As observed in the previous chapter, entrepreneurship is now recognised as a vital quality for the emergence and sustenance of economic growth in less developed countries (Romijn, 1989). This is primarily because of the positive correlation between economic growth and business formations that has been postulated and/or implied in early economic theories by Cantillon (1755) Knight (1921) and Schumpeter (1934, 1948). Entrepreneurship development should, therefore, be one of the primary policy concerns if poverty is to be alleviated in African countries.
As it will be shown later in the literature, the level or amount of entrepreneurship is strongly determined by environmental (social, legal, economic, political, educational, turbulence) factors. Thus, countries with conducive policies, organisational environments and educational systems are expected to have high levels or amounts of entrepreneurship (Morris and Lewis, 1991). It has been well acknowledged that for many years since independence African public policy was not conducive to entrepreneurship development. The situation is compounded by the fact that even before independence, modern entrepreneurship was dominated by foreigners with Africans playing only an insignificant role. This lack of conducive policy has generally been reflected in the low levels of entrepreneurship which has further resulted in Africa's underdevelopment, the present crises and the high levels of unemployment. As it will be demonstrated in this chapter, entrepreneurhsip development in Tanzania has greatly been affected by Government policy.
Paakkari (1992) has argued that the main reason for weak development of African-owned businesses in Tanzania "has been more the lack of conductive enterprise environment than a lack of entrepreneruship itself". Similarly, findings by a World Bank sectoral survey on furniture, construction and horticulture showed an existence of abundance supply of indigenous (African) entrepreneurs in Tanzania (World Bank, 1991). However, due to historical reasons and Tanzania's own policies in the 1970s and early 1980s, entrepreneurship has been, and still is, dominated by migrants from South Asia (about 90% of private industry and trade outside the informal sector) (Paakkari, 1992). Indigenous entrepreneursip is, therefore, still at its infancy and is mainly limited to small-scale businesses. The remainder of the materials in this chapter demonstrates how colonialism and government policy after independence in 1961 have affected the development of indigenous entrepreneurship in the country in general and also how these policies have engendered women's involvement in business.
Marginalisation of traditional African entrepreneurs started as early as the colonial times in Tanzania. African economies during this period were restructured to make them produce those goods that complemented the economic needs of the colonising powers (Rugumamu, 1992: 8). Subsequently, activities outside those demanded by the colonialists were regarded as unproductive. This started during the German rule, between 1890 and end of World War I. As in other countries in Africa, small artisans were displaced by trade and locally based Transnational Companies (TNCs). The situation was made worse when the TNCs opened up production subsidiaries in the country (Biersteker, 1978).
Furthermore, important services that encourage entrepreneurship growth were only accessible to foreign firms. As in other African countries foreign commercial banks, discriminated against local entrepreneurs. The credit to Natives (Restrictions) Ordinance of 1931 required Africans to obtain special government permission before they could apply for a predetermined amount of bank loan (Rweyemamu 1972). This discrimination continued even during the British rule (1918-1961). Whereas, Asian entrepreneurs could borrow any amounts of money from commercial banks, successful African entrepreneurs could only borrow up to Shs. 100 (McCarthy, 1982: 49).
During both the German and British rule, the import - export trade came under the control of Europeans who had contacts with their European markets. Larger wholesalers were mainly Europeans while smaller wholesalers and retailers were Arabs and Asians (Schyberger: 1978). It was during this period that new multinational merchandising companies with main offices in Nairobi rather than Dar es Salaam dominated the import-export and distributive trade of crops and manufactured articles. Such firms included Tancot and Brooke Bond companies which controlled coffee and cotton trade, Mithcell Cotts (pyrehturm), Ralli Brother of Kenya, a subsidiary of Ralli Brothers of London (sisal business), Leibig Extract of Meat Company who processed and exported meat products, Smith Mackenzie Company, Wigglerworth and Company, Dalgeity and International Trading and Credit Company of Tanganyika (Rweyemamu, 1973). Asians and, to some extent, Arabs bought supplies (mainly imported) from these Europeans and retailed them to Africans. Most of these TNCs later on opened up manufacturing subsidiaries in Kenya rather than in Tanzania and Uganda.
