A Case of Small Scale Traders in Nyamagana District Mwanza Region

The University of Dodoma University of Dodoma Institutional Repository http://repository.udom.ac.tz

Social Sciences Master Dissertations

2015 The contribution of the informal sector to youth poverty reduction: A case of small scale traders in Nyamagana district Mwanza region

Mkama, Shabani

The University of Dodoma

Mkama, S. (2015). The contribution of the informal sector to youth poverty reduction: A case of small scale traders in Nyamagana district Mwanza region (Masters dissertation). The University of Dodoma, Dodoma. http://hdl.handle.net/20.500.12661/1874 Downloaded from UDOM Institutional Repository at The University of Dodoma, an open access institutional repository. THE CONTRIBUTION OF THE INFORMAL SECTOR TO

YOUTH POVERTY REDUCTION: A CASE OF SMALL SCALE

TRADERS IN NYAMAGANA DISTRICT MWANZA REGION

Shabani Mkama

A Dissertation Submitted in partial fulfillment of the Requirement for the Degree of

Master of Arts in Development Studies of the University of Dodoma

The University of Dodoma

October, 2015 CERTIFICATION

The undersigned certifies that he has read and hereby recommends for acceptance by the University of Dodoma a dissertation entitled: The contribution of the informal sector to youth poverty reduction: A case of small scale traders in Nyamagana district Mwanza region. In partial fulfillment of the requirements for the degree of

Master of Arts in Development Studies of the University of Dodoma.

……………………………

Prof. Peter A. Kopoka

(SUPERVISOR)

DECLARATION

AND

I, Shabani Mkama declare that this dissertation is my own original work and that it has not been presented and will not be presented to any other University for a similar or any other degree award.

Signature……………………………………..

No part of this dissertation may be reproduced, stored in any retrieval system, or transmitted in any form or by any means without prior written permission of the

University of Dodoma.

ACKNOWLEDGEMENT

First and foremost, I wish to thank the Almighty God for His blessings throughout the period of this study. I am constantly amazed by His goodness.

Secondly, I wish to thank my supervisor, Prof. Peter.A.Kopoka for his intellectual advice, personal commitment, assistance and intensive supervision from the very beginning of this study until its completion

Thirdly, I wish also to extent my gratefully thanks to my fellow MADS student for their support and cooperation since the birth of this work up to the completion, for sure their effort had made a great impact for my studies.

I, also post my special appreciation to my beloved friends Mariam Mgabo, Husna ally, Adam Ndokeji, ,Mugisha Julius, Kimisha Hussein and Matajiri Hamisi for their encouragement and emphasis towards the completion of this work.

I am especially grateful to my mother Hellena Mkama and my father Bruce

Mandara, for their tireless support, guidance; heart giving and time they spent to direct me in all aspect of my studies for sure they kept their eyes over me through prayers and was a source of constant encouragement.

Last, but not least I extend my thanks to all respondents in the study area for their patience and marvelous cooperation during data collection. To you all your love and togetherness remind me a lot.

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DEDICATION

This work is dedicated to my lovely late sister Maneno, my late grandfather

Mandara, who always prayed for my success. Their words have inspired more to the completion of this dissertation. My Almighty God rest their souls in Peace!

ABSTRACT

This study, aimed at examining the contribution of the informal sector to youth poverty reduction. By analyzing the contribution provided by the youth as well as other stakeholders and the government, the study also intended to assess the trading situations of small scale trade which could influence and hence impact the level of youth participation as well as their contribution in the informal sector. The study was conducted at Mbugani and Mirongo Ward of the Nyamagana district in Mwanza region July, 2015. A cross-section research design was opted. The study, involved

100 respondents, from the selected streets and 6 key informants were chosen totalizing 106 of the selected sample to the field area. Data was collected by using questionnaires and interviews from the respondents. Data analysis was done using

SPSS 16.0 version and Ms excel. Results of the study show that, the informal sector has employed a large number of youths. Youth are employing themselves in this sector though there is little support from government and private institution.

Financial institution, are the only ways which have helped youths to acquire their initial capital thus there is a need for financial institutions to reduce their interest rates to attract more youths, on the other hand, the procedure for getting loan from these financial institution are not well known to the majority of youths hence there is a need to provide education so as to create awareness of these procedures. From the study findings it is recommended that legal measures should be taken against the government officers and other stakeholders in the ward level who are found to be involved in fraud. In order for the informal sector to grow faster youths should be involved in decision making and comprehensive support from the government should be established to the informal sector which could ensure proper training and technical support to youth in the informal sector.

TABLE OF CONTENTS

CERTIFICATION ...... i DECLARATION AND COPYRIGHT ...... ii ACKNOWLEDGEMENT ...... iii DEDICATION ...... iv TABLE OF CONTENTS ...... vi LIST OF TABLES ...... x LIST OF FIGURES ...... xi LIST OF ABBREVIATION AND ACRONYMS ...... xii

CHAPTER ONE: INTRODUCTION ...... 1 1.1 Introduction ...... 1 1.2 Background of the study...... 1 1.3 Statement of the problem ...... 5 1.4 Objectives of the study...... 7 1.4.1 General Objective ...... 7 1.4.2 Specific Objectives ...... 7 1.5 Research Question...... 7 1.6 Significance of the study ...... 8 1.7 Scope o the study ...... 9 1.8 Chapter Scheme ...... 9

CHAPTER TWO: LITERATURE RIVIEW ...... 11 2.1 Introduction ...... 11 2.2 Definition of terms and concepts ...... 11 2.2.1 Informal sector ...... 11 2.2.2 Youth ...... 12 2.2.3 Unemployment ...... 13 2.2.4 Small scale traders ...... 14 2.3 Poverty ...... 14 2.3.1 Categories of poverty ...... 16 2.4 Poverty Reduction ...... 16 2.4.1 Poverty and small traders ...... 18 vi

2.5 Concept of the Informal sector ...... 20 2.6 Introduction of the informal sector in Tanzania ...... 22 2.6.1 Arusha Declaration and Economic Crisis ...... 22 2.6.2 Oil crisis of 1973 (Global economic crisis) ...... 23 2.6.3 Tanzania-Ugandan war 1978-1979 ...... 24 2.6.4 Lack of public services ...... 24 2.7 Policy Review on Small traders in Tanzania ...... 25 2.8 Youth Unemployment in Tanzania ...... 29 2.8.1 Effects of youth unemployment ...... 31 2.9 Theoretical Framework of the study...... 32 2.10 Contribution of the informal sector to youth Poverty reduction in urban areas: A General Overview ...... 35 2.10.1 Contribution of the informal sector to youth Poverty reduction in Africa ...... 36 2.10.2 Contribution of the informal sector to youth Poverty reduction in Tanzania ...... 36 2.11 Studies related to informal sector and youth in poverty eradication ...... 37 2.12 Research Gaps ...... 40 2.13 Conceptual Framework ...... 40 2.14 Chapter summary ...... 42

CHAPTER THREE: RESEARCH METHODOLOGY ...... 43 3.1 Introduction ...... 43 3.2 Research design ...... 43 3.3 Profile of the study area ...... 44 3.3.1 Study Area ...... 44 3.3.2 Geographical location of the study area ...... 44 3.3.3 Social economy of the study area ...... 44 3.4 Sampling and sampling techniques ...... 45 3.4.1 Sampling design ...... 45 3.3.2 Study of the population ...... 46 3.3.3 Sampling unit ...... 46 3.3.4 Sampling frame ...... 47 3.3.5 Sample size ...... 47

vii

3.3.6 Sampling procedure ...... 48 3.3.6.1 Purposive sampling ...... 49 3.3.6.2 Simple random sampling ...... 49 3.4 Data collection method and instruments ...... 50 3.4.1 Questionnaire ...... 50 3.4.2 Interview ...... 51 3.5 Validity and Reliability ...... 51 3.6 Data Analysis and Presentation ...... 52 3.7 Ethical Issues ...... 52 3.8 Limitation of the study ...... 53 3.8.1 Time constraints ...... 53 3.8.2 Fear and inadequate transparency to share information on financial issues ..... 53 3.8.3 Financial constraints ...... 53 3.8.4 Over expectation for payments ...... 53 3.9 Chapter Summary ...... 53

CHAPTER FOUR: RESULTS AND DISCUSSION ...... 55 4.0 Introduction ...... 55 4.1 Demographic analysis ...... 55 4.1.1 Sex of Respondents ...... 55 4.1.2 Age of Respondent ...... 56 4.1.3 Education Level of Respondent ...... 57 4.2 Trading situations of small scale trade at Nyamagana District ...... 58 4.2.1 Income before Starting Business ...... 58 4.2.2 Residence before Starting business ...... 59 4.2.3 Initial Capital ...... 59 4.2.4 Training received before starting business...... 60 4.3 Contribution of Petty trade to reduction of poverty to youth...... 61 4.3.1 Savings made from Business ...... 61 4.4 Challenge facing trading activities in the Informal sector ...... 61 4.4.1 Challenges facing the business ...... 61 4.5 Possible Initiatives to Small businesses ...... 62 4.6 Chapter summary ...... 65

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CHAPTER FIVE: CONCLUSIONS AND RECOMMENDATIONS ...... 66 5.1 Introduction ...... 66 5.2 Conclusion ...... 66 5.3 Implications of the results ...... 67 5.4 Recommendations ...... 68 5.5 Areas for Further Studies ...... 70 REFERENCES ...... 71 APPENDICES ...... 78

LIST OF TABLES

Table 3. 1: Summary of the distribution of sample size ...... 48 Table 4. 1: Sex of Respondents ...... 56 Table 4. 2: Education Level of Respondents ...... 58 Table 4. 3: Residence before starting business ...... 59 Table 4. 4: Training received before starting business ...... 61 Table 4. 5: Saving made from Business...... 61

LIST OF FIGURES

Figure 3. 1: Nyamagana District map...... 45 Figure 4. 1: Age of Respondents ...... 57 Figure 4. 2: Income before Starting Business ...... 58 Figure 4. 3: Understanding initial capitals ...... 60 Figure 4. 4: Challenge facing Business ...... 62 Figure 4. 5: Alternative strategies as individuals ...... 64

LIST OF ABBREVIATION AND ACRONYMS

Best Business Environment Strengthening Tanzania.

DAC Development Assistance Committee

FAO Food Agriculture Organization

FISOTA Federation of Informal Sector Operates in Tanzania.

ILO International Labor Organization.

IS Informal sector.

SME Small and Medium Enterprises.

SPSS Statistical Package for Social Science.

NGOs Non Government Organization.

NSGRP National strategy for Growth and Reduction of Poverty

REPOA Research on Poverty Alleviation

UNDP United Nation Development Programme.

UN United Nation

US United States

UNICEF United Nation Children Fund

URT United Republic of Tanzania

WB World Bank.

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CHAPTER ONE

INTRODUCTION

1.1 Introduction

This study aims at examining the contribution of the informal sector to youth poverty reduction in urban areas in Tanzania taking Nyamagana District in Mwanza as a case study. The study was particularly focused on the contribution of informal sector to youth Poverty reduction. This chapter includes background to the study, statement of the problem, objectives of the study, research questions, and significance of the study and Limitation of the study.

1.2 Background of the study.

For the past four decades small scale traders have been part of the informal sector and have become one of the major employment opportunities in developing economies. Globally the share of the informal sector in the total labor force is estimated to constitute about twenty percent (20%) of the workforce and accounts for 30-40% of informal sector in off-farm employment (Becker, 2004). The

Informal sector makes more than a half (57%) of total employment in Latin

America, 85% in the Caribbean and more than half (65%) in Asia, it is estimated that

10 million people are involved in street vending in India (Bhowmik, 2005). Almost a half (48%) of this non agriculture employment in North Africa and almost three- quarter (72%) in sub Saharan Africa are in one way or another involved in street vending(Carr, Marilyn et al 2001 and Becker, 2004).

