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Why Tanzania must nurture startups to end joblessness

Startup Pic A file photo representing startups

Sat, 22 May 2021 Source: thecitizen.co.tz

Tanzanians have increasingly been engaging more and more in entrepreneurial activities seeking to improve their financial fortunes and hence built the country’s economy.

However, the mostly young entrepreneurs say they often come across hurdles, especially when it comes to government support through policy, expertise, and how to access low-interest loans for capital.

Those looking into venture capital or ‘angel’ financing for the first time face a more bleak landscape, as one of the key challenges that small businesses face today.

Entrepreneurs who spoke to The Citizen revealed that there was no single solution when it comes to addressing the numerous challenges facing start ups.

Access to investment

The startup community feels that there is a need for the government to put in place conducive policies and environment for both domestic and foreign investors to inject funds into promising startups.

Mr Shilton Ulomi, founder and chief executive of MyHI (My Health Insurance) said other countries have created a good environment to recognize startups and facilitate fund-rising through inviting interested investors.

“The government should be a link between startups and investors by providing a secure linkage and easing the business environment,” he said.

Mr Ulomi opined that having an investor supporting an innovation especially in the technology industry, which he operates, is crucial in terms of forming connections and a network, access to training, and mentorship.

“Running a startup is different from running a normal business. So, founders need continuous training and coaching on how to successfully run the venture,” he said.

Online tutoring platform ‘SmartClass’ cofounder Adam Duma expressed his concerns that even politics affect the start-ups in Tanzania because, at some point, investors hesitate to provide funds as a result of the political environment surrounding the business sector.

“Before injecting their money, most investors analyse the political situation of the country and if there are no conducive policies then it becomes a challenge to endorse startups in that particular country,” he said.

He said proper investment policies are important to attract investment and facilitate the growth of startups.

“In Kenya and other African countries like Nigeria, startups attract a lot of money. But, here in Tanzania, there are a few to none,” he said.

Mr Duma added that there was also a lack of angel investors and venture capital or domestic firms which were willing to support the startup ecosystem.

Compliance

Mr Ulomi whose MyHI was one of the three winners of last year’s Vodacom Digital Accelerator Programme said another struggle entrepreneurs face is in the initial process of registering the company where there is a burden of costs and a heavy bureaucracy.

He said the government should formulate a policy or rather soften the procedure by exempting startups from the costs such as registration and legal fees.

“There are multiple entrepreneurs who have failed to start operating because they have not met the requirements to open the business and this is due to the costs,” he said.

“If it was possible to loan youth who join higher education then the government can even allocate funds to lend some ideas to run businesses considering the unemployment rate that is in the country,” Mr Ulomi added.

Hubs

Mr Duma said that the country also lacks committed and promising incubators or hubs to raise talented entrepreneurs.

“Most of the entrepreneurs are building their businesses from scratch. So, they need a mentorship platform that would guide them in what problems their innovation is going to solve, the market size and how to approach it,” he said. According to him, the existing hubs in the country are not beneficial to entrepreneurs, because there are no successful entrepreneurs coming as result of the training or support from the existing hubs.

“These hubs have so far provided theoretical inputs which most entrepreneurs learnt from schools,” he said.

“They are not teaching upcoming entrepreneurs on the challenges of starting or running a business. Despite having a lot of incubators which failed to produce successful entrepreneurs, there are a lot of lies and politics which are not really helpful,” he said.

Mr Duma said poor knowledge and skills among start-up entrepreneurs can also be one of the limitations to grow.

“No real content. A huge problem exists with founders who do not have proper knowledge to search and look for opportunities to grow either from investment firms or commercial banks,” he said.

According to him, this provides an opportunity for local organizations or institutions to initiate programmes to support start-ups which align with their course of business.

He said, for example, last year Vodacom Tanzania started the accelerator programme of which Smart Class became a winner, helping it to grow its margin into a successful enterprise.

Government reacts

Industry and Trade deputy minister Exaud Kigahe told The Citizen that although their impact in the startup ecosystem was still minimal, there were efforts going on by the government through the existing institutions.

He mentioned initiatives under the Tanzania Commission for Science and Technology (Costech) and the Small Industries Development Organisation (Sido).

“At least we have something in place to support start-ups, micro, small and middle enterprises in the country. We have been also advocating for the commercial banks in the country to ease loans for the small businesses,” he said.

The deputy minister said the government has also initiated programmes to support women, the disabled and youth.

“What we recommend is that they should have an association or a group which will make it easier for them to have dialogue with the government and air their grievances,” he said.

Source: thecitizen.co.tz