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3.1-3.2 The SME sector in Tanzania: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005

 
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3.1-3.2 The SME sector in Tanzania: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005
   

SME definitions The Tanzanian government defines SMEs according to sector, employment size, and capital investment in machinery. Accordingly, SMEs are defined as micro, small, and medium-size enterprises in non-farm activities, including manufacturing, mining, commerce and services. A micro-enterprise is one with fewer than five employees, a small enterprise with 5-49 employees, a medium enterprise with 50-99 employees and a large enterprise with more than 100 employees (see Table 1). Capital investments range from less than Tshs 5 million to over Tshs 800 million. This definition would exclude a number of informal economy enterprises, peasant farmers, and Tanzanians engaged in lower-level income-generating activities.

Characteristics of the SME sector There is a shortage of comprehensive data on the state of the SME sector in Tanzania. Most reports on the sector rely on data from the 1991 National Informal Sector Survey (NISS), which is outdated. Although other studies have been done (the 1992 Rural Informal Sector Survey (RISS), the 1995 Dar es Salaam Informal Sector Survey), the NISS (1991) remains the only nationwide study of the informal sector. The current number of enterprises by size, sector, geographical location, age and sex of owner remains unknown.

The 1991 NISS survey reported a total of 1,801,543 informal sector enterprises employing 2,369,380 people (an average of 1.3 persons per enterprise). Sixty per cent of the enterprises were located in rural areas and 40 per cent in urban areas. Informal sector employment amounted to about 22 per cent of the total labour force, 15 per cent in the rural areas and 56 per cent in the urban areas. About 74 per cent of people employed in the sector were sole operators. Women made up about 36 per cent of the sector. Over 75 per cent of female employment in the sector was in the trade/restaurant/hotel category.

According to Mlingi (2000) “recent estimates indicate the number of establishments and the number of employees in the sector has been growing at a rate of 10 per cent a year since 1991” (p. 70), mostly taking place in urban areas. She cites evidence from Wangwe (1999) that most of the growth is accounted for by an increasing number of female operators in the informal sector. Mjema (1998) estimated that the proportion of males in the informal sector declined from 64 per cent in 1991 to 30 per cent in 1995, implying that the percentage of women operators in the sector increased from 36 per cent in 1991 to 70 per cent by 1995.14 The latest survey of SMEs in Tanzania was carried out by Swisscontact in May 2003.15 They conducted a survey of 4,050 households in the Uruhu Corridor, which includes five regions of the country. The number of households in these regions totals about 2 million and represents about a third of the country’s population. The purpose of the survey was to estimate the number of micro and small enterprises (MSE) and micro and small farms (MSFs), and to explore their challenges and use of financial and nonfinancial business services. Fifty-seven per cent of the households had a member who was operating an MSE or an MSF; for the MSE portion, it was over 38 per cent (see Table 2).

Table 2:Distribution of MSEs and MSFs by size: Five regions of Tanzania, May 2003 Total No. of households 2,021,553 Avg. household size 5.33 people Estimated population 10,770,228 Number of MSEs 781,687 Number of MSFs 365,102 Percentage of households with MSE 38.8%

Percentage of households with MSF 18.1%

Percentage of households with MSEs or MSFs 56.9%

Almost 43 per cent of the MSEs were owned by women, 48 per cent by men; 8.6 per cent by families (husband and wife), and 0.5 per cent by multiple owners. The 781,687 MSEs employed 1,260,520 persons, including the working owners, an average of 1.6 per enterprise.

The population of Tanzania is approximately 37 million. Extrapolating from the Swisscontact household survey in five regions, assuming it is representative of the country as a whole, suggests that there are as many as 2,685,404 MSEs and 1,254,270

MSFs in the country. If women own 43 per cent of MSEs (in the five regions), then there could be as many as 1,154,724 women-owned MSEs in the country. However, there is no way to fully substantiate these estimates.

Over 85 per cent of MSEs in the Swisscontact survey were not registered; just over 50 per cent had a daily trade, local authority or other licence. Over two-thirds of the MSEs operated their enterprises from home (43 per cent) or from the roadside (20.9 per 14 cent (see Table 4.3). Only 31 per cent operated in a market, commercial or industrial centre. Ninety-three point five (93.5) per cent marketed their products and services to the final consumer (mostly in the same town or region), reflecting the large number of traders and service providers in the total MSE population.

Table 3: MSE operating locations, Swisscontact (2003)

Operating Locations Percentage Homestead 43.0

Roadside 20.9 Traditional markets 15.6 Commercial/industrial centres 14.8 Unknown 5.7 Total 100.0

Just less than half of MSEs had gross annual sales of under Tshs 1 million (about US$1,000) and only 4 per cent had sales of over Tshs 10 million (about US$10,000) (see Table 4.4).16 In lieu of recent data on the employment size of Tanzanian MSEs, this provides evidence of their micro scale.

Table 4: Distribution of MSEs by gross annual sales, Swisscontact (2003)

Range of gross annual sales Number Per cent Up to Tshs 100,000 47,014 6.0

Tshs 100,001 – 200,000 56,007 7.2 Tshs 200,001 – 500,000 126,824 16.2 Tshs 500,001 – 1 M 137,250 17.6 Tshs 1,000,001 – 2M 163,627 20.9 Tshs 2,000,001 – 5M 162,822 20.8 Tshs 5,000,001 – 10M 57,901 7.4 Over Tshs 10M 30,242 3.9 Total 781,687 100.0 To learn more about this author, visit International Labour Organization's Website.

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International Labour Organization
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As the world's only tripartite multilateral agency, the ILO is dedicated to bringing decent work and livelihoods, job-related security and better living standards to the people of both poor and rich countries. It helps to attain those goals by promoting rights at work, encouraging opportunities for decent employment, enhancing social protection and strengthening dialogue on work-related issues. The ILO is the international meeting place for the world of work. We are the experts on work and employment and particularly on the critical role that these issues play in bringing about economic development and progress. At the heart of our mission is helping countries build the institutions that are the bulwarks of democracy and to help them become accountable to the people. The ILO formulates international labour standards in the form of Conventions and Recommendations setting minimum standards of basic labour rights: freedom of association, the right to organize, collective bargaining, abolition of forced labour, equality of opportunity and treatment and other standards addressing conditions across the entire spectrum of work-related issues.
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