The informal sector in Africa is dominated by trade-related activities, with services and manufacturing accounting for only a small percentage of this sector (UN 1996).

For example, in Angola, Nigeria, South Africa and Uganda, a majority of informal

1 sector workers are active in retail trade (ILO 2002). Most of these workers are self- employed, which accounts for 70 percent of workers in this sector in South Saharan

Africa, with the remained in wage employment. Street vending is one particular informal activity that is prevalent on the continent. According to 1992 figures on informal sector quoted in Charmes (1998), street vendors represented almost

(80.7%) of all economic units surveyed in urban areas in Benin, with women making up over three quarter (75%) of vendors (ILO, 2002).

In Tanzania informal sector contributes about a quarter (40%) of GDP and it is the second employing sector accounting for 10% of the total employment in the country

(TRA, 2011). It consist of mainly the unregistered and hard to pay tax group such as small scale traders, farmers small manufacturer craftsmen, individual professionals and many small scale business. The presence of highly growing informal sector is an opportunity at the same time a challenge for taxation, regulation, financing reforms and provision for social services with efforts to eliminate poverty (ESRF, 2010).

Omary (1995) reported that the informal sector plays a vital role in improving people welfare. The emphasis was on the key contribution to the household economy. In fact, without informal activities the households would suffer economic hard ships.

For example, women who are the food vendors known as “mamantilie” and other small business like petty traders (Machinga) earn income which goes directly not only to the bread winners but also help for other household responsibilities in

Tanzania. Street vending of merchandised products are prospering due to its potential contribution to house hold welfare through employment creation and income generation (Msangi, 2002).

There are more than 1.2 billion youth people (15 to24 years of age) in the world, of which, about 90 percent are leaving in developing countries. The proportion of youth population in Sub-Saharan Africa is 14 percent (UN 2011). In2011, nearly 75 million youth were unemployed around the world. Besides, youth were three times more likely to be unemployed than adults. The youth unemployment rate in Sub-

Saharan Africa was 11.5 percent (ILO, 2012). Thus, youth unemployment has becomes a serious threat to the social, economic, and political stability of a nation

(ILO, 2012)

There are several factors which have aggravated the high youth unemployment rate in Africa. Among these factors include the high proportion of youths population

(slightly more than 20 percent); underdevelopment of the economies which leads to low job creation; small private sectors to employ the growing youth population; low quality of education contributing mismatch of skills needed by the labour market; lack of general and job-related skills; and limited formal work experience are notable

(Semboja 2007; UNECA 2005).

In Mwanza the poor who constitute a half (45% to 50%) of population are mostly informal workers. This informal sector is growing very rapid and has about 4500 small business including, food vendors, local beer sellers, Chip sellers, as well as petty traders who are highly increasing up to 15% recently (Pride, 2004). The sector faces the challenges due to the failure of the economy of Mwanza to absorb the growing labor force. This is caused by low investment in manufacturing sector as well as informal sector which could produce more employment chances to people

(The citizen, 2010).

Small traders as one of components of informal sector accounts for substantial and increasing share of urban employment in most of the developing countries and majority of the urban and rural dwellers employment in most of the developing countries depend on informal activities for their livelihoods (The Citizen, 2010). The nature, characteristics and challenges of small traders in Tanzania differ according to the product being offered. For that case, there are various types of small traders in

Tanzania. These include fruit selling, scavenging of recycled sold waste and street trading of merchandised products. Trade liberalization is cited to be one of engines for influx of merchandised products in the country (Msangi, 2002). Major challenges facing small traders in Tanzania include poor working condition, inadequate infrastructures, lack of working capital and entrepreneurial skills (TRA, 2011)

On the other hand, small traders in Tanzania have been as the result of the level of poverty. It is estimated that 36% of the total population in the country live under poverty line US$ 1.5 per person per day (World Bank, 2011). The country is ranked

53 of 157 countries suffering from absolute poverty estimating 13 million people in the country live below poverty line and 1.1 million people living with HIV/AIDS and 2.4 million orphans (Index Mundi, 2012 and World Bank, 2011). Poverty in

Tanzania is characterized by lack of basic needs such as food, housing, sanitation, health facilities, and low level of income, corruption and misuse of natural resources.

Unemployment is however, another poverty indicator contributing to income poverty among citizens. In 2012 unemployment rate stood at 11% in Tanzania and youth being the most affected age group (URT, 2012). Level of poverty is among the challenges facing street hawking business as they lack business skills, working capital and operate in poor and informal infrastructures (TRA, 2011).

The aim of this study is to make an assessment of the contribution of the informal sector to youth poverty reduction, a case of small traders in Nyamagana District in

Mwanza city

1.3 Statement of the problem

Different literature on small traders such as McLachlan (2005), INSAE (2009),

Garcia-Bolivar, et al. (2006), Mc lanchlon, (2005) reveal various contribution of the informal sector towards reduction of income poverty, employment creation and poverty reduction in urban areas. On the other hand, Reports such as ESRF (2010) criticize the presence of informal sector in Tanzania as one among challenges characterized with poor provision of social services, as it operates haphazardly, unmindful of environmental or health hazards (ESRF, 2010). Moreover, TPSF

(Tanzania Private Sector Foundation,2011) have complained about the registration law for association of petty traders in Tanzania. VIBINDO (Jumuiya ya vikundi vya wenye viwanda na biashara ndogondogo Tanzania) that the Business law registration which was enacted in 2007 encompasses rigorous procedures which frustrate business registration and licensing leading to increased cost of doing business and inefficiency (ESRF, 2010). This is because Business law imposes a licensing of

50,000, 30,000, and 10,000 for business operating in municipal, district and village councils respectively. “It is not workable, you can‟t charge flat rate without considering size and capital of the businesses, turn over and other factors”, said by

Mr. Gastoni Kikuwi, VIBINDO chair person when he was warning that implementation of the law will drive out of business of many VIBINDO members

(TPSF, 2011).

Moreover, these informal operators are often excluded from policymaking or law making processes. As a result, government is not held accountable to their concerns

(ESRF, 2010). This creates an opportunity for a small number of politicians to control the nation‟s economy through a system of politically-motivated, state- endorsed laws and regulations at the expense of the rest of the population who rely in the informal sector.

Poverty alleviation and its eventual elimination occupy an inner most position in the development agenda of many developing countries, including Africa (Dhemba,

1999). Now-a-days, it seems that developing countries are giving more emphasis on improving socio-economic status of underprivileged groups (including youth) of the society to open-up better opportunities for employment and income generation

(Asmamaw, 2004). Development could be negatively affected if high rate of youth unemployment persist. Thus, many African countries are placing greater emphasis on youth employment and development.

It is well documented that informal sector is the major provider of job for the youth in Africa ILO (2012).For instance; about 13.4 percent of youths were engaged in informal sector businesses in Tanzania (ILFS, 2006) Thus, understanding the contribution of informal sector employment in reducing youth unemployment is crucial for the success of economic development policies and poverty reduction strategies.

However, the Informal sector lacks adequate finance and managerial skills, infrastructure, market information and business contacts with external markets

(Mnenwa, 2008), because of the above mentioned problems this study aimed at

6 making an assessment of the contribution of the informal sector to youth poverty reduction, a case of small traders in Nyamagana District in Mwanza city

1.4 Objectives of the study.

The objectives of the study are divided into two categories. They are general and specific objectives on which the study was focused.

1.4.1 General Objective

The main objective of this study is to make an assessment of the contribution of the informal sector to youth poverty reduction, a case of small traders in Nyamagana

District in Mwanza city

1.4.2 Specific Objectives

i. To provide an overview of the informal sector (small scale traders) and

youth poverty in Nyamagana

ii. To assess the trading situations of small scale trade at Nyamagana District

iii. To examine the contribution of Petty trade on reduction of poverty to youth

employment in Nayamagana District

iv. To determine the challenges facing trading activities of small scale traders .

1.5 Research Question.

i. What is the contribution of the informal sector to youth employment and

development

ii. What is the trading situation of small scale traders in Nyamagana

iii. What is the relationship between the informal sector and youth employment

iv. What effect does the informal sector have on Poverty reduction to youth?

v. What challenges face small scale trading activities at Nyamagana District?

1.6 Significance of the study

This study was expected to make an important contribution as it will lead to increased awareness among policy decision-makers, Mwanza city development stakeholders on how consider small traders in the development plans. The significance of this study is that it also highlights that there was a need to have in place empirical information that was used by city and development planners to integrate small traders in Mwanza city especially the Nyamagana district development plans and especially on how to allocate the resources, for example allocation of business venues, technical support and provision of credit and social amenities to small traders in the study area.

The expected outcome of this study was that it generated additional knowledge which will be used as one of the references by policy makers, private sector, Civil

Society Organizations and development planners to facilitate and formalize small traders as one of official and taxable poverty reduction tools in urban areas. This chapter provides the overall research problem, hypothetical research questions and objectives and finally significance of this study.

Individually, as researchers knowledge will be aquired on the important linkage between informal sector and livelihood improvement and through that we will determine strengths and constraints. The study will also provide information on the role played by informal sector in raising the community livelihood, ensuring the cooperation between formal and informal sector toward livelihood improvement.

Also the study creates awareness and willing for the national to provide full support to the informal sector through different strategies which ensures the role and position of informal sector toward sustainable development. Also the findings is used by

8 policy makers and development agents to improve strategies for strengthening informal sector and their position to the social, economic, political and cultural aspects. It paves the way to NGOs and other international agents to intervene in order to contribute on the informal sectors and come up with possible measures on the efficiency of the sector. Moreover the study raises awareness to both study area and researchers on nature and different types of informal existing in the community and dominant categories involving in informal activities.

The study is also expected to open the minds of the financial sector that they may see the youths as a sector of the population which are worth of being granted financial assistance through their small businesses.

The study will also show the government that the youths are in need of training so that they ca also become more productive within the society.

1.7 Scope o the study

The study was conducted in Mwanza using Nyamagana district as its case study. The population included the youths who participate in the informal sector in the area as well as local government leaders and other non government agencies.

1.8 Chapter Scheme

This dissertation contains five chapters. This chapter presents, the background, statement of the problem, research problem, research objectives and appropriate research questions. The significance of the study and scope of the study were outlined in this chapter.

Chapter two focuses on the theoretical and empirical review of the relevant literature from around the world and in Tanzania were both published and unpublished were viewed to examine the contribution of the informal sector to youth poverty reduction in urban area. As well as its implications to the ongoing efforts to poverty reduction.

The theories related to the informal sector were critically discussed and finally the conceptual framework based on the literature review was presented.

Chapter Three is devoted to description of research methodologies used for conducting the study. It shows the research design, research settings, sample design and sampling procedure, as well as the types and source of data used. This chapter also shows how data was , analyzed and presented preceded by consideration of issues of validity reliability and ethics in this research.

Chapter Four concentrates on data presentation, analysis and discussion. It starts with description of the demographic characteristics of the study. Then it proceeds to present and discuss the findings that answered the research questions. The data presented show what the respondents had to say about the research problem.

Chapter Five presents a summary, conclusion and recommendations of the study. It is the concluding part of the dissertation where a summary of what has been observed in the field is presented. Based on the findings the chapter proposed recommendations and also indicated areas for further study.

CHAPTER TWO

LITERATURE RIVIEW

2.1 Introduction

This chapter, reviews the literature related to the informal sector and youth poverty reduction. This section starts by defining the key concept, global overview of the contribution of informal sectors to youth poverty reduction, theoretical and conceptual frame work.

