WOMEN’S INFORMATION CENTER (WIC) REPORT …€¦ · Handicraft has a ready source of raw materials and a ready local and international market, while tailoring has the potential

UNITED REPUBLIC OF T ANZANIA MINISTRY OF COMMUNITY DEVELOPMENT, GENDER AND CHIDREN

(MCDGC)

WOMEN’S INFORMATION CENTER (WIC)

REPORT ON THE ASSESSMENT OF FEASIBILITY OF A WOMEN

BUSINESS INCUBATOR

SUBMITTED BY: DR. MARCELLINA M. CHIJORIGA, FACULTY OF COMMERCE AND MANAGEMENT, UNIVERSITY OF DAR ES SALAAM

With the support of the Italian Government through the Italian Association for Women in Development (AIDOS)

AUGUST 2003

A Study on the Feasibility of a Business Incubator for Women

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TABLE OF CONTENTS ACKNOWLEDGEMENTS .........................................................................................iv LIST OF ABBREVIATIONS ....................................................................................... v 0. EXECUTIVE SUMMARY......................................................................................vi

1. INTRODUCTION ....................................................................................................1

1.1 Background.................................................................................................... 1 1.2 Policy Framework and Related Initiatives.................................................... 3 1.3 Objectives of the Feasibility Study................................................................ 4 1.4 Methodology .................................................................................................. 5

2. REVIEW OF INCUBATOR CONCEPTS AND MODELS.................................7

2.1 Types of Incubation Systems .......................................................................... 7 2.1.1 Distinction by the variety of activities supported ...................................... 7 2.1.2 Distinction by the range of services provided............................................ 7

2.2 Objectives of Business Incubators .................................................................. 8 2.3 Lessons Learnt from International Experience ............................................... 9 2.4 Lessons Learnt from Tanzanian Experience .................................................10

3. PROFILE OF WOMEN ENTREPRENEURS AND THEIR BUSINESSES. 12

3.1 Profile of Women Entrepreneurs ..................................................................12 3.2 Profile of the Women Owned Businesses.....................................................12 3.3 Main Activities Carried by Women and Potential for Doing More..............13

4. ASSESSMENT OF THE DEMAND FOR AND READINESS OF POTENTIAL PARTNERS TO SUPPORT INCUBATION SERVICES ............. 14

4.1 Key Constraints to Development of Women Enterprises .............................14 4.2 Access to Workspace as a Constraint for Starting and Expanding Businesses..................................................................................................................................14 4.3 Willingness to Participate in Incubation Services ........................................15 4.4 Willingness and Ability to Pay for Incubator Services.................................16 4.5 Stakeholders’ Preferences .............................................................................16

4.5.1 Preferred type of incubator .....................................................................16 4.5.2 Preferred incubator location....................................................................17 4.5.3 Preferred sectors to be included in the incubator ....................................17 4.5.4 Preferred model for running the incubator. ..............................................18 4.6 Potential Partners and their Roles .................................................................18 4.7 Sustainability of the Incubator ......................................................................20 5. PROPOSED RESOURCES REQUIREMENTS AND COSTS OF SETTING AN INCUBATOR ...................................................................................................... 22 5.1 Human Resource Requirement ......................................................................22 5.1.1 General manager of the incubator ...........................................................22

5.1.2 Permanent team of incubator experts......................................................22 5.1.3 Group of associate experts (10 in various areas at least one on each type of business in the incubator). ..................................................................22 5.1.4 Support staff ............................................................................................22 5.1.5 Foreign technical assistance....................................................................23


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5.1.6 Management structure.............................................................................23 5.2 Equipment Requirements .............................................................................23

5.3 Renovations of the Incubator Building ........................................................24 5.4 Proposed Financial Budget for the Pilot Incubator ......................................24

6. CONCLUSION AND RECOMMENDATIONS ................................................. 27

6.1 Sectors to be Included in the Incubator ........................................................27 6.2 Type of Businesses to Participate in the Incubator. .....................................27 6.3 Suggested Type of Incubator .......................................................................27 6.4 Potential Location of the Pilot Incubator .....................................................27 6.5 Sustainability of the Incubator .....................................................................28 6.6 Number of Businesses in the Incubator .......................................................29 6.7 Management of the Incubator ......................................................................29 6.8 Preparation of a Contract Between Incubator and the Business Operator ...29 6.9 Lead Partner and Collaborators....................................................................29 6.10 Development of Monitoring, Evaluation and Tracking Syste ms.................30 6.11 Development of a Full Proposal and Business Plan ....................................30

7. IMPORTANT CONSIDERATIONS AND WAY FORWARD.......................... 31

7.1 Important Considerations .............................................................................31 7.2 Proposed Way Forward and Implementation of a Pilot Project..................32

APPENDIXES List of Workshop participants List of People Interviewed Data Collection Questionnaire for the Women in Business Data Collection Questionnaire for the Women not in Business Data Collection Checklist for Stakeholders.


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ACKNOWLEDGEMENTS

We wish to thank the Ministry of Community Development, Gender and Children (MCDGC) and the Italian Government through the Italian Association for Women in Development (AIDOS) for giving us the opportunity to carry out this interesting study. We particularly wish to thank Nicoletta Confalone, AIDOS/MCDGC Project Manager as well as Mrs. Kisanga, Project Director, Women’s Information Centre at the MCDGC for their support and facilitation throughout the course of this study. Special thanks should go to Ms. Liku Kamba and Peter Komba for assisting us in data collection. We are also thankful to all participants who attended and gave feedback to the preliminary report, which was presented at a stakeholders’ workshop on 1st August 2003. This report has benefited a lot from their contributions. We are extremely grateful to all the women and staff of potential collaborating partners, who spared the time to respond to our interviews so enthusiastically in Dar es Salaam and Iringa. Dr. Marcellina M. Chijoriga and Dr. Donath R. Olomi


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LIST OF ABBREVIATIONS AGOA Africa Growth and Opportunity Act AIDOS Italian Association for Women in Development AMKA Market Linkage NGO BDS Business Development Services CIDA Canadian International Development Agency DFID Department for International Development DRC Democratic Republic of Congo EOTF Equal Opportunities for all Trust Fund FAWETA Federation of Women Entrepreneurs in Tanzania FCM Faculty of Commerce and Management GETs General Enterprising Tendencies HIV/AIDS Human Immuno-Defficiency Virus/Acquired Immune Deficiency Syndrome ILO International Labour Organisation MCDGC Ministry of Community Development, Gender and Children MFI(s) Micro-Finance Institution(s) MSE(s) Micro and Small Enterprise(s) MTI Ministry of Industry and Trade NGO(s) Non-Governmental Organisation(s) NMB National Micro-Finance Bank NORAD Norwegian Agency for International Development PRIDE Promotion of Rural Initiative and Development of Enterprise PTF Presiden tial Trust Fund for Self Reliance RNE Royal Netherlands Embassy SIDO Small Industries Development Organisation TACAIDS Tanzania Commission for Aids TAFOPA Tanzania Food Processing Association TCCIA Tanzania Chamber of Commerce, Industry and Agriculture TGT Tanzania Gatsby Trust UDEC University of Dar es Salaam Entrepreneurship Centre UDSM University of Dar es Salaam UNFPA United Nations Population Fund UNIDO United Nations Industrial Development Organisation VETA Vocational Education and Training Authority WAMATA Wanawake Tanzania WAWATA Wanawake Wakatoliki Tanzania


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0. EXECUTIVE SUMMARY 0.1 INTRODUCTION Although women’s participation in the Micro and Small Enterprise sector in Tanzania has increased dramatically in the past 20 years, women enterprises remain in the low profit, low growth areas. They are stifled by limited education, lack of skills and business experience, limited access to support services and an adverse regulatory and cultural environment (ILO, 2002 & 2003). Numerous interventions are yet to produce notable results in yielding more growth of women-owned enterprises. The national Small and Medium Enterprise (SME) Development policy, developed by the SME section of the Ministry of Industry and Trade, has singled out development of business incubators as one of the priority areas and is in the process of establishing a National Business Incubator Programme, as a framework for guiding all the incubation initiatives. In May 2003 the Women’s Information Centre (WIC) at the Ministry of Community Development, Gender, and Children (MCDGC) commissioned the Dr. Marcellina Chijoriga, of the Faculty of Commerce and Management of the University of Dar es Salaam, to carry out a feasibility study on using business incubators as an alternative means of facilitating the establishment and growth of women owned enterprises. The study was supported by the Italian government through the Italian Association for Women Development (AIDOS). This report presents the draft findings based on surveys carried out in Dar es Salaam and Iringa. The objectives of the study were to assess the needs, opportunities and constraints faced by women entrepreneurs and to determine whether the concept of business incubation could sustainably help address the challenges hindering women from expanding their enterprises. The study involved a review of the relevant literature, a sample survey of women and discussions with potential partners in Dar es Salaam and Iringa. The survey covered women engaged in food processing, ta iloring, artwork, mushroom farming, horticulture and animal husbandry and those who are not in business. 0.2 KEY FIELD FINDINGS

0.2.1 Profile of the women and their businesses

Consistent with past studies, the survey revealed that most (64.7%) of the women in business are young (25-39 years). A majority (75%) have at least secondary education. Most of the businesses are still at the infancy stage, with almost 70% having been established after 2000. The fact that women are young and educated and that their enterprises are in their infancy means that they are appropriate for business incubation services. Women enterprises were found mainly in textile (40%), food processing (28%) and artwork (24%) and these are therefore the main activities with the potential for incubation.


