BUSINESS STUDIES FORM FIVE NOTES (New Syllabus)

Chapter One: Business Environment

Introduction

Understanding the business environment provides relevant insights into the opportunities and challenges in the marketplace. These insights enable businesses to adapt their strategies and operations accordingly. It is therefore critical for businesses of all sizes and sectors to understand the business environment in which they operate. In this chapter, you will learn about the concept of business environment, business start-ups, and stakeholders in the business. The competences developed will enable you to collaborate with key business stakeholders to establish and operate businesses effectively.

Think: A business operating in a vacuum.

The Concept of the Business Environment

Business environment refers to all the factors influencing business operations and well-being. It helps in recognising business opportunities, identification of required business resources, and organisation of the resources that facilitate business operations as well as performance. This is because the environment in which businesses operate is dynamic and multifaceted. It encompasses a wide array of factors which influence operations and decisions. Principally, several internal and external factors create a dynamic context in which businesses operate. Thus, understanding these factors helps businesses to seize opportunities, anticipate and adapt to changes, and overcome challenges.

Imagine an environment where a trader operates a small fruits stall in a busy market. This kind of business is not just about selling fruits but also will have to consider other things which affect its operation such as the prices of fruits, the weather, the number of customers around, the types of fruits, and even the regulations governing trading in the market place. All these factors that impact the fruits selling business constitute what is referred to as the business environment. As a way of enhancing the understanding of the business environment, one can pay attention to what is happening around and how it affects business. By so doing, one can make better decisions and increase the chances of the business success.

Types of Business Environment

The environment in which businesses operate can be classified into two main types: internal environment and external environment as shown in Figure 1.1. Understanding these types of environments equips business operators with valuable insights about opportunities and challenges, and operational requirements present in their operating landscape. By analyzing and adapting to these environments, businesses can formulate effective strategies to thrive in a dynamic business environment.

Figure 1.1: Business Environment

Internal Environment

The internal environment of a business consists of all factors within the business organisation's management control. These factors may include organisational structure, leadership style, corporate governance, organisational climate, organisational culture, human resources management, and operational processes. Understanding the internal environment is necessary for assessing the business strengths, and weaknesses, cultivating a culture of excellence, innovation, and resilience. With this, businesses can unleash the full potential of their employees, enhance effectiveness, and achieve sustainable growth and success.

Components of the Internal Environment

The internal environment includes a variety of elements, some of which are explained as follows:

• Organisational structure: This refers to the framework of responsibilities, roles, hierarchies, communication channels, and relationships within the business. It determines how tasks are divided, coordinated, and executed across departments or units. An efficient and flexible business organisational structure facilitates communication, collaboration, and decision-making, enabling the business to adapt to changing market conditions.
• Leadership style: Leadership plays a crucial role in shaping the internal environment. Different leadership styles have varying impacts on customer orientation, employee motivation, engagement, and performance. Effective leadership empowers employees, inspires trust, promotes transparency, and fosters a culture of innovation and continuous improvement.
• Corporate governance: This refers to the system of rules, practices, and processes from which businesses are directed, controlled, and governed. It ensures accountability, transparency, and ethical behaviour at all levels of the business organisation. Solid corporate governance mitigates risks, safeguards stakeholders' interests, promotes long-term sustainability and value creation.
• Organisational climate: This reflects the predominant mood, atmosphere, and perceptions within the business organisation. It includes factors such as communication patterns, morale, trust, and employee satisfaction. A positive organisational climate fosters creativity, employee engagement, and commitment, which drive business performance.
• Organisational culture: This refers to the shared values, beliefs, norms, and behaviours that tend to shape the work environment and guide employee actions. It reflects the business organisation's identity, personality, and its core principles. A positive organisational culture fosters unity, cohesion, and creates a sense of belongingness among employees which results in driving business performance and resilience.
• Human resources management: This encompasses all activities related to recruitment, training, development, retention and retirement of employees. It involves all policies, practices, and programs geared to maximise employees' potential, satisfaction, and well-being. It is, therefore, crucial to have good human resource management practices since a competent and motivated workforce is the backbone of organisational success, driving productivity, creativity, and customer satisfaction.
• Operational processes: This encompasses the procedures, workflows, and systems used to deliver products to customers. They define the way resources are allocated, how tasks are performed, and how objectives are achieved within the business organisation. Streamlining and optimising operational processes that boost efficiency, eliminates unnecessary costs, and improves business performance.

External Environment

The external environment of a business organisation focuses on the external forces that influence its operations, decisions, and performance. These are factors that the business has no direct control of. The external environment represents the dynamic context in which the business operates. These contexts include economic, social, political/legal, technological, competitive and global environments. By comprehensively analyzing and adapting to these factors, businesses can navigate uncertainties, seize opportunities, and achieve sustainable growth and success in business landscape. Thus, understanding the external environment helps businesses to anticipate trends, identify risks, and develop strategies to remain competitive and resilient in the market.

Components of the External Environment

The external environment includes a variety of elements, some of which are explained as follows:

• Economic environment: This encompasses factors such as market conditions, macroeconomic indicators, and economic policies that impact businesses' operations and performance. It includes elements such as inflation rates, market forces, Gross Domestic Product (GDP) or economic growth, interest rates, exchange rates, unemployment rates, purchasing power, and overall market demand. These factors significantly influence businesses' sales, costs, profitability, and investment decisions.
• Social environment: This reflects the societal attitudes, trends, health consciousness, values, and behaviours that shape customer preferences, demand, and business practices. It includes demographic factors such as age distribution, population size, levels of income, literacy levels, as well as cultural diversity. Understanding social dynamics helps businesses to tailor their products and marketing strategies to meet the needs and expectations of diverse customer segments effectively.
• Political and legal environment: This reflects how the state or government regulates the economy. It encompasses government policies, laws, regulations, and political stability that impact businesses' decisions and operations. It involves factors such as tax policies, tariffs, labour laws, consumer laws, safety laws, trade regulations, competition laws, environmental regulations, political will, and intellectual property right laws. Changes in political stability can create uncertainties and challenges for businesses that may require them to adapt their strategies and operations accordingly.
• Technological environment: This comprises innovation, advancements in technology, and digitalisation that influence businesses across industries. It includes factors such as artificial intelligence, automation, information technology, and digital platforms. Embracing technology enables businesses to enhance their performance in terms of productivity, efficiency, competitiveness, innovation of new products, quality of products, and ability to reach customers through digital channels.
• Competitive environment: This comprises rival businesses, industry structure, market dynamics, and competitive forces that influence businesses' competitiveness and market positioning. It includes factors like competitors' strategies, strengths, weaknesses, and market share. Understanding competitive environment dynamics helps businesses to identify opportunities, differentiate their products, and develop effective strategies to gain a competitive edge in the market.
• Global environment: This encompasses international factors, trends, and events that impact businesses as a result of globalisation. It includes factors such as international trade, climate change, ecological aspects, geopolitical risks, cultural diversity, economic interdependence, and cross-border regulations. Principally, globalisation presents opportunities for businesses to expand internationally, access new markets, and collaborate with global partners. Similarly, global environment poses challenges in terms of market volatility, cultural differences, and geopolitical tensions.

Activity 1.1

Visit any business operating in your local area, then:

1. Discuss with the owner how ICT and globalisation influence his or her business operations.
2. Explain the business environment factors that may affect its operations.

Exercise 1.1

1. Justify the need for businesses to explore their internal and external environments.
2. Describe the components of the external business environment and explain how each component impacts businesses in Tanzania.
3. With examples, explain how the internal business environment differs from the external business environment.

Business Start-ups

A business start-up marks the onset of an entrepreneurial journey, where individuals embark on the process of bringing a business idea to life. It involves a series of steps such as conceptualisation, planning, execution, and growth of a business venture. Start-ups often emerge in response to opportunities, market gaps, or problems that entrepreneurs believe that they can address with innovative solutions. These solutions may range from new products to business models that challenge traditional practices.

Usually, the process of starting a business begins with ideation, where entrepreneurs generate and refine ideas based on market insights, personal experiences, or industry trends. Ideation is then followed by market research where entrepreneurs assess and validate the feasibility and potential demand for their proposed solutions.

Once a viable business idea is identified, entrepreneurs develop a business plan that outlines the business objectives, target market, value proposition, revenue model, and growth strategy. The business plan serves as a roadmap guiding the start-up's operations, resource allocation, and decision-making processes.

As start-ups gain control and achieve milestones, they may attract extra funding, expertise, and partnerships that will eventually enable them to expand their reach, scale of operations, and capture more market opportunities. Therefore, a business start-up refers to a business in its early stages of operations.

Agents Supporting Business Start-ups

Business start-ups are receiving support from different agents for their establishments as well as operations. Such agents are categorised into two groups namely: government agents and non-government agents. Some of the government agents that support business start-ups include Local Government Authorities (LGAs), Tanzania Investment Centre (TIC), Tanzania Revenue Authority (TRA), Small Industries Development Organisation (SIDO), Fair Competition Commission (FCC), Tanzania Trade Development Authority (TanTrade), Zanzibar Investment and Promotion Authority (ZIPA), and Micro, Small and Medium Industrial Development Agency (SMIDA). Non-government agents supporting business start-ups in Tanzania include Tanzania Private Sector Foundation (TPSF), Tanzania Chamber of Commerce, Industry, and Agriculture (TCCIA), Zanzibar National Chamber of Commerce (ZNCC), and Tanzania Association of Micro-Finance Institutions (TAMFI). Some of these agents are explained in chapter four.

Activity 1.2

Read the following case, and answer the questions that follow.

Micaela is a young entrepreneur living in Dar es Salaam. She has always been concerned about environmental sustainability and renewable energy. One day, while visiting rural areas outside the city, she noticed substantially limited electricity access, with many households relying on candles and kerosene lamps for lighting.

Inspired by this observation and driven by her passion for green energy, she decided to start her own business focusing on providing solar-powered solutions. She envisioned a business that would not only address energy challenges but also promote environmental conservation and economic empowerment.

Micaela began her journey by researching solar technology, market demand, and rural consumer needs. She also reached out to potential customers to gather feedback and validate her business idea. With a clear vision, she solicited funding to kick-start her business. She pitched her business idea to some investors in Dar es Salaam, where she presented her market research findings, revenue projections, and social impact goals.

Impressed by Micaela's passion and business acumen, a group of angel investors agreed to provide seed funding to support her start-up. Micaela set out to establish her business operations with funds secured as shown in Figure 1.2. She partnered with solar equipment suppliers in the city, recruited a team of technicians, and set up a small office and warehouse in Kigamboni Dar es Salaam. She also designed a marketing strategy to raise awareness about her products among rural communities.

Figure 1.2: Micaela's solar electric business

As Micaela's business gained momentum, she started selling solar-powered lighting; through her official online social media kits; to households in different parts of Dar es Salaam city as well as some neighbouring towns such as Kibaha, Mlandizi, Kisarawe, Mkaranga, and Bagamoyo. Her products were well-received and accepted as they offer families a clean, affordable, and reliable source of lighting. She also introduced innovative payment options to make the products more accessible to low-income customers.

Over time, Micaela's start-up grew fast, expanding its product offerings and geographical reach. The business attracted the attention of international investors interested in funding its expansion plans. With additional funding and strategic partnerships in place, Micaela's start-up continued to scale its operations throughout Tanzanian regions, bringing light and opportunity to more communities. It also expanded across East Africa.

Questions

1. Describe Micaela's initial inspiration for starting her solar-powered lighting business.
2. What challenges did Micaela face during the early stages of launching her start-up, and how did she overcome them?
3. Discuss the strategies she used to secure funding for her business start-up.
4. Describe how ICT can help Micaela to ensure sustainable business performance.
5. Based on what you have learnt in this case, brainstorm and develop a business start-up idea by considering key details such as the target market, product offering, and unique selling proposition.

Skills Lab Activity

How does the business environment affect the business operations in your locality?

Stakeholders in the Business

Understanding business stakeholders is crucial as it helps businesses to navigate through complex stakeholder relationships, mitigate risks, build trust and credibility, as well as create long-term value for all parties involved. It helps businesses to identify, prioritize, and manage relationships with key parties who have an interest in the businesses' success or are impacted by its operations. By considering the interests and perspectives of stakeholders, businesses can foster collaboration, make informed decisions, and achieve sustainable success in the interconnected business environment.

In the business context, stakeholders refer to individuals, groups, or entities that have an interest in the activities, decisions, and outcomes of a business. Stakeholders can include a wide range of individuals and groups such as employees, government agencies, investors, customers, suppliers, financial institutions, communities, and competitors.

Types of Stakeholders

The following are two major categories of business stakeholders:

• Internal stakeholders: These are individuals or groups within the businesses such as employees, owners, and managers. Internal stakeholders are directly involved in the daily operations and decision-making processes of the business.
• External stakeholders: Unlike internal stakeholders, these are individual's groups, and organisations outside the business entity that are impacted by its actions or can impact its actions. External stakeholders can include government agencies, customers, suppliers, investors, communities, and advocacy groups.

Roles and Interests of Stakeholders

The following are the roles and interests of some of the business stakeholders:

• Owners: These are individuals who have initiated a business after developing a business opportunity from the business ideas. Business owners mostly contribute initial capital and any other resources needed for a business to start. Again, business owners are affected by the business operation outcomes.
• Employees: These are vital stakeholders who contribute their expertise, skills, knowledge, and labour to the business. They have a vested interest in job security, career development opportunities, fair wages, and a positive work environment.
• Customers: These are key stakeholders whose satisfaction and loyalty are necessary for the success of any business. They have interest in receiving high-quality products, excellent customer service, fair pricing, and a positive overall experience.
• Government agencies: These are government authorities that regulate businesses through laws, regulations, and policies. They have interests in compliance with legal requirements, public safety, and providing necessary services to the public including businesses.
• Investors: These are individuals or groups that have invested their stake in a business. They include venture capitalists, shareholders, and lenders who provide financial resources to the business in exchange for returns on their investments. They are interested in the businesses profitability, growth potential, and the protection of their investments.
• Suppliers: Suppliers provide goods or services to the business to facilitate production process and offering services. These goods and services play an important role in its supply chain and operations. Suppliers have interests in fair treatment, timely payments, and long-term partnerships with the business.
• Communities: These are stakeholders who may be impacted by business activities, such as employment opportunities, environmental impact, and contributions to community development initiatives. They have interests in sustainable practices, corporate social responsibility, and positive community engagement.

Stakeholder Engagement and Management

Stakeholder engagement involves identifying key stakeholders, understanding their interests and concerns, and actively involving them in relevant decision-making processes in the business. This includes seeking feedback, addressing grievances, and communicating transparently about business activities and outcomes.

Stakeholder management involves developing strategies to address the needs and expectations of different stakeholder groups while balancing competing priorities and interests. This involves prioritizing stakeholder concerns, negotiating or compromising, and building mutually beneficial relationships over time.

Stakeholders' Matrix

For effective stakeholders' engagement and management, it is crucial to understand stakeholder's matrix. The stakeholder matrix, also known as the stakeholder analysis matrix or stakeholder mapping. This is a tool used by businesses and organisations to identify, analyse, and prioritize stakeholders according to their level of interest and power in a business. The matrix helps businesses to understand stakeholders' roles, expectations, and relationships with the business which allows effective communication, engagement, and management of stakeholder relationships.

The matrix typically comprises of a grid with two axes: the level of "Interest" axis and the "Power" axis. Each stakeholder is plotted on the matrix based on their level of interest in the business and their level of power over its outcomes.

• Level of interest axis: This axis represents the extent to which stakeholders are affected by or interested in the business. Stakeholders with high interest are those with a significant stake in the project's successor failure and are likely to be directly impacted by its outcomes. Conversely, stakeholders with low interest may have minimal involvement or be indirectly affected by the business.
• Power or influence axis: This axis represents the degree of power that stakeholders have over the business. Stakeholders with high influence are those who possess the authority, resources, or decision-making power to shape the business's direction, outcomes, or implementation. Stakeholders with low influence have limited ability to directly impact the business's outcomes.

Based on their placement on the matrix, stakeholders can be categorised into four main quadrants as shown in Figure 1.3.

Figure 1.3: Stakeholders matrix

• High level of interest, high power (Key players): These stakeholders have both a high level of interest in the business and significant power over its outcomes. They are crucial stakeholders who must be closely engaged, consulted, and managed throughout the business lifecycle. It is important to involve these stakeholders in the planning process as they have the power to bring a change once satisfied with the plans. Examples include owners, business sponsors, senior management, regulatory authorities, or major investors.
• High level of interest, low power (Keep informed): These stakeholders have a high level of interest in the business but limited influence or power over its outcomes. While they may not have decision-making authority, they can still impact the project through word of mouth, support, or contributions. It is essential to keep them informed, engaged, and satisfied to maintain their support. Examples may include community groups, ordinary customers, or local residents.
• Low level of interest, high power (Keep satisfied): These stakeholders have significant influence over the business's outcomes but have minimal interest in the business. They may include regulatory bodies, industry associations, or government agencies responsible for overseeing the business's compliance or approvals. While their involvement may be limited, their decisions or actions can significantly impact the business's success.
• Low level of interest, low power (Monitor): These stakeholders have minimal interest in the business and little influence over its outcomes. They may include peripheral stakeholders or individuals who are indirectly affected by the project and are not actively engaged. While their impact may be minimal, it is still important to monitor their interests and manage any potential risks or concerns that may arise. These include community groups and advocacy groups.

Once stakeholders are identified and plotted on the matrix, organisations can develop tailored strategies for engaging and managing each stakeholder group effectively. This may involve communication plans, stakeholder engagement activities, conflict resolution strategies, or risk mitigation measures to ensure that stakeholder needs, expectations, and concerns are addressed throughout the business lifecycle.

