Tanzania: formalising the informal.
Tanzania's huge informal sector has largely been ignored by the authorities. Now there is a change of heart and efforts are being made to formalise this sector in the face of mounting unemployment. Herald Tagama reports.
To eke out eke out
1. to make (a supply) last for a long time by using as little as possible
2. a living, more and more Tanzanians are running businesses by the roadside, on the streets, or even from the corridors of their own homes. "The informal sector is presently a key thread of the fabric of our society, and of our economy. That is the reality," affirms President Benjamin Mkapa Benjamin William Mkapa (born November 12, 1938) is a former President of the United Republic of Tanzania (1995 - 2005) and former Chairman for the Revolutionary State Party (Chama Cha Mapinduzi, CCM). He is a graduate of Makerere University. .
"What would happen if the entire informal sector in Dar es Salaam Dar es Salaam
Largest city (pop., 1995 est.: 1,747,000), capital, and major port of Tanzania. Founded in 1862 by the sultan of Zanzibar, it came under the German East Africa Co. in 1887. were to go on strike?" the President asks. "The truth is that if that were to happen, God forbid, much would grind to a halt." He says his government can no longer ignore the rapidly growing informal sector--but he wants it formalised Adj. 1. formalised - concerned with or characterized by rigorous adherence to recognized forms (especially in religion or art); "highly formalized plays like `Waiting for Godot'"
formalistic, formalized so that assets can be used as collateral for loans.
Tanzania has more than 2.3m jobseekers and according to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. the National Household and Budget Survey, close to 13% of Tanzania's labour force is unemployed. And the labour force is growing by 3% a year.
Many Tanzanians see their living standards living standards npl → nivel msg de vida
living standards living npl → niveau m de vie
living standards living npl slide inexorably downwards despite the claims of government, international creditors and donors that Tanzania's economy is growing by leaps and bounds. More than half of Tanzania's 35m people live on less than $1 a day
The Ministry of Labour, Youth Development and Sports says that around 600,000 Tanzanians complete schools, colleges and universities every year and stream onto the labour market, particularly in the more competitive urban areas. But only 8.5% of the labour force requires post-primary education. Therefore, finding any kind of meaningful employment is next to impossible, and many school-leavers simply opt to hawk wares or, more ominously, turn to street crime to make a living.
Agriculture is still Tanzania's largest employer, absorbing 80% of the workforce, and agriculture represents the country's largest informal sector. The Tanzania Investment Centre talks about an increasing inflow of foreign direct investment, with projects worth $265m approved between 1990 and 2002, creating around 42,000 jobs--but that's still too few to absorb the growing army of unemployed.
Although the Bank of Tanzania The Bank of Tanzania is the central bank of the United Republic of Tanzania. It is responsible for issuing the national currency, the Tanzanian shilling.
It was established under the Bank of Tanzania Act 1965, however in 1995 the government decided the central bank had too is encouraged by the country's improving macroeconomic mac·ro·ec·o·nom·ics
n. (used with a sing. verb)
The study of the overall aspects and workings of a national economy, such as income, output, and the interrelationship among diverse economic sectors. performance, few Tanzanians see the benefits of the growing economy. Inflation declined from 30% in 1995 to 4.3% in June 2003. It was hoped that it might fall further, but famine pushed it up to 4.5% in November 2003. That's because the food basket This article or section may be confusing or unclear for some readers.
Please or discuss this issue on the talk page. accounts for 74.2% of the disposable income disposable income
Portion of an individual's income over which the recipient has complete discretion. To assess disposable income, it is necessary to determine total income, including not only wages and salaries, interest and dividend payments, and business profits, but also of Tanzanians.
Mkapa agrees that low inflation has meant few benefits to the majority of poor Tanzanians. The number of hawkers, commonly known as machinga, is growing. Their name is derived from English words "marching guys". The machinga, mainly young men, walk all day to peddle portable items such as second-hand clothes, toys, utensils and cosmetics. However, Tanzania's informal sector traverses all groupings of the economy. They include the more traditional smallholder agriculture Smallholder Agriculture is the major form of food production in the world. Subsistence farming
It is typically based on family farms in poor countries and is often associated with subsistence production - although this type of production is not absent in developed that accounts for 50% of the country's GDP GDP (guanosine diphosphate): see guanine. , to clothing, taxi hire, food services food services Hospital services A 24/7 department in a hospital that provides for the nutritional needs of inpatients–eg, those needing special diets, preparing meals and transporting them to the floor and, through the cafeteria, the hospital staff and , blacksmithing, photography and car servicing.
But one of the major problems of the informal, and therefore unregulated business sector is that it operates haphazardly, unmindful of environmental or health hazards. In urban areas, cases of food-poisoning, originating from women, or mama n'tilie, vending foodstuffs foodstuffs npl → comestibles mpl
foodstuffs npl → denrées fpl alimentaires
foodstuffs food npl → at the roadside, are very common. Health officials complain that informal food vendors often fuel regular cholera outbreaks.
