1

“STRUCTURAL BARRIERS, CONSTRAINTS, AND URBAN YOUTH

UNEMPLOYMENT: THE CASE OF ILALA MUNICIPALITY, DAR-ES-SALAAM ”

 19th ANNUAL RESEARCH WORKSHOP

Ledger Plaza Bahari Beach Hotel Dar es Salaam, Tanzania

April 09-10, 2014

By Dr. Christopher Awinia

PRAXIS, Tanzania

1. Introduction2. Background to the problem3. Specific objectives4. Research Findings

Main elements constraining young traders enterprises to transform

Illegitimisation of Youth Enterprises Fines and penalties Informal payment and bribes

5. Effect on urban youth enterprises Factors causing some youth not to acquire productive

capabilities The state of multiple deprivations to urban youth self-

employment6. Way forward and recommendations for further research

Outline

Urban youth unemployment in Tanzania (Dar-es-Salaam and other urban areas) is increasing (ILFS, 2006)

Proportion of youth, unemployed and in rural-urban migration is increasing (Census 2002, 2012)

Urban poverty concentrated among urban youth characterised by low capabilities to transform and lack of employment (ILFS, 2006; Kweka and Fox, 2011; Awinia 2013, 2014)

Background to the Problem

1. To assess main constraints faced by young urban people’s UHUEs [to transform] … in the wake of business formalisation and regulation of informal markets

2. Suggest ways and strategies to eliminate the constraints and have urban youth employment enhanced through [transformation of] their UHUEs

Objectives of the Study

Main elements constraining young traders

Presentation of Research Findings

Type of Constraint FacedDegree of Constraint

Highly ExtremelyFreq. % Freq. %

Lack of Business Premises 48 24.6 125 64.1

Prohibitive procedures for obtaining licenses 28 25.2 39 35.1

Cost of obtaining a license 22 20.8 20 37.7

Fines and penalties 59 35.3 49 29.3

Loss of stock and assets during eviction 53 31.5 81 48.2

Informal payments and bribes 71 41.3 43 25

Failure of the enterprise (due to the above) 57 31.8 84 46.9

010203040506070

24.6 25.2 20.835.3 31.5

41.331.8

64.1

35.1 37.729.3

48.2

25

46.9

HighExtreme

Type of Constraint

%Constraints Faced by Youth

Enterprises

Lack of Business Premises

Prohibitive procedures for obtaining licenses

Cost of obtaining a license

Fines and penalties

Loss of stock and assets during eviction

Informal payments and bribes

Failure of the enterprise (due to the above)

0 20 40 60 80100

HighExtreme

Proportion of those who were Extremely Constrained

Lack of business premises presents itself as a leading constraint (64.1% said were extremely constrained in this dimension)

This leads to lack of access to other opportunities for enterprise transformation

This sub-sector is important to urban youth poverty 98.8% of youth who lacked premises said the UHUEs they

have was their main source of employment

Key Findings

Business Location of Main Activity %Within own or business partner’s home-with special business space 18.6

Within own or business partner’s home-without special business space 9.2

Structure attached to/outside own or business partner’s house 1.3

Permanent building other than home 13.3

Fixed stall/kiosk-at market 11.0Vehicle cart, temporary stall-at market 6.1

Other temporary structure 6.4

Fixed stall/kiosk-in street 4.3

Vehicle cart, temporary stall-in street 9.6Construction site 1.9Customer’s/Employer’s house 0.6No fixed location/mobile 17.7Total 100

Source: NBS (2007)

Municipal regulations illegitimises UHUEs of urban youth without business premises

This put young urban traders at constant conflict with municipal law enforcers

Causes loss or damage of stocks/assets 48.2% (extremely) and 31.5% (highly) constrained by resulting

from uncertainty over their legal entitlements and city aux. police ‘cleansing’ operations

The Concept of Illegitimisation

Uncertainty causes low investment and therefore affects transformative development of urban youth enterprises

Combined, 95.2% of urban youth interviewed said their enterprises were negatively affected by the prevailing state of illegitimisation