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However, women are mainly engaged in producing traditional products for which the market is within their vicinity. There are other products, which could be produced and marketed elsewhere using the resources available.

0.2.2 Need for incubation services

The most critical barriers to women in starting and growing enterprises are: limited human capacity in terms of technical, business and marketing competencies, limited access to finance and markets. Others are lack of appropriate working premises and a cultural environment, which makes it more difficult for them to start and develop businesses. Sector-wise, those in textile and food processing were most affected by access to working business premises. A large majority (over 80%) of the respondents cited access to working premises as a very serious constraint. Almost all (95.7%), 65.4% and 55.6% of those already in business, and respectively in food processing, textile and artwork, started business activities at home, and 87%, 41.9% and 44.4% respectively are still operating from home. Food processors cannot be licensed while operating from home and this in turn seriously limits their ability to sell to formal establishments and distant markets. Most (98% of those in business and all of those who are yet not in business) showed interest to participate in the incubator. 0.2.3 Willingness and ability to pay and stakeholders’ preferences Although over 90% of the women are willing to pay for the service, a majority (over 80%) can afford only between Tshs 10,000/= and 30, 000/=, while only 15.8% can pay over 30,000/= per month. The stakeholders’ (women in business and those not in business) preferences with regard to location, types of incubator and sectors to be included are as follows:

Type of incubator. Women who are involved in the specialized production such as food processing and tailoring as well as all stakeholders prefer the full service incubator, citing the need for very comprehensive support. Women in handicrafts and arts prefer virtual (without walls) incubator because they operate in rural areas and are dependent on rural labour.

Preferred location. The most appropriate location for the incubation services are in urban and suburban areas where there is a fairly high concentration of micro enterprises or potential business operators. The SIDO Industrial Estates are a natural candidate for incubators with walls. The specific location chosen should be readily accessible to women. Iringa is recommended for location of the pilot because of the potentials there and the fact that in Dar es Salaam there are already similar initiatives likely to be implemented.

Sectors to be included. Food processing, handicraft and tailoring sectors have a high percentage of businesses with growth potential. The priority should be as follows: food processing, followed by handicraft and tailoring. Food processing has a lot of linkage potential with the dominant agricultural sector. Handicraft has a ready source of raw materials and a ready local and international market, while tailoring has the potential to exploit the


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opportunities under the Africa Growth and Opportunity Act (AGOA), if well managed.

0.2.4 Preferred model of an incubator. There are women who are in business to generate profits as well as women who are in business to make a livelihood (survivalists). The later cannot pay economic fees. Since there is a trade-off between sustainability and focus on poverty alleviation, there have to be two incubator models with distinct objectives. One is for businesses that have shown growth potential and the second for those aimed at subsistence purposes, focused on poverty alleviation.

0.2.5 Sustainability of incubators

Since incubators do continuously accommodate nascent enterprises and graduate established ones, they often rely partially on development funding. There is therefore an unavoidable trade-off between supporting the real poor and financial sustainability of the incubator. The lowest income strata of women entrepreneurs would be able to pay Tshs 15,000/= per month. If left to those who can pay Tshs 60,000/= per month, it could operate on a low cost basis relying mostly on free training, consultancy and advisory services from other agencies in the locality. For social sustainability and as a means of solving some of the cultural and gender problems, men (husbands) should be sensitised and involved in the pilot incubator project.

0.2.6 Potential partners

Potential partner institutions and the services they have agreed to provide include Small Industries Development Organisation (SIDO) regional office (premises, technical training, business skills, finance), municipal government (extension services on matters related to agriculture and food processing, co-operatives), Tanzania Chamber of Commerce, Industry and Agriculture regional chamber and Federation of Associations of Women Entrepreneurs in Tanzania (FAWETA) (business information and networking), AMKA (market linkages) and VETA (technical and business training and advisory services). All of the parties are ready to be members of an Incubator Board, should it be established in Iringa.

0.2.7 Key lessons from international and Tanzanian experience International as well as Tanzanian experience suggests that for incubators to be effective in supporting enterprise development, they should themselves be entrepreneurial and business-oriented. This requires that they are professionally managed, have an effective board, focus on the core function of business development, generate all its operating requirements internally, put clear terms and conditions and avoid tenant’s tendency to be over dependent on incubator staff.


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0.3 CONCLUSIONS, RECOMMENDATIONS AND THE WAY FORWARD

0.3.1 Conclusions There is need for the incubation service and there are women entrepreneurs willing and able to pay for at least part of the cost of running the incubator. There is a lot of international experience and best practice from which Tanzania can learn. There is very limited local experience, suggesting that the initiative must start as a pilot from which locally relevant lessons can be learnt for rollout. The policy framework and the institutional setting are very supportive and conducive for establishment of incubators. There are a number of public and private sector actors who are willing to support the incubator. There are other institutions thinking about setting up incubation facilities and therefore any initiative must be co-ordinated under the National Incubator Programme of the Ministry of Industry and Trade. The key challenges to the viability of the incubator are the limited ability to pay among the target beneficiaries (the low income operators can only afford Tshs 15,000/= which is about a fourth of the unit cost of operating a very basic full service incubator unit, relying principally on the existing network of business development provider). At the same time, AIDOS and the MCDGC are pursuing a development agenda, which means they cannot just go for the fairly established, business -oriented enterprises which can afford economic rent. The best candidates for incubation are those sectors with potential for growth, mainly agro-processing, artwork and tailoring. While the first sector requires a full-service incubator, the other two can be serviced with a virtual incubator, organised from within the full-service one. The virtual incubator will also cost less, making it affordable to the low-income survivalist women as well. It is therefore suggested to set up one full-service incubator focused principally on food processors, which will also extend services to the two other sectors, using both internal and network expertise. Iringa municipality is recommended for the location, due to more potential and the fact that there are no similar initiatives being considered there. 0.3.2 Key Considerations Recommended in Establishing and Operating the Incubators In order for the incubators to be sustainable, the following are recommended:

• A project proposal, incorporating a 4- year business plan should be prepared, using this report as the main input. The proposal should however be prepared in a participatory manner with the key stakeholders: i.e. entrepreneurs’ associations (FAWETA, TCCIA), SIDO, MIT, etc.


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• Adequate resourcing should be provided for, including full-time high calibre and adequately paid Incubator Manager, 3 permanent experts, a group of (part-time) associates in various areas, and support staff (Secretary cum administrator, cleaner cum watchman and driver cum messenger). It is also recommended to have one foreign expert on incubators during the pilot phase.

• Funds should be availed for renovating SIDO Estate buildings to be

used for the incubation purposes, subject to reaching agreement with SIDO on this aspect.

• The incubator should be under a Board of Directors, comprising key

stakeholders: SIDO, FAWETA/TCCIA, VETA, central government (where it is suggested that MCDGC would take the lead role), local government (Municipal Director’s office). The proposal for setting up the incubator should include a “Constitution” for the Incubator, including its Board.

• There should be clear criteria and terms between the various actors.

MCDGC should have a collaborating BDS provider (SIDO is recommended) and therefore there is no need to set up a separate corporate body for incubation. There should be clear terms between the MCDGC and SIDO and between the incubator and its tenants/tenants. There should also be clear selection criteria and exit terms for tenants. All of these should be in the proposal for setting up the incubator.

• Proposed total budget for five years will be US $ 772,900 to be spent

as follows: US $ 75,040 (Year 0), US $133,300 (year 1), US $149,800 (year 2), US $ 135,300 (year 3), US $ 124,800 (year 4) and US $ 150,800 (year 5).

• The programme should be linked to micro finance institutions and

commercial banks which can support the women during incubation and after graduation.

0.3.3 Way Forward The pilot phase should be implemented in three phases. Phase 1 should include negotiating with relevant partners, constituting the Board, development of the proposal and business plan, funds solicitation, renovation of the incubator space, recruitment of staff, selection of businesses/persons to partake in the pilot and preparation of business plans for selected firms. Phase 2 will include procurement of equipment to be used by the businesses, collection of baseline data from the businesses and launching of the incubator. Phase 3 shall be evaluation and development of a proposal for rolling-out.