2.2 Definition of terms and concepts

2.2.1 Informal sector

The general view of the informal sector is that it comprises of activities primarily of petty traders involved in such activities as selling of second-hand clothes, shoe shinning, food selling and repair and construction; operating mainly from the streets of the main urban centers. It can also be described as any activity generating income and profits, though on a small scale, uses simple skills, is dynamic and not tied to regulation of the activities. Such activities include: vegetable selling, street vendors, masonry, and carpentry (Gibson, 2007).

However Meier G and Rauch J (2007) differentiated the characteristics of the formal and Informal sector as including the following characteristics; Ease of entry,

Reliance on indigenous resources, Family ownership of enterprises, Small-scale of operation, Labour-intensive and adapted technology, Skills acquisition outside the formal school sector and unregulated and competitive markets. Formal sector includes; Difficult entry, Frequent reliance on overseas resources, Corporate ownership of enterprises, Operation on large-scale, Capital intensive and mostly

11 technology is imported, Skill acquired formally, mostly expatriate, Protected markets

-through tariffs, quotas and trade licenses.

Closely related to the ambiguity in its definition is a disagreement on the degree of significance that should be attributed to the IS in policy discussions - despite recent empirical evidence suggesting the economic importance of the sector (Charmes,

2000).

The informal sector as a concept was first introduced by Hart in 197, according to

Bekkers and Stoffers (1995). Though, Kabra (1995) claims that the concept really builds upon the earlier concept of the "unorganized sector", which encompasses production units of small size, including handcrafts, which have a "domestic or unorganized character" and may also be part of the "non-monetary" sector of the economy.

In this study informal sector mean any activity generating income and profits, which uses simple skills, and is dynamic and not tied to regulation of the activities.

Informal sector will facilitate to youth poverty reduction.

2.2.2 Youth

The United Republic of Tanzania (2007) defines youth as any human being(female or male). However, Lowicki and Pillsbury (2000) argued that concepts of youth, adolescence, and even what constitutes young people vary.

An adolescent is generally thought to be a subset of the youth category. A World

Health Organization official described the overlapping complications with the following description: “Adolescents are 10-19 years old; youth are 15-24; and young people are 10-24 years old aged between 15-24 years.

Sommers (2001) argued that age ranges continue to differ. A common range is

15-24, which is advocated by UNICEF and others. There tend to be slight variations among international agencies, such as Save the Children‟s age range of 13 to 25.

According to U.S. Census Bureau (2010) “youth” refers to adolescents and young adults between the ages of 10 and 24. Under this definition, there are approximately 64.5 million youth (or 21% of the population) in the United

States. Although traditional definitions of youth include adolescents ages 12 to

18, cultural and economic shifts have protracted the period of adolescence.

Children as young as 10 are included in this range because puberty begins at this age for some youth, and experiences in early adolescence often shape enduring patterns of behavior. Older youth, up to age 24, are in the process of transitioning to adulthood. Many young people in their mid-20 sattend school or begin to work, and some live with their parents or other relatives.For the purpose of this study youth will means the male and female aged between the age of 18-35.

2.2.3 Unemployment

According to NEP 2008, unemployment is defined as a situation of total lack of work of an individual. It can be viewed as an enforced idleness of potential wage earners or self employed persons that are able and willing to work, but cannot find work. In Tanzania where a significant amount of the people can earn a living only by working for others; being unable to find a job is a serious problem. Lack of work makes a person feel deprived and rejected by society. The Unemployment rate is thus the percentage of the unemployed relative to the total labour force.

2.2.4 Small scale traders

The term SMEs is an acronym for “small and medium scale enterprises”. In this case there are firms or businesses which are small and medium in sizes. They are firms or businesses arising as a result of entrepreneurial activities of individuals. Several definitions and meanings of SMEs exist. This is due to their global diversity and characteristics (Darren 2009). Arowomole (2000) affirmed that a single universally accepted definition of SMEs has not been easy as different countries have different criteria for defining SMEs. Adding that many countries have defined it in terms of manpower, management structure and capital investment limit. He further noted that experts in this field have also contributed to the diversity in SMEs definitions. One crucial thing to note about SMEs definition is that certain criteria have been used to define what SME stands for most especially according to countries, sizes and sectors. Conrad and Darren (2009) explain that the main reason why SME definition varies particularly from industry to industry; county to country; size to size and number of employee to number of employee is to reflect industry, country, size and employment differences accurately. Baumback (1983) defined SME in terms of employment, asset value and dollar sales. According to Jasra, Khan, Hunjra, Rehman and Azam (2011), Small and Medium Enterprise (SME) represent a business and not a public limited company

2.3 Poverty

Etymologically, the word poverty comes from a French word pauvre literary meaning poor person or pauvreté meaning poverty. The Oxford Advanced Learners

Dictionary (2000) defines poverty as “the deprivation of food, shelter, money and clothing that occurs when people can not satisfy their basic needs. Poverty can be

14 understood simply as lack of money, or more broadly in terms of barriers to everyday‟s life”. Kopoka (2012) classify poverty into two categories namely absolute and relative poverty. Absolute poverty is therefore conceptualized to be a state where people are severely deprived of their human basic needs including food, water, sanitation, clothing, health, education and information. Besides, relative poverty is generally defined as economic inequality in a certain society or region

(Ibid.). by using Wikipedia‟s definition, the world bank estimated 1.29 billion people were living in absolute poverty in the year 2008 where almost a half (47%) of those people were living in sub-Saharan Africa had highest incidences of absolute poverty(World bank, 2008 and 2011).

According to the United Nations Development Report (1998) poverty is defined as a complex phenomenon that generally refers to in adequance of resources and deprivations of choices that would enable people to enjoy decent living conditions.

However Hermson et al (2008), defined poverty as the gravest insult to human dignity despite decades of international organization effort to eradicate it..

The World Bank (1990) defines poverty as inability to attain a minimum standard of living. According to World Bank (2001), poverty is a pronounced deprivation of well-being related to lack of material income or consumption, low level of education and health, vulnerability and exposure to risk, lack of opportunity and powerlessness. Poverty is further explained as a very complex concept to define as a result a number of definitions exist which are influenced by different disciplinary approaches and ideologies (Handley et al, 2000).This view point is supported by

Bagachwa (1994) who argues that Poverty is a dynamic concept which changes with time and space as well as the level of education and communication.

Poverty is also defined by a sense of helplessness, dependence and lack of opportunities, self-confidence and self-respect on the part of the poor. Indeed, the poor themselves are powerlessness and voiceless as key aspects of their poverty

(quoted by Geoff et al, 2009) from (Narayan et al., 2000).

REPOA (2003) also defined poverty as the failure of certain capacity which is very important for individual or community to enforce their claim to resources that are necessary for their wellbeing, the failure may result from unfavorable socio-political or environment condition or both. This study will view poverty as the including low income and the inability to acquire the basic goods and services necessary for survival with dignity.

2.3.1 Categories of poverty

Poverty is multidimensional which includes social, economic, political and institutional perspective. The Development Assistance committee (DAC) in 2001 recognized five key dimensions poverty. These are Economic (income,livelihood, and decent work),Human (health, education), Political (empowerment, rights and voice), Social-cultural (status, dignity) and perspective (insecurity, risk, vulnerability).

Poverty in this study mean failure of certain capacity which is very important for individual or community to enforce their claim to resources that are necessary for their wellbeing.

2.4 Poverty Reduction

According to Owen (2009) Poverty reduction is defined as a permanent reduction in the global poverty headcount through economic growth has

16 contributed both to poor programme selection and poor programme design and implementation, and it has thereby undermined the effectiveness of aid. Explicit recognition and endorsement of the diverse meanings of poverty reduction would allow different programmes to be selected and designed for those various objectives, rather than trying to distort every programme to meet a one-size-fits- all definition of success. Poverty reduction” is often used as a short-hand for promoting economic growth that will permanently lift as many people as possible over a poverty line.(Owen,2009)

However, Ravi (2009) argued that the determinants of poverty reduction are policy instruments that benefit the dominant coalition of political power but which, incidentally and also, benefit poverty reduction. If a set of instruments harms the interests of the dominant coalition, it will not be implemented, even if it is known to be a determinant of poverty reduction. (Ravi, 2009)

According to FAO and World Bank (2001) Poverty reduction is defined as collective responsibility to fight all avoidable forms of deprivation. It involves collaboration to: make poor people less poor (also referred to as poverty alleviation); enable poor people to escape from poverty; build institutions and societies that prevent people from becoming poor or from slipping further into poverty. Pro-poor policies and strategies aim to address all three goals.

Combined with the involvement of poor people in their implementation, they are important components in the fight against poverty . However, building poverty- free communities requires broader interventions because all segments of society must play a part in preventing its occurrence. It means building pathways out of

17 poverty and protecting vulnerable people, both poor and non-poor especially women, children and the elderly.

Poverty reduction refers to efforts ranging from the modest easing of some symptoms to the radical transformations that enable people to escape poverty altogether. Poverty reduction requires both practical and strategic changes at many levels and addresses direct and indirect causes of poverty (FAO/WB).

Escape routes from poverty are not built on technical forestry activities alone, but through multidimensional strategies that include social and institutional transformation.

2.4.1 Poverty and small traders

Unemployment is one of poverty indicators. According to The integrated labour force survey of 2006 unemployment and especially among the youth is one of unprecedented development challenge facing poverty reduction initiatives in

Tanzania. One of the 2000 to 2005 MKUKUTA operational targets was to reduce unemployment rate from 12.9% in 2000/1 to 6.9% by 2010. Conversely, unemployment rate stood at 11% in 2006 and 2012 respectively (ILFS, 2006, URT,

2012). Dar es salaam as one of mega cities in Tanzania is leading with unemployment rate of 31.3% followed by other urban area with 16.3 % (ILFS,

2006). It is further estimated that 30% of economic active labour force is either unemployed or under employed (URT, 2007). This shows that MKUKUTA operational targets managed to reduce unemployment by almost 2% from 2000 to

2012.

Currently, the government is working hard to reduce unemployment rate in the country. Tanzania employment service agency (TaESA) under ministry of labour and employment works on behalf of the government to reduce unemployment and develop employment opportunities. Striving to achieve national goal TaESA strive to achieve MKUKUTA targets set in National Development Goals

2025(TaESA, 2012). The government also in the process of improving informal sector where small traders belongs has established national employment policy of 2007 in the process of improving employment opportunities. This is also supported by other national policies such as National Microfinance Policy of

2001 and Small and Medium Enterprise Policy of 2003 to curb the rate of unemployment especially among the youth. With all government initiatives to reduce unemployment and work toward achievement of national development goals 2025 mostly implemented through MKUKUTA programmes unemployment still overwhelms the national poverty reduction and development agenda. As the result 36% of the total population in the country is living under poverty line (US$ 1.5 per person per day) (Wikipedia the free encyclopedia,

2012). Tanzania is further ranked 53 of 157 countries suffering from absolute poverty (Index Mundi, 2012). World Bank (2011) reports that 13 million people in the country live below poverty line, there are 1.1 million people living with

HIV/AIDS and 2.4 million orphans. These are some indicators of poverty in

Tanzania.

Small trader are thus used by unemployed people as a poverty survival strategy in urban areas. The current national policies have not been able to address effectively informal sector (Msoka, 2007). In Tanzania informal sector where small traders

19 belongs contributes about a quarter (40%) of GDP and it is the second employing sector accounting for 10% of the total employment in the country (TRA, 2011). The exact number of people working in the informal sector is not known in Tanzania and especially in Mwanza. However, it is estimated that 60% of the country‟s business come from informal economy (Xaba et al, 2002, DMC, 2008).

2.5 Concept of the Informal sector

The concept of informal sector first appeared in the 1970‟s, which highlighted how the rural areas were becoming more and more depopulated due to urban migration.

