Abstract: In Eastern Africa, the current structural reforms, reduced state involvement in the production and delivery of goods and services all have begun to reshape employment patterns. An immediate response has been the creation of alternative sources of livelihood exemplified by an increasing number of small and medium size enterprises in the private and tertiary sector. This paper emphasizes the need for government support and proper regulations that recognize the importance of land ownership and access for local communities. Furthermore, it calls for improving small- and medium- size enterprises access to credit, and an increased institutional and human resources development support. Such improvements cannot be sustained without an efficient legal framework instruments and regulations.
At the Cairo Senior Policy Seminar on an Enabling Environment for Enhancing Entrepreneurship in the Private and Public Sectors in Africa (AAPAM/ ECA/SAPAM, 1990) factors constraining the growth of the small and micro-enterprise sector were discussed in detail. The major ones outlined were lack of clear policy guidelines; low levels of skills and technical capabilities; low value attached to training and, where training is emphasised, lack of trainers or training materials; lack of links between good trainers and small entrepreneurs; lack of credit support for entrepreneurship development; information bottlenecks or blackouts on technology, markets, etc.; foreign exchange constraints and lack of planning, inventory management and general management capabilities (AAPAM/ECA/SAPAM, 1990:12-13).
As a follow-up to the Cairo Policy Workshop, the UN-ECA came up with concrete Measures for the Stimulation, Development and Promotion of Indigenous Entrepreneurial Capability in Africa (1992). This document gives a broader view of the historical, social, political and legal constraints to entrepreneurship development in Africa. A few points from this document need re-emphasis. Firstly, it is argued that most of Africa's old generation of entrepreneurs were well connected to the political system and this led to tendencies towards luxury consumption and corruption (ECA, 1992:15).
Secondly, during colonialism, the state played a big role in marginalizing African entrepreneurs and, after independence, suppressing the emergence of a strong business class and keeping small and micro enterprises at the fringes of society. A hope is raised that the same states in Africa can use their powers of intervention to develop and coordinate policies, allow access to entrepreneurs to investment, trade and marketing information (ECA, 1992:24-32). The document concludes by outlining major areas requiring intervention for small and micro enterprises. These include providing the necessary skills by increasing production-oriented training, making technology research, and science and technology generally, relevant to small and micro enterprises, and strengthening grassroots support systems for these enterprises (ECA, 1992:55-57).
Underlying all these initiatives is the struggle against poverty. Economic growth in sub-Saharan Africa has been very sluggish. While all continents are experiencing economic hardships, this region has lagged behind in terms of GDP growth, averaged at an annual rate of 2%, compared to some 3.4% for Latin America and 4.8% for East Asia (Dominique, 1994:43). While nutrition and health levels recorded a sizeable rate of increase in the rest of the world, they stagnated in Africa during the 80s (Turshen, 1991). According to a summary given by Dominique in 1990, 49% of the population in South Asia, 48% in sub-Saharan Africa, 33% in the Middle East and North Africa, 25% in Latin America and 11% in East Asia were poor.
While predictions are for improvement in the incidence of poverty in the world generally, the incidence of poverty in sub-Saharan Africa is expected to remain high, with a possibility that the number of those living in poverty may double (see Table 1). Therefore Africa may contribute about 33% of the world's poor by the year 2000 compared to only 16% in 1985 (Dominique, 1994:44).
Table 1: Incidence of Poverty in the Year 2000 by Region
|
Incidence of Poverty of Total Population (%) |
Number of Poor (in millions) |
||||
|
1985 |
2000 |
1985 |
2000 | ||
Sub-Saharan Africa East Asia South Asia Latin America & Caribbean Eastern Europe Middle East, North Africa & W. Europe |
46.8 20.4 50.9 19.1 7.8 7.8 |
43.1 4.0 26.0 11.4 7.9 7.9 |
180 280 525 75 5 5 |
265 70 365 60 5 5 | ||
Source: Dominique (1994).
According to Dominique sub-Saharan Africa and South Asia will remain the most poverty prone as we enter a new century, but it has been observed by experts that South Asia has better prospects of reducing the number of poor than sub-Saharan Africa (Dominique, 1994:46).
The threat of poverty to national and regional stability in Eastern Africa cannot be over-emphasized. Poverty studies in East Africa, show alarming trends. It has been estimated by the World Bank that, at a poverty line of Ugandan Shs.6,000, about 55% of all Ugandans can be classified as poor. It has also been estimated that 92% of Uganda's poor live in the rural areas (World Bank, 1993:2). Although Uganda has had a devastating history, the country is characteristic of poverty trends in Eastern and Central Africa. In this region, core poverty is concentrated among the older, less educated and among communities excluded from dynamic sectors by poor communication and service infrastructure. These groups have very little support in the areas of health, education, diet and preventive medicine.
Eastern African governments have started addressing problems of poverty and its accelerating factor, unemployment. In Sessional Paper No.2 of 1992 on Small Enterprises and Jua Kali Development in Kenya, for example, the Kenyan Government has expressed its recognition of the small- and micro-enterprise sector, and outlined a policy to support it. Among many other strategies, the policy underlines the need to liberalise and deregulate the economy in order to create an environment conducive to the development, stability and growth of small enterprises. In 1993, the Government of Kenya issued a policy document jointly with the UNDP in which the former undertook to work towards a regulatory and policy environment supportive of entrepreneurship generally, and small and micro enterprises in particular. It undertook to re-examine and tackle,
...the inhibiting general policy framework; inadequate infrastructure; poor access to technology; limited markets; cumbersome laws and regulations, affecting the small-scale sector... (GOK-UNDP, 1993).
Similar comprehensive policies have been promulgated by the governments of Tanzania and Uganda. Such measures re-echo the hope of the UN-ECA that the state is still a possible force in reshaping the structures of power, production and distribution. Behind this hope is also the hope that laws and regulations, if changed and simplified, have a potential for catalysing growth. Before we address this issue, it is good to consider the historical factors which have affected entrepreneurship in Africa.
The colonial marginalization of African entrepreneurs was achieved not through neglect but outright suppression, exclusion and discrimination. Apart from the open exclusion of African farmers from the right to grow lucrative cash crops such as coffee, or to keep advanced breeds of livestock in Kenya, Tanzania and Uganda (Coulson, 1978), African people were barred from operating retail stores in urban areas and their trading activities were confined to 'locations' or local trust lands. This policy was more pronounced in Kenya, Zambia and other African countries such as Malawi, Zimbabwe, South Africa, etc. (Beveridge and Oberschall, 1979; Swainson, 1980). Even in these locations African entrepreneurs were not allowed to sell everything. They were licensed to sell commodities which were not dominated by expatriate traders (Kennedy, 1988:29).