Task 1.1

Think about any business which you would like to establish, explain the key stakeholders of the business and the reasons for their consideration.

Exercise 1.2

1. Consider your school as a business organisation, then:
   1. Identify and categorise the various stakeholders.
   2. Discuss the roles and relationships of each stakeholder group and how they may impact the success of the school.
   3. Develop a stakeholder mapping template and map them according to the stakeholder's matrix.
   4. After completing the stakeholder mapping exercise, make a group presentation to compare findings and insights, articulating the importance of understanding stakeholder dynamics in business decision-making.
   5. Using Micaela's start-up as a case study, conduct a stakeholder mapping exercise to identify the stakeholders and their level of influence on her business.
2. Assuming the role of a project manager leading a stakeholder engagement initiative, evaluate the significance of stakeholder mapping in business, including its benefits and limitations.

Project Activity

Establish any form of business in your school environment based on your capacity then assess the role of each stakeholder involved towards the success of that business. Prepare a report about the progress of your business and the contributions of your stakeholders.

Chapter Summary

1. Business environment refers to all conditions both internal and external that influence the operations, performance, and decision-making of a business entity.
2. Internal business environment encompasses various components such as organisational culture, leadership style, human resources management, organisational structure, operational processes, corporate governance, and organisational climate.
3. External business environment encompasses various components such as economic environment, social environment, political and legal environment, technological environment, competitive environment, and global environment.
4. A business start-up is the process of establishing a new venture with the aim of bringing products to the market. It involves identifying business ideas, identifying a business opportunity, securing funding, and executing a plan to turn the idea into a viable business.
5. Start-ups often face challenges such as resource constraints, market competition, and uncertainty, but successful ones create jobs, drive innovation, and contribute to economic growth.
6. Stakeholders in business refer to individuals, groups, or entities that have interest in or are affected by the activities and outcomes of a business. They include owners, employees, customers, investors, suppliers, government agencies, communities, and advocacy groups.
7. The stakeholders in business are categorised into internal and external stakeholders. Internal stakeholders are individuals or groups within the business, such as owners, employees, and managers. External stakeholders are individuals or groups outside the business, such as customers, suppliers, government agencies, and local communities.
8. Stakeholder management involves developing strategies to actively address the needs, interests, and expectations of different stakeholder groups. It requires identifying key stakeholders, understanding their priorities and concerns, and implementing actions to engage and manage their relationships.
9. Understanding and managing stakeholders is essential for businesses to build trust, mitigate risks, and create value for all parties involved.
10. Stakeholder engagement is the process of involving the stakeholders in relevant decision-making processes and activities. It helps businesses to build trust, enhance relationships, and achieve shared goals and outcomes.
11. Stakeholder mapping is a strategic tool used by businesses to identify and analyse stakeholders based on their level of interest and power. It involves categorising stakeholders into different groups and plotting them on a matrix to prioritize engagement and management efforts.
12. Stakeholder mapping helps businesses understand their stakeholders' perspectives, needs, and expectations, enabling more effective communication and decision-making.

Revision Exercise

1. In your opinion, how does consideration of the business environment contribute to making informed business decisions? Provide examples from both local and global contexts to support your arguments.
2. Evaluate the influence of technological advancements on the economic environment in Tanzania.
3. Discuss the importance of understanding the business environment in Tanzania.
4. Synthesize the key differences between the economic and political environments in Tanzania and provide recommendations for businesses operating in this context.
5. In your opinion, what are the essential qualities that aspiring entrepreneurs need to succeed in the business start-up process? Provide examples of successful entrepreneurs in Tanzania to support your arguments.
6. The majority of business start-ups encounter issues with stakeholder management, particularly with suppliers and customers. Provide advice on how they can improve stakeholder engagement strategies to build stronger relationships and mitigate potential conflicts.
7. Use relevant examples to explain the contribution of business stakeholders to the overall success of the business.
8. Analyse the role of employees as stakeholders in influencing organisational culture and performance.
9. Explain how businesses can use communication channels to engage stakeholders and convey their messages effectively.

Chapter Two: Business Units

Introduction

The nature and forms of businesses operating in different countries depend on size, ownership structures, and industrial sector. This brings us to the basic aspects of a business unit. In this chapter, you will learn about the concept of business unit, and the forms of business units according to size and ownership structure. The competences developed will enable you to establish and operate a company, franchise, joint venture, and co-operative.

Think: Operating a business of any form.

The Concept of Business Unit

A business unit is an organisation, enterprise, or firm that deals with the production, distribution, or exchange of products to make profits. It may be set up by an individual or a group of individuals. Business units have different classifications as explained throughout this chapter.

Size Classification

Size classification of businesses is a method that is used to categorise businesses according to metrics such as annual turnover, number of employees, or value of assets. This classification aids stakeholders in understanding the business landscape and tailoring regulations and policies to support different businesses according to their sizes. Globally, businesses are also classified according to various measures including the nature of the market, capital requirements, regulatory environment, and level of technology adapted depending on the level of a country's development. In Tanzania, the size classification of businesses is guided by the indicators provided in the Tanzania Small and Medium Enterprise (SME) Development Policy of 2003. The policy defines the business size from micro to large enterprises as shown in Table 2.1.

Table 2.1: Categories of SME in Tanzania

Category	Number of employees	Capital investment in machinery (TShs)
Micro enterprise	1 - 4	Up to 5 million
Small enterprise	5 - 49	Above 5 million to 200 million
Medium enterprise	50 - 99	Above 200 million to 800 million
Large enterprise	100+	Above 800 million

Source: URT. (2003).

NB: In the event of an enterprise falling under more than one category, then the level of investment will be the deciding factor.

Exercise 2.1

Reflect on the meaning of business unit, then, provide examples of business units operating in your area and explain their importance to the community.

Ownership Structure of Business Units

Business units are classified into two forms of ownership, that is public and private. Public ownership consists of businesses owned partially or totally by the government such as parastatals and corporations. Private ownership consists of businesses that are owned privately by individuals or groups such as sole proprietorship. Figure 2.1 provides details on some forms of business units according to ownership, however, in this book only companies, franchises, joint ventures, and co-operatives forms are described.

Figure 2.1: Ownership forms of business units

Company

A company is a corporate association of persons formed to carry out specific functions to generate profit. It is a 'corporate body' created under the law and it exists on its own, separate from the members who comprise it. In the eyes of the law, a company is an artificial person that can enter into contracts, own properties, incur liabilities, sue others, be sued by others, and do anything for which it has been formed for. Examples of companies in Tanzania are Tanzania Commercial Bank (TCB), the People's Bank of Zanzibar (PBZ), Air Tanzania Company Limited (ATCL), and Tanzania Electric Supply Company Limited (TANESCO).

Types of Companies

Companies are classified based on the nature of capital, ownership, control or holding, access to capital, and other factors as follows:

Classification of companies based on the nature of capital

• Companies limited by shares: In these kinds of companies, the liabilities of members are limited to the extent of the number of fully paid-up shares. This means that in case of winding up, members will be liable only for the number and value of shares that have been fully paid for.
• Companies limited by guarantee: These are companies without any shareholder but are owned by members called guarantors who agree to pay a nominal amount of debts or liabilities in the event of winding up. The profit earned by the companies is re-invested in the company to be used for different purposes. For example, most of the non-profit making companies operate as companies limited by guarantee such as TPSF.
• Unlimited companies: These are companies without limits on their members' assets. In these companies' shareholders become liable for all the debts of the company in case the company becomes insolvent. If the company does not have sufficient assets to pay all the liabilities during its winding up, the personal belongings of shareholders will be used to compensate for the deficit.

Classification of companies based on ownership

• Private companies: These are those companies whose articles of association restrict the free transferability of shares. In terms of members, private companies need to have a minimum of two and a maximum of fifty members.
• Public limited companies: These companies allow their members to freely transfer their shares to others. They need to have a minimum of seven members, but they have unlimited maximum number of members. Most large-scale industrial and commercial companies fall under this type of company.

Classification of companies based on control or holding

• Holding and subsidiary or group companies: In some cases, the company's shares might be held fully or partly by another company. The company owning these shares becomes the holding or parent company. Likewise, the company whose shares are owned by the parent company becomes a subsidiary company. Holding companies may exercise control over their subsidiaries. Thus, when company "A" holds more than 50 per cent shares of company B, then company "A" is the parent or holding company and company "B" is a subsidiary company.
• Associate or affiliate companies: These are those in which other companies have significant influence. This implies control of at least 20 percent and not more than 50 percent of total share capital of a company.

Classification of companies in terms of access to capital

• Listed companies: These companies have their securities listed on stock exchange markets. This means persons can freely buy and sell their shares. In such markets, public companies are commonly listed.
• Unlisted companies: These companies, do not list their securities on stock exchange markets. Private companies can fall under this category.

Other classifications of companies

• Government companies: These are those in which more than 50 percent of share capital is held by either the central government, or by one or more state governments, or jointly by the central government and one or more state governments.
• Foreign companies: These are those that are incorporated or registered under the laws of one state but perform their businesses outside their domestic country.
• Charitable companies under certain specific sections: Certain companies have charitable purposes as their objectives. Charitable companies focus on the promotion of arts, science, culture, religion, education, sports, trade, and commerce as their objectives. These companies are not for profit making; hence they do not pay any dividends to their members.
• Dormant companies: These are companies that exist but are inactive in a given period. These companies are generally formed for future projects. They do not have significant accounting transactions and do not have to carry out all compliance with regulatory authorities.

Activity 2.1

(a) Search details of companies operating internationally, then:

(b) Identify at least 10 of those companies operating in Tanzania.

(c) Categorise the companies identified in part (b) based on the types of companies. Provide reasons for your answers

Features of a Company

• Separate legal entity: There is a clear line of separation between the business and its owners. The business assets are separate from those of the owners or shareholders.
• Perpetual succession: Companies are established with a belief of indefinite operation. This means companies are designed in such a way that the death of any member will not significantly affect the continuity or going concern of the company.
• Control: Companies are always managed by the board of directors who act on behalf of the owners. They are responsible for appointing and guiding the top management and overseeing the daily functioning of the company.
• Liability: Contrary to the unlimited companies, limited companies have limited liability. The liabilities of owners of the business are limited to the amount of capital they have agreed to contribute or the amount of capital guaranteed by owners in the event of a crisis.
• Common seal: Since there are many owners of a company, a common seal is prepared to identify all of them as one. The common seal is required to appear in all dealings of the company to guarantee the involvement of the company. In the absence of such a seal, company participation is not guaranteed and hence exempted.
• Risk sharing: This is when the risk of the company is borne by every owner of the company and is limited to the amount of capital they have agreed to contribute. As the amount is borne by many, the risk is spread out and thus, reducing its impact on an individual shareholder.

Advantages of a Company

• Encourages business expansion: It is easy for a company to grow since a company's capital can be raised from different sources. Therefore, expanding the business becomes easier. Companies can increase their capital by issuing more shares or debentures. They can also use their reserves to fund their expansion.
• Transfer of ownership: For public companies shareholders are free to sell their shares at any moment in the stock market. This makes the company's ability to continue with operation regardless of the transition in ownership (change in ownership).
• Limited liability: Unless otherwise stated, the liability of shareholders is limited to the amount of capital they have agreed to contribute or the guarantee that a shareholder provides. If the company fails to meet its obligations to pay creditors, the personal property of shareholders will not be taken to pay the company's liabilities.
• Presence of professional management: The management of a company is in the hands of the board of directors who are elected by the shareholders and have extensive expertise. Salaried professional managers are hired to oversee the day-to-day operations of a company hence, the company is provided with expert management.

Disadvantages of a Company

• Absence of direct control by shareholders: The owners (shareholders) do not have direct control over the running of the business. Only the expert directors have control of the business through the positions they hold in the company.
• Lack of secrecy: Due to legal requirements, a company must make numerous financial statements available to the registrar of companies, financial institutions, and the general public. Hence, commercial secrecy is compromised. It is further lowered when the company issues its annual report to shareholders, as competitors can have access to all financial information.
• Complex and costly formalities: In forming and registering companies, there are various requirements and procedures to be followed. Also, companies' operations are guided by complex regulations that must be adhered to. Adhering to such formalities may be costly and time consuming.
• Possibility of misallocation of resources: There is a possibility of companies being operated by other people rather than their owners. The management operating the company may abuse their powers and conduct fraudulent activities for their personal gains. This leads to misallocation of company's resources.
• Lack of personal interest: Unlike proprietorship and partnership, salaried managers handle a company's day-to-day operations. Salaried managers then, may have little personal interest and dedication to the company since they are only employees not owners.
• Double taxation: After paying out all salaries, bonuses, overheads, and other expenses, the company also pays taxes on profits. Even though the company's profit is taxed as a corporate tax, still the dividends paid to the stakeholders are taxed as a withholding tax, thus, leading to double taxation.

Formation of a Company

The process of forming a company begins with promoters. Promoters are the founders of a company. They take initiatives to create the company's plan. Once the plan is finalized, the promoter applies to the registrar of companies for permission to establish the company. This application includes the submission of two essential documents: the memorandum of association, and articles of association.

Upon submission of these documents, the registrar reviews the application for compliance and if all prescribed conditions are met, the registrar grants permission for the formation of the company. This approval is formally recognised through the issuance of the Certificate of Incorporation and the Certificate of Registration. With the receipt of these documents, the company is officially empowered to commence its operations in accordance with the laws of the country signifying its legal existence as a corporate entity. The memorandum of association, and articles of association are explained as follows:

Memorandum of Association

A memorandum of association is a legal document that outlines the key principles and objectives upon which a company is formed. It serves as the constitution of a company and it contains all essential information about the company's structure, purpose, and powers. The memorandum of association consists of the name, purpose, types of shares, and amount of capital of the company. It is usually prepared with the help of a lawyer. Table 2.2 shows the components of the memorandum of association.

Table 2.2: Components of the memorandum of association

Component	Description
1. Name clause	The name should be unique and must be differentiated from other existing registered business names.
2. Place of operation/address/situation/location clause	Information on the registered office where the books of accounts will be kept and physical address is also added under this clause.
3. Objective clause	The aims and objectives of the company are stated here. It includes both primary and secondary goals.
4. Capital clause	(a) Information on the authorised or registered capital of the business is provided. (b) Information on the amount of share capital, the unit into which share capital is divided and types of shares to be issued (common or preference share). Note: The capital clause can be altered only after a meeting of the shareholders and agreeing on the alterations by their majority (above fifty-one per cent).
5. Liability clause	Information on the extent of liability to the owners is provided in this clause.
6. Declaration clause	Declaration of the promoter or owners of the business on their desires to establish the business.

Articles of Association

Articles of association outline the internal rules and regulations governing the management and operation of a company. These rules detail how the company will be operated, including procedures for directors' appointments, meetings, issuing shares, and distribution of profits. Articles of association work in concurrence with the memorandum of association to provide a thorough framework for the company's structure and governance. Table 2.3 shows the components of the Articles of Association.

Table 2.3: Components of the articles of association

Component
1. Organisation structure.
2. Powers and rights of each shareholder including the founder or owners of the company, and the power of the board of directors.
3. Election of the management committee.
4. Organisation meetings.
5. Information on business financing sources.
6. Company accounts and records.
7. Management salary.
8. Information on borrowing, dividend, and reserve policy.
9. Information on transferability of shares.
10. Information on book-keeping and auditing requirements.
11. Information on altering capital.
12. Information on the qualifications, duties, and power of directors.

Company's Management

Company management involves an interaction among company's key stakeholders such as shareholders, directors, and workers. Managing a company involves a dynamic interplay among these key stakeholders each playing a crucial role in steering the company towards achieving its goals. The company's management functions include planning, organising, staffing, controlling, coordinating, and leading as shown in Figure 2.2. These functions work together to achieve or realize the company's objectives.

Figure 2.2: Managerial functions

Source: Adapted from Koontz & O'Donnell, 1968

• Planning: Planning is a basic function of management that focuses on setting up the courses of action that facilitate pre-determined goals of the company. It informs about what is to be done, when it should be done, and the way it should be done in realizing the company's objectives. Planning plays an important role in the future of the company as it aims at underlining the best ways of utilizing company's resources effectively.
• Organising: Organising refers to a process of identifying and pooling together the necessary resources such as human, physical, and financial resources which are required in the implementation phase for achievement of company goals. Organising as a function of management helps in identifying different activities and responsibilities to be undertaken by different units within the company as well as the individuals or employees involved in the realization of the company objectives.
• Staffing: Staffing as a function of management is focused on the process of how the right employees for the right positions are recruited as well as proper allocation of roles or assignments to the right individuals. Also, staffing is involved in the development of employees through training, allocation of remuneration and other benefits that may facilitate employee's performance.
• Coordinating: Coordinating ensures that different departments and groups work in collaboration. Coordination signifies the conscious and rational process of pulling together the different parts of an organisation and unifying them into a team to achieve predetermined goals in an effective manner. It is said to be the essence of management since it binds all the other functions of management. It comprises of integration, unification, harmonisation, and synchronisation to provide unity of action for pursuing common company goals.
• Controlling: Controlling ensures that activities are executed in line with the company' objectives. The controlling process plays an important role as it helps to set standards of measuring performance against set objectives. Through controlling, evaluation of the performance of the pre-determined activities are established against the actual performance to determine to what extent the progress has been made. This information is important as it informs the management on issues that may need intervention by adjusting or correcting any deviation where necessary.
• Leading: Leading refers to a process of inspiring workers and influencing the way they operate and relate to each other in implementing the company goals. It focuses on how people or groups of people who are tasked to undertake activities within the company are to be guided, motivated, and supervised to realize organisational objectives.

