**Box 2.1: Effects of the Decline in Agricultural Production on Rural Non-farm Enterprises**

# 1.6

In the rural areas, agricultural and non-agricultural enterprises are so complementary that capital and labor for either activities flow reciprocally between the two groups of enterprises. Almost every operator of a non-farm enterprise is also a farmer. The entrepreneurs of Lukuledi Village gave evidence to this by saying: _“During the rainy season, every villager here is farming. We, who have non-farm enterprises, have to go to farm in the morning and do our non-farm activities in the afternoon. Even if we don‟t farm, we don‟t get anyone to buy from us since all our potential customers are away from the village center where we run our non-farm enterprises. In the afternoon some farmers buy from us, but we don‟t expect many of them since they hardly have money. Others are away from the village for several weeks to farm.”_ The complementary relationship between agricultural and non-agricultural enterprises was made clearer by one respondent who owned a shop and said: “ _I expect to circulate my money through agriculture so that my shop can flourish. Now that agriculture is limping, my shop is limping too_ .” Another one added: “ _Siku hizi, hasa 2007-09, pesa imepotea sana, ”which_ means: “ _These days, especially from 2007 until now (2009), cash is not available_ .” The discussants further explained that rural entrepreneurs depend on farmers. They have to earn cash from agriculture in order for them to buy their goods. They added that some entrepreneurs divert money from their enterprises and use it on agricultural production, ending up losing money from both activities in times of bad weather. They noted that rains had been less than in some years, resulting in a decline in agricultural productivity, income, and food security.

One respondent who was selling petroleum products said: _“These days, most people do not even buy kerosene; they use grass to light their houses. This is because they do not get good harvests for selling and boosting their household income.”_ That famine was looming was made evident by a concurrent open meeting while the focus group discussion was being held, to discuss how to distribute maize about to be received by the village as part of the food relief operation of the government.

_Narrated by a male participant, FGD, Masasi District_ 20. In sum, the primary drive behind the growth of HEs in both rural and urban Tanzania is income diversification in an economy with limited option in the non-farm sector, rather than a latent wellspring of entrepreneurship which spots a great business opportunity. This, combined with evidence showing that very few graduate beyond HE status into a small business employing people outside the family, has led some authors to dismiss them as “survivalist” (see Kinda and Loening, 2009, for Tanzania; and Mead and Lindholm, 1998, for a survey of experiences in Africa in the 1990s). However, their importance in absorbing labor in the economy, and therefore helping people to work more hours and earn more cash, cannot be understated. Previous studies have found that overall economic growth brings more HE and microbusiness activities, which are especially important for women as the flexibility of these activities allows them to produce household goods and earn income at the same time. It is expected that when more panel data become available (like those collected for Kagera as cited above), stronger evidence on the role of HEs in poverty reduction and economic development will emerge.

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