Zahoro Muhaji: Tanzania’s Startup Economy Is Moving Faster Than Its Policy

DAR ES SALAAM — Tanzania’s startup economy is expanding into areas that its existing business rules were not designed to accommodate, according to Zahoro Muhaji, Executive Director of the Tanzania Startup Association. Muhaji, speaking on the M&S Podcast, described a sector that has moved from a relatively small community of young companies into a growing part of the economy. He said the Tanzania Startup Association initially identified about 200 formally registered startups, compared with more than 1,300 today. He also said that startup investment entering Tanzania over the past five years has exceeded TZS 1 trillion. The numbers point to a wider change in the structure of entrepreneurship. More young Tanzanians are attempting to build companies around technology, digital services and new business models, while the institutions that determine whether those companies can register, raise capital and operate legally are still largely organised around conventional businesses. The financial system still assumes the business already exists Muhaji's strongest criticism concerns the relationship between startups and finance. He argues that Tanzania's financial system is structured around businesses with operating histories rather than companies at the stage where capital is needed to prove whether an idea can become commercially viable. "Our financial and business system was designed around businesses that are already operating, not businesses that are starting," he said. "If you go to a bank, they want a business that is already operating, generating revenue, making money, profitable, and with collateral. They are not giving money to someone who has only an idea and is just starting." That distinction has economic consequences. A mature company can demonstrate revenue, assets and repayment capacity. A startup often cannot. Its principal asset may be software, intellectual property, a customer base that has not yet monetised or an untested business model. Traditional lending therefore treats precisely the characteristics that make a startup young as reasons not to finance it. Muhaji argues that the alternative cannot simply be to tell young entrepreneurs to become more disciplined or work harder. He says part of the problem is structural. During his travels around Tanzania, he encountered young people complaining about access to local government loans and the procedures surrounding them. His conclusion was that some barriers required institutional intervention rather than individual effort. "There are things that have to be addressed structurally," he said. "Some things are mindset, but some things are structural." His proposed financing model is based on allowing more room for risk at the beginning of a company's life. "We need a financial system that makes it easier for people to get capital for their ideas," he said. "Not collateral, not a title deed, because someone who has just finished university does not have a plot of land to give you. Let the idea enable that person to get some starting capital, even a small amount, to pilot it." That would represent a different allocation of risk between entrepreneurs, financial institutions and the state. Muhaji's argument is that government should accept some of the risk associated with experimentation if it wants a larger pipeline of companies capable of growing into substantial businesses. He pointed to the United States as an example of an economy where institutions have created greater room for people to take commercial risks, although his comments did not provide a detailed comparison of the two countries' financing systems. The licensing system can struggle when the business itself is new. Finance is only one part of the problem. Muhaji also described a regulatory system that can struggle to classify businesses whose activities do not fit established categories. He gave the example of a company developing an e-commerce platform. According to his account, the founders approached local authorities for a business license but could not find their business activity in the existing classification system. Another example he offered was a hypothetical company developing three-wheeled flying vehicles. A business model that does not appear in the existing regulatory categories can create a basic administrative problem before the entrepreneur has even reached the market. "Regulations are not ready to receive you because you are doing something new," he said. "If you go to a local authority, there is a big book containing different types of businesses. You look for your business, and the name is not there." The problem becomes more serious when registration is a legal prerequisite for operating. Muhaji described a circular process in which a new company needs an office lease to register, while the property owner may be reluctant to lease space to a company that has not yet completed registration. The entrepreneur then faces another requirement from the tax authorities before completing the same process. "You put in place an environment that makes these things easier," he said, describing the problem as one of administrative sequencing rather than entrepreneurial capacity. For a conventional business, such procedures may be an inconvenience. For a technology company operating in a market where the business model itself is new, they can become a barrier to entry. The policy question is therefore larger than whether registration forms should be simplified. It is whether regulatory institutions can recognise economic activity before it has become sufficiently common to appear in the existing rulebook. Muhaji wants startups to receive a protected period in which they can survive. Muhaji also argued that the early years of a business deserve a different policy treatment from those of an established company. He cited a figure that seven out of every 10 businesses fail during their first year and said that by the third year nine out of 10 have failed. The interview did not establish the source or methodology for those figures, so they should be treated as claims made during the interview rather than independently verified national statistics. His proposed response is what he described as a form of "vaccination" for