In the 1920s and 1930s, the colonial government in Tanzania blocked a number of individual industrial projects that were proposed by Asians and non-British investors (Rugumamu, 1992:11). The British colonisers basically opposed the establishment of competing industries in Tanzania and even within other East African countries. By this time Africans could only be found in petty trading activities. All the above operations, laws and regulations led to the marginalisation of the African entrepreneur. As Rugumamu (1992:12) observes the African entrepreneur was "relegated to a very low turnover retailer and itinerant trader".
The Asian community also marginalised the African entrepreneur. For example, in urban settings Asian shopkeepers often drove out African and Arab competitors. By 1960/61 about 34, 381 retail trade licenses out of 44,000 (about ¾ in number) were owned by Africans, but they controlled far less than a third of the volume of retail trade (Hawkins, 1965:34). According to Hawkins only a handful of Africans were engaged in wholesale trade.
Marginalization of the African entrepreneur was further compounded by the dearth of skills and education among these entrepreneurs. According to Reweyemamu (1973) commercial courses in colonial schools were reserved for Asians. It is true that in the last two decades of the British rule, some token corrective measures to encourage participation of indigenous entrepreneurs in business were introduced too late.
By independence in 1961 economic activities were mainly dominated by migrants from South Asia. As observed above, this situation had been brought about by the colonial rules and regulations that discriminated African entrepreneurs against foreign entrepreneurs. At independence, the government was at a dilemma. Whereas the need for supporting indigenous entrepreneurship was a matter of priority, the government also had to contend with the expanding role of the multinational companies in the country.
Due to the recommendations by the World Bank (1961: vii) and the Arthur D. Little (1961): which underscored the important role of private entrepreneurs in the economic development of Tanzania, the independent Government passed the Foreign Investment (Protection) Act of 1963. The Act was aimed at encouraging foreign investors to invest in the country. Although the official policy was neutral, that is, no particular sector - private or public - was favoured; private investment dominated the industrial sector of the country.
By mid 1960s it was realised that the concentration of economic power in a few individuals and ethnic groups was unacceptable to the people as well as the government because it was seen as a potential source of social tension. State intervention and entrepreneurship received widespread political support. The government then established an Industrial Studies and Consultancy Centre in order to promote the expansion of the manufacturing sector. The forms of assistance included tax reductions, market and industrial research and small loans to help Africans to establish Small Scale Industries.
In the distributive trade sector, the system had to be moulded to serve the Government's goals of social and economic development. As a result many consumer co-operatives were encouraged to develop. To back up the consumer co-operative movement, the Co-operative Supply Association of Tanganyika (COSATA) was established in 1962 by the government as a wholesale organisation to supply to the consumer co-operatives. SOSATA was also entrusted with the responsibilities of advancing the formation of consumer co-operatives and to train Africans to become shopkeepers. It is worth noting that the training objective was not to educate Africans to become private shopkeepers but rather to enable them to work in consumer co-operatives. Nevertheless, due to the lack of capital among Africans, the formation of consumer co-operatives could not be well supported.
Despite the above efforts, a properly defined national policy on entrepreneurship development in both public and private sectors as well as financial and counselling facilities to small private business was missing.
