Inflation to expansion: How businesses thrive in the shifts

TANZANIA: INFLATION is like the rain. You can’t stop it, but you can choose whether to build a better roof or stand outside and get soaked.

According to the National Bureau of Statistics (NBS), Tanzania’s inflation rate stands at 3.1 per cent in January 2025, while this seems relatively stable, the reality on the ground tells a different story.

The cost of living is rising and Tanzanians are feeling the pinch in more ways than one.

Yet, while some businesses are cutting back, others are expanding, investing and growing.

Why? Because inflation isn’t just about rising costs, it’s about how you position yourself, adjust your strategy and find opportunity in market shifts. This is how businesses that thrive during inflation make their moves:

• Strategic Borrowing: Lock in low rates before they climb higher. In inflationary periods, borrowing gets more expensive, loan rates that were 12 per cent last year are now 15 per cent plus. Banks are tightening lending criteria, making it harder to access capital. Smart businesses act early to secure funding before conditions worsen.

Renegotiate existing loans—fixed rates protect you from future hikes. Secure funding now before banks tighten further. Borrow for expansion, not survival—debt should fuel growth, not cover losses.

If you plan to expand your business, securing financing now at a lower rate means you gain an edge over competitors who wait and end up paying higher interest. The businesses that borrow smartly today will be the ones expanding tomorrow.

• Turn the Shilling’s Fluctuation into an Advantage: A depreciating Tanzanian shilling makes imports more expensive but also makes Tanzanian exports more competitive.

In 2023, businesses relying on imports faced higher costs, exporters of coffee, cashews, and manufactured goods saw foreign demand surge.

If you import, hedge your forex exposure—lock in good exchange rates.

If you source locally, push that advantage—market your product as a cost-effective aternative.

If you export, expand aggressively—a weaker shilling makes your products more attractive to global buyers.

Tanzanian coffee exporters saw a 20 per cent demand increase as the shilling weakened, giving them a pricing edge. If you’re a local retailer relying on imported goods, the rising cost of foreign currency could eat into your profit margins. But if you adjust your supply chain to source more locally or hedge against currency risk, you can still maintain competitive prices for your customers.

Alternatively, if you’re an exporter, the weaker shilling means you can offer better deals overseas, outpricing competitors and gaining market share.

• Optimised Cost Structures: Cut Inefficiencies, Not Investments Inflation forces businesses to rethink costs but cutting the wrong costs can backfire.

Some companies slash marketing, lay off key employees, or lower product quality—only to lose market share. The smarter move? Cut inefficiencies while investing in productivity.

Automate operations—use tech to reduce long-term costs. Renegotiate supplier contracts—bulk purchasing and long-term deals prevent price shocks.

Optimise logistics—rising fuel prices mean transport efficiency is critical.

Vodacom Tanzania reduced operational costs by 10 per cent in 2023 by investing in automation.

Competitors that failed to modernise are now struggling.

Instead of blindly cutting costs, analyse cost structures to trim waste while reinvesting in revenue generating activities. The key is cost optimisation, not cost elimination.

• Adapt to Shifting Consumer Behaviour

Inflation changes how customers spend; consumers prioritise essentials over luxuries. They buy smaller, more affordable options. Brand loyalty weakens and if there’s a cheaper alternative, they switch. Companies that understand these shifts and adapt will grow their market share.

Introduce budget friendly product sizes to smaller, affordable packaging. Launch loyalty programs to retain customers even when they’re tempted to switch. Reposition your product as “inflation proof” and show why you offer the best value.

If your customers are downgrading or switching brands, it’s time to rethink your product strategy. Businesses that offer value-based alternatives will capture price sensitive customers while retaining their existing base.

• High Growth Opportunities: Where to Invest Next While some businesses are focused on survival, others are finding new profit centres.

Industries that thrive in inflationary periods include:

Fintech & Digital Payments: Consumers and businesses seek cost-efficient financial solutions.

High Margin Products & Services: Inflation erodes low margin businesses first. Government and Institutional Partnerships: Many industries receive subsidies, tax incentives and funding support.

Fintech companies in Tanzania grew by 23 per cent in 2023 as businesses adopted digital transactions to cut costs.

Instead of just reacting to inflation, proactive businesses look for high growth areas where demand is rising. Whether it’s digital banking, energy efficient solutions, or B2B services, investing in the right sectors can turn an economic shift into a growth opportunity.

Inflation Isn’t a Crisis— It’s a market shift; it doesn’t shrink all businesses—it rewards those that are agile, data driven and forward-thinking