Building an entrepreneurial Tanzania – 2

03May 2016
Ambassador Juma v Mwapachu
The Guardian
Dynamic Realities
Building an entrepreneurial Tanzania – 2
  • What is probably of greater priority today is to re-define and shape anew the role of the Tanzanian state in a brave new world where the role of the state as entrepreneur and as a driver of innovation is given pre-eminence

In last week’s article, we ended by observing that alchemists are individuals who ‘sow the seeds of the future’ for societies and that such individuals when faced with difficult economic environments are able to discern and exploit opportunities to create businesses.

In last week’s article, we ended by observing that alchemists are individuals who ‘sow the seeds of the future’ for societies and that such individuals when faced with difficult economic environments are able to discern and exploit opportunities to create businesses that respond to the prevailing conditions and go on to succeed.

If you therefore take the example of the worst economic conditions Tanzania has ever found itself in, the period between 1982 and 1984, people who ventured out to start businesses at that time by focusing on the opportunities presented by the diverse shortages of consumer goods, were able to move on and become wealthy.

Asian Tanzanians Exploited Unique Opportunities

Most of them happened to be Tanzanians of Asian origin who were able to use their own forex funds out of the 1984 government approved exports forex retention scheme to import consumer goods in short supply.

Tanzanians of African origin like Reginald Mengi were only to step in later from around 1986 and faced haunting competition from the well-established and resourced businesspersons of Asian origin.

Flowing from last week’s think piece, the large question that arises is why Tanzania has so far failed to build a strong entrepreneurial culture and dynamism. Why are there such few indigenous Africans in what one may describe as ‘serious business’; businesses that contribute significant tax revenues, create many jobs and make business people wealthy. It is an important question requiring a broad national conversation.

New Industrialisation Needs Economic Disruption

President Magufuli’s government may want to give this question important priority following his call for a serious return to the industrialization thrust that existed in the 1970s, a proposal that also demands serious interrogation in terms of what exactly ‘industrialisation’ means-what sectors, what products, which markets, levels of competition etc.

In particular, it is vital that Tanzania re-examines the assumptions that have underpinned its social and economic model for transformation and question whether it continues to make sense in a world whose fortunes are increasingly influenced by disruptive technologies, innovations, internet of things, and even artificial intelligence. Moreover, Tanzania cannot escape the reality that 65 per cent of its population still lives in the rural areas with agriculture being its mainstay for income and livelihood.

The Peasant as Entrepreneur

Thus, an important question about building an entrepreneurial Tanzania must necessarily involve how the peasant can be transformed into becoming an entrepreneur. It is a question that goes hand in glove with probably the larger policy issue about how a new generation of farming entrepreneurs can be unleashed where agri-business value chains become one of the economy’s pivots. It is these two strategic interventions that can best assure the creation of substantial jobs and wealth.

The challenge in unleashing such entrepreneurship lies on the state of the policy environment. Does the government have in place an enabling environment to support the development of such entrepreneurship? Of course, there are a whole host of conventional determinants: quality education, agri-business focused- vocational training, rural infrastructure, costs of logistics, markets and access to finance.

Generating Entrepreneurial Confidence

However, what is more important for Tanzanians is to wake up to the reality which Charles Handy, in his new book, ‘The Second Curve-Thoughts on Re-inventing Society’ describes as the necessity to imbibe a mindset that ‘new thinking is not the prerogative of those in authority----the thinking could and should start with ourselves----One of our faults is that we are too modest, too willing to believe that those in power know best.’

I find this perspective critical in Tanzania’s quest to turn entrepreneurial as a country.
It may be recalled that in the early to mid-1990s, a serious debate emerged about the empowerment of indigenous African Tanzanians. There were virulent calls and demands for President Ali Hassan Mwinyi’s administration to adopt positive discrimination policies of the type enacted by Malaysia’s President Mahathir Mohammad and the term, ‘uzawa’ emerged.

‘Uzawa’- Can it Build Entrepreneurship?