young businesses. The idea is to reduce the cost of experimentation during the period when a company is most vulnerable. "We need to create a specific environment so that when someone starts a business, they are protected from year zero for at least the first few years," he said. "They should not be burdened with taxes and charges during the first three years. They should have an easier process for registration and an easier process for closing the business." The proposal goes beyond tax relief. An economy that makes it cheap to start a business but expensive and complicated to close one can leave entrepreneurs trapped in failed ventures. A simpler exit process can also improve capital allocation because founders can move resources from an unsuccessful business into another opportunity rather than spending years dealing with administrative obligations. Muhaji's argument is therefore based on the idea that failure is part of the process through which a startup economy discovers viable businesses. He said Tanzania needs to reduce the cost of trying. "We need to lower the cost of trying. In fact, failing is okay, just as it is with a child learning to walk. You see the child stand and fall, but the child does not give up." The social cost of failure can become an economic constraint. Muhaji places part of the problem outside government and financial institutions. He argues that Tanzanian society itself often treats business failure as a personal disgrace rather than as part of entrepreneurship. "We need to normalise failure as something ordinary," he said. "Failure is normal. People who have succeeded have failed many times." He connected this social attitude to the reluctance of entrepreneurs to expose themselves publicly. Successful young business owners can become targets of suspicion rather than examples for other young people to study. Muhaji recalled a case in which a newspaper published a list of successful startup founders and said that some of the people featured were subsequently approached by authorities asking questions about their businesses, permits, and taxes. His account was presented as an example of how celebrating entrepreneurial success can be followed by scrutiny that makes other entrepreneurs less willing to disclose their achievements. The wider economic effect is cultural as well as financial. If entrepreneurship is perceived as suspicious, young people receive fewer visible examples of what business success can look like. Muhaji argued that Tanzania needs both to accept failure and to celebrate legitimate success. "People who have succeeded are afraid to come forward and say, 'I have succeeded and this is how I did it,'" he said. "Many people believe that those who have succeeded are lying." That argument also connects to the question of career choice. Muhaji said younger Tanzanians increasingly want to work in areas such as content creation, technology, music, and other forms of digital enterprise, while some parents still measure economic security through conventional professions and formal employment. The mismatch reflects a deeper transition in the economy. New occupations can emerge faster than social institutions can develop the role models, education pathways, and professional structures that make those occupations credible to families. Tanzania’s youth policy is being tested by a generation with different economic expectations. Muhaji's assessment of young Tanzanians is that their economic aspirations are changing faster than many policy programmes. He described youth demand as "ever evolving", influenced by technology, globalisation, urbanisation and changes in Tanzania's economic structure. He gave the example of content creation. A generation ago, podcasting was not widely viewed as an economic occupation. Today, some young people see content creation as a potential livelihood and want to build businesses around YouTube and other digital platforms. That shift creates a policy challenge because public programmes built around agriculture, formal employment or traditional entrepreneurship may not capture the full range of economic activities young people are pursuing. "You cannot say that because several years ago we had a programme where we gave young people farms and taught them to use a hoe, we must do the same thing again this year," Muhaji said. "The needs of young people are constantly changing." His argument is not that agriculture or traditional employment have become irrelevant. It is that youth policy needs mechanisms capable of detecting changes in demand rather than assuming that the economic aspirations of one generation will remain fixed. That becomes particularly relevant to Tanzania's long term development strategy. Muhaji participated in the technical team involved in preparing Dira 2050 and said the process involved consultations across the country, including with young people, businesses, professionals, religious leaders and other groups. He argued that the strategy has to remain understandable to the generation that will live through much of its implementation. "If young people do not understand Dira 2050, Tanzania will struggle on the journey ahead," he said, arguing that young people will form a large share of the population in the decades ahead. He also said that technology should be used more aggressively to explain the strategy to young people and connect them to its implementation. The startup sector is asking for a seat inside economic policymaking Muhaji's position on youth participation extends beyond entrepreneurship programmes. He argues that young people need greater representation in institutions where economic decisions are made. He described youth participation as one of the most important issues raised during the Dira 2050 process and argued that participation should include public boards, institutions and agencies rather than being reduced to formal politics. His argument is based on the idea that younger people bring knowledge of markets and technologies that older institutions may not possess. "We need to expand opportunities for young people to participate in the leadership of the country," he said. "I do not mean only politics. I mean boards, institutions and public agencies." He used his own experience on a university board as an