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1. INTRODUCTION 1.1 Background Most of the World’s people are poor, and the majority of the world’s poor are women. Statistics show that most poor people are self-employed or work in micro and small enterprises (MSEs). Participation in MSEs is seen as the most assured way of tackling poverty and creating a broad based economic growth. The importance of the MSEs along with women’s participation in the sector has increased tremendously since the mid 1980’s. Indeed, the MSEs (herein defined as enterprises employing between 1 and 49 persons) have now become the main source of employment and incomes for a majority of the people in developing countries, including Tanzania. Moreover, participation in the MSE sector is widely seen by policy makers as well as donors as a means of economically empowering marginalized groups, including women (Hannan-Andersson, 1995). Increased participation of women in the MSE sector has not only altered their access to independent cash income and controls over economic resources but also poses a socio-cultural challenge (Mbuguni and Mwangunga 1998.). For example, women are increasingly contributing in meeting household economic needs, a role that was traditionally left to men in many societies. A number of initiatives have been taken by governments, donors and Non-Governmental Organisations (NGOs), both local and international ones, to increase start-up rates and performance levels of women-owned MSEs. Nevertheless, women in the sector are still found predominantly in low growth areas earning lower revenues than their male counterparts (Rutashobya, 1995). Involvement in business activities by many women is yet to sustain and advance them in a manner that is more beneficial to them and to the economy in general. In particular, the limited performance of women-owned enterprises may not have enabled them to create meaningful and sustainable jobs or enterprises that are able to withstand the challenges posed by globalisation. Previous studies have shown that women in the MSE sector are concentrated in the informal, micro, low growth, low profit areas, where competition is very intense. These include, food vending, tailoring, batik making, beauty salons, decorations, local brewing, catering, pottery, basket making, food processing and charcoal selling. The main reason is that these sectors require relatively small start-up capital and are thus easy to enter. The incidence of growth of their MSEs is very low, and indeed much lower than that of male owned enterprises (ILO, 2002). The literature has identified the following main constraints to performance of women owned enterprises at micro, meso and macro levels. At the micro level, the main issues are limited education, skills and business experience. At the meso level, the main constraints are limited access to support services,


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including loan levels suited to the business needs, technical and management training, advice and marketing. These problems arise from limited capacity and outreach of existing institutions as well as the women’s inability to afford to pay for the services. In the case of micro-finance, the problem is mainly limited to substantial loans. To some extent, micro-credit is now widely available, especially in urban areas, thanks to donor support and the popular solidarity group-lending model. Nonetheless the loans sizes are still small and many MFIs do not have adequate funds to meet the demand for micro credit. Another problem is that women’s advocacy organisations appear to be weak, making it hard for women to have their voices heard. Few organizations like TAMWA are working on the issues, however because of cultural legacy it will take long for women voices to be heard. Also, the laws and regulations affecting businesses (including licensing procedures) were designed for relatively large activities and are therefore difficult for micro enterprises, which are predominantly owned by women, to comply with. Corruption and bureaucracy make matters worse especially for women, who are more vulnerable to physical pressure from corrupt officials. At the broader macro environment level, the main barrier to performance of women-owned enterprises is a cultural environment that makes it more difficult for women to start and run enterprises due to their traditional reproductive roles. Women have to divide their time between their traditional family and community roles. Studies have shown that some of the constraints are gender specific and hence affect women in business more than their male counterparts. The above-mentioned problems lead to the following effects:

• Informal micro enterprises which fail to formalize and graduate into Small and Medium Enterprises (SMEs)

• Few women manage to start up sustainable projects • Low quality outputs, low value addition and under utilization of

indigenous natural resources, giving rise to low competitiveness of MSEs in national as well as regional and international markets

• High unemployment, especially among the youth • Inadequate contribution by MSEs sector to the GDP • Sustained poverty of significant dimensions • Continued economic marginalisation of women

Recognising the need to assist women, AIDOS in collaboration with the Women’s Information Centre (WIC) at the Ministry of Community Development, Gender and Children, is considering the possibility of establishing a Women Business Incubator as a means of assisting women who wish to start or expand their business. It was considered necessary to carry out a feasibility study to assess the possibility of starting and operating the incubator. AIDOS commissioned Dr. Marcellina M. Chijoriga of the Faculty of Commerce and Management, University of Dar es Salaam, to carry out this feasibility study. This document presents the report.


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1.2 Policy Framework and Related Initiatives 1.2.1 Policy framework . The objective of the Tanzanian Vision 2025 is to transform the country’s predominantly low productivity agricultural economy to a semi-industrialised economy led by a modernised and highly productive agricultural activities which are buttressed by supportive services. Tanzania’s Sustainable Industrial Development Policy (SIDP) 1996-2020 places specific emphasis on the promotion of SMEs. The SME Development Policy (2003-2013) aims at fostering job creation and income generation through the promotion of the creation of new SMEs and improving the performance and competitiveness of existing ones. The policy states, inter alia, that:

Technology advancement and transfer are important aspects of SMEs development. SMEs have limited access to technology, partly because they lack relevant information. The problem is further compounded by existence of industrial support institutions which are weak and operate in isolation without focusing on the actual requirements of the SME sector. Furthermore, technologies available are not disseminated to the relevant institutions. As a result, SMEs continue to use mainly poor and obsolete technologies

The resultant policy statement states that:

The government will facilitate acquisition and adaptation of technologies as well as enhance networking between research and development institutions and SMEs in a bid to upgrade technologies so as to raise the productivity and competitiveness of the sector

The policy paper specifies one of the strategies for achievement of this policy as “establishment of business incubators.” 1.2.2 Related Initiatives There are a number of incubator related initiatives currently on-going in Tanzania. National Incubator Programme. The Ministry of Industry and Trade has already started activities to develop a National Incubator Programme, which is a framework to guide all initiatives in this direction. This has been done in collaboration with the Technology Development and Transfer Centre (TDTC) and the Entrepreneurship Centre at the University of Dar es Salaam. A National Steering Group has been established, under the Chairmanship of the Head of the SME Section in the MIT. Other members include: Tanzanian Industrial Studies Organisation (TIRDO) and SIDO. Sokoine University of


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Agriculture and the National Development Corporation (NDC) have also shown interest to collaborate. Tanzania Gatsby Trust / TDTC Incubation Initiative. TGT has expressed willingness to support business incubators focused on food processing for the Easter Zone of Tanzania (Zanzibar and Tanga, Coast and Morogoro Regions). A study is underway to establish viability and modalities of establishing it. Zanzibar Ministry of Education. The Ministry of Education in Zanzibar is, in collaboration with the Ministries responsible for industry and commerce, exploring the viability of setting up a business incubator. An Italian Consultant supports the study. SIDO. SIDO had an experience in running industrial estates, which were established in 1970 (see more in section 2.4). These estates were closely related to the incubator concept. The stakeholders workshop was informed that SIDO has established one incubator and that three more were in the process of being established. All are technology-based incubators, and they are closely working with the University of Dar es Salaam. SIDO expects to expand the incubators after getting the experience in running the three. 1.3 Objectives of the Feasibility Study The main objective of the study was to assess the potential of establishing a Women Business Incubator. The field survey explored the entrepreneurial climate in Tanzanian to identify barriers to starting and growing businesses. Specifically the study intended to:

(i) Identify barriers faced by women in establishing business (ii) Determine the type of incubator to be established (iii) Identify sectors with growth and export potential where women are

involved in (iv) Explore possible ways of addressing the women needs (v) Assess the modality of operating and managing an incubator

(suitable incubator model) (vi) Assess willingness of the women to participate in an incubator (vii) Assess women’s ability to pay for the incubator (viii) Assess and recommend possible location for the incubator (ix) Assess potential sources of financing the project (x) Assess potential partners to run and participate in the project (xi) Assess the financial implications of establishing the incubator

It is known that women are concentrated in food vending, tailoring, batik making, beauty salons, decorations, local brewing, catering, pottery, basket making, food processing and charcoal selling.


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1.4 Methodology The study comprised both a desk study and a field survey. Secondary data was collected from various sources. Currently, there are efforts to establish a National Incubator Programme spearheaded by the Ministry of Industry and Trade (MIT), Small Scale Industrial Development Organization (SIDO), University of Dar es Salaam Entrepreneurship Center (UDEC) and Technology Development and Transfer Center (TDTC) of the University of Dar es Salaam. Documents related to these initiatives were reviewed. Primary data was collected through interviews with various actors. Women who are in business and those who are not yet in business were interviewed, using a questionnaire with both open-ended and closed questions. The questionnaires elicited information on demographic characteristics, activities, challenges facing them in starting or running their businesses, future plans, awareness of, willingness and ability to pay for incubation services, preferences with regard to location, model, etc. Interviews were also carried out with potential partners, including heads of relevant local government departments, and local enterprise development agencies. These were guided by a checklist, which elicited information on the organizations’ activities, awareness, willingness to collaborate in setting up and/or operating the incubator, main economic activities in the area, activities which could potentially benefit most from incubation services, preferred incubator model and location, women’s ability to pay for incubation services, role which they could play and cost implications. The sample was picked partly from lists of women business operators at the University of Dar es Salaam Entrepreneurship Centre (UDEC) database, the Tanzania Food Processors Association (TAFOPA), Federation of Women Entrepreneurs in Tanzania (FAWETA) and other sources. The rest were picked through convenient sampling in the respective study areas. Past studies have shown that most MSEs are concentrated in Dar es Salaam followed by Arusha, Kilimanajaro, Mwanza, and Morogoro regions. The sample was drawn from Dar es Salaam and Iringa regions. Dar es Salaam is the major business centre while Iringa was picked as a representative of rural areas with substantial unexploited potential in various sectors, which could benefit from incubation.