The political and economic philosophy enshrined in the Arusha Declaration called for greater economic independence, self-reliance and greater emphasis on poverty alleviation, employment generation and rural-urban equality. This was to be achieved through state control of the commanding heights of the economy. The result was massive nationalisation of foreign and private capital and new parastatals were established. Various incentives to encourage the growth of parastatals included, for example, preferential access to credit, foreign exchange concessions, protection from both local and foreign competition through subsidies, tariffs, quotas and exclusive licenses. It has been widely acknowledged that these incentives served to marginalise the private sector. As a result, state owned firms grew from 3 entities in 1961 to 380 in 1979 and to 425 by June 1990 (URT, 1993:3). A part from the incentives geared towards promoting growth of the public sector, other directives and regulation, as Rugumamu (1992) observes, tended to work against private entrepreneurship development in the country. These included the Leadership Code (discontinued in February 1991) which prevented senior government, party and parastatal sector employees from holding shares or accepting directorships in private enterprises, from owning rentable property, employing wage labour and from receiving more than one salary. Others were:
(a) the Price Control Act of 1973;
(b) confinement policy which restricted distributive trade to prastatals and co-operatives, the result of which was the mushrooming of many co-operatives;
(c) wage regulation - minimum wages policy;
(d) credit rationing according to Annual Finance Plan;
(e) central control of investment planning; and
(f) administrative allocation of foreign exchange through import licensing.
The formation of the National Small Industries Development Corporation (NSIDC) in 1967 and the Small Industries Development Organisation (SIDO) in 1974 whose main role was to promote the development of small industries in the country only appeared to be contradicted by the above mentioned policies, regulations and administrative controls. SIDO's ineffectiveness and its subsequent inability to promote the development of small scale industrialisation in the country can, therefore, be greatly explained by the absence of an appropriate supportive government policies and regulations.
In the area of retail trade, participation of individual investors was discouraged, to a great extent by various government measures. The "Operation Maduka" (Maduka means shops) campaign of 1976, for example, led to the closure of many private shops in favour of co-operative/village shops. In 1980 the Government had gone to the extent of announcing that the Party and government should start to establish and supervise village shops in the same way as they run schools and dispensaries (Scyberger, 1987). By this time also the government had stopped issuing licenses for new retail shops except for special fields such as spare parts, pharmacies and garages. The government had also stopped renewing licenses for private wholesalers. In March 1980, the government formalised the various decisions taken by promulgating the Policy of Internal Trade. These events, including the preferential allocation of essential goods to consumer co-operatives, led to the mushrooming of many co-operatives. The role of consumer co-operatives increased especially after March 1983 when the government declared a war against illegal activities and unscrupulous businessmen.
The country faced serious economic crisis in the late 1970s and early 1980s. The problems manifested themselves in such areas as acute shortages of basic commodities, deterioration of social services, economic infrastructure and erosion of government revenue base. Many of these problems were mainly a result of excessive administrative controls over economic activities, the continued growth in the size of the public sector without regard to the limited financial resources (which instead of generating revenue for the government, were now being sustained through government subsidies), poorly implemented industrialisation strategy among others. A change in national policies became inevitable if the economic decline was to be reversed. This led to the launching of many institutional and economic reforms by the Government starting from 1984 to date.
The economic crises of the late 1970s and early 1980s forced both the party and the Government to adopt economic and political reforms. Structural adjustment programmes were adopted. The government has so far implemented two economic recovery programmes since 1986/87. These are ERP I: 1986/87 - 1988/89 and ERP II (Economic and Social Action Programme (ESAP): 1989/90 - 1991/92. During this period, the government has realised that the economy can be revamped through market forces. This policy has been manifested through the following policy and institutional reform measures adopted by the Government since 1984.
- Trade liberalisation
- Active exchange rate management
- Adjustment of interest rates
- Review of the tax structure
- Price decontrols since 1984
- Public sector restructuring designed to reduce Government's direct involvement in business
- Investment promotion policy and
- Restructuring of the financial system.
Together with the economic crises of the late 1970s through 1980s, the structural adjustment measures have brought in a lot of hardships to families and households.
A number of studies (e.g. Maliyamkono and Bagachwa, 1990; and Rutashobya 1991) suggest that women's participation in business is essentially rooted in the informal sector. In the Tanzanian context, therefore, as is the case for most Sub-Saharan African countries it is difficult to discuss women's participation in entrepreneurship without examining the development of the informal sector in general. This is partly because many small businesses, especially of the traditional type, form an important part of the entire informal sector activities in these countries (El Namaki, 1991). Additionally, informal sector activities have enabled many of its operators to accumulate capital to start relatively large and legally recognised business. The two terms, informal activities and small scale entrepreneurship are, therefore sometimes used interchangeable in these countries.
