39. Constraints imposed by market competition affect HEs in two different ways. First, a large number of HEs sell similar products or services, and compete for the same limited number of customers, hence their turnover is low. Second, as is the case with the rest of the economy, increased imports of products (mainly from Asia) threaten the survival of HEs manufacturing similar products locally, although HEs involved in trading as well as all Tanzanian consumers gain. Thus, while the first type of competition adversely affects HEs in the trade and distribution sector, the second type has opposite effects on production- and trade-related HEs.

# 4.1.2 **_Constraints by Spatial Location_**

40. When location and availability of infrastructure are considered, some HEs are more disadvantaged than others. Access to electricity and transport differ significantly by region. In the Kilimanjaro region, 79 percent of households have access to electricity, compared to 15 percent in Kigoma and 21 percent in Mtwara.<sup>11</sup> While close to half of the households in Kilimanjaro have public transport to markets, no such facility is available in Kigoma and only 3 percent were served in Mtwara. Half of the households in Kilimanjaro are connected to mud external road, compared to 77 percent in Mtwara and 75 percent of households in Kigoma (Table 4.2). Overall, about half of all rural households are connected to mud roads only, indicating that the country‟s road infrastructure remains underdeveloped (Table A1.12). The share of rural nonenterprise households thus connected is higher (55 percent) relative to rural households with HEs (50 percent).

**Table ‎4.2:  Overall Infrastructure Constraints for Operating Rural Non-farm Enterprises, 2005**

||Distance to<br>bank (km)|Electrified<br>(%)|Public<br>transport to<br>markets(%)|Mud<br>external<br>road(%)|Distance to<br>city (km)<br>|Distance to<br>market<br>(km)|Average<br>tax rate<br>(%)|Days to<br>register|Number of<br>observations|
|---|---|---|---|---|---|---|---|---|---|
|Total by<br>Region|39.1|50.0|14.4|48.2|15.5|6.1|19.3|20.9|1230|
|Kilimanjaro|18.4|78.8|44.9|49.8|12.2|6.9|18.1|20.2|113|
|Morogoro|84.0|40.2|27.4|37.1|19.4|7.7|20.6|19.2|238|
|Mtwara|59.2|20.7|3.3|76.9|16.5|7.6|28.5|19.5|199|
|Mbeya|19.3|67.5|8.3|30.8|12.7|5.8|13.8|17.3|285|
|Tabora|27.1|48.7|0.0|45.0|21.1|6.6|20.2|27.1|142|
|Kigoma|53.3|15.2|0.0|75.0|11.9|3.2|17.2|20.2|130|
|Kagera|46.9|42.6|9.9|33.2|20.5|2.8|17.1|25.2|123|

_Source: Calculations based on the NBS/World Bank 2005 RIC Survey data_ 41. For urban HEs, shortage of land or business premise is one of their most critical constraints, a factor that led many of them to hawking as a last resort. Moreover, as rental price increases with the size of potential market, most HEs are pushed into smaller markets or temporary structures in unauthorized locations.

# 4.1.3 **_Seasonality Problem in the Rural Areas_**

42. Seasonality is a critical feature of HEs, especially those in rural and peri-urban areas. In 2006, only about 40 percent of HEs who had been in existence for at least one year reported operating all 12 months. Many of those who operated less than 12 months are in rural areas.

> 11 Note that lack of access to electricity is a key constraint, and a more strategic area for intervention to increase the productivity of HEs. Jin and Deininger (2008) report that rural and semi-urban households with access to electricity are more likely to have an HE (44 percent), against 32 percent for those without.

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