The survey covered women enterprises in horticulture, food processing, artwork, textile and animal husbandry. Women enterprises were concentrated mainly in textile (43.2%) food processing (28.4%) and artwork (23.0%).

Table 1.1 Sectoral Distribution of Women Enterprises Sector Number Percentage

Horticulture 3

4.1 Food Processing 21 28.4


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Artwork 17 23..0 Textile 32 43.2 Animal husbandry 1 1.3Total 74 100.0 In total of 152 (151 women were interviewed, 74 in business and 77 not in business). Of these, 1 was from Dar es Salaam and 34 from Iringa. The team also visited women who were involved in mushroom farming supported by the municipal council and VETA in Iringa. In addition to the field data collection, a stakeholder focus group workshop to validate the research findings was held on 1st August 2003. This report reflects the field findings as well as comments from the workshop.


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2.0 REVIEW OF INCUBATOR CONCEPTS AND MODELS 2.1 Types of Incubation Systems The traditional business incubator is a micro-environment with a small management team that provides physical work space, shared office facilities, counselling, information, training and access to finance and professional services in one affordable package. The main purpose of the incubator is to nurture young firms, helping them to survive and grow during the start-up period when they are most vulnerable. Incubators provide hands on management assistance, access to financing and orchestrated exposure to critical business or technical support services. They usually offer entrepreneurial firms shared office services, access to equipment, flexible leases and expandable space all under one roof. However, business incubators vary widely in terms of variety of activities supported as well as range of services provided. 2.1.1 Distinction by the variety of activities supported

• Multi-purpose incubators admit any type of business satisfying basic commercial criteria.

• Specialised incubators focus on particular activities, such as

development of a specific technology, eco-tourism, food processing, etc.

2.1.2 Distinction by the range of services provided

• Full service incubators provide:

o Enterprise development services, such as hands -on assis tance with regard to business planning, training on business management skills, linkage to providers of credit, accounting, legal and other professional services and ad hoc advice.

o A business consultancy network. Since the incubator may not

be able to provide all the services required in -house, it networks with individuals and institutions which can provide these to the incubator tenants either at a small fee or as part of their own mandate. For example, government extension workers or SIDO and VETA staff could be linked with the incubator tenants to provide advice and training on specific issues.

o Entrepreneurial synergy. Co-locating entrepreneurial firms

provides the prospect of generating a symbiotic environment where entrepreneurs share resources and experiences, learn from one another, exchange business contacts and establish collaborative business relationships


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o Flexible and affordable working space, either in the form of offices or workshops but in both cases on an “easy in easy out” basis. They can also help tenants find premises after they graduate. Incubator facilities have a variety of sizes so that as a firm grows, it can relocate to a larger unit or expand its existing unit. The incubator environment should not only facilitate production, but should also facilitate to build the right image to the tenants of the businesses.

o Common services. These include secretarial support;

telephone answering and common reception and mailing facilities, access to computers and other office equipment, meeting rooms, and canteen facilities. Manufacturing firms may have access to machinery which has been procured for common use.

• Virtual incubator or incubator without walls provide all services,

except workspace and office space and each client operates from own separate premises.

• Managed workspace is basically workspace and possibly shared

office space, without any significant support services. Incubators also vary in terms of sponsors (state, economic development agency, University, private firms), objectives (empowerment, poverty alleviation, technology transfer, and location (urban, suburban, rural and international 2.2 Objectives of Business Incubators Business incubation usually involves different types of stakeholders each of which may have different objectives. Table 2.1 Main Stakeholders in Incubator Systems and their Objectives Stakeholder Main objective/stake in

incubation Caveat

Local and central governments

Enhancement of economic development, job creation and increasing the tax base through the creation and expansion of businesses

This requires restricting admission to firms with high growth potential

Universities and other R&D institutions

Commercialisation/transfer of technology

This means restricting admission to technology-based firms

Real estate developers Profit from renting out space to incubator tenants

Many such incubators are forced to take on any forthcoming tenant to fill space

Donors/NGOs Poverty reduction/empowerment among vulnerable groups

This may require continuous subsidy, since tenants selected on the basis of poverty will have limited means to pay for services before they graduate


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2.3 Lessons Learnt from International Experience Incubators have been used for over 20 years in the developing countries. During this period, a lot of research has been carried out to document the lessons and best practice. Amstrong (2002) recently documented these lessons. The key ones are discussed below. The idea is to make use of these in establishing and operating incubators in Tanzania. Incubators which are most enterprising and sustainable in business terms are also most effective in value adding to their tenants An incubator which is more enterprising and hence financially sustainable becomes more effective in many ways. First, it becomes a role model for its tenants. Also, being more enterprising and more business-oriented, it tends to focus more squarely at the core function, contracting out the non-core ones. Both of these tendencies lead to better performing tenants. Better performing tenants can afford to pay for services and this lessens bad debts, follow-up costs and reduces reliance on external funding, which is unreliable. The more stable the funding, the more an incubator can focus on the enterprise development needs of its tenants. Entrepreneurial management of an incubator therefore sets forth a virtuous cycle of sustainability, whereas one which is not sets off a vicious cycle of dependency and failures. Common reasons for failure The most common reasons for failure of incubators are:

o Lack of feasibility study and business plan to establish adequacy of demand and strategically planning establishment and operations

o Poor governance/inactive board. This entails lack of strategic direction,

control and effective stakeholder involvement o Location with poor infrastructure, weak entrepreneurial culture o Manager or staff without business experience/skills. This arises partly

from failure to appreciate the importance of competent management and partly from failure to attract a high calibre of management and staff due to unattractive remuneration, organisational structure or positioning of the incubator. The image of the incubator can be enhanced by the composition of partners

o Higher investment and operating costs than those which can be

sustained

o Insufficient linkages to relevant expertise

o Unsupportive government policies or taxes


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o Lack of or inappropriate admission criteria: admitting on the basis of need/poverty or ability to pay rent rather than potential to develop an enterprise

o Improper selection of premises: picking a structure or land because it is

available, rather than business viability considerations Use of Incubator Managers’ time can easily be diverted from the core mission If business incubators are to deliver economic benefits then more attention needs to be paid to promoting business growth among their tenants. The incubator management should ideally devote more time in business development (consultancy, counselling, and generating entrepreneurial synergy) at the expense of maintaining workspace, office services, etc. Research shows that 75% of the incubator managers’ time was being spent on non-incubator responsibilities and real estate issues such as rent collection, maintenance and management of refit or refurbishment of tenant spaces. Lower value added tasks can be partitioned out by contracting out, arranging for a sponsor to perform them, delegating to a staff member, sharing people who perform similar roles elsewhere, etc.

2.4 Lessons Learnt from Tanzanian Experience There is no experience on full service incubation in Tanzania. However, SIDO’s experience with industrial estates can be useful. SIDO established industrial estates in the late 1970s in Dar es Salaam as well as in other regions. The main service provided was managed workspace for industrial SMEs, along with common facility workshops for engineering oriented SMEs within the estate. In addition, SIDO provided machinery on credit for some of the tenants. Training and advisory services were also availed to the tenants. There has been no formal evaluation of these initiatives. However, anecdotal evidence as well as discussions with SIDO officials who have been there long enough suggests that the results have been disappointing. Only a very small proportion of the businesses which started or relocated to the estates have expanded. Most have either closed down or reduced their level of operations significantly. Some of the estates have been sold or converted to godowns. Others are empty. There are a number of lessons to be learnt from the limited information available on this initiative. The industrial estates were constructed first and then SIDO started looking for tenants. Since the estates were located away from the urban centers, few manufacturing firms were willing to relocate from their established premises, which were closer to the market, to the incubator. In order to convince them to


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relocate SIDO officials had to promise the business operators low rent and availability of many free services. As a result, when they relocated to these premises, they saw themselves as having favored SIDO by helping them fill the space they so desperately needed to fill. For example, some of the tenants are paying a monthly rent of Tshs 6,000 (US $ 6), the same as they were paying when they came in 1979. New tenants are paying Tshs 150,000 (US $ 150) for the same space. The first batch of tenants argue that they were promised low rents to relocate and hence the rents they are charged cannot be adjusted upwards. Others have sent SIDO to court after attempts were made to raise the rents. One SIDO official narrated the following to the consultants: One of the first tenants was a manufacturer of metal waste bins. After some effort, we managed to convince him to relocate from an area close to Kariakoo to Vingunguti (SIDO industrial estate). Then we loaned him the equipment he needed to increase production significantly. At the same time, we started looking for a market for his products. We landed a big order for waste bins in one of the parastatal organisations. When we told him to deliver the products, he said he could not, since he had no transport and no money to hire a truck. We took a SIDO truck and sent it to his factory, and asked him to load the goods. He said he could not do that. The SIDO official who had brought the truck teamed up with another person who happened to be around to load the bins and deliver them at the client’s premises. After the first delivery, the officer went to SIDO and requested for an loan to pay porters to load and offload the bins. After all of the order had been delivered, the Procurement Officers at the parastatal requested that they be given three waste bins for personal use, as complementary. When this request was sent to the supplier by the SIDO officer, he flatly refused, saying that he did not have any bins to give away. He never got another order from this client. The key lessons from SIDO’s experience are:

o An assessment of demand and in particular readiness of potential tenants to use and pay the services is critical

o The way tenants are recruited should be done very carefully to ensure

that they know what to expect from incubation facilities

o Management should perform in such a way that tenants are encouraged to take responsibility for their business activities, rather than leaving business activities to incubator management and becoming over-dependent on them.


