A growing policy debate in Tanzania is questioning whether the country would tolerate the same level of inefficiency seen in some state-owned enterprises (SOEs) if those institutions were privately run, as policymakers and economists push for deeper reforms to improve productivity and strengthen the role of public firms in the economy.
The issue came into sharp focus during the second public dialogue organised by the Public Private Partnership Centre (PPPC) on March 30, 2026, where participants argued that the country must rethink how state institutions are structured if they are to contribute meaningfully to long-term development goals. The first dialogue on the same subject had been held earlier last month at the University of Dar es Salaam.
Leading the reform argument, David Kafulila said Tanzania can no longer rely on incremental reforms and must instead move toward full corporatisation of SOEs. He framed the issue in simple terms: if even a quarter of the inefficiency seen in some public institutions existed in the private sector, the country would not accept it.
His remarks built on concerns raised earlier by Prof. Semboja Haji Hatibu Haji of the State University of Zanzibar, who argued that many SOEs remain structurally inefficient for two main reasons.
Prof. Haji said, they lack real operational autonomy because key decisions are often influenced by political authorities and despite ongoing reforms, many of them continue to use more resources than the value they generate, resulting in low productivity and weak financial performance.
Kafulila said corporatisation running state enterprises using corporate governance principles is widely recognised as the most effective way to improve efficiency while maintaining public ownership.
He noted that he has supported the idea since his time as a Member of Parliament, arguing that the model would allow SOEs to increase productivity, improve service delivery and respond more effectively to changes in the global economy.
The urgency of the reforms becomes clearer when placed against Tanzania’s development ambitions.
According to Kafulila, the Fourth Five-Year Development Plan (FYDP IV) expects SOEs to contribute nearly 38 trillion Tanzanian shillings over the next five years, equivalent to about eight percent of the overall plan value of 477 trillion shillings.
That means public enterprises would need to generate around 7 trillion shillings annually, about seven times more than their current contribution.
“That level of contribution requires a complete shift in how we run public institutions,” he said, adding that the reforms would also align with the broader direction outlined when the government launched Vision 2050.
To support his argument, Kafulila pointed to international experience, saying corporatisation has already transformed public enterprises in several countries.
He cited Canada as one of the leading examples, while countries such as Vietnam, China and Singapore have used the model to build strong, competitive public companies that contribute directly to economic growth.
He also argued that listing SOEs on the stock exchange would significantly improve transparency and accountability while expanding economic ownership among citizens.
“Listing is not just about raising money,” he said. “It is also about improving governance and performance.”
The question of efficiency becomes more sensitive when translated into essential public services.
Kafulila cited the case of DAWASA, where a large share of water produced does not reach paying customers.
According to figures cited during the dialogue, more than 250 billion litres of water are not paid for every year, highlighting what he described as a major policy failure rather than simply a technical problem.
“If this level of inefficiency was coming from the private sector, the country would not accept it,” he said, adding that the issue shows why a deeper structural reform of SOEs is needed.
Economists at the dialogue warned that the risk is not only poor performance but also the emergence of what some participants described as “zombie public companies” – institutions that continue to exist but no longer create real economic value.
They argued that corporatisation from a management perspective, combined with stock exchange listing from a governance perspective, could help address the problem by forcing greater accountability and stronger financial discipline.
Adding a broader policy perspective, Ambassador Mero told the forum that Tanzania must build confidence in its own ability to modernise and place the private sector at the centre of economic development while transforming public institutions into efficient, commercially driven entities.
He said the country should adopt modern economic systems that encourage competition, efficiency and innovation while maintaining strategic public control where necessary.
The debate also highlighted the evolving role of the Public Private Partnership Centre (PPPC), which participants said should not only provide policy advice but also help develop bankable projects, strengthen fiscal discipline and ensure that public-private partnerships deliver measurable economic value.
Taken together, the discussion suggests that Tanzania is entering a more pragmatic phase of economic reform, in which the focus is shifting from whether SOEs should change to how quickly they can be transformed into efficient, commercially driven institutions capable of supporting the country’s long-term development ambitions.