This process resulted into more growth in the urban areas. However, the growth did not give rise to employment but to the development of small-scale activities. The activities provided rural migrants and urban dwellers with employment opportunities in the modern sector as a means of living and surviving (Turnham, Salome &

Schwarz 1990, 12).

Earning opportunities outside the modern system which had to be found for surviving, and the informal sector appeared to be common and more practical covering all sorts of survival strategies employed by the poor. In other words, the informal sector was basically the urban transposition of rural underemployment

(Turnham, Salome & Schwarz, 1990, 12).

As mentioned again by Chen (2001, 1) that the informal sector has quickly gone up in the past twenty years in all corners of the globe. During that time there was a global economic crisis; in the wake up of the crisis many countries in the Eastern and Southern Asia have experienced a breakdown of formal jobs and the rise of informal employment. Even before the coming of crisis some official statistics

20 pointed out that, informal employment existed for more than 50% of non-agricultural employment in Latin America and the Caribbean, almost 50% in East Asia and greatly 80% percent in other parts of Asia and Africa. For urban employment the informal activities have gained control for more than half in Africa and Asia and a quarter in Latin America and the Caribbean (Chen 2001, 1)

15 years after the concept of informal sector was introduced, it was revealed that it was not easy to come up with one acceptable consistent and usable definition of informal sector (Celestine 1989, 6). The socio-anthropological studies of activities which were regarded as informal were based on shoe-shining, street vending and rickshaws. In the 1970‟s and 1980‟s most of the research done on socio-economic nature which had used a big variety of definition to expand the concept.

The Informal sector refers to a home based or an individual establishment or an activity operated by the owner with a few or no employees. Informal sector operators have little or no access to organized markets, credit institutions, modern technologies, formal trainings, and public services. Besides, they do not have a fixed place to work; as a result they often carry out their business in small shops, streets, outlets or home-based activities (CSA 2004). The sector also provides a wide range of services, and produces a variety of basic goods that can be used by all classes of consumers, especially by the low income groups Asmamaw (2004). Besides, the sector can serve as a breeding ground for new entrepreneurs, and absorbs the labour force that is left out from the formal sector employment UNCHS (2006). In addition, the sector contributes a lot in reducing urban crime and violence Reddy, Vijay and

Manoranjan (2002).

2.6 Introduction of the informal sector in Tanzania

There are various reasons that lead to the rise of informal economy in Tanzania, the economic crisis of 1973 being the main factor.

2.6.1 Arusha Declaration and Economic Crisis

The Arusha Declaration 1967 which was written by Julius Nyerere, the first president of Tanzania and approved by the executive committee of Tanganyika

African National Union (TANU), which was the main political party before and after independence. It is one of the most important political and economic decrees in

Tanzanian history, the declaration aimed at creating a more self-reliant society, and outlining the principles of “Ujamaa” (Nyerere‟s vision of socialism) (Arusha declaration, the 1967). The declaration has led to the establishment of villagization program through socialism and self reliance, which aimed at bringing the villages closer reasonably to facilitate government provision of economic and social services to rural dwellers. Moreover, there was provision of basic health, education, and transportation facilities. New dispensaries were built, schools, community centers and water supply. (Nyerere 1977,3). And also bank of farmers (CRDB) was established, cooperative societies as well as agricultural boards. Nevertheless, the campaign was conducted at the same time when Tanzanian economy was suffering from oil crisis of 1973, which led to the increased oil prices and simultaneously severe drought and shortage of food supply from peasants who depended on the government‟s aid. As the villagization program brought ujamaa policy to an end, farmers continued to live in their villages even though the government was not able to fulfill its promises regarding the provision of services. But later when hardships of

22 life could no longer be bearable, people moved to urban places to search for more ways of surviving. Komba (1995) cited by (Erdmann & Mehler 2000, 163.)

2.6.2 Oil crisis of 1973 (Global economic crisis)

In October 1973the oil crisis started which was a global economic crisis. As a result in 1970s and 1980s in Tanzania, the informal economy has gained too many new dimensions. In finding a way of beating up the crisis, people discovered new strategies (Smith 1990, 49). For example, several people have left their town jobs and started farming on the borders of the city to beat up the crisis. During these years of 1970s and 1980s, the country experienced 65% decline of wage earner, consumer prices boosted and the least wage earning to agricultural value added per worker went down by 60%, leading to workers becoming victims hence shifting to agricultural production.(Smith 1990, 49.)

Currently in Tanzania, everyone knows that it is difficult to live off the official wages. Everyone in the family ought to work to increase family‟s income (Smith

1990, 51.) Such work can be agriculture, animal husbandry, sewing, food vending, shoemaking, carpentry, and hair dressing; this includes women, children and retired senior citizens. The sideline activities seem to increase the income 10 to 15 times the formal wage. They are not supported or recognized by the government since they are untaxed and unlicensed (Smith 1990, 51). Nearly all employed people engage in these activities but their activities always depend on their class, occupation, education, gender, age and ethnic group and some of them may be related to their jobs.(Smith 1990, 51.) The policy of Tanzania was based formerly on self-reliance cooperation and communalism as formulated by the first president Mwalimu Julius

Nyerere (Smith 1990, 68). In recent years people have become more self reliant

(Smith 1990, 68). The past informal economy in Tanzania proved that the government attempts to use control over area of economics, but people can always form their own space and affirm their preferences (Smith 1990, 69.)

2.6.3 Tanzania-Ugandan war 1978-1979

The Ugandan-Tanzania war known as the Liberation war in Uganda was fought between Tanzania and Uganda in 1978-1979. Tanzania did not receive any help from other African countries in the Organization of African Unity (OAU). As a result, the war has led a country in to poverty since the economy went down because the country spent a lot of money to finance the war. Peasants in the rural areas, who depended on the government‟s support, could no longer get it. The production in the villages‟ decreased and later people decided to move to the cities to look for employments. However, employment was not easy to find which resulted to people get engaged in informal sector activities.

2.6.4 Lack of public services

Another reason for the rise of informal sector activities in Dar es Salaam was the lack of public services. Late 1970s and throughout 1980s Tanzania‟s economic situation worsened, state revenue dropped severely. The government attempted to subsidize agriculture and provide free education and public health facilities.

However, with minimum revenue the quality of the services dropped drastically.

Moreover, infrastructure was not well maintained and the public transport system got poorer and poorer and health facilities deteriorated significantly. In the beginning of

1980s private health care and private transport systems were established. Despite the strict restriction against private services, people were willing to offer them to make additional income.

At that time Tanzania had harsh restrictions regarding imports so as to protect national industries, with the industries failing to produce desired goods which were greatly in short supply, informal activities increased an attempt to make desired consumer goods.

In the 1990s, Tanzania got engaged in a series of structural adjustment programs and liberalization, which resulted to trade liberalization and mainly softening regulations concerning imports. At this period import consumer goods were extensively available and informal sector was flourishing. The availability of these consumer goods increased businesses depending on the types of goods, for instance hair dressers, shoe repairers and mechanics. (Muller, 15-17)

The private owned busses known as “daladala” were legalized as long as they obtained official safety checks and licenses when the government knew that they were not able to provide such services, since they were poorly maintained and were on the verge of unsafe. Between 1986 and 1991 the number of government owned busses fell from 300 t0 500

2.7 Policy Review on Small traders in Tanzania

Since in1980s Tanzania has undergone various and rigorous economic transformation to accommodate free market economy which has re-oriented the state-lead in to competitive economy making the government less effective in economic issues compared to private sector (TRA, 2011). National Development

Vision 2025 is among government macro-economic policies that have recognized the contribution in informal sector in reduction of income poverty. One of the national visions is making informal sector a competitive economy and capable of

25 providing sustainable growth and shared benefits (URT, 1999). The national vision

2025 is envisaged to economic transformation from informal characterized by low productivity to high productivity and competitive economy by 2025.

Poverty Reduction Strategic Paper (PRSP) of 2000 also is one of national macroeconomic policies that is recognized the contribution of informal sector in national development. The PRSP was initiated when the government of Tanzania was accepted for debt relief and the area of concentration in that poverty reduction strategic paper was to develop a benchmark for the implementation of National

Development Vision 2025 objectives (URT, 2000).

In 2003 the government introduced the Small and Medium Entrepreneurial (SME)

Policy with major objective of transforming informal sector into formal or private sector. The following year (2004) the government enacted income tax act of 2004 to enable informal sector operate in accordance to government regulations including paying tax. Tanzania revenue authority was therefore bestowed with policy and legal mandatory to oversee all eligible small and medium enterprises while Small

Industries Development Organizations (SIDO) and other vocational learning institutions were left with the responsibility of capacity building of small and medium entrepreneurs with finance and managerial skills.

In realization of the contribution of informal sector in poverty reduction in Tanzania the government introduce National Micro-Finance Policy of 2001. The policy main goal was to provide the poor mostly involved in informal sector with guidelines and the possibility of conventions micro-credit schemes by addressing financial challenges which were blocking the informal sector from accessing financial credits.

Some of the policy focus on informal sector was developing a collateral security and addressing micro-credits with regard to the simplicity of business operations in the informal sector (URT, 2001). The micro-finance policy was to work hand in hand with other sectoral policies such as Sustainable Industrial Development Policy of

1996 and National Employment Policy of 1997 and rural development policy of

2001. The major objective of industrial development policy was to enhance sustainable development of industrial sector with major focus on transforming traditional industries into modern ones as well as developing employment opportunities (URT, 1996). This was also supported by national employment policy with the vision of developing not only a society engaging in decent employment but also realizing the national development vision 2025 and Poverty Reduction Strategic

Paper of 2000 (URT, 2008).

However, TRA admits that revenues from small and medium enterprises are still low

(TRA, 2011). Becker (2004) and TRA (2011) have identified three key areas where the government needs to work hard in order to increase revenues from informal sector. These are namely lack of knowledge concerning taxpaying, business registration and management practices, secondly, lack of proper business premises and lastly cumbersome procedures and corruption in formalization of informal enterprises. On the other hand, TRA (2011) does not agree the above mentioned problems to major causes of informal sector escaping from paying tax; they perceive other factors such as informal sector operators‟ perception on paying tax system and process to be some of stabling block in transforming informal to formal sector.

Other factors highlighted by TRA were also discussed by Becker (2004) and these include lack of effective market demand as well as lack of financial capital, inflation

27 and high interest rates among locally available credit schemes along with pathetic economic infrastructure.

TRA (2011) contends that level of education in particular among informal sector operators is currently a development challenge. The reflected in the Integrated

Labour Force Report of 2006 is also complemented the TRA (2011) findings that more than half (54.7) of the labour force among small traders have primary education. This also has its implication in translating and adapting entrepreneurial requirement and government regulations pertaining to the sector. Various policy analysts and academician such as Britwum (2002); Edwards, (1988); De Soto,

(2000) are contending that the current education policy especially in primary education is not effectively preparing informal sector operators to be able to exploit opportunities therein. Much of the contentions were basically dwelling on the policy challenge that it is preparing Tanzanians to be „job seekers‟ not „job creators‟.

According to integrated labour survey report unemployment in the country was 11% with urban areas leading with 16.3% followed by rural rural areas with 7.1%. This was contrary to the MKUKUTA operational target to reduce unemployment from

12.5% in 2001 to 6.9% in 2010 (URT, 2007).

According to Becker (2004), informal education or what he calls „on-the-job training‟ commonly know as apprenticeship is mostly used in informal sector giving more chance not only to those who never gone to school but also introducing skills and know-how which is hardly provided by formal education. All in all, informal and formal education in informal sector remains a development discourse.

Specifically, has realized the contribution of small traders as a segment of informal sector in employment creation. Msoka (2007) highlights the government initiatives in creating conduceive environment for small traders especially in Dar es Salaam.

