administered three questionnaires for
policies as well as legislative and the baseline study. One questionnaire
regulatory framework challenges in was for ecosystem actors, the second
the light of current best pan-African was for innovation support
practices, including Tunisia, Senegal, organisations (ISOs), and the third
and Kenya. was for startups. The respondents to
the ecosystem support survey
Specific objectives of the project included academic departments,
include: national think tanks, business
registration agencies, development
i) Review and diagnose current partners, regulators and Government
challenges facing startups in ministries. Some of these were also
Tanzania that are related to consulted as part of key informant
policies, as well as to legal and interviews.
regulatory frameworks, which
could potentially be addressed The surveys were administered from
through realistic (legislative) November to December 2021. About
reforms 16 ecosystem actors, 25 innovation
support organisations (ISOs), and 63
ii) Benchmark selected recent African startups responded to the survey.
startup acts from Tunisia, Senegal
and Kenya to develop a clear FINDINGS:
understanding of Tanzania's
legislative framework, comparative The Status of Startup Environment
strengths and weaknesses and its in Tanzania
potentials for reform
In analysing the status of the startup
iii) Prepare tangible, feasible and clear environment in Tanzania, the focus
recommendations and best included assessing key domains that
practices for policy and legislative affect the entrepreneurship and
reforms and further dialogue with
innovation ecosystem as a whole.
policy makers and startup
These domains, which are commonly
ecosystem stakeholders
used in the evaluation of the
iv) Prepare a comparative baseline entrepreneurial ecosystem1, include
report containing startup policies, laws and regulations,
challenges, benchmarks, best financing, business development
practices and recommendations. support, markets, human capital,

1
ANDE “Entrepreneurial Ecosystem Diagnostic Toolkit”, December
2013
research and development culture, compliance with employment laws.
and infrastructure. Much as there is no Also, in assessment of the regulatory
specific policy and legislation on framework, which is made up of the
startups, we found that there are Central Government and local
several policies, such as the Small and governments, the study found that
Medium Enterprises Policy (2003), the there are no specific incentives for
National Trade Policy (20030, the startups, reporting requirements and
National Research and Development penalties for non-compliance do not
Policy (2010), and the National favour new entrants in business (i.e.
Economic Empowerment Policy (2004) startups), tax rates are not favourable
which, in one way or the other, have a and the entry requirements have a
direct or indirect implication on the long list of requirements, some of
startup ecosystem and, therefore, which may be difficult for startups to
have impact in the development of comply.
startups. The most important reform
Another important aspect is on the
is introducing a policy on startups by
intellectual property (IP) for startups.
capitalising on existing policies and
There is a need for orderly protection
their direct or indirect implications on
and sharing of proprietary information
startups. The proposed policy on
in the form of intellectual property
startups has to address the gaps in
assets. Therefore, the national IP
the existing policies. One of the
Policy should, among others, seek to
identified gaps is the fragmentation of
encourage strategic protection of IP
policies, while both are addressing
assets from research, in particular
almost the same thing. The new
and, for the benefit of startups, should
startup policy will also need to
put emphasis on the effective use of
harmonise the roles in the policies
utility models/certificates by enacting
that have implications on startups.
detailed provision under the Patents or
The harmonisation has to be on
the envisaged Industrial Property Act
institutional coordination of both
and commercialisation processes with
research institutions and institutions
users such as startups, SMEs and
that oversee other aspects of the
other large enterprises.
startup ecosystem, such as capacity
building and nurturing of startups, One of the most important legislative
creating a conducive environment for reforms to be undertaken for purposes
startups on all pillars or domains of of creating a favourable environment
startups. for the startup ecosystem is passing a
specific piece of legislation on
On legal and regulatory framework, as
startups. Much as policies and laws
one of the key aspects affecting the
are inter-related, it is important to
startup ecosystem, an assessment
enact a particular law that sets
was made on aspects such as business
standards and procedures, which all
entry requirements, the cost of
stakeholders must follow. In addition,
starting business, tax rates, available
having a specific law on startups is
incentives and major compliance
important because, much as the SMEs
issues ranging from tax compliance to
Policy is in place, no legislation has amended to accommodate what will
been passed to give that policy the be in the startup law.
force of law. Also, the National
Benchmarking Other African
Research and Development Policy,
Countries with Tanzania
2010, which is very key in the startup
ecosystem, is not, to a large extent,
reflected in the Tanzania Commission
for Science and Technology Act, 1986,
a key legislation in research and
development. This is so because, after
the passing of the policy in the year
2010, the 1986 law was not amended
to reflect and give legal force to  17 countries
with Small
important aspects in the Policy. Business Acts
(Orange)
 3 Countries with
The startup legislation should Startup Acts
(Blue). These
recognise the pre-startup stage where are Tunisia,
Senegal and
nurturing is crucial for entrepreneurs Kenya
 1 Country (Mali)
to go to the startup stage. The law with a draft
Startup Act
should have clear provisions on the (Blue)