Laws were used, during the colonial period, to give different licences to different racial groups in Africa. While most Asians in East Africa were not allowed to 'own' land they were allowed to hold leases for commercial agriculture. The Madhvani family were the biggest beneficiaries of this policy. In Uganda and Tanzania licensing laws explicitly prevented Africans from owning or operating hand ginneries or even buying or selling raw cotton or cotton seed. Similarly credit controls were imposed legally on African entrepreneurs. Kennedy (1988:30) gives numerous examples of colonial laws in Zimbabwe, or Rhodesia as it was then known, and Kenya which placed limits on amounts of money to be lent to African borrowers from banks. This was in addition to the general limitation that African land was valueless - it belonged to the community as a whole. All Africans were thus tenants at will, and could acquire no individual titles over 'communal land'. Therefore, for credit purposes this land could not be used as a security.
Colonial laws expressly prohibited Africans from growing lucrative cash crops. For example, in Kenya, growing coffee was made illegal for Africans. In Sudan, a strategy was adopted which, while not banning the growing of cotton, was based on changing the technology of the ginning mills and hybridization of cotton as technological means of rendering African produce redundant (Roberts, 1987:471). Technological destabilization was accompanied by intervention in the social relations of production through introduction of share-cropping contracts with chiefs and collusion with local chiefs to force local cotton growers to switch to hybrid varieties of cotton. The French colonizing authorities, through contracts and coercion, managed to control decisions on the division of labour and marginalized local producers. Similar strategies were adopted in Kano State (as it then was) in Nigeria (Shea, 1975).
In Ghana the control and regulation of mining rights had a clear objective of making it illegal for Africans to hold mining licences in areas endowed with minerals. Where, as an exception mining was allowed for Africans, it was only allowed if they used the so-called 'native methods' (Howard, 1978:68; Kennedy, 1988:30). A combination of discriminatory licensing regulations and undisguised exploitation of technological superiority were deployed in this area.
Pricing policy has also been raised as an instrument which was used to discriminate against African entrepreneurs, especially in the area of services. Railway services had differentiated rates based either on geographical criteria or on the nature of goods. Products produced by settler communities enjoyed very low freight rates and the tariffs tended to be lower generally for all services in areas inhabited by
expatriate farmers or entrepreneurs. Extension services in Sudan were cheaper for French cotton farmers, than for local farmers while in Kenya and Tanzania, veterinary and medical services were not only more accessible to settler communities but also cheaper for such communities. In addition, expatriate communities resisted income tax and were exempted from many import duties. The burden of paying all kinds of taxes fell on the Africans whether or not they were engaged in any income-generating activities. Kennedy (1988:32), using Brett (1973) has estimated that African people contributed 70% of the state revenues during most of the colonial period in East Africa, i.e. to foot the cost of their own exploitation and exclusion.
While regulation and technological marginalization were used as instruments of excluding African entrepreneurs in Eastern Africa, the encounter between expatriate and local entrepreneurship in West Africa was more violent. Taking advantage of a competitive market for textiles developed over decades as the Trans-Saharan trade, it was easier for European companies to undercut local textile firms by supplying cheaper and more durable textiles. In what Johnson has categorised as 'cotton imperialism' an account is given of how the culture of competition was exploited to edge out African entrepreneurs from the textile industry and trade in West Africa (Johnson, 1974). But while African entrepreneurs continued competing with European traders for a long time, the latter were united while the former not only competed with the latter but also among themselves (see for example Pitt, 1978).
It is interesting to note that while African entrepreneurs remained very loyal to the market norms of free competition, their expatriate counterparts continued to rely on non-market norms such as price fixing, controlling supply, engineering fluctuations by creating buffer stocks, starving African traders by delaying payment to them, price compounding and creating several tariff, migration and other barriers. Readers of African history cannot forget that blockades and sanctions did not only help to pull down the apartheid regime in South Africa but had been tried before on the Opobo Kingdom in Nigeria and on Lobengula's Greater Zimbabwe. King Jaja of Opobo tried to compete with British companies in the export trade. He was blockaded for several years, wars were waged against him several times and he was finally defeated and repatriated after almost sixteen years of trade wars with European powers.
Even when trade was still based on human beings, the power of the chiefs was greatly constrained. As Hopkins (1980:82) has shown, not only were the chiefs encouraged to be too dependent on the slave trade but when it was abolished, they lost ground - their premises were searched and looted from time to time and the slaves who were liberated or repatriated and resettled were used against them or used as harbingers of the new culture of wage employment, Christianity and Western goods consumerism (Kennedy, 1988:35).
While West African entrepreneurs put up stiff resistance for some time even after losing political leadership, they were rooted out gradually, through a combination of bureaucratic and other non-market mechanisms. The first of these was incorporation. The direct victims were the cocoa and palm oil extractors and exporters who could no longer sell directly to Europe after the entry of Cadbury's into the West African market. Importers began relying on expatriate exporters. As the local producers failed to obtain direct access they became intermediaries and sold their products at lower prices. They became brokers for big companies and, according to Kennedy (1988:36-7), the rapid expansion of railways and other inland transport facilities accelerated the further marginalization of local entrepreneurs, as European companies penetrated the inland markets further. The same strategy was used in Eastern Africa. After crippling the indigenous textile cottage industry in Sudan, the French quickly converted the local entrepreneurs into merchants whose specialisation became the sale of imported French textiles. In Southern Uganda, wholesale traders who had established themselves as impoters of fabrics from India and the Arabian peninsula were converted into retailers of British products. In Tanzania cities which had sprung up and expanded on the basis of ivory and gold trade, such as Zanzibar, Tabora, Kigoma and Kilwa, were abandoned and deprived of infrastructural support. The traders in these towns lost their skills and hegemony over time as they refused to move to the new business centres dominated by European traders. Also involved here was the exploitation of African culture. The colonial administrators knew that estabished African land owners would not easily migrate, leaving behind their ancestral land and burial grounds. They knew that without support they would quickly cease being a dynamic force. Within a period of less than two decades they succeeded in replacing the Africans in the major areas of trade and commerce (Koponen, 1988:101-125).
The second strategy was that of displacement which, in West Africa, occurred after the European companies such as Cadbury's entered the inland markets and established their own processing and export agencies. Fluctuations in world prices exacerbated the situation for African enterprises. While European companies had a strong back-up network of banks and insurance companies, most African entrepreneurs were carrying their own risk.
According to Kennedy (1988:37), most cocoa traders were ruined by a temporary cocoa price boom which raised the price from Shs47 to Shs123 overnight per hundred weight in 1919, sucked in many African traders and when the price fell the following year most of them became bankrupt and were taken over by big companies. Socially engineered shocks were not limited to price fluctuations. European companies teamed up to control prices for all imported goods, thus undercutting local aspirant or operating traders. Sometimes, such companies held the prices low and organised windfall sales in order to force local entrepreneurs out of business. Most of these measures were taken to suffocate new entrants who were already acquiring their merchandise at a relatively higher cost. According to Kennedy (1988:39) once the new entrants had been cut out, prices would return to their normal levels.