One of examples of government efforts is establishment of Machinga complex in

Dar es salaam and relocation of small traders from city centre to new places.

However, this has been contended to have been scented by political interests and lacking participation in decision making. As the result, new places including

Machinga Complex was complained by small traders to have few customers compared to those in streets, inadequate transport systems, poor business infrastructures, low security of property and mixing of tradable products in the same avenue e.g. food and hardware. Inconsistency of the government regulation enforcement is one of the policy issue retarding government efforts in relocation of street vending in Dar es salaam. For instance, Msoka (2007) admit that changing of selling time in Mwenge, Buguruni and Ubungo from day time to from around 7:00 pm to 11pm targeting customer rushing home since local government is not operating during night hours thus city policy cannot operate during that time thus small traders operate with zero fear. Conflict of interest is another challenges facing relocation of small trade premises, as the government is putting long term strategies the small traders are busy struggling to make ends meet based on one-day-survival.

Therefore, to cope with city police traders are sleeping during the day and work during the night when the government officials are out of office.

2.8 Youth Unemployment in Tanzania

Despite Tanzania‟s economy been resilient to shocks with GDP growth during the quarter July to September, 2012 was 6.5 % and is expected to remain upbeat with a

GDP growth forecast of 7.1% in 2013 (National Bureau of Statistics, 2012)

Ultimately, youths remained unemployed) but still its recurrent spending has exceeded revenues, contributing to growing fiscal deficits and highest public debt stock approached 42% of GDP in 2011. The budget deficit, at 6.6% of GDP in 2011, improved from 7.1% in 2010. On the other side of the coin, Tanzania shilling has been under pressure since 2010 falling by 10.6% in 2011 and making imports more expensive, for instance, increasing oil imports for power generation are driving strong demand for foreign currency. Given this state of Tanzania economy, available comprehensive programmes that target youth are absent. As a result, the typical youth in Tanzania face difficulties to secure job opportunity and majority have no option but rather to swim on an unemployment pool. Youth unemployment has become a concern in Tanzania with nearly 2.4 million unemployed people- most of them young-representing 10.7% of the population, situation is more critical to urban youths, as argued by Africa Development Bank (2012) that lack of sufficient employment opportunities for young women further complicates the situation. . A study by O‟Higgins (2001) reported that although youth unemployment varies from one country to another, a few features are common to most of the nations investigated.

Tanzania served as good example of Eastern Africa country that has failed to effectively utilize its urban youths. The estimates of unemployed persons for year

2011 are 2,368,672 persons which is equivalent to 10.7% of the labour force population (National Bureau of Statistics, 2011). Currently the total number of labour force population is estimated to be 22,152,320 persons, of whom 19,783,648 are estimated to be employed, among the employed, 2,502,327 persons are estimated

30 to be employed in the informal sector activities. Further, it is estimated each year

700,000 graduates entering the labour market but only 40,000 (5.7%) get employment into formal sector. The incidence of unemployment among the youth is relatively high. The youth constitute 60 per cent of all people who are unemployed.

2.8.1 Effects of youth unemployment

Persistent and high youth unemployment has adverse long-term consequences for currently young people and society at large. These include a higher risk of future unemployment, a prolonged period of unstable jobs and a potentially depressed income growth (Arumlamplam et al., 2001). Such consequences may result from deterioration of skills but also from prospective employers‟ negative perceptions of youth who have been out of work for prolonged periods. On top of its detrimental effects on future earnings and employability, youth unemployment may hurt happiness, job satisfaction and health for many years thereafter (Morsy, 2012). To avoid these consequences heavy investment in human capital is needed to raise employability and future earnings among youths. This kind of investment will increase youth productivity, hence, improvement in economic growth performance of a particular country. Unfortunately, this became a day dream, and most of youth remain neither educated nor employed a main characteristics of urban youth in

Eastern and Southern Africa. Despite the youth being in large proportion in these countries, little resources devoted to ensure youth educational and employment availability. Hence, majority of the youth in Eastern and Southern Africa had to live in a pool of unemployment and confront with challenges associated with. No wonder, most of these countries that are unable to effectively utilize their youth are

31 found towards the end of the tail of world‟s poor countries and expose its youth to terror and drug gangs.

2.9 Theoretical Framework of the study.

The theory of „Unlimited Labour Supply‟ developed by Arthur Lewis in the 1950s provides an employment policy framework adapted by most of developing economies. Lewis argues that the surplus of labor currently hanging in informal sector can be absorbed in the he calls formal economy and disappear if the governments in developing economies invest in industrialization and formalization of informal sector. In nutshell, Lewis perceives informal sector as a country‟s disgrace and development challenge which should eliminated by any means. By using Lewis‟ theory a number countries including Tanzania have invested adequate resources in transforming informal sector with policy, legal, and institution framework. However, number of developing economies such as Kenya has proved the theory wrong with the reason that transforming informal economy into formal or modern economy does not have positive relationship with surplus of labor force or rather unemployment. Economic development as stated by Lewis and his followers does not answer the ever increasing number of people opting informal sector as their source of livelihoods in development economies (Becker, 2004 and Mbilinyi, 2010).

Becker (2004) concludes that informal sector cannot be confined in getting solutions from economic development approaches alone. It needs a multi-disciplinary approach by not making it disappear into something else but making it a source of legal employment to most of people in developing economies. Lewis‟ theory has been strongly challenged by Destombes (2010) that the cause of informal sector is

32 not because of labor surplus but failure of informal sector to absorb labour force and failure of agriculture in especially agrarian communities in developing economies.

Instead, Becker (2004) highlights some areas that need more attention by the governments in development economies towards realization of the contribution of informal sector in national development. Failure of agriculture and limited capacity of formal economy in most of agrarian communities in developing economies is cited by Becker to be one of the factors influencing most of rural people who opt off- farm activities in informal sector. He also cited the current increased population growth and stringent urbanization to also influence people to see informal sector as their sole option. Others include excessive government costs and regulations, corruption, inadequate education, anti-poverty structural adjustment programmes, rural-urban migration, complexities in global economy and unawareness of government on the contribution of informal sector in national development to be some of factors increasing number of people getting into informal sector.

The trade and informal sector theory developed by Stopler-Samuelson commonly known as Heckscher-Ohlin (HO) model does best explain the influence of globalization on the developing economies. The theory states that “ trade liberalization – a major component of the globalization process – leads to an increase in demand for labour-intensive exportable good in developing countries (assuming that this is the relatively abundant factor) resulting in an increase in its price and wages of those employed in this sector” (UNECA, 2004). From globalization point of view this theorem is interpreted as infusion of new patterns of trade, capital transfer and diffusion of technology into informal sector in developing economies which intern increase demand of labor of merchandised goods and services either for

33 export on imported ones. Furthermore, globalization is contended to be one of the factors contributing to unemployment. Msoka (2007) explain the contribution of globalization on unemployment that it has come with high technology in industrialization replacing human labour, gearing to local cost of production, high turnover and intensifying competition resulting into scarcity of employment in formal sector and pushing people into redundancy and vulnerability.

Msoka (2007) affirms that small traders increased immensely from 1980s to 1990s and became the largest employer in Dar es Salaam. This is associated with structural adjustment of economy in the country where the government adjusted its economy from state-owned economy to market-based economy leaving people to fend themselves in labour market. On the other hand, globalization is asserted to minimize ability of local and infant industries in the country to find its way into free market economy thus reducing chances of employment creation. Small trading therefore remains a coping strategy for survival (Msoka, 2007).

Although the flow of foreign direct investment (FDI) in Africa is as low as 3% of world share, the Heckscher-Ohlin (HO) theory has significant contribution into informal sector. In fact, the current commendable of informal sector in reduction of income poverty in especially Africa has been much influenced by global market trends UNECA, 2004). Opening trade barriers in African governments like Tanzania has opened opportunities for importation of merchandised goods and services including cross boarder human labour from developed countries especially china thus opening opportunities for small traders of locally produced and imported goods.

The HO theory has been contended by various scholars (Rugumamu (2005; Shiva et al. 1998) to tamper with formal economy in developing countries in terms of flow of cheapest merchandised goods which kill the market of locally produced products. all in all, the contribution of Heckscher-Ohlin (HO)model in informal sector and especially small trader is currently inevitable thus calls for the attention of policymakers and political will to regulate the strands between opportunities and threats of imported and capital flow in informal sector. For that case, the HO will be used to study the contribution of small traders in poverty reduction and how it can integrate into national development agenda as a profitable and taxable sector.

2.10 Contribution of the informal sector to youth Poverty reduction in urban

areas: A General Overview

According to Yuki (2007) The Informal sector cover a wide range of activities. some of the activities includes selling fruits and vegetables, clothes and shoes, various items in Kiosk, food processing and sale, small manufacturing, production, construction and repair of goods, coolies, money changing, domestic works, prostitution, drug pedding, small scale artisan, barberry and shoe shining. However

Yuki (2007) he further argue that informal sectors play an important role in reducing urban unemployment, crime and violence, and serving as breeding ground for new entrepreneurs. In 2011, nearly 75 million youth were unemployed around the world.

Besides youth were three times more likely to be unemployed than adults. According to ILO (2012 ) the youth unemployment rate in Sub-Saharan Africa was 11.5 percent, thus youth unemployment becomes a serious threat to the social, economic and political stability of a nation. On the other hand, Onugu (2005) Points out that

Small and Medium Enterprises have remained as much important and relevant

35 economic catalyst in industrialized countries as they are in developing countries. In many developed countries more than 90 percent (90%) of all enterprises are within

Small and Medium Enterprises (SME) Sub sector while 80% of the total industrial labour force in Japan 50% in German and 46% in USA small trade contributes nearly 39% of the country‟s national income.

2.10.1 Contribution of the informal sector to youth Poverty reduction in Africa

There are more than 1.2 billion youth people (15 to 24 years of age) in the world. Of which, about 90 percent are living in developing countries. The Proportion of youth

Population in sub-Saharan Africa is 14 percent (UN.2011) in Ethiopia it was about

21 percent (CSA 2008).

Furthermore (CSA, 2004) suggested that informal sectors refer to a home based or an individual establishment or an activity operated by the owner with few a few or no employees. Informal sector operators have little or no access to organized markets, credit institutions, modern technologies, formal trainings and public services. Informal sector play an important role in urban Poverty reduction through creating jobs and reducing unemployment ( Lal and Raj 2006).In urban areas of

Africa the employment in informal sector is predictable to be 60 percent (World

Bank ,2008).it is well documented that informal sector is the chief provider of job for the youth in Africa.

2.10.2 Contribution of the informal sector to youth Poverty reduction in

Tanzania

Onugu (2005) argued that informal sector have aptly been referred to as the engine of growth and catalyst of socio-economic transformation of any country. There are

36 about 700,000 new entrants into the labour force every year. Most of these persons end up in the SME and especially in the informal sector. Furthermore, Olomi (2006)

Pointed out that about one-third of Gross Domestic Product (GDP) originates from small business

2.11 Studies related to informal sector and youth in poverty eradication

According to Reddy, Vijay and Manoranjanm (2002), found that the Informal sector plays a crucial role in urban poverty alleviation through creating jobs and reducing unemployment. Consequently, many developing countries are recognizing the sector‟s importance in their economy and trying to put appropriate policies in place to encourage the sector. In view of its contribution to socio-economic development, an enabling environment has to be created for operators in order to facilitate the transition of the sector to formality.

Asmamaw (2004) provides that a shortage of working capital is the major impediment that the youth have indicated in the sector. In this respect he provides that the policy makers need to design imperative measures to solve this hindrance factor, such as through providing access to microcredit and/or special credit services.

Lack of working premises is the other challenge that the operators are confronted with, which deserves an immediate attention by the government. Similarly, it is also vital to tackle the problems of an inadequate market and a shortage of raw materials.