definition of startups and, where

possible, differentiate between SMEs This study benchmarks selected recent
and startups. The law should also African startup acts from Tunisia,
provide for registration and eligibility Senegal and Kenya, as well as the
for registration of startups, establish Startup Act draft from Mali, to develop
institutions responsible for registration a clear understanding of Tanzania's
and coordination of all issues related legislative framework, comparative
to startups, as well as certification of strengths and weaknesses, and its
incubators and accelerators. potential for reform.
Institutions established in the startup
law should also have the role of Startup Acts are legislative
facilitating dialogue between instruments aimed at fostering
regulators and stakeholders of the entrepreneurship and enabling the
startup ecosystem, maintaining the development of new firms with high
register of startups and other growth potential. Most startup Acts
important provisions which are key to create incentives (tax, subsidies,
the startup ecosystem. In addition, procurement, etc.) for firms
there should be provisions of incentive considered as startups according to
or support for startups. For purposes their respective definitions, which are
of avoiding conflicting and multiplicity mostly based on perceived potential
of roles and functions, the startup law for growth and innovation. Criteria to
should have cross-referencing define startups in startup Acts
provisions that link the startup law generally include the number of
with other important legislations, and employees, annual turnover, capital
those other legislations should be requirements, number of years in
existence, clauses on growth establishing a one-stop shop and by
potential, and other qualitative streamlining the process of issuing
criteria, especially on the sector of the building permits (iii) in 2017:
firm. For example, in our assessment expanding the credit bureau borrower
of startup Acts from other countries, coverage and beginning to distribute
we noted that the Tunisian Startup credit data from retailers; (iv)
Act requires an economic model that reducing both exporting and importing
presents a strong innovative and time by creating, in 2016, an online
technological character. system for downloading and
processing custom documents, i.e. the
Three countries in Africa, namely
Tanzania Customs Integrated System
Kenya, Senegal and Tunisia, have
(TANCIS); (v) improving access to
enacted startup legislations. Startup
credit information by creating credit
Acts are also under development or
bureaus in 2015; and (vi) making
consideration in several other African
cross-border trading easier by
countries such as Benin, the
upgrading infrastructure at border
Democratic Republic of Congo, Egypt,
posts and at the Port of Dar es Salaam
Ethiopia, Ghana, Nigeria, and Rwanda.
in 2015.
Kenya, Senegal and, to a lesser
extent, South Africa appear to have Tanzania has a number of areas for
the most comprehensive regulations in improvement compared to many
place. At the same time, Ghana, countries in Africa, offering better
Mozambique, Nigeria, Rwanda and opportunities regarding the ease of
Seychelles require some major doing business. By increasing land and
amendments to their frameworks to property registration fees in 2018,
accommodate startups. Cameroon, Tanzania made property registration
Gabon, Madagascar and Tanzania more expensive. In 2017 Tanzania
have fragmented and dispersed made paying taxes more complicated
individual regulations, with much and costlier by increasing the
room for improvement towards having frequency of filing the skills
a specific startup policy and, development levy and by introducing a
ultimately, a startup Act. workers’ compensation tariff to be
paid by employers. In 2015, Tanzania
Much as Tanzania has no specific law
increased registration fees, thus
on startups like Tunisia, Senegal and
making it more difficult to start a
Kenya have, Tanzania has
business. The introduction of mobile
implemented various regulatory
money levy in 2021 has also disrupted
reforms in the last six years across
the small and medium enterprises
several areas, which create a strong
space in which startups thrive.
foundation towards having a startup
Innovation and technology sector
policy. These reforms include (i)
suffered a setback due to this new
making it easier to start a business by
levy; paying taxes has as well become
launching, in 2019, online company
more complicated for companies by
registration; (ii) in 2018: making it
the introduction of an excise tax on
easier to issue construction permits by
money transfers. Furthermore, several
gaps exist in support services, such as startups, partly due to the fragmented
science, technology, engineering, and and limited availability of information.
mathematics (STEM) training The fragmented funding ecosystem
opportunities in the ecosystem; requires startups to invest significant
business services for entrepreneurs time and resources upfront in
(recruiting, accounting, legal support); attracting funding of smaller amounts
access to early-stage investment than counterparts in the region. The
opportunities; and focus on Government should expedite its
international markets (scaling-up). decision to capitalise development
financing institutions in the country,
Challenges Facing Startups and
who can provide long-term financing
Entrepreneurs
that is needed by startups.