Despite the company's management functions, the success of a company depends on the collective efforts of its key stakeholders such as shareholders, board of directors, and workers; who have to work in harmony towards shared goals and aspirations as follows:

• (a) Shareholders: These are the owners of the company who are driven by the desire to maximise their investment returns. They elect directors and entrust them with the task of corporate governance on their behalf.
• (b) Board of directors: These serve as the highest organ of the company which provides guidance and leadership to management. Directors are responsible for making strategic decisions that not only safeguard the interest of the company but also enhance shareholders' value. Through their oversight role, directors make sure that the management team operates in line with shareholders' interests in ensuring corporate objectives are met. They establish the organisational culture, ethics, integrity and foster conducive environments for sustainable growth. By setting clear policies and objectives, the board of directors provide a framework for effective strategy execution. They monitor the company's affairs and ensure compliance with legal and regulatory requirements while mitigating risks. Regular board of directors' meetings serve as platforms for reviewing performance, assessing risks, and charting the courses of actions for the future of the company. During board meetings, directors engage in strategic discussions to scrutinize reports, evaluate trends, and approve major initiatives. By engaging in strategic discussions and decision-making processes, they ensure that the company remains co-operative and responsive to the changing market conditions.
• (c) Workers: These are the employees at all levels of the company. They play a significant role in translating strategic objectives into tangible outcomes. They are the key driving force behind operational excellence, innovation, and customer satisfaction.

Note: Effective management involves empowering workers by fostering a culture of trust, collaboration, continuous learning, and recognition by providing incentives based on the performance of individuals or groups of people. By so doing, management can enhance workers' engagement and productivity, eventually driving revenue growth and profitability of the company.

Winding up of a Company

A company as an artificial person can die just like a natural person. Winding up of a company means closing down the business. That is, the life of the company comes to an end or ceases to operate. As the birth of the company was enabled by law, the death will as well be affected by the law. Therefore, legal procedures must be followed during the winding up of a company. Examples of circumstances under which the company may be wound up include conflicts between shareholders, poor management of the company, and company becoming bankrupt.

Activity 2.2

With the help of reliable sources:

(a) Identify the companies that existed in Tanzania and collapsed or ceased to operate;

(b) Explain the reasons for the collapse of the companies identified in part (a); and

(c) Suppose you were the owner of those companies what would you do to revive them?

Exercise 2.2

1. Mr. EGM completed Form IV in 2004. Since then, he has been employed in his brother's restaurant as a manager. Now, he would like to establish a company that will supply home appliances. However, he is not well informed on the basic requirements for company formation. How can you help him?
2. As a knowledgeable person in company management, how would you articulate the mechanisms through which shareholders influence decision-making processes within a company?
3. Suppose you are a worker of a particular company:
   1. How will you perceive the key responsibilities of the board of directors in corporate governance?
   2. How will you contribute to ensure accountability, transparency, and strategic direction within the company?

Franchise

A franchise is a business in which the owner of a business system (the franchisor) grants an individual or group (the franchisee) the right to run a business using the franchisor's business system for a fee and/or some share of income generated. Franchisees are also permitted to use the franchisor's branding, trademarks, and identification marks under specified guidelines. It is important for anyone planning to start a business by becoming a franchisee to remember that in franchising, the franchisee is bound to an agreement with the franchisor for a defined period. Franchising is meant to spread business in areas where the original owner is unable to reach. Some examples of the franchises found in Tanzania include: Kentucky Fried Chicken (KFC), and Subway which are American fast-food chains that are operating in Tanzania.

Advantages of Franchise

• Business operations assistance: Depending on the terms of the franchise agreement and the structure of the business, the franchisee might receive significant assistance in business operations. The assistance may be in form of equipment, supplies, marketing support or plans to operate the business.
• Profit: In general, franchises receive higher profits than independently established businesses. Most franchises have recognizable brands that bring customers from different countries. This popularity results in higher profits.
• Customer base: Franchises have access to instant brand recognition and a loyal customer base. Even if the branch of a franchise is opened in a small town, the likelihood is that potential customers are already familiar with the brand from exposure to commercials or travel to other cities.
• Ease of securing finance: An already established brand in franchising makes it relatively easier to secure finance from lenders due to brand awareness.
• Less risk of failure: Since the franchisee operates a business that has been tested already in the market and has a known brand, all these create a favourable business environment for a franchisee to succeed.
• Training offered to franchisee: Training provided by the franchisor compensates for the need for experience.

Disadvantages of Franchise

• Little room for creativity: Franchisees are not entirely in control of their businesses, they cannot make decisions on producing or delivering products the way they prefer without approval by the franchisor.
• Higher initial cost: The initial cost in most franchising agreements is relatively high. This may be a disadvantage for small businesses as they need to meet some compliance costs in the country where the franchisor needs to operate in.
• Potential for conflict: While one of the benefits of owning a franchise is the network of support received from the franchisor, it also has the potential for conflict. This is because any close business relationship can result in misunderstanding, especially when there is an imbalance of power among the parties involved. At times the parties may not be able to get along in such circumstances.
• Risk from other franchises: Failure of one franchise may cost other franchises as the investor may lose an entire chain of investments due to poor image of any one of the franchises.
• Lack of financial privacy: The franchise agreement will likely stipulate that the franchisor can oversee the entire financial ecosystem of the franchise. This lack of financial privacy can be seen by the franchisee as a disadvantage. However, it may be less of an issue if financial guidance is welcomed.

Activity 2.3

Use any reliable source to identify franchises available in Tanzania and explore the benefits of those franchises to the community and economy.

Exercise 2.3

1. How does franchise differ from other forms of business unit?
2. Describe the challenges encountered by franchises in Tanzania.

Joint Ventures

Joint venture is when two or more companies form or create a single legal entity in which each party owns shares in the newly formed company. It is aimed at pursuing a common goal for a specific period where the enterprise's risks and rewards are also shared according to agreement by the involved parties. Motivation for forming a joint venture includes business expansion, product development, and product expansion into new markets, particularly internationally. A joint venture provides the business with several benefits including more financial resources, more management capacity, more technical know-how, access to well-established markets, and means of distribution.

Features of Joint Ventures

• Agreement: Two or more companies agree to undertake a business for a definite purpose and are bound by it.
• Joint control: There exists a joint control of the co-ventures over business assets, operations, administration, and even the venture.
• Pooling of resources: Firms in the joint venture pool their resources, which help in large-scale production including capital, manpower, technical know-how and expertise.
• Sharing of profit and loss: The co-ventures agree to share the profits and losses of the business in an agreed ratio mostly depending on the amount of capital contributed by each party. The computation of the profit and loss is usually done at the end of the business venture. However, where the business continues for a long duration, the profit and loss are calculated and shared annually.
• Access to advanced technology: By entering into joint ventures, companies get access to various techniques of production, marketing, and doing business, which decrease the overall cost and also improve the quality of products.
• Dissolution: Once the term or purpose of the joint venture is complete, the agreement comes to an end, and the accounts of the co-ventures are settled as when it is dissolved.

Advantages of Joint Ventures

• Access to new markets: A joint venture agreement provides an opportunity to access new markets and distribution networks. This in turn enhances sales of the products rendered by the new joint venture firm.
• Enhance business growth: Joint venture arrangement helps businesses to grow faster, increase productivity, and generate greater profits as it brings companies together with their resources including networks.
• Provides access to more resources: When two or more companies agree on a joint venture, it means they are pooling together the resources including technology and staff to an established venture. This is advantageous in combining expertise, knowledge, and technology in offering better services.
• Flexibility: Being a temporary contract between participating companies, a joint venture can dissolve at any specific future date or when the project is completed.
• No loss of identity: Each company can maintain its own identity and can easily return to normal business operations once the joint venture is complete.
• Economies of scale: Joint ventures help organisations to scale up with their limited capacity. The strength of one organisation can be utilised by the other. This gives a competitive advantage to both the organisations to generate economies of scale.
• Minimisation of risk: Joint ventures tend to share risks between the companies involved in the agreement. This in turn helps to minimise the overall risk of the venture.

Disadvantages of the Joint Ventures

• Taxation challenges: Creating a joint venture may result in more complex tax arrangements especially when the joint venture involves companies from different countries.
• Political risk: Joint ventures formed by companies from different countries may involve high political risks especially if the wrong partner is chosen.
• Unequal involvement: Equal pay may be possible, but it is extremely unlikely for all the companies working together to share the same involvement and responsibilities.
• Clash of cultures: Companies involved in the joint venture agreement may have different beliefs, tastes, and preferences which may lead to poor cooperation and integration. This may undermine their profitability.

Activity 2.4

Based on the context of Tanzania, review different literature on joint ventures from reliable sources, then:

(a) Describe the process of forming a joint venture.

(b) Discuss the reasons for the success and failure of the joint ventures.

(c) Explain what you could do to ensure that, the joint ventures succeed.

Exercise 2.4

Collaboration is one of the important aspects of the success of any business. Briefly explain the benefits of jointly owned businesses.

Co-operatives

Co-operative organisations also known as co-operative societies are voluntarily formed by individuals with common interests of pooling resources to promote their welfare. In Tanzania, co-operative organisations started during the colonial period. Co-operative organisations differ from other major forms of organisations since they are set not for profit earning but to promote the welfare of their members. Co-operative organisations are characterized by "Each for all and all for each" philosophy meaning that, everybody benefits from acting collectively. Examples of co-operative organisations in Tanzania include: Savings and Credit Co-operative Societies (SACCOS), Kilimo Fursa Co-operative, and Agricultural Marketing Co-operative Society (AMCOS).

Features of Co-operatives

• Voluntary membership: Co-operative organisations are formed by voluntary membership. A person who shares similar interests and is willing to follow a society's norms has the right to join the society, and become a member.
• Finance: Co-operative organisation members contribute to the finances of a co-operative organisation by purchasing shares or periodic compulsory savings. The government also may provide financial assistance in the form of state and central co-operative bank loans.
• Democratic control: Co-operatives are controlled democratically. The business of a co-operative organisation is generally managed by a committee elected by the members at an annual general meeting. Regardless of the number of shares, all members have the same voting rights and power. "One man one vote" is the basic element of co-operative democracy in making decisions pertaining to co-operative operations and welfare.
• Surplus distribution: Like profit-oriented businesses, a co-operative organisations' surplus is distributed to members in proportion to their capital contribution or an agreed ratio. At least twenty-five per cent of profit must be allocated to the general reserve according to the law. Similarly, a portion of the proceeds (not to exceed ten percent) may be used for the general welfare of the community.
• Service motive: A co-operative organisation is created with the primary goal (motive) of delivering beneficial services to its members and society, whether in the form of credit, consumption items, or input resources.
• Education and training: A co-operative organisation may provide education and training to its members with the aim of developing the skills of its members for the growth of the co-operative organisation.
• Solidarity: Co-operative organisations are formed by people with common interests. The members of co-operative are united while making any decision regarding their welfare.

Formation of Co-operatives

Co-operative organisations are registered under the Co-operative Societies Act of the year 2013. The Tanzania Co-operative Development Commission (TCDC) is the registrar of all co-operative societies in Tanzania. The following are the procedures to register a co-operative organisation:

1. Making voluntary decision: Individuals must voluntarily decide to form a co-operative society and inform the co-operative officer within their location about their aim of establishing a co-operative.
2. Holding a general establishment meeting: Individuals intending to start a co-operative organisation must hold a general meeting that will be chaired by the co-operative officer. The agenda for the meeting will among others include:
   1. The goal of starting the co-operative organisation.
   2. Appointment of members to form the founding board of the co-operative organisation.
   3. Appointing the board leaders.
   4. To inform members about procedures for the establishment of the co-operative organisation.
   5. Delegation of powers and responsibilities to the founding board until the co-operative organisation is registered.
   6. Proposing the name of the co-operative organisation, fees, and shares.
3. Holding a general meeting to discuss the board's recommendations: The founding board is required to call a meeting with the founders to discuss and approve the constitution, budget, business plan, and the will to start the co-operative organisation.
4. Applying for registration: The application will be sent to the assistant registrar of co-operatives at the regional level. Upon satisfaction, the registrar must issue a certificate of registration within sixty days.
5. Holding a general meeting after registration: The meeting must be held within two months for handing the registration certificate to members, dissolving the founding board and appointing the management board, receiving directives from the registrar of co-operatives as well as setting strategies to attain co-operative objectives.

Types of Co-operatives

Co-operatives are divided into two main categories, according to membership registration and the services they provide. The two categories are further explained as follows:

According to membership registration

The co-operatives that are registered according to membership registration are categorised as follows:

• Primary co-operatives: These are co-operatives in which all the members are individuals in a local area like a village, ward, or council. It takes a minimum of five individuals. The main purpose of establishing these primary co-operatives is to provide goods and services to the customers at reasonable cost, hence improving standard of living. These co-operatives also, provide employment opportunities or services to its members and promote development.
• Secondary co-operatives: These are co-operative societies in which they operate at the district or regional level. These co-operatives aim to provide services to primary societies.
• National co-operatives: These are co-operative societies that operate within the boundaries of a certain nation. The main objective of national co-operative is to develop and strengthen the co-operative movement in order to play a leading role in poverty eradication, employment creation and socio-economic transformation in the nation.
• International co-operatives: These are co-operative societies that operate among countries. They are located in many countries. The main objective of international co-operatives is to promote the world co-operative movement, promote and protect co-operative values and principles, and facilitate the development of economic and other mutually beneficial relations between its member organisations. For example, the African Cashew Alliance (ACA).

According to the services they provide

The co-operatives that are registered according to the services they provide are categorised as follows:

• Marketing co-operative societies: These are co-operative societies in which the main objective is to market the products of its members. These are also known as producer co-operative societies such as Agricultural Marketing Cooperative Societies (AMCOS).
• Saving and Credit Co-operative Societies (SACCOS): These are co-operatives whose main objective is to make their members save. They also offer credits to their members.
• Consumer co-operatives: These are co-operatives whose main objective is to protect consumer in terms of price variation and improvement of the welfare of the consumer. For example, the Tanzania Consumer Advocacy Society (TCAS).
• Transport co-operatives: These are co-operative societies whose main objective is to deal with the welfare of the transport industry. For example, the Tanzania Bus Owners Association (TABOA).
• Handcraft co-operatives: These are co-operatives that deal with the welfare of handcraft dealers. For example, the Tanzania Handcraft Association (TanCraft).
• Multipurpose co-operatives: These are co-operatives that serve different purposes of the members.
• Farm products co-operatives: These are co-operatives that deal only with the farm producers and their products such as Kilimanjaro Native Co-operative Union (KNCU).

Advantages of Co-operatives

• Easy formation: The formation of a co-operative organisation is considered easy as there is always a co-operative officer in place to assist and provide guidelines.
• Freedom of entry and exit: Everyone who is interested can join a co-operative organisation. A member can be anyone who shares a common interest. The membership price is maintained low so that everyone can participate in co-operative organisations and benefit from them. At the same time, any member of a co-operative organisation who wishes to leave is free to do so.
• Promotes democracy: All members of co-operative organisations have equal rights and power regardless of their shares. Co-operative organisations allow anyone to join, leave, choose a leader or be chosen as a leader.
• Fair distribution of surplus: The surplus generated by co-operative organisations are distributed amongst members fairly; as a result, everyone in the co-operative organisation benefits. Furthermore, co-operative organisations benefit the community since a portion of the surplus, not exceeding ten per cent can be used to improve the welfare of the community in which the co-operative organisation is based.
• Limited liabilities: A co-operative organisation members' liability is restricted to the amount of shares they have contributed. A co-operative organisation member cannot be held individually accountable for the organisation's liabilities.
• Going concern: A co-operative organisation continues to operate for a long time regardless of the death, insanity, or insolvency of any of its members. This is because those events have no bearing on its continuation as they are treated separately from co-operatives that assumes independence.
• Possess some distinct set of interests: Co-operative organisations operate in a small geographic area, and members have a stringer sense of shared interests. Members can communicate with one another work together and handle organisation activities more effectively.
• Attract government assistance: The government can provide full assistance to co-operative organisations to encourage their growth. Assistance given by the government may include offering low-interest loans, as well as subsidies and other benefits.
• The elimination of middlemen: Co-operative organisations have direct contact with both producers and final consumers. As a result, they are not reliant on middlemen and may save the earnings that the middlemen enjoy.
• Provide credit to its members: People have been liberated from informal money lenders by co-operative groups. Informal money lenders charge large interest rates, and the peoples' income is largely utilised to pay the interest. Co-operative organisations have benefited large population by providing loans at lower interest rates to their members.
• Contribution to agricultural development: The government's efforts to enhance agricultural production have been complemented by co-operative organisations. They have enhanced people's lives in the rural areas and they are always accessible for help.
• Offer reasonable prices and high-quality products: Co-operative organisations purchase and sell large quantities of goods directly from producers and to customers respectively. Fair prices and high-quality products offered by the co-operative organisations ensure market satisfaction.
• Social benefit: Co-operative organisations have a significant role in influencing societal norms and reducing wasteful spending. The co-operative organisation profits are utilised to improve the welfare of their members.

