Investors considering opportunities in Tanzania’s growing fuel retail market are being advised to take a careful approach before building new petrol station.
Experts and petrol station operators say that choosing the wrong location can seriously hurt profits. In fact, location is often the single most important factor in whether a petrol station succeeds or struggles.
Several investors who rushed into projects without market data have already lost millions of shillings.
A Growing Market With Hidden Risks.
Demand for fuel continues to grow in Tanzania, driven by the expansion of trade routes and an increasing number of vehicles, especially cross-border traffic, as Tanzania’s strategic location provides access to major markets in East and Central Africa.
For independent investors, a petrol station is more than just a business — it is an opportunity to achieve their dreams of wealth while serving their communities.
For large multinational energy companies, building new petrol stations allows them to expand market share, increase sales turnover, and strengthen their credit standing with banks.
But despite this growth, industry experts caution that the petrol station market is becoming increasingly competitive.
“Yes, fuel demand is growing, but not every petrol station will experience high sales volumes,” said Eng. Innocent Urio, Head of Engineering and Maintenance at Puma Energy Tanzania. “Profitability depends on traffic flow, accessibility, and visibility. A bad location will lock you into years of underperformance.”
The Cost of Wrong Decisions.
Petrol station construction is a capital-intensive venture. Industry insiders estimate that even a modest petrol station can cost around Tsh 300 million, excluding land acquisition.
Large and modern petrol stations with ancillary services such as car washes, garages, restaurants, mini-supermarkets, and shops can cost upwards of Tsh 1.6 billion.
“Once you have sunk that money into infrastructure, it’s very hard to recover if your volumes don’t meet projections,” noted Eng. Mnanka Maginga, a downstream petroleum consultant who has advised several operators in Dar es Salaam, Arusha, Shinyanga, and Mtwara. “We have cases where stations are pumping less than 50,000 liters a month, when they need at least 100,000 liters to break even.”
He pointed out that petrol stations obstructed by buildings or trees lose visibility and, consequently, customers.
Eng. Urio agreed, explaining that a station must be both visible and easy to access. “If drivers find it difficult to see or reach your petrol station — for example, if they must make a U-turn or navigate narrow roads — they are likely to choose competitors,” he said.
Urio also noted that a petrol station next to a strong competitor may struggle to achieve high profitability unless it offers a unique advantage such as brand trust, lower prices, or superior service.
“You build your petrol station next to a large multinational oil marketing company and name it Kipendacho Roho, you will lose customers,” Urio added.
Jackson Benedict, the owner of Otto Oil in Mwanza, supported this point: “My petrol station is located close to TotalEnergies. We struggle to compete because they have more reputation and financial muscle than we do. But we are improving every day.”
By contrast, some operators regret moving too quickly. A station owner in Dar es Salaam, who asked not to be named, admitted he miscalculated:
“We assumed our location would have huge demand for additional services. We invested millions of shillings to build shops and a mini-supermarket, expecting rental income. All our facilities are empty.”
The Everyday Customers.
Motorcycle taxi drivers, or boda boda, form one of the most loyal and frequent customer bases for petrol stations in both urban and rural Tanzania. Their perspectives highlight what makes a station attractive.
“We go where it’s easy to enter and exit quickly,” said Ramadhani Mtigile, a boda boda rider in Dar es Salaam. “If the station is too far from our route, we don’t bother. Even 50 shillings more per liter is better than wasting time and fuel.”
His view underscores the importance of accessibility and location in attracting consistent retail customers.
The Role of Market Data.
Industry consultants argue that a proper feasibility study should be non-negotiable. Such studies typically examine traffic counts, surrounding land use, competitor analysis, local purchasing power, and regulatory constraints.
“Investors often think they are saving money by skipping feasibility studies, but it’s the opposite,” explained Eng. Maginga. “The few million shillings spent on professional research can save billions in losses down the line.”
He added that modern feasibility assessments increasingly include projections for fuel sales revenue, return on investment, payback period, operational expenses, estimated investment costs, and potential demand for ancillary services such as car washes, mini-supermarkets, and ATMs.
Looking Ahead: Smarter Strategies Needed.
With Tanzania aiming to become a regional trade hub, fuel demand is projected to remain robust in the medium to long term. But experts insist that only stations backed by strong feasibility studies and smart location strategies will succeed.
“Investors need to move from gut-feel decisions to data-driven strategies,” said Eng. Urio of Puma Energy Tanzania. “That means traffic counts before investing. There are various technologies to capture traffic density — including vehicle types, as well as peak and off-peak flows. It’s also important to consider regulatory approvals, to ensure your land meets requirements from EWURA and NEMC.”
For operators like Jackson, the lesson is clear: “Location is everything. You can’t move a petrol station once it’s built. If you get it wrong, you’re stuck.”
Conclusion.
Tanzania’s fuel retail sector continues to attract attention, but the difference between profit and loss often comes down to a single factor — location. With the stakes so high, industry voices urge investors to resist the temptation of rushing projects and instead prioritize thorough feasibility studies.
As boda boda riders, station owners, consultants, and engineers all agree: where you build your station is as important as what you build. For investors, the choice is simple — invest in research upfront or risk years of struggle.