Platforms to explore innovative

solutions: Few platforms support the
1. Scale
1. Private
1. Competition
development of innovative solutions.
The establishment of innovation and
2. Partner
2. Operations 2. Access
3. Government
3. R&D 3. Scaling
a) Network reach

maker spaces would increase access

4. Seed 4. Information
b) Policy
5. Other 5. Networks
c) Validation skills

to innovative products, processes and

services.

Business environment: The study

The study highlights challenges for
covered a number of aspects,
improvement and growth in the
including the legal and regulatory
Tanzania startup ecosystem and
framework whose challenges have
makes recommendations of potential
been highlighted above. Respondents
solutions. Some of the challenges and
quoted the business environment to
recommendations are on the
be unsupportive of their growth.
following:
Several policies that are currently
Resource availability and access: being reviewed, such the SME Policy,
Startups have limited access to Trade Policy, and Investment Policy,
funding for ideation, validation and should accommodate interests of
growth. Having policies that create an startups. As such, there is a need to
environment for promotion and strengthen and establish support
incentivised funding as highlighted in mechanisms to increase access to
this report will stimulate the startup finance, upskilling and validation.
ecosystem. In particular, there is lack Increasing the number of ISOs and
of patient capital - i.e. long-term supporting their operations will boost
capital defined by the investor’s the startup ecosystem.
willingness to forgo immediate returns
Entry and market access support:
and/or exercise some level of
Respondents indicated the
flexibility with the expectation of more
unfavourable conditions for startup
substantial returns in future. Potential
entry and market access. Policy
foreign investors are also not
directives and regulations that protect
knowledgeable about Tanzanian
startup entry are recommended.
Entrepreneurial skills: A moderate where available, such talent tends to
number of respondents indicated that be expensive, while some do not see
lack of entrepreneurial skilling the benefit of compensation in the
programmes is a bottleneck to form of equity during the earlier
performance. In addition, stages of startups development. The
entrepreneurship support Government should intervene in
organisations are inadequately providing opportunities for training
capacitated to provide support to and funding of such programmes
startups. Existing entrepreneurship through existing institutions that are
courses offered by institutions such as providing training in entrepreneurship.
the National Economic Empowerment This can also be achieved through
Council (NEEC) and the University of networking and by forging linkages
Dar es Salaam Business School with related training institutions.
(UDBS) located at the main campus of
the University of Dar es Salaam RECOMMENDATIONS:
(UDSM) should be revisited to Policy Reform
accommodate interests of startups. In
addition, entrepreneurship should be (i) One of the most important and
incorporated into all levels of necessary steps in improving the
education to induce entrepreneur current environment for the
culture from the early stages of startup ecosystem in Tanzania is
education. Programmes on to reform policies that have
entrepreneurship and innovation in impact on startups so as to
higher learning institutions need to be provide more guidance,
strengthened. consistency, clarity, efficiency
and accountability. The reform
Support programmes are short term:
should capitalise on the existing
Most of the support programmes in
policies that are articulate on a
the startup ecosystem are short-term,
number of key issues in the
thus do not provide enough support to
creation, growth and graduation
gain the needed skills, knowledge and
of startups into larger enterprises
guidance to successfully launch and
validate businesses in the market. (ii) The most important reform is to
Medium-term and long-term introduce a policy on startups by
programmes should be designed to capitalising on existing policies,
suit the requirements of startups. such as the updated versions of
Small and Medium Enterprises
Address gaps in support programmes:
Development Policy, 2003 (which
Gaps in existing support programmes
is being finalised as SME
include quality of hubs’ managers, Development Policy of 2022) and
trainers and facilitators, which has the National Trade Policy 2003
resulted in weak institutions mostly
(which is being revised into NTP
focused on light-touch early-stage
2022), as well as on the National
programmes. Also, availability of Research and Development
skilled local talent is limited and, Policy, 2010, and the National
 Economic Empowerment Policy, practices, such as counterfeiting
2004. The proposed policy on and trademark imitations, which
startups has to address the gaps discourage investment in
in existing policies and in the branding and innovation. It is
updated forms of the policies recommended to have a national
intellectual property policy that
(iii) One of the identified gaps is the
should, among others, seek to
fragmentation of policies while
encourage strategic protection of,
they are addressing almost the
in particular, intellectual property
same thing. A startup policy will
assets from research, and for the
bring together the fragments in a
benefit of startups. The policy will
rationalised and coordinated
place emphasis on the effective
policy
use of utility models/certificates
(iv) The new startup policy will need and patents to the benefit of
to harmonise the roles in the startups.
policies that affect startups.
Legislative Reform
Harmonisation has to be on
institutional coordination, on both (i) It is recommended that a specific
research institutions and piece of legislation be passed on
institutions which are overseeing startups. The legislation will set
other aspects of the startup standards and procedures that
ecosystem, such as capacity must be followed by all
building and nurturing of stakeholders and give the startup
startups, and creating conducive policy and related policies the
environment for startups on all force of law
pillars or domains of startups
(ii) It is recommended that the
(v) Institutionally, the startup policy startup legislation should
will be managed by one ministry recognise pre-startup stage
and designed to be inclusive where nurturing is crucial for
regardless of the regulator under entrepreneurs to go to the
whom the startup falls. startup stage.

