Starting a Business

Starting Your Own Business in Tanzania, All You Should Know About Having Your Own Business, Be Your Own Boss, How Can I Start My Own Business? and more on AfricaPay Tanzania

What is the first thing I should consider before starting a business?

According to the Chief Executive Officer of the Business Registrations and Licensing Agency (BRELA) Mr Estariano Mahingila, he says the very first thing one should do before starting a business is to develop a business plan. He explained that a business plan serves as a road map showing what you will be doing in your business, and how to practically go about it.

A business plan provides a practical guideline as to how your business will grow, it keeps you focused and when it is accompanied by a realistic budget, a business plan helps you plan and implement better. The CEO says it is important to always remember that starting a business is not a game but a venture that needs to be taken very seriously from the word go. 

How difficult will it be for me to develop a business plan and what should be included?

A business plan is hard to implement unless it is simple, specific, realistic and complete. Even if it is all these things, a good plan will need you to follow up and check on it. Your business plan depends on the people who are part of your business, particularly the process of commitment and involvement, and the tracking and follow-up that comes afterwards.

Too many people think of business plans as something you do to start a company, apply for a loan, or find investors. Yes, a business plan is vital for such purposes, but there’s a lot more to it.

Preparing a business plan is an organised, logical way to look at all of the important aspects of a business. First, decide what you will use the plan for, such as to:

  • Determine what you want to do and how you will best go about it. (eg grow and sell tomatoes for hotels and restaurants).
  • Create regular business review and room for changes and correction. (eg decide to either increase or reduce the hotels and restaurants you are supplying).
  • Support a loan application.
  • Clearly define agreements between you and your partner(s). (eg the farm labourers, the clients you are supplying the tomatoes to, etc).
  • Budgets and expenditure (e.g. wages, water bills, fertiliser, transport etc).

A business plan is not supposed to be a complicated document that once it is made, it is forgotten and not followed through. If you create your own business plan, put in a language you understand easily, then you will be able to use it better.

The Tanzania’s Property and Business Formalisation Programme (MKURABITA) is in the process of developing a simple business plan in software. Other organisations such as Help Age are developing a simplified from of a business plan.

With a business plan in hand what should be my next step?

Most important of all you need capital to start and run your new business. Generally speaking people are unwilling to approach banks and financial institutions for loans as they fear the risk of losing their homes or small businesses if they fail to pay back loans on time. Many instead opt for informal sources of credit.

You may save up capital from working hard over a period of time or you could borrow money from friends and or relatives (but be kind enough to pay them back!). You could even join a savings scheme (eg SACCOS).

A few people have sold farm produce and saved the money after a couple of harvests to invest in their first business. There are no short cuts in raising the capital for your new business.

Please note banks hardly ever give out money for starting up businesses. Currently small businesses and entrepreneurs have difficulty getting loans from financial institutions. One of the reasons is that banks must operate within set rules and reduce risks. The Bank of Tanzania sets rules and regulation on the operations of all banks and banks in turn are expected to comply.

The Tanzania’s Property and Business Formalisation Programme (MKURABITA) feels it is necessary to review the regulations and allow banks to take advantage of formalised assets of business people.

Where may I apply for capital if I am a youth or a woman?

Visit the local government offices in your area on a regular basis and find out which projects or programmes are available that assist up-and-coming business people. Be careful to understand the requirements and the consequences of not paying back these loans in time. There is nothing worse than losing the little property you own over an unpaid loan.

According to Mr Gaston Kikuvi, Chairperson of VIBINDO, the umbrella society for small businesses, he says that the Ministry of Information, Culture, Sports and Youth Development, has a fund allocation for youth. One has to visit the offices to find out how it is disbursed. At the same time government set up a policy whereby 10 percent of revenue collected from district councils should be allocated to youth and women for credit - but focusing on improving existing businesses and not funding start-up businesses.

In addition to having the capital and determination what else should I have as someone new to the business environment?

  • Vision and desire to succeed.
  • Commitment.
  • Business management and technical skills (these can be learnt).
  • Secured premises.
  • Legal recognition by relevant authorities.

Where could I set up my business?

Since you have decided to get into business and you know what products or services you will be selling, the next step is to establish where you want to set up your business. You may opt to set up your business at home, for example, if you want to get into tailoring. 

You may want to be nearer your potential customers and may have to secure a place in either a market or shopping mall. If you are brave enough you may choose a spot where you know there is no competition and set up shop.

Wherever you choose, the next thing you will need is a business license. These are issued by Local Government Authorities. Without one you will be operating illegally according to the laws of the country.The last thing you would want to be told after starting your business is that you are operating illegally and have your business property confiscated!

Ideally the local Government Authorities are supposed to inspect your business premises before you start - but this is not always the case.

The issue of business premises is crucial for specialised businesses like food production. In order to be certified by the Tanzania Foods and Drugs Authority, having proper business premises is a must.

Do I have to give my new business a name?

