Tanzania’s Perception of Scandinavian Investments in Tanzanian SMEs

Abstract: Tanzania is developing and their small and medium-sized enterprises (SMEs) can support economic, social, and technological development. Foreign direct investments (FDI) help Tanzania to sustain its businesses financially. How Tanzanian SMEs perceive the dependence on other countries' investors is unclear. This research analyzes whether and if so when investors should inject capital into SMEs as a minority or majority shareholder according to the SMEs’ perception. Nine semi-structured interviews with representatives of the Nordic/East African investor MTI Investment and four of their Tanzanian subsidiaries as well as a thematic analysis were conducted. The findings show that if the manager of the Tanzanian SME is the founder of an established SME, minority shareholders offer expertise and capital while still being in control of the business operations. An exception is when investors enter the business in the start-up phase. Then, a majority shareholder can help out better with their resources and can develop the business together with the manager. Majority shareholders are also appreciated when the leading CEO is not an entrepreneur. Then a strategic partner who injects capital and offers their skills to help out in all situations is perceived the most helpful for Tanzanian SMEs. Furthermore, the Tanzanian regulations are mostly supportive and through a visible change in opening Tanzania for FDIs, more investors are attracted. Further research is needed to see whether the perception changes over time.