(vi) A national intellectual property (iii) It is recommended that the law

policy should be designed to should have clear provisions on
ensure orderly protection and the definition of startups and,
sharing of proprietary information where possible, differentiate
in the form of intellectual between SMEs and startups.
property assets.2 In addition, There should also be registration
market competition will be and eligibility for registration of
regulated to assure fairness and startups, institutions responsible
discourage frivolous trade for registration and coordination
of all issues related to startups,
2
MWAKAJE, S. J., (2011). National Study on the Effective Use of
Intellectual Property in Small and Medium Sized Enterprises in
certification of incubators and
Tanzania, accessible at:
https://www.wipo.int/edocs/pubdocs/en/wipo_natstudy_sme_tanza
accelerators, incentive or support
nia.pdf, accessed 3rd January 2022.
 for startups, facilitation of (vii) It is recommended that the new
dialogue between regulators and law should recognise research
stakeholders of the startup institutions under it as incubators
ecosystem, maintaining the of startups, as they will have
register of startups and other specialised knowledge in research
important provisions or their establishing laws should
state clearly that one of their
(iv) It is recommended that
roles is to provide incubation
legislation should avoid
services to startups and, in so
overlapping and multiplicity of
doing, they will be eligible for
roles and functions. This should
incentives provided under the
be done by ensuring that the
Startup Act. Private sector
startup law has cross-referencing
players whose research is not
provisions that link the startup
their core business, but due to
law with other important
the nature of business they can
legislations, and those other
provide support to startups in the
legislations which have been
same or similar way as a
reviewed in this report should be
research institution, may also
amended to accommodate what
register as incubators for
will be in the startups law
purposes of getting incentives
(v) It is recommended that the associated with incubation of
Tanzania Commission for Science startups
and Technology Act, 1986 be
(viii) It is recommended that
amended to ensure there are
legislation should make provision
provisions in the general
for research institutions to be
framework of administration and
given adequate financial and
coordination of the startup
technical incentives. Incentives
ecosystem, as well as legal
could be based on performance
provisions for managing technical
such as the number of incubates
issues on innovation, research
they host and success stories
and development coordination
from their incubation
and a framework on technology
programmes. It is recommended
transfer that is more robust than
that the mew legislation
the one provided for in Section
recognises the special position of
15 (supra)
startups when it comes to tax
(vi) It is recommended that the new rates, filing of tax returns,
legislation should ensure better incentives etc. The tax policy
coordination of research and should recognise their important
development by providing the position in the economy as
Commission with the mandate to potential tax payers, employers
create a pool of research and players in the economy. The
institutions instead of making law should also provide special
them affiliates as per the current tax incentives such as lower tax
law rates or no tax on income for a
 certain period for startups. Such year, depending on the industry
tax incentives will fertilise the and need in any particular period
startup ecosystem and attract
(x) It is recommended that, as a
capital inflow in the economy.
further incentive to startups, the
The incentives that are provided
Minister for Finance may, under
could be changed to normal tax