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3. PROFILE OF WOMEN ENTREPRENEURS AND THEIR BUSINESSES This section provides a profile of the women entrepreneurs in Tanzania and their businesses, which is the target of the envisaged business incubator. The idea is to ensure that the subsequent analysis and recommendations take full account of the characteristics of the target group. 3.1 Profile of Women Entrepreneurs

Past studies on women entrepreneurs (ILO 2002 and 2003) as well as findings of the current survey revealed that most (64.1%) of the women engaged in business activity are in the most economically active age group (25-39 years), meaning that they can benefit from incubation services, which assume that the owner has a long-term development plan which the incubator will help realise (Table 3.1).

Table 3.1 Age Group of the Women Age Group Women Not In Business Women in Business

Number Percentage Number Percent 15-24 8 10.3 1 1.4 25-39 50 64.1 38 51.4 40-55 19 24.4 30 40.5

Above 55 1 1.3 5 6.8 Total 78 100.0 74 100.0

Consistent with previous studies, a majority (71.5%) of the women in the types of business surveyed have at least secondary education. This also means they have a lot of potential to develop sustainable business activities with support from incubation services (Table 3.2).

Table 3.2 Educational Profiles of the Women Women not in Business Women in Business Education level Number Percent Number Percent

Primary school or lower 22 28.2 15 20.3 Vocational or technical training 5 6.4 3 4.1Secondary school education 35 44.9 37 50.0Advanced secondary school education

11 14.1 8 10.8

Post secondary school education

5 6.4 11 14.8 13.7

Total 78 100.0 74 100 3.2 Profile of the Women Owned Businesses

The women businesses are mostly sole proprietorships (81%) or group activities (15%). Again, as in previous studies, most of the businesses are still at infancy stage, with almost 62.8% having been established after 2000. This means that they are still very much in need of the support services availed by an incubator (Table 3.3).


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Table 3.3 Age of the Business Year Number of businesses Percentage

1980-1999 28 37.8 2000-2003 46 60.8

Total 74 100 3.3 Main Activities Carried by Women and Potential for Doing More

The survey covered women engaged in horticulture, food processing, artwork, textile and animal husbandry. However, women are engaged mainly in producing very traditional products for which the market is within their vicinity. There are other products, which could be produced and marketed elsewhere using the available resources.

Table 3.4 shows the activities in which women are involved as well as consultants’ suggestions on unexploited potential in each sub-sector.

Table 3.4 Activities Carried out by Women and Unexploited Potential

Sector Main activities Unexploited potential Food Processing Processing and parking of

grains, dried vegetables, garlic, juice making, street vending (mama lishe).

Processing of dried meat, pork sausages, salami, bacon, fruit canning.

Artwork Manufacture and marketing of baskets, containers, mats, decorations, pottery etc.

Manufacture of (food, beverage, flower) containers and container wraps, Beads work, Buttons, Belts, Carpets, Handbags,

Textile Tailoring, clothes Tailoring of standardised textile products for export/sale in the local market in large quantities, ties and dye making, pillows and bed sheets, short pants tablemats.

Horticul ture Cultivation and marketing of onions, carrots, tomatoes, bananas, mushrooms etc.

Cultivation and marketing of apples, peaches, plums, paprika, rose/flower farming.

Animal husbandry Poultry farming Raising traditional breeds (e.g. chicken, goats) in commercially.

Services Secretarial services Baby sitting, cleaning, old peoples homes care etc.

Natural products Spices Dyes, Cosmetics, spices etc.


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4.0 ASSESSMENT OF THE DEMAND FOR AND READINESS OF POTENTIAL PARTNERS TO SUPPORT INCUBATION SERVICES

This section shows the results of the consultants’ analysis of the need for incubation services, ability of the targeted women to pay for the services, readiness of potential partners to support the initiative, preferences with regard to incubator model and location and pre-requisites for sustainability.

4.1 Key Constraints to Development of Women Enterprises Key problems facing women in starting and developing their businesses have been widely documented in many studies (ILO 2002 & 2003). As in previous studies, this study found that the most critical constraints are limited human capacity in terms of technical and business competencies, limited access to finance, markets, and appropriate working premises. All these problems point to the need for comprehensive support in such a form as incubation. 4.2 Access to Workspace as a Constraint for Starting and Expanding Businesses Table 4.1 below shows that 62.5% of all respondents considered access to working place/business premises to be a very serious constraint when starting a business. Only about a quarter (22.3%) considered it not a constraint at all. An even larger percentage (69%) considered access to premises as a serious constraint.


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Table 4.1:Women Responses to Access to Workspace as a Constraint When Starting theBusiness and Now Sector The extent of the constraint Total A very serious

constraint A Constraint Not a

Constraint

In Starting the Business Number 1 1 Horticulture Percentage 100.0 100.0 Number 15 5 4 24 Food

Processing Percentage 62.5 20.9 16.7 100.0 Number 6 3 4 13 Artwork Percentage 46.2 23.1 30.8 100.0 Number 24 2 8 34 Textile Percentage 70.6 5.9 24.5 100.0 Number 45 11 16 72 Total Percentage 62.5 11.2 22.3 100.0

Currently Horticulture Number 1 1 Percentage 100.0 100.0 Food Processing

Number 18 5 1 24

Percentage 75.0 20.8 4.2 100.0 Artwork Number 6 2 5 13 Percentage 46.2 15.4 38.5 100.0 Textile Number 23 3 4 30 Percentage 76.7 10.0 13.3 100.0 Total Number 47 11 10 68 Percentage 69.1 16.2 14.7 100.0 Sector-wise, those in textile and food processing were the most affected by access to working business premises. Almost all (95.7%), 65.4% and 55.6% of those in food processing, textile and artwork started business activities at home, and 87%, 41.9% and 44.4% respectively are still operating from home. Food processors cannot be licensed while operating from home and this in turn seriously limits their ability to sell to formal establishments and distant markets.

4.3 Willingness to Participate in Incubation Services

Most of the women interviewed (both existing and potential business operators) showed interest to participate in the business incubation services. Over 98% of those in business would like to participate in the incubator and all of those not in business said that they are willing to participate (Table 4.2).

Table 4.2: Women Responses to Willingness to Participate in the Incubator Number of response Yes No Women in Business 68 98.5 1.5 Women not in Business 76 100 0


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4.4 Willingness and Ability to Pay for Incubator Services All (100%) of the women in business are willing to pay for the service (Table 4.3). Table 4.3: Women Responses to Willingness to Pay for Incubation Services Response Those in Business Those not in Business Number % Number % Yes 74 100.0 76 97.4 No 0 0.0 2 2.6 74 100.0 78 100.0

However, the majority (72.7%) can afford only between Tshs 10,000/= and 30, 000/= per month. Only 19.7% of the respondents can pay between Tshs 30,000/= - 50,000/= per month. A much lower proportion (7.6%) can pay over Tshs. 50,000/=. Almost all (97.4%) those who were not in business are willing to pay for incubation services. However, 81.8% of the respondents can pay Tshs. 30,000/= or less. Only about 18.1% of the respondents can pay over Tshs 30,000/= per month (Table 4.4). Table 4.4: Amount Respondents Can Afford to Pay Those in Business Those not in Business

Tshs Number % Number % 10,000 - 30,000 48 72.7 54 81.8 31,000 - 50,000 13 19.7 9 13.6 51,000 - 100,00 0 4 6.1 3 4.5 101,000 - 200,000 1 1.5

Total 66 100.0 66 100.0 Despite their willingness to pay, women’s ability to pay (affordability) is still questionable. This means the rental charges for use of the incubator services will have to consider the income levels of the participants to the incubator. For the incubator to be sustainable, some subsidisation will be necessary especially when the business is entering the incubator for the first time. A smaller amount should be charged at the beginning, and increased as the business grows (e.g. 25% of the rental charges paid in the first year, 50% in the second year, 75% in the third year and 100% in the fourth year).

4.5 Stakeholders’ Preferences (Women in business and women not in business) 4.5.1 Preferred type of incubator

Many women who are involved in the specialized production such as food processing and tailoring prefer the full service incubator. Similarly, all the potential partners interviewed indicated that for maximum effectiveness, a full services incubator is the preferred one. The main reason is that the businesses are still in their infancy and will require significant support to grow.


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Food processors may not outgrow their informal micro status without support in terms of premises, counselling and marketing assistance. Tailors may not graduate without support in machinery and significant support in marketing and quality management.

Women involved in handicrafts and arts have shown interest in participating in a virtual service incubator. This is because their businesses are currently close to the raw materials and have no critical problems of working premises or equipment. In addition, most of the businesses are labour intensive and therefore depend on the rural population for their labour force.

