By : Veneranda Sumila:
Young Tanzanians are finding it difficult to start businesses due to many
challenges that characterize the business environment in the country.
Limited access to finance is consistently mentioned as the most pressing
barrier by almost three quarters of SME’s in different surveys.
This, according to reports is attributed to low capacities of SMEs to
develop viable projects, articulate financial requirements and manage funds.
A recent Sokoine University Graduate Entrepreneurs Cooperative Society
(SUGECO) report reveals that the financial problem is even more pronounced
among young graduates.
According to the report, banks typically finance businesses with track
record of good performance, experienced management teams and quality
collateral.
“This is a big challenge for young graduates who have had no opportunity to
build up collateral, experience or track record,” says the report which was
sponsored by BEST-AC.
On his part Revelian Ngaiza an agricultural economist from the ministry of
Agriculture Food security and Cooperatives urged the government to
intervene so as to ensure that businesses stat-ups have access to finances.
“Small businesses are key to ensuring the prosperity of any economy, if
well financed they can largely transform the economy of this country,” said
Mr Ngaiza.
Underdeveloped enterprise culture is another thing that hinders the
start-ups of business in the country.
A culture of enterprise in society, according to the report, is one which
values and rewards initiative, hard work, flexibility, risk taking and
innovation.
“This culture is still hugely under-developed. Young people are prone to
wanting effortless success and sometimes resort to short cuts,” said Dr
Donath Olomi the Chief Executive Officer of Institute of Management and
entrepreneurship Development (IMED) which conducted the research.
He said that there is an inherent tendency in society to view graduates as
elites and that some policy makers view graduates and those with some
assets as unworthy of support and would rather channel resources
exclusively to the poor.
“At the same time, some graduates consider starting small as inappropriate
for the “educated” and tend to want to start with large entities before
they have learnt from business or sector experience,” said Dr Olomi.
He said that thought there are efforts to reform the education system to
among others promote the enterprise culture, but this is evolving slowly.
Limited access to productive infrastructure is another challenge affecting
young from starting business in Tanzania.
While arable land is abundant in Tanzania, most of it is not served by
reliable transport, water and power.
This, according to the report, makes it difficult for those with limited
means to use it productively.
“Most business operators cannot access appropriate production premises,
local governments are unable to provide suitable serviced land for various
productive activities,” says the report adding that,
“Critical services, such as power, telephone, water, and roads are
under-developed and sometimes not available, making it expensive to start
businesses.”
According to Dr Olomi, access to business development services is limited
due to inadequate supply of quality and affordable provision, inability and
willingness of SMEs to pay for these services and lack of information about
their availability.
“Business development services providers have limited capacity in terms of
the entrepreneurial, technical and facilitation skills. Few have had any
training in facilitation, and many are training or advising on areas where
they are not themselves trained,” said Dr Olomi.
He said that unfriendly regulatory framework also characterizes business
start-ups in the country.
According to the report, though the regulatory and administrative framework
for businesses has improved in the past 10 years, there are still many
obstacles and the pace of reforms is slow
“The process of starting and particularly licensing a business is still
costly, time consuming and cumbersome, as a result of which a majority of
businesses remain informal and hence unable to benefit from market based
resources and services, including finance,” reveals the report.
On his part Mr Ngaiza noted that it is difficult for local entrepreneurs
who lives abroad to come and invest in agriculture in their mother country.
“There is a man who lives abroad but he has been asking for a land to
invest in agriculture here in the country seven years ago, to date he has
not been given the land to invest,” said Mr Ngaiza.
According to the report, local governments should be tasked to support
young, knowledge intensive entrepreneurs coming from universities to
acquire land and premises for investment.
“The Tanzania Investment Centre should coordinate with all local
governments to ensure that land and premises are available for young
graduate entrepreneurs,” says the report.
According to the report, in order to address issues related to taxation and
compliance to regulations and access to utilities, Tanzania Investment
Centre should open a desk that deals with young knowledge intensive
investors in agriculture and agribusiness.
This, according to experts, will see local young investors registered for
investment incentives; obtain guidance and facilitation in establishing
their businesses, including dealing with regulatory requirements.
TIC grants certificates of incentives for lead and priority sectors,
agriculture and livestock is one of the lead sectors.
According to Dr Olomi quality and fixed cost for new, rehabilitation and
expansion projects is $100,000 for projects which are locally owned and
$300,000 for foreign owned projects.
This, according to Olomi is a big hindrance to young entrepreneurs who
wishes to register for investment incentives.
“It should be noted that the amounts refer to planned investment cost,
rather than what the investor has or will invest immediately,” said Dr
Olomi.
On her part agricultural economist at the SUA Anna Temu said that creating
good environment for business start-ups and investments will enable the
government to create enough jobs and spur production.
“A large number of university students and graduates are interested in the
entrepreneurial career, the challenge is that they are unable to transition
successfully due to a range of barriers,” said Dr Temu.
According to her, fairly skilled labour in the agriculture and agribusiness
sub-sectors will spur production, value addition, and bring an even
distribution of food in the country.
“This will in turn enable achievement of the triple objectives of providing
jobs, increasing the purchasing power and acquire food and developing rural
infrastructure,” says Dr Temu.
According to the report, to enhance employability of graduates, Tanzania
needs to look beyond salaried employment.
“This is a global problem and tertiary education is challenged to
reconsider the purpose of education, so that graduates are prepared also
for self-employment,” says the report.
The report emphasizes that entry of many graduates in the private sector,
and in particular the agriculture sector will infuse dynamism and
innovation and will serve as role models for other youth, including those
with lower levels of education.
What should be done?
To Realize start-ups in Agricultural Sector in Tanzania, there is need:
o For support environment for graduates to realize transition into
entrepreneurship -accessing first stage finance, premises, land, etc for
development of viable projects;
o To Reduce barriers in the processing of TIC- Tanzanian Investment
Centre’s investment incentives, deliberately make it accessible to young
graduates;
o Deliberate measures to support knowledge intensive entrepreneurs among
graduates and change of attitudes of the entire government system and the
community on to stop equating commercial land ventures with “land
grabbing.”
o TIC should be empowered to expand its land bank, and makes more land
available for graduates’ schemes which should be supported by central
government budgetary allocation
o Local governments should be tasked to support young, knowledge intensive
graduate entrepreneurs
o SUGECO, other actors needs a One-Stop Center government office or an
agency to service agribusiness start-ups. The Centre will address the entry
barriers to business for young graduates.
Ends