Section 10 of the Income Tax
rates when startups graduate to
Act, 2004 amend the Second
another stage as will be provided
Schedule to the Act, by
under the law. The legislation
exempting from taxation, income
should prepare different tax
received by startups in the form
returns for startups, which are
of grants or donations from all
simple, with little details and less
sources. In addition, expenses
frequency of filing at TRA. This
incurred by entities that are
will be effected by amending the
registered as incubators, hubs
provisions of the Income Tax Act,
and labs, in financing or
20043 and the Tax Administration
supporting startups be allowable
Act, 2015 on the requirements of
expenses under Section 16 of the
filing returns and the form of tax
Income Tax Act, 2004 in the
returns. Having less frequent
same way as it applies to
filing requirements for small firms
contributions made to charitable
will reduce the cost of compliance
institutions, provided certain
and at the same time provide
control measures are followed
firms with a cash flow
advantage4. The VAT provision (xi) The requirement for physical
should be amended to allow business premises should be
startups to make payment upon relaxed in the case of startups.
receipt of cash, as startups have The requirement for having office
cash flow issues regarding paying premises while applying for a
VAT before being paid for business licence and taxpayer
services rendered or for goods identification number, be
supplied dispensed with when it comes to
startups. Startups should be
(ix) The law on startups should have
allowed to use the address of
a general provision on the
incubators and the like at the
entitlement of tax incentives for
stage of applying for a business
startups with specific incentives
licence and taxpayer
provided under the Finance Act,
identification number
which is issued every financial
year. This will give room for (xii) Application forms should be
introducing new incentives or simplified for startups and other
amending incentives from year to requirements be strapped as well

(xiii) It is recommended that closure

requirements be simplified and
3
4
Section 88 (1) and 91(1) of Income Tax Act, 2004
SME Tax Compliance and Simplification, OECD Centre for Tax Policy
speeded up. Time limits be set
and Administration, 2007
 for TRA to submit their claims should be encouraged by using
with proof so as to speed up the tax breaks or tax deductibility
process of both voluntary and provisions in tax laws
compulsory closure of businesses.
(ii) Support: Innovation support
In addition, the process of closure
organisations (ISOs) are an
of startups upon failure to take
essential support mechanism in
off or for whatever reason be
the ecosystem. The operations of
simplified; for example, the
ISOs are diverse, cutting across
requirements to appoint an
different sectors. There is need
insolvency practitioner may be
for policy and legislation that
dispensed with for voluntary
recognise the different business
closures and publication may not
models (private sector,
necessary be three times as is
Government, civil society, social
the case now, and the period for
impact), which these entities take
closure may be set to one month
and afford them the legality and
from the date of completing all
flexibility to operate
processes instead of the current
requirement of three months5. (iii) Infrastructure: Establishing
innovation and maker spaces
Ecosystem Building
across the country will increase
startups' access. Existing
infrastructure policy and
legislation should accommodate
1. No of 3rd Gen
2. Infrastructure
1.
2.
Enabler
Client
the infrastructural specifics for
1. ICT
3. IP
4. Multi-helix
3.
4.
Startup
Gender
2. Real Estate
these spaces. Property and
energy tax should be supportive.
In addition, digital infrastructure,
1. Pipeline
2. Institutions
3. Programmes