Disadvantages of Co-operatives

• Limited financial resources: Co-operative organisations are always operating on limited financial resources resulting from low membership dues (fees). This leads to a low accumulation of financial resources which in turn results in a failure of the co-operative organisations to achieve intended goals and objectives.
• Reliance on government funds: As cooperative societies fail to raise funds on their own, they sometimes rely on government assistance. Heavy reliance on government assistance may result in the inability to properly plan their activities. This is because in most cases the government subsidies do not come on time as expected.
• Lack of administrative skills: Co-operative organisations are managed by the committee elected by their members. These members may not have the required qualifications, skills, or experience. Since co-operatives have limited financial resources, their ability to recruit employees is limited. Therefore, they cannot employ the most talented personnel. As a result, lack of managerial skills leads to inefficient management, poor functioning and difficulty in achieving objectives.
• Misuse of funds: If the members of the managing committee are corrupt, they might misuse the funds of the co-operative organisation. Many co-operative organisations have faced financial difficulties and closed down because of corruption and misuse of funds.
• Possibility of conflicts among members: Co-operative organisations are based on the principles of co-operation and therefore, harmony among members is important. But in practice, there might be internal politics, differences in opinions, and quarrels among members which may lead to disputes. Such disputes may affect the general functioning of co-operative organisations.

Activity 2.5

Consult local government leaders or any other persons concerned with co-operatives existing in the community. Based on the discussion with that person, explain how the co-operatives benefit their members and the community.

Exercise 2.5

1. How co-operatives differ from joint ventures?
2. With vivid examples, explain different types of co-operatives.
3. Co-operative organisations have no significant contributions to the welfare of their members. Discuss this statement.

Skills Lab Activity

Suppose that the majority of the newly established businesses in Tanzania normally fail in the early stages to achieve their intended objectives. As a Business Studies student, how can you help the owners of those businesses to re-establish and sustain their operations?

Project Work

Select and analyse case studies of successful and unsuccessful franchises in the context of Tanzania. Prepare a report about the key factors that contributed to the success or failure of those franchises.

Chapter Summary

1. A business unit is an organisation, enterprise, or firm that deals with the production, distribution, and exchange of products for the purpose of making profits.
2. Business units are classified in different ways depending on their, size, ownership, and industry sector.
3. According to size, business units in Tanzania are classified into micro, small, medium, and large enterprise.
4. According to ownership structure, business units are classified into two forms of ownership, that is public and private.
5. A company is a corporate association of persons formed to carry out certain specific functions with the aim of making profit.
6. Companies can be classified based on the nature of capital, ownership, control or holding, access to capital, and other basis.
7. Franchising is a business system in the form of marketing and distribution in which the owner of a business system (the franchisor) grants an individual or group of individuals (the franchisee) the right to run a business using the franchisor's business system.
8. A joint venture is a union between two or more companies that pool their resources and expertise to pursue a common goal for a specific period where the enterprise's risks and rewards are also shared.
9. Co-operatives are voluntary organisations that are formed by individuals to achieve common goals or for the common interests of their members.

Revision Exercise

1. Describe various categories of SME in Tanzania.
2. Your father wants to establish a company and he was told that, the company will have limited liabilities. However, he is not aware of either limited or unlimited liabilities. Briefly explain to him the concepts of limited and unlimited liability companies and their differences.
3. The presence of companies in any country contributes a lot to the growth of its economy. Justify.
4. Explain the legal and regulatory requirements for the formation of a company.
5. Suppose that you are invited to participate in an annual youth meeting. Through their invitation letter, you are requested to talk to the attendees on the basic requirements for company formation. Briefly explain the required documents for company registration as part of your presentation.
6. Suppose you are a shareholder in a certain company, what initiatives would you propose to empower workers within a company and enhance their engagement, productivity, and satisfaction?
7. Assume that you are a director of a certain company. In your capacity, how will you prioritize the agenda for board meetings to ensure they serve as effective platforms for strategic discussions, decision-making, and oversight in company management?
8. Describe the role of co-operatives in fostering local economic development.

Chapter Three: Financing Medium-Sized Businesses

Introduction

Normally, businesses are established and operated by individuals or groups of individuals with the main objective of generating profits. In particular, one of the factors to be considered before establishing a business is the way it can be financed. In this chapter, you will learn about the concept of medium-sized businesses, and sources of financing for the medium-sized businesses. The competences developed will enable you to acquire financial support from different sources to establish and run the medium-sized businesses.

Think: Operating business without any financial support.

The Concept of Medium-Sized Businesses

Universally, there is no single accepted definition of medium-sized businesses. However, nations use different measures of size to define medium-sized businesses depending on their level of development. The Tanzania Small and Medium Enterprise (SME) Development Policy of 2003 recognises four categories of businesses namely: micro, small, medium, and large-scale enterprises. Medium-sized businesses are based on the following features:

• Number of employees: Medium-sized businesses employ 50 to 99 people who are engaged in various business activities like production and marketing of products as well as business support services such as accounting and human resources management.
• Capital invested: Medium-sized businesses invest capital which range from TShs. 200 million to TShs. 800 million.
• Operations: Medium-sized businesses employees are divided into different sections of operations like production, marketing, finance, information technology, procurement, and human resources that lead them to perform the assigned duties or activities.
• Proprietorship: Medium-sized businesses may be owned by an individual, groups of individuals, family members as well as the public who have a common interest to ensure pre-determined goals are achieved.

Generally, medium-sized businesses are businesses whose number of employees and capital invested fall under well-defined limits depending on a country's SME policy.

Importance of Medium-Sized Businesses

The following are the importance of the medium-sized businesses:

• Creates employment: Medium-sized businesses employ a relatively large number of people to carry out various business activities. The number of people employed is usually large compared to small businesses. For example, in Tanzania medium enterprises employ from 50 to 99 people.
• Faster decision-making: Medium-sized businesses decisions can be made by a single person or group of persons unlike large enterprises. This enables the businesses to reach conclusions on various matters timely.
• Easy sharing of information: Medium-sized businesses communication process is easier compared to large businesses since management and employees are closer due to its smaller size. This enables information to flow smoothly and problems are addressed timely by people working together as a team.
• Enhances growth of the economy: Medium-sized businesses contribute to the country's economic growth through payment of different taxes which are used in the provision of public services. They also facilitate the supply of products for consumption, boost exports, and enable investment in other economic sectors.
• Cost effectiveness: Medium-sized businesses are likely to have lower operational costs compared to large businesses due to their scale of operations. This enables them to have proper allocation of resources and efficiency in business operations and management.
• Easy access to resources: Medium-sized businesses have better access to resources including finance compared to small businesses. Such access facilitates medium-sized businesses to grow and pursue more business opportunities to foster optimum business performance.
• Closer relationship with customers: Medium-sized businesses can provide satisfactory customer services than larger-sized businesses due to their smaller customer base. They have the capacity to develop strong personalised relationships with customers, understand their demand and receive unique feedback from them.

Activity 3.1

Visit at least five businesses in your locality, and consult the owners or managers concerned on the detailed information related to features of those businesses. After consultation, use size metrics or indicators provided in the Tanzania SME Development Policy of 2003 to categorise those businesses.

Exercise 3.1

1. Suppose you are invited to talk to a group of entrepreneurs who are not familiar with medium-sized businesses. Which issues will you talk to them?
2. Suppose you are the owner of a particular medium-sized business. How can you compare your business to other categories of businesses?

Sources of Financing for Medium-Sized Businesses

Business enterprises need money for conducting different activities including buying raw materials, paying labours, or other production costs, and operational costs. Commonly, financing a business is essential as it assists the business to reach its pre-arranged goals. Thus; without finance, the business will not be able to engage in production and realize its objectives. Medium-sized businesses are either financed by the owner (s), other people or organisations outside the business.

There are various sources of finance for medium-sized businesses. These sources of finance are grouped into two main categories; internal and external sources. Some sources of financing for medium-sized businesses are shown in Table 3.1.

Table 3.1: Sources of financing for medium-sized businesses

Internal sources	External sources
(a) Retained earnings	(a) Share capital
(b) Sale of non-current assets	(b) Venture capital
(c) Leasing of non-current assets	(c) Overdrafts
(d) Sale and leaseback of non-current assets	(d) Secured loans
	(e) Debentures
	(f) Crowd funding
	(g) Grants

Internal Sources of Finance

The internal funding of a business is acquired within the business without any support from outside. Some internal sources of finance include retained earnings, sale of non-current assets, leasing of non-current assets, and sale and leaseback of non-current assets which are explained as follows:

Retained Earnings

Retained earnings are also termed as undistributable profit. These are profits obtained in the business that are not distributed to owners as returns on their investment. Medium-sized business owners may decide to reallocate some of the undistributable profits gained from the business to enhance efficiency and effectiveness in their business operations. Retained earnings are typically contemplated as further finance for better business growth in the future. Higher retained earnings indicate that a business is financially healthier.

Medium-sized enterprises benefit from retained earnings as they are free cashflow that is not repaid. As opposed to loans, retained earnings have no issue costs and no interest rate to be repaid by the business as they are profit reserves generated in the business operations. Retained earnings also provide flexibility to business owners in reallocating resources to different operations. However, some of the challenges of this source of funds in supporting medium-sized businesses include its inadequacy to support operations and future expansions if the medium-sized business entirely depends on it. This in turn may lead to poor business performance, which is unlikely to attract external investors hence the inability to raise additional capital.

Sale of Non-Current Assets

Non-current assets are the assets whose economic benefits are expected to be harnessed for a long time to support business operations. Some of the non-current assets include land, plant, equipment, vehicles, and other properties. Sale of non-current assets is another source of financing for medium-sized businesses whereby business owners dispose some of their idle assets. Sale of idle assets is a way of changing unproductive tangible assets into cash. The medium-sized business may sell idle or unproductive assets to raise finance that may be used for various productive business activities or opportunities. However, the business should evaluate the outcomes before making a decision to sell some of its non-current assets. Income generated by the business from the disposal of idle non-current assets can be reinvested back into the business.

From sale of non-current assets, the business acquires funds without incurring debt, and no interest is charged. It also saves some costs to business enterprises that may be used for repairing and maintaining redundant assets. However, the sale of non-current assets decreases the assets which could be used by the business in the future. It also takes time to find the right buyer, something which leads to delaying the availability of funds needed to conduct the business operations.

Leasing of Non-Current Assets

This refers to an agreement in which one party allows another party to use the non-current assets and return them after the specified time period. The asset owner is known as "lessor" meanwhile the person that uses the leased assets is called "lessee". In leasing, the terms and conditions that regulate agreements are outlined in a contract between the parties involved. There must be periodic payment by the lessee to the owner for the use of the assets. For this case, the medium-sized businesses will be obtaining cash after leasing their assets to other parties that will increase business finance.

Leasing of non-current assets does not add the business debts; instead, it creates more access of finance needed for business operation and expansion. In addition, lease of non-current assets enables the lessor to repossess the asset (s) that may be productive to the business when the lessee returns them after the agreed time. However, leasing non-current assets is not convenient to newly established businesses as they might not have redundant assets to lease. Another challenge is that the lessor temporarily loses the ownership and will have no control over the property until the agreed period between the two parties comes to an end. Again, leasing of non-current assets in business leads to wear and tear which causes a shorter life span of those assets.

Sale and Leaseback of Non-Current Assets

Sale and leaseback of non-current assets refers to the process whereby the asset owner sells some of their assets to another party then the assets are promptly leased back from the buyer. Periodic payments (rental expenses) are made by the business entity to the owner for the use of an asset for an agreed time. Bearing of repair and maintenance expenses depends on the agreement between two parties involved. Sale and leaseback benefit to the medium-sized enterprises by enabling the business venture to acquire both cash and assets that are used for various business operations. In this case, the business will continue to use the assets either for production or other business activities. However, this source of funding has some weaknesses like loss of ownership and control over the assets.

Exercise 3.2

1. Kichochi decided to leave his job as a sales manager of TX company to start his own medium-sized business. Explain the reasons why Kichochi might resort to seeking finance to set up his new business enterprise.
2. Suppose you own a business selling and distributing second-hand motor vehicles within Dar es Salaam. Due to the good performance of your business, you made a plan to expand it by opening new branches outside the region, however, you do not have enough capital to support your initiative. Which sources of finance would you use and why?
3. The TIE catering business has been operating for almost six years in Tanzania Institute of Education. The business owner intends to increase capital by selling some of his assets. Explain to TIE's catering owner or the management the benefits of using business profits as a source of finance rather than selling some of the assets.

External Sources of Finance

External funding of a business refers to finances provided by individuals or group of people outside the business venture. These include share capital, venture capital, overdrafts, secured loans, debentures, crowd funding and grants.

Share Capital

Share capital also known as equity finance, is one of the ways of financing medium-sized businesses mostly used by new business enterprises. Share capital refers to the means of raising capital by selling shares to investors. The business increases finance by its capital through selling ownership (share) to investors. Shareholders are given rights to ownership and may have control in the management of the business. Shareholders receive dividends and capital gain (capital growth) as returns of their investment in the business.

Share capital benefits businesses by allowing an enterprise to raise finance without incurring debts as there is no payment of interest that adds the cost of the finance like bonds and loans. Share capital enables the medium-sized businesses to raise substantial amount of finance to undertake its operations. Moreover, this approach brings in new shareholders who may add on valuable expertise to the business operations and meeting various expenditures. Despite the advantages of share capital financing, selling of shares to raise business finance usually results in ownership dilution for existing shareholders. Ownership dilution occurs when the existing shareholders or business owners lose part of control over the business in case the new shareholders have come with new interests and preferences. It also leads to a loss of business secrecy as the new shareholders gain portion of ownership and control of the business.

Venture Capital

Venture capitalists are professional investors who may be wealthy investors, investment banks, or other financial institutions. Depending on the stage of business enterprises, they can have 25 per cent to 50 per cent of ownership in invested businesses. Venture capital financing is a way of raising funds from private equity investor (s) or venture capitalists for business enterprises with high growth potential in exchange for equity. Venture capitalists expect to get above-average returns from their investments; hence, they invest in high-risk and potentially high-return businesses. Venture capital funding is suitable for new and growing business enterprises which seek large amounts of capital and have high growth potentials.

In addition, venture capitalists' investments in business enterprises may not necessarily be financial as venture capitalists may provide technical and managerial expertise as well as business connections to guide business enterprises. Venture capitalists can finance a business enterprise until the business generates returns on invested capital. Returns for venture capitalists may be generated through selling of their ownership, for instance, selling their shares to other investors or as a return in the form of dividends.

Venture capital offers a large amount of capital to the business. Venture capitalists invest for ownership; hence, enterprises are neither obliged to repay the invested money nor make additional investments by using their personal assets or loans. The fact that they also invest into an enterprise their own business expertise, experiences, guidance, and connections; they help business enterprises to better manage their risks and thus, increase chances to grow. Despite these positive factors, venture capital financing is not easy to secure. Another drawback is that venture capitalists mostly invest in high-risk businesses with expectations for high returns on invested capital. In addition, entrepreneurs may lose their businesses to these venture capitalists in an event of low performance.

Overdrafts

An overdraft occurs when a bank allows the account owner to overdraw. It occurs when there is insufficient money in the account offered by banks to current account holders. This means that the account owners can withdraw more money than what they actually have in their bank balance. A business can use overdraft to pay suppliers, labour, or purchase different resources for business. An overdraft is a flexible way of financing the business enterprise as it varies from time to time with the needs of the business.

Overdrafts are considered as a quick source of finance and easy to be acquired to meet unforeseen business expenditures. Further, it increases cash flow to the business enterprise as borrowers may obtain this debt within a short time as it does not require many formalities. Despite those benefits of overdrafts, they are short-term borrowing that cannot be used by the business enterprise as the main source of funds for expanding its operation. The amount to be overdrawn is limited since the account holder cannot overdraw more than what a bank has allowed. Normally, overdrafts hold high interest rate if not paid back in a short period of time compared to other forms of bank loans.

Secured Loans

Secured loans are offered by lenders to the borrowers with collateral like land, house or vehicle. If the borrower defaults to repay the loan, the assets can be possessed by the lender. Examples of secured loans include mortgage and business loans.

Loans help businesses to access capital that may be used to finance business expansion, smoothen operations, hire more workers, or purchase non-current assets like equipment and machines. It also helps the business to maintain its ownership status because lenders are not part of the business. Financing medium-sized businesses through loans may be challenging because business assets may be possessed by lenders if the business defaults to repay the borrowed money, hence the borrowers lose the businesses' properties or equipment. Also, it is a relatively slow way of financing the business because there are several requirements and procedures to be followed in loan application. In addition, the interest rate charged to borrowers adds cost of the loan at the time of repayment.

Activity 3.2

With the help of ICT and consultations:

(a) Identify different financial institutions in Tanzania that provide loans to medium-sized businesses.

(b) Visit one of the nearby financial institutions identified in part (a) and inquire information about the conditions for providing loans to medium-sized businesses.

(c) How can you improve the conditions of providing loans in part (b)?

Debentures

A debenture is a type of long-term debt that is not secured by collateral. Debentures are secured only by the creditworthiness and reputation of the issuer who can be corporations and governments aiming to raise capital or funds. Debentures have fixed interest rate that the issuing business will pay in future time during the repayment of that debt. Payment of debenture interest is made regardless of whether the business makes profit or not. Debentures may be redeemable, in which their repayment is for a specified time while for irredeemable debentures, repayment of capital to debenture holders is made when the business has gone into liquidation. Medium-sized businesses may borrow money in the form of debentures to raise finance as it is a long-term finance for business enterprises.

Debentures benefit businesses because debenture holders are not part of business ownership. The debenture is the unit of loan but the business assets will not be used as the collateral. Financing business enterprise through debenture is beneficial since it serves as a long-term debt in which the business may use it as the sufficient source of finance. Furthermore, debenture is more flexible because the business enterprises offer debentures to different potential investors who are interested. Despite those benefits, raising finance from the external investors through debentures is limited to existing businesses, not start-ups. Also, like other secured loans, medium-sized businesses issuing debentures to raise finance bear interest that should be paid by the business enterprise at the time of repayment.

