This whole report analyses the general environment of a small business in Tanzania. Firstly, it will discuss on the economic environment, whether or not the economic condition in Tanzania is suitable for the operation of a small business. Secondly, the issue of legal-politic will be examined. It discusses the worthiness and safety of direct investment in Tanzania. Other than that, sociocultural of Tanzania will be studied as well by using Geert Hofstede’s four dimension values. Finally, this report will discuss about the impact on the environment of Tanzania’s growth after the implementation of science and technology.
General Environment of Small Business in Tanzania Economic Environment There are several issues pointed out in Tanzania’s economic environment. They are economic crisis, inflation, poor agriculture productivity, low level of education and scarcity (USAID 2010). From the resource (worldbank 2010, 4), Tanzania is considered as one of the lower middle income countries with $ 1,350 of gross national income per capita. However, she has big possibility for continued growth due to the funds that is provided by mutual donors in assist Tanzania’s economic infrastructure like transportation and telecommunications.
From the view of investor, areas that need investment to enhance transport infrastructure development in Tanzania are road rehabilitation, railway system, waterways, merchant marine, airports and terminals (Central Intelligence Agency 2010). Next would be the telecommunication infrastructure development. In 1999, a 5 years program costing USD 250 million sponsored by international donor community had improve Tanzania’s telephone system, broadcast media and internet host (Telecommunications Structure and Policy n.d.). Investment in these infrastructures can aid in the growth of Tanzania’s economy.
In the past, Tanzania’s economic development depends on agriculture as she is rich with natural resources (Natural Resources n.d.). Agriculture has become the second main income of Tanzania which involved 80% of labour force (Central Intelligence Agency 2010). In year 2009, Tanzania exports commodities like gold, coffee, cotton and others which generates $2.976 billion and imports commodities like machinery, industrial raw materials, crude oil and others which cost $5.776 billion (Central Intelligence Agency 2010). From the statistic, third parties can well understand the market demand of other countries and also the resources market needed in Tanzania industry.
Tanzania has an average of 7% economic growth per year since 2000 (USAID 2010). Due to this grow, the rural livelihoods can be improved as well as poverty can be decreased and increasing the Gross Domestic Product (GDP). The inflation rate of Tanzania has increased to 12.1% in 2009 and a world ranking of 204. which means the annual rate of growth of prices in economy has increased but inflation rate still consider low (Central Intelligence Agency 2010). Moreover, Tanzania’s commercial bank prime lending rate was decreased to 14.98% in 2008 and a world ranking of 40 (Central Intelligence Agency 2010). While the current exchange rate of Tanzanian Shillings (TZS) that convert to 1 US Dollar (USD) is 1,440.81 (Tanzanian Shillings (TZS) to 1 US Dollar (USD)). From the data, Tanzania’s economic is getting stable since the economic crisis in the early 1990 (Icon Group Internation, Inc 2000, 66). Tanzania is a suitable place to start small business with low inflation rate and high lending rate which compared to other countries, but the main key factors are the growing economic and political stability.
Legal-political environment Although Tanzania’s political stability is claimed to be moderately constant since independence (Tanzania Country Overview 2010), there are still political risks that can’t be avoided. Such risks are political violence and corruption crime which surfaces when general election comes near. There was such a case happened in Tanzania election, where the secretary of Chama Cha Mapinduzi (CMM) party was caught for selling their party’s membership card for personal interest without legal procedures. This card that was sold can be misused in future national elections which could cause the election corruption (Election Corruption crimes in political parties get nasty as General Elections n.d.). Due to the political issues, businesses often face some circumstances that increased the risk of investment in Tanzania.
The other critical issue that affect business environment in Tanzania is the political instability. Factors that caused political instability can be wars, revolutions, terrorism, frequent changes in government and others (Samson and Daft 2009, 145). For instance, war begins because of the scramble for natural resources by colonial countries between 18th and 19th centuries. This brought a great impact on the environment as the well-known Serengeti National parks located between Kenya and Tanzania is in a threat during the war (Daniel 2009). Only businesses that relied on natural resources as their main resources may be influenced by this political instability.
“Tanzania had the highest inflows of foreign direct investment (FDI) in the East Africa region in 2006.” reported by United Nations Conference on Trade and Development (Bureau of Public Affairs 2008). In the year stated, FDI approached USD 501.5 million from USD 325 million in the previous year. This part of success is because of Tanzania’s government enforced some law and regulations on business, for instance, the Tanzanian Investment Act of 1997. This establishment effectively increased FDI by protecting investors’ safety and providing investment opportunities to them. Furthermore, they provide investment facilitation services which distribute investment information that are needed by investors (Bureau of Public Affairs 2008). If this enhancement achieved continuously, this would bring Tanzania’s economic development to a higher level.
Sociocultural Environment Tanzania is enriched with different cultures like language, foods, traditional dance and others. They have many local languages due to the different ethnic groups. For the convenience of administration in government, Kiswahili and English are introduced to be their official languages. Although there are many different major religion in Tanzania, but most of the population from Tanzania are Islamic as there are 35% of them are from mainland population and more than 99% of Zanzibar population are Islamic (Nations Online 2010). One of the famous culture in Tanzania is their traditional dance which is known as “Ngoma” (Culture heritage and traditions n.d.).
Table below shows the comparison between East Africa (included Ethiopia, Kenya, Tanzania and Zambia) and World Average in Hofstede’s cultural dimensions.
(Source: Hofstede n.d.)
From the survey of Hofstede, the power distance index of East Africa is slightly higher than world average. This explains that the population from East Africa can accept the unequally distribution in power among institutions, organizations and society (Samson and Daft 2009, 150).
