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.