Smeeding and Ross Phillips (2002) analyzed the economic sufficiency of young people‟s earnings in seven countries (France, Germany, Italy, Sweden, the UK, the

US and the Netherlands). They find that in all countries, only a minority of young people of either sex in their late teens and early twenties are able to support

37 themselves with their earnings alone. Even when state welfare benefits are taken into account, a significant proportion of young people remain unable to support themselves – and much less a family – before their mid- to-late twenties. Although young people‟s incomes become markedly more sufficient for their needs through the early twenties, poverty rates decline much more slowly over this age group, indicating that young people with low earnings are protected from poverty to a degree because of living with their families of origin.

Barbara Igel (1994) studied five congested areas in Bangkok between 1985 and 1988 and found that the opportunity for employment was dependent upon location. Those living near the trading areas were able to sell food and merchandise, provide portage services, and collect used materials for reselling. Those living near factories were able to sell food and beverages. These economic activities were not registered and were highly vulnerable to risks of all sorts, which is why most of the people surveyed indicated that they wanted formal employment.

Erdmann Gero & Mehler Andreas, (2000) discusses the main reasons for the existence of informal labor market in Dar es Salaam, why people engage in them, problems they encounter and how they tackle them. Majority of people practicing informal labor are from poor families, less educated and mostly young. They come from less developed areas to the cities trying to survive. Problems they encounter such as employment once they reach to the cities which leads them to the informal activities. Moreover, a solution to an old age pension for individuals who practice informal labor activities should be considered. An ideal solution has to be found on the side of city police in handling the public without causing troubles to the society

Anselm Strauss,Juliet Corbin. (1998) are of the general view concerning informal labor market and what pushes people in it is the household economic situation which is brought by the global economic system. The concept of informal labor market is still not very well defined though it is recognized, but no one has provided an accurate definition. The informal labor activities have come to be known as big source of income for developing countries like Tanzania, and that it will continue to play a big part in raising economic development in the near future.

A number of studies have looked at different aspects of the urban youth unemployment in Tanzania (Semboja, 2007, International Labour Organization,

2012, World Bank, 2009). Findings from these studies indicate that urban youth unemployment have continued to increase and have remained at extremely high levels despite considerable efforts to promote sustainable development by national governments and international development agencies. Based on the 2006 ILFS urban unemployment was 25 percent for men and 33.7 percent for women in Dar es

Salaam (major commercial city in Tanzania) and 16.5 percent for both men and women in other urban areas in 2006. ILFS 2006 report that the overwhelming majority of the unemployed youths were made up of first time job seekers, focusing on 15+ years in Dar es Salaam city and other urban areas, that the general unemployment stand at 31.5 percent in Dar es Salaam and 16.5 percent in other urban areas, further, sex differentials in unemployment on 15+ years age group found nearly 60 percent of the unemployed women, in urban areas compared to only

45 percent of the unemployed men. Fifty six percent of the unemployed population are women.

2.12 Research Gaps

Most of the reviewed literature and reports have focused on the significance of informal sector towards urban income poverty reduction in developing economies.

According to the 2006 Integrated Labour Force Survey wholesale and retails of merchandised goods where street vending is the highest employer (57.5%) in the informal sector (URT, 2007). However, its specific contribution especially in

Mwanza City is inadequately documented.

Based on the Heckscher-Ohlin (HO) model the opening of trade barriers and flow of merchandised goods and services are of paramount recognition of its contribution in income poverty reduction in the study area (Edwards, 1998). Therefore more investigation is needed in order to have an empirical picture of the contribution of small traders in urban income poverty reduction in Mwanza city especially

Nyamagana district and how can the sector be harmonized with mwanza city development.

2.13 Conceptual Framework

This is a set of broad ideas and principles taken from relevant fields of enquiry and used to structure a subsequent presentation (Reinchel and Ramney, 1987) However

Miles (1994) defined a conceptual frame work as a visual or written product which explained either graphically or in narrative form the main things to be studied and the presumed relationship. The conceptual frame work of this study will demonstrate the contribution of informal sector (Petty trade) to youth poverty reduction.

Figure 2. 1: Conceptual Frame work.

Small scale Trade

Related Economic Activity among Majority.

Role played Challenges/indicator of poverty Measures to be taken  Income  Aids and Loans generation  Lack of fund without interest  Employment  Low income  Business training creation  Poor nutrition  Control of price  Develop new  Poor healthcare fluctuations business skill  Poor clothing  Acces to  Develop good  Poor housing permanent relationship  Lack of education electricity  Increase capital.  Poor acces to  Provision of

information. quality education

 Poor transport  Sound business faciliti tax and tariffs  Ready market  Good transport facilities

Poverty reduction

 Increase income  Good nutrition  Good healthcare  Good housing

 Quality education  Acquire assets  Change life style.

Source:Modified from Faki Malengo,2010

2.14 Chapter summary

The chapter has dealt with a review of various literature from published sources, journals, magazines and legislative acts. It discussed the informal sector, youth and poverty in the world and in Africa. The chapter has also looked at the contribution of the informal sector in youth development and poverty eradication. The following chapter discusses the research methodology applied in the study.

CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Introduction

This chapter focused on the methods that were adopted and used for this study with the aim of achieving the research objectives. It provides detailed description of the study area, research design, study population, sampling design, technique, size, frame and unit. It further describes how data was collected, analyzed and presented.

The efforts to ensure reliability and validity of the study were done as well as ethical considerations of the study were described

3.2 Research design

Creswell (2007) defines research design as the general blue print for the collection, measurement and analysis of data, with the central goal of solving the research problem. Karlinger (1975) argues that descriptive studies are not only restricted to fact-finding, but may often result in the formulation of important Principle of knowledge and solutions to the significance of the problem. Research design is scheme, outline or plan that is used to generate answers to research problem

(Orodho, 2003). However Kombo and Tromph (2006) defined research design as the glue that holds all the elements in a research project together. This study employed a cross-sectional design which enabled the researcher to collect data over a short and fixed period of time. A cross sectional research design is recommended to employ descriptive survey research approach. Further, it use a mixed data collection and analysis approach in which quantitative and qualitative data is collected (Kothari,

2004:32; and Meier and Brudney, 1987:124).

A Cross-sectional design provides description of the existing characteristics of a sample that represent a population at one point of time. In addition, it has the ability to obtain high degree of accuracy and precision in social science research (Frey, et al

1991:79; Bailey 1994:13). Cross sectional design was preferred for the reason that it enables the researcher to collect data at a single point of time, from respondents on the variables. The design minimize cost and time since the study was for academic degree that have strict fixed time frame.

3.3 Profile of the study area

3.3.1 Study Area

The study area for the study was Mwanza in Nyamagana Distruct this is an area which is located at the heart of Mwanza city. It is a place filled with small businesses which are mostly owned and employed by the youth (UTR,2012)

3.3.2 Geographical location of the study area

Mwanza region is located in the northern part of Tanzania just south of Lake

Victoria. The Lake Victoria waters separate the region from the neighboring countries of Kenya and Uganda. To the east, north and West are the sister lake dominated regions of Mara and Kagera. To the south there is Shinyangaregion. It lies between latitude 10 30‟ and 30 0‟ south of Equator and the longitudes 310 45‟ and 340 10‟ east of Greenwich. (URT, 2012).

3.3.3 Social economy of the study area

The economy in Mwanza is dominated by smallholder agriculture employing about

85% of the region‟s population and completed by and expanding fisheries sector.

Mining and Livestock sectors also command a recognizable share in the economy of

Mwanza region. (URT,2012)

Figure 3. 1: Nyamagana District map.

source: URT, 2012

3.4 Sampling and sampling techniques

3.4.1 Sampling design

Kothari (2004) defined sampling design as the set of procedures the researcher would adopt in selecting items into the study sample. It involves specifying the population or universe of the study, the sample unit, the size, the sampling frame and the parameters of interest. Sampling design represents the framework within which 45 the sampling takes place, including the number and types of sampling schemes as well as the sample size (Onwuegbuzie and Collins 2007). Each of these items is described in the following subsections.

3.3.2 Study of the population

The target Population under this study comprised of three categories: Government officials, NGOs officials responsible for small scale traders as the key informant.

Small scale traders are the main target and daily operators while government officials were selected because their status as they can provide relevant information related to the study based on their experience. In addition to that NGOs officials were selected due to their experience as they work hand in hand with small scale traders at grass root level.

3.3.3 Sampling unit

According to Kothari (2004:56) and McNabb, (2002:117) sampling unit is the basic element of the population such as a person or a thing being sampled. It may possibly be a geographical one such as state, district, village, or a construction unit such as house, flat, or it may be a social unit such as family, club, school, or it may be an individual. These are generally elements considered available for selection in some stage of the sampling process.

The respondents from two wards of Nyamagana Municipal Council were involved in the study. The proposed wards are Mirongo and Mbugani. These wards provided accuracy evidence to this study because majority people from these wards are engaged in the informal sector.

3.3.4 Sampling frame

A sampling frame or source list is a complete list of all the individual and objects of the population from which sample is drawn for study. Individuals in the list have shared properties that could be identified in every single element (Kombo and Tromp 2006). The sampling frame was established from Nyamagana District

Municipal council to include wards of Mbugani and Mirongo.

3.3.5 Sample size

Sample size refers to the number of items to be selected from the universe to constitute a sample. Kothari (2004) proposed that the size of sample should be optimum fulfilling the requirements of efficiency, representativeness, reliability and flexibility. Principally the sample size should be neither excessively larger nor too small. The sample size from this study was drawn from two wards of Mbugani and

Mirongo ward and the total population from this area is 47964.The targeted respondents which used in the study are small scale traders (hand clothes, shoe shining, repair and construction, Food selling, vegetable and fruits selling, street vendors, Masonry, carpentry, Tailoring), Government officials and NGOs officials

Sample size in this research is 100 respondents and this was the true representative

of the population. The size was statistically determined using a formulae n=N/1+N(e)

Where n= sample size

N = total population

e = significance level (0. 1) and

1 = constant.

Therefore; n=?

N= 47964

e=0.1

47964/1+479.64(0.1x 0.1) =

47964/479.64=100.

Sample size selected was 100 and 6 key informants

The study uses the above sample composition for this study because they are stakeholders within the informal sector. In addition, they were persons whose action regarding small scale trade. Therefore, they were expected to have relevant information required to address the research problem

Table 3. 1: Summary of the distribution of sample size

Name of Ward Respondent category Mbugani Mirongo. Government officials 2 2 NGOs officials 2 2 Small scale trades 46 46 TOTAL. 50 50 Source: Researcher Own Design, 2015

3.3.6 Sampling procedure

Description of how the cases were selected from a sampling frame constitutes sampling design or procedure (O‟Sullivan and Rassel, 1989). This study employed simple random and purposive sampling techniques for selecting participants.

According to Kemper, Stringfield, and Teddlie, (2003:292), the use of a wide range of sampling techniques in a research methodology greatly increases the possibility of

48 generating findings that are both rich in content and inclusive in scope. Subsequent sections described these procedures and rationale for adopting them in this study.

3.3.6.1 Purposive sampling

The procedure involves deliberately selecting individuals, groups, and settings that maximize understanding of the underlying problem as selected elements are considered to provide required information. In purposively selecting key informants for the study the major criteria used according to Patton (1990:169) and Adam and

Kamuzora, (2008:32) is possession of expertise or experience also referred as information rich on the problem under investigation. Further, purposive sampling allows the researcher to have a purposive target on a group of people believed to be reliable for the study.

The procedure was used to select respondents from Nyamagana District council. The subjects to be selected purposely were Government officials (Ward Executive officers and Ward councilors) and NGOs officials. These respondents were considered to be very important for the study because they are leaders in which the informal sectors are found, hence they provided specific information for this study.

