Startups seek relief from high compliance costs

DAR ES SALAAM: STAKEHOLDERS have called for lower regulatory compliance costs, tax relief and easier access to finance for startups, saying high licensing fees and certification costs are making it difficult for young entrepreneurs to turn innovative ideas into viable businesses.

The call comes as the government has given the Ministry of Industry and Trade six months to develop a dedicated startup policy aimed at improving young entrepreneurs’ access to capital, markets and investment opportunities.

Speaking at the Jenga Leo Innovation Forum yesterday, University of Dar es Salaam (UDSM) Senior Lecturer and Innovation Coordinator Dr Moses Mchome said some young innovators faced substantial costs to register their businesses and obtain the approvals needed to take products to market.

He cited organic fertiliser innovators who, according to him, needed about 11,000 US dollars, equivalent to more than 30m/-, to secure the necessary market approval. Other innovators faced costs exceeding 3,000 US dollars to meet Tanzania Bureau of Standards (TBS) requirements.

“These young people are still at university. Where will they get that money from?” he asked, urging policymakers to consider the financial constraints facing businesses at their earliest stages.

Dr Mchome proposed a regulatory sandbox that would allow eligible startups to test innovative products and business models under defined conditions.

He also called for measures to ease their initial burden of taxes, licensing and certification fees. He said such arrangements would enable innovators to direct limited resources towards product development, raw materials and reaching customers instead of exhausting their capital on compliance costs before generating revenue.

Access to working capital was another challenge, even for startups that had secured business opportunities, he said.

Dr Mchome called for financing mechanisms enabling eligible startups with verified purchase orders to obtain funds to fulfil contracts, earn revenue and repay the financing after delivering their products.

The forum brought together entrepreneurs, investors, academics, policymakers and development partners to discuss ways of strengthening Tanzania’s startup ecosystem and helping innovative businesses progress from ideas to commercial operations.

Konrad Adenauer Stiftung (KAS) Tanzania Resident Representative Peter Koch said high startup costs and limited access to finance challenged entrepreneurs in both developing and developed economies.

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He said the government could consider targeted programmes to reduce selected fees and regulatory burdens for young businesses, including possible tax exemptions for qualifying startups.

“Bringing policymakers, financial institutions, established businesses and entrepreneurs together would help identify practical solutions to the challenges facing startups,” he said.

Through the Jenga Leo initiative, KAS Tanzania, in partnership with The Launchpad Tanzania and AHK Eastern Africa, plans to facilitate further discussions, including policy hackathons, to generate ideas for a more inclusive startup policy.

The Launchpad Tanzania Co-Executive Director Carol Ndosi said support programmes needed to reflect young entrepreneurs’ actual needs, particularly their difficulties in securing investment to move from the idea stage to commercial production.

She said the organisation had connected entrepreneurs with investors, banks, development partners and businesssupport programmes since it began operating in 2017.

Through its programmes and partnerships, The Launchpad Tanzania had reached about 150 young entrepreneurs, with 36 progressing from early-stage ventures to more established businesses, she said.

Ms Ndosi said the organisation also planned to strengthen collaboration with universities across Tanzania to identify young innovators and connect them with support suited to their stage of development.

She added that closer coordination among stakeholders would help ensure promising ideas received appropriate support at different stages of growth, from product development to financing and market entry.

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