The Eastern African entrepreneurs were subjected to more ruthless types of displacement. Their major specialisations were completely marginalised. They had excelled in bark cloth making, pottery, woodwork, etc. All these were kept out of the market and made non-commodities. The new European merchants seemed not to recognise their value and in their stead promoted new imported commodities. This deprived the local enterpreneurs of the opportunity of even becoming brokers or sub-contractees. Having ignored and marginalised their cities, the European merchants went on to ignore their skills and products.
Banking institutions also played their part in the exclusion strategy by charging higher fees for services they provided to African clients. Overdraft facilities were reserved mainly for established customers, and the rate of interest paid on small savings accounts was much lower than for companies. Checking or current accounts were allowed only for those with sureties or security. Most African traders both in West and Eastern Africa did not have recognised or acceptable sureties.
The question is, then, whether the situation substantially changed after independence. Far from changing for the better, the situation deterioraed further. After fifty years of systematic exclusion, African entrepreneurs were completely marginalised. Foreign companies were on top, supported by state-controlled marketing boards. In the middle were migrant wholesale and retail traders of Asian and Levantine origins. Below was the services and public sector which was the only avenue for gainful or wage employment; the African trader was left to unlucrative retail trade or in the informal sector. In this sector the small-scale and micro-enterprise operators have suffered most. The next section will be used to show how.
Colonial laws and administrative practices did not disappear with the end of colonialism. They had been developed within the womb of African society, were not meant to be temporary and had evolved over a period of time. Principles of law applicable in former colonizing societies were made part of the corpus juris of independent states through reception clauses and judicial precedents (Seidman, 1968-69). Legal education, started during the colonial period, did not change the content and orientation of lawyers. On the contrary it reinforced common law values and norms of legal interpretation and application. As research has shown, the popularization of inherited law and its related principles increased after independence as more lawyers were trained on traditional lines (Ghai, 1981; Luckham, 1981a). Attempts by radical African leaders to change the fundamental tenets of received laws met stiff resistance from the ascendant legal profession. This was the case in Ghana during Kwame Nkrumah's regime (Luckham, 1981b). Even with some attempts to create some element of equity, access of the small operators to land, licences, credit, technology, markets, etc. has continued to be constrained by inherited laws and practices. The main areas which affect small traders are land, credit, markets, technology and information. Each of these will be discussed separately.
The British colonial land policy in Africa was predicated upon a three-pronged strategy: the settler model, which was applied in the settler colonies of Kenya, Zambia, Zimbabwe and South Africa; the native model, commonly known as the West-African model, and the dual strategy, combining the native model but accompanied by massive alienations of land to foreign companies, settlers and the state. Under the settler model the best of the land was taken by settlers and the state controlled the remaining land which was allocated to tribal communities as trust land or native locations. The native model left land predominantly in the hands of the local communities but the state remained the paramount landlord. In both strategies very little land was left to be shared by the local people. Access to the remaining land was determined, and remains determined, by practices which continue to alienate small producers. The major processes perpetuating exclusion include survey methods, survey of villages, demarcation and allocation of tenure to smallholders, and demarcation of urban, peri-urban and minor townships and settlements.
Most of the Eastern African countries rely on three methods of land survey - the traditional landmarks, cadastral surveys and aerial surveys. Cadastral and aerial surveys are normally very expensive and in the majority of countries are carried out at the request of the aspiring leaseholder who has also to meet the costs of the survey. It is mainly those who can meet costs and provide transport who normally have their land surveyed by these methods and who obtain secure and reliable tenure. Such costs not only exclude small operators but leave out local communities.
In urban areas traditional landmarks have disappeared and can rarely be relied upon by small landholders to claim entitlement to land for demarcation or registration. This gives more room for administrative demarcation of land in urban areas. More often than not, administrative demarcation is done without consultation. Many estates and market places have thus been demarcated without the consent of, let alone consultation with, the small operators who have used this land for a long time (Ogendo, 1978; Shivji, 1995). Most surveys however, even those which are not aerial, are costly, and require the interested parties to meet survey costs. Smallholders cannot afford the costs involved.
Registration procedures are based on two practices and rules - the general boundaries rule and the specific boundaries rule. Specific boundary demarcation surveys which are relied upon by the majority of land offices in the region are equipment intensive, take a very long time, require ascertainment and acceptance by most possible claimants of the land in question, and end up by being too costly for the small or disadvantaged farmer or entrepreneur. Although even advanced countries such as England rely mainly on the general boundaries rule, many land offices in Africa still insist on the specific boundaries procedures which many land officers find handy. The main assumption of the author is that this method is preferred because it increases the contacts between the land officers and groups with enough resources to meet the costs involved in this method of survey.
Village surveys have tended to take a very long time even in countries such as Congo, Mozambique, Tanzania, Uganda and Zambia which have had, for a considerable period, clear policies on giving land to the tiller. The basic problem has been that village surveys have been carried out by aerial survey techniques, instead of chains and benchmarks which were traditionally used even during the colonial period. The insistence on aerial surveys when equipment and materials for aerial photography have remained chronically in short supply has resulted in many villages remaining unsurveyed and therefore without title under the common registration of titles laws. Lack of registered titles is not only affecting the rights of smallholders to use their land commercially. It is also affecting patterns of land ownership and land use and aggravating land disputes, land grabbing and land hunger in many urban and sub-urban areas.
Delays in carrying out surveys and thereby delaying registration of land are a factor of insecurity among smallholders. Trends in Kenya and Tanzania, for example (Government of Tanzania, 1994:36-37), show that delays are politically engineered. Politicians shift boundaries of villages to manipulate electoral constituencies. In 1974 village boundaries in Kondoa District, Tanzania, were changed by administrative decision to sub-divide a village into two, to weaken a political opponent of the incumbent member of parliament. The village was traditionaly called Mrijo but, shortly before the elections, it was divided into Mrijo Juu (Upper Mrijo) and Mrijo Chini (Lower Mrijo). After the elections, in 1975, the village was reunited. This is just one small example to show some of the reasons why groups in power may prefer a system where village boundaries are kept fluid. Lack of surveys and registration impinges on security of tenure for smallholder farmers and petty traders.
Existing evidence shows that most African governments give more priority to surveys and allocation of title deeds to non-agricultural interests than to rural agricultural interests. The Fourth National Development Plan (1989-1993) by the Zambian government disclosed that only 2,432 title deeds were issued in agricultural areas between 1980 and 1988 compared to 5,475 deeds in non-agricultural areas during the same period, while only 1,230 cadastral surveys were carried out on farmlands compared to 3,801 such surveys during the same period (1980-88) on stands (Republic of Zambia, 1989:150). This shows some bias against rural farmlands which tends to exclude smallholders from titles and security. Another factor which excludes small-holders is that most of the limited surveys on villages or farmland are carried out by private surveyors or part-time surveyors in private employ. This was stated in a report by the Government of Tanzania (1994:38). The report stated that this practice leads to boundaries being 'extended to a neighbour's land without his knowledge' (1994:38). But another fundamental problem is that many small-holders cannot hire these private surveyors.
