Digital Rights

#YoungBoldDigital: How Regulatory Environment Is Working Against Tanzania’s Tech Start-Ups

They have the vision. They have passion and innovation brilliance. But the regulator hasn’t seen, or believed, in any of it yet.

The Chanzo Reporter

June 10, 2022

subscribe to our newsletter!

If you spend a few hours with some of Tanzania’s tech start-up founders, you almost remain with one draining question: Why are they not successful yet?

They put in a lot of work. You see the brilliance in their design, implementation, and product. And they also manage to capture enough market to show traction.

Taking a deep dive into their stories, you will understand that they are working in an environment in which by design failure is the rule. They have the vision. They have passion and innovation brilliance. But the regulator hasn’t seen, or believed, in any of it yet.

“You need many licenses to operate just one simple stuff,” one founder lamented recently to The Chanzo.

In a Tanzania environment when you speak about a license or a regulator, it’s a guarantee that money and time will be spent on just meandering through the bureaucracy

For example, to start a fintech product, you need to have a license from the Bank of Tanzania (BoT), and a license from the Tanzania Communication Regulatory Authority (TCRA). The licenses are not just expensive. It takes an unusual amount of time to get their approvals. But even after getting the license, the legal requirement is quite tedious, such as in fintech the requirement of paying 1% of transaction volume.

The regulatory environment is a result of gaps in the Tanzania environment where policies, laws, or practices of the land are yet to recognize the potential that Start-Ups can offer especially in this ICT era.

“When you go to TCRA, they treat you as if you are already a big corporation,” a founder who is working to launch a telemedicine start-up opened up to The Chanzo recently.

Speaking about solutions going forward, in the YongBoldDigital series start-up founders have proposed for the Tanzania government to consider having a tech Regulatory Sandbox.

“If there was a way that these requirements, these compliances could be minimized or if we could have a leeway to explore if our product or solution is viable before we have to comply with these things”, emphasized Neema Maghimba, founder of Sheria Kiganjani

A regulatory sandbox is a controlled environment that allows entrepreneurs, investors, regulators, and other players to live-test out innovative products or services without having to face some hindrances posed by the existing laws or regulations.

The Bank of Tanzania (BoT) adopted a similar approach in 2008 when it allowed electronic money transfers without having laws or regulations in place. Several countries in Africa have adopted regulatory sandboxes including Kenya, Mauritius, Mozambique, Rwanda, Ghana, and Nigeria.

In the 2022/2023 budget speech, the Minister of Information, Communication, and Information Technology said that the government through Information and Communication Technology Commission has prepared the Regulatory Sandbox Framework for Digital Innovators, ICT Products, and Solutions. It’s yet to be realized how the framework will contribute to the improvement of the environment and the extent of its operation.