example, saying that his age and understanding of what younger students wanted allowed him to push reforms that later influenced the institution. Whether such appointments produce better outcomes depends on the quality of the individual and the institution, but the underlying policy question is clear. Tanzania is attempting to build a technology intensive economy while a significant share of its institutional decision making remains separated from the generation developing and consuming those technologies. That gap is particularly visible in the startup sector. Muhaji said the government initially told startup actors that engaging with individual companies was difficult and encouraged them to organise themselves so that government could engage with the sector collectively. The Tanzania Startup Association emerged from that process, beginning with 14 founders, according to his account. The episode illustrates a broader relationship between organised business and public policy. Governments can regulate individual firms, but sector associations can aggregate information about common regulatory problems and present them as policy issues. For emerging sectors, that intermediary function can become important because regulators may not yet have enough direct experience with the businesses they are being asked to regulate. Technology is changing the relationship between citizens and government The interview also moved beyond business regulation into the relationship between technology, citizenship and government. Muhaji argued that social media has given young people greater access to political leaders and public institutions, while anonymity can also amplify abusive behaviour. His distinction was that technology does not necessarily change people's underlying character. "Technology amplifies who you are," he said. In his view, social media gives people capabilities that were previously unavailable, including the ability to reach senior political figures directly and publicly criticise them. He connected this development to economic and democratic change. As education expands and incomes rise, he argued, citizens become more aware of their rights and more willing to question government decisions. He described this as part of the interaction between economic development and a widening democratic culture. "Democracy has its cost," he said. "People speak, people criticise. As the economy expands and people's incomes increase, you cannot expect citizens to behave exactly as they did years ago." This is one of the more consequential arguments in the interview because it places political communication inside an economic transition. A population with greater education, income, connectivity and access to information will also have greater expectations of public institutions. Government therefore faces a changing form of accountability as the economic and social structure of the country changes. Muhaji's conclusion was that political leaders need to learn to listen to this new class of citizens. "For those of us with political responsibility, it is good to learn to tolerate and live with citizens of this kind and listen to them," he said. AI could widen the productivity gap unless young people build their own capabilities Muhaji's assessment of artificial intelligence follows the same institutional argument. He sees AI as a major economic technology that will change jobs and business models, but he also argues that Tanzania is still not using its capabilities at scale. "AI is a technology that will change many things in our lives as human beings," he said. "It will also change employment and many kinds of work. There are many things people are doing around the world with AI that we Tanzanians are still not using properly." His warning is not that young people should avoid AI. It is that they should avoid allowing AI to replace their capacity to think independently. He described AI as an assistant whose usefulness depends on the quality of the questions and instructions provided by the user. "The more critical you are, the questions you ask it, the work you give it, the way you challenge its answers, the more you get from it," he said. "We need to build our own ability to think independently." That distinction has direct implications for the labour market. If AI reduces the cost of producing websites, content, analysis and other forms of digital work, some tasks that currently provide income for young professionals may become cheaper and easier to automate. Muhaji's proposed response is to build capabilities that are harder to replicate, particularly communication and human relationships. "People who succeed in life often have two major qualities," he said. "They are very good at relationships and very good at communication." For Tanzania's emerging digital economy, that suggests a shift in the definition of employability. Technical skills remain important, but the ability to communicate, build trust, interpret information and work with other people may become more valuable as machines perform a larger share of routine cognitive tasks. Local government is where economic policy becomes visible to households Muhaji's experience as a councillor in Buguruni gives another dimension to his economic argument. He said ordinary citizens interact with local government through education, health, roads, drainage, waste management and other services that shape daily economic activity. He argued that local government is often closer to household economic conditions than national institutions. "Ninachamini mimi binafsi kwa dhati 90% ya wananchi wa kawaida, maisha yao ya kawaida 90% ya maisha yao yako chini ya diwani," he said, referring to the role of councillors and local government in people's daily lives. The 90% figure is his personal estimate from the interview and should not be treated as an independently verified statistic. His description of Buguruni illustrates what that means in practice. He discussed roads, drainage, sanitation, health infrastructure, wastewater and schools. He said the ward had begun construction of local roads and that a health centre project valued at about TZS 4 billion was underway after compensation was paid to households affected by the construction, according to his account. He also described a major wastewater