Generally lack of clear and efficient state-based surveys of land promote insecurity of tenure among smallholders, lead to non-commercial use of land, generate land disputes which cost smallholders more than the value of the disputed land, encourage fragmentation of land and, as smallholders remain without title, governments and unscrupulous land officers get leeway for arbitrary allocation of land and titles to favoured persons or groups.
The Town and Country Planning Laws and Regulations of some of the former British colonies have been inherited from the colonial powers. They were passed to develop towns as centres of commerce, tourism, administration and diplomacy. African people were expected to live on the periphery of these towns and provide labour, service and where necessary cheap commodities such as food and tourist- oriented merchandise. These laws vested the powers for land management either in the local authorities or central government or both. The Governor, now the President, was given overall powers to acquire and redistribute land. Two sets of provisions in these laws affect the access of small entrepreneurs to land. They relate to re-development and planning of land in urban and peri-urban areas.
The Town and Country Planning Ordinance of Tanzania, for example, empowers the President to acquire any land compulsorily if he/she is satisfied that such land cannot be developed appropriately. The law allows those affected to get compensation and, where dissatisfied, to appeal to the High Court. The law however, does not require the President to consult those affected or to involve them in his decision or in its implementation. The legal effect of the President's power to acquire land is that such acquisition extinguishes all legal rights, unless such rights are expressly retained under the acquisition order. As was noted in the Presidential Commission of Inquiry into Land Matters (1994:70), the effect of this law is that persons holding such land under customary law lose all their rights without a right to compensation.
The Commission of Inquiry noted that the full impact of this law on the rights of customary landholders in planning areas was that an acquisition order amounted to 'expropriation of their lands resulting in massive displacement'. Most of those displaced are the small town dwellers who have lived in the areas for a long time. Urban Planning Regulations further make it difficult for small operators to obtain titles to land in urban areas. African cities were modelled on the metropolitan garden cities without backyard vegetable gardens and as cities in which the only non-human animals expected to live there were pets - no poultry or other livestock. Small traders and horticultural farmers who attempt to set up small vegetable gardens or to keep livestock qualify either for the destruction of their stocks or crops or for court action. In some cases governments have encouraged urban dwellers to cultivate urban fallow land and grow food crops. But in other cases such crops are destroyed or plots confiscated without compensation.
Conflicting signals from government increase insecurity among small landholders. In Sudan, for example, an attempt had been made to codify laws and protect the customary landholders around urban areas. New regulations have been passed which give the administration discretion to remove such rights, or to proscribe certain types of land use. As has been noted by Blaikie (1990:9) such conflicting signals give contradictory messages and increase insecurity. Social tension also mounts, as long- established land tillers see 'their' land being parcelled out to imprtant people or companies. Evidence of such tension has surfaced in Mali, Zaire and Nigeria where riots and looting followed decisions of governments to allocate customary land to urban elites (Platteau, 1992:35)
In summary it can be stated here that land tenure systems still discriminate against smallholders, most of whom in urban and peri-urban areas are engaged in small and micro enterprises. The East African Royal Commission 1953-55 on land issues, for example, commented:
All urban expansion is at the expense of those Africans who have settled either inside or on the edge and who may, because re-planning with high-grade and costly development is inseparable from such enlargement, consequently be evicted when land inside the towns is developed or when township boundaries are enlarged. Although they are legally entitled to acquire leasehold plots inside the towns, few have the resources to do so and the majority live in towns without security of tenure. The effect of the extensions of township boundaries has been in general to drive back the African population to form congested African settlements outside the perimeter. (East African Royal Commission Report 1953-55, Commd. 9475, p.216, para. 55)
Fifty years later the situation has not changed in East Africa or any other African country.
A combination of economic, financial and business regulations and practices still impinge on the capability of the small entrepreneurs to get access to credit. As pointed out earlier, most of these practices have been received and carried over from the colonial time. They are not directly intended to exclude the small operator but succeed in eliminating such operators from credit systems. In this section we shall focus on sources of finance or capital for small- and micro- enterprise operators; procedures related to debt and equity; procedures for short-term and long-term capital; working capital requirements; risk considerations; and alternative financing systems prevalent in the small- and micro-enterprise sector.
The typology of the small- and micro-enterprise sector is very complicated. It has been pointed out by Thomas and others (1991:5) that the small-scale sector is far from homogeneous and does not constitute a single sector in the real sense. But most studies on small-scale industries in Africa (Dawson, 1991; Dawson and Onyenyika, 1993; de Wilde, Schreurs and Rachman, 1991; Juma, Torrori and Kirima, 1993; Kaplinsky, 1990) show that the biggest proportion of small-scale enterprises are in manufacturing. It is also emerging that most micro enterprises are in trade, commerce and services (Parker and Torres, 1994). While the problems and characteristics of these enterprises differ and generalisations are difficult, they share common problems which they confront in different ways when it comes to financial markets - sourcing, choice making, risk taking and coping with the reservations and fears of bankers and creditors.
Sources of finance for small operators are normally limited. In Africa today the banking sector is preoccupied with cutting costs. Small account holders place a big administrative burden on a banking sector without mechanised banking systems - credit cards, cash cards, cheques or automatic cash dispensers. In many banks customers crowd and queue not to deposit but to withdraw funds deposited by employers or other debtors, but such customers do not normally deposit regularly.
Small-enterprise operators fall within this category. To cope with these uncommercial transactions banks are increasing their concentration on large businesses most of which are foreign owned, reducing opening hours for small part-time depositors and introducing high charges for deposit accounts and overdrafts.
The banks are currently caught in a web of declining export earnings, increasing demands for international transfers for import support, rising domestic demand for investment and recurrent expenditure, and increased needs to retain higher liquidity ratios as well as minimum legal reserves which rise with inflation. In this scenario, most banks are finding security in serving large customers through automated services which require less labour and administrative costs. In the last five years, some of the finance companies which were specializing in financing small and micro enterprises (e.g. SEFCO in Kenya) have decided to go into large-scale commercial banking in order to survive. Although a study on this has still to be completed, so far 40% of such institutions in Kenya have opted for this path while about 50% of the small enterprise funding programmes in national banks have been phased out in Tanzania, Zambia, Zimbabwe and Uganda. As has been noted by Marsden (1990), the banking situation is becoming too complicated for small borrowers or account holders.
While banks are finding it more difficult to address the needs of part-time or small clients, they still remain the primary source of credit. With deregulation and the liberalisation of trade, other sources, e.g. financing from suppliers, customers, friends and relatives, are becoming less reliable. Banks in Africa have never set aside their own funds for the support of this sector. Most such funds come from international donors or governments. Most banks have not disguised their dislike of the role they are called upon to play in administering these funds. But when they do accept these roles they execute them using traditional banking practices. They render services through overdrafts, term loans, export or import finance or advice.