Crowd Funding

Crowd funding involves raising funds from the public where a large number of people and organisations contribute small amounts of money to finance entrepreneurial activities. It can be conducted through social media, physical contacts with friends, family members, work acquaintances and customers. This approach of getting financial capital requires the business enterprises to make decisions about the initiators and platforms. There are different ways for an enterprise to be engaged in crowd funding such as debt, equity, reward, and donation.

• Debt crowd funding involves raising funds from investors who should be repaid the invested money, with interest. An example is microfinance where very small sums of funds are lent to poor clients at certain interest rate guaranteed by other fellow clients.
• Equity crowd funding involves collecting money from people and organisations in exchange for shares or certain levels of ownership in a business enterprise. Equity crowd funding is successful if the value of investment goes up rather than when value goes down.
• Reward crowd funding involves raising funds from people and organisations in exchange for non-financial benefits such as free gifts. Free gifts or rewards can be recognition, tickets to a concert or event, regular or free media publicity or coverage.
• Donations crowd funding involves raising funds from people and organisations in exchange for social or charitable activities. Returns to donations are considered intangible but donors have personal or social motivation for financing the business expecting nothing back or refund.

Crowd funding is a quick and cheap way of raising capital, for example, donation and reward crowdfunding. It also enables business enterprises to communicate with people and organisations about the activity that needs to be financed. Furthermore, the act of sensitising investors can be regarded as a way of promoting the business and increases the possibility for investors to become new or loyal customers. Some constraints regarding crowd funding include raising money can at times be costly in terms of invested time. Again, it is not quite certain whether the funds to be raised may meet the amount targeted by the business enterprise. Moreover, under crowd funding, business enterprises are required to share their business ideas with investors. By so doing there is a risk for their unprotected ideas being stolen by others. As a result, the failure of an enterprise whose activities or ideas were financed by crowd funding may damage the reputation of the business and investors.

Grants

A grant is financial support from either the government or private organisations that is given to enhance business activities. Grants may be offered by both local and international organisations to support specific projects or initiatives. The government or private organisations can provide grants in form of money or materials to start-ups and existing businesses as well. For a business to access a grant, usually there are strict application requirements to be fulfilled by the beneficiaries. Moreover, the grant providers stipulate spending conditions which the beneficiaries have to follow in order to ensure that the money or materials provided are fully utilised for the intended purpose.

A grant has the benefit of being a debt-free financial support as it does not need to be repaid. It increases the credibility and attractiveness of an enterprise to other investors or other stakeholders. A grant also enhances the growth of the medium-sized enterprise. Lastly, it is associated with money which promotes a positive change in the society. However, a grant has some challenges including its difficulty to acquire as it involves strict application, screening, and spending conditions. In addition, bureaucracy usually exists in grant application which makes the process complex.

Activity 3.3

1. With the help of ICT identify and visit some of the business enterprises that have received financial support from either the government or private organisations in Tanzania. Then, ask the owners the following:
   1. How did they secure the financial support?
   2. How are businesses benefiting from such support?
2. Use reliable sources to describe other sources of financing for medium-sized businesses apart from those explained in this chapter.

Exercise 3.3

1. Your friend Miss Johari wants to start a catering business. Unfortunately, she has limited capital to start that business and subsequent operations. Which advise will you give her on the following:
   1. Identifying different sources of finance that she can apply.
   2. Describe the advantages and disadvantages of each source identified in part (a) above.
2. Despite the existence of different sources of financing for medium-sized enterprises, still secured loans are considered as the most common way used for financing them. Explain why secured loans are the most preferred?
3. Mr. Banuani is an entrepreneur whose business activity is retailing different types of cosmetics in Dodoma Region. Unfortunately, all of his properties including products were burnt in a fire accident. He approached one of the commercial banks in Tanzania seeking for a secured loan but the bank did not grant his request. What could be the reasons for the bank refusing to lend money for his business?

Chapter Summary

1. The medium-sized businesses are classified based on the number of employees and capital invested. In Tanzania, a medium-sized business has employees ranging 50 to 99 and capital invested ranges from TShs. 200 million to TShs. 800 million.
2. Existence of many medium-sized business enterprises in the country lowers the unemployment rate to the society because they employ many people as the workforce.
3. Medium-sized businesses need finance for carrying out various business activities. These funds are used as working capital and for future expansions or meeting other maturing obligations.
4. Leasing, Sale and lease-back of non-current assets, sale of non-current assets and retained earnings are some of the internal sources of finance while share capital, venture capital, overdrafts, secured loans, debentures, crowd funding, and grants are some external sources of finance for medium-sized businesses.
5. Business enterprises may choose any of the sources of financing businesses depending on different factors such as availability, potentiality, formalities to be followed, and accessibility of the source.

Revision Exercise

1. Financing medium-sized businesses seems to be advantageous to the owners, as without money the business will automatically succumb. Reflecting on this statement, explain the advantages of finance to medium-sized business.
2. Critically analyze the key features of a medium-sized business in Tanzania.
3. Mr. Majuto worked as a gardener in one of the five-star hotels in Tabora Region five years ago. However, his monthly salary was not adequate to meet his family expenses so he quit his job. He slowly ventured into the farming business. He currently employs around 61 employees and he has won TShs. 200 million from one of the non-government organisations operating in Tanzania after submitting his business proposal to increase his production capabilities.
   1. State the source of finance used by Majuto.
   2. What are the advantages and disadvantages of the source identified in part (a)?
4. Suppose your friend Sofia owns a medium-sized business and needs capital to fund various operations. She consulted you as an expert in the aspect of financing medium-sized businesses. Identify and advise her on internal sources she can opt and explain advantages and disadvantages of each to her.
5. Baraka and Musa completed form IV at Marlex Secondary School. They were not successful selected for the Advanced Secondary Education; therefore, they jointly established a medium-sized business of selling second hand clothes in Mwanza region, unfortunately, the business has run bankrupt because of insufficient working capital. Which source of finance would you advise them to apply for and why?
6. CHJ owns a small business for almost ten years. He used to retain profit obtained from his business since commencement. However, his ambition is to upgrade the business to a medium-sized one. As an expert in Business Studies:
   1. Explain why CHJ wishes to upgrade his business.
   2. What potential benefits of the source of financing opted by CHJ to upgrade?
7. Assume you have received secured loans several times from commercial banks to support your business. Describe the challenges you usually encounter when using this financing approach.

Chapter Four: Business Regulatory Environment in Tanzania

Introduction

Medium-sized businesses play a crucial role in driving economic growth. In so doing, they navigate a multifaceted regulatory landscape comprising various financial, legal, and operational requirements. Indeed, for a medium-sized business to achieve sustainable growth, it is critical to ensure compliance with policies and regulations. In this chapter, you will learn about the roles of government and non-government agencies, as well as the policies and regulations that apply in promoting and controlling medium-sized business activities. The competences developed will orient you to comply with policies and regulations governing and supporting the establishment and operation of medium-sized businesses in Tanzania.

Think: Establishing a business in Tanzania without any compliance.

Roles of Government and Non-Government Agencies in Regulating and Supporting Businesses in Tanzania

Government and non-government agencies play complementary roles in regulating and supporting medium-sized businesses in Tanzania. This is done through the provision of essential services such as information, and financial assistance. By so doing, they enable creation of environment that is conducive for medium-sized businesses and hence, contribute to the country's economic development. In this chapter some of government and non-government agencies regulating and supporting businesses in Tanzania are discussed.

Government Agencies

Government agencies ensure proper policies and regulations that are developed to impact or support the business performance due to their strategy. It is important for business stakeholders to have knowledge of the laws and regulations governing the business environment in Tanzania. Different types of laws and regulations that can affect business include labour and consumer protection, environmental protection, social and business legislation, and tax legislation. Additionally, there are specific laws and regulations for specific sectors such as transport, food and beverage industries, agricultural sector. Some of the government agencies supporting and regulating businesses in Tanzania are the Tanzania Investment Centre (TIC), Zanzibar Investment Promotion Authority (ZIPA), Tanzania Revenue Authority (TRA), Tanzania Trade Development Authority (TanTrade), Small Industries Development Organisation (SIDO), Micro, Small and Medium Industrial Development Agency (SMIDA), and Fair Competition Commission (FCC). These agencies are described as follows:

Tanzania Investment Centre (TIC)

The Tanzania Investment Centre (TIC) was established in 1997 under the Tanzania Investment Act (1997), Cap 38, Revised Edition (R. E) 2022 as the primary agency responsible for promoting and facilitating investments in Tanzania. Its key activities are geared towards coordinating, promoting, and facilitating investment in Tanzania and advising the government on policy matters to create a competitive, attractive, and sustainable investment climate. Its mandate includes attracting domestic and foreign investors, facilitating business registration and licensing, and providing advisory services to investors. For medium-sized businesses, the Centre offers support in navigating the investment landscape, including assistance in obtaining investment certificates, permits, and licenses. In addition, TIC plays a significant role in creating an enabling environment for medium-sized businesses to succeed by providing information on investment opportunities in the country, incentives, and regulations.

Zanzibar Investment Promotion Authority (ZIPA)

Zanzibar Investment Promotion Authority (ZIPA) was established in 1986. It was initially a department under the Ministry of Finance and Economic Affairs of Zanzibar. ZIPA officially became an Authority under Act No. 4 of 2018. It is responsible for promoting and facilitating investments in Zanzibar. The authority is also mandated to ensure a conducive business environment, processing approval for new investments, facilitation of incentives, and all necessary permits to investors. Further, ZIPA provides institutional support for economic development and ensures coherent economic and business policy formulation in Zanzibar.

The Tanzania Revenue Authority (TRA)

The Tanzania Revenue Authority (TRA) was established by Act of Parliament No. 11 of 1995, and started its operations on 1st July 1996. In carrying out its statutory functions, TRA is regulated by law, and is responsible for overseeing tax administration and revenue collection in Tanzania. Medium-sized businesses are subject to various tax obligations, including corporate tax, Value-Added Tax (VAT), and payroll taxes. TRA plays a vital role in ensuring compliance with tax laws and regulations, providing guidance and assistance to medium-sized businesses in fulfilling their tax obligations. In keeping up with technological advancements, TRA offers online platforms and services for tax registration, filing, and payment, streamlining tax processes, and enhancing compliance among medium-sized businesses. In Zanzibar, the Zanzibar Revenue Authority (ZRA) works hand in hand with TRA to enhance tax administration. Tax compliance by medium-sized enterprises allows the government to carry out its functions like provision of education, health and infrastructure development effectively. This in turn helps to mitigate medium-sized business challenges hence improving their performance.

Tanzania Trade Development Authority (TanTrade)

Tanzania Trade Development Authority (TanTrade) was established by the Tanzania Trade Development Authority Act No. 4 of 2009. TanTrade replaced the Board of External Trade (BET) which was established by Act No. 5 of 1978 and the Board of Internal Trade (BIT) Act No. 15 of 1973. In facilitating trade, TanTrade works to create a conducive environment for medium-sized businesses to operate and thrive. Through its efforts to enhance the performance of the trade sector, TanTrade indirectly supports medium-sized businesses by facilitating access to markets, promoting export opportunities, and providing regulatory guidance. Additionally, TanTrade's initiatives to organise international trade fairs create platforms for medium-sized businesses to showcase their products, expand their networks, and explore new business opportunities both domestically and internationally.

Small Industries Development Organisation (SIDO)

Small Industries Development Organisation (SIDO) was established under the Act No. 28 of 1973. Since its establishment in October 1973 under the then Ministry of Trade, Industry, and Marketing, SIDO has played a significant role in nurturing medium-sized businesses in Tanzania. Originally tasked with developing the small industry sector, SIDO has also evolved to provide comprehensive support to medium-sized enterprise development by providing access to infrastructure, technology, and skills development. Moreover, SIDO collaborates closely with other government agencies and international donors, including Tanzania Bureau of Standards (TBS), Swedish International Development Cooperation Agency (SIDA), and the World Bank (WB) to implement programs aimed at supporting businesses in Tanzania. These initiatives encompass technology development and transfer which has significantly contributed to the growth and competitiveness of medium-sized enterprises in Tanzania. Generally, SIDO capitalizes on strategic interventions and partnerships to remain a key catalyst for the development of businesses in Tanzania, and fostering economic growth in the country.

Micro, Small, and Medium Industrial Development Agency (SMIDA)

The Micro, Small, and Medium Industrial Development Agency (SMIDA) was established by Act No. 2 of 2018 as an industrial development agency under the Ministry of Trade and Industries implementing almost the same activities as SIDO in Zanzibar. The core functions of the Agency are to advise, develop, coordinate, promote, and offer every form of support to micro, small, and medium-sized industries in Zanzibar. Its support spans from the early stage of formalisation, marketing of the product to graduation of SMEs to large industry category. In addition, SMIDA facilitates affordable credit schemes and other financial and non-financial services through the Small and Medium Industrial Development Fund (SMIDE) in Zanzibar.

Fair Competition Commission (FCC)

The Fair Competition Commission (FCC) was established under Act No. 8 of 2003 with a crucial role in ensuring fair and competitive market practices in Tanzania. FCC is mandated to intervene in markets to prevent anti-competitive behaviour, market dominance, price fixing, and other practices that could harm businesses and disrupt market stability. By curbing such practices, the FCC fosters an environment where medium-sized enterprises and other businesses can compete fairly in the market. Further, the FCC's oversight extends to addressing abuse of domination and scrutinizing mergers and acquisitions that lead to market concentration which are detrimental to medium-sized businesses. Through these interventions, the FCC safeguards enterprises by ensuring they have equitable opportunities to grow and succeed in the marketplace.

The Roles of Government Agencies in Promoting Businesses

Government agencies in Tanzania execute various programs and initiatives aimed at promoting businesses including medium-sized enterprises through accessing finance, capacity building, and market development. By addressing key challenges related to access to finance, capacity building, and market development, the agencies contribute to creating a conducive environment for businesses including medium-sized enterprises. In turn, medium-sized businesses thrive, innovate, and contribute to the country's economic development goals. Some of the key roles of the government agencies in promoting businesses in Tanzania include the following:

Access to Finance

Government agencies such as the Tanzania Commercial Bank (TCB) and the Tanzania Agricultural Development Bank (TADB), provide financial support to medium-sized businesses through loans, grants, and subsidies. Similarly, specialized financing programs, such as the Medium and Small Enterprises Credit Guarantee Scheme, aim at mitigating the risks associated with lending to medium-sized businesses through encouraging financial institutions to extend credit to this sector. Furthermore, the government collaborates with international development partners and microfinance institutions to expand access to financial services for medium-sized businesses.

Capacity Building

Government agencies such as SIDO and the Vocational Education and Training Authority (VETA), offer capacity-building programs tailored to the needs of different businesses including medium-sized enterprises. Such programs include technical skills development, entrepreneurship training, and managerial capacity enhancement. These programs equip medium-sized business owners and employees with the knowledge and skills needed to operate and grow their enterprises effectively.

Market Development

Government agencies work to create an enabling environment for medium-sized businesses to access both domestic and international markets through trade facilitation measures and market development initiatives. Export promotion programs are performed by the Tanzania Trade Development Authority (TanTrade), which assists medium-sized businesses in exploring export opportunities, accessing trade information, and participating in trade fairs and exhibitions. Moreover, the government invests in infrastructure development, logistics, and trade facilitation in terms of improvements to transportation networks, customs procedures, and trade corridors to enhance market access for medium-sized businesses.

Non-Government Agencies

Some of the non-government agencies supporting businesses in Tanzania are Tanzania Chamber of Commerce, Industry, and Agriculture (TCCIA), Zanzibar National Chamber of Commerce (ZNCC), Tanzania Association of Micro-Finance Institutions (TAMFI), and Tanzania Private Sector Foundation (TPSF). These agencies are described as follows:

Tanzania Chamber of Commerce, Industry, and Agriculture (TCCIA)

The Tanzania Chamber of Commerce, Industry, and Agriculture (TCCIA) serves as a crucial institution in supporting the growth and development of businesses including medium-sized enterprises in Tanzania. Since its establishment in 1988, TCCIA has played a vital role in facilitating the country's transition from a centralized, planned economy to a more open, mixed economy that embraces private ownership and entrepreneurship. By collaborating closely with international organisations and the Tanzanian government, TCCIA works to support the private sector and create an enabling environment for medium-sized businesses to flourish. Through its advocacy efforts, capacity-building initiatives, and networking opportunities, TCCIA empowers medium-sized businesses to navigate regulatory challenges, access market opportunities, and foster growth. Similarly, TCCIA helps in shaping policies and regulations that support the needs of medium-sized businesses by facilitating dialogue between the private sector and government. Furthermore, TCCIA enhances access to resources, expertise and market linkages for medium-sized businesses, initiatives which enable them to compete effectively in domestic and global markets.

Zanzibar National Chamber of Commerce (ZNCC)

The Zanzibar National Chamber of Commerce (ZNCC) was established in 2007 as the Zanzibar National Chamber of Commerce, Industry and Agriculture (ZNCCIA). Its name was shortened deliberately as a branding strategy to encompass all private sector players in Zanzibar. ZNCC is an apex body of the private sector in Zanzibar. It acts as a voice of the private sector linking its members to the government. Its main functions are advocacy, training, networking, and information sharing. Other specific activities provided to its members include the facilitation of all matters concerning trade, market opportunities, business advisory services, and entrepreneurial skills development.

