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2.1 The rise and fall and rise of private sector: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005

Guest post by: International Labour Organization

Article Overview: 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.

2.1 The rise and fall and rise of private sector: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005

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 1967-
1976, 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.

Related Articles
  1.2 Mission Objectives: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005
  8.0 Promotion of women’s entrepreneurship: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005
  4.0 The state of women’s enterprises in Tanzania: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005
  6.1 The informal sector: Gender Entrepreneurship and Competitiveness in Africa 2007
  8.1 Recommended actions – promotion: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005

Article Tags: development, development, economy, economy, entrepreneurship, entrepreneurship, government, history of Tanzania, indigenous business class, National Micro Finance Policy, rural development, self reliance, Sustainable Industrial Development Policy, Tanzania



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