For many years geoscientists believed that coals (Type III Kerogen) generate gas only. The geochemical study of Durand and Parrante ( Petrolum Geochemistry and Exploration of Europe, pp. 255–265, 1983) revealed that coals have reasonable potential for oil generation. On this basis forty outcrop samples of Lower and Upper Permian age, i.e. coals and carbonaceous shales, were collected from the south western Rift Basin of Tanzania. The aim of the study was to determine the richness, type, maturity and hydrocarbon potential of the above samples. These samples were subjected to both geochemical and petrological analyses. Geochemical analyses included solvent extraction, TOC, GC, GC-MS and pyrolysis. The petrological analysis included vitrinite reflectance, spore fluorescence and maceral content. The geochemical analyses showed all samples to be rich in organic matter of Types II and III and samples from Songwe Kiwira, Namwele, Mbamba Bay, Njuga and Mhukuru coalfields were in an early mature-mature stage of hydrocarbon generation. Whereas samples from Ketewaka and Ngaka coalfields showed a GC-trace of early generated waxy oil. All samples contained organic matter derived from terrestrial material which was deposited under oxic environment. The Hydrogen Index of most coals and carbonaceous shales was greater than 200 indicating that they can generate oil or light oil. Petrological observations showed all samples to be in the range of 0.47–0.67% Ro and some of them were rich in both liptinite and vitrinite macerals. From both geochemical and petrological observations it was concluded that the Lower and Upper Permian coals and carbonaceous shales under study are probably capable of generating oil. The oil generated has the same characteristics as that generated by Cretaceous and Tertiary coals discovered from other parts of the world, i.e. Adjuna and Kutei Basins in Indonesia and the Gippsland Basin in Australia (Kirkland et al., AAPG Bull. 71, 577, 1987).