East Africa has a lower uncertainty avoidance index compare to world average. Low uncertainty avoidance meanings that the society is feeling comfortable with hesitation and tolerance with ambiguity in any unstructured situations (Samson and Daft 2009, 150). From the data collected, the point of view of culture and belief of people from East Africa is phlegmatic and thoughtful as they allow different opinions but try to avoid strict laws and rules (Hofstede n.d.).
Individualism and Collectivism
People from East Africa are more towards collectivism as the ranking of individualism is extremely low. Samson and Daft (2009, 150) defined collectivism as “a preference for a tightly knit social framework in which individuals look after one another and organisations protect their members’ interests.” This can be seen that individuals from East Africa are basically integrated into strong and organized groups.
Masculinity and Femininity
Refers to the distribution position between the genders, the femininity value in East Africa is a little more than masculinity value. In this position, this society is understood to be a reserved, caring just like a woman’s value which also aimed to be cooperation, group decision making culture (Samson and Daft 2009, 150).
Long-Term Orientation and Short-Term Orientation
At the fifth dimension, East Africa is associated with short-term orientation which defined as a social that is following tradition and meeting social requirement. They are having less value on long-term orientation which is thrift and perseverance (Samson and Daft 2009, 150).
Technological Environment Today, people value the importance of technology as essential in their life. Besides, it is believed that technology not only can assist in education achievement, but it is also aid in economic development of a country. In Tanzania, there are several national initiatives established in the purpose of guiding the government on science and technology policy since independence of Africa (Mukama and Yongolo 2005). Most of the technical and industrial research focused on agriculture of Tanzania as the priority of food productivity and food security (Matata et al. 2010).
African Technology Policy Studies Network (ATPS-Tanzania) which was found in year 2001 by Ms. Bitrina Diyamett (African Technology Policy Studies Network, Tanzania Chapter n.d.). This organization contributed by emphasizing the growth of Tanzania and the reduction of poverty by developing the use of science, technology and innovation (African Technology Policy Studies Network, Tanzania Chapter n.d.). In the case of declining soil fertility, a replenishment technology is introduced into agriculture of Tanzania to overcome this problem (Matata et al. 2010). Once there is improvement in technology, the significant proportion like food insecurity and malnourishment will also be reduced as the soil fertility and macronutrient levels are increased.
Globalization A Boon Or A Curse Developing Countries Economics Essay
What is Globalization? At an economic level Globalization is the process denationalization of markets. In much simpler words it integration of an economy to the world economy. Globalization theoretically is an economic phenomenon, but it has its impact can be felt on all fields of human life. Also Globalisation has helped developed countries by bringing in opportunities for economic development. Globalization also has helped developing countries in gaining greater access to developed country’s technology and their markets. But globalisation has its own negative impacts and challenges. Growing inequality in within and across nations, environmental problems and volatility in financial market are some of the negative impacts of globalisation.
What is it that differentiates between a developed country and a developing country? Terms like rich and poor, high income and low income, industrial and agricultural etc. are also being used. The attributes that differentiate a developed country from a developing country are infrastructural development, national income, quality of life, education and health. Many of the developing nations have a very huge national income but when it comes to Per capita income they are among the lowest. Because per capita income not only depends upon the national income but also the total population of the country. Unfortunately the main characteristic of any developing nation is that they have massive population. So countries are differentiated on the basis of their per capita income because it is more feasible and easy. At the top most level are the high income countries, with per capita incomes ranging from $10,000 to $30,000. These countries have well developed infrastructure, a large urban population, an educated labour force. These countries are mature and are growing at a very slow pace. Included in this category are: United States, Canada, France, Germany, United Kingdom and other members of European Union and others in the Pacific, Japan, Australia, and New Zealand. These advanced countries work together in the Organisation for Economic Cooperation and Development (OECD).
In the middle there is a wide range of developing countries in terms of the World Bank’s Terminology, “Lower middle and Upper middle income” countries. Countries having per capita income ranging from $10,000 to $1000 per year. Some of these countries are making huge development and slowly approaching maturity. Most of the Asian countries fall under this category including Korea, India, Indonesia and also some Latin American countries like Brazil, Argentina, Mexico etc. Most of the countries which fall under this category lack enough infrastructural facilities and education. Many of these countries are on the path of industrialization and most of them are labour intensive industries. On the other hand many of them still have large number of population living the rural areas where it is underdeveloped.
Finally, there are the very poor countries, with per capita incomes of less than $755. Countries of Eastern Europe and the former Soviet Union that have been in the process of transition from Soviet-style command economies to the free market. These countries have substantial industries and had attained a middle income living standard.
I feel that Globalization is without doubt a boon for the developing nation. It is considered to be one of the most successful prosperity and anti-poverty movement in modern era. With the help of Globalization developing countries are able to reap the benefits of current technology; which will result in production of better quality products. This doesn’t mean that globalization does not have any negative effects. Globalization can also cause some serious problems like brain-drain, outsourcing, environmental issues etc. It also has an adverse effect on the local industries as they cannot compete against foreign multinational companies.
But even if globalization has these negative impacts, it was a great opportunity for the developing nations to rise through increased foreign trade and Investments. Openness to trade, factor flows, ideas and information have powerfully stimulated progress, economic and political. Because of globalization the earth has become more flatter, faster and more fashionable. But there are people who believe that globalization can bring only harm to developing nations. They argue that globalization has been implemented in order to exploit the developing countries resources and labour force. But when we consider the gains or benefits of globalization we can find out that globalization has brought in more good than bad of the developing countries.