Small and Medium Enterprises in Transitional East African Economies: The Case of Tanzania

The institutional context of transitional economies in Africa can neither be explored nor understood without consideration of its complex colonial history and its legacy of influence on business today. Nor can we understand Africa as a continent without understanding the different regions and diverse influences experienced from past external powers. Africa is not homogenous. While other parts of the continent remain war-torn, improvised and debt-ridden, managed by corrupt regimes, others are experiencing more positive trajectories. Tanzania, for example, has sustained economic growth of around 7% annually during this time period, a rate considerably higher than in many other emerging and advanced economies. The economic importance of small to medium-sized enterprises (SMEs) is substantial, helping to explain Tanzania’s exceptional growth. We explore the following question—how does the institutional environment affect SME development in a transitional economy, especially contemporary institutional challenges, reflecting many interrelated past colonial influences? Many SMEs lack resources and expertise to mitigate uncertainties and challenges they face in their international business partnerships. Highlighting the heterogeneity of Africa, we focus on East Africa, explaining why some economies, such as Tanzania, are increasingly observed as highly promising locations for business opportunities.