The state of Illegitimacy is created by municipal business regulations, works against transformation of youth enterprises for inclusive growth

The Concept of Illegitimisation-2

The state of illegitimacy is responsible for other hidden-costs which constrain transformation of urban youth enterprises

The degree of constraint to urban youth self-employment enterprises were high (35.3%) and extreme (29.3%) due to forced payments of fines, penalties and various forms of punishment for trading in places without a valid business license

Fines and Penalties

Lack of business premises contributes to constraints against transformation as above

Other constraints proceeding from lack of premises include a penalty for ‘loitering’ (meaning conducting business in a restricted area), also called (“polluting the environment”) was TShs 50,000

The ‘psychological effects’ from lacking legitimacy prevent long-term investment and innovation

Fines and Penalties -2

38.6% urban youth were forced to pay informal payments and bribes

28.6% (10,000 p.m), 19% (5,000 p.m) and 15.9% (20,000 p.m)

Rate of informal payments and bribes depended most on location

Informal Payment and Bribes

Correlation between lack of business premises, severely affected by informal payments and bribes and those severely affected by pymt of fines, penalties and other punishments

60.5% of those who said their UHUEs were severely constrained by informal payments and bribes also said they were severely constrained by fines, penalties and other punishments

Youth enterprises that lacked business premises were multiple

deprived – thus constrained

This creates shocks, risks and vulnerabilities, thus constraining UHUE youth self-employment enterprises to transform

Poorest urban youths affected most Among the lowest income quintile (earning 50,000/- p.m

and less) 91.2% among them said their UHUEs were affected in one way or another by solicitation of informal pymts and bribes

55% among the bottom-most quintile said they were highly constrained and 26.5% severely

Youth enterprises that lacked business premises were multiple deprived – thus constrained-2

Lack of Business Premises

Prohibitive procedures for obtaining licenses

Cost of obtaining a license

Fines and penaltiesLoss of stock and assets during eviction

Informal payments and bribes

Failure of the enterprise (due to the above)

0

50

100

Highly Constrained

Severely Constrained

Not constrained at all

Youth enterprises that lacked business premises were multiple deprived – thus constrained-3

Main Factors Causing Multiple Deprivations to transformation of urban youth enterprises for self-employment and more inclusive growth

Youth enterprises that lacked business premises were multiple deprived – thus constrained-4

The triangle of multiple deprivations to transformation and enterprise development

3. Deprivations in access to micro-credit and productive assets

Deprivations in ownership of bank account

1. Deprivations in access to business license

2. Deprivations in ownership of bank account (barrier to pax in financial sector services)

Youth enterprises that lacked business premises were multiple deprived – thus constrained-5

88.3% of youth said they did not have business premises Importance: 66.7% of those who did not own business

premises said their UHUEs were their main source of employment

56.5% failed to transform their enterprises because they were severely constrained by (a) long, (b) bureaucratic, (c) complicated procedure for obtaining business license

Licenses were inaccessible to them – mainly because they did not own a business premises

35.1% said difficult conditions in acquiring a business license served as a severe barrier to transformation of their UHUEs. 25.2% (a big barrier). 73.9% (overall)

Youth enterprises that lacked business premises were multiple deprived – thus constrained-6

94.6% said they were unable to obtain business premises. As a result they could also not obtain a business license

Lack of business license constrained urban youth to participate in the financial sector thus being excluded from the opportunity to transform their enterprises

45.3% (severely) and 49.2% (highly) urban youth enterprises constrained to transform by lack of banking and financial services

As a result of the foregoing, 94.4% said all the various constraining factors made them unable, in one way or the other, to conduct their enterprise (total collapse)

46.9% (contributed severely), 31.8% (to a big extent) and 15.6% (to a small extent)

Youth enterprises that lacked business premises were multiple deprived – thus constrained-7

CONCLUSIONS

Municipal authorities should create more business premises for young people 35% said nothing is currently being

done by municipal officials to obtain more premises

48.5% said the area where they are currently work is restricted - putting them in conflict with the law

