TANZANIA PRIVATE SECTOR STRENGTHENING ACTIVITY
YOUTH ENTERPRISE POLICY ANALYSIS REPORT
Creating a Better Business Enabling Environment for Youth
This report is made possible through the support provided by the Feed the Future through the United States Agency for International Development, under the Feed the Future Tanzania Private Sector Strengthening Activity, Contract No. 72062320D00014 / 72062122F00002. The contents of this Youth Enterprise Policy Analysis report are the sole responsibility of Tetra Tech and do not necessarily reflect the views of USAID or the United States Government.
Implemented by: Tetra Tech 159 Bank Street, Suite 300 P.O. Box 1397 Burlington, VT 05402
Acknowledgement
This Youth Enterprise Policy Study report was developed under the leadership of the Feed the Future Tanzania Private Sector Strengthening Activity, with invaluable technical and financial support from the United States Agency for International Development (USAID).
The report was developed through deep collaboration and participation from multiple stakeholders, including senior government officials, researchers, think tanks and industry specialists who provided critical inputs at various stages of the study. Their insights and deep experience made the study an interesting undertaking. Special thanks go to the youth groups and Feed the Future Tanzania Private Sector Strengthening grantees for providing key insights on issues surrounding youth enterprise development in Tanzania. Tetra Tech would like to extend sincere thanks for the cordial support extended by the National Economic Empowerment Council (NEEC) and the Zanzibar Economic Empowerment Association (ZEEA) right from the outset of the assignment through to the end. Special thanks to Dr. Onesmo Shuma for leading this effort.
Photo Caption: Geoffrey Yohana Mbuna, Founder and Managing Director of JAB and member of Khebhandza Marketing Company, a PSSA grantee, demonstrates his organic fertilizer products during the 2023 Tanzania International Agriculture Trade Show in Mbeya.
Photo by: Jonathan Seni for PSSA
Table of Contents
INTRODUCTION
5
BACKGROUND RESEARCH BACKGROUND RESEARCH METHODOLOGY
FINDINGS
7
DESK REVIEW
FIELD SURVEY FOCUS GROUP DISCUSSIONS
RECOMMENDATIONS
34
ANNEXES
51
REFERENCES
POLICIES REVIEWED
KEY RESPONDENTS
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Acronyms and Abbreviations
AMCOS AMT ARDS BBT-YIA BDS CGT CR CSO DP ESRF GoT i4Policy ICT
Agricultural Marketing Cooperative Society Alternative Minimum Tax Agriculture Routine Data System Building a Better Tomorrow - Youth Initiative for Agribusiness Business Development Services Capital Gains Tax Criteria Civil Society Organization Development Partner Economic and Social Research Foundation Government of Tanzania Innovation for Policy Information and Communication Technology Local Government Authority Monitoring and Evaluation Ministries, Departments, and Agencies Ministry of Investment, Industry, and Trade Ministry of Finance and Planning Micro, Small, and Medium Enterprises National Strategy for Youth Involvement in Agriculture National Economic Empowerment Council National Entrepreneurship Strategy Nongovernment Organization Private Sector Association Private Sector Strengthening Activity Southern Agricultural Growth Corridor of Tanzania Sustainable Development Goal Small and Medium Enterprises Tanzania Horticulture Association President’s Office Responsible for Local Government Administration Trademark East Africa Tanzania Revenue Authority Tanzania Startups Association United Nations Framework Convention on Climate Change United Republic of Tanzania United States Agency for International Development Value Added Tax Zanzibar Economic Empowerment Agency Zanzibar Revenue Authority
LGA M&E MDAs MIIT MoFP
MSMEs NSYIA NEEC NES NGO PSA PSSA SAGCOT SDG SMEs TAHA TAMISEMI TMEA TRA TSA UNFCCC URT USAID VAT ZEEA ZRA
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Introduction
Photo Caption: Amina Awesi (20), member of Popular Inspiring and Relief Organization (PIRO), a PSSA grantee, showcases her mango pickle products at the 47th Dar es Salaam International Trade Fair.
Photo by: Jane Mulungi for PSSA
1.1 BACKGROUND
Findings from the assignment will provide a framework for PSSA to develop and support meaningful and impactful interventions to strengthen the business- enabling environment and improving access to services and markets for Tanzanian enterprises, especially those led by youth. Findings will also contribute to PSSA’s policy objectives under PSSA Indicator #1: Number of agricultural and nutritional enabling environment policies analyzed, consulted on, drafted or revised, approved or repealed, and implemented with U.S. Government assistance.
This document presents findings from a “Youth Enterprise Policy Analysis” commissioned for the United States Agency for International Development (USAID)/Tanzania Feed the Future Private Sector Strengthening Activity (PSSA). The assignment targeted youth-based agricultural enterprises in Tanzania and explored the impacts of existing policies and policy gaps on youth-led enterprise development and success. Tetra Tech implements PSSA in partnership with Tanzanian private sector associations, youth- and private sector-serving institutions, private enterprises, Government of Tanzania (GoT) mainland and Zanzibar ministries and agencies, local government authorities (LGAs), and other donor-funded programs. The purpose of PSSA is to improve Tanzania’s business- enabling environment, focusing on economic opportunities for youth through two interconnected objectives: Objective 1 Strengthen the capacity of key private sector associations to advocate for the implementation and enforcement of policies that support youth entrepreneurs, startups, and businesses. Objective 2 Strengthen the capacity of private sector associations to increase member awareness of, access to, and use of business and financial services and of opportunities that match to the needs, abilities, and aspirations of youth entrepreneurs, startups, and businesses.
