Global trends increasingly highlight transport and logistics as central to economic growth, and Tanzania is no exception. The transport sector is a major contributor to Tanzania's foreign currency reserves, with USD 2,614.8 million, ranking third after the travel/tourism sector (USD 3,642.5 million) and minerals (USD 3,608.5 million). Combined, the transport and tourism sectors account for 42.62% of the country's foreign currency reserves. The sector's significance is further underscored by its positive impact on the current account, where the service account (primarily transport and travel) recorded a surplus of USD 4,569.70 million in FY 2024, compared to a deficit of USD 5,915.9 million in the goods account.
In terms of GDP, transport and storage contribute 7.8% to the GDP, making it the fifth-largest sector, and contributed 6.3% to GDP growth for the year ended 31 June 2023.
Tanzania's strategic location, with its ports serving several landlocked countries like the DRC, Zambia, Rwanda, Burundi, Malawi, and Uganda, offers immense potential for the transport sector.
Despite the strong contribution and extensive potential of the transport sector, there are still challenges facing the sector and hindering realisation of these potentials.
Fuel prices remain a significant issue affecting the sector. Although Tanzania boasts the lowest fuel prices in East Africa—primarily due to lower fuel sourcing costs compared to landlocked countries—there is still potential for improvement, given the broad economic impact of fuel costs beyond just the transport sector. The adoption of Compressed Natural Gas (CNG) in vehicles, which can offer up to a 50% cost saving compared to traditional fuels, could provide much-needed relief. However, the scarcity of CNG filling stations has been a major obstacle. Currently, a few available CNG stations are located in Dar es Salaam, making CNG use impractical for transport sectors that often operate long-haul or cross-country trips. In addition to cost savings, CNG is a more environmentally friendly option with lower CO2 emissions and offers benefits for the balance of trade, as it is a locally produced resource, unlike petrol and diesel which are imported using foreign currency. Therefore, the recent announcement by the Tanzania Petroleum Development Corporation (TPDC) to increase the number of filling stations and natural gas production by 80 million cubic feet is encouraging news. This challenge presents a very good opportunity for the growth of the gas sector.
There are also outcries by transporters on the lack of efficient border management systems, leading to significant delays at border crossings. The challenges include inadequate border facilities, a lack of mechanisms for promptly escalating traders' issues to relevant agencies, limited human resources, and poor coordination between authorities. These issues hinder the country’s potential to be a key player in regional integration. Additionally, congestion at the ports is exacerbated by a limited number of scanners and redundant verification processes. Vehicles also face delays at weighbridge stations. These inefficiencies increase both administrative and fleet costs for transporters, as well as the opportunity cost. Some of the easy wins would be removing duplications on the verification processes and exempting empty trucks from weighing requirements.
Certain government policies have also adversely impacted the transportation sector. High taxes on imported used and new vehicles, as well as spare parts, have driven up transportation costs for both goods and passengers. Additionally, some policies are not conducive to business, creating obstacles for entrepreneurs looking to invest in the industry. A notable example is the recent corporate income tax schedules for individual transporters, which apply fixed progressive tax bands based on vehicle capacity (for goods-carrying vehicles), with a maximum annual tax of TZS 2.2 million for vehicles over 30 tonnes. This approach means vehicle owners are taxed regardless of vehicle usage or income generated, which contradicts with the fundamental principle of income tax being levied on actual profits or income. An alternative could be to incorporate the tax into fuel, specifically diesel, to avoid penalising non-transport uses of petroleum and kerosene. This approach could be similar to the excise duty that replaced the abolished annual motor vehicle licence fee.
Infrastructure, which is at the backbone of any development in the transport sector, has been another challenging area. The analysis from the agricultural sector for instance shows that, rural infrastructure to support production, processing and marketing of agricultural produce is very poor, even though agriculture is mainly practised in the rural areas. Rural infrastructure including roads are in many cases lacking. On the other hand, regional infrastructure is inadequate to deepen regional integration. The 2019 Global Competitiveness Report showed that Tanzania lags behind other regional countries in development of infrastructure, particularly in the EAC and SADC. In the SADC, Tanzania has a score of 45 out of a possible 100 compared to a score of 68 for South Africa and 54 for Botswana and in the EAC, 54, 52 and 48 for Kenya, Rwanda, and Uganda respectively. The 2019 ease of doing business report by the World Bank Group had placed Tanzania at 33 in dealing with construction permits and 42 in trading across borders, the lowest ranking in the region (Kenya: 15 and 12; Rwanda: 7 and 5; Uganda: 19 and 14). In recent years, the country has embarked on ambitious projects to extend and improve the existing infrastructure, with flagship projects including Standard Gauge Railway (SGR) and road initiatives. However, the overall progress of the initiatives to unlock infrastructure particularly in the rural areas has been rather slow.
Lastly, and connected to transportation is the lack of sufficient and conducive storage facilities. Storage is of paramount importance in the logistics value chain. Of particular challenge are the cold storage facilities for the perishable goods. Efforts by the government to construct cold houses in Mbeya and Kilimanjaro airports are for the purpose of addressing this concern and mostly for horticultural products. However, this also presents an opportunity to the private sector for mini cold storage facilities for other perishable commodities including agricultural and meat, fish and dairy products.
Overall, the logistic sector cannot be ignored as the engine for economic growth in Tanzania. The whole chain (freight, clearance transport, storage etc) already employs (directly and indirectly) a significant labour force and has both a direct and indirect trickle-down effects to various other sectors. Resolving the above challenges and taking up some of them as opportunities, would certainly further increase the benefits of this sector to the economy.