At this point in Tanzania’s history, the culture of entrepreneurship is in need of revitalization. During the years of colonial rule in the country, the development of indigenous entrepreneurship was hampered. Tanzanians of African origin were mainly employed as laborers in cash crop farming, with limited access to business. After independence in 1961, enterprises remained under the control of expatriates and businesspeople of Asian origin. The Declaration of Arusha in 1967 served as a landmark in the history of Tanzania.
It set out a policy focusing on socialism, self-reliance and rural development. The result of this declaration was the nationalization of industrial activities and a substantial increase in state intervention in the economy. However, the “Africanization” of the economy did not take place through the transfer of ownership to the indigenous business class. Within the framework of socialism and self-reliance, which was linked to a strategy of import substitution, the government opted for the development of large-scale, monopolistic, mostly state-owned enterprises. At the time, leaders were of the view that rapid development was only possible if key enterprises were owned by nationals (the indigenous business class being too small to take on this mission).
The government took control of the production of many goods, import and export marketing tasks, the allocation of resources and foreign exchange, and the determination of prices. These control mechanisms were used to stimulate the development of the public sector; the policy environment was strongly biased against small private enterprises. This economic adjustment programme had both positive and negative impacts on small enterprises, depending on their characteristics, but tended to dramatically suppress “entrepreneurial impetus”. In fact, during the socialist era of 196711976, a campaign was launched to discourage private entrepreneurship, projected in the popular press and among politicians as evil and something to be tolerated only during the transition to full socialism (Olomi and Nchimbi, 2002, p. 6).
By the end of the 1970s, the stimulation of large-scale state enterprises, capital and import intensive, was proving ineffective due to the lack of technology and management know-how. Due to the extent of the economic crisis of the 1970s and early 1980s, and pressure from the World Bank and IMF, the government was forced to change its economic policies from 1986. The government adopted the Economic Recovery Programme, designed to put an end to the economic deterioration and to transform the state-led economy into a market-driven economy. Final reforms took place in 1991, and the regulatory environment partially adjusted accordingly. Due to privatization activity and the retrenchment of workers from public institutions, coupled with the state of the economy, many people were driven into micro-enterprises in order to make ends meet.
These “first generation entrepreneurs” found – and in many cases still find – themselves operating in an underdeveloped “enterprise culture”.
Development partners are now clearly focused on working with the government to strengthen the Tanzanian economy. Several new policies have been put into place over the past three years, including the National Micro Finance Policy (2000), the Strategic Trade Policy (2002), the Business Environment Strengthening in Tanzania (BEST)
Programme (2001), the Poverty Reduction Strategy Paper (2001), an Agricultural Sector Development Strategy (2000), a Rural Development Strategy, and a Sustainable Industrial Development Policy (1996-2020). To these can be added the National SME Development Policy (2003) and the National Trade Policy (2003). In addition, several donors are implementing major development strategies – the UNIDO Integrated Country Programme (2002-2005), USAID Private Enterprise Support Activities (2002), DANIDA Business Sector Programme Support (2003-2008), and the UNDP Private Sector Development Programme.
A recent joint statement of development partners on the need for private sector development in the Tanzanian economy reads as follows:
“The Government of Tanzania and the World Bank have put private sector development squarely on the agenda of this year’s Consultative Group Meeting. Growth is needed to reduce income poverty and to reduce long-term aid dependency. All agree that the private sector is the engine of that growth. The President has shown he is a clear advocate for liberalization of the economy, and has initiated promising round tables with local and international investors in the context of the National Business Council. Development partners are increasingly keen to support him in his effort towards private sector led economic growth. In the Poverty Reduction Strategy Programme (PRSP) document, the Government of Tanzania made it very clear that in order to reduce poverty a national economic environment which stimulates development has to be created. Growth is not a parallel process but an integral part of poverty reduction. We consider that the momentum is there now to go that extra mile. It is vital for all partners, bilateral donors, multilateral organizations, civil society and the private sector, to unite behind a Tanzanian strategy for pro-poor economic growth that enables the informal sector and SMEs – the so-called missing middle – to flourish and grow.” (Joint Statement by Development Partners on Private Sector Development, Consultative Group Formal Session, December 2002).11 In 2003, the government took the lead on such a growth strategy and is working on a number of key issues:
• strategy for pro-poor economic growth; • implementation framework for strengthening the business environment (BEST Programme); • revision of local revenue systems; • clarification of the Lands Act in order to secure the use of land as collateral; • improved access to essential agriculture and rural financial services; • improved international trade arrangements for Tanzania.
In February 2003, the government approved a new Small and Medium Enterprise Development Policy (SMEDP) and is in the process of designing its implementation framework.
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