1.2. RESEARCH METHODOLOGY
The assignment involved a desk review and extensive stakeholder consultations. The consultant used a combination of interview instruments to collect information from stakeholders. These included structured questionnaires, key informant interviews, and focus group discussions. The desk review focused on policies influencing the business-enabling environment for youth enterprises in agriculture, agribusiness, agricultural technology, and related sectors. It included assessing how these policies influence youth enterprise—specifically, their access to inputs and resources, skills and technology, finance and financial services, business and technical services, and markets. The review also identified institutions (including government ministries and agencies) responsible for implementing and enforcing these policies, the effectiveness of enforcement, and gaps in policy and regulatory frameworks. The team subsequently grouped and synthesized information from field interviews and secondary literature and clustered key findings into respective thematic areas.
1.1. RESEARCH BACKGROUND
The purpose of this analysis is to guide the design and implementation of PSSA and PSSA partner-led activities related to policy implementation and enforcement and to focus the policy priorities of GoT ministries and agencies by identifying the following: (i) national policies (or policy components) that when effectively implemented and enforced can enable youth enterprises to access services, finance, and market opportunities; (ii) policies that are detrimental to youth enterprise (i.e., impede access to finance or impose undue financial or logistical burdens); and (iii) gaps in policy or effective policy enforcement (i.e., policies not backed up with appropriate instruments) that, if bridged, could enable youth enterprise.
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Findings Desk Review
Photo Caption: Saada Masudi (28), Founder and Chief Executive Officer of Saada Products and member of Khebhandza Marketing Company, a PSSA grantee, demonstrates her spice products during the 2023 Tanzania International Agriculture Trade Show in Mbeya.
Photo by: Jonathan Seni for PSSA
2.1. DESK REVIEW
catalyst for development. They need to be empowered and prepared to be good citizens who can make proper decisions as entrepreneurs and be fully engaged in all aspects of economic development.
The desk review focused on: assessing the general landscape in which a typical Tanzanian youth entrepreneur operates; the opportunities and challenges surrounding them, and how these are reflected in their respective groups (i.e. MSMEs and prospective innovators). This is followed by an in-depth analysis of government policies targeting youth and youth-led enterprises in Tanzania in general and how they have “cascaded” down in the “PSSA Zones of Influence” and beyond.
2.1.2. Multiplier Effects of Youth Challenges
The limited involvement of youth in agribusiness is a result of multifaceted challenges. One challenge has multiplier effects on other challenges. For example, limited access to loans from commercial banks to youth is due to a lack of land ownership and bank regulations/practices that require loan applicants to secure their applications with non-movable assets. Thus, to overcome limited access to bank loans and value chain financing from buyers, youth need more flexible loan products. In order to reach youth with access to finance, banks must develop new products appropriate for youth capacities, contexts and needs. Banks need to support more favorable business startup environments by allowing for the use of movable assets to secure loans for youth entrepreneurs. The government needs to enact contract farming laws to enable youth to use secure market contracts as loan guarantees. Providing training to youth without addressing other challenges, such as land access and unfavorable business environments, results in insignificant outcomes. Organizations working in isolation to address youth challenges may result in duplication of efforts, ineffectiveness, and inefficiency. Partners in the youth agribusiness ecosystem must work together to address youth challenges. [7] [6]
2.1.1. Tanzanian Youth a Demographic Dividend
Tanzania’s population is projected to increase from 53.9 million in 2015 to 186.9 million by 2065. The country has one of the world’s fastest-growing youth population. Young people aged 15–34 are projected to increase from 17.8 million to 62.3 million by 2065. The average Tanzanian is 17.5 years old, and 44 percent of the population is under 15. Tanzania needs to capture this “demographic dividend,” but this will depend on the drive and determination of young people themselves and the effectiveness of policies to capitalize on their potential. [3] The youth population in Tanzania is an important demographic that should not be ignored. This group suffers from high unemployment and faces many constraints in their efforts to create self-employment through entrepreneurship. About 53.3 percent of youth in Tanzania are unemployed, and the number of youths accessing micro-credit is only 4 percent. The unemployment rate for youth aged 15-35 years in the United Republic of Tanzania has increased from 12.1% in 2014 to 12.6% in 2020/2021. The highest youth unemployment rate in both periods is observed in Zanzibar at 24.6% and 27.6% in 2020/2021. Yet this age group represents a labor force in its prime. [4] Recent analysis shows that the number of formal sector jobs created annually has decreased, with the number of new private sector jobs at a third of 2013 levels. With almost 800,000 new entrants to the workforce every year, and only a small percentage of them able to find formal employment, it is vital to support youth in identifying, creating, linking, and obtaining business and employment opportunities. Understanding Tanzanian youth and their situation is critical to formulating and enforcing appropriate policies to support youth entrepreneurs, startups, and businesses. Young people are change-makers, innovators, and the [5] [1] [2]
