Entrepreneurs undoubtedly form the building base of any developing country though in most cases they remain unsung heroes of any progressive society
Economic reforms, involving shifting from socialism and central planning to a market-led economy, that started almost a quarter of a century ago have seen many entrepreneurs in Tanzania struggling to shake off the social stigma associated with private business activity.
In that course the relationship between entrepreneurs and government officials in Tanzania is still fraught with suspicion at best and outright mistrust at worst.
This was revealed by Executive Chairman of InfoTech Investment Group LTD, Ali Mufuruki at the launching of Tanzania Top 100 Mid-Sized company survey in Dar es Salaam last week.
The problem however, he said, the problem does not end with government officials but society at large has issues with the local private sector in particular where parents openly discourage their children from taking jobs with SME employers.
This occurs due to the fact that they fear that these companies may not offer the best career prospects for their children because they believe that employment in the private sector is risky and that there is no job security..
“Parents would rather see their newly graduated children, with an MBA, Medicine or an engineering degree, taking low-rated jobs in government or in state-owned organisation than in private sector because government is seen as a dependable employer with higher job security, training opportunities and easy career progress. More important for them, people do not get fired very easily from government jobs,” said Mufuruki.
On the other hand he pointed out that banks too treat the private sector, especially the small and medium sized companies of which the majority are owned by Tanzanians, with extra caution when it comes to advancing loans and other financial transactions.
“The rate of credit approval for local SMEs across the nation remains disappointingly low, leaving many owners to fund their businesses from savings, family support or very expensive microfinance loans,” he said.
In order to alleviate problems SMEs are facing, the Tanzania Investment Center (TIC) Executive Director, Emanuel Ole Naiko said that his center as an arm of government in all investment matters is fully committed to remove unjustifiable risks, costs and barriers which hinder SMEs from thriving.
He cited that under the National Development Vision 2025, among other things aimed at creating a semi-industrialized economy with per capita income of not less than $1500 by 2025, creating a well educated and learning society and making the private sector the engine of economic growth in global competitive economy and regionally integrated it within East Africa and SADC.
In order to achieve that Naiko pointed out that TIC has established departments to spearhead issues pertaining to domestic investors which includes promotion, facilitation, entrepreneurship training and preparation of feasible and bankable projects.
Moreover, he noted that one of the departments that the center has established has been charged with the responsibility of building strong SMEs linkage with big operators in the country basing on After Care and Business Linkage.
Naiko also said that among the challenges that remains in the whole of Africa's industry today is lack of skilled labour, a problem he said was not only critical in Tanzania but also the whole of Africa.
He added that SMEs should at all level invest in educating their labour force for effective production as it is the only way the private sector can be the engine of economic growth, stressing, “Education at all level must be developed holistically by both government and private sector.”
Nevertheless, Naiko noted, it is common when people talk about SMEs that they think only of citizens involved in manufacturing industries and trade while they do not consider farmers as part and parcel of the group.
“Today, some contract farmers who have established their base in Tanzania are extremely successful...let's use these SMEs as a vehicle to develop commercial agriculture in Tanzania,” he urged.
He further said that the concept is that if economical regional groups like EAC, SADC and others succeeded, SMEs farmers will be the first to benefit and will no longer be subjected to compete with farmers from the European Union and United States and hence be free from unfair non tariff hurdles to reach AGOA and EU markets.
Most importantly is the fact that recognising and celebrating local successful SMEs will not only provide an alternative career path for the youths in Tanzania and provide them with a new set for role models to emulate but also building confidence in investing in Tanzanian economy.
Small and Medium Enterprises (SMEs) undoubtedly play a crucial role in employment creation and income generation in Tanzania while it remains true that they can be easily established since their requirements in terms of capital; technology, management and even utilities are not as demanding as it is the case for large enterprises.
These enterprises can also be established in rural settings and thus add value to the agro products and at the same time facilitate the dispersal of enterprises. Indeed SMEs development is closely associated with more equitable distribution of income and thus important as regards poverty alleviation. At the same time, SMEs serve as a training ground for emerging entrepreneurs.
In Tanzania, the full potential of the SME sector has yet to be tapped due to the existence of a number of constraints hampering the development of the sector. They include: unfavourable legal and regulatory framework, undeveloped infrastructure, poor business development services, limited access of SMEs to finance, ineffective and poorly coordinated institutional support framework.
More therefore, still needs to be done to promote SMEs, including eradication of the stigma the general public has when it comes to employment, job security and so on.