3.3.6.2 Simple random sampling

The study used a simple random sampling procedure to select respondents from various small scale trades (informal sectors) in urban giving them equal and known chance of being selected. In simple random sampling, as Cohen, Manion and

Morrison, (2000:100) posited that, each member of the population under study has an equal chance of being selected and each selection is entirely independent of the next. The method involved selecting at random from a generated set of random

49 numbers, the required quantity of subjects for the sample. The simple random sampling is used to ensure that all potential respondents got an equal and independent chance of selection. Further, it enabled the researcher to pick a small number of respondents for the study among many.

3.4 Data collection method and instruments

Data collection for the study involved survey, interview and documentary review.

The researcher employed a variety of techniques to triangulate information.

According to Ary, (1996), triangulation means that use of multiple methods to verify the findings. This was done intentionally on the ground that no single research technique or instrument is adequate in itself to collect valid and valid and reliable data on a particular problem. This is similar to what Bogdan and Biklen (1992) observed that exclusive reliance on one method may bias or distort the researcher‟s picture of a particular reality being investigated. What is certain is that research techniques or instruments have shortcoming that need to be complimented by the use of other variety of methods. What follows is a description of each method and techniques and how they were used in the data collection

3.4.1 Questionnaire

A questionnaire is a subset of questions on a given topic (Job, 2003).The data are collected by sending the questionnaire to the informants and requesting them to return the questionnaire after answering the questions (Saleem, 1997). This is method whereby respondents fill in answers in written form and the researcher collects the forms with the completed information (Kombo &Tromp, 2013).Both open and close ended questionnaire was used to collect Data from the field.

Questionnaires were distributed to 100 respondents who are small scale traders from each ward (Mbugani and Mirongo Ward).100 respondents selected from the population because it‟s the sample which provided clear information with regard to the Population of Nyamagana District, On the other hand, the number of respondents selected provided sufficient data since they were easily reached by researcher .The study put on this method because it is easy to get consistent information within a short time and at a low cost.

3.4.2 Interview

An interview is the method of field investigation whereby the researcher meets their respondents, through interaction researcher asks specific questions to the respondents to get answers to research problem (Holye, 2002).The interview method of collecting data involves presentation of oral-verbal stimuli and reply in terms of oral-verbal responses (Kothari 2004).

The method was used to collect data from 2 Ward executive officers, 2 ward councilor and 2 NGOs officials these key informant provided relevant and sufficient information to the study. The method was used because it is flexible and information could be obtained in detail and well explained. Interview enables a researcher to get immediate feedback from respondents at same time to make follow up by asking extra questions.

3.5 Validity and Reliability

Pre testing of pre designed questionnaire was done to youth in informal sector and key informant which include ward executive officer, councilors and NGO officer.

The purpose was to cross check whether they were appropriate and if could be used

51 to collect the intended data. Cross checking with different tools was done to ensure information to be valid and reliable. Building of confidence to respondents was done where by all interview and questionnaire conducted by using Swahili language. All this was conducted to ensure the validity and reliability of the research.

3.6 Data Analysis and Presentation

Kombo and Tromp (2013) define data analysis as examining what has been collected in a survey or experiment and making deductions and inferences. It involves scrutinizing the acquired information and making inferences .Analysis means a critical examination of material in order to understand its parts and its relationship and to discover its trend (Twumasi,2001).The data was analyzed using analytical and descriptive statistical analysis with the help of SPSS.SPSS is the tool that can help researcher to summarize the data and to examine the relationships between variables.Tables, charts and graphs were used to present data that were collected from the field. Microsoft Excel was used to prepare graphs and charts.

3.7 Ethical Issues

Research ethics refers to application of moral standard to decision made in planning, conducting and reporting the results of research studies. The study took into consideration respondent‟s privacy and willingness of respondents as well as truthfulness, thoroughness, objectivity, and relevance principle were both applied in all procedure in planning, conducting and reporting the results. All these applied to the morality in research.

3.8 Limitation of the study

The research was conducted within a framework of the following constraints and limitations:

3.8.1 Time constraints

The time allocated for the field work, data collection, data analysis and report writing was limited to ensure carrying out a comprehensive field research with a large sample size. The researcher solved this problem by working even on weekends, asking the respondents to pardon his for the inconvenience.

3.8.2 Fear and inadequate transparency to share information on financial issues

In case of some of the respondents, there was no transparency in sharing information or appropriate data on their financial status. They feared that such information was sensitive and they never wanted other people to know their financial position.

3.8.3 Financial constraints

Funds available were very insufficient to enable collection of large samples of data from the relevant respondents. This was solved by the researcher digging into his own pocket .

3.8.4 Over expectation for payments

Some participants were reluctant share their views during the meetings because they expected to be paid some money for this exercise.

3.9 Chapter Summary

The chapter discussed the methodology used to conduct the study. The quantitative and qualitative (descriptive) used; simple random and purposive samplings were

53 used to select 100 respondents for the study. The chapter also discussed the data collection methods and instruments, survey and face to face interviews by interviewer. Validity and reliability of measurements and findings as well as ethical considerations were also discussed in this chapter, apart from data analysis design.

CHAPTER FOUR

RESULTS AND DISCUSSION

4.0 Introduction

This chapter focuses on data presentation, analysis and discussion of the findings.

Data were analyzed both quantitatively and qualitatively. The quantitative data were summarized in tables and figures. The analysis meant to show correlations among various research variables.

4.1 Demographic analysis

The main respondents included in this study were the beneficiaries informal sector and the representatives of those informal sector from selected wards of Mirongo and

Mbugani, in Nyamagana district at Mwanza region. Informal sector representative were interviewed therefore their responds appear directly in discussion and conclusion.

4.1.1 Sex of Respondents

Distribution of the respondents by gender included 51 male (51%) and 49 were female (41%) as shown in table 4.1 below. From the results below it seem that there are more men than there are female participants in the study. From the censor conducted in 2012 in Tanzania there is a clear indication that there are more females that there are male. In the inormal sector however this is not the case as there are more male than females who are willing to work in the area.

Table 4. 1: Sex of Respondents

Sex Frequency Percent Male 51 51 Female 49 49 Total 100 100 Source: Field study, 2015.

4.1.2 Age of Respondent

From the findings shows that most of the respondents were youth aged between 25-

34 years old this implies that most of the youth of this age are the beneficiaries of informal sector who had to provide information on the contribution of the informal sector to youth poverty reduction. From the study findings those range from 18-24 were 25 respondents (25%). Those who range from 25-34 were 72 respondents

(72%), those range 35- 45 were 3 respondents (03%). This finding implies that the population comprise of youth who had made saving from running businesses in the informal sector though there is little support from government and other Non government organization.

Figure 4. 1: Age of Respondents

80 70

50 40

30 Percentage (%) 20 10 0 18-24 25-34 35-45 Age

Source: Field study,2015

4.1.3 Education Level of Respondent

Distribution of population according to their education level of respondents differs, some of them were primary level, and other was secondary level while other was college or university level. Primary educations were 65 respondents (65%), secondary educations were 32 respondent (32%) and college/university level were 3 respondents (03%). This data justify that the majority number of youth have acquired Primary education while the minority have access to college or university.

The Education level was determined the respondent‟s benefits. Informal sector workers usually acquire necessary skills through either on job training or traditional apparent-ship system (UNESC 2006). The level of education must mainly be determined by the skills which they possess.

Table 4. 2: Education Level of Respondents

Responses Frequency Percent Primary education 65 65 Secondary education 32 32 College/university 3 3 Total 100 100 Source: Field study, 2015

4.2 Trading situations of small scale trade at Nyamagana District

4.2.1 Income before Starting Business

Concerning the trading situations of small scale trade within the informal sector among the 100 respondents, 19 respondents (19%) were having income before starting working in the informal sector while 81 respondents (81%) were not having any income before starting working in the informal sector. This implies that the majority number of youth is living in massive poverty. The field study also discovered that most of the youths acquired their initial capital through loan.

Figure 4. 2: Income before Starting Business

YES NO

Source: Field study, 2015

4.2.2 Residence before Starting business

In order to understand the trading situation of small scale trade involving in informal sector there was the need to know where did they reside before starting their business and their response was own house 3(3%), at Parent 67 (67%) and rented house 30 (30%), hence this indicates that the large number of youth were living to parent before starting their trade. The findings also discovered that youth aged 18-24 most of them they still live with their parents and after working in the informal sector they started their life by living in rented houses, on the other hand this implies that the informal sector has contributed greatly to youth poverty reduction.

Table 4. 3: Residence before starting business

Responses Frequency Percent Own house 3 3 At Parent 67 67 Rented house 30 30 Total 100 100 Source: Field study, 2015.

4.2.3 Initial Capital

From the field study findings with the intention of understanding where did the respondent get their initial capital for the purpose of helping in assessing the trading situation, 67 (67%) acquired their initial capital from loan, 8 (8%) acquired from

Relatives/Friends, 16 (16%) acquired their initial capital from their own source ,5

(5%) acquired initial capital from loan and their own source and 4(4%) were employed in informal sector that means it was not their trade. Thus this indicates that most of youths acquired their initial capital from loan and this was done by various financial institutions like banks, SACCOS, etc

Figure 4. 3: Understanding initial capitals

30 Percentage 20

Response

Source: Field study, 2015

4.2.4 Training received before starting business.

The outcome of the findings shows that 86 (86%) were not receiving any kind of training and 14 (14%) received entrepreneurship skills to run their business. Hence this symbolize that, most of the people who are working under informal sector there are working with their own skills the thing which has caused poor management of their business. The findings also discovered that the private institution unlike government institution is the one which provide more training to these petty traders.

Table 4. 4: Training received before starting business

Response Frequency Percent Not received 86 86 Entrepreneurship 14 14 Total 100 100 Source: Field study, 2015.

4.3 Contribution of Petty trade to reduction of poverty to youth.

4.3.1 Savings made from Business

Concerning the study findings most respondents agreed that they have made savings from the business and this was the result of the findings, 96 (96%) agreed to the question asked if they have made savings from the business and the 4 (4%) mentioned that they have not made any savings from the business. From the informal sector many youth have benefited and this has solved the problem of unemployment which has caused most of the youth to engage in bad misconduct.

Table 4. 5: Saving made from Business.

Response Frequency Percent YES 96 96 NO 04 04 Total 100 100 Source: Field study, 2015.

4.4 Challenge facing trading activities in the Informal sector

4.4.1 Challenges facing the business

From the field study it was also important to understand the challenge facing youth in informal sector and the results ranges, 31(31%) mentioned unstable electric power to be their challenge, 35 (35%) increase of rent, 4 (4%) to be degraded

61 because of the trade they do, 22 (22%) pointed lack of customer to be the challenge facing their business and 8 (8%) were faced by poor working environment as their challenge. With regard to the field study finding increase of rent were the big challenge facing youth in informal sector, on the other hand unstable electric power was another challenge, if the government was its building in which the youth in informal sector could do their trade with low rent it‟s true that the youth in informal sector they could have a lot of benefit from this trade

Figure 4. 4: Challenge facing Business

Percentage 15

0 unstable electric increase of rent to be disgraded lack of customer poor working power environment Response

Source: Field study data, 2015.

