Startups as an Engine of Job Creation in Tanzania

The Tanzanian labour market is under immense pressure. Each year, more than 900,000 young people enter the workforce, yet the formal economy is unable to absorb them. Against this backdrop, startups have emerged as a crucial source of new employment, creating 138,453 jobs in 2024, a 23 percent increase from the year before (Tanzania Startup Ecosystem Status Report 2024).

This expansion highlights the unique capacity of startups to generate jobs at scale and speed. Three-quarters of Tanzanian startup founders are between 18 and 34 years old, which means that young people are not only finding employment in these ventures but are also driving them as creators. In logistics, e-commerce, and agriculture-related startups, employment opportunities are spreading beyond Dar es Salaam, reaching secondary cities and rural areas. This geographic spread is significant, given Tanzania’s need for inclusive growth.

The type of jobs startups create is equally important. While many are gig-based or part-time, they still represent entry points into the formal economy, where workers can develop new skills in digital tools, operations, and management. Over time, such skills spill over into the wider labour market, seeding new companies and raising productivity. Startups thus serve as informal training grounds, building the human capital that Tanzania needs to industrialize.

Yet the job engine is fragile. More than 70 percent of startups in Tanzania are pre-revenue, meaning their ability to sustain payrolls depends heavily on grants, short-term debt, or donor programmes. Employment can vanish just as quickly as it appears. Informality is another challenge: roughly a quarter of startups remain unregistered, often to avoid compliance costs, which leaves employees without protections or benefits.

Policy must therefore focus on durability, not just volume. Linking public financing and procurement support to metrics such as job permanence and training provision would help align incentives. Universities, which have been the breeding ground for most founders, can be formalized into the pipeline through structured partnerships, ensuring that graduates move directly into internships and startup roles. Labour frameworks that protect gig workers without imposing unsustainable costs on young startups will also be vital. If these measures are taken, startups could evolve from being stopgap employers into stable drivers of Tanzania’s long-term labour market transformation.