2.1.3. Startup Ecosystem in Tanzania
Tanzania is experiencing significant startup growth. Startups in the country increased by 15%, from 587 in 2021 to 673 from 2021 to 2022. This growth is driven by a rising entrepreneurial spirit, especially among youth pursuing self-employment. Most agriculture enterprises can be categorized as startups. The financial resources (i.e., the volume of funding) channeled to any sector can be used as a proxy to indicate the potential for growth in that sector. In 2022, the most funded sectors in Tanzania were financial technology (Fintech) and agriculture, with each receiving 27.7 percent of funding. Fintech and agriculture funding suggest that investors consider these sectors to have high potential, indicating that these industries may be experiencing significant growth, innovation, and market demand in Tanzania and globally. [8]
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[9]
The enabling environment is often quoted as the most significant challenge for impact ventures in Tanzania. [11]
Figure 1: Funded sectors in Tanzania’s startup ecosystem
Services
9.09%
Youth-based enterprises are adversely affected by poor business operating environments. Despite several reform measures instituted in recent years, Tanzania’s business environment remains less competitive due to government interventions. The 2019 Global Competitiveness Report ranks Tanzania at 117 out of 141 countries, well below its regional peers (including Kenya, Rwanda, Ghana, and Uganda). Despite gradual improvements in enterprise development and competitiveness, Tanzania lags behind its regional comparators. Tanzania’s scores on Doing Business and EBA (Enabling the Business of Agriculture) Agribusiness Indicators also offer some insights into its performance compared with regional competitors. Tanzania’s overall Doing Business ranking was 144 of 190 countries in 2020, the second [12][13] [14]
Deep Tech
9.09%
Energy
9.09%
Retail
9.09%
Agriculture
27.27%
Fin Tech
27.27%
0%
10%
20%
30%
The emphasis on Fintech and agriculture could increase competition and innovation within these sectors, ultimately benefiting consumers and the broader Tanzanian economy; however, only 11 known startups received funding in 2022. The Tanzanian startup ecosystem is relatively small or at an early stage of development. This gives new entrants and entrepreneurs opportunities to build innovative solutions and businesses. The limited number of startup beneficiaries suggests that access to funding may be challenging for startups in Tanzania, possibly due to a lack of local funding sources. Few funded startups may also indicate the need for more support structures, such as incubators, accelerators, and mentorship programs, to help create a significant investment pipeline.
worst in the group of countries shown. Tanzania’s composite EBA score was 57.15, ranking 43 of 101 countries. This score is lower than those of Kenya and Zambia but higher than Ethiopia, Rwanda and Uganda.
[15]
For the Doing Business Trading Cross Borders indicator, Tanzania is the worst in the group and ranked 182 in the world. Similarly, Tanzania’s EBA score for Trading Food is the lowest of a group of five East African countries and Zambia. While its composite EBA score trails only Kenya and Zambia by a small amount, Tanzania lags behind most of the other countries in the region in yields (for maize), fertilizer application rates, and public expenditure on agriculture despite its large land area, under-utilized arable land, and large population. [16]
2.1.4. Key Challenges for Youth Enterprises, MSMEs and Prospective Innovators
Challenge 1: Regulatory and business environment
A key focus for prospective innovators and entrepreneurs is leading their ventures to impact and scale more effectively and efficiently. This requires addressing challenges related to the regulatory and business environment (the business enabling environment) and the actors’ capacity to shape the enabling environment for innovation. In recent years, the perceived reliability and transparency of the early-stage business policy and regulatory framework have improved. At the same time, it is still considered bureaucratic and cumbersome for early-stage [10] ventures. Policies related to, for example, customer research, social media, or lengthy processes regarding investments may slow down the development of fast- moving impact ventures. While the number of days required to set up a business in Tanzania is comparable to other nascent innovation ecosystems, the amount of time needed to acquire credit can be 3 times longer.
