Posted on February, 2, 2021 at 09:47 am
Micro, Small and Medium Enterprises (MSMEs) play a considerable role in Tanzania’s economy.
Yet, they are also the group of businesses that operate under a considerable number of challenges. Some are genuine; yet others are the making of operators on their own.
With few requirements in terms of capital, technology and management - among others - it is easy to establish an MSME and available examples attest to this.
It is estimated that more than 70 per cent of employment comes from MSMEs and also that they account for over 95 percent of all enterprises in Tanzania.
However, MSMEs’ growth is riddled with a number of constraints, including limited access to funding, ready access to markets and unfavourable legal and regulatory frameworks.
Other hurdles are increased unfair competition, ineffective or poorly coordinated institutional support framework and lack of leadership skills.
“So, in short: the ecosystem to support MSMEs is not well developed,” noted Dr Donath Olomi, a business expert and economist who is also chief executive officer of the Institute of Management and Entrepreneurship Development (Imed).
Regulations
It is Dr Olomi’s view that there were so many regulations and policies that companies must adhere to. Some of the regula- tions are imported and/or out- dated. While large-scale businesses can ably include the available procedures in the cost of running businesses - and, ultimately, transfer same to the final consumer - MSMEs are different.
Taxes, he said, were high and tax administration is unfriendly to MSMEs. But Mr Ahmed Khan, owner of the Wildness Safari, believes capital must be taken off the list of challenges that MSMEs face. The company is headquartered at Ilala in Dar es Salaam.
He believes capital becomes a challenge because some people think one needs to have over Sh1 million to start a venture.
“You can start with even less than that, and grow it gradually,” says Khan, who is now planning to diversify his businesses beyond tourism by venturing into food processing industry within the coming three to six months.
“I am currently doing market research,” said Mr Khan. This, he said, will help him to do avoid the tendency whereby people only copy and paste what others do. Competition Over the years, the market- place has become increasingly crowded and competitive.
In order to gain exposure, Mr Khan suggested, MSMEs needed to hone their skills in product presentation and service uniqueness.
“Instead of dealing with a number of products at ago, MSMEs need to identify or devise their own competitive advantage in order to stand out from the multitude of small businesses crowding the market- place,” he opined.
Managers need to move faster and act smarter, to keep up with the proliferation of competition that appears to be increasing rapidly.
A resident of Kigamboni who plans to start a chilli and tomato sources processing factory in the coming two months, Ms Doreen Ndalahwa, with funding from lenders, the going should be easy. “I am looking for about Sh5 million to start my small-scale factory,” says Ms Ndalahwa.
If funding is down, businesses will struggle to keep up with demand and may lose out on sales. Ms Ndalahwa is currently involved in chili farming at her Kigamboni home.
She came up with an idea to establish the processing industry after she found out that she could earn more if she added value to her product. She sells a 20-litre bucket of chilli for between Sh2,000 and Sh3,000. Thereafter, traders who buy directly from the farm take to the market to sell the same at up to Sh12,000.
“This is what made me think outside the box and decided to undergo a short course on food processing so that I stop selling in raw form,” noted Ms Ndalahwa.
Management
Small-scale businesses are often managed by a small team of individuals with little to no real management experience.
“Jerking management abilities would be key to the success of MSMEs. I advise those who are financially capable to attend training offered by the Small Industries Development Organisation (Sido),” she suggested.
A five-day food processing training costs Sh150,000. She added that employees who do not receive adequate training may have difficulties in meeting expected performance standards.
It is said that MSME operators, especially the start-ups, do not invest in their knowledge but are more concerned with making money.
Recruitment
For some sectors, employing skilled staff can be difficult for small businesses.
A successful business can be built on employing the right people with the right skills set. However, the challenge for MSMEs is first attracting and then retaining them.
Sido’s funding
Sido says it was doing every- thing within its means to make funding more accessible to MSMEs.
Sido’s regional manager for Dar es Salaam, Mr Baraka Kandonga said they have a culture of issuing loans to small-scale entrepreneurs to support them improve their businesses and investments.
Sido provides loans that range from Sh8 million to Sh500 mil- lion at an interest rate of 13 per- cent which is charged on a reducing balance method that is on loan balance.
“We offer loans for working capital and investment capital,” said Mr Kandonga. “When it comes to capital loan, one needs to have 20 percent of the price of machinery of which will be used as a collateral for a loan whose
MSMEs’ growth is riddled with a number of constraints, including limited access to funding, ready access to markets and unfavourable legal and regulatory frameworks gestation period is up to seven years.” Repayment period for working capital is up to three years.
Sido is implementing the program in collaboration with various stakeholders such as Vocational Education Training Authority (Veta), Azania Bank, National Economic Empowerment Council (NEEC) and the National Social Security Fund (NSSF) to empower MSMEs and capacitate with cheap loans.
The Citizen did not immedi- ately establish a number of the program’s beneficiaries and the amount of loans disbursed so far. On markets, Mr Kandonga said Sido has been organising national trade fairs with a view to among others, promoting locally produced goods to the rest of the world. The Investments minis- ter, Prof Kitila Mkumbo, was recently quoted by local media as saying if the country was to generate serious employment and income, investment in the private sector, SMEs in particular, was inevitable.
“The growth model of Chi- na and Korea is largely centred on massive investments in small-scale enterprises,” he expounded.
Source: The Citizen