4.5 Possible Initiatives to Small businesses

This section intended to find out from respondents what do they perceive are the stakeholders role to promote street vending business including small businesses themselves, government, CSOs and private sector.

a) Possible Initiatives to Improve Small businesses at individual level

The findings on individual strategies to improve small businesses are found in figure

4.5. The findings indicate that almost all respondents (81.7%) saw the need to work in group and raise the working capital through legally recognized SACCOS. It is also worth mentioning that about 8% of respondents also mentioned business discipline and (5.6%) training to be one of strategies to improve the business. Like other normal business based on currently free market economy, respondents findings implies that working in group and joint business venture is one of the possible initiative that is likely to improve and promote small traders. Training in business and entrepreneurial skills is as well one of the individual prerequisite initiatives needed to improve the business. Business partnership and capacity building are also reported by ILO (2006) and Adams (2008) to be one of the areas needed to transform informal sector into well paying and officially recognized business. Joint business ventures and capacity building in business skills are therefore possible strategies identified by this study to be some of the possible strategies that can be opted by individual small traders to improve the business.

Figure 4. 5: Alternative strategies as individuals

Training Working in groups Business displine

12% 7%

81%

Source: Field study data, 2015.

b) Possible Initiatives to Improve Small traders by government

The responses from the finding on the possible strategies to be adopted by the government to improve street vending business are also indicated in Table 16. It is observed form the finding that half of respondent (50%) plead to the government to allocate venues for street vending. Street vending venues is one the challenges facing town master plan. Lack of small trader venues in most of municipal councils in

Tanzania makes small traders operating in illegally and seen as town disgrace. For instance, some of district official interviewed and responses from Focus Group

Discussion affirms that Nyamagana as a small trade venue in Mwanza is not sufficiently compared to the available number of small traders. Allocating small traders venue is thus a possible strategy to promote small trading in the study area. this also was pointed out by Msoka (2007) however he draws experiences from matching complex in Dar es Salaam that areas selected for small traders should be as close as possible to the where there is congregation of people.

Furthermore, more than one third of respondents when interviewed t also suggest the government to think on providing soft loan to small traders. One of the challenges facing small traders mentioned in this study is lack of working capital. Provision of soft loan from the government implies that it will expand the working capital and increase trader‟s earnings. However, some key informants of this study emphasized group formation of small traders with legal identity to attract support from the government.

c) Possible Initiatives to Improve small trade by CSOs and Private Sector

The findings on suggestion put forward for CSOs and private sectors supporting small traders are as well presented. It is observed from the findings that couple of responses has been put forward by respondents as possible strategies that can be used by private sector to improve trade business. This includes provisional of soft loan with low interest rates, capacity building in business/entrepreneurial skills and fair price of street vending product of retailers/wholesalers.

4.6 Chapter summary

The purpose of this chapter was to host a presentation of the findings and develop a playground for discussion of the same findings of this study. The coming chapter will concentrate much on developing conclusions discussed in chapter four.

CHAPTER FIVE

CONCLUSIONS AND RECOMMENDATIONS

5.1 Introduction

This chapter presents a summary of major findings of the study followed by a conclusion, recommendation and suggestion for further studies. The overall aim of this study was the contribution of informal sector to youth poverty reduction, a case of small scale Trade in Nyamagana District, Mwanza region.

5.2 Conclusion

From the findings presented and discussed in chapter four, it has been established that the informal sector has employed a large number of youth; youth are employing themselves in this sector although there is little support from the government and private sector.

Financial institution are helping youths to acquire their initial capital thus there is the need of financial capital to reduce their interest rates to attract more youth, on the other hand, the procedure of getting loans from these financial institution are not known to the majority of youths hence there is a need to provide education so as to be aware of these procedures.

Most of the youths before starting their business, were living with their parents but after working under the informal sector they were able to rent their own places, this shows that, they have received benefits from this sector hence the government should improve this sector so as to supplement more youth with regard to the employment problem.

It was further identified that, unstable electric power and increase of rent has affected much the youth in informal sector some are becoming bankrupt because of the challenges encountered.

The findings affirmed the need of individual small traders to work in group and raise the working capital through legally recognized SACCOS. Joint business venture and capacity building in business skills are therefore possible strategies identified by this study to be some of the possible strategies that can be opted by individual small businesses to improve the business. Provision of soft loans and Allocating small trader venue is thus a possible strategy to promote small traders in the study area.

It is observed from the findings that a couple of responses has been put forward by respondents as possible strategies that can be used by private sector to improve small trade business. This includes provisional of soft loan with low interest rates, capacity building in business/entrepreneurial skills and fair price of small traders‟ product of retailers/wholesalers.

5.3 Implications of the results

The research has found that the current labour market is characterized by an increasing number of school leavers, graduates and adults who do not find jobs in the formal sector. One of the factors mentioned as limiting investors from employing

Tanzanians is their lack of proper skills required in the jobs available. Most of them have attended schools and colleges and have graduated with high qualifications.

However, the qualifications do not match with the required skills by employers.

Therefore, there is a need to remove or reduce the existing mismatch between skills imparted to graduates and those that are needed in the labour market. So this is a problem which has created poverty for the youth.

More over it is noted that the business environment in Tanzania has improved over years and this tends to promote enterprise creation, discourage informality and improve good governance. Making further improvements to the business environment is key to helping markets work better for small businesses and also improving the investment climate in Tanzania. This implies the need to focus on basic issues (basic education and health, macroeconomic stability, good governance and addressing infrastructure weaknesses) that create the opportunity for the private sector to grow and diversify and thus provide more productive and decent jobs for women and men. It is critical to recognize that Tanzania as a huge country (close to

1 million square kilometers and a population of about 50 million) and has specific challenges in different parts of the country, therefore solutions may vary.

The development of micro-and small enterprises in the informal economy is a means of promoting decent work for all women and men, irrespective of where they work.

The deep causes of informality are not only in the legal frameworks but accompanied by numerous reasons, and many of them are not related to the legal field itself. In the immediate term, actors in the informal economy must be recognized by labour and labour-related laws.

5.4 Recommendations

The utility of any research lies mostly in the conception of the research findings and then putting it into use. If the research findings cannot be put into any use desired,

68 then the whole research exercise will be meaningless and the research finding can be termed as mere waste of material. The research findings cannot be put into use unless the researcher recommends to and directs these recommendations to the desired audience. The following are the measures recommended to be taken to reduce the existing problems.

The discussion for this study has concluded that small traders working together as the group is of paramount important. It has also seen as source of social capital and collateral security in micro-financial institutions. Individual small traders should join in groups so that they develop business joint venture in sourcing of their merchandised products as well as developing work place bargaining power with the local government. Formation of groups at this time might be of great importance if legally registered may improve their working capital and bargaining power.

There is a need for the government and other Non- Governmental organizations to provide training to the youth who are self employed in the informal sector so that they are able to produce more goods of high quality and those which they are currently producing. This training should be provided on a regular basis the source of funding for these trainings should be obtained from the taxes collected by the

TRA as well as the district council in the study area.

Also the government should provide proper and conducive areas where the youth who are in the informal sector can sell their goods and provide services to the people within the community. Also the areas which are to be provided should be located in areas where people frequently visit so that the people get access to that the goods and services are easily provided.

Youths in the informal sector should be also involved in the decision making process this is because they are the ones who are involved in this sector. They have a better knowledge of the problems and challenges they face and the kinds of remedies that can be afforded to them so that they work better.

The findings of this study are also supported by the 2011 TRA report on informal sector are concluded that small trader is one of the government potential areas for revenues. However, this needs more research and political will to invest on small trader‟s infrastructures.

5.5 Areas for Further Studies

i. .It has been concluded from this study that small traders contribute to poverty

reduction and also as source of government revenue. There is therefore a

need to study how small traders with their mobility nature can pay tax.

ii. Selection of small traders products have been indentified in this study

however the factors influencing choice of small trader product among gender

segment has not been covered. There is a need as well to study.

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APPENDICES

Appendix 1: Questionnaire for Youths in Informal Sector.

TOPIC: Contribution of the informal sector to youth poverty reduction:

A case of small scale Traders in Nyamagana District.

INTRODUCTION: Iam Mr Mkama Shabani a Postgraduate Student from the

University of Dodoma

This research is for academic purpose only.

Tick ( √ ) the best alternative and write in short in suitable space

BASIC INFORMATION

District……………………………… Street……………………………. Ward………………………………… Date…………………………..... Sex ……………………………… Education A.Male level……………………… B.Female A.Primary Level. B.Ordinary Level C.Advanced Level D.College /University Level F.Never attended Age…………………………………… Number of A.18-25 dependents…………………. B.25-35 A.1-3 C.35-45 B.3-6 C.6+ D.No dependant. Marital status……………………….. Nature/Kind of A.Single employment………………… B.Married A.Self employment C.Divorced B.Employed by other D.Widow E.Other

1.Before joining the informal sector what activities/work were you engaged in?

……………………………………………………………………………………

2.Before starting your business where did you reside?

A.Own house

B.At Parents

C.Rented house

3 .What assets did you posses before your business ?

A.Bed and Chairs

B.Bicycle and motorcycle

C.Others mention.

4.When did you start your business?

A.1 month-2 year B.2-5 year C.6-10 year D.11+ years

5.Did you have any income before?

A.YES

B.NO

6.What was your capital when initiated your business ? A.Below 50000 B.50000-100000 C.200000-500000 D.600000-900000 E.1000000-2000000

7.Where did you get your initial capital A.Own sources B.Financial institution C.Cooperative union D.Relatives/Friends

8.What is your profit perday ? A.Below 500 B.500-2000 C.2500-5000 D.6000-10000 E.11000+

9.What kind of training did you receive before starting your business? 10.( a) In you business, do you have any support ? A. YES B. NO

(b) If yes, which support and from which source ? Financial Aid and Loan Training Government NGOs Development Practitioners

11.Which challenge do you face in running your business ?

………………………………………………………………………………………… ………………………………………………………………………………………… ………………………………………………………………………………………… ……………. 12.How many family members do you support? …………………………………………………

13. How many meal do you afford perday ? A.One B.Two C.Three

14. How much do you spend for treatment per day ?

A.10,000-150,000 B.160,000-250,000 C.260,000 +

15.How much do you spend for education cost perday ? A.10,000-100,000 B.110,000-200,000 C.210,000-300,000

16.Do you posses any means of transport? A. YES B. NO

17. If yes which kind of transport do you posses ? A.Biycle B.Motorcyle C.Both Motorcycle and D.Car Biycle

18. Do you have any savings made from your business? ………………………………………………………………………………………… …… 19.Do you employ people in your business? A.YES B.NO 20.Have you undertaken any expansion to your business? A.YES B.NO 21.Which kind of assets do you posses A.House B.TV/Radio. C.Funiture D.Land E. Both

Thanks for your cooperation.

Appendix II: Interview Schedule for Government Officials

TOPIC: : Contribution of the informal sector to youth poverty reduction:

A case of small scale Traders in Nyamagana District.

INTRODUCTION:Iam Mkama Shabani a Postgraduate Student from the University of Dodoma

This research is for academic purpose only.

Tick ( √ ) the best alternative write in short in suitable space

District…………….. Ward………………….Village……………….. Position……………… Date……………………… Working experience…………………. 1 What assistance do you provide to youth in the informal sector? 2 How much do youth in informal sector contribute in your ward? 3 Is there any government support to youth small scale traders in your area? Explain 4 Which challenge do youth small scale traders face in running their business in your area? Explain

Thanks for your cooperation.

Appendix III: Interview Schedule for Non Governmental Officials (NGOs)

TOPIC: : Contribution of the informal sector to youth poverty reduction :

A case of small scale Traders in Nyamagana District.

INTRODUCTION:Iam Mkama Shabani a Postgraduate Student from the University of Dodoma

This research is for academic purpose only.

Tick ( √ ) the best alternative write in short in suitable space

District…………………….Ward…………………..Street………………. Name of organization…………………….Date………………………..

1 Activities your organization is engaged in 2 What type of small scale traders are your supporting? 3 What kind of support is given by your organization to youth small scale traders ? 4 What achievement did small scale traders your supporting have? 5 Which challenge do youth small scale traders your supporting face in running their business? Explain

Thanks for your cooperation..