Names provide identification of persons and things and a business can only be identified formally by its name. However, according to the Chairperson of VIBINDO, Mr Gaston Kikuvi, most small businesses in the country do not have names unless it is a requirement to access credit from the bank or financial institution. On top of that the cost of processing a registration certificate is high and may even be more than the initial capital of your business.

The CEO of BRELA stresses that although currently it is possible to run your business legally without a name or without registering as a company, it is important to obtain a business license.

The advantage of having a registered business name is that the name will help identify your business and hence advertise it. Once registered no one else is allowed to use it. Business names are registered under the Business Names (Registration) Ordinance (Chapter 213 of the Laws).

After approval of name and payment of fees an applicant is issued with a Certificate of Registration of name and a document with which the applicant can go ahead and open a bank account.

What does it take to register a company?

First of all you need someone or some people to form a company with. A minimum of two people can form a company, while the maximum number of people is 50. Then you will need someone from any of the following professions to draw up legal documents called Memorandum and Articles of Association - the professionals could be lawyers, accountants or auditors.

The CEO of BRELA emphasises that people starting up businesses should consult these professionals, as poorly drawn up documents delay the whole process which should only take a maximum of six working days. The legal documents that are required for registering a business have to be drawn up in English and follow a basic format.
For companies BRELA receives and approves the applications and the procedure can only be done in Dar es Salaam.

In a bid to simplify the process BRELA has posted a user-friendly format for the Memorandum and Articles of Association that are easy to adapt for individual use. You can find the business information here

Do I have to form a company in order to start a business? 

Not at all. You could enter a partnership with another person or even decide to be the sole proprietor of your business. The advantage of forming a limited liability company is that you, the owner, will not be held responsible for any problems in the business as the company and not the individual will be sued.

What challenges would I as a woman face when starting up a business in Tanzania? 

The following are the major challenges faced by women setting up businesses

  • Poor infrastructure, from bad roads to poor access to electricity makes it difficult to access appropriate markets easily and on time. 
  • Lack of business premises in terms of availability and affordability.
  • Lack of financial literacy, business and technical skills. 
  • Lack of information. Women need better access to ways of accessing and sharing information on products and services - for example, government procurement purchasing opportunities and information on international trade.
  • Lack of access to easily-available start up capital. Women often lack formal education on financial matters and face gender-based barriers to accessing financing (eg a woman may be asked to obtain consent from her spouse before getting any financing). 
  • Limited business related networks.
  • Lack of working equipment and technology.

What would be the best way for me as a woman to overcome the challenges mentioned above?

It would be wise to join an association whereby members of that association are in the same or similar business as you.

In addition to joining an association find out if that particular association is a member of VIBINDO, the umbrella organisation for informal business operators in Tanzania. It was established in 1995 as a regional organisation in Dar es Salaam. In November 2007 it became a national organisation. Members of VIBINDO Society are informal business groups, private companies and registered enterprises. VIBONDO does not cater for individuals.

The categories of businesses include the following:

  • Manufacturers: This group includes all who deal in textiles such as tie and die, batik, metal works and metal fabrication, food/ processing, carpentry, handicraft, horticulture, cattle and poultry keeping, etc.
  • Vendors: Business people that deal in agricultural and industrial produce and products such as fruits, vegetables, cereals and more. Traders who buy and sell goods such as used clothes (mitumba), brand new clothes, domestic utensils, leather goods, electrical goods and much more.
  • Service providers: Food vendors, stone crushers, motor vehicle mechanics, electricians, plumbers, porters, watch repairers shoes shiners, car washers, etc.

How does VIBINDO assist SMEs and micro-entrepreneurs like me?

  • VIBINDO lobbies and advocates on the behalf of member organisations for policy, laws, regulations and by-laws to promote a better business.
  • Trains in leadership skills, business management, technical skills.
  • Conducts research. 
  • Offers financial services (eg the establishment of VIBINDO SACCOS).
  •  Is starting a Micro Health Insurance Scheme Programme. VIBINDO is working on setting up a mechanism whereby members will put a little amount of money into a separate account; the money will cover health care services when members and their families fall sick.
  • Procures markets.
  • Facilitates members to participate in different trade fairs (international and domestic).
  • Links members to relevant markets for their products and services.
  • Secures business premises.
  • Identifies premises and petitions authorities on behalf of petty traders.

Is the organisation found countrywide?

VIBINDO currently operates in four regions:

  • Dar es Salaam (all three Districts (Kinondoni, Ilala and Temeke).
  • Mtwara (Mtwara Mikindani municipal council and Masasi district council).
  • Lindi (Lindi town council, Ruangwa and Liwale).
  • Morogoro (Morogoro municipal council and Mvomelo).

What are main objectives of VIBINDO?

The main objective of VIBINDO is to create good interrelationships among members, and to represent them to government and other stakeholders and relevant authorities dealing with informal sector development in order to safeguard their rights for their development.

VIBINDO also aims to help group members’ efforts to improve their skills in business management, business tactics/technical skills and financial management through linkages to training institutions and programmes.

It also supports the creation of micro-finance schemes that promote a saving culture and good credit-utilisation skills to its members. And it assists group members and (non-members) to formalise their business.

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