Challenge 2: Access to financial services
Empirical research has shown that youth are one of the most financially excluded groups in Tanzania. Overall, youth in rural areas that are dependent on agriculture activities as remain the most excluded from formal financial services. The number of excluded rural youth aged between 16 and 25 years have increased from 33% in 2017 to 51% 2023. (Source: Fiscope Survey, 2023) . The National Financial Inclusion Framework 2018-2022 has recognized youth as a key demographic in need of increased efforts to ensure not only their financial inclusion but also to aid them in preparing for the future. Inclusive finance for rural youth carries the potential to not only increase their welfare, shock resilience and economic productivity but also contribute to leveling
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existing disparities and amplifying youth development across all settings. [17]
best-collateralized clients with whom banks have an ongoing relationship. Interest rate determinations are made on a case-by-case basis. Smaller loans (of TSH 1-10 million, equivalent to USD 427 – USD 4,474) attract higher interest rates as they carry higher risks, not to mention high transaction costs in extending such loans and monitoring clients. Loans of this size would go to smallholders, who are typically not organized into groups or associations, operate at lower scales, and who lack collateral. [21] A high degree of exposure in lending to smallholders Banks and agribusiness funds are hesitant to lend to or invest in many SMEs, particularly if they view them as dependent on smallholders. As a result, most agribusiness finance in Tanzania has gone to larger firms that typically limit their exposure to out-growers. The main reasons are the risk of improper or incomplete use of production inputs by smallholders, the tendency to side sell at least some of their produce (and often some inputs), and the aggressive purchasing tactics of “briefcase exporters,” who invest nothing in providing inputs and agronomic advice to farmers but arrive at the farm-gate with cash in hand at harvest time. On the other hand, commercial farms/firms will work with smallholder farmers, but they prefer to build a relationship of trust and loyalty over time. It should be noted that although development partners have [22] prioritized lending to SMEs that work with smallholder farmers as out-growers or suppliers (including farmers grouped in women’s and youth groups), technically, these are SMEs, but in the Tanzanian context, they are considered large firms. [20]
Across the country, most MSMEs (including those youth- led) engaged in the agriculture sector are challenged by limited capital and cannot easily access financial services from financial institutions and other capital venture providers due to the following reasons: Perceptions of financial institutions In general, financial institutions in Tanzania perceive agriculture to be highly risky. This is due to climate and weather risks, which can lead to production shortfalls for farms with no irrigation; and policy and regulatory risks, which can lead to increases in fees, duties and taxes. There is also the perception that Tanzania is not competitive in international markets, with very few exceptions (exports of avocados, e.g.), due to a host of factors related to the business environment. Also, bankers have a limited understanding of the agriculture sector in general (more so of the horticulture sector). This erodes bank appetite to lend to the sector - risk appetite. Furthermore, mobile banking is expensive, with high transaction costs. This renders them unavailable to small-scale farmers. [18] Mismatch of present financial products Most of the financial products available on the market are not specifically tailored to the needs of MSMEs (much less youth MSMEs), and this is especially true for businesses working in the agricultural sector. This includes products that are currently available but also includes the eligibility criteria put in place that are out of reach of MSMEs, especially those led by youth. L ack of information to MSMEs MSMEs lack information on available products and facilities that can be beneficial to them, and also information on why and when to take loans or use financial products to grow their business. Need for collateral Financial institutions normally request collateral, mostly in the form of immovable assets such as land or houses. This is a huge hindrance because most MSMEs do not have this collateral and, therefore, cannot access products from financial institutions. Private finance for agriculture and agribusiness is limited in Tanzania. This affects aspiring youth agri-entrepreneurs as well. Interest rates charged by banks depend on the loan size and duration. There appears to be no difference in rates charged on loans to horticulture farms and non-horticulture farms. Current commercial bank prime rates range between 18% and 23% per annum, which are only granted to the largest, [19]
Challenge 3: Lack of startup policy in Tanzania
Tanzania has no specific laws or policies related to startups, and existing laws do not expressly define the term “startup”. However, several policies have direct or indirect implications on the startup ecosystem and, therefore, impact the development of startups. These include the Small and Medium Enterprises (SMEs) Policy (2003), the National Trade Policy (2003), the National Research and Development Policy (2010), and the National Economic Empowerment Policy (2004). There are ongoing initiatives to develop startup policies both in the Tanzania mainland and in Zanzibar. The Tanzania Startup Association (TSA), National Economic Empowerment Council (NEEC), and Zanzibar Economic Empowerment Agency (ZEEA) are the groups spearheading these efforts. Similar policy formulation in the Tanzania mainland has advanced and is expected to be completed by the end of this year. [23]
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This was preceded by a “Comparative Baseline Survey on the Establishment of the Startup Act in Tanzania.” [24]
startups may be unable to scale their businesses, access critical resources, and sustain their operations.
Challenge 5: Innovators lack critical business acumen
The TSA has led several other efforts in parallel, including mapping and digitizing the startup ecosystem in Tanzania and the most recent Ministerial Public-Private Dialogue on establishing the National Venture Capital Trust Fund. This was a joint effort between the Ministry of Finance and Planning (MoFP) and the Tanzania Angel Investors Network. The dialogue focused on addressing identified financing gaps through innovative and alternative financing for SMEs and startups in Tanzania. In Zanzibar, the mobilization process has already started; ZEEA collaborated with the Innovation for Policy Foundation (i4Policy) to sensitize and create awareness among [26] startup actors and policymakers. The group conducted a series of training programs and seminars in Zanzibar and asked participants to brainstorm key challenges facing startups and potential strategic policy interventions. Subsequently, the i4Policy Foundation was tasked to develop a Draft Startup Policy, with release expected by the end of September 2023.
