The crisis of jobs and implications on national cohesion

Juma Mwapachu 

By Juma Mwapachu  

 

In Summary

• The youth bulge, represented by an increasingly burdensome growth of the youth population that is available as workforce, could either be a dividend or a source of social conflict.

 

Tanzania faces a major and daunting challenge in responding to a crisis of jobs and in uplifting the quality of lives of its citizens.

The youth bulge, represented by an increasingly burdensome growth of the youth population that is available as workforce, could either be a dividend or a source of social conflict.

It is thus of critical importance that that President Jakaya Kikwete’s government deliberately prioritises job creation in all its policies and programmes.

It must immediately convene a National Dialogue with leading private sector companies to dwell on this jobs issue and lay out concrete strategies on how best jobs can be fostered in Tanzania.

Importantly to discuss, is the current unidentified jobs crisis that is more connected to skills mismatches vis a vis the real needs of the new economy rather than the mere existence of people with diplomas and degrees.

However, the dialogue should pivotally focus on how the government, as a pillar of a developmental state, can best pursue and implement ‘soft’ industrial policies that foster the growth of small and medium enterprises (SMEs).

For it is in this sector of SMEs that the government can realise concrete results on job creation. In this context, Tanzania is ripe for policies that facilitate economic transformation through the removal of barriers to the growth of SMEs and for providing the much needed catalysts for the growth of the industry.

The Confederation of Tanzania Industries in 2000 had presented to the government a proposal on Industrial Policy which the Government reviewed and apparently adopted. However, since then there has been little action in shaping a fiscally supported industrialisation investment programme.

How best to promote the development of small and medium enterprises in Tanzania as a strategic driver of wealth and job creation must thus occupy more time and attention of our government today.

The reason is simple. It is well established that SMEs constitute an important engine of social and economic development. In many African countries, SMEs account for about 50 per cent of job creation.

In Tanzania, for example, it is estimated that a third of the GDP originates from the SME sector. In South Africa, on the other hand, SMEs generated 22 per cent of the country’s GDP and 55 per cent of all jobs in 2010. But then what type of SMEs does Tanzania have and what contribution could they have were government to focus on how to expand and enable them?

It is in this context that I argue for a policy thrust to grow successful SMEs if long term sustainable economic development and transformation is to be realised in Tanzania.

The bedevilling question is consistently how to forge such successful SMEs.

In this and the next week think piece, I present a broad overview of why SMEs are of economic and political importance in Tanzania and proceed to discuss the challenges in promoting the industry and what can be done to support the growth of SMEs.

SMEs: Economic and political dimensions
First of all, the place and role of SMEs is not simply an economic issue; it is fundamentally a political one. On the one hand, globalization has unwittingly brought about the marginalization of SMEs most of which would have sprung from small value adding manufacturing processes and trading activities particularly agricultural based.

Somehow, agriculture which is the mainstay of economic activity in African countries has not been developed as an industry as to be bundled into the concept of SMEs.

Indeed, part of the reason why the Tanzanian youth increasingly shun farming is because they do not view it as a business; in other words, it is not viewed as an industry on the basis of which knowledge and expertise could be harnessed and utilised.

Where agriculture has been integrated into the industry cluster, it has mostly been through medium and large scale commercial farming involving commodities such as coffee, tobacco, tea, sugarcane, edible oil seeds and floriculture.

And the drivers of such agribusiness have naturally been global companies, African multinationals and firms owned by rich nationals. In sum, globalization has contributed to the erosion of economic spaces for indigenous SMEs to grow.

The Chinese factor

The emergence of China in the African economic space, particularly in the past decade, has also brought about dislocative pressure on indigenous SMEs in Tanzania and several African countries. It is estimated that 80 per cent of the Chinese companies currently operating in Africa are SMEs.

The downside of Chinese SMEs operating in Africa is that they tend to use Chinese workers and thus fail to contribute to local job creation. Indeed, Chinese nationals now compete with even micro national business players in what are traditional urban market places. Kariakoo Market in Dar es Salaam is one clear case.

The entry of the Chinese trading phenomenon in Tanzanian markets is heightened by the monopoly of Chinese consumer goods, some of them, regrettably, being counterfeits but largely of very low prices. This market influence upsets the level playing field for locally produced goods from SMEs.

As a consequence, some African countries have experienced significant job losses and the erosion of opportunities for wealth creation. In Nigeria, the government has adopted strict regulatory measures to curb Chinese imports by requiring importing Chinese companies to setup production units in the country. Can Tanzania be as equally bold in enforcing such a decision?

   

SMEs and economic empowerment
There is yet another dimension why SMEs have an important political bearing. This relates to the agenda of economic empowerment of indigenous populations to participate more prominently in wealth creation.

Whilst one happily discerns a new drive, impetus and mushrooming of small trading firms and activities owned by Tanzanians of African origin in many major towns and cities in Tanzania, it is equally important to point out that these activities are yet to extend to ownership of the real sectors of the economy- agri-business and manufacturing in particular.

Thus the wealth divide currently seen in Tanzania, along racial lines, and which raises serious political sensitivities, is partly fuelled by the lopsided structure of ownership of the real economy.

However, my key point is not really about the state of the racial bias in ownership structure as much as about getting Tanzanians of African origin to participate more robustly in growing the SME sector as a strategic driver of national development and creation of jobs.