Report lists bottlenecks preventing SMEs growth in Tanzania

Dar es Salaam. Small and medium enterprises (SMEs) in Tanzania face four main regulatory obstacles that limit their desire to grow into companies that could effectively compete in the global market, a new study has revealed.

The study by the Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA) in partnership with the University of Dar es Salaam’s Business School (UDBS) and Trias Tanzania shows that SMEs have been contending with issues pertaining to labour regulations, tax and levies, environmental regulations as well as health and safety regulations.

But the government said it was aware of the existence of tariff and non-tariff barriers to businesses, noting, however, that its plan was to improve the country’s business climate as guided by the Blueprint for improvement of the business environment.

“So far, we have scrapped a total of 19 taxes that made doing business difficult in the country. This is in addition to several others that we had scrapped last year,” the Deputy Minister for Investment, Industry and Trade, Mr Exaud Kigahe, told The Citizen yesterday.

He said the government was also working out a way of integrating seven regulatory agencies so they can work under one roof.

Unveiling the report in Dar es Salaam yesterday, the TCCIA executive director, Mr Nebart Mapwele, said the study – which involved a sample of 3,000 business persons and 2,000 experts and public sector servants in ten regions – shows the presence of unfair business ground indicators for SMEs.

“The findings of the study shows that tax estimates were very high; the presence of regulatory authorities which perform similar activities and delays in the provision of services from public servants,” he said.

He said basing on the study findings, they were recommending that the regulatory bodies that perform similar duties to be integrated and that a friendly mechanism of taxation be put in place.

The laws restricting free flow of trade could also have to be amended, Mr Mapwele said.

The two-year study conducted from January 2020 to June 2022 revealed that the government was losing colossal amounts in uncollected tax through Cross-Border Trade (CBT), particularly in border points in Mwanza, Arusha, Mbeya and Mtwara regions.

“Most of the trades take place in the border areas are informal businesses which cause the government to lose taxes. This is due to the presence of unfriendly systems for these SMEs to be registered in the formal system so they can pay taxes,” Mr Mapwele said.

According to the study, cross border traders were challenged by high taxes and fees; the existence of non-tariff barriers including road blocks; existence of unfriendly business policies including levying of taxes prior to generation of income and language barriers.

According to Mr Mapwele, the study found out that SMEs were not being involved in the planning of the government and development policies.

As a result, they were not aware of the existence of policies that seek to pinch their operations.

“Awareness about policies and participation of traders in their formulation is still limited,” he said.

This, Mr Mapwele added, was partly why certain issues that were highlighted in the past two Five-Year Development Plans had not been implemented.

“For instance, the plan of the last Five-Year Development Plan was to create an industrial economy that couild see our processed products getting access to foreign markets,” he added.

According to the Policy Research Unit Coordinator at the UDBS, Prof Goodluck Urassa, the study has shown that many entrepreneurs were unaware of even the government-sponsored programmes and therefore, they fail to take advantage of the various opportunities at their disposal.

“The other issue is the private sector’s low level of capital and expertise in carrying out government-sponsored projects,” he said.

Basing on parameters of access to finance, labour regulations, taxation, government services and business to business, the study shows that the level of trust in the business environment in the country stood at only 55 percent.