Entrepreneurship in Tanzania

Abstract

Entrepreneurship is often seen as one of the main measures to combat poverty in SSA. Yet, efforts still have not led to sustainable economic development. Scholars are arguing that new policies should be developed that build forth on existing values and institutions, instead of working against it. For this reason, this research is developed a qualitative research project that investigates the behaviours and strategies exercised by local entrepreneurs in Tanzania in light of the socio-cultural and economic context. It will therefore answer the research question:

How are SMEs operating in the technology industries dealing with the socio-cultural and economic demands originating from the Tanzanian business environment?

Tanzania is transforming from a traditional system that includes traditional socio-cultural and economic values and institutions, towards a modern system including more modern values and institutions. A clear distinction between the two systems has thus been proposed, where practices that are value- and institutional laden are identified and classified over these systems and the levels of the company, the civil society and the state. A total of 16 cases were developed of SMEs operating in the tech-industries by interviewing managing directors and senior managers, as well as making observations, which were consequently cross-analysed. This led to the development of a model that contain the values and institutions across the aforementioned levels and systems.
The main findings include that Tanzanian businesses tend to be hierarchical, are socio-culturally connected to informal ties including reciprocities, have a fatalistic attitude to production controls and rules, and have a synchronic time management. Supply chains are compartmentalised with little cooperation, coordination, information sharing and suggestions for innovations. In addition, due to the prevailing copying behaviour of many entrepreneurs, markets are characterised as either being very competitive with little to no product differentiation, or as being severely underdeveloped. The institutional environment remains unfavourable, where regulatory compliance is often time-consuming and expensive due to the bureaucratic systems. In addition, a combination of bureaucracy, weak law enforcement and a lack of transparency generates an unequal playing field, with unfair competition, privileges and corruption. Entrepreneurs often face a dilemma, where not participating in these practices leads to losing business opportunities. Nonetheless, the ICT sector seems to struggles less with these issues and the companies tend to be more successful.
The amount of the developments happening in Tanzania are tremendous and four of these stood out from the rest. These include a shift towards egalitarian management, a reduction of the social ties, a decrease in corruption and strong market developments. Drivers for these changes include improvements in the institutional surrounding, urbanisation, developments in infrastructure and technologies, and education.
Companies will benefit from implementing teamwork and remuneration policies, balancing social ties, rotate employees over station, implement basic SCM principles, occasionally pay allowance fees, apply to support organisations and have an open debate on more controversial practices.