The growth of the informal sector activities have often been linked to the economic crises of the late 1970s through 1980s. This linkage has been well documented in the literature. It has generally been acknowledged that the economic crises have led to many difficulties in the families and household, especially in urban areas. The declining real wages, inflation, and the harsh impact of stabilisation and structural adjustment policies all reflect the difficult position of the Tanzanian economy as a whole. For example, real wages fell by 78 percent from 1974 to 1988. With the rising cost of most consumer items in the country and subsequently the widening gap between incomes and expenditure, "it meant that the gap must be closed by sideline incomes" Tripp (1990:68). Official statistics indicate that while in "1976, formal wages constituted 77 percent of total household income where the head of household was a wage earner; in 1988, 90 percent of the income was from informal activities (Tripp, 1990: 68). It is therefore, obvious that by 1988, the amount of money people earned from the informal sector was higher than that they earned from formal employment.
The impact of the economic crises and the structural adjustment measures has undoubtedly been greater on women than on men. Given that most wage earners are men, the burden of adjustment fell heavily on women who now became the main breadwinners by participating in income generating activities. As carers and managers, therefore, women have played a significant role in enabling the family to adapt to the obvious change. As Tripp (1990) puts it: "former financial obligations of men to women... were in the process of being reversed because the informal projects had generally become more economically rewarding than wage earning in the 1980s (p 21). This observation is supported by the finding of some studies in Tanzania that even women in wage employment are found to operate in the sector (Rutashobya, 1991; Tripp, 1990). For women, the primary motive for participating in income generating activities has been the need to take care of the family, particularly in the wake of the increased number of members in a household, because of extended families. In a study on women in the informal sector in Tanzania (Rustashobya 1991) the mean number of children per family was 4.17 while the mean number of dependants plus children was 10.2.
Results of a national informal Sector Survey revealed that women constituted 35.4 percent of the total employment of 2,369,380 persons recorded for the survey. The results also showed that women were more represented in the Informal Sector in urban areas (42.6%) than rural areas (30.5%). The difference is caused by the higher proportion of women operators in urban areas (47%) than in rural areas (29.7%) (see Table 2.1). The proportion of women operators to total operators and that of women employees to total employees in the sector are almost equal (35.7% and 34.3% respectively).
Table 2.1
Total Informal Sector Employment/Female Employment by Type by URBAN/RURAL
Type |
Total Persons |
Females | |||
Urban/Rural |
Number |
% |
Number |
% |
% Female to Total Persons |
Operator - Urban Rural Total |
612,258 1,130,416 1,742,674 |
35 65 100 |
287,465 335,631 623,096 |
46 54 100 |
47 29.7 35.7 |
Employees - Urban Rural Total |
337,845 288,861 626,706 |
54 46 100 |
117,141 98,049 215,190 |
54 46 100 |
34.7 33.9 34.4 |
Total - Urban Rural Total |
950,103 1,419,277 2,369,380 |
40 60 100 |
404,606 433,680 838,286 |
48 52 100 |
42.6 30.5 35.3 |
Source: Extracted from Tanzania Informal Sector Survey, 1991, Planning commission, Dar es Salaam.
Another study by Tripp (1990) revealed that 65 percent of those who started small businesses between 1982 and 1987 were women, while in the previous five years women constituted only 28 percent of people starting businesses. An ILO Informal Sector Survey in Zanzibar in 1991 showed that about 51 percent of total informal sector operators (90,000) were women.
Despite this significant participation of women in income generating businesses, the majority are still found to operate very small business activities. Such activities, as it will be shown later, are not high growth potential activities because of the absence of specialisation.
It is this setting which makes a study on women entrepreneurship quite timely and interesting. Constraints facing women in business should be explored if their participation in business is to be supported and encouraged. This kind of study should come up with appropriate recommendations on how the role of women in entrepreneurship should be promoted.