There was a powerful sense then that the adoption of policies in support of ‘uzawa’ would act as ‘big bang’ (as in God’s creation of the earth) prescription for jump-starting ‘entrepreneurship’ within the Tanzanian African population!

The late Mwalimu Julius Nyerere characteristically castigated such rallying call for ‘uzawa’ as a racist ploy describing it as something no different from ‘ukaburu’ (Boer-type racism).

And here lies the rub. Did the ‘uzawa’ ethos seek to propel the notion that entrepreneurism could be ‘thrust’ upon a people? In May 2003, a leading Tanzanian business executive, Iddi Simba, wrote a small book entitled, ‘A Concept of Indigenisation’ in which he put up a powerful case for ‘indigenous’(African) nationals to be mobilized and integrated in the modern sectors of the economy.

Simba was well informed about the Malaysian model of positive discrimination. His thesis though falls short of a clear process for what he describes as ‘encouraging the growth of indigenous entrepreneurship’ apart from proposing the inculcation of a mindset that views national development as a vital responsibility of the ‘masses of indigenous Tanzanians’.

Critical Contexts for Building Entrepreneurship

Thus, the fundamental question remains: how do you actually go about building broad-based entrepreneurialism in Tanzania? Whose responsibility is it? Is there a shared responsibility between the State and the private sector? What is the balance of roles and what can the State do?

More fundamentally, Tanzanians have to determine what an entrepreneurial Tanzania should aim for; is it size of the economy or is it a ‘better’ economy which is more focused at returns from specialization.

A quick example is where lies greater and more sustainable returns as well as jobs and their multiplier effects between investments in biodiversity and tourism and manufacturing?

The Innovative State-the Past and Lessons

To make sense about this subject about building an entrepreneurial Tanzania it is essential to examine some important contexts. Lest we forget, ideas about State Entrepreneurship and the Innovative State arose in the context of the ideology of Ujamaa (Socialism) as enshrined in the 1967 Arusha Declaration.

State entrepreneurship was conceived within the ideological framework of state ownership of the commanding heights of the economy. The private sector was deemed to be more interested in market development and wealth creation for a few as opposed to building industries that created organic links with utilization of national resources that also created mass jobs and prosperity for the many.

The establishment of over 480 parastatals by the mid-1980s was a manifestation of state entrepreneurship. What is also noteworthy is the role which the state took in spearheading what today is conventionally described as innovation.

The ruling orthodoxy in economic theory today is that the state is not competent to take the driving seat in propelling innovation-led growth; that it is the role of the private to unleash the power of entrepreneurship and innovation.

It is interesting, in retrospect, to note that the late Mwalimu Julius Nyerere thought differently about such idea as early as the mid-1970s. He could have easily ended with state entrepreneurship driven by public ownership. But he had a vision around what Prof Mariana Mazzucato of Sussex University has recently promoted as the ‘innovative state’ in her book, ‘The Entrepreneurial State-Debunking Pubic Vs Private Sector Myths’.

Utilizing the brilliance of Cleopa David Msuya as Minister for Trade and Industry, Nyerere proceeded to establish a number of state firms to drive industrial innovation in various sectors of the economy.

Nyerere’s Ideas of the Innovative State

Nyerere was well seized of the reality that Tanzania’s economic transformation hinged on scientific research, absorption and application of modern technologies and building indigenous technologies that best suited Tanzania’s needs.

In this vein, parastatals like Tanzania Industrial Studies and Consulting Organisation (TISCO), Tanzania Industrial Research Development Organisation (TIRDO), Small Scale Industries Development Organisation (SIDO), Tanzania Engineering and Manufacturing Development Organisation (TEMDO) and Centre for Agricultural Mechanisation & Rural Technology (CAMATERC) were established.

At the University of Dar es Salaam, at what was then the Faculty of Engineering, an Institute of Production Innovation was also established to foster advanced research and development in engineering fields.