Table 4.5: Women Responses to Type of Incubator Preferred

Women in Business Women not in Business Type of Incubator Number Percentage Number Percentage

Workspace 8 11.1 10 13.0 Full-Service 64 88.9 67 87.0 Total 72 100.0 77 100.0 4.5.2 Preferred incubator location

The most appropriate location for the incubation services are in urban and suburban areas where there is a fairly high concentration of micro enterprises or potential operators of micro enterprises. The SIDO Industrial Estates are a natural candidate for incubators with walls. As to where the incubators could be located, the women entrepreneurs interviewed emphasized that the location should be readily accessible by the women; otherwise they may not be able to use them. This is because a woman running a business is still responsible to all her traditional gender roles, which makes it difficult for her to stay too far from her family. As noted in the field and supported by other studies many of the women who start income generation activities are forced to operate close to or within their homes and therefore may not benefit from full service incubation services located away from their residential areas.

4.5.3 Preferred sectors to be included in the incubator According to the survey three sectors, food processing, handicraft, and tailoring have a high percentage of businesses with growth potential. Based on the results the food-processing sector should be given top priority because most women have been trained and are still getting training by SIDO. In addition, the sector has the potential of developing the agricultural sector from which the food processing depends for its inputs. Food processing will also assist in adding value to the agricultural outputs and hence fetch higher prices. The support to food processing will also have a triple effect/feedback effect to the lower levels and rural areas of the economy.

Second priority should be given to the handicraft sector, because experience shows that this has been one of women traditional economic activities e.g. the basket, mats the pottery making. Also, the products have an export potential.


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For example the baskets in Njombe are currently being sold in Kenya, Sweden, USA, Germany, Italy, and Denmark.

The third priority should be given to the tailoring sector, because the products have proved to be less competitive in the market due to low/poor quality of the output. Participation in the incubator will improve the quality of the products and make products more competitive and successful. The tailoring sector also has an export potential. Both the handicrafts and tailoring sectors have a potential for marketing to the USA under the AGOA, which requires high quality and large volumes of products. The incubator should therefore assists women in improving the quality and increasing the quantity of their products as well as in raising their marketing skills. 4.5.4 Preferred model for running the incubator. The field results showed that women involved in the food processing, handicrafts and tailoring sectors have both the business and subsistence motives. This means that assisting them to participate in a business incubator will require the utilization of two types of business incubators. One is for businesses that have shown growth potential and the second one should instead aim at subsistence purposes, focussing on poverty alleviation. While the growth potential type will be able to pay for the services, businesses for subsistence purposes will need to be highly subsidized. Nonetheless, the businesses are necessary to improve the livelihood and living standards of the majority of women living in the rural areas. This means that from the beginning the focus of the incubator should be clear. One focus of the incubator should be on promoting business growth and hence having a commercial motive. The second focus should be on development, whereby improvement in living standards and livelihood welfare would be the ultimate expected result. If both incubators have to be adopted then the model for running the incubator services would be an incubator within an incubator. This will be the most appropriate approach in order to allow those businesses with growth potential to serve other businesses for subsistence purposes. Therefore, while participating in the incubator, business for subsistence purposes will eventually be groomed for growth by those with growth potential. In the long run this will enable those business for subsistence purposes to learn from those with growth potential and hence create an entrepreneurial culture amongst women. It is hoped that some of the women may improve their businesses and decide to do business for commercial purposes. 4.6 Potential Partners and their Roles An incubation facility is an economic development tool for a particular community and must therefore be organised around the needs, characteristics and support available locally. The Incubator must be steered by a Board comprising mainly of local stakeholders. It is often not easy for an incubation facility to have all the services, which its tenants need in -house. As a result, it


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is always important to network with other service providers, for them to complement what the incubator facility is doing. Equally important, an incubation facility must have the support of government policy as well as that of key players in enterprise development in the area where it is located. As noted earlier, incubators require both tangible and intangible support from the community around it. Their association with credible individuals or institutions make it easier for it to access resources, including attracting the necessary quality of management. During the study, the consultants had discussions with various players who can play a role, in one way or another, in supporting the establishment and operations of an incubator in Iringa or Dar es Salaam. The list of stakeholders and their possible role in supporting the incubator initiative was discussed at a validation workshop on the 1st of August 2003. Since most of the stakeholders are found in all parts of the country, the results of this discussion will largely be applicable to other regions as well. The list of stakeholders and their possible roles is summarised in Table 4.6 below. Table 4.6: Potential Partners and their Roles INSTITUTION MAIN FUNCTION POSSIBLE SUPPORT MIT SME policy

formulation and facilitation of SME development in Tanzania Empowerment of Tanzanians.

• Support the Incubator through the National Incubator programme.

• Link and coordinate the various incubator p rogrammes.

• Link the incubator to various networks.

SIDO Technology Transfer, business training, micro -finance

• Provider of premises for incubator • Provider of technology transfer, business

skills and finance to incubator tenants • Key member of Incubator Board

CENTRAL GOVERNMENT AND MUNICIPAL GOVERNMENT

Provide advice, support and review policies, rules and regulations to support MSEs. Provide advice in agriculture, co -operative, business and community development

• Provider of technical training on agri-processing related activities, co-operative

• Participate in selection of incubator tenants/refer tenants

• Subsidize the operations and sustainability of the Incubation

• Key member of Incubator Board • Promote replication of the incubators • Provide Space

VETA – Zonal Office Provide technical training and advise on agro-processing, tailoring, metal work, etc

• Provide technical training and advise to Incubator Tenants

• Participate in selection of Incubator Tenants/refer tenants

TCCIA Support members

through training, advise, marketing, support services, etc

• Advise Incubator Tenants to join associations

• Refer/recommend members to Incubator • Participate in the Board of the Incubator • Assist in Sourcing for Markets

FAWETA Support members • Advise Incubator Tenants to join


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INSTITUTION MAIN FUNCTION POSSIBLE SUPPORT through training, advise, marketing, support services, etc

associations • Refer/recommend members to Incubator • Participate in the Board of the Incubator. • Assist in sourcing for Markets

AMKA Support sourcing of markets and market linkages

• Support sourcing of markets and market linkages

Micro finance Institutions and commercial banks such TGT, PTF, PRIDE, SIDO, Akiba Bank, Postal Bank, NMB etc.

Provide Micro Finance and other financial services to MSEs.

• Provide Micro Finance and other financial services to MSEs

Private sector Development Partners: RNE, DFID, Sida, NORAD, CDC, CIDA, UNIDO, ILO, UNFPA, AIDOs, etc

Support enterprise development for poverty alleviation and economic growth

• Financially support establishment of incubators/replication

• Provide technical support for setting up incubators in various parts of the country

• Support study tours for exposures

Advocacy and Lobby Groups, Institutions and NGOs e.g. TAMWA, TACAIDs

Advocacy, Lobbying, and Publicity

• Support MSEs in sensitisation, lobbying and publicity.

• Assist in sensitising MSEs operators in AIDs pandemic awareness.

4.7 Sustainability of the Incubator

Both the financial and social sustainability should be considered for the successful implementation of the incubator. The nature of incubators is that they continuously accommodate nascent enterprises, graduating all the established ones. As a result, incubators typically rely partially on developmental funding and partially on tenants’ fees. There is therefore an unavoidable trade-off between the support to the real poor and the financial sustainability of the incubator. The study has shown that the lowest income strata of women entrepreneurs would be able to pay Tshs 15,000/= per month for the service in the first year, which adds up to only Tshs 450,000/= per month for 30 tenants. This would hardly be enough to pay the salary of the incubator manager.

If the incubator is to be reserved for the small minority who can pay Tshs 60,000/= per month, their total monthly rent would amount to only Tshs 1,800,000/=. With this amount, it is possible to operate a low costs incubator relying mostly on free training, consultancy and advisory services from other agencies in the area.

Since there is no prospect on getting a permanent donor agency to support incubators, there are two ways of achieving this. One is to target relatively able enterprises and rely on free services from other support agencies, such as VETA, SIDO, government extension workers, etc. The other is to get the


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local government, in the respective areas, to agree to subsidize incubation services as a way of fostering business development and expanding their tax bases. The other aspect of sustainability is the social sustainability. Gender and cultural issues do inhibit women who are in business and those wishing to start one. For the successful implementation of the incubator it is necessary that a solution be found on how to solve some of the gender and cultural issues. For example, it is proposed that the incubator should not be too far from the woman’s home place to enable her to participate in the business, in the family and in the community’s affairs. The study has revealed that many women do not want to travel too far from their homes and many are still involved in all family affairs. Culturally many men do not want their wives to be far away from home. One man said, “When I go home I want to find my wife there. I cannot imagine my wife doing business far away from home. My relatives will think I am not married and will not understand me”. Many men share the same kind of reservations, especially in Iringa, where strong traditional cultural values are still strongly upheld. During the workshop a proposal was made that, as experienced in women business incubators programmes in India, men (husbands) should be involved in the incubator. In India the woman (wife) is the one who joins the incubator, but the sensitisation is done to both the man and the woman. Also, when the woman is in the incubator the man is informed about what is happening. The assumption is that when the woman graduates from the incubator, the husband will then be ready to assist and support the woman. Studies in Asia show that business incubators have been successful where the man was actively involved. It is therefore proposed that the role of men should be considered in running the incubator and after graduation. Replicability of the incubator programme should also be considered. During the implementation other incubators could be modelled based on the pilot one. This means that some of the mistakes learnt should not be repeated when establishing a new one. Given the large potential and need for increased business growth, the demand for incubator will increase if the pilot incubator is successful. It is therefore very important that errors and mistakes made are handled immediately and programmatically.