project in Buguruni that he said would process wastewater and recycle treated water, benefiting residents connected to the system. These claims concern specific projects and were not independently verified in the supplied interview. The economic point is broader. Urban productivity depends on infrastructure that is often treated as a municipal issue. Roads reduce the cost of moving people and goods. Reliable water and sanitation reduce health risks. Schools determine the quality of future labour. Waste management affects the quality and cost of urban life. As Dar es Salaam grows, the performance of local government becomes increasingly connected to the productivity of the wider economy. Muhaji argued that Dar es Salaam could become a megacity and that its future problems would require different approaches to infrastructure, transport, health and security. He also estimated that the city contributes close to 30% of Tanzania's GDP and said the figure demonstrated why urban governance deserves greater economic attention. That GDP estimate was not sourced within the interview and should therefore be treated as an interview claim rather than an established statistic. The policy question is whether Tanzania can redesign institutions at the speed of its entrepreneurs The interview ultimately connects several problems that are often discussed separately. Startup finance is a banking issue. Licensing is a regulatory issue. Youth participation is a governance issue. AI is a technology issue. Failure is a cultural issue. Local infrastructure is a municipal issue. Muhaji's argument is that these issues are connected by a single economic transition in which young Tanzanians are entering markets faster than many institutions are adapting. His proposed changes are correspondingly broad. He wants financing systems that can accept more early stage risk, simpler business registration, easier business closure, a period of reduced costs for young companies, regulations capable of recognising new business models, greater youth participation in institutions and wider use of technology in public communication. He also wants society to become more comfortable with both entrepreneurial failure and legitimate success. The scale of the transition remains an empirical question. The figures cited in the interview about startup numbers, investment and business survival require independent verification before being treated as national statistics. But the institutional problems he describes do not depend entirely on those figures. A business that cannot find itself in the licensing framework, cannot access finance without collateral or cannot close without disproportionate administrative cost faces the same structural problem regardless of whether the startup sector contains 500 companies or 1,500. Tanzania's economic policy challenge is therefore becoming less about encouraging young people to start businesses and more about ensuring that the institutions surrounding them are capable of recognising, financing, regulating and scaling the businesses they create. The next stage of the startup economy will be determined not only by the entrepreneurs who build companies, but by the rules that determine which companies are allowed to survive long enough to become institutions themselves. FAQ What does Zahoro Muhaji say is the biggest problem facing Tanzanian startups? Muhaji argues that Tanzania's financial and regulatory systems were largely designed around businesses that are already operating. He says startups often lack the revenue, profitability and collateral expected by banks, while new business models can fall outside existing licensing categories. His proposed response is to create institutions that recognise the different risks and needs of businesses at the beginning of their lifecycle. How many startups does Muhaji say Tanzania has? Muhaji says the Tanzania Startup Association initially identified about 200 formally registered startups and that the number has since risen to more than 1,300. The supplied interview does not provide the underlying database or methodology, so the figures should be treated as statements from Muhaji rather than independently verified national statistics. What does Muhaji propose for startup financing? He argues that young businesses should have access to smaller amounts of capital that can be used to test and develop ideas without requiring conventional collateral such as land. He also argues that government should accept some of the risk associated with early stage businesses because experimentation can produce companies that later contribute to employment and economic growth. Why does he want special treatment for young businesses? Muhaji argues that new businesses are particularly vulnerable during their early years and that Tanzania should reduce the administrative and financial cost of starting and closing a business. His proposed measures include easier registration, easier closure and reduced taxes and charges during the first years of operation. The specific survival rates he cited in the interview require independent verification. What does Muhaji say about young people and Dira 2050? He argues that young people need to understand Dira 2050 because they will be a major part of the population that experiences its implementation. He also says the strategy needs continuous public education and greater use of technology to communicate its objectives to younger citizens. What is Muhaji's position on AI and employment? Muhaji expects AI to change many jobs and business models but does not believe it will replace every form of human work. He argues that young people should develop independent thinking, communication and relationship building because these capabilities become more valuable when technology can automate routine intellectual tasks. Why does he connect youth participation to economic policy? Muhaji argues that young people should participate in public boards, institutions and policymaking because they have direct experience of emerging technologies, digital markets and changing consumer behaviour. His broader argument is that an economy seeking to build a technology and knowledge sector needs young people represented in the institutions that shape the rules under which that sector operates.