The demand for fuel in Tanzania continues to grow, driven by increasing vehicle ownership and expanding economic activities such as transportation, mining, construction, and agriculture.
At the same time, the Government of Tanzania is working to improve nationwide access to fuel, including in rural areas, by making it easier for business owners to establish petrol stations beyond major urban centres.
These initiatives are helping to accelerate the growth of the petrol station industry across the country.
If you are a business owner looking to expand into the petrol station sector, this article provides essential insights into the most promising opportunities for running a profitable petrol station with sustainable growth and minimal risk.
- Build a World-Class Petrol Station in Township Areas.
The petrol station business is highly location driven, and success largely depends on securing a viable and high-potential site.
From our experience of more than ten years in petrol station project consultancy and research, we have observed that stations located in township areas generally record stronger sales performance than those located in suburban environments.
Although land costs in township areas may be higher, these locations benefit from stronger traffic flow, higher fuel demand, and greater potential for attractive returns on investment.
- Build a Mini Petrol Station in Rural Areas.
In some rural areas, residents and boda-boda riders travel long distances, sometimes up to 40 kilometres, to access fuel. Establishing petrol stations in such locations improves accessibility for local communities while also presenting a promising investment opportunity.
Read:Eight Profitable Business Opportunities in the Petroleum (Energy) Sector in Tanzania
Capital and infrastructure requirements in rural regions are typically lower compared to urban environments, and the Energy and Water Utilities Regulatory Authority (EWURA) has simplified some regulatory requirements for investors developing rural petrol stations.
However, one major risk is the possibility of fuel supply disruption caused by poor road networks in certain remote areas, which investors should carefully assess before proceeding.
- Operate Under a Franchise or Dealership with International Oil Marketing Companies.
Developing strong brand recognition for a new petrol station can take significant time and resources.
Operating under a franchise or dealership agreement with established international oil marketing companies such as ORYX or Puma Energy allows investors to benefit from brand trust, reliable fuel supply systems, and established customer confidence.
Read also:Two Potential Business Opportunities in Waste/Used Oil Recycling in Tanzania and Africa
However, franchise models may limit pricing flexibility, and in some cases, the margins offered may be relatively thin. Investors should therefore review franchise agreements carefully to ensure that the terms align with their financial expectations and business objectives.
- Establish Electric Vehicle and Hybrid Charging Stations.
Although electric vehicle adoption in Tanzania is still at an early stage, national mobility initiatives and infrastructure development plans suggest gradual growth in EV and hybrid vehicle usage in the coming years.
Converting part of the petrol station forecourt into an electric vehicle charging area can help capture emerging demand, diversify revenue streams, and position the business for future market trends.
The main challenges include slow adoption rates and high upfront installation costs. Investors may manage this risk by initially introducing fast-charging facilities in larger urban centres such as Dar es Salaam, Mwanza, Arusha, or Dodoma, where early demand is more likely to develop.
- Develop a Compressed Natural Gas Filling Station.
While demand for petrol and diesel continues to grow, alternative fuels are gaining increased interest across the transport sector.
The number of vehicles powered by compressed natural gas (CNG) has been gradually increasing, and government plans indicate an ambition for a significant portion of vehicles to transition to CNG by 2050.
However, the number of CNG refilling stations in Tanzania remains limited. Developing an integrated petrol and CNG filling station offers a strong growth opportunity, particularly among cost-conscious transport operators such as boda-boda, bajaji, and taxi owners who seek lower fuel expenditure compared to conventional fuels.
Bonus Opportunity: Petrol Station Real Estate Investment.
Land prices along major highways and strategic high-traffic corridors continue to rise, yet many investors have not fully capitalised on acquiring prime locations ahead of future development.
Investors may purchase and hold land in strategic fuel-demand corridors and later lease or sell these locations to petrol station developers and operators at profitable rates, creating long-term value through real estate appreciation.
Key Risks and How to Manage Them.
Drawing on over ten years of consultancy and business planning experience in the petrol station sector, we have identified several major risks that commonly lead to underperforming stations, along with measures that can help investors mitigate them and improve project outcomes.
- Location Risk.
The performance of a petrol station is strongly influenced by its location. Selecting a site with limited demand, low traffic flow, or weak commercial activity often results in reduced sales and poor profitability. To minimise this risk, investors should conduct a comprehensive feasibility study before committing capital. A detailed feasibility report provides insights into demand levels, projected profitability, expected payback period, and potential returns on investment, enabling more informed decision-making.
- Operational Risk.
Operational inefficiencies can significantly affect financial performance. Common risks include fuel losses during loading and offloading, leakages from storage tanks, and inaccuracies during fuel dispensing. These issues can gradually erode margins if they are not addressed through effective operational controls. Implementing smart monitoring systems, maintaining equipment regularly, enforcing strict handling procedures, and ensuring accurate stock tracking are essential for reducing losses and maintaining strong financial performance.
- Sales and Purchase Price Risk.
Fuel price fluctuations create another major source of financial risk. A station may purchase stock when prices are high and later be forced to sell during periods of declining prices, which reduces profitability. To manage this challenge, operators should maintain optimal stock levels, accelerate sales when downward price movements are anticipated, and increase inventory when upward trends are expected. Strategic inventory planning plays an important role in stabilising returns in a price-sensitive market.
Final Words
The petrol station business remains one of the most profitable and scalable investment opportunities in Tanzania. Many entrepreneurs we have supported continue to expand their operations by opening new locations as their businesses grow.
Although risks exist, long-term success in the sector depends on securing high-potential locations, maintaining strong operational discipline, ensuring consistent and reliable product supply, offering competitive prices, and providing quality customer service.
With careful planning and execution, investors can achieve sustainable growth and long-term profitability in the petrol station industry.