[25]
Most founders of Impact Ventures are highly educated by Tanzanian standards, with 80% holding a bachelor’s degree or higher, but they lack critical business acumen and are fairly inexperienced. Tanzanian innovators and entrepreneurs often fail to assemble a team for their Impact Ventures that covers the broad skill spectrum necessary to lead Impact Ventures to success: including deep sectoral and market expertise to technical and digital skills, business and financial skills, and soft and leadership skills. While talent is available, there are challenges in building out the required levels of expertise across the skills spectrum. The root causes may lie in the educational system as well as in the availability and accessibility of successful serial entrepreneurs as role models. According to the World Bank (2017), the average startup entrepreneur in Tanzania has launched 1.1 businesses, which indicates that seasoned serial entrepreneurs are scarce in the ecosystem. [28]
Challenge 4: Intensive compliance requirements
Challenge 6: Disparity between skills development services providers
The initiatives described above signify current government commitments to supporting startups and youth-led enterprises in accessing market opportunities. However, for startups to succeed and grow, they require specific support from the government and corporations during their entry into the market. This support can come from favorable regulations, access to funding, partnerships, and procurement opportunities. Data reveal that startups in Tanzania face challenges in accessing such support, with potential implications for their growth and sustainability. Most startups in Tanzania (57.5 percent) find market entry compliance requirements very intensive and costly. Complex bureaucratic processes, stringent regulations, and high costs associated with registering and licensing businesses are cited as contributing factors. Moreover, 71.3 percent of startups consider regulatory sandboxes essential for easing market entry, indicating that the current regulatory environment may not be conducive for startups to innovate and experiment. The challenges startups face in accessing support affect their growth and sustainability significantly. High costs and intensive compliance requirements for market entry can discourage entrepreneurs from starting businesses in Tanzania, leading to reduced innovation and economic growth. Furthermore, without the support and collaboration of government and corporate entities,
There is a significant disparity between the number of skill development service providers (approximately 122) and the substantial influx of new entrants in the job market, estimated at around 800,000. Only 10% of these new entrants hold university and college degrees, resulting in over 90% lacking the specialized skills needed in the job market. This skills gap poses a significant challenge for young people seeking self-employment or opportunities to employ others. This highlights an urgent need for expanding skills development resources to accommodate growing workforce demands. It is crucial for the government to assume a more facilitating role in this process by promoting collaboration between ESOs, educational institutions, and industry stakeholders. Given the significant and growing demand for talent, government investment in upskilling the workforce is essential for Tanzania's economic development. [29]
[27]
Challenge 7: Low capacity of business development services
The Innovation Ecosystem in Tanzania is growing fast, from less than 5 actors in 2013 to 46 in 2018. However, the quality and level of support they provide varies. In general, a lot of attention has been given to [30] [31]
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[34]
services towards early-stage ventures and entrepreneurs, often at the ideation stage, resulting in less capacity in the Innovation Ecosystem overall to support Impact Ventures at later stages of life-cycle (actual enterprise building, prototyping, business model validation, growth/scaling and becoming investor ready). While skills and talent exist at BDS that can serve the entire spectrum of Impact Ventures support, it is scarce and not readily available to a large number of Impact Ventures. Often support programs are geared towards delivering compelling venture pitches and early-stage prototypes and fail to work on the robustness of the business. For example deeply understanding markets; working on actual traction and business model validation (i.e. fostering customer interaction and sales); an executable go-to-market strategy; developing robust, scalable business processes; venture governance; licenses and freedom to operate; and building a talented team that could carry the growth of a venture. The last point is also linked to the lack of availability of funding and the complexity of the enabling environment. [33] [32]
to the unique needs of Tanzanian startups. Options for promoting innovative and alternative funding sources like angel investments and venture capital should be considered.
Challenge 9: Land ownership policy
Land ownership remains restrictive in Tanzania. Under the Land Act of 1999, all land in Tanzania belongs to the state. The Act recognizes three types of land: general, village, and reserved. General land is surveyed land usually located in urban and suburban areas. Village land is common in rural areas and is privately or community- owned. Most of the village land is not surveyed. Village land cannot be used for investment unless it is transferred into general land. Reserved land includes land for forestry, national parks, and public recreational areas.
Procedures for obtaining a lease or certificate of occupancy can be complex and lengthy for citizens and foreign investors.