Bank overdrafts are the easiest short-term credit arrangements which can benefit customers. They are normally for fixed financing limits which can be extended by mutual agreement, and are paid by interest on the outstanding daily balance. Most small entrepreneurs, especially in the micro-enterprise sub-sector, fail to get access to this facility for several reasons. First, in order to get regular overdraft facilities, a customer must have a regular monthly income which can be used to determine the appropriate financing limits. Most of the small entrepreneurs lack this certainty due to frequent cash flow problems. Some small enterprise credit non-gevernmental organizations have avoided this problem by encouraging small entrepreneurs to form credit associations, e.g. 'Juhudi' in Kenya organised by the Kenya Rural Enterprise Programme, which can take credit through one person who, at all material times, can be supplied with funds by other members to deposit in his or her account. As we shall see later in the recommendations there are many informal financing systems which exist in this sector and could be used to solve the individual liquidity problem.
The second limitation is that in business financing, overdraft facilities have to be based on daily or monthly working capital requirements. Most small and micro enterprises have no clear view of their optimal working capital needs. Some tend to overstock goods to avoid price fluctuations and some tend to peg their working capital needs to their consumption targets. In such situations their operational or working capital needs remain unpredictable, even when they can show that they have a chance of regular income. This is compounded by the failure of most of them to separate their personal funds from the funds of their enterprises even, in some cases, when such an enterprise is registered as a firm.
These are short-, medium- or long-term loans which can range from three months to twenty-five years, depending on the age of the intended borrower. These are more complicated for the small entrepreneur.
First, they have high transaction profiles and costs. The loan agreements follow standard formats drawn and attested to by practising lawyers. Lawyer fees are not low by any standards and may swallow as much as 5% to 10% of the amount of the loan. Advocates are not evenly spread out in African towns. The majority are concentrated in big cities whereas the bulk of small operators are in small and medium size towns of 5,000 to 10,000 people (Parker and Torres, 1994; Meagher and Yunusa, 1992).
The second and major obstacle is that short-, medium- and long-term loans can only be secured against fixed assets. Large companies and registered cooperatives have provisions for debentures, charges, floating charges and other types of securities which can be based on stocks and shares in addition to fixed assets. Small and micro enterprises do not have a reliable or acceptable share or stock structure. In addition, very few of them, especially in the peri-urban and rural areas, have recognised fixed assets. Most of them hold customary law titles to land which are contestable by relatives or clan members and are therefore unpredictable. In some cases small operators have no leases, but only rights of occupancy under which they occupy land at the pleasure of the state which can revoke such rights for purposes of redevelopment or redistribution. The attendant uncertainty of such titles reduces the value of the security and discourages lenders from giving long-term loans to unsecured borrowers. But in any case, short-term credit is more expensive than long-term credit.
A third obstacle is the requirement of guaranty. Short-term credit can be based on the personal guarantee of the borrower but long- and medium-term loans require a guarantor. Such a guarantor should also have security in terms of fixed assets and should be credit-worthy. When dealing with a group of unsecured potential borrowers, such a requirement is a difficult hurdle. The situation becomes even more complicated in the case of women. Many countries, especially in the Southern African region, still treat women as minors when it comes to contracting. Some of this countries have retained regulations which deny women the right to open accounts in banks without the permission or guarantee of their husbands. The excesses of such practices can be seen in the case below:
Women Refused Bank : Clientele Wins Fight 'A shock awaited Julia Sebutinnde, a British trained Ugandan lawyer when she went to open a bank account in Namibia. The bank refused simply because she was a woman, eventhough she had come to Namibia as a government adviser and had her own income. "They said as I was married, I had to have my application endorsed by my husband" she said. What made it worse was that her husband, John, himself a banker, was not allowed to work in Namibia as an accompanying spouse and could not be her guarantor without an income'. |
Source: Daily News, Tanzania. Reported on Saturday, September 17, 1994.
Although Sebutinde's case was more embarrassing for Namibian bankers because she had come as a legal technical adviser from the Commonwealth Secretariat's Commonwealth Fund for Technical Cooperation, it brought to the fore the plight of women entrepreneurs who face the experience of having to be nice and obedient to their husbands in order to keep their bank accounts live or their credit lines open.
Small entrepreneurs sometimes operate by pawning and pawn-brokerage and in East and West Africa this practice is very common. But the Gaming Acts and the Pawnbroking Prohibition Acts in Africa make pawn-brokerage illegal. Although pawn-brokerage is equated to gaming, the relationship is legally engineered. Pawning involves a deposit of some object of value as a security for a loan. The illegitimization of this practice during the colonial period was prompted by the urge to purify credit systems of all traditional systems of value and security. The continuation of the colonial stigma attached to pawn-broking can only be justified if similar objects, as accepted in pawning were accepted as security by banking systems. As long as they remain unacceptable by mainstream banking, there is no justification to exclude the small entrepreneur from pawning and pawn-brokerage.
Hire purchase as a method of obtaining access to equipment without paying the whole purchase sum at the time of acquisition, has been the secret of industrial expansion in the US and Europe. The Singer company could not have gained ascendancy on the world market if it had not been popularised by hire purchase, and the motor industry grows from strength to strength in the US and Europe because of lease arrangements and the readiness of some governments (e.g. the French) to buy out old cars and encourage those whose cars have been bought out to lease new cars. The spill-overs of this strategy are multiple - increasing access to equipment, phasing out high-fuel consumption and environmentally unsustainable technologies, and promoting lending/credit and employment.
In the past three decades some countries in Africa have outlawed hire purchase. This was the case in the majority of former socialist countries which considered hire purchase as mechanisms for popularizing consumerism or capitalism generally. In the remaining African countries hire purchase was retained but severely circumscribed. Most existing laws for example, regulate the transfer of title in the leased property. They provide for a requirement of payment of up to two-thirds of the value of the property before title can pass to the leasee. This subjects the leasee to excessive control by the leasor. It also requires the leasor or financier to maintain an insurance on the property until the title passes to the owner. This definitely increases the costs of the lease which are passed to the hirer or leasee.
A simpler procedure would be to treat a lease as a credit sale, with the risk and title in the property passing immediately to the leasee upon receipt by the leasor of the agreed down-payment and signing of the contract. Then the owner would retain rights only on the contract and not over the property; the leasor would have no insurable interest over the property but, as in all cases of hire, would be entitled to the right to recover and repossess the property in case the leasee defaults on payment.
There are two types of leases commonly in use in Africa - the operating lease and the financial lease. The financial leases have been subjected to many legal controls, as discussed above; finance houses have either been suppressed or, where developed, excessively controlled and patronised by state officials. As a result financial leases have been limited. Another limiting factor has been that such financial leases require evidence of regular income and a bank account. For reasons seen earlier, for small operators, these are not easy to obtain or retain. Most small operators eventually opt for operational leases by hiring equipment (mainly tools, motor vehicles, secretarial equipment, sewing machines, tractors, carts, wheelbarrows, etc.) which are more expensive than financial leases.
