Improvements in and expansion of ICT services has accelerated in Tanzania over the last decade, supported by new submarine cable connectivity, successful completion of a National ICT Broadband Backbone project and rising investment in mobile broadband networks. Martin Warioba, managing partner of WS Technology Consulting, told OBG, “Local ICT firms providing networking, hardware, software and project management solutions should benefit from the increasing focus on IT services from the public and private sectors.”
As is the case in many of Africa’s economies, however, there are still challenges facing the sector. The country’s large rural population means internet penetration remains low, while a substantial small and medium-sized enterprise (SME) sector means that ICT services are out of reach for most businesses. However, steadily rising demand for next-generation services and rapid growth in e-government and e-payment systems could see that change in the coming years. Mesam Rizvi, managing director of Technology Associates, told OBG, “The government has always been the largest purchaser of IT equipment. This is the case worldwide and in Tanzania, and so a dip in spending directly affects IT companies.”
The Ministry of Communication, Science and Technology (MCST), formed in 2008, was, until recently, responsible for ICT policymaking; monitoring and evaluation; and regulatory and legal matters pertaining to communication, ICT, and science, technology and innovation. In late 2015 – following the election of President John Magufuli – its functions were taken over by the Ministry of Works, Transport and Communications, as well as the Ministry of Education, Science, Technology and Vocational Training.
Officially launched in 1988, the Tanzania Commission for Science and Technology operated under the MCST as a parastatal organisation, and was formed with Parliamentary Act No. 7 of 1986 to replace the Tanzania National Scientific Research Council. Comprising public and private sector representatives, the commission is mandated to advise the government on science and technology policy, set priorities for research and development activities, promote, coordinate, monitor and evaluate scientific research and technology transfer and development, and facilitate cooperation at the national, regional and international levels. The Tanzania Communications Regulatory Authority (TCRA) was established in 2003 as the country’s telecommunications watchdog, with responsibilities including licensing, spectrum allocation, setting tariffs and taxes, and resolving disputes (see Telecoms overview).
The sector has seen rapid development over the past two decades. According to a publication from the Department of Electronics and Telecommunications Engineering at the University of Dar es Salaam (UDSM), internet services in Tanzania in 1995 consisted of 10 email service access points connected to the FIDONET network, with UDSM holding the highest number of email users in the country at 120 and daily international traffic recorded at 200 kb. Internet development was limited over the next 15 years, and the TCRA reported that internet penetration stood at 12% when it began publishing quarterly usage statistics in 2011.
Internet adoption has increased rapidly since 2011. The TCRA reports that the total number of internet users rose from 5.3m in 2011 to 7.5m in 2012 (a 41.6% increase), to 9.3m in 2013 (a 23.8% increase), 14.2m in 2014 (a further 52.7%), 17.26m in 2015 (21.3%) and 19.9m in 2016 (15.1%). Internet penetration reached 40% in the same year, putting the country on track to reaching the targets of its Five-Year Development Plan II (FYDP II).
In 2011 the TCRA reported that there were 3.7m mobile wireless users, comprising 69.8% of total internet users in the country. This was followed by 968,088 fixed wireless users and 677,450 fixed-line consumers. Fixed-line internet services declined in 2016, with the TCRA recording 18m mobile wireless users compared to 1.2m fixed wireless users and 629,474 fixed-line wired users. Mobile data will likely remain the primary driver of future internet customers as operators continue investing in the development of 3G and 4G LTE services.
Total international bandwidth capacity is 5000 Mbps thanks to three submarine cables: the East African Submarine Cable System, the SEACOM African undersea cable system and the East African Maritime System. These have helped provide a solid base for scaling up backbone infrastructure and, as of mid-2016, the government had successfully laid 25,954 km of fibre-optic cable covering 24 regions in mainland Tanzania. Internet capacity should continue to improve in the coming years following the April 2016 announcement that the country will be connected to a new fibre-optic undersea cable under development by Liquid Telecom.
Long-term ICT growth and development is embedded in the Tanzania Development Vision 2025, a long-term, five-pillar economic strategy launched in 1999 focused on transforming Tanzania into a semi-industrialised country. The strategy emphasises high-quality livelihoods for Tanzanians, national unity, good governance, education and economic competitiveness. The education pillar emphasises entrepreneurship, creativity and innovation, while economic competitiveness will be enhanced by technological adaptability. The government reformulated its mid-term economic development plan in 2011, adopting a midterm model running in five-year iterations. The current and second plan, FYDP II, runs from FY 2016/17 to FY 2020/21 and includes ICT-specific development targets.
The FYDP II notes that Tanzania’s ICT sector remains constrained by limited education and a lack of the human resources necessary to adapt, manage and operate new technologies; weak monitoring of hardware quality and standards; and low adoption of open-source software. As a result, infrastructure expansion is a particular focus. The FYDP II targets increasing telephone service access to 80% of the population by FY 2025/26 from 57.3% in FY 2014/15, and to raise internet penetration to 80% from 22% over the same period. It aims to boost public research and development funding to 1% of GDP – from 0.4% in FY 2014/15 – highlighting ICT development as being both an anchor for industrialisation and competitiveness, and critical for creating an enabling environment for private sector investment. It envisions increased adoption of ICT platforms in health services and education delivery systems, and targets raising the number of Tanzanians with basic ICT skills from 10m in 2016 to 17m by 2021, as well as “expanded and extensive” use of ICT at 53 vocational training institutions. Integrating ICT equipment into public entities including the police force also takes priority, with plans to expand e-government offerings and utilisation, an area with significant potential for expansion.