However, Tanzania has sizeable arable land for agricultural land acquisition, and the pace of land titling is a limiting factor in realizing large-scale farming. Less than 10 percent of the land has been surveyed, and registration of title deeds is currently manual and mainly handled at the local level. Foreign investors may occupy land for investment purposes through a government-granted right of occupancy/lease (“derivative rights” facilitated by the Tanzania Investment Centre) or through sub-leases through a granted right of occupancy. Foreign investors can also partner with Tanzanian leaseholders. Rights of occupancy and derivative rights may be granted for periods up to 99 years and are renewable. In general, land resources are abundant in Tanzania; however, available land for production and investment is scarce and difficult to get hold of, particularly in the northwestern region of Arusha. [35] Limited access to land among youth in agriculture has been extensively reported. It is increasingly becoming more challenging because of population growth and delayed transfer of land ownership to youth due to increased life expectancy. Most youth farm family land or land leased on a seasonal/short-term basis. Both land access options are associated with limited investment and restrictions on applying agro-inputs, hence low outputs. As youth cannot invest (for example, install irrigation systems) in land they do not own; they farm during the rainy seasons and are increasingly affected by climate change. Farming family land also implies that [36] [37] [38]
Challenge 8: Heavy reliance on informal funding sources and donor funding
Tanzanian startups’ escalating reliance on informal funding sources stifles growth and innovation, highlighting the need for diverse and robust investment networks to unlock their full potential. Findings show that Tanzanian startups predominantly depend on personal savings (36.21 percent) and support from family and friends (32.76 percent) for financing, increasing from 64 percent in 2021 to almost 70 percent in 2022. This growing reliance on informal networks may stem from limited awareness about formal financing options, stringent lending criteria from financial institutions, and a cultural preference for personal networks. Consequently, this reliance may restrict startups’ access to larger capital pools, inhibiting their growth potential and ability to scale. Tanzanian startups face funding barriers with heavy reliance on Development Partners (DPs), personal savings, and limited access to local venture capital, hindering the ecosystem’s growth and innovation potential. As evident from 2022 data, funding distribution among various capital providers reveals an imbalance that calls for developing more sustainable and diverse financing options. Development Partners (DPs) supporting Tanzanian startups account for 24.39 percent of capital providers. However, this over-reliance on external funding sources raises concerns about the sustainability and long-term growth of the startup ecosystem. Consequently, there is a pressing need to cultivate homegrown financing alternatives that cater
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youth have limited output control and decision-making and thus lack the resources to purchase land and become independent. [39]
Precision Ag and robotics, innovative food and data- connected agriculture in 2018 in the East African Community (EAC), between 66% and 86% of firms specialized in data-connected agriculture – that is, farming apps or providing enabling services for app development.
Challenge 10: Inability to fully capitalize on the opportunities from digital technology
[42]
Challenge 11: Entrepreneurship education in Tanzania
The COVID-19 pandemic has led to increased demand for digital services which has the potential to improve youth employment in Tanzania. A number of companies have developed digital tools to extend their services using virtual platforms. These developments are also evident in the agriculture sector. Vodacom, for example, has established the “M-kulima” platform. Tigo has established the “Tigo-kilimo” platform. There are also private individuals with operations focused on precision agriculture. Within the horticulture industry, TAHA is using digital means to extend its services by establishing a central; repository for horticulture sector, commonly referred to as TARIC. The system allows data sharing across the value chains. Despite these developments, there is a lack of coordination among key players/actors, especially in the digital agriculture space. Everyone is operating in silos. There is a need for the Ministry of Agriculture to take a lead coordination role. Coordination of digital services will ensure Tanzania is progressively able to tap into the advantages of new developments in the ICT space, which have exposed rural youth to a fast-moving world. Those youth who wish to engage in agriculture want to adopt modern technologies that require more technical skills and less energy. The development of the telecommunication sector has, in a short period of time, changed every aspect of young people’s lives, even in rural areas of Tanzania. For example, mobile financing services are widely used by young people in rural and urban areas. They track and transmit important information using mobile technology. Growth of the digital platform economy within agriculture is increasingly becoming an important pathway to development. Digital agricultural platforms (such as farming apps) are driving e-commerce [40] and the “servicification” of agriculture in developing regions. Côte d’Ivoire, Ghana, Kenya, Nigeria, Senegal, South Africa, Uganda and Zimbabwe have been described as hotspots for digital-tech solutions. Of these, Agplatforms, or farming apps, are some of the most common forms through which farmers have been ‘platformised' in agricultural value chains. A research paper on ‘AgriTech Disruptors in East Africa’ shows that, of a sample of 70 AgriTech innovative firms. [41]
Formal business education in Tanzania is still mostly classroom-based, aiming to deliver technical skills, business management skills and personal entrepreneurial skills as important learning outcomes. Creativity and problem-solving are gaining in importance as important entrepreneurial skills. Integrated Entrepreneurship Education (IEE) also plays a role in the teaching of knowledge and skills that enable individual students to plan, start and run their own businesses in the formal or informal sector. The state of entrepreneurship education in Tanzania has a lot of implications for the public and private sectors and donor interventions. There are substantial gaps to be closed in the country’s entrepreneurship education landscape. Inadequate entrepreneurship education in Tanzania’s educational institutions sends signals that the situation is even worse for disadvantaged youth who have not been inside the classrooms of the few institutions that happen to offer entrepreneurship training. [44] [43]