Options to reduce youth unemployment through transformative

productive capabilities

Build-on the Open Air Market (Gulio) Model 94.5% said open air markets on pavements contributed to increasing

access of premises 47.5% (to a big extent) and 26.5% (very significantly) 95.2% (contributed positively to creation of urban youth employment),

35.4% (very significantly) 64.9% favour municipal auth. to enact by-laws that would allow urban

youth to trade on pavements (in the style of machingas) 22% (strongly favoured) liberalisation of the pavement sector Such measures would contribute to enlargement of capabilities among

youth to create self-employment (access to business premises->participation in financial/banking sector ->dev. of transformative productive capabilities, innovation and efficiency)

Options to reduce youth unemployment through transformative productive capabilities-2

64.9% favour municipal auth. to enact by-laws that would allow urban youth to trade on pavements (in the style of machingas)

22% (strongly favoured) liberalisation of the pavement sector

Such measures would contribute to enlargement of capabilities among youth to create self-employment (access to business premises->participation in financial/banking sector ->dev. of transformative productive capabilitities, innovation and efficiency)

Options to reduce youth unemployment through transformative productive capabilities-2

1. The space and importance of low capabilities urban enterprises needs to be identified in the ongoing enterprise transformation/formalisation agenda

2. Recognise primary motivation of starting UHUEs is not enterprise development – hence formalisation /transformation for enterprise development is not their priority

Recommendations

3. Undertake municipal reforms to foster urban youth employment/enterprise development through creation of business premises for informal enterprises

4. Need to liberalise the ‘pavement economy’

5. Create UHUE forums/assoc to promote self-regulation

6. Future urban road construction should take into account the need to create more space for business premises for urban youth

Recommendations-2

KNOWLEDGE GAP AND AREA FOR FURTHER RESEARCH

It is true that micro-enterprises are constrained to transform

The main area of constraint is capability deprivations to transform and undertake business development for more inclusive growth

The conclusion of the present study show inability of urban youth enterprises to transform is not only in the constraints and lack-of, but in capability deprivations as manifest in inequalities between capabilities of urban youth to transform

Knowledge Gap

There are some enterprises, including youth enterprises which have been able to transform even under present conditions

The knowledge gap is: (1) “what are the key drivers behind the successful transformation of urban enterprises?” (2) “what are the main factors that make some enterprises to transform and develop while others do not?”

Knowledge Gap -2

The present study was undertaken to contribute to knowledge development in the area of enterprise development for more inclusive growth

The study looked at how informal urban enterprises of the youth are constrained to transform

Conversely, it is equally, and even more important to look into “pathways” that have been taken by enterprises that have successfully transformed

Area for Further Research

This approach will generate valuable lessons for policy, identify, codify and enable facilitation and dissemination of common best practices of enterprise transformation for inclusive growth

The findings will be empirical, coming from practitioners themselves, and based on facts and experience

Area of Further Research-2

Title: Key Drivers behind successful Transformation of Urban Enterprises:

Comparative study of Transformed SMEs in Carpentry and Agro-processing in Ilala District

Objective: To identify main drivers that contribute to transformation of urban enterprises

Specific objectives:  Map-out pathways followed by urban enterprises that managed to transform Identify extent that transformed enterprises contribute to urban employment creation

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Objectives of the Proposed Study

Methodological Supplement

Secondary data sources

Unstructured key informant interviews

Unstructured/semi-structured qualitative interviews (FGDs)

Structured quantitative questionnaire

Methodology

No. Area No. of youth in HEs to be interviewed

1. G/mboto Cluster 1 50

2. G/mboto Cluster 2 50

3. Mchikichini Cluster 1 50

4. Mchikichini Cluster 2 50

5. Total 200

Sample-size

Purpose judgmental for qualitative interviews

Stratified sampling technique for the structured quantitative questionnaire survey

Level 1: Purposive (choice of clusters/groups)

Level 2: Random (listing of total population then choosing through simple random sampling)

Sample Selection

Qualitative data through MVIVO software for ethnographic data analysis

Structured questionnaire survey through SPSS – drawing comparisons, associations and generalisations of different variables measured

Data Analysis Techniques

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