Mobile Broadband Boost
Expansion of mobile broadband service networks has been a critical support for ICT growth, given that mobile broadband services account for more than 80% of internet users in Tanzania. The country’s seven private and publicly licensed telecoms providers – Vodacom, Airtel, Tigo, Zantel, Halotel, Smart Telecom and the Tanzania Telecommunications Company Limited (TTCL) – began investing heavily in data networks over a decade ago. In February 2007, 3G development in Tanzania commenced when Vodacom Tanzania, the country’s largest mobile operator according to the TCRA, launched in Dar es Salaam, followed by Dodoma and Arusha. In February 2015 the company announced that it would invest TSh150bn ($68.2m) to upgrade its 2G and 3G networks, in addition to expanding rural coverage. Vodacom was followed in 2012 by Zain Tanzania (now Airtel) and Zantel. Zantel launched a 3/3.5G network in May that year, followed by expansion to Dar es Salaam in September 2014. Tigo began offering 3G services in 2013. In October 2014 Vietnam’s Halotel received a universal licence from the TCRA, announcing that it planned to invest $1bn to launch 3G services, building a range of new infrastructure including 13,000 km of fibre-optic cables.
Although 3G penetration currently remains limited to just 35% of the population and spectrum availability has been a challenge, operators have made major inroads recently in the deployment of 4G LTE services. In April 2012 4G development began when Smile Communications Tanzania launched a pilot trial of 4G LTE services in Dar es Salaam, offering speeds up to four times faster than rival 3G networks. Full commercial deployment in Dar es Salaam came in June 2012, using LTE technology supplied by Alcatel-Lucent on the 800-MHz band. In February 2015 TTCL announced that it planned to offer 4G LTE services by July 2015 through its relatively small mobile division, which is concentrated on commercial customers, after signing a contract with China’s Huawei to upgrade its existing networks. Its 4G LTE network went live in Dar es Salaam in December 2015. In August 2016 TTCL announced plans to attain nationwide 4G coverage by 2018.
Tigo followed with its own 4G LTE network launch in Dar es Salaam in 2015, after announcing plans to invest $120m in upgrading and expanding its network through the deployment of 787 new base transceiver stations. The company, which now provides 4G coverage in 23 cities, intends to invest $70m in network expansion by the end of 2017, following $75m spent on broadband service expansion in 2016. Shortly after, in 2015 Zantel also announced plans to launch a 4G network in Zanzibar, which went live in April 2016. In June 2016 Vodacom launched 4G LTE coverage with transmission speeds of up to 70 Mbps in Dar es Salaam using Nokia equipment, but noted it would not be able to roll out coverage to all major cities until more spectrum became available.
Spectrum allocation has been a problem for many telecoms sectors in Africa, and Tanzania is no exception. With 4G expansion somewhat constrained by lack of available radio frequency, the TCRA announced in February 2016 that it plans to auction frequencies that had been acquired at the World Radiocommunication Conference, breaking with the previous system in which spectrum was awarded following a mobile operator’s application. Newly acquired spectrum includes frequencies on the 694-790-MHz, 1427-1492-MHz and 3300-3600-MHz bands, which will be used for broadband services and deployment of an emergency service mobile network. The TCRA has not yet announced a date for the auction.
Having already witnessed tremendous growth in the number of mobile money services transactions and users (see Telecoms overview), the country could benefit from expanding digital payment platforms to include public and corporate actors. According to a September 2016 study published by the UN-backed Better Than Cash Alliance initiative, payments digitisation could boost Tanzania’s annual tax revenues by $477m, pushing its tax-to-GDP ratio above current levels of around 12% (see Economy chapter).
The study found that while annual motor vehicle licence fee payments account for less than 2% of the Tanzania Revenue Authority’s domestic tax revenue, they had traditionally posed a substantial administrative burden to collect. A digital payment platform was launched in 2013, and within three weeks 42% of motor vehicle taxes were being paid via mobile money. The Ngorongoro Conservation Area Authority, meanwhile, reported that two years after it banned cash payments for park entrance fees in 2011, revenues increased by 40% for the same volume of tourists.
Rolling out these systems also places a burden on the private sector, which must have access to online accounts and, in some cases, special equipment, in order to benefit from – or comply with – the new services, and this has caused some concern for SME owners in particular. In 2013, for example, the second phase of the government’s value-added tax digitisation programme introduced a requirement that small traders purchase electronic billing machines, which cost between $274 and $460 per unit. Although these offered improved transparency for sales volumes, protests followed, with traders unable to afford the investment in some cases and others resistant to providing full revenue visibility. However, the government is moving to mitigate these challenges, announcing in January 2016 that it had reached an agreement with the Tanzania Traders’ Association to subsidise the purchase.
With internet adoption, mobile broadband network coverage and digital financial services set to continue on a strong growth path into 2018, Tanzania’s ICT sector should play an important role in supporting robust mid-term macroeconomic growth. Network expansion into rural areas will offer improved ICT access and adoption, while government support for private players – including telecoms operators and retail stakeholders – has shown that a collaborative approach offers significant benefits to both parties, further strengthening the ICT sector’s foundations.