Introduction: Growth of the Construction Sector in Tanzania
The construction sector is one of the fastest-growing industries in Tanzania, driven by strategic government projects (such as roads, the SGR railway, and bridges) as well as private residential and commercial real estate developments. For an entrepreneur, this presents a golden opportunity as the demand for professional and registered contractors is high. Owning this business does not require you to be an engineer, but it demands keen management, compliance with local laws, and sufficient startup capital.
In this article, we will analyze step-by-step how to transition from a local fundi or investor to a contractor recognized by the Contractors Registration Board (CRB), operating costs, and how to win tenders.
Requirements and Preparation (Capital & Registration)
The construction business is heavily regulated to ensure building safety. Below are the main requirements and estimated costs:
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Company Registration (BRELA) and TIN (TRA)
You must register a Limited Company with BRELA. This gives you the legal status to enter into contracts. Afterward, you will need a Company TIN and Tax Clearance from the Tanzania Revenue Authority (TRA).
Cost: TZS 400,000 – 600,000 (BRELA fees and preparation of MEMARTs). -
CRB Registration (Contractors Registration Board)
This is the primary requirement. You cannot call yourself a contractor without a CRB certificate. Startups usually begin at "Class 7" or "Class 6". To register, the company must employ a Technical Director with a construction background.
Cost: Application and initial registration fees can reach TZS 700,000 – 1,500,000 depending on the class and category (Civil or Building). -
Business Office
CRB will inspect your office before granting registration. You need an office with a physical address, tables, chairs, and a cabinet for document storage.
Cost: Office rent (City or outskirts) TZS 300,000 – 1,000,000 per month (Note that rent is usually paid for 6 or 12 months upfront). -
Basic Equipment
For the lowest grade (Class 7), you need at least one small Concrete Mixer, a Vibrator, Wheelbarrows, and hand tools.
Cost: TZS 3,000,000 – 7,000,000 (These are available at Gerezani street in Dar es Salaam or major hardware stores in regions). -
Safety Gear (PPE)
Helmets, Reflectors, and Safety Boots for your workers are mandatory for safety and the company's professional image.
Cost: TZS 500,000 – 1,000,000 for a small team of 5-10 people.
In-Depth Business Analysis
Classes and Types of Contracts
This business is divided into classes ranging from 7 (lowest) to 1 (highest). A new contractor starts at the bottom and upgrades based on the value of completed projects ("Projects value") and equipment owned.
There are also categories: Building Contractors (Structures/Houses) and Civil Works Contractors (Roads and Infrastructure). It is advisable to start with one based on your capacity.
Finding Work (Tenders vs. Private Sector)
Government Tenders: These are advertised through the electronic procurement system called NeST (National e-Procurement System of Tanzania). You must learn how to use this system.
Private Sector: This relies on building private homes, fences, or office renovations. This requires building a reputation in the streets.
Pros and Cons
Advantages of Construction Business
- High Margins: A single construction project can generate millions in profit. On average, the profit margin can range between 15% to 30% of the project cost.
- Asset Growth: As you win more jobs, you acquire more equipment (trucks, excavators). These assets are capital and can also be rented out to others.
- Market Protection: Since CRB registration is required, the market is not easily flooded by unqualified individuals ("Makanjanja"), reducing unfair competition to some extent.
Challenges and Solutions
- Payment Delays: Especially with government projects or large institutions, payment certificates can take time to process.
Solution: Do not rely on project funds to run your office. Set aside Working Capital and build a good relationship with a bank for Overdraft facilities. - Price Fluctuation: The price of cement, reinforcement bars (nondo), and timber changes frequently.
Solution: Include a Price Fluctuation Clause in your major contracts or purchase all key materials at the beginning of the project. - Labor Management (Theft and Negligence): Theft of materials (cement) on site is a national issue.
Solution: Hire a trustworthy Storekeeper, use CCTV if possible, and conduct surprise inspections.
Marketing and Competition Strategies
Construction is a business of trust. Use these strategies:
- Project Signboard: At every site you work on, place a signboard with your company name and phone numbers. This is the best way to advertise to passersby.
- Network with Architects & Quantity Surveyors (QS): These are the first people to meet clients wanting to build. If they know your work is good, they will recommend you to their clients.
- Timely Completion: A major complaint against Tanzanian fundis is delays. If you finish work on time and with quality, that same client will bring you five others.
- Online Portfolio: Take good photos of completed projects (Before and After) and post them on Instagram or create a PDF Company Profile to send to corporate clients.
Frequently Asked Questions (FAQ)
Q: Can I open a construction company if I am not an Engineer?
A: Yes, you can be the owner (Shareholder/Director). However, to register with CRB, you must employ a professional (Technician or Engineer) to act as the company's Technical Director.
Q: What is the project value limit for Class 7?
A: Currently, Class 7 (Building) is allowed to undertake a single project with a value not exceeding approximately TZS 300 Million (Laws change, verify with CRB).
Conclusion
The construction business in Tanzania is respectable and offers sustainable profits. The secret to success is starting by following the law (CRB Registration), being honest with client materials, and maintaining quality standards. Do not be discouraged by the initial bureaucracy; once you have your class registration, the sky is the limit.