for example a startup portal and

4. Upskilling

application that aggregate

Challenges that startups and information on and for startups
entrepreneurs face in Tanzania will increase access to learning
present opportunities for the and opportunities
improvement and growth of the
(iv) Markets: Influence and
ecosystem. Recommendations
encourage market uptake of
presented can be implemented with
startups' products, processes,
existing policies and legal frameworks,
and services. Flexibility in
and others are unique to the
procurement legislation should be
entrepreneurial ecosystem and may
designed to facilitate market
need stand-alone policy intervention.
entry and market development
(i) Funding: Increase financing flows
(v) Capacity building: The startup
to the ecosystem. Attracting
pipeline should be provided with
funding from the private sector
capacity building promotion and
support. There is need for
5
Section 345 (4) of the Companies Act, 2002
 definitive programmes that (i) Adopt a participatory approach
promote the start of the
1) Tanzania Startup Association
innovation pipeline ideation.
(TSA) and Government of
Entrepreneurship courses at all
Tanzania (GoT) should follow a
levels of education will induce
participatory process of co-
supportive culture from the early
creation by involving
stages of education. It is also
entrepreneurs and their
important to strengthen
partners (investors, incubators,
programmes on entrepreneurship
etc.) from the beginning in the
and innovation in institutions of
co-design and co-evaluation of
higher learning.
startup legislation and policies.
(vi) Research and development: This entails that TSA and GoT
Startups should be provided seek input from industry
access to research results from associations and startup
institutions of higher learning and organisations when crafting and
from research and development implementing regulations
organisations that generate
2) TSA and GoT should consider
knowledge and in-built
using the assistance of
mechanisms for
experienced organisations such
commercialisation. Startups need
as the World Bank and the
access to facilities to iterate and
Innovation for Policy Foundation
improve their products
(i4Policy) to facilitate
(vii) Intellectual property: Tanzania’s participatory processes, for
intellectual property policy should example through the arranging
reflect startups and make of hackathons
provisions for promoting
3) It is recommended that
innovation.
participative process is divided
General Recommendations and into several main phases such
Best Practices as:
a. Agenda setting: emphasise,
These recommendations are derived
unite, define and prioritise
from a benchmark study of selected
b. Drafting: ideate, design and
recent African startup Acts. From the
review
literature and the various legislation
c. Implementation: adopt,
by African policy and law makers,
deliver and evaluate.
certain lessons can be learned, both
regarding the design of startup Acts (ii) Create a holistic ecosystem and
and their technical content. The follow a long-term approach
following recommendations are
therefore made based on the good 1) Startup and entrepreneurship
practices from other African countries. legislation and policies must
recognise the ecosystems and
inter-connections of
 entrepreneurs and should firms as the core policy goal,
therefore be inclusive, holistic, TSA and Government should
and well-coordinated. rather focus on framework
Formulation of legislation conditions such as improving
should recognise the allocative efficiency (healthy
interdependence of the multiple firm entry, exit, allocation of
components of the ecosystem labour and financial resources),
and therefore adopt a holistic encouraging business-to-
ecosystem approach business spillovers (better flow
of knowledge across firms,
2) TSA and Government must
tighter linkages to external
guard against policy
markets, networks, and
fragmentation and contradictory
agglomeration), and the
mandates through excellent
strengthening of firm
inter-agency co-operation.
capabilities (innovation,
Contradictory mandates (e.g.
managerial and
collecting tax revenue and
entrepreneurship skills).
enabling business; protecting
local labour and importing (iv) Clearly define target beneficiaries
skilled labour) should be
carefully analysed and merged a. TSA and Government should