For several years until the beginning of the demise of socialist ownership in the early 1990s, these state institutions fostered technology driven innovation in Tanzania.

They were well funded by the government and some built excellent laboratories for applied research and created different types of technology prototypes. They are now a shade of what they used to be largely because the new economic policy views the private sector as the principal driver of innovation. These institutions are now starved of state funding. It is a false development.

Global Logic about State as Entrepreneur

Professor Mazzucato’s book debunks this view and powerfully argues that ‘in fact, in countries that owe their growth to innovation, the state has historically served not as a meddler in the private sector but as a key partner of it-and often a daring one, willing to take risks that businesses won’t’.

She goes on further to argue that in getting governments to transform their mindsets (away from the dominant focus on fixing market failures) by thinking big about the centrality of innovation-be it through biotechnology, green technology, advanced medicines, environmental engineering and energy- the traditional role of the state, as thrust upon it by neo-liberalism, has to be fundamentally reconsidered.

To Mazzucato, this means ‘empowering governments to envision a direction for technological change and invest in that change. ‘The lesson I guess that is learnt from Tanzania’s retreat from the state being an important entrepreneur and player in the process of innovation is that there was an acute policy failure in the period of public ownership to see that the state also needed a strong private sector to make a success of its entrepreneurial work and forutilization of the research and development results coming out of the state R&D institutions.

Unfortunately, following the upsurge of the market and the strengthening of the private sector from the mid-1990s, there has been no serious effort on the part of the government to re-build state R&D institutions and in developing coalitions of cooperation among the government, academic think tanks and business to foster innovation.

It is innovative breakthroughs that bolster the growth of firms and the economy as a whole. It is no longer adequate for the government to merely create the enabling conditions (normally policy-oriented including fiscal measures).

Cultural Dysfunctions in Building Entrepreneurship

But there is also the second context which needs to be considered. It relates to an ingrained culture that militates against the growth of the entrepreneurial spirit among Tanzanians of African origin.

There are five conditions we wish to draw attention to. First is short-termism culture in doing business. Many of them are driven by the expectation of immediate or quick returns from business.

They do not venture into business long term. There is thus the tendency to ‘cut corners’. It explains much of their informality of businesses and the fear to borrow from banks whilst complaining about lack of access to finance.

Second, is risk averseness which also undermines long-term investment and the quest for creativity and innovation. Third, the culture of imitation underlies many of their business ventures; it is the ‘container’ business mentality; a ‘copy-cat’ style of business start-ups.

If someone starts a bar with ‘nyama choma’ and appears successful, that becomes a source of business ‘intelligence’ for others to emulate.

Fourth, is the dominant culture of conspicuous consumption among the African business people. It is what the late Professor Ali Mazrui described as ‘self-indulgent exhibitionism’; a serious enemy of the investment habit that drives business success.

Fifth, there is a serious weakness in understanding the dynamics of competition which fuels demands for special treatment and protection.

Unless these dysfunctional mindset conditions are squarely addressed, the quest for unleashing a broad entrepreneurial spirit in Tanzania would be a daunting task. Improving quality of education all round is one area that can surely help change minds and influence radical risk taking for business.

Conclusion- a Return to a Developmental State

So whilst Tanzania needs to determine how best to cultivate an entrepreneurial spirit in its broad citizenry, which is a huge challenge because of decades of socialist ownership and the near collapse of an entrepreneurial state, what is probably of greater priority today is to re-define and shape anew the role of the Tanzanian state in a brave new world where the role of the state as entrepreneur and as a driver of innovation is given pre-eminence.

As a start, the government should set up a National Entrepreneurship Forum to drive the entrepreneurship agenda. For as President Barack Obama aptly said at the 2015 Global Entrepreneurship Summit, ‘no country can achieve its full potential unless it draws on the talents of all its people’.

The proposed Forum can be a platform for drawing on such talents of the Tanzanian people and especially the youth. But secondly, Tanzania needs a quick return to embracing the idea of a developmental state.