The reasons why operational leases are more expensive are many, and need some discussion. In many cases leasees are charged a daily rent for the use of the equipment. The rent is tied to the risk, and is so high that it takes the biggest portion of proceeds (especially with motor vehicles, photocopiers and sewing equipment). This is because in most cases the leasee meets the running costs while the leasor takes the risk on the life of the equipment, and takes care of repairs, and wear and tear costs. This distribution of risk increases the burden of the leasee who has to finance the owner's actual and notional risk while meeting the daily operational costs. What is crucial is that most operators would favour financial rather than operational leasing and unless conditions for the former are relaxed and made more conducive to the entry of small-enterprise operators into this market, the latter will remain at the mercy of equipment owners most of whom are based in the public service systems and have a vested interest in the continuation of this system.
Formal and informal capital markets are restricted in many African countries. While the stock exchange is beginning to emerge in former socialist countries, existing stock exchanges in Kenya, Ghana, Gambia, Gabon, Zimbabwe and other countries are expanding. At the moment most of the internal stock markets are attempting to attract foreign investors but because of infrastructural, communication and bureaucratic bottlenecks, foreign investors are still dragging their feet. Instead there is a marked sharp increase in investment in treasury and other bonds because most of them have a high fixed interest rate, have a reliable rate of return, are short-term and can realise profits before political changes take place. While studies will take time to complete before it is known to what extent liberalization of the African economies has led to increased foreign investments, comments on current trends are not out of place.
One such comment is that although sources of equity for all entrepreneurs have been widened, established companies in the formal sector have a higher chance of raising equity from the stock market than small enterprises. Banks still supply equity capital to established sectors and, as more formal private enterprises emerge, the demand for bank loans as a form of equity will increase. This does not leave much room for banks to struggle to reach the unestablished sectors. For the reason discussed earlier, they are rolling back their credit frontiers among unsecured sectors.
The primary source of financing will be from suppliers, customers and social networks. Finance from suppliers implies the use of credit sales as a form of financing. Every former British colony has a Sale of Goods Act or Ordinance. These acts have remained on the shelf for most of the last few decades. This is because credit sales such as hire purchase were stigmatized in many countries. Although the claim was that they would increase indebtedness, it seems the fear was that they would promote a market culture, increase the power of wholesale traders or commercial groups and undermine loyalty to state and party activities or institutions. The latter was apparent because strengthening commercial links between consumers and the commercial class was likely to clash with the intention of the state in control oriented systems to retain the commitment, loyalty and social indebtedness of the population.
Although the Sale of Goods Acts remained in force, their use was limited by administrative and legal factors. Administratively they were confined to operators who had registered offices or business premises. As many towns deteriorated, even street names and house numbers disappeared. Taking the risk of giving merchandise on credit to someone whose place of domicile could not be traced was not something traders could easily do. In many towns there were no maps which could be used to trace a defaulter. The unreliability of the police system as regards information on residents was another factor. Due to lack of reliable equipment or information systems, no verifiable information could be obtained on residents in any town or village. Local authorities which were supposed to cater for, and keep information about, their residents could not raise, keep or manage such information.
Legal barriers were imposed through trade confinement laws. During the era of the command economy the distribution of most fast going commodities was confined to state monopolies. Most of these had branches up to grassroot level, and distribution was executed on political lines.
The Sale of Goods Law remained on the shelves. Now with de-confinement the monopoly of distribution has shifted to private cartels. Most of these are controlled by a few importers who can import goods in bulk. Already tendencies of confinement are shifting to the external export markets. For liquors, beers, tyres, perfumes and medicines, most exporters in Europe have signed exclusive supply contracts. They are not allowed to enter into agreements with other local importers. While, in policy, import markets are open, exporters are being forced to deal only with selected importers. This is not supportive of entrepreneurship.
In summary, therefore, it can be argued that equity through capital is becoming more difficult for small entrepreneurs, and joint ventures with local or foreign companies are less likely. Another conclusion is that in the past credit sales as a source of equity or finance could not operate because of monopoly and administrative problems. But also with trade liberalization, new forms of monopoly are emerging. In all these the small operators remain uncatered for under the credit sale systems except as underpaid and unprotected sub-contractors who are working at their own risk for a very narrow margin of profits. They are not entrepreneurs in any sense; they are labourers (Harrod, 1987).
The main sources of finance which remain open to small entrepreneurs are finance by customers, and finance by relatives, friends, partners and through social networks.
This section will concentrate on two issues. First it will make a general comment on other areas where rules and procedures tend to exclude small entrepreneurs from effective economic participation. Then it will address the possible benefits and disadvantages of the excessive regulation of this sector.
Most of the small entrepreneurs would like to be considered business people. Conceptually and practically they fall within the realm of business laws and regulations. In this area the business licensing laws are still very restrictive. The standard definition of a 'business man' (read business person) concentrates on a 'business man carrying on business under any written law' (see Business Licensing Acts of Kenya, Tanzania and Uganda). Written laws in this context cover companies, cooperatives, business associations, partnerships and sole traders. These categories do not necessarily include small traders or business people. They leave out the unregistered business especially in the micro-enterprise sub-sector. Once they are excluded they cannot claim rights of access to credit, land, water, etc. and cannot lawfully organise.
The definition of 'industrial activity' under the Industrial Licensing Laws of Kenya, Uganda and Tanzania for example, define 'industrial activities' as activities carried out in an 'industrial area, light industrial area and service trade area'. There are no grey areas in these laws to cover backyard, informal, home-based or non-industrial areas of production and services. Definitions are normally important when it comes to distribution of support systems, infrastructure, extension facilities, etc. Those not catered for are likely to be left out.
Other regulations completely marginalise services and activities of small entrepreneurs. Under the Mining (Prospecting Rights) Regulations of 1979 in Tanzania, for example, Regulation 6 provides that prospecting rights should not be issued to persons under the age of eighteen or persons unable to read or write. The regulation further provides that prospecting rights can however, be granted to individuals as agents for persons who cannot read or write. Apart from the fact that licensing laws prohibit the issue of licences to persons under eighteen, even when the age at which people are allowed to work is sixteen in many African countries, the assumption that people who cannot read or write cannot properly carry out mining activities, ignores the majority of people engaged in everyday small-scale mining in Africa. Besides 'unable to read or write' is too wide a definition because it may be used to exclude blind people who are literate.
Some of the regulations governing the activities of hawkers under the Hawking and Street Trading Regulations need mention in this respect. In the whole of Eastern and Southern Africa, these regulations are part of the town-planning regulations. For hawkers or street traders to operate, permits are required, especially if they want to erect a stall. To obtain such a permit a hawker or street trader needs a building plan. The plan has to be approved by the local authority with jurisdiction over the area. Before the plan is approved permit fees have to be paid. The payment of fees is not a guarantee for approval. Where approval is denied the fees are not refundable. The application of a permit has to be accompanied by a building plan. Once approved, a stall cannot be inherited, transferred, leased, exchanged or assigned.