into a single, coherent clearly define the target
framework beneficiaries of the legislation
and policies based on rules
3) TSA and Government should
establish holistic but realistic, b. TSA and Government should
long-term goals with sustained clearly state the policy
political commitment objective(s), whether fostering
growth, creating jobs,
4) TSA and Government should enhancing productivity,
ensure that policy measures are stimulating innovation and
aligned to existing programmes technology development, or
and reforms. supporting under-served and
fragile populations
(iii) Focus holistically on framework
conditions and not only on c. Discretionary processes applied
startup by a selection committee and
subjectively based on perceived
a. The aim of TSA and
high growth potential, job
Government interventions
generation, productivity
should be to improve the
enhancement and innovation,
general business environment
must be avoided since it is
to ease the entry, functioning
difficult to develop and
and exit for all firms
administer qualitative selection
b. Instead of focusing on growth criteria associated with
potential and high-potential unobservable characteristics
 d. It is recommended that, rather, expenditure to justify its
an entitlement selection process continuation or expansion
is followed. This entails an
f. Policy makers should also
objective, rules-based selection
consider outsourcing the
process with clear-cut criteria
implementation of certain policy
for being considered as a
interventions to established
startup or not. Firms qualify
private sector or civil society
subject to submitting proof of
players.
the stated criteria.
(vi) Design interventions to include
(v) Focus on the quality of
the under-served
implementation and monitoring
TSA and Government must
a. TSA and Government should
ensure that policy interventions
focus on the quality of
do not benefit only the
execution and implementation.
privileged and, therefore,
Monitoring and data collection
reinforcing existing inequalities.
mechanisms should therefore
Policies, legislation, and
be established
programmes should therefore
b. Detailed strategies, action be designed not only for high-
plans, adequate institutional growth entrepreneurs, but also
anchoring and co-ordination for under-served regions and
across the public sector, clearly populations.
allocated responsibilities, well-
staffed teams, adequate (vii) Ensure political will and co-
budgets, effective operation between Government
communication (including clear ministries and agencies
guidelines easily understood by To ensure political will and close
users), and quick processes
co-operation between
(including limited bureaucracy
Government ministries and
and non-duplicative paperwork) agencies, it is important that
should be formulated or
the Presidency, all relevant
established
Government ministries (e.g.
c. Compliance should be carefully education and finance
managed to avoid fraud ministries) and agencies, and
the tax authority are involved in
d. All outputs and outcomes the process of the drafting and
should be monitored against finalising of the startup Act.
inputs to determine the success
of policies by a monitoring body (viii) Follow novel processes in the
digital era
e. Impact evaluations should be
undertaken to test assumptions, a. When formulating the startup
ensure inclusive access, and Act, policy makers and
clarify the outcome of the public legislators must adapt their
 regulatory approaches and tools • Access to agile regulation
based on an understanding of such as sandboxes to
emerging digital technologies enable testing of
and business models. This business models (e.g.
includes new principles such as self-driving vehicles, use
agile regulation and regulatory of drones)
sandboxes in select industries • Trust in intellectual
that can accelerate the property rights, including
development of technologies fair use
and innovative business • Access to shared services
models. Agile regulations can and reusable public-
incorporate various approaches sector data
to experimentation, co-creation, • Effective competition
knowledge acquisition, feedback (inter-operability, such as
loops, and course correction. open platforms, access to
application programming
(ix) Create an enabling legal and
interfaces (APIs), and
regulatory environment in a
data sharing).
digital world