Tanzania Association of Micro-Finance Institutions (TAMFI)

Tanzania Association of Micro-Finance Institutions (TAMFI) is a not-for-profit umbrella organisation for microfinance institutions in Tanzania. It was formally registered in 2001 as the network for microfinance activities in the country. The association seeks to develop the capability of microfinance institutions and the microfinance sector in general through advocacy, lobbying, research and development, responsible microfinance, capacity building, and information gathering and dissemination. The association promotes and encourages the establishment of new products and related markets, and organises forums and meetings in order to promote communication among members, to strengthen their relationship and to transfer information and experience among them. TAMFI encourages networking which is an integral part of any association.

Tanzania Private Sector Foundation (TPSF)

Tanzania Private Sector Foundation (TPSF) was formally incorporated under the Companies Act (Cap 212) as a company limited by guarantee on 4th November, 1998 for the purpose of promoting private sector-led social and economic development in Tanzania. As an apex and focal private sector organisation, the Tanzania Private Sector Foundation (TPSF) is the voice of the private sector and the umbrella body for private sector associations and corporate bodies in all sectors of the economy, including trade associations. Its members are business associations, corporate companies, multinationals, SMEs, start-ups, and working groups of the various sectors of the economy. TPSF provides a platform for the private sector to engage in Public-Private Dialogue (PPD) at local, national, and international levels. The Foundation opens potential markets for its members through business forums and participation in local and international trade fairs, as well as offering programs to build the capacity of members to become competitive in both local and international markets.

The Roles of Non-Government Agencies in Promoting Businesses

Generally, the non-governmental agencies play the following roles in promoting medium-sized businesses in Tanzania:

Advocacy

Non-government agencies in collaboration with the private sector engage with the government in case of issues pertaining to the business environment. Specifically, they advocate for public-private dialogue, policy advocacy and facilitate reforms in the business environment at local and national levels. At times these non-government agencies involve higher learning institutions to undertake policy research to properly engage the government in case there is an issue that requires evidence-based analysis.

Capacity Building

Non-government agencies offer customized training to the private sector community as part of building capacity in terms of knowledge and skills. The training sessions are usually aimed at enhancing business management, market access, financial management and technology efficiency.

Networking

Non-government agencies provide platforms and avenues for the private sector to network or engage with various stakeholders in the business ecosystem. These stakeholders include suppliers, agents, distributors, policy makers, financiers or investors, development partners, and customers. Such networking platforms are very pertinent to business sustainability.

Market Access

Non-government agencies have different programs that enhance market access. These programs include the provision of market information, linkages to various markets, and preparation of exhibitions both locally and internationally. Through such forums, the business community can showcase their products to their potential customers. In turn this stimulates more sales.

Activity 4.1

(a) With the help of ICT collect information on three (3) government and two (2) non-government agencies responsible for regulating and supporting medium-sized businesses in Tanzania.

(b) For each agency in part (a), gather information about its mandate, functions, and recent activities relating to supporting businesses in Tanzania.

(c) Pay a visit to any of the agencies in part (b), interact with the staff, and observe their operations.

(d) Describe the roles played by the agencies visited in supporting medium-sized businesses in Tanzania.

Exercise 4.1

1. What is the primary objective of the Tanzania Trade Development Authority (TanTrade), and how does it contribute to the development of medium-sized businesses in Tanzania?
2. Explain the overarching challenges and opportunities that medium-sized businesses face in Tanzania when conducting their activities.
3. Imagine you are managing a tech company encountering obstacles of regulatory compliance and access to funding. Which government agencies can help you in addressing the problems of regulatory compliance and access to funds?

Policies Promoting Businesses in Tanzania

Policies are guidelines, regulations, and measures established by governments or organisations to guide decision-making to achieve specific objectives in various sectors. In the context of promoting business enterprises, policies are developed to create an enabling environment to facilitate the growth and sustainability of businesses. This is because policies can unlock the full potential of entrepreneurship and enterprise development by aligning regulatory frameworks, incentives, and support programs with the needs and aspirations of businesses.

The Importance of Policies in Promoting Business Enterprises

The following are the importance of policies in promoting business enterprises:

Creating an Enabling Environment

Policies provide a framework of rules and regulations that support business activities by protecting property rights, ensuring legal certainty, and promoting fair competition. To foster a conducive business environment for enterprises to thrive, policies encourage investment, entrepreneurship, and innovation by establishing a transparent and predictable operating environment.

Addressing Market Failures

Policies address market failures and distortions that hinder efficient allocation of resources and business development. Policies may target externalities such as information asymmetry, pollution, or monopolistic practices to promote market efficiency and competition which will eventually ensure a level playing field for businesses of all sizes.

Facilitating Access to Resources

Policies aim to improve access to crucial resources that are essential for business growth and competitiveness. Such resources include finance, technology, infrastructure, and labour. Through targeted interventions, policies support business enterprises in overcoming barriers to entry and expansion, enabling them to access the needed resources to innovate, invest, and create value.

Stimulating Economic Growth and Development

Policies promote business enterprises by encouraging investment, job creation, and productivity improvements. By fostering entrepreneurship and supporting the growth of Small and Medium Enterprise (SMEs), policies contribute to poverty reduction, income generation, and inclusive economic development, thereby improving living standards and enhancing social welfare.

Ensuring Social and Environmental Responsibility

Policies promote responsible business practices by establishing regulations, standards, and incentives to address social and environmental challenges. Through measures such as environmental regulations, Corporate Social Responsibility (CSR) initiatives, and labour standards, policies encourage businesses to operate sustainably, ethically, and in harmony with communities, thereby fostering long-term societal well-being and value creation. In several cases, socially responsible enterprises tend to outperform those that are not.

Policies Promoting Medium-Sized Businesses

Policies play a crucial role in fostering economic growth, innovation, and consequently job creation in Tanzania. By creating an enabling environment for medium-sized businesses to thrive, these policies stimulate investment, enhance productivity, and promote sustainable development across various sectors. There are several policies, laws, and bylaws promoting medium-sized businesses, however, in this chapter investment and industrial policies are discussed.

Investment Policies

The investment policies and incentives available to medium-sized businesses in Tanzania are designed to stimulate economic growth, attract domestic and foreign investments, and create employment opportunities. In Tanzania, several national investment strategies, policies, and programs have stipulated some interventions with important implications on medium-sized enterprises growth and sustainability as exhibited in some of the following policies and strategies:

Tanzania Development Vision - 2025 (TDV 2025)

Tanzania Development Vision 2025 (TDV 2025) was developed in the late 1990s to guide economic and social development efforts up to the year 2025 with the aim of transforming Tanzania into a middle-income country and transforming the economy from a predominantly agricultural one to a diversified and semi-industrialized economy with a substantial industrial sector comparable to typical middle-income countries. Among the investment priorities that aim to steer Tanzania to achieve middle-income status by 2025, the vision strategizes on how to support medium-sized businesses to implement light manufacturing activities. The targeted industries are agro-processing, manufacturing of consumer durables, and assembly industries (processing of meat, leather, fruits, nuts, wood, and paper production).

Through the vision, the government of Tanzania anticipates to attract private sector investments which are vital to the future growth and productivity of the economy. Thus, the vision details how the government undertakes to alleviate constraints to private sector participation in the desired industrialization and socio-economic transformation. These activities include providing appropriate guidance to the private sector and all other stakeholders, investing in ways that leverage the participation of the private sector, making limited smart interventions, as necessary in areas that are important for Tanzania's development and nurturing collaborative action, and effective state-business relations.

The National Investment Promotion Policy

The National Investment Promotion Policy of 1997 was established with the objectives of supporting maximum mobilization and utilization of domestic capacity including cooperation with other countries, promotion of export orientation on domestic production of goods and services to enhance the development of the export sector, encouragement of inflows of external resources to complement national efforts, encouragement and facilitation of the adoption of new technologies, and enhancement of transparent legal framework that facilitates the promotion and gives due guarantee of protection to all forms of investment activities.

These overarching policies give rise to numerous other regulations and strategies for promotion of investment in Tanzania. The following are key areas covered in the various policy and strategies for promotion of investment in Tanzania:

Tax Incentives

A tax incentive is an aspect of government policy that lowers the amount of tax that individuals or businesses owe in order to encourage certain activities or achieve specific goals. The government of Tanzania offers various tax incentives to medium-sized businesses to encourage investment and stimulate economic growth. These incentives include tax holidays, reduced corporation tax, and exemptions from income tax, export and import duties, and Value-Added Tax (VAT) on certain products. Several laws and regulations provide room for tax incentives such as the Zanzibar Investment Promotion and Protection Act No. 14 of 2018, the Value Added Tax Act Cap 148 revised edition of 2019, the Income Tax Act Cap 332 revised edition of 2019, and the East African Community (EAC) Customs Management Act of 2004 and its amendments. By reducing the tax burden on medium-sized enterprises, these incentives aim to enhance their competitiveness, attract investment, and facilitate business expansion.

Investment Guarantees

An investment guarantee is a form of financial protection that is offered by governments to investors to safeguard them against potential losses. The Tanzanian government provides investment guarantees to medium-sized businesses to mitigate risks and instill confidence in investors. These guarantees may take the form of guarantees against nationalization, and breach of contract, as well as guarantees for repatriation of profits and capital. By offering assurances of protection and stability, investment guarantees help to attract long-term investment and foster a conducive business environment for medium-sized businesses. For a medium-sized business to enjoy the investment guarantee, it has to register with TIC and enjoy the rights as provided in the Tanzania Investment Act No. 10 of 2022. These rights include investment guarantees, access to land, and employing expatriates. In addition, investments are guaranteed against any form of expropriation. Tanzania is a signatory of several multilateral and bilateral agreements on the protection and promotion of foreign investment.

Preferential Treatment for Domestic Investors

The government of Tanzania prioritizes domestic investment and offers preferential treatment to domestic investors including medium-sized businesses, through various policies and initiatives. Domestic investors benefit from preferential access to government procurement contracts, priority in obtaining licenses and permits, and eligibility for government-funded development programs and incentives. Moreover, the government may provide financial support, technical assistance, and capacity-building programs specifically tailored to the needs of domestic investors thereby promoting the growth and competitiveness of medium-sized businesses operating in Tanzania.

In addition, domestic investors have access to the following international preferential treatments:

• The African Caribbean and Pacific-European Union (ACP-EU) framework signed on 15th November 2023 with the aim of mobilising investment, supporting trade and fostering private-sector development, to achieve sustainable and inclusive growth and create decent jobs for all.
• The African Growth Opportunity Act (AGOA) was enacted on 18th May 2000 as Public Law 106 of the 200th Congress of the United States of America (USA). The AGOA legislation has been renewed on different occasions, most recently in 2015, when its validity was extended to September 2025. It provides duty-free entry into the United States for almost all African products, which helps in fostering an improved business environment in Tanzania. Tanzania also qualifies for textile and garment benefits under the AGOA.
• The East African Community (EAC) vision 2050 signed on 2nd March 2016 as implementation of the EAC treaty of 1999 aimed at promoting inter and intra-regional trade and investment through creating a conducive environment for cross border and foreign investment. In the Vision, Tanzania's priority areas include promotion of an investment and savings culture. The vision is currently in the early stages of phase 2 out of 7 phases with activities that include strengthening human capital and conducting feasibility studies on the investment infrastructure. The EAC also signed a Trade and Investment Framework Agreement (TIFA) with the USA in 2008 which is in force to date.

Activity 4.2

Conduct a library search and describe the specific tax incentives provided under various investment policies in Tanzania.

Industrial Policies

Industrial policies are strategic initiatives designed by the government to facilitate the development and expansion of key sectors and industries within an economy. These policies aim at creating a favourable environment for businesses to thrive. Industrial policies encompass several measures tailored to specific sectors including fiscal incentives, infrastructure development, research and development support, and regulatory reforms.

In the context of medium-sized businesses, industrial policies are particularly relevant as they provide frameworks and support mechanisms to overcome challenges and capitalize on opportunities within their respective sectors. Industrial policies include initiatives geared to streamline regulatory processes, reduce administrative burdens, and enhance access to finance and market opportunities. Effective industrial policies play a crucial role in promoting the growth and competitiveness of medium-sized businesses thereby contributing to economic development and prosperity.

In Tanzania, several national industrial strategies, policies and programs have stipulated some interventions with important implications on medium-sized enterprises growth and sustainability as exhibited in some of the following policies and strategies:

Tanzania SME Development Policy of 2003

The policy aims at stimulating SMEs development and growth through improved legal and institutional framework, enhancement of services provision, and improvement of infrastructures. Generally, this policy intends to create an enabling environment for businesses to prosper in the country including the medium-sized enterprises.

National Trade Policy of 2003

The policy aims at transforming Tanzania's economy by enhancing the competitiveness of the domestic producers to participate in the global economy through trade liberalization. The trade policy focuses on increasing efficiency and linkages in domestic production to achieve a diversified competitive export sector, which in turn stimulates growth and development in the country.

Sustainable Industrial Development Policy (SIDP): 1996 to 2020

The policy emphasised on the promotion of small and medium-sized industries. To achieve this, the SIDP focused on simplification of business registration and licensing processes. Again, SIDP encouraged the simplification of taxation as well as the formalization of the informal businesses in the country. Further, SIDP focused on the improvement of financial services accessibility, including enabling youth, women, and people with disabilities to be involved in economic activities.

Integrated Industrial Development Strategy (IIDS) of 2025

The strategy is like an update of the SIDP as it focuses on ensuring that the objectives of SIDP are implemented. Thus, IIDS emphasises on transformation in the agriculture sector by improving productivity from low to semi-industrialized, with the private sector being considered as the vehicle for economic development.

National Agricultural Policy (NAP) of 2013

The policy aims at addressing the obstacles and problems in the development of the value chains in the agricultural sector in the country. Such problems addressed by NAP in the agriculture value chains include poor quality of the agricultural products, limited participation of the private sector, insufficient productivity, insufficient support services, over-dependency of the sector on rain for agricultural activities, poor infrastructure and facilities. NAP also addresses other factors affecting agricultural value chains like environmental deterioration, crop pests and diseases.

Blueprint for Regulatory Reforms of 2018

The Blueprint was established to provide an enabling business environment to improve business operations in the country. This reform emphasizes that government agencies should provide relevant information to the private sector and the private sector should be prioritized in the envisaged reforms because of their role in economic transformation in Tanzania.

Task 4.1

Review at least two industrial policies in Tanzania:

(a) Describe their objectives and key provisions; and

(b) Explain how each policy promotes medium-sized businesses growth.

Exercise 4.2

1. Suppose you own a medium-sized business, discuss the importance of skills training and workforce development initiatives in enhancing the competitiveness of your enterprise.
2. Assume you are operating a medium-sized business in Tanzania. Explain how your business operations may be impacted by the policy with examples of specific industrial policies.

Chapter Summary

1. Government and non-government agencies regulate and support medium-sized businesses in Tanzania.
2. The Tanzania Investment Centre (TIC) is primarily responsible for promoting and facilitating investment in Tanzania. Its key activities are geared to coordinate, promote, and facilitate investments in Tanzania.
3. Zanzibar Investment Promotion Authority (ZIPA) ensures a conducive business environment, processes approval for new investments, and facilitates incentives and all necessary permits to investors in Zanzibar.
4. The Tanzania Revenue Authority (TRA) is responsible for overseeing tax administration and revenue collection in Tanzania.
5. TRA offers online platforms and services for tax registration, filing, and payment, streamlining tax processes and enhancing compliance among medium-sized businesses.
6. Tanzania Trade Development Authority (TanTrade) supports medium-sized businesses by facilitating access to markets, promoting export opportunities, and providing regulatory guidance.
7. The key roles of Micro, Small and Medium Industrial Development Agency (SMIDA) are to advise, develop, coordinate, promote and offer every form of support to micro, small and medium industries in Zanzibar.
8. The Fair Competition Commission (FCC) is mandated to intervene in markets to prevent anti-competitive behaviour, market dominance, price fixing, and other practices that could harm consumers and disrupt market stability.
9. The Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA) works to support the private sector and create an enabling environment for medium-sized businesses to flourish.
10. Zanzibar National Chamber of Commerce (ZNCC) is an apex body of the private sector in Zanzibar with the main functions of advocacy, training, networking, and information sharing.
11. Tanzania Association of Micro Finance Institutions (TAMFI) seeks to develop capability of micro-finance institutions and the micro-finance sector in general through advocacy, lobbying, research and development, responsible micro finance, capacity building, information gathering and dissemination.
12. The Tanzania Private Sector Foundation (TPSF) is the voice of the private sector and the umbrella body for private sector associations and corporate bodies in all sectors of the economy, including trade associations in Tanzania.
13. Policies are guidelines, regulations, and measures established by governments or organisations to guide decision-making and achieve specific objectives in various sectors.
14. Policies play a significant role in promoting business enterprises by creating an enabling environment, addressing market failures, facilitating access to resources, stimulating economic growth and development, and ensuring social and environmental responsibility.
15. Some of the policies which promote medium-sized businesses include investment policies and industrial policies. These policies encompass a range of measures, including tax incentives, investment guarantees, and preferential treatment for investors.