Challenge 12: Lack of agribusiness skills among the youth population
Most youth in Tanzania enter the agribusiness career and the labor market unprepared, as they lack appropriate agribusiness-related skills. This is chiefly because about 70% of youth aged between 14 and 17 are not enrolled in secondary education, and thus they enter agribusiness careers and the labor market unprepared. They lack appropriate agribusiness-related skills. Even those who are able to continue with secondary and tertiary education, only around 38% of them are medium or highly skilled. Most of the graduates from universities and colleges lack practical and employable skills. Thus, there is a mismatch between labor market needs and what universities and colleges produce. Incubation/internship and training industry-government linkages (TIGLs) could address the mismatch. However, these options have not only remained weak but also exclude agriculture. As a result, most of the youth in agribusiness lack practical skills. [46] [45]
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The absence of new farming technology application skills, entrepreneurship, and financial management skills among youth, particularly those in rural areas, have remained critical challenges limiting their performance and accessibility to resources such as loans. Access to [47] extension services to youth is also limited, a situation that discourages youth engagement in agriculture. Youth in rural areas have smartphones, but they lack the skills to use them to access information related to the market and access to agro-inputs and logistics. [48]
Consequently, enforcement of contract farming has remained weak, and the interests of parties in the contract are not protected. Some contract buyers who offer inputs to youth on credit fail to recollect their investments as youth get involved in side-selling. [53]
Challenge 15: Youth’s limited access to agro-inputs and extension services
Compared to middle aged farmers, youth apply fewer modern mechanized farming techniques (i.e., application of quality seeds, fertilizers and pesticides), even when improved seeds and other agro-inputs are available in their localities. This is because youth lack cash to procure them, and their access to sources of finance (direct credits) and value chain financing are limited. Consequently, youth perceive the utilization of improved agricultural inputs and the application of recommendations from extension officers as expensive and unaffordable. In some rural areas, the supply of tools and machinery is limited, which is also a major obstacle to the mechanization of farming by youth. [54]
Challenge 13: Challenges with the current government-led access to credit programs for youth
The Government, through the National Youth Development Fund (NYDF), has been offering loans to youth groups since July 2015, but there is limited data on the groups that were involved in agribusinesses. Accessibility of funds from Local Government Authorities (LGAs) to youth remains challenging, especially for youth in agribusiness. LGAs offer loans to youth who can demonstrate the recoverability of funds, but most youth lack entrepreneurial and financial management skills. Thus, they are unable to prepare fundable project proposals. Due to their limited savings, youth cannot afford to pay for the cost of proposal development by BDS. LGAs are considered bureaucratic by many youth. Indeed, LGAs reach less than 50% of the groups they intend to serve and offer 25% of funds allocated for loans to youth and women. Access to loans from commercial banks has remained limited as banks require collateral (non-movable assets such as land and houses), which the majority of youth fail to provide as they do not own assets. Youth cannot get loans from cooperatives because they are not members. [50] [49]
Challenge 16: Climate change and environmental sustainability
The mounting pressures exerted by climate change and environmental degradation have far-reaching consequences for agricultural livelihoods, which are highly dependent on natural resources and ecosystem services. This, in turn, can have negative consequences on the development of youth enterprises in agriculture. Climate change-induced weather variability and greater prevalence of drought and flooding are expected to further disrupt farmers’ operations in the agriculture sector. Estimates indicate that an expected 15% reduction in rainfall could cause a 16% decrease in yields by 2030. Inefficient irrigation and water management are further expected to put pressure on already stretched freshwater resources (the agriculture sector alone being responsible for over 80% of the country’s total freshwater withdrawal despite the majority of farming being rain-fed). [55] The dependence of agriculture on rainfall increases exposure to climate risks, particularly to frequent droughts and periodic flooding. This increases the necessity for youth engaged in agriculture to adopt and practice climate-smart agriculture (CSA). Climate-smart agriculture (CSA) is agriculture that increases productivity, improves resilience, and mitigates climate change. The adoption of advanced farming technology is necessary to speed the transition to CSA in Tanzania. [56]
C hallenge 14: Youth's limited access to market, related infrastructure, and auxiliary services
Limited access to markets, appropriate logistics facilities, packaging materials and limited market information have been major challenges for youth. These challenges result in an unreliable and low price of crops and high post-harvest losses, especially for perishable crops like horticulture, in which the majority of youth are involved. Transport costs are also considered very high. The [52] development of out-grower schemes or contract farming, which could provide a ready market and facilitate value chain financing and access to improved agro-inputs, is challenged by the lack of contract farming laws/ regulations to govern contract farming implementation and the protection of parties involved. [51]
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Wide adoption of CSA technologies and practices can allow Tanzania to counteract the effects of climate change.
