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Mindset change vital for SMEs to enter international market

THIS year’s Dar es Salaam International Trade Fair which ended last Saturday has inspired my thinking to write few lines specifically focusing on SMEs.

I have been attending continuously these fair as exhibitor since 2014 and throughout my participation has provided me with an insight about what it will take to catapult Tanzanian emerging SMEs to graduate and enter high end market segment.

But before dwelling to what I think is needed to help our SMEs graduate into higher level, it is important to place issues in proper perspective.

My discussion will dwell on contributions of SMEs to economic development and constraints to their development in Tanzania.

In my opinion, SMEs in Tanzania, refereeing by sample that participated in just ended 2019 international trade fair provide about 85 per cent of business employment of Tanzania.

They also contribute about 70 per cent to Tanzania’s GDP and more importantly account for about 92 per cent of businesses in Tanzania.

Drawing experience from other countries, statistics indicates that, in South Africa for example, it is estimated that 91 per cent of the formal business entities are SMEs.

These according to their records contribute between 52 to 57 per cent to GDP and provide about 61 per cent to employment. Reflected to our SMEs, if statistics could be collected efficiently, a true picture of how important SMEs are could be revealed.

Notwithstanding the recognition of the important roles SMEs play in many countries and in Tanzania in particular and based on interview carried out during this year’s exhibition, development of SMES in Tanzania is largely constrained by a number of factors such as lack of access to appropriate technology, limited access to international markets, knowledge on what international market standard are, the existence of laws and issues of patient right, regulations and rules that impede the development of the sector, weak institutional local capacity, lack of management skills and training, and to a lesser extent finance.

At the beginning I thought finance was a major constraint but I later found I was wrong. Views expressed here are not meant to accuse anybody those responsible to ensure SMEs in Tanzania are supported to grow but to provide some relevant recommendations to policy makers, development agencies, entrepreneurs, and SME managers to ascertain the appropriate strategy to improve the SME sector in Tanzania.

As indicated earlier on, this is my 6th year continuously attending trade fair exhibition held in Dar es Salaam.

Throughout these years I have learnt a great lesson that I believe if solutions are identified and proper strategy put in place market penetration of our SMEs architects and industrialist could improve considerably.

For instance, lesson drawn from samples I have been studying for the last six years indicated that there was no significant change at all on for example the way products are packed.

Year in year out same participants displayed same products in the same format. As a result of marketers’ poor quality of their products, lack of entrepreneurial skills, lack of what the market need and inconsistency in production, there is no stern growth.

For the past five years, high numbers local SMEs have failed in their first and second year phase of operation, which is normally the first three to five years.

Those that have survived as part of my research their survive usually continue to operate in conditions of ambiguity due to not only volatile market, intense competitive rivalry, lack of marketing skills, shortage of serviced areas to do proper business but due to lack of knowledge on what market need and branding just amongst others.

According to discussion held with over 500 SMEs at just ended Saba Saba trade fair, SMEs in Tanzania will continue to struggle to access markets for their products, owing to a number of factors like low product and service quality, preference of imports by some markets, incapacity and inconsistency in production and absence of deliberate policy instruments or mechanisms to protect the local suppliers.

Acquisition of funding by SMEs based on in-depth analysis is no longer an issue. Issues are what will take for, let say, honey produced and packed by an industrialist penetrate international honey market?

Which international certification are needed or required and what procedure to comply with or to be able to penetrate the international market?

Most SMEs operators indirectly suggested that the Ministry of Industry and Trade should to be more proactive in supporting them, not by giving them unrestricted or subsidized access to finance, but concentrate more on how they can be assisted to upscale their products.

Although many SMEs aim to make profit and increase their sales, none SMEs was prepared to export their products. Something has to be done on quality and branding of SMEs product if to upscale their product is what Tanzania need.

There is growing recognition of the important role SMEs play in economic development.

They are often described as efficient and prolific job creators, the seeds of big businesses and the fuel of national economic engines.

Even in the developed industrial economies, it is the SME sector rather than the multinationals that is the largest employer of workers.

Interest in the role of SMEs in Tanzania need to be the process and this has to continue to be in the forefront of national policy. Governments at all levels have to undertake initiatives to promote the growth of SMEs sector with robust strategies not lip services approaches.

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Author: Dr Hilderbrand Shayo

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