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3.1-3.2 The SME sector in Tanzania: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005
Written by: International Labour OrganizationArticle Overview: 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
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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Survey (NISS), which is outdated.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
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
Wanted: jobs for Africa’s youth - Broadening consultation
1.3 Methodology: Support for Growth-oriented Women Entrepreneurs in Tanzania, 2005
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