live in land degradation hot spots than in any other country. The only country bordering Tanzania that has a higher percentage of land affected by degradation is Rwanda. However, Rwanda’s population is nearly only 1/5 the size of Tanzania’s population, and over four times as many people in Tanzania live in land degradation hot spots than in Rwanda. Land degradation may lead to economic decline for youth engaged in agriculture production. A study conducted in 2015 demonstrated that the cost of degraded land per year is $223 billion (USD).101 For each person engaged in agriculture in Tanzania, this is equal to over $5,000.00 per year. This problem is worse for Tanzanians in rural areas. The Morogoro region in central Tanzania had an estimated annual cost of $297 million for land and degradation-related issues. In contrast, Dar es Salaam— the largest city in Tanzania—had an annual cost of only $6.4 million. Obviously, these impacts are even greater for young farmers who are just starting out and have less capacity to recover from climate-related shocks and stressors. However, they also have the benefit of greater awareness of climate change and environmental issues, and fewer entrenched behavior change barriers to overcome. [60] [61]
Soil health is also emerging as central to sustainable livelihood generation for farmers, with unsustainable farming practices such as mono-cropping or overuse of chemical fertiliser depleting the soil of essential nutrients, destroying valuable soil microorganisms, and often leading to loss of valuable topsoil, the last of which is further compounded by the increasing prevalence of drought and flooding. Overall, this is increasing farmers’ dependence on soil inputs and their already problematic vulnerability to erratic rainfall, given lower soil-water retention capacity. Other less direct environmental impacts are being felt and enacted by the sector. For instance, climate change is causing increases in the prevalence of pests and diseases, which is leading to farmers suffering high crop losses and an increasing number turning to chemical-based pesticides. This, in turn, is adversely affecting the natural environment and human health, especially that of farmers, who often use these products without any protective equipment or proper training. [57][58] There is also a wide concern about water scarcity. In some areas, water has dried up due to the effects of climate change. Natural water sources are drying up. The increase in the number of farmers (particularly in horticulture) in recent years has exacerbated the situation. It has led to increased water demand. In many areas, there are no immediate alternative water sources, such as shallow and deep wells. Land degradation is also a primary environmental issue in Tanzania. Due to its effect on crop production, land degradation primarily affects farmers living in rural parts of the country. Unsustainable farming techniques, deforestation, and rainfall variation are the main drivers of land degradation. Victims of land degradation tend to struggle from increased undernutrition, decreased economic well-being, and regular environmental migration. Implementing the principles of conservation agriculture is essential to increasing crop yields and decreasing poverty and undernutrition in Tanzania. [59] Tanzania is more affected by land degradation than almost any country in the world. 51% of the land in Tanzania is affected by land degradation hot spots; only six countries in the world have a higher percentage of land affected by land degradation hot spots. All of the countries in Eastern Africa but one have lower levels of land degradation hot-spots and more people in Tanzania
2.1.5. Analysis of Specific Policy Documents
The review team conducted an analysis of policies affecting youth enterprises in Tanzania using a four-stage filtering process: (i) developing criteria for assessment; (ii) scoring specific policies against the established criteria; (iii) assessing existing policies’ promotion of youth enterprise development; and (iv) using the findings as a basis for proposing areas for PSSA intervention.
Table 1. Criteria for desk review
Criteria (CR)
Description/ Examples
CR 1: Clearly defined target groups
Who/what the policy targets (specifically: youth, women, SMEs, or the generic/general population). The objectives of the policy (e.g., promotes access to inputs and resources, technology, and services such as financial, technical, and access to markets). Regulatory framework to support implementation and enforcement; accountability measures targeting key implementing actors.
CR 2: Coverage/ specificity
CR 3: Enforcement mechanisms
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The review team analyzed 32 policies (see Annex 1) for this assignment and assigned relative scores for specific policies against the established criteria (Annex 2). The team used these criteria to gauge how individual policies can potentially impact youth associations and businesses within the PSSA Zone of Influence (ZOI). It should be noted that assigned ratings are based on the current design of these policies. The team used the following parameters to assess how existing policies might influence the business enabling environment for youth enterprises: (i) access to inputs and resources; (ii) access to skills and technology; (iii) access to finance and financial services; and (iv) access to business, technical services, and markets. Results show that most of the policies reviewed do not focus on any targeted populations or parameters. Only a few existing policies cover the broad areas of PSSA focus to varying degrees. Results of a comparison of existing policies with PSSA parameters are presented in Annex 3.
Criteria (CR)
Description/ Examples
CR 4: Enabling factors/barriers
Specific and targeted instruments to enforce the utility of the policy. Government interventions. Strategies for promoting the achievement of maximum impact/output. The degree of integration and coordination with other policies for maximum effectiveness. Matching tools. Other considerations including critical barriers preventing the policy from being developed or adopted at a given time, when these barriers normally shift, and how one acts quickly and proactively when there is a window of opportunity. Institutions and key actors responsible for administering, implementing, and enforcing the policy. Mechanism to facilitate more engagement of the private sector. Consultative mechanisms between the public and private sector (i.e., a coordination platform). Clearly defined roles for key actors. Clear guidelines on how each actor will be held accountable for the areas assigned within the policy action plan. The lead institution(s) to champion the policy agenda. Monitoring and evaluation systems and tools, including indicators relevant to the policy (e.g., realistic, and measurable indicators) and knowledge management system, to ensure the policy remains relevant and valid in current and future dynamics. The expected short-, intermediate-, and long-term outcomes; the added value of the policy. Also, the unintended positive and negative consequences of the policy (e.g., multiplier and trickle-down effects). Demonstrable improvements from the policy; evidence on the ground on the effectiveness of the policy (direct, indirect, qualitative, or quantitative). Gaps in the data/evidence base. [62] [63] [64] [65] [66]
CR 5: Institutional framework
CR 6: Implementation framework
CR 7: Expected impact
CR 8: Evidence/ ability to measure policy effectiveness
[67]
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