# **Box 4.3: Main Constraints Identified by VIBINDO,**<sup>**20**</sup> **2008**

1. Lack of reliable and suitable location for doing business

2. Lack of recognition in local town planning 3. Lack of start-up and working capital 4. Lack of basic management and business development skills 5. Lack of laws that recognize the informal sector 6. Inadequate implementation of the national SME development policy 7. Lack of institutional framework (within specific ministry) for the promotion of the informal sector 8. Lack of representation in national policymaking 9. Humiliation and insecurity resulting from the negative attitude of city council officials 10. Official view of informal sector activities as illegal 11. High cost of legal services and court procedures 12. Unfavorable tax assessment, based on size of capital and not on profit 13. Language discrimination as most laws are written in English 14. Unfair market competition due to imports of low quality cheap goods 15. Lack of linkage with large-scale enterprises 16. Lack of representation and recognition in the national business council.

_Source: VIBINDO, 2008_

# **Box 4.4: Major Constraints Listed by the Sampled Enterprises in the Urban FGDs, 2009**

1. Lack of capital because of high interest rates charged on loans and unfavorable repayment conditions, which hinders expansion of the enterprises and/or start-up of new ones

2. Unreliable markets/unpredictable demand 3. Lack of skills to organize and conduct business 4. Middlemen ( _madalali_ ), who take home most of the profit (e.g., this was a major problem in the Keko cluster of carpentry).

5. Inadequate machinery, equipment, and tools; lack of maintenance 6. Poor quality of packaging materials for enterprises engaged in food processing 7. Fluctuation in prices of inputs and products; sharp rise in commodity prices 8. Poor condition of transport/infrastructure for businesses that have to transport commodities from one region to another (for instance, bananas from Kagera to Mwanza region).

9. Payment of unrealistic taxes (based on estimates by local and central government agents) 10. Competition among entrepreneurs doing the same type of business over few customers 11. Business premises subject to demolition ( _bomoa-bomoa_ ) by municipal and central government authorities; poor location with weak customer base 12. Corruption (involving tax assessment and in accessing loan from President Kikwete‟s Fund, in particular.

13. Lack of teamwork (not organized); lack of collaboration, for example, among enterprises doing the same kind of business, causing heavy competition and often tension 14. Seasonal businesses (e.g., food vendors get a large number of customers in construction sites only at particular times, etc).

15. Difficulties in getting commodities, for instance, timber for furniture industries 16. Absence of industries to process agricultural products like tomatoes 17. Imbalance between expenditure and earnings (low profits) 18. Unethical or untrustworthy employees 19. Perishability of products (e.g., fruits and vegetables resulting in loss of earnings).

20. Family members diverting money allocated to business for luxury goods.

20 VIBINDO is an organization of informal sector operators based mainly in Dar es Salaam. Its main function is advocacy for informal traders.

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