3.5. NATIONAL LITERATURE: DEVELOPING COUNTRIES’ POLICIES ON THE
3.5.2. Tanzania case study
a) Policy implications in Tanzania
The inclusion of the informal economy into policy has increased contributions to the economy of Tanzania. The government is developing a national policy that intends to Figure 3.1: Tanzania and its economic and social dynamics
(cultivation zones, boundaries and social issues like crime) Source: https://www.eturbonews.com/164903/tanzania-not- place-invest-africa (2017)
Areas where cashew nut is cultivated.
CASHEW NUT ZONE
75 stimulate a series of potential SMMEs’ capabilities, along with the support of the private sector (Wangwe and Mmari, 2013). This is shown in the above figure 3.1, where potential and economic zones are highly operational. Tanzania’s government has outlined its vision regarding the country’s economy incorporating more economic contributors into urban planning gateways to achieve a more diverse, vigorous and inclusive economy. The notion behind the proposals is to create an economic spatial environment that has a strong domestic supply and demand value add capacity (Salaam, 2002). The intention is to use this initiative as a progressive outlet in the economic and social development agenda, leading government to further invest at a local and national level for the reduction of urban poverty.
b) Government and collaboration in development
The achievement of this government goal generally requires the redefining of private and public sector responsibilities, roles and capacities. Therefore the government, in a joint venture with the private sector, has established the Economic Reform Programme (ERP) (Lema, 2013). The ERP sees the government managing and facilitating the economy and changing to become a public goods producer, also encouraging job creation and employment growth in the private sector. All of this is necessary because Tanzania’s informal sector is lacking in productivity, innovation, strategic spatial formulation, value added activities and policy frameworks, thus creating slow growth in various economic spectrums. The nature of the economic design in Tanzania is diverse (Salaam, 2002). The formal sector is operating under conditions which confine its functionality and it is an export- oriented, non-competitive (within a modern environment) and small polarized sector, The formal sector thus operates within a limited spectrum, while the informal sector has a large spectrum with low rates of growth and focuses on the provision of services on a domestic scale (Salaam, 2002).
In 1991 there were approximately two million informal operators engaged in informal activities, according to the Informal Sector Survey of 2000. Authors argue that the strength of the informal sector is driven by the decreased government payroll, with large publicly-owned corporations being privatised (Rei and Bhattacharya, 2008). This argument brings forth the notion that the informal market will function if more people enter the sector. A decreased government payroll and privatisation resulted in thousands of people losing their jobs and moving into the informal market. Interacting with each other on an economic and social level, these participants and other parties bring new ideas and mechanisms onto the trading platform. This environment also has social housing, bringing into one working environment different informal activities in different occupations, with different levels of service. This
76 allows for the diffusion of segregation amongst the poor via the sharing of information and trading skills. The formal private sector in Tanzania does not have the capacity to absorb shocks in the market, and this has resulted in the growth of the informal sector with the establishment of new business operations, as people intend to survive economically (Danielson, 2000). The table below shows indicators of Tanzania’s poverty rates and starting positions, indicating the social and economic stability. The average developing country is more developed than Tanzania, according to these indicators. Table 3.1 below shows the health level, education level, and the infrastructure and housing gaps in Tanzania, which reveal the level of unemployment and the lack of service delivery by the government to the community.
Table: 3.1. Poverty and social indicators of Tanzania and the averages for developing and developed countries
Indicators Unit Tanzania Average for
developing countries
Average for developed
countries
GDP per capita US$ 240 970 16394
Population living below the poverty line
% 51 Not available Not available
(0-5 years) mortality rate Per 1000 live births
160 88 9
Maternal mortality Per 100,000
200-400 384 28
Literacy rate % 76 85.5 99.8
Enrolment in primary school % 74 77 100
Enrolment in secondary school
% 7 35-47 Not available
Patient ratio of Doctors Patients per Doctor
23,000 5767 344
Malnutrition % 29 30 Not available
Households with water supply (indoors)
% 52 63.3 74.5
People in temporary settlements
% 11 70 Not available
Average life expectancy Years 52 63.3 74.5
Source: Report, ILO SED( 2001)
77 Previous efforts to bridge the gaps shown in the table involved large enterprises trying to absorb the unemployment and increasing levels of poverty by soliciting foreign investments.
The Tanzanian government passed the Tanzania Investment Act in 1997, which focused on making foreign investment simpler. This resulted in the Tanzania Investment Roadmap (TIR) being established to scrutinise the investment process in Tanzania. This initiative occurred upon the government’s observation of declining investment into the economic sphere - it noticed a decline in investments between 1991 and 1995. The intention of the government was to improve local and foreign investment in the formal and informal economies, thus the Tanzania Investor Roadmap (1996, p. 12) states:
The government’s focus in Tanzania of endorsing and supporting informal and formal small and micro corporations is an initiative that is being planned (United Nations industrial development organization, 2012). Policy formation by the government has significantly improved the regulatory systems for informal and formal small and micro business operators (Pahwa, 2006). The ideology behind the nature of the process the government is initiating as a support structure comes from the realisation of the fact that the informal sector is ill- equipped for the process of formalisation. The goal is thus to give access, support, resources, and to formulate strategy for the informal market to operate in a formalised environment (Salaam, 2002; URTMIT, 2002). The government established the Ministry of Industries and Trade’s Sustainable Industrial Development Policy (MITSIDP) for this purpose although it currently does not have any specific mechanism for implementation (Pahwa, 2006).
The Ministry’s draft SME Development Policy (SMEDP 2001-2011) identified that the enterprises have not benefited sufficiently from programmes that attempt to reform the Tanzanian economy in relation to the informal and formal small, micro and medium sized operations. The intention is thus to adjust the inconsistency in the benefits with the implementation of different measures which include spatial planning performance that enhances informal business establishment and beneficial competition between the formal and informal sectors (Ligthelm, 2013). This also includes the improvement of operating SMEs and the improvement of urban spatial fragmentation related to spatial availability and
78 accessibility, to allow strategic economic patterns and social connections in Tanzania. The major focus, however, is the creation of sustainable jobs and income generation. With the contribution of informal and formal small, medium and micro operations toward business shares, the Tanzanian SME Development Policy (SMEDP) intends to improve and promote operations as it outlines the process of emerging individual sector and privately led sectorial growth (UNIDO, 2012). Making a policy that is spatially inclusive; focused on removing entry and trading barriers; developing, growing and expanding; and that increases productivity and quality is a complex assignment for the likes of Tanzania. Spatial reformation is an objective within SMEDP programmes and the programmes focus on being strategic when creating spatial designs that are viable for the informal market.