This procedure is too technical and too elaborate for hawkers and street traders. A requirement for an architectural building plan is too costly for a person who wants to sell simple commodities to eke out a living. What happens is that those with means secure such permits, build stalls and rent them out to small traders at a premium. The transaction and operational costs involved result in turning the small entrepreneur into a subsistence wage worker. Restrictions on leasing, transfer or assigning kiosks to other parties are rarely enforced. But restrictions on inheritance of stalls and kiosks are not only restrictive but conflict with traditional practices of inheritance in many countries.
Other examples of unrealistic and over-elaborate regulations relate to the establishment of day-care centres which are important for small entrepreneurs with babies and young children. Taking an example of the Day Care Centres Regulations 1982 of Tanzania, they make it illegal to operate day-care centres without a valid registration certificate. Before a certificate is given an inspection has to be carried out and an inspection report compiled and submitted to the licensing authority. To be accepted, the report must show that the premises are suitable. Four forms have to be filled and all of them are very detailed. To allow the application certain requirements must be satisfied.
The first of these are site requirements. The rules stipulate that the centre should be located on a suitable site, secure from cyclists and with adequate playgrounds. Second, the centre has to have adequate sanitary conveniences including separate conveniences for members of each sex. Third, toilets should be furnished with sufficient toilet tissue, clean towels and soap. Fourth, doors to toilet rooms should be of the shape which affords privacy to the user and are convenient for use by children. Finally, it is required that every owner or operator of a day-care centre should ensure that there are available at the centre such a number of toys, materials and equipment as prescribed in those regulations. A separate schedule provides for the nature of in-door and out-door games necessary for day-care centres.
Such regulations, meticulous and well intentioned as they may be, do not reflect the reality of many working communities. Furthermore, they do not take into consideration the crowded nature of African markets or industrial estates. They envisage a garden city with a lot of space and day-care centres as a requirement of parents working in well-paid established jobs. The informal and related sectors are not expected to have a need for day-care centres and cannot meet the stipulated requirements. Overall it is important to note that rules and regulations which seek to promote welfare and protect the quality of life of young people have an intrinsic human resource development value. But rules exist in context and may be an obstacle if they do not cater for the prevailing economic and social conditions of the very people they are intended to protect. In the next section a few comments are made on the advantages and disadvantages of control- oriented regulations.
Rules and regulations relating to production and services tend to have three main objectives: socialization, integration, and facilitation. The socialization function of regulation is normally attained when rules set up standard norms and procedures of behaviour which people and organizations have to comply with in order to perform acceptable production or service related activities. Such rules may cover business practices, for example, which relate to health standards, packaging procedures, etc. Their message is simple: if you want to be drawn on board and to remain part of the team of players in the business world, you have to learn to comply with the laid-down procedures. Such rules and regulations become more effective when they reflect the needs of society and when their utility is seen both by operators and their clientele to be vital. More often than not, the most effective rules or norms are not written or enforced. They are self-enforcing.
Examples of such rules are in the area of agricultural produce or livestock products. Norms exist about treatment of coffee beans, tea, sisal juice, cocoa products, milk or other foods. These norms are in most cases self-enforcing. Most tea producers know that tea leaves collected and not treated in a particular way over a period of time, become stale and unfit for consumption. The same goes for coffee or cocoa beans, tallow or other animal products. Because the products lose their utility if not treated according to certain procedures, farmers engaged in the relevant business tend to make an effort to understand the standards, classifications and other norms on quality without waiting to be sanctioned or penalized by or through the rejection of their products. Rules and regulations by the state or the market become factors or instruments of socialization and education, and sanctions do not take the form of punishment.
The second function of rules and regulations is integration. In this function rules do not seek to educate or socialize the producer. They set standards which have to be complied with by all means. If producers cannot comply with them, they have no right to engage in the relevant forms of production. The difference between socialization and integration is that in the former the producer can engage in an activity at the risk of the product being rejected by the market regulations while in the latter the producer has to comply with the rules in order to enter into the relevant production or service activity. Most of the rules governing production in the small- and micro-enterprise sector are aimed at integration rather than socialization. Integration-oriented rules and regulations tend to be driven by several sub-objectives.
The first of these is incorporation. They are normally passed in order to unify conflicting or competing systems of production, e.g. to subordinate traditional to modern or old to new systems of production or distribution. City and town development regulations and natural resources development regulations, e.g. in fishing, forestry and mining activities may fall in this category. The second sub-objective is standardization. More often than not large-scale systems of government and administration find it difficult to develop adequate mechanisms for understanding, isolating, facilitating, monitoring, evaluating and innovating upon a multiplicity of systems of power, production, distribution, mediation, etc. It becomes administratively cheaper to limit the extent to which plural structures can be accommodated. Hence, rules are passed which establish standard procedures through which those who cannot be accommodated are automatically eliminated.
The third sub-objective of integrationist regulatory systems is compliance. The basis of standardization, which stems from incorporation strategies, is that systems which are being incorporated are either inadequate or inferior. This assumption is based on the assumed technological superiority of the official norms. Hence, the old are assumed to be inferior and so are the traditional, in many cases. The mechanism of eliminating the inadequate and the inferior becomes enforcement on pain of penal sanction for non-compliance. The most contested element in all these is the emphasis on legality and the assumption that the legal is essentially legitimate. Although for those incorporated or subordinated their norms or standards may seem and remain within their own perceptions legitimate, for the system they are illegal and therefore illegitimate.
The goal underlying integration-oriented regulations is control. The disadvantages of control-oriented activities are numerous. First, they raise unanswered issues of the conflict between legality and legitimacy. Town-planning regulations, survey methods, land registration, licensing regulations, etc. tend to emphasize issues of legality at the expense of issues of legitimacy. Second, most of the control-oriented regulations tend to generate systems for exception and resistance. Taxation laws are a clear example. Small and big enterprises alike tend to tolerate what they regard as reasonable levels of taxation. Big companies tend to overspend on matters such as entertainment allowances or the increased contributions to charities, in order to avoid taxes. They also tend to avoid long-term investment projects or to divert company profits to the payment of more wages in order to reduce their tax bills. If they can divert some of their taxable income to industrial relations or public relations activities which boost their image and public support, they find those more attractive. All firms, whether large or small, avoid visible or detectable growth if such a trend could put them in a new and higher tax bracket.
Control-oriented regulations also tend to distort the welfare benefits of the enterprise system. If such rules give leeway to law enforcement officers to grant or deny services or to allow or not allow enterprises to carry on with, or to carry out, certain activities, such officers become legitimately entitled, in their own eyes and those of enterprise owners, to some kind of rent or premium for the exercise of their discretionary powers. Such positions become very attractive to corruption- rather than development-minded officers. Entrepreneurs spend most of the time struggling to endear themselves to such officers and, from time to time, 'grease' their palms to help them reach decisions expeditiously or favourably. This distorts the welfare system in society at large, as income differentials among public servants increase, while at the same time the costs incurred by enterprises in the 'greasing' exercises are always passed on to the consumer in the form of increased prices or reduced taxes and payments to the state.