Revision Exercise

1. Analyse the role of government agencies as stakeholders in regulating businesses in Tanzania.
2. Suppose you are a medium-sized business owner in Tanzania, how can you benefit from the services provided by the Tanzania Investment Centre (TIC)?
3. What tax obligations are medium-sized businesses subject to in Tanzania and how does the Tanzania Revenue Authority (TRA) or Zanzibar Revenue Authority (ZRA) assist in fulfilling those obligations?
4. In which ways does the Tanzania Trade Development Authority (TanTrade) support medium-sized businesses in accessing markets and export opportunities?
5. How can one leverage the support provided by the Small Industries Development Organisation (SIDO) to enhance the enterprise's growth and competitiveness?
6. Discuss the role of the Small Industries Development Organisation (SIDO) in fostering innovation and technology transfer among medium-sized businesses.
7. Discuss the role played by the Fair Competition Commission (FCC) in ensuring fair and competitive market practices for medium-sized businesses in Tanzania.
8. Suppose you are a medium-sized business owner, how can you engage with the Fair Competition Commission (FCC) to address market challenges and ensure fair competition?
9. Explain how medium-sized businesses benefit from the investment policies and incentives offered by the Tanzanian government.
10. What key challenges do medium-sized businesses face in accessing finance and how do government agencies address these challenges?
11. Describe the capacity-building programs available for medium-sized businesses in Tanzania and show how they can enhance enterprises development.
12. How do government agencies collaborate with international partners to support medium-sized businesses in Tanzania?
13. What are the roles played by the Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA) in supporting medium-sized businesses?
14. How does the Tanzania Revenue Authority (TRA) ensure that medium-sized businesses comply with tax laws and regulations.
15. What incentives does the Tanzanian government offer to encourage medium-sized businesses to invest in key sectors?
16. Outline multilateral and bilateral agreements for international preferential investment that Tanzania has adopted.

Chapter Five: Business Registration in Tanzania

Introduction

Business registration acts as a gateway towards achieving business performance which subsequently affects economic performance. In fact, countries cannot realize sustainable businesses and economic growth without registering businesses operating in their economies. In this chapter, you will learn about the concept of business registration, types of business licenses, procedures for registering businesses, and sanctions for non-compliance for medium-sized businesses in Tanzania. The competences developed will enable you to acquire skills for registering businesses in Tanzania including medium-sized enterprises.

Think: Operating an unregistered business.

The Concept of Business Registration

Business registration is the process of obtaining legal authorisation to start and operate a business in a given locality. It is sometimes referred to as business formalisation. It involves registering the business, products, properties, documents, intellectual property, and many others. Business registration does not only pertain to starting the business but also day-to-day business operations. Evidence of business registration is usually in the form of business licenses, permits, and certificates.

Importance of Business Registration

The following are the importance of business registration in Tanzania:

• Enhances freedom to do business: The government of Tanzania instructs business owners in the country to operate a business with a valid business license issued by the respective Authority. Therefore, for any entity to operate the business freely in Tanzania either Mainland or Zanzibar it is important to be registered to avoid the consequences of operating an unregistered.
• Increases access to credit: Many financial institutions in the country offer loan access to businesses that have formalised their operations. Businesses that have undergone the formalisation process can use this opportunity to secure funding from financial institutions, government or other formal lenders to expand their operations and hence boost economic developments.
• Increases market access: A registered business increases the level of trust to its customers, channel members and general public. Registration of a business has an implication to a third party that the relevant authorities have endorsed the business activities and it is safe to transact/interact with such business. It is that trust which helps a registered business to penetrate various markets. In addition, it enables a medium-sized business to bid for lenders in the private and public sectors.
• Enables protection of intellectual property rights: Intellectual property (IP) registration enables companies to protect their core business as well as research and development activities. Apart from protecting businesses, Intellectual property registration also helps companies build value. This is because Intellectual property is typically counted as an asset when assessing a company's value. As a result, Intellectual property assets can even be used as collateral for loans.
• Improves tax administration: The sharing of information between BRELA or BPRA and Tanzania Revenue Authority (TRA) or Zanzibar Revenue Authority (ZRA) ensures that all registered and operating businesses in the country pay taxes. By formalising the business, the tax administration burden is significantly reduced as fewer resources are allocated to search for those businesses that are informally operating in the country.
• Increases of tax base: More registered businesses expand the accessibility of collecting tax across more entities. Every registered business at BRELA or BPRA or any other authority reflects the same increase in the number of tax payers in the TRA or ZRA. If more businesses formalise their operations, the same effect will be reflected on the tax base, hence increase the revenue collected by tax authorities.
• Assists in the acquisition of property rights: Business formalisation allows the business in the acquisition of property. By using its registered business name, the business may acquire large investments such as land or properties, something which can be limited in the case of unregistered businesses.
• Helps in the planning process: Business formalisation helps the government and businesses during the planning process. With formal businesses, the government can estimate the amount of revenue to be collected, the cost of collection, allocation of social services, infrastructure, and levies. Similarly, business owners can easily estimate the amount of tax liable each year and plan for payment.

Activity 5.1

Visit a nearby business licensing authority and request for a list of registered medium-sized businesses in the locality. Thereafter, consult at least three owners of those businesses and ask them about the benefits of registering their businesses.

Exercise 5.1

1. Describe the aspects involved in registering the businesses.
2. Why should a business undertake registration?

Types of Business Licenses

Business registration of either a medium-sized or other forms of business in Tanzania is a multifaceted phenomenon as demonstrated in Figure 5.1. Moreover, business registration depends on the form of the business (size, business organisation, and products), type of sector, locality (Tanzania Mainland versus Zanzibar), ownership (local versus foreign), location (rural versus urban), and many other factors. Based on the Tanzania Small and Medium Enterprise (SME) Development Policy of 2003, capital invested and number of employees are criteria used in determining the category of businesses when the businesses including medium-sized enterprises are registered.

Figure 5.1: Thoughts of organs responsible for registering businesses

General Licenses

These are broad permits, licenses or certificates issued to business enterprises by the LGAs, BRELA, or BPRA or their agencies. They are expected to be acquired by a business after applying for the sectoral business licenses. Some of the general licenses include the following:

Business License

This license is usually issued upon registering the business. It is the authorisation given by the business licensing authorities to start and operate a business. In Tanzania Mainland, business licenses are classified into two classes, that is Class A and Class B. Class A business licenses are those issued by the Ministry of Industry and Trade (MIT) through the Business Registrations and Licensing Agency (BRELA) whereas Class B licenses are issued by Local Government Authorities (LGAs). Examples of business licenses issued by BRELA are in Table 5.1.

Table 5.1: Business licenses issued by BRELA

Business Category	Examples
Real Estate	Estate Agent, Estate Developer, Property Managements, Real Estate Agent
Shipping and Cargo	Shipping Agency, Shipping Business, Cargo Valuation, Cargo superintendence, Harbours and Cargo Handling
Financial Services	Banking and Financial Institutions, Capital Market, Microfinance Institutions, Insurance and Assurance
Tourism	Tourist Hotels, Lodges, Camps, Tour Operators, Hunting Safaris, Travel Agent
Transportation	Transportation of Passengers or goods by Air, Transportation of Passengers and goods by railway
Telecommunications	Fax, Telex, E-mail, Internet Services Provider, Telecommunication Services
Mining and Energy	Mining and Gas Drilling, Mineral and Gas Survey, Electricity Production and Distribution
Manufacturing and Trade	Manufacturing and selling, Import and selling, Export and selling

Source: Tanzania National Business Portal (2024)

In Zanzibar, BPRA is responsible for registering companies, firms (partnership and sole proprietorship), civil society, corporative society and public corporations. In issuing business licenses, BPRA has grouped all businesses into 21 sectors (A to U) as shown in Table 5.2 which are later classified into various sub-sectors, business activity groups, and business activity class.

Table 5.2: Sectors in which business licenses are grouped in Zanzibar

Sector Code	Sector Description
A	Agriculture, forestry, and fishing
B	Mining and quarrying
C	Manufacturing
D	Electricity, gas, steam, and air conditioning supply
E	Water supply; sewage, waste management
F	Construction
G	Wholesale and retail trade; repair of motor vehicles and motorcycles
H	Transportation and storage
I	Accommodation and food service activities
J	Information and communication
K	Financial and Insurance activities
L	Real estate activities
M	Professional, scientific, and technical activities
N	Administrative and support service activities
O	Public administration and defense; compulsory social security
P	Education
Q	Human health and social work activities
R	Arts, entertainment, and recreation
S	Other service activities
T	Activities of households as employers; undifferentiated goods and services producing activities of household for own use
U	Activities of extraterritorial organisations and bodies

Source: BPRA (2024)

Company Registration Certificate (Certificate of Incorporation)

For companies to run day-to-day operations, they need to be registered or incorporated in the list of the Company Registrar as per the Company Act of 2002 in Tanzania Mainland and the Companies Act of 2013 in Zanzibar. In Tanzania Mainland, a Company registration certificate (Certificate of Incorporation) is issued by BRELA whereas in Zanzibar it is issued by BPRA.

Business Name Registration Certificate

This is issued to individuals, partnerships, or corporations to exclusively that register a trading name with the licensing authority. An individual business name is owned by one natural person or legal person; a business name for partners is owned by more than one natural person(s) and/or legal person(s) and a business name for a corporation is owned by a corporate body. BRELA and BPRA are responsible for registering business names in Tanzania Mainland and Zanzibar respectively.

Certificate of Compliance

This is provided to foreign companies that have been established, registered, and operate in other countries. To operate also in Tanzania, they need to have a Certificate of Compliance. This certificate is awarded by the BRELA and BPRA to those foreign companies that intend to open their branches and operate in Tanzania Mainland and Zanzibar.

Taxpayer Identification Number (TIN) Certificate

Taxpayer Identification Number (TIN) is a unique tax identification number for individuals, firms or companies. In Tanzania Mainland, upon a company's registration and acquisition of its incorporation number, the business is also required to have a TIN, which is granted by the Tanzania Revenue Authority (TRA). Nonetheless, for the process to be fully completed and to obtain the original TIN Certificate, the company must submit the requisite forms and documentation to the relevant tax authorities.

Value Added Tax (VAT) Certificate

This is a certificate issued by the Tanzania Revenue Authority (TRA) to businesses that are required to charge and remit Value Added Tax (VAT). The VAT certificate is issued to businesses that are involved in the provision of taxable goods and services such as lawyers, accountants, and engineers. As at the year 2024, it is also required by businesses with an annual turnover which meets a registration threshold of at least TShs. 200 million and TShs. 100 million in Tanzania Mainland and Zanzibar respectively.

Incentive Certificate

Holders of certificates of incentives are entitled to various investment incentives. In Tanzania Mainland, the Tanzania Investment Centre (TIC) is in charge of issuing incentive certificates. For Zanzibar, the Zanzibar Investment Promotion Authority (ZIPA) is responsible for the issuance of incentive certificates. In both cases of TIC and ZIPA, a one-stop Centre for acquiring most licenses has been established. The investment incentives are given to the companies depending on the given conditions by TIC and ZIPA.

Occupational Safety and Health Certificate

Good health and safety of all workers in any country are key factors necessary for improving productivity. It is therefore the responsibility of the government, employers, and workers to ensure that all workplaces including medium-sized businesses are safe and in a healthy state. To ensure health and safety, governments put in place regulations that protect workers from traditional work hazards as well as new hazards associated with technological changes.

Fire Safety Certificate

This is a certificate issued by the Fire and Rescue Force to certify that a business premises comply with fire safety regulations. It ensures that the business has adequate fire safety measures in place to protect employees, customers, and property.

Pension Funds Registration

Apart from different business licenses, certificates or permits that the businesses need to possess to start business operations, business owners (employers) have to register their employees with pension funds. Pension funds play a crucial role in securing the financial future of employees, including in the context of medium-sized businesses. In Tanzania Mainland, the National Social Security Fund (NSSF) and the Public Service Social Security Fund (PSSSF) are institutions responsible for managing pension contributions. NSSF serves private sector employees while PSSSF serves public sector employees. In Zanzibar, the Zanzibar Social Security Fund (ZSSF) serves both in public and private sector employees.

Work Permit

This is a permit that is issued to non-citizens in Tanzania. For Tanzania Mainland, the Commissioner of Labour is responsible for issuing work permits to non-citizens, while in Zanzibar work permits are issued by the Labour Commissioner of Zanzibar. Non-citizens who need to work in different sectors including the business sector need to have a work permit. There are five categories of work permits, from class A up to E. Class A is issued to investors and the self-employed; Class B is issued to those possessing prescribed professions (medical and health care professionals, experts in oil & gas, teachers and university lecturers in science and mathematics); Class C is issued to other professions, Class D is issued to employees or foreigners engaged in approved religious and charitable activities and Class E is issued to refugees.

Residence Permit

This is the permit issued to non-citizens intending to live in Tanzania. It is issued by the Commissioner General of Immigration Services in Tanzania Mainland and Zanzibar. There are three types of residence permits ranging from Class A to C. Class A permit may be granted to non-citizens who intend to enter or remain in the United Republic of Tanzania and engage in trade, business, professional activities, agriculture, animal husbandry, mineral prospecting or manufacturing. Class B permit may be issued to a foreigner who has obtained specified employment in the United Republic of Tanzania, and has been issued with a work permit by the Labour Commissioner. Class C permit may be issued to foreigners intending to enter and reside in Tanzania for purposes other than those specified for the grant of residence permit Class "A" or "B". These include: students, researchers, volunteers, persons attending cases in Courts of Law, former employees winding up affairs, and persons attending medical treatment.

Intellectual Property Rights

There are various types of intellectual property rights in Tanzania Mainland and Zanzibar that are important in protecting business secrets, industrial designs, and other forms of intellectual property.

Table 5.4: Types of intellectual property rights

Intellectual property type	Tanzania Mainland Administered	Zanzibar Administered
Copyright	Copyright Society of Tanzania (COSOTA)	Office of Copyright Society of Zanzibar (COSOZA)
Patents	BRELA or African Regional Intellectual Property Organisation (ARIPO)	BPRA or ARIPO
Trademarks	BRELA or ARIPO	BPRA or ARIPO
Industrial designs	ARIPO	ARIPO

Sectoral Licenses

These are sector-specific permits, licenses or certificates issued to business enterprises by sector ministries or their agencies. The majority of these are expected to be acquired by a business before applying for the general business licenses. In some instances, during the application for a business either to the LGAs, BRELA, or BPRA it is mandatory to acquire a sectoral license to operate such business. Some of the sectoral licenses include the following:

• Tourist Agency License (TAL): This license is issued by the Ministry of Natural Resources and Tourism for tourist businesses including hotels, lodges, tourist agents, tour operators, car rental, car hire, hunting safaris, photographic safaris, and tourist campsites.
• Insurance license: This license is issued by Tanzania Insurance Regulatory Authority (TIRA) for insurance and assurance businesses like insurance brokers, insurance agents, underwriting and loss assessment.
• Banking license: This license is issued by the Bank of Tanzania (BOT) for businesses dealing with banking, foreign exchange, financial services agency, and microfinance.
• Capital exchange and stock licenses: These licenses are issued by the Capital Markets and Securities Authority (CMSA) for stock exchange brokerage businesses.
• Telecommunication and broadcasting licenses: These licenses are issued by the Tanzania Communication Regulatory Authority (TCRA) for the telecommunication businesses services in the country.
• Mining licenses: These licenses are issued by the Ministry of Minerals for the businesses of minerals legislation, reconnaissance or mineral inspection, mineral prospecting and mining.
• Explosive dealers license: This license is issued by the Ministry of Minerals for the businesses of provision of explosive services to mining sites and mining companies.
• Customs Agency License (CAL): This license is issued by TRA for the businesses of clearing and forwarding, bonded warehouses, and Inland Container Depots (ICDs).
• Medicine and medical devices permit: This license is issued by the Tanzania Medicines and Medical Devices Authority (TMDA) for the businesses of drugs or medicines, cosmetics, medical devices, pharmaceuticals and narcotic products.
• Industrial License: This license is issued by BRELA for the businesses of processing, and manufacturing in heavy or light industries.
• Shipping License: This license is issued by Tanzania Shipping Agencies Corporation (TASAC) for the businesses of shipping, shipping agents, port and harbour operators, cargo tallying and evaluation, cargo handling and water sport facilities.
• Land transport license: This license is issued by Land Transport Regulatory Authority (LATRA) for the land transportation businesses including railway operators, freight forwarders, cargo consolidation and de-consolidation, railway transportation, road transportation of passengers and goods.
• Air worthiness certificate and permits: These certificates and permits are issued by Tanzania Civil Aviation Authority (TCAA) for the air transportation businesses including, air charter, aerial work services, air balloon services and ground handling services.
• Merchant license: This license is issued by Tanzania Ports Authority (TPA) for the businesses of ship chandlers, miscellaneous port services, stevedoring and lighterage.
• Electricity license: This license is issued by Energy and Water Utilities Regulatory Authority (EWURA) for electricity production and supply businesses like electrical contractors and electricity standby generators.
• Petroleum dealers license: This license is issued by EWURA for the businesses of refining crude oil, import and sale of petroleum products, wholesale of petroleum products and retail sale of petroleum products.
• Water dealers license: This license is issued by EWURA for the businesses of water production and supply, water sewerage services, water sales and marketing, sewerage transmission and disposal.
• Water drilling permit: This permit is issued by Ministry of Water for businesses of water drilling and supply.
• Gaming license: This license is issued by the Gaming Board of Tanzania for gaming businesses like casinos, slot machines, lottery and betting games, manufacture of gaming equipment, sale and distribution of gaming equipment and accessories.
• Ammunition dealers' license: This license is issued by Tanzania People's Defence Forces (TPDF) for businesses dealing with arms and ammunition.
• Crop board permits: These permits are issued by the respective Crop Boards for businesses dealing with agricultural crops such as cashew nuts, cotton, sisal, tea, coffee, tobacco, sugar, cereals, and pyrethrum.
• Export permits: These permits are issued by the Ministry of Agriculture for the businesses of exporting agricultural produce.
• Professional certificates: These certificates are issued by the respective professional boards for businesses of providing professional services such as accountants (National Board of Accountants and Auditors), contractors (Contractors Registration Board), engineering (Engineers Registration Board), running hospitals, dispensaries, law offices, pilots, and ship captains.

