Tanzania's Digital Economy Moment Is Here. The Conditions To Sustain It Still Need Work.

On June 11th, the Minister of Finance proposed a trajectory in Dodoma that will shape Tanzania's economy for years. Digital payment is now the backbone of how the government plans to improve tax efficiency. Transport, retail, education fees, land transfers, strategic crops, cooperative unions: all earmarked for mandatory digital payment. The Tanzania Revenue Authority has been set a target of TZS 39.09 trillion for 2026/27, around 11% above last year's outturn, and it is counting on digital infrastructure to get there. Tanzania's Instant Payment System (TIPS), operated by the Bank of Tanzania, processed 651 million transactions worth TZS 54.95 trillion in 2025, up from TZS 29.82 trillion the year before. Using that infrastructure to increase revenue collection efficiencies and bring more of the informal economy into a traceable system is exactly the kind of structural reform that compounds over time. The benefits will not arrive in a single budget cycle, but instead accumulate as more activity becomes visible, more revenue becomes collectible, and the digital infrastructure becomes the normal way Tanzanians transact. For this strategy to work, the sector carrying those digital rails needs to keep investing in them. Tanzania is asking operators to build and maintain a high-capital, high-cost network across one of the most geographically challenging markets in East Africa, while simultaneously competing for the same investment capital as Kenya, Uganda, Rwanda, and Ethiopia. Winning that competition requires a fiscal environment where the return on infrastructure investment holds up. The PwC Tanzania pre-budget analysis of the telecoms sector set out the challenge clearly, highlighting that the cumulative fiscal burden on the sector is squeezing the margins that fund network expansion. When capex decisions are made at a group level and competing markets offer a better return, Tanzania loses the investment it needs to make its digital strategy work. Tanzania’s telecoms sector carries an effective tax rate of around 46.6% per unit of consumer spend on the telecommunications side. Combined with a low average revenue per user, that shrinks the capital available for long-term network expansion considerably. A sector squeezed from both sides, high taxes and thin margins, finds it progressively harder to justify the scale of investment Tanzania’s digital strategy requires. Past a certain threshold, higher rates on a price-sensitive base stop raising more revenue and start reducing the activity that generates it. Tanzania already has a data point on what that threshold looks like. In July 2021, the government introduced a levy on mobile money transactions. Within three months, person-to-person transactions fell 38%. People returned to cash. The revenue the levy was meant to capture partly went with them. That episode shows how quickly digital behaviour reverses once the cost of participation rises. Network investment works the same way: capital goes where the return is, and the return depends on a sustainable operating environment. The Budget Committee’s review of the Bill between its tabling in Dodoma and passage on June 23rd is worth noting. Several proposed levies on agricultural and livestock payments were dropped after sector input. That is a working channel, and the case for the telecoms sector heading into FY 2027/28 is no weaker. Operators making decisions on tower sites, spectrum, and network modernisation work on five-to-ten-year horizons. When the fiscal framework can shift materially from one budget to the next, those decisions get deferred or redirected. A published multi-year fiscal outlook for the telecoms sector, even an indicative one aligned to the Fourth Five-Year Development Plan, would give operators and investors the visibility they need to commit capital at the scale Tanzania’s digital strategy requires. This should be a consideration for the FY 2027/28 budget. The final budget also confirms measures that help operators carrying long-term infrastructure commitments. The 90-day window for out-of-court tax settlement gives a faster route to resolving disputes than the courts. The continued deferment of VAT on capital goods protects cashflow that would otherwise be tied up at import, though that relief now sits on terms set by the Minister for Finance rather than applying automatically. For a sector planning network investment over five-to-ten-year horizons, a rule and a discretion are not the same thing. One an investment committee can underwrite. The other it has to caveat. Published criteria for how that discretion gets used, or an indicative multi-year outlook, would let operators treat the relief as something they can actually plan around. Dira 2050 is underway. The conditions that will decide whether private capital backs it are still being set, and the window to make them predictable is still open.