African Echo: Dar es Salaam, city under construction
by Lesole Kodisang. Anyone with a window seat and flying into Dar es Salaam, Tanzania, for the first time might not immediately notice the major difference between its cityscape and those of others in developing nations. But, within minutes, they’ll soon be baffled by it: the disproportionately large number of unfinished and roofless houses.
This growing yet peaceful city in Africa is buzzing with energy and ambition that manifests itself in entrepreneurship, clearly visible as you drive out of Julius Nyerere International airport and head into the CBD. Every corner, side street, alleyway and pavement serve as the business premises of young entrepreneurs, men and women, selling all sorts of ‘stuff’.
In Tanzania, entrepreneurship is the most-respected and -valued activity, no matter how big or small the business, to the point where parents bring out the figurative champagne when your small enterprise makes its first sale, rather than reserving it for when you land a formal job.
Only 4% of Tanzanian adults earn a salary from formal employment and 41% cover their living expenses through money generated from farming activities (not necessarily as farm labourers but as farmers themselves). The remainder are mostly entrepreneurs
While entrepreneurship is the most-preferred way of earning an income, the business landscape poses a lot of challenges for locals. Chief among these is that it is incredibly competitive — and it would be, when most people are interested in or have a business selling anything and everything from veggies to gadgets. In this environment, generating enough to cover your expenses is a big ask; generating enough income to make a profit is extraordinarily harder. What make it even more difficult are laws regulating business. These are quite unstable, with impromptu announcements on regulatory business requirements constantly being made. A case in point is the recent bill that requires bloggers to pay the government an annual fee of US$900.
Indicators of success
What has this to do with the landscape of half-finished houses, which, at first glance, look and feel neglected, abandoned or may even be relics of war?
For Tanzanians, the two most-important indicators of success are starting a business and owning a house. And here’s the light bulb moment: when having a house is more important than getting a good education, it really means people do take pride in owning houses. And, so, Tanzanians are building their own houses from scratch, using their own money. In other words, they save and save and save, and then use this to build their dream homes. They don’t take out loans and a significant number certainly don’t have access to good old bonds, or mortgage finance.
The Tanzanian mortgage market is relatively new and, as a result, there are far too many barriers to entry for the potential customer, such as high-interest rates, long application processes and not that many banks to choose from. At last count, of the 50-plus commercial banks operating in the country, only half offered a home-loan facility.
Opportunity looking for a solution
The big question, therefore, for financial institution wishing to make an impact in the country is this: how do you enable — or empower — a fairly independent nation, less reliant on formal salaries and stable jobs than others, to secure ownership of their completed dream homes in a shorter time period? Is it through reimagined credit products, made-over saving facilities or schooling them in essential business knowledge that matches their entrepreneurial flair?
One thing’s for certain, Africa’s not holding its breath, and this is an opportunity looking for a solution.
- AIM Strategy. TMRC (Tanzania Mortgage Refinance Company). Finscope Tanzania 2017.
Lesole Kodisang, FCB Africa integrated strategy lead, has over 10 years’ experience in strategic planning working for South Africa’s top agencies and has helped grow various top brands in different categories and industries across multiple platforms from above-the-line to below-the-line. African Echo seeks to unpack markets in Africa, highlight business opportunities and share insights into what works and what rebounds.
“Motive” is a by-invitation-only column on MarkLives.com. Contributors are picked by the editors but generally don’t form part of our regular columnist lineup, unless the topic is off-column.
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