In urban areas, militiamen sporadically battle with street hawkers. In Dar es Salaam and other large towns, vendors have had their wares seized and kiosks destroyed. But some politicians stridently support the machinga and mama n'tilie. Argues Dar es Salaam Regional Commissioner Yusuf Makamba: "Harassing such potential voters is unacceptable. Next time they vote it will be against the ruling Chama Cha Mapinduzi The Chama Cha Mapinduzi (Party of the Revolution in Swahili) is the ruling political party of Tanzania. History
The party was created February 5, 1977, under the leadership of Julius Nyerere, as the merger of the Tanganyika African National Union (TANU), the party."
The exact number of Tanzanians engaged in the informal sector is hard to assess. The first comprehensive National Informal Sector Survey was conducted on mainland Tanzania in 1991 by the Tanzania government, the United Nations Development Programme, the International Labour Organisation and the Swedish International Development Agency.
They discovered that an informal enterprise usually employed between one and five people. The survey showed that 60% of the 1.8m enterprises they researched operated in rural areas. Practically all of them suffered from under-capitalisation, with 72% of the enterprises having an initial capital of less than $5 and 41% with less than $1. The average age of the workers was 32 years for those in the urban areas, and 36 years for their colleagues in the rural areas. More than a half of the operators had completed primary schools, but only 4% had attended secondary school or higher.
PERUVIAN MIRACLE WORKER
"The time has come for the government, both central and local, and for the people in the public and formal sector as a whole, to accept the informal sector for what it is: a reality of life, an important provider of goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. , and a market for goods and services provided by the formal sector," says Mkapa. "But owners, managers and speculators need the help of every one of us in this room to give this role a better and legal legitimacy."
In September 2003, Mkapa invited Peruvian economist Hernando de Soto Hernando de Soto is the name of:
Spanish explorer who landed in Florida in 1539 with 600 men and set out to search for the fabled riches of the north. , formerly an economic adviser to the former Peruvian President Albert Fujimori, is also a member of the World Commission on the Social Dimension of Globalisation, co-chaired by Mkapa and Finnish President Tarja Halonen Tarja Kaarina Halonen (IPA: . Mkapa is much impressed by De Soto's 'magic wand' for alleviating poverty through formalising the informal sector. ) (born December 24, 1943, in Helsinki, Finland) is the eleventh and current President of Finland.
Mkapa summoned all his technocrats and administrators for studies on formalising property rights in Tanzania. De Soto explained how assets in the informal sector should be formalised to provide owners with collateral for obtaining bank loans. At the workshop, cabinet ministers, technocrats, scholars, and regional and district commissioners, all brainstormed.
Foreign Minister Jakaya Kikwete President Jakaya Mrisho Kikwete (born October 7 1950) is a Tanzanian politician and current President of the United Republic of Tanzania. Kikwete was born in Msoga, Bagamoyo District, Tanzania or as it was then known, Tanganyika. pondered how poor Tanzanians would raise funds to have their plots of land surveyed. "It costs around $50 to have one acre surveyed," he said. "A villager may have up to 10 acres. The amount of money needed to have the whole area surveyed would be too much since he is a poor man. He would be unable to pay that much. It's a colossal sum for a villager."
Another hurdle is the shortage of land surveyors. When the government was surveying 20,000 acres on the outskirts of Dar es Salaam, it had to engage all surveyors in the country. And Attorney-General Andrew Chenge said that although De Soto's concept was attractive, it would be foolish to accept it at face value. "We have to ask ourselves: where are we going to get such huge sums of money to formalise property? Are we going to get it from loans? And if so how are we going to pay those loans?" he asked.
However, Mkapa believes De Sotos theories are relevant and workable, although he has no answer to this particular problem. That was why he called a workshop to debate the matter.
"There is indeed an immense potential within the informal sector. This potential has been condemned to function outside the existing legal regime, constraining its ingenuity and productivity, and thereby denying the poor and the economy as a whole the benefits of the entrepreneurship that is vital to their self-determined well-being and the prosperity of their country," he insists.
From this month (January) the government intends starting a pilot project of formalising assets owned informally. It hopes that by carrying out the formalisation Noun 1. formalisation - the act of making formal (as by stating formal rules governing classes of expressions)
systematisation, systematization, rationalisation, rationalization - systematic organization; the act of organizing something on a broad scale they can enable many Tanzanians who own their own properties to use them as collateral to borrow from banks.
"The government," Mkapa says, "pretends those people in the informal economy do not have assets so they do not have property rights, and those people pretend they do not have assets so they do not have to pay taxes on them or follow rules and regulations.
He cites that much of the real estate in Tanzania's urban areas is outside the formal, legal, sector. "Yet, if we could bring in all these assets and properties into legality, that legality would unleash a lot of investment capital."
But Kikwete, an economist, thinks micro-credit provision is the immediate solution to alleviate poverty in Tanzania. Others technocrats simply believe in the poverty reduction programmes and economic reforms promoted by the World Bank and the International Monetary Fund.