Furthermore, compliance and non-compliance have their costs. To ascertain compliance, inspection and enforcement processes are involved. More often than not enforcement costs are ascertainable, but compliance benefits are not. Hence, it is difficult to tell whether the benefits are higher or lower than costs. In the case of non-compliance which does not reduce enforcement costs, enterprises enter into a spiral of other costs - preparing petitions, attending arbitration or hearing procedures, paying for representation if they can afford it, preparing defences and paying experts for that, making appeals and bearing all the costs that accompany appeals. When all the processes are over and those involved are many entrepreneurs and enterprises, the cost is transferred to the consumer or deducted from taxable income. In both cases the welfare contribution of the enterprise system to society is reduced. Cost distortions follow from this, and each action sets another stage for further and future distortions. The best way to reduce these distortions is to look for ways of reducing enforcement costs while increasing compliance benefits. Socialization norms which rely more on the produce than production itself may help in this direction. This brings me to the other function of regulations - the facilitative function.
Rules and regulations can play multiple functions of socialization and integration and their utility could be enhanced if they facilitate rather than control development. Regulations which require people not to grow vegetables in the town centre can be useful in preserving the order of the town and its beauty, if they are supported by regulations which make land rates lower in sub-urban or peri-urban areas. Similarly licensing rules which make it difficult for small operators to set up kiosks without permission in the town areas can be better enforced if, in selected areas, sheds are built and are readily accessible to the public but rented at very low cost with low or no taxation. It is also possible that taxation objectives can be achieved by indirectly taxing the small entrepreneurs through banks. As most of them hold accounts in postal banks, and if postal banks can be given low interest credit facilities and small entrepreneurs are encouraged to borrow from such postal banks on the security of their deposits, it would be easier to tax postal banks on their annual profits if they can attract many small enterprise depositors than to attempt to tax the entrepreneurs directly.
Generally rules make more sense if they have well built-in alternatives. Requiring street traders not to use carts on streets, for example, without requiring towns to construct side-roads for carts only leads to frustration and resistance. Preventing animal keepers from grazing their livestock in town parks can only succeed if the parks are themselves well kept and made usable by human beings. At the same time once these parks are made no longer open or even attractive to livestock, their owners have to be directed to which areas of the city they can take their animals for grazing or which area 'city pastoralists' can inhabit. Legislation for one system without providing for alternative systems increases the costs of enforcing rules and regulations and leads to conflict.
A few conclusions have already been included in the text above but some will be re-emphasized here. First, it has to be accepted that the colonial legacy of exclusion is still with us and forms one of the cornerstones of Africa's underdevelopment. Secondly, as was noted in the Philadelphia Declaration of 1944 at an ILO meeting, poverty anywhere is a threat to prosperity everywhere. Poverty is a threat not only to those experiencing it but to all peace-loving people at community, national and international level. Third, Africa's reform programmes will succeed only if they draw on board every able-bodied person with the capability to work and allow them to make their contribution. In this respect people who are not looking to the state for jobs or welfare, who are determined to live by their own efforts and make an honest living without exacting rent from their jobs or authority, deserve immediate and adequate support. Most of these are based in the small and micro enterprises. They believe in work, and they need to be assured of the right to work. Regulations will help more by facilitating and channelling than by obstructing and controlling their efforts. In this respect it is recommended that a few issues be put on the agenda for policy review.
It is generally recommended that the importance of land to the African people be given its due recognition and that it be accepted that communities consider land ownership and access to land resources as a yardstick for measuring their citizenship and entitlement.
Most governments do not yet allocate adequate financial resources to land survey departments. It is recommended that more resources be given to these departments, to enable them to acquire the necessary equipment and materials for surveys, demarcations and subsequent registration of communal and individual titles. It is also recommended that popular participation in determining land rights and the consultation of land users in the acquisition of land for redevelopment or redistribution be protected by constitutional provisions, as is the case in Japan, Korea and Malaysia.
Survey methods also need to be re-examined. They should be based on practical, cheap and affordable technologies which are not import-dependent and prone to shortages, high energy costs, breakdown and foreign exchange problems.
Corruption has remained a constraint to democracy and contributes to the erosion of individual and community entitlement rights. The time has come for the state to confront malpractices in the administration of land, as such malpractices give room to detractors to concentrate on land matters and divert governments from other development issues. Registration procedures which are long, costly or dispute-prone should be reviewed and, if possible, discarded in favour of cheaper, shorter and more reliable procedures.
The importance of security of tenure should be recognised separately from the security value of titles as a security for commercial transactions. Security of tenure is in itself as much a factor of growth and stability among urban and rural producers as the value which its derivative title may produce as a security for loans.
Mainstream banking institutions cannot continue to support small entrepreneurs while trying to operate commercially. Financing through small-enterprise development NGOs, credit associations, post office banks and cooperative societies, remains one of the few channels for credit to this sector.
A study of informal credit systems such as 'Chilemba' in Zambia, 'Ikub' in Ethiopia, 'Jjangi' in Zaire, 'Esusu' in Nigeria, 'Tontine' in Cameroon, 'Juhudi' in Kenya and 'Upatu' in Tanzania be carried out systematically in order to identify the dynamics of informal credit systems and the way they can be linked with formal ones.
Provisions barring married women from obtaining licences, credit, travel permits or opening bank accounts in their own right be reviewed and removed from legislation. Constitutional provisions on equal opportunity be strengthened with provisions for appeal.
Hire-purchase regulations should be reinstated, where suspended, and upgraded, where they have been eroded. Financial leases should be encouraged more than operational leases, as the former have wider spill-overs in the economy than the latter. Credit-sale agreements should be encouraged as a mechanism for supplier financing of small entrepreneurs. Administrative procedures should be mounted to generate, upgrade and manage information on residence, and streets be given ascertainable and traceable names and houses properly numbered, so that town residents' domiciles can be ascertainable. Insurance schemes prevalent in the informal organisations of small entrepreneurs should be identified and their dynamics understood with a view to linking them with formal insurance systems.
It is recommended that laws and regulations be used as a means to specific ends and not as ends in themselves. A balance be struck between the costs and benefits of regulations; where the costs are too high regulations be reduced or self-enforcing mechanisms be built in, to reduce enforcement costs. Colonial practices and procedures which were meant to exclude Africans from operating businesses in city centres, or operating certain types of businesses, or which keep small operators at the fringes of society, be reviewed and discarded. Regulations be built within market practices so that they control the quality of the product or services rather than concentrating on controlling production per se without addressing product promotion.
Control-oriented regulations which promote alternative systems, resistance, rent-seeking and scape-goating, or regulations which make it their sole objective to ensure things are done right rather than ensuring the right things are done have little contribution to make to development and should be discarded. Rules and regulations stand a better chance of being observed if they derive their strength from their legitimacy rather than their legality. Drafting processes should be increasingly based upon research, consultation and comparative practices elsewhere in order to ensure a balance between propriety, legality and legitimacy.
Legislation should not be only restrictive but complimentary. Rules prohibiting a practice may succeed if alternative practices and choices abound. Hence reciprocity, complementarity and choice, if built into legislative practices may help to enhance compliance.
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