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5.0 PROPOSED RESOURCES REQUIREMENTS AND COSTS OF SETTING AN INCUBATOR The human resources, financing and other resource requirements of the incubator are spelt out below. 5.1 Human Resources Requirement The human resources requirements should include: 5.1.1 General Manager of the incubator This should be a business-oriented person who has sound knowledge of and experience in working with MSEs and well as Business Development Services (BDS) providers. He/she should be someone with a total understanding of small businesses in general rather than a mere expertise in one area. This is because he/she will continuously be required to provide basis advice on all matters to the incubator tenants. Knowledge of BDS will be instrumental in linking the incubator clients with BDS providers. Proposed salary for the manager should be US $ 2,000 per month. 5.1.2 Permanent team of incubator experts (3) The centre should have at least a small team of experts who have knowledge and experience in the following areas: Business Development and Management expert (1), Accounting and Finance expert (1), Network (Management Information Systems) expert (1). The team should liaise with the associate team of experts in case there is a problem which needs to be solved. A small permanent team will reduce the cost of running the incubator. Proposed salary for each expert is US $ 1,500 per month. 5.1.3 Group of associate experts (10 in various areas at least one on each type of business in the incubator) Instead of employing full time staff to work in the incubator it is proposed that the incubator management team should approve a database of associate experts in various areas who will be ready to assist the MSEs. The expert areas should be determined by the types of business included in the incubator and the specific needs of the businesses. The expert team will be contracted when and as need arise. The budget for the experts will depend on how many will be needed at any particular time. 5.1.4 Support staff The incubator will need some support staff to run the office such as an Office Management Secretary (1), a Cleaner/Watchman (1), Driver/Messenger (1). Tentative cost of the support staff is estimated at US $ 500 per month.


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5.1.5 Foreign technical assistance MCDGC should think of requesting a business incubator specialist to assist in running the incubator during the pilot phase. During that time some capacity building will be developed to the local staff. The technical expert should have knowledge and experience in MSEs, experience in running incubators, worked as a developing countries and has business acumen. Proposed salary of the expert is estimated at US $ 5,000 per month. 5.1.6 Management structure As pointed out during the interview and workshop recommendations, there should be a board supervising the incubator. The board should comprise of the MCDGC, which should be the lead ministry. Other board members should include:

• VETA • SIDO • UDSM – For technical consulting purposes • TCCIA/FAWETA – regional chambers • Other appropriate local NGO • Local government (Municipal Director’s office)

5.2 Equipment Requirements This will depend on the type of business to be admitted in the centre. Nonetheless the following are necessary equipments to run the incubator administrative office. These are:


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Table 5.1 Equipments for the Incubator Administrative Office S/No Type of Equipment Quantity Amount in US $ Office Equipments Desk Top PC 6 6,000 Server 1 7,000 Laser Printer 1 500 Printer 1 700 UPS 1 100 Photocopier 1 4,000 Fax machine 1 500 Telephones for the office 6 360 Telephone exchange 1 3,000 Fans 6 180 Office Furniture (tables, desks etc) 6 sets 2,000 Furniture for Incubator Meeting room 1 set 1.000 Furniture for the Reception Office 1 set 1,500 Furniture for the Coffee/recreation room 1 set 2,000 Equipments for the Business Incubator Offices Telephones for the Business Incubators 20 1,200 PCs for the Incubator 4 4,000 Fan for the Incubators 20 600 Total 34,640 5.3 Renovations of the Incubator Building According to the SIDO renovations of the sheds varies from one building to the other. It also depends on the type of business which will occupy the incubator. In general, all sheds need some renovations (face lift). This is estimated to cost about US $ 2,000 for each shed. Currently, SIDO Iringa has about eleven (11) shades of which three are occupied. Eight (8) shades could therefore be planned to be used by the business incubator. So far each shed could be used by between 4 and 6 businesses. This means a total of about 40 businesses could be accommodated. Within the compound three more shades could be built. Assuming one shed cost US 2,000 for renovations and rehabilitation, rehabilitation of 8 shades will cost about US 16,000. 5.4 Proposed Financial Budget for the Pilot Incubator The proposed budget covers costs of establishing the incubator including costs for renovating the incubator (the office) and some running costs for the first four years. It also included the expected income generated by the businesses.


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Table 5.2: Overall Development Budget Proposed Details Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Total

PHASE I: Setting Up the Incubator

Costs of Renovating the Shades

16,000 0 0 0 0 16,000

Procurement of Equipments and Facilities (including automatic voltage)

34,040 0 0 0 0 34,040

Preparation of Project Proposal

10,000 0 0 0 0

Preparation of Project Business Plan

15,000

Total Costs of Phase 1

75,040 0 0 0 0 75,040

Phase II: Implementation Staff Salaries General Manager (1) Permanent Experts (3) Support Staff Salary (3) Board Meetings

24,000 54,000

6,000 16,800

24,000 54,000

6,000 16,800

24,000 54,000

6,000 16,800

24,000 54,000

6,000 16,800

24,000 54,000

6,000 16,800

120,000 270,000

30,000 84,000

Subsidies Rental Services

8,400 15,000 10,500 0 0 33,900

Office Operating Costs (to cover running costs such as fuel, transport, stationary, utilities, communication costs etc.

24,000 24,000 24,000 24,000 24,000 120,000

Total Costs of Phase II

133,200 139,800 135,300 124,800 124,800 657,900

Phase III: Monitoring and Evaluation and Roll Out Other Incubators

Cost of Monitoring, Evaluation and Tracking System

0 10,000 0 0 30,000 40,000

Total Grant Costs 75,040 133,200 149,800 135,300 124,800 154,800 772,940 Table 5.3: Tenant Support Scheme (based on 40 businesses selected) Proposed Details Year 1 Year 2 Year 3 Year 4 10 25 35 35 Expected Income From Business Incubators.

Rental Charges per month US $ 30 US $ 50 US $ 75 US $ 100 Rental Services per year

3,600 15,000 21,000 42,000

Expected Costs Subsidized Rent

70 50 25 0


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Proposed Details Year 1 Year 2 Year 3 Year 4 Subsidized Incubator Rental Vouchers 8,400 15,000 10,500 0 Surplus/Deficit From Operations (4,800) 0 11,500 42,000


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6.0 CONCLUSIONS AND RECOMMENDATIONS The study has shown that the concept of incubator could be a potential service for eliminating some of the problems faced by women wishing to start a new business or to improve existing ones. Many women have indicated their willingness to participate and to pay for the incubator. International as well as Tanzanian experience suggests that for incubators to be effective in supporting enterprise development, they should themselves be entrepreneurial and business-oriented. This requires that they are professionally managed, have an effective board, focus on the core function of business development, generate all its operating requirements internally, put clear terms and conditions and avoid tenants’ tendency to be over dependent on incubator staff. Based on the results the following are recommendations relating to the establishment of the incubator. 6.1 Sectors to be Included in the Incubator

Food processing, textile and artwork are the sectors which have the potential to benefit at the most from incubation services. These have a high potential for growth, which is yet to be realised and may not be realised at all without comprehensive support in the form of incubation services.

6.2 Type of Businesses to Participate in the Incubator.

Women involved in the food processing, handicrafts and tailoring sectors have both the business and subsistence motives. It is therefore recommended that the preferred type of business to participate should have both the commercial and developmental focus. We therefore propose that the model for running the incubator services should be an incubator within an incubator

6.3 Suggested Type of Incubator

Many women who are involved in specialized production such as food processing and tailoring prefer the full service incubator. Those involved in horticulture and artwork have no critical problems of premises or equipment, hence virtual incubators would do.

6.4 Potential Location of the Pilot Incubator

Both Dar es Salaam and Iringa have the potential for locating a business incubator especially the full services type of incubator. Given that similar initiatives are currently being proposed in Dar es Salaam and Kibaha area, it is recommended to establish a pilot incubator in Iringa. Some of the reasons for locating the pilot incubator in Iringa are:

• Availability of raw materials

• Presence of incubator tenants

• Availability of incubator services providers e.g. institutions, consultants

and NGOs


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• Good infrastructure (water, electricity, roads etc.)

• Presence of development partners (donors, companies, financial

institutions, Community based organizations, religious organizations

e.g. DIRA and WAWATA)

• Local government supportive of the initiative and can should be taken

in to provide space

In addition Iringa offers lots of potential for existing and innovative products. Iringa has a high potential for developing the food-processing incubator given its high concentration of agricultural products including fruits, vegetables, cereals, potatoes etc. Iringa is also a source of good baskets, mats, and pottery. The clay soil in Iringa is very rich and can be used for developing a ceramic factory. There are no transport problems to and from Iringa and the major roads linking Dar es Salaam are also good. Iringa can be used to service the Southern Highland Regions of Mbeya, Rukwa and Ruvuma. In view of the proximity, good infrastructure, transport and the source of raw materials Ir inga qualifies to be selected as a good pilot business incubator location. It is therefore recommended that two incubators be started, one for food processors and one for artwork.