a. Overall, TSA and Government  Doing business digitally

should create a venture-friendly • Connectivity, including
legal and regulatory universal access,
environment that supports the spectrum management,
creation and growth of startups Internet connectivity
in an increasingly digital world. policies, domain name
registration, and data
b. The following elements of an infrastructure (data
enabling environment should be centre, cloud computing,
considered: artificial intelligence)
 Innovation and firm growth • Data privacy and
• Accelerated incorporation security, including the
and registration changes right to data subjects,
(e.g. mergers, cross-border data
acquisitions, listings) transfers, and cyber
security and enforcement
• Ability to attract global
• Payments, including
expertise and the use of
licensing of payment
gig workers, such as
contractors and e-Labour service providers, and
payment authorisation
• Ability to raise capital,
and processing
complete mergers and
• Logistics, including
acquisitions, and
effectively repatriate connecting online
foreign investments transactions to offline
production, and customs
 processes (cross-border Government should create a
e-Commerce) favourable environment and clear
• Digital market policy for venture capitalists and angel
regulations, including investors to support startups.
electronic documents and
signatures, consumer (ii) Financial Institutions
protection, and It is a well-established fact (and was
intermediary liability. pointed out by the numerous studies
and the survey undertaken by this
 Sector and industry
study) that banks and financial
• Technical regulation for
institutions do not have favourable
digital business in the
loan conditions for startups. This was
various sectors such as
mentioned as one of the major
fintech, mobility, tourism,
challenges in Tanzania.
e-Commerce, etc.
• Examples include Financial institutions should re-
licensing, quality and evaluate their current loan policies
certification standards, and procedures regarding
occupational health and entrepreneurs and startups and work
safety, environment with the Government to create a
protection, etc. favourable environment for
entrepreneurs and investors.
 Taxation
• Taxation harmonisation (iii) Local Government Authorities
for online and offline (LGAs)
services (i.e. application
The role of incubators at the level of
of existing tax statutes,
local governments has led to the
sector-specific taxes, tax
eventual success of startups in many
collection
African countries, as well as globally.
responsibilities).
The organisational structure of LGAs
should recognise the initiative or
Recommendations Regarding
institutions that have their own
Specific Agencies and Actors
incubators in their areas of
This part is an extension of the jurisdiction. Therefore, LGAs should
recommendations derived from the cover the remunerations and overhead
benchmarking of selected recent costs of such incubators from their
African startup Acts. They are made own (often limited) resources.
with specific reference to agencies and
It is recommended that incubators
actors.
should be inculcated in the current
organisational structure of LGAs.
(i) Government
Also, LGA technical officers and other
Government should create favourable
stakeholders should be involved in
conditions for startups to access loans
identifying key challenges to be
they can afford. Furthermore, the
addressed by startup incubators. This shortage of providers in the forging
will encourage entrepreneurs to solve industry, as well as the provision of
their own problems. forging education. The previously well-
known SIDO forging workshops are
(iv) Tanzania Commission for Science outdated and will have to be
and Technology (COSTECH) modernised to accommodate newer
technologies such as additive
Proper registration of startups,
manufacturing or 3D printing.
according to pre-defined criteria, is an
important part of the startup process, It is recommended that SIDO should
as is the monitoring and evaluation of establish relevant and modern
startup performance over time. The programmes for startups.
creation of a central hub for
registration, as well as the monitoring Existing SIDO programmes should be
and evaluation of startup performance revisited to be matched with current
are therefore mandatory. needs of startups.

It is recommended that a startup SIDO workshops should be

registration hub, as well as a modernised to reflect current
monitoring and evaluation hub to technological practices and to match
monitor startup performance should the needs of startups as well as needs
be established. of the current market.

COSTECH could be considered as a (vi) Education Institutions (System

possible main hub for registering and Curriculum)
startups through various programmes
Primary, secondary and university
(e.g. DTBi) and to oversee their
level education (mostly) should
performance with full reporting to the
prepare students to become
necessary ministries and agencies.
entrepreneurs, to run their own
Incubators should be inculcated in the business or employ themselves.
current organisational structure of
It is recommended that Tanzania’s
COSTECH as an implementer and
education system should introduce
promoter.
special programmes to educate
COSTECH should provide technical startups on how to start their business
support to LGA technical officers and (something which is not taught in
other stakeholders when needed. schools), though some of the
institutions (such as UDSM) are doing
(v) Small Industries Development this from their own sources of funding.
Organisation (SIDO)
Primary, secondary, and tertiary
Basic industries, such as foundries education should include studies on
(casting and forging) are key to most entrepreneurship and on how to start
of manufacturing and engineering a business for all students.
work. However, there is currently a

Economic and Social Research Foundation (ESRF)

51 Uporoto Street, Ursino Estate, P.O. Box 31226, Dar es Salaam - Tanzania
Phone: +255 22 2926084 – 9, Website: www.esrf.or.tz Email: esrf@esrf.or.tz
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