Enclaved or linked? Examining local linkage development in the Tanzanian off-grid solar market

Foreign direct investments in the off-grid solar sector have been growing in East Africa. By linking up as subsuppliers with the foreign multinational companies (MNCs) undertaking these investments, local companies can benefit from knowledge spillover, which could contribute to improving their competitiveness and capabilities. This depends crucially on the extent to which linkages are forged between the foreign MNCs and the local companies. However, little research has been done so far analyzing local linkage development in the off-grid solar sector in East Africa. To meet this knowledge gap, we examine the breadth and depth of linkages between the foreign MNCs and the local companies in the off-grid solar sector in Tanzania. The article draws on interviews undertaken with eleven MNCs and eleven local companies. We find that the breadth of the linkages was narrow, as the majority of the components and services were imported from abroad. Those which were procured from local suppliers were low-value components, suggesting that the depth of linkages is also limited and shallow. However, there were more backward linkages in the deployment chain than in the manufacturing chain, while more extensive linkages were observed in larger solar systems compared to smaller systems. In order to increase the depth of backward linkages, we recommend focusing on building up the capacity of local companies to offer auxiliary services in the deployment value chains. Furthermore, although small-sized solar systems are seen as crucial components in facilitating affordable energy access to many off-grid areas, they do not offer many opportunities to develop backward linkages between foreign MNCs and local companies.