The best place is in Iringa Municipality and the recommended site is the SIDO Industrial Estate, most of which is currently under-utilized. While to establish a new place will be more expensive, cost of developing, renovating and improving the current SIDO premises will be minimal.

6.5 Sustainability of the Incubator

Since there are no prospects of getting a permanent donor agency to support incubators, there are two ways in making sure the incubator is sustainable. One is to target relatively able enterprises and rely on free services from other support agencies, such as VETA, SIDO, government extension workers, etc. The other is to get the local government in respective areas to agree to subsidize incubation services as a way of fostering business development and expanding their tax bases. For both modes, all tenants participating in the incubator should pay some token user fees/charges for the services provided by the incubator. It is proposed that a rental charge fee should range from 25% to 100% in the first and second year respectively.

To resolve some cultural and gender related problems both women (wife) and men (husbands) should be involved in the incubator.


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6.6 Number of Businesses in the Incubator

The number of incubators to be included in the incubator should be minimum at the beginning and increased progressively. For example in the first year only 30% of the required business should be allowed to start their businesses in the incubator. In the second and third year the number should increase to 50% and 85% respectively. At any point in time some space in the incubator should be left to allow growth of existing businesses. Based on the space available at the Iringa SIDO shades, a total of about 40 businesses could be targeted for the pilot incubator. Maximum time for the businesses to stay in an incubator should be four years. Businesses could leave before on voluntary or compulsory basis.

6.7 Management of the Incubator

An autonomous board, supervised by the MCDGC should be instituted to oversee implementation of the pilot incubator.

6.8 Preparation of a Contract Between Incubator and the Business Operator A contract should be drawn between the businesses selected to join the incubator and the Incubator operator/Management. The contract should spell out all the rules and regulations as well as rights and responsibilities of each party to be fulfilled by both parties, the procedure for joining the incubator and how the business can be dismissed from and incubator or graduate, the role and expectations of the business during the incubation period. The development programme for each business should be attached to the incubator to be used as a guide in monitoring the progress of the business.

6.9 Lead Partner and Collaborators

There is need to have a lead partner and some collaborators. While MCDGC should be the lead partner, SIDO should be considered as the lead local partner. Other institutions including the Ministry of Industries and Trade (MIT) and other development partners including donors, should be involved as collaborators. Their roles should be clearly defined.


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6.10 Development of Monitoring, Evaluation and Tracking Systems

A monitoring, evaluation and tracking system should be developed. Monitoring by management of the incubator should be done daily. While progress reports to the incubator board should be presented every three months. The reports should be distributed to all the incubator’s stakeholders. Evaluation of the incubator should be done twice: at the end of the first year and at the end of the fourth year. A tracking system should be developed for all businesses that will go through the incubator and whether they will be successful or not.

6.11 Development of a Full Proposal and Business Plan

The proposed figures in this report need to be worked out in a full project proposal. Thus a full project proposal should be developed as a basis for starting the incubator as well as a business plan for running it.


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7.0 IMPORTANT CONSIDERATIONS AND WAY FORWARD

7.1 Important Considerations

Prior to starting the incubator the following should be done:

(i) Discussions with SIDO on use of the facilities

There is need for the MCDGC through the MIT discusses with SIDO on the possibility of using SIDO shades in Iringa for the women business incubator. SIDO could be given the contract to manage the incubator while the overall ownership and responsibility of running the incubator should be in the MCDGC.

(ii) Participation of local stakeholders

From the survey it is clear that there are a number of people/institutions who could become stakeholders or potential stakeholders in the incubator. The stakeholders would have different roles during the planning, establishment and implementation of the business incubator. In order to capture the interest of many stake holders it is necessary that the following be done.

• Awareness building: Conduct seminars and workshops to raise awareness of the intended beneficiaries on the aims and vision for establishing the incubator

• Involvement of the stakeholders: The stakeholders should be requested to identify their specific roles and the contribution they would make

Local stakeholders listed in Table 4.6, as well as others, should be fully involved in the development of the incubator project as well as in its implementation. (iii) Establishing a Selection criteria for participants to the incubator Before establishing the incubator there is need to establish the selection criteria for those who qualify to participate in the incubator. Best practices indicate that those to be included in the incubator should possess general enterprising tendencies (GETs) such as initiative, optimism, self-drive, and risk taking. Those lacking entrepreneurial traits should be given some training in order to build the entrepreneurial culture, attitude and business management capacity. One way of building the entrepreneurial culture is by asking those who do not own businesses to be placed close to those who do have businesses and let them learn from the successful and with growth potential ones. This will help develop existing women entrepreneurs and build new ones.


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(iv) Solicit for Funding Funding adequate to run the incubator for the first five-year years should be solicited and committed in order to run the incubator smoothly. Funding should also be solicited from Micro Finance Institutions and Commercial Banks which should be linked up to finance the business incubators during the incubation period and after graduation.

(v) Development of an Exit Strategy An exit strategy should be clearly developed and should indicate how a business will be required to leave the incubator voluntary or on a compulsory basis. Three options are available:

• Business Has No Interest in Staying: A business is no longer interested in staying in the incubator because of some dissatisfaction. The business should be allowed to leave the incubator

• Business Fails to Meet the Incubator Rules: A business has failed to

meet the incubator rules, which leads to expelling the business

• The Business Graduates: A business has a right to leave the incubator at any particular time if it feels it has developed enough to be able to work on its own

7.2 Proposed Way Forward and Implementation of a Pilot Project Implementation of the Pilot Incubator should be done in phases. The proposed phases are as follows: PHASE ONE: SETTING UP THE INCUBATOR (i) Funds Solicitation The first thing which should be done in phase one is to solicit for funds. Funds should be solicited to cover renovations or construction of the incubator. The funds should also be solicited to run the incubator for the first five years of the pilot stage. While funds for year one (1) to four (4) will be used to run the incubator, funds for year five should be used for evaluating the project and follow-up of those who have graduated from the incubator. (ii) Renovations and Construction of the Incubator Preparation should be made with regard to the renovation of a place or constructing a building where the incubator is to be located. (iii) Selecting the Management and Administrative Structure and Team to Manage the Pilot Incubator A management and administrative team to manage the incubator should be selected and appointed. These will be the staff to manage the incubator on a


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day-to-day basis. In addition a board to oversee the incubator should be selected and appointed. (iv) Procurement of Equipment and Facilities Procurement of equipment and facilities for both the office and businesses should be done. Equipment required by the specific businesses should be procured during the implementation. (v) Selection of the Businesses to be Included in the Incubator. Business to be developed should be selected prior to starting the business. A careful selection criterion should be used to ensure objective selection. (vi) Preparation of Business Plans for Businesses Selected For proper guidance and monitoring each business selected to join the incubator should have a business plan. The incubator team of experts together with the business operators should jointly prepare the business plan. Ownership of the business plan should be in the women business operator. PHASE 2: IMPLEMENTATION OF THE PILOT INCUBATOR When all the preparations are ready, the incubator should start the operations. Some of the major issues to be done during implementation are as follows: (i) Procurement of Facilities and Equipment to be Used by the Businesses The specific equipment and facilities to be used by the businesses selected to join the incubator will need to be procured having selected the businesses. (ii) Preparation of the Businesses Data Base and Profile Basic data of the business and the owner e.g. when the business was established, amount financed for the business, type of business facilities available etc, should be developed. The database should capture all the necessary information and data required for monitoring and evaluation of the businesses. (iii) Monitoring Instruments Monitoring instruments should be designed and should be filled and checked by both the incubator management and the business operator. This will help to closely monitor how the business is progressing. The instruments should guide both the operator and the incubator management on what to do in case of any problems. (iv) Financing the Incubator There is need to create a financing arrangement for the incubator. It is proposed that instead of money being issued to the businesses, a voucher system should be used for all the services they wish to pay for. All paid up service by incubator should be agreed at the start and be included in the contract.


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(v) Development of Accounting and Business Records for the Incubator Some accounting records to record all funds received by the business and all expenses made by and on behalf of the incubator should be kept. The business operator should keep the same records. In addition to the accounting records, there should be some business records (e.g. sales, markets, production, etc) on how the business performs. PHASE 3: EVALUATION OF THE INCUBATOR AND ROLL OUT OF OTHER INCUBATORS While monitoring of the incubator will be done continuously and reports prepared quarterly, an evaluation of the incubator should be done after two (2) years and at the end of the fourth year. The evaluation conducted at the end of two years should help to assess the progress and impact of the incubator. Changes may be proposed following a monitoring report or an evaluation. The evaluation at the end of the fourth year should help to look at the whole implementation and to plan for a full incubator programme. Thus the whole business incubator concept should be reviewed, including the mode of operation. This will also be the time to roll out more incubators.


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