Activity 5.2

Visit a nearby place where different business activities are conducted:

(a) Identify at least three medium-sized businesses that are conducted in that area;

(b) Categorise the businesses identified in part (a) into their respective sectors; and

(c) Describe the types of licenses that the businesses identified in part (b) need to possess.

Exercise 5.2

1. Why is business registration a multifaceted phenomenon in Tanzania?
2. Describe the sectoral licenses which medium-sized businesses are supposed to comply with.

Procedures for Registering Businesses

The procedures of registering businesses including medium-sized enterprises vary depending on the type of license being sought and locality of operation in Tanzania Mainland and Zanzibar. However, the general procedures for issuing a business license, registering a business name and company, acquiring a TIN number are almost similar in both Tanzania Mainland and Zanzibar. Moreover, the procedures for sectoral licenses differ from one sector to another. The following section provides details on registration processes at the level of the LGAs, BRELA, BPRA, TRA, and ZRA. Most applications are done online.

Procedures for Business Name Registration

The following are the procedures for registering business names:

(a) Creating an account through Online Registration System (ORS): The applicant creates an online account via BRELA or BPRA website if they do not have one. Once an account is created the applicant will select the 'registration of business names' option from the 'our-services' menu provided online.

(b) Name clearance: Before commencing the new business registration process, the applicant must perform a name clearance exercise online whereby he or she assesses other business names registered with the agency which are similar to theirs.

(c) Filling in the application form: Once satisfied that there are no similar names, the registration process begins. In registering the new business, the applicant is supposed to prepare the application. The details to be filled in the application form depend on the type of entity being registered.

(d) Uploading the attachments: The applicant will be obliged to upload the attachments.

(e) Making and confirming payment: Once documents are successfully uploaded a control number will be generated for payment. Payment includes payment for registration fee and annual maintenance fee.

(f) Submitting the application: Once payment is received the applicant will submit the application.

(g) Decision from the agency: In case there are corrections in the submission, the applicant will get feedback of areas requiring corrections. If there are no corrections then the applicant will receive an approval and certificate with the business name and the business extract that has director's details.

Procedures for Company Registration

The following are procedures for company registration:

(a) Creating an account through Online Registration System (ORS): The applicant acting on behalf of the company being registered creates an online account via BRELA or BPRA website in case they do not already have one.

(b) Selecting the type of company to be registered: The applicant has an option to register either a foreign company; private company either limited by guarantee or shares, public company limited by shares or unlimited private company.

(c) Filling in the application form: The applicant will fill-in the application form as per details required. The details to be filled in the application form will depend on the type of company being registered.

(d) Uploading the attachments: The applicant will be obliged to upload the attachment. Some of the documents include; directors and shareholders details, certified copies of memorandum and articles of associations.

(e) Making and confirming payment: Once documents are successfully uploaded a control number for payment will be generated.

(f) Submitting the application: Once payment is received the applicant will submit the application.

(g) Decision from the agency: In case there are corrections in the submission, the applicant will get feedback on areas requiring modification. If there are no corrections, then the applicant will receive an approval and certificate of incorporation from the agency.

Procedures for Acquiring Business License from LGAs in Tanzania Mainland

The Local Government Authorities (LGAs) is entitled to offer a business license for class "B" businesses. Class "B" are such businesses that are established and operate in a specific local/district/municipal area. The following are the procedures for obtaining business license from LGAs in Tanzania Mainland:

(a) Opening an account: The applicant of a business entity will open an account on behalf of the entity. In opening an account, it is important for the applicant to have a national ID and TIN number.

(b) Selecting the type of business license being sought: As indicated earlier LGAs have several types of licenses they issue; therefore, the applicant has to select the type of business license.

(c) Filling the application form: Depending on the type of license the applicant will provide the necessary details required by the form. Details sought may include principal business details, and business contact information.

(d) Uploading the necessary details: The applicant is expected to upload the necessary attachments. These attachments may differ depending on the type of business being applied for.

(e) Decision from LGAs: Upon the applicant submitting the necessary details, the application may be rejected or approved.

(f) Making payment: If there is no objection a control number will be issued for payment. The amount to be paid will depend on the type of business.

(g) Receiving the license: Once the payment is made, the applicant receives a business license to start the business.

(h) Renewing the license: The applicant has an option to renew the license if it was for one (1) year or temporary (one month), transfer the license (in case the business location has changed), or terminate the license.

Procedures for Acquiring a Business License from BRELA or BPRA

BRELA and BPRA are entitled to offer a business license for class A businesses. Class A are such businesses that are established and operate across the country as well as engage in the international businesses that is across the national borders. The following are the procedures of acquiring business license from either BRELA or BPRA:

(a) Creating an account through online registration system (ORS): The applicant acting on behalf of the company seeking a business license creates an online account via BRELA or BPRA in case they do not have one already.

(b) Filling in the application form: The applicant will fill-in the application form as per details required. The details to be filled differ depending on the type of business.

(c) Uploading the attachment: The applicant will be obliged to upload the required attachments.

(d) Making and confirming payment: Once documents are successfully uploaded a control number for payment will be generated. This allows the applicant to effect payment.

(e) Submitting the application: Once payment is received the applicant will submit the application.

(f) Decision from the agency: In case there are corrections in the submission, the applicant will get feedback of areas requiring modification. If there are no issues to attend, the applicant will receive an approval and business license from the agency.

Procedures for Applying for a Tax Identification Number (TIN) Certificate

Tanzania Revenue Authority (TRA) and Zanzibar Revenue Authority (ZRA) have several services that can be accessed online through the taxpayer portal with little or no physical movement of an applicant. Such services include TIN application and filing tax returns.

For medium-sized businesses to have a TIN it is a pre-requisite that one of the directors applying on behalf must have an individual TIN. An individual TIN number may be applied for by a director who is either a resident or non-resident. In application for a TIN certification for a medium-sized business the following procedures are followed:

(a) Get an individual TIN for the applicant or director;

(b) Fill-in the application form (Business TIN Registration Form);

(c) Estimate the income, tax payable and payment installments;

(d) Upload/submit the necessary documents that include:

• Certified memorandum and articles of association;
• Introduction letter from Local Government Authorities (LGAs);
• Certificate of incorporation;
• Certified lease agreement or title deed; and
• Power of Attorney.

(e) Submit the request to the Authority for review.

Procedures for Registering with Pension Funds

The registration procedures vary slightly for each fund but it is crucial to understand the eligibility requirements set by the pension funds. Such criteria may consider factors like the number of employees or the sector in which the business operates.

Once the eligibility criteria are clear, the next step is to gather the required documents such as registration documents, tax identification number, and employees' details. Afterward, the business should contact the relevant authority of the pension fund to obtain guidance on the registration process. Then, the business needs to complete the application forms accurately and submit them along with the supporting documents to the pension fund authority. Upon submission, the business must await approval from the pension fund authority.

Once approved, the business will receive confirmation from the authority, including details such as the registration number with the fund and instructions for making periodic contributions. From there, the business can start making contributions to the pension fund on behalf of its employees, ensuring regularity and adherence to the fund's guidelines. By following these steps thoroughly, a business can successfully register to a pension fund and fulfill its obligations towards providing social security for its employees.

Shortly, the following are the procedures of registering for pension funds:

(a) Fill in the required forms;

(b) Attach the necessary documents that include:

• a copy of certificate of incorporation or registration;
• TIN certificate;
• Business license; and
• Certificate of business name.

Activity 5.3

Visit at least two registered medium-sized businesses in your locality and explore how they got registered, the challenges they encountered, and how they managed to overcome them.

Exercise 5.3

1. Describe the procedures for acquiring a business license issued by BRELA and BPRA.
2. What key steps is a medium-sized business supposed to follow to get a Tax Identification Number (TIN) Certificate?

Sanctions for Non-Compliance of Registered and Unregistered Medium-Sized Businesses

The first obligation of the business entity including a medium-sized business is to register the business and acquire the necessary licenses before commencement. Failure to acquire the necessary licenses results in different sanctions for non-compliance. These sanctions differ depending on the type of license. It should also be noted that sanctions are not only applied to unregistered businesses but also the registered ones depending on the fault committed. This section presents the sanctions for non-compliance of registered and unregistered medium-sized businesses.

Failure to operate the business

Most of the Acts establishing various licenses have clearly stated that a business entity that has not complied with the regulations should not start the respective business. A medium-sized business in particular is not expected to operate in Tanzania without having a valid business license. Therefore, any business without a valid business license is not expected to start or run a business in Tanzania.

Fines or penalties

The majority of the Acts and regulations have clearly stated that there will be fines or penalties in case a business entity fails to acquire the necessary licenses and permits. For example, in Tanzania Mainland, failure to comply with the Business registration procedures, may result in a respective business entity is facing a fine depending on the offense(s) committed.

Imprisonment

Some of the sanctions stated in some Acts and regulations have suggested imprisonment due to non-compliance. For instance, failure to meet the regulatory requirements of the business registration Act attracts a fine or imprisonment for a certain period.

Suspension or revocation or de-registration of the license

Some licenses such as business license may be suspended, revoked, de-registered, or cancelled if the following happens:

• Premises have ceased to be used for the purpose for which the certificate of registration was issued;
• The business owner, manager or person-in-charge has, since the certificate of registration was issued, been convicted of any offence;
• The business owner has become bankrupt or if a company has gone into liquidation;
• Failure to comply with any condition of the certificate of registration;
• Submitted false information during the application; and
• Not complying with the laws governing the business.

Fines or penalties after registration

There are some situations in which fines or penalties are instituted even after business registration. These situations include the following:

• Changing location without notification to the issuing authority;
• Failure to file tax returns to the relevant authority;
• Carrying on business at any place not specified in the certificate of registration; and
• Failure to surrender certificate of registration which has been suspended, revoked or cancelled to Registrar.

Confiscation of property

In some other instances a medium-sized business is likely to have property confiscated in if the following happens:

• Tax evasion;
• Trading of counterfeit or expired products; and
• Trading in illegal or unregistered products.

Exercise 5.4

1. Describe the types of sanctions that a medium-sized business is likely to face when operating an unregistered business.
2. Discuss the scenarios in which a business license of a medium-sized business may be revoked or cancelled or de-registered or suspended.
3. Explain the situations in which the property of a medium-sized business may be confiscated.

Skills Lab Activity

Discuss the different business opportunities available in the school environment and how they can be utilised.

Project Work

Based on what you have discussed in the skill lab, document the registration procedures of any business of your choice in relation to the identified business opportunities in the school environment and predict the challenges likely to be encountered during the process.

Chapter Summary

1. Business registration is the process of obtaining legal authorisation to start and operate a business in a given locality.
2. The importance of registering a business includes freedom to do business, access to credit, market access, intellectual property rights, improve tax administration and planning process.
3. There are several types of licenses such as business license, business name registration certificate, company registration certificate, certificate of compliance, tax identification number certificate, and other sectoral licenses.
4. There are several procedures for registering a business name, company, acquiring a business license, and tax identification number.
5. Failure to register a business may lead to fines, penalties, imprisonment, business closure, suspension of the license, and confiscation of property.

Revision Exercise

1. Describe the scope of business registration of a medium-sized enterprise.
2. Registering a medium-sized business has been considered by most applicants as time-consuming, bureaucratic, and costly with little value. Debunk this myth by examining the importance of business registration accruing to the applicant and the public in general.
3. Registering a medium-sized business is a very complex phenomenon as there are many licenses. Describe the generic licenses or permits or certificates that apply in Tanzania Mainland and Zanzibar.
4. Critically illustrate at least five sectoral licenses you are aware of.
5. Mr. and Mrs. Kasa plan to establish a private company limited by shares to sell pesticides. The company is expected to be located in Dar es Salaam region. Describe licenses that they are supposed to acquire before the commencement of the business.
6. What are the important documents needed in acquiring a business license from either BRELA or BPRA?
7. Ms. Khadija Swalehe is establishing a business in Babati, Manyara region. Describe the procedures that she must follow in registering the following:
   1. Business Name
   2. Company Registration
   3. Tax Identification Number
8. With relevant examples from Tanzania, illustrate the types of sanctions that a medium-sized business is likely to face by not being registered.
9. What can cause a medium-sized business to face fines or penalties after registration?

Chapter Six: Business Planning

Introduction

Failure to plan is a plan to fail. In order to avoid business failure, business owners, managers, and promoters use business plans. Developing a business plan enables the planning of all business activities to be conducted at a certain time. In this chapter, you will learn about identification of business opportunities and business plan development. The competences developed will enable you to develop a business plan for a medium-sized business.

Think: Sustainability of a business which has not been properly planned.

Identification of Business Opportunities

Business opportunities consist of attractive avenues in the environment, which provide entrepreneurs with the potential for effective business idea development. A promising opportunity always begins with brilliant business ideas. So, while a business idea is a creative thought or concept, an opportunity is an evaluated and promising idea. It portrays a chance to bring that idea to life and make it a reality. Identification of appropriate business opportunities is an important aspect to business because it enables the entrepreneurs to identify and focus on what customers are missing. An entrepreneur can identify business ideas by scanning the environment for unsatisfied or unfulfilled needs as well as considering customers' complaints about existing businesses. Once ideas are effectively evaluated on the bases of market potential, competition, resources, and ability of the entrepreneur to pursue the idea, then ideas graduate to opportunities.

Thus, the process of generating good business idea(s) involve a number of processes such as brainstorming to coming up with a number of initial ideas, screening those business ideas, ranking of those business ideas, and mind-mapping the selected business idea on a business model, like Business Model Canvas (BMC). Figure 6.1 provides a summary of the processes which facilitate generation of business ideas.

Figure 6.1: Processes of generating business idea(s)

The following learning tasks and learning activities guide the process of generating good business idea(s):

Task 6.1: Generating Business Ideas

Use Table 6.1 to identify the five most unsatisfied or unfulfilled needs and their corresponding target market, business ideas and opportunities based in your community.

Table 6.1: Business idea generation

S/N	Problem/gaps/unsatisfied/unfulfilled needs (business opportunity)	Target/market (who)	Business idea(s) (solution / what can be offered?)
1.
2.
3.
4.
5.

Task 6.2: Screening Business Ideas

For each of the five business ideas identified in Task 6.1 respond to the following questions for every idea.

Table 6.2: Screening business ideas

S/N	Questions for screening your opportunities or ideas	Insert your response
1.	Are you convinced that there is a ready market for the product? Do you have some indications?
2.	What is unique? Can you develop competitive advantages over others?
3.	Do you have, or can you quickly acquire the Key Success Factor (KSF) for the business?
4.	Is the idea compatible to legal requirements and moral/ethics?
5.	Is the market saturated? If yes, think twice.
6.	Is the idea compatible with community's values and life style?
7.	Does it have growth potential? Is the industry declining/stable/growing?
8.	Can you raise the investment capital required? How?
9.	What makes you the best person to do this business?

Task 6.3: Ranking of Business Ideas

Use the responses on Task 6.2 to rank the business ideas from 1 to 5, where 1 represents the lowest or poorest and 5 is the highest or best. Then, select one business idea with the highest score.

Table 6.3: Ranking business ideas

S/N	Criteria	Idea 1	Idea 2	Idea 3	Idea 4	Idea 5
1.	Market availability
2.	Uniqueness
3.	Compatibility with the legal requirements
4.	Compatibility with the community
5.	Your capability (skills, knowledge)
6.	Ability to raise or acquire capital
7.	Growth potential
Total scores

Mind Mapping the Selected Business Idea on a Business Model Canvas (BMC)

Activity 6.1

Visit the school library or online sources and review literature on different business models including Business Model Canvas (BMC).

Task 6.4

1. Use the Business Model Canvas (BMC) components reviewed in Activity 6.1 to mind map the selected business idea with the highest score in Task 6.3.
2. Based on your selected idea, write two pages summary responding to the following questions:
   1. The broad idea - What is the business?
   2. What is the customer need and how does the product meet this need?
   3. How is your idea better than that of your competitors, if they exist?
   4. Who will be your target market - Who are the customers?
   5. How will you make or offer the product?
   6. What will be the location of the business?
   7. How will it make a profit?
   8. What amount or funding is needed, what for, and what has already been acquired?
   9. What is the prospect or growth of the idea?
   10. Why are you the one(s) most appropriate for this business?

Exercise 6.1

1. Explain the link between unmet needs, business opportunities, and business idea
2. What are the possible sources of business ideas?
3. What are the criteria for screening the business ideas?
4. Briefly explain the key components of a Business Model Canvas (BMC)

Skills Lab Activity

Based on your understanding of business idea generation, how can you help the school community to do the same?

Business Plan Development

A business plan is developed using the business opportunity generated from the business ideas. Once an entrepreneur has generated a viable business idea, then, the development of a business plan starts. The business plan document involves the following components: business description, industrial analysis, market assessment, marketing plan, operations plan, management and organisational plan, and financial plan as shown in Figure 6.2.

Business Description

Industrial Analysis

Market Assessment

Marketing Plan

Operations Plan

Management & Organizational Plan

Financial Plan

Figure 6.2: Components of business plan

Business description entails the basic information about the business including the product (s) offered, owner(s), and location of the business. Market assessment provides information on the extent of product demand in the market as well as the industrial analysis. Market assessment mainly focuses on determining strengths, weaknesses, opportunities, and threats in the market. Based on the market status information obtained during the market assessment, an entrepreneur may decide on the marketing plan and strategies to be used in generating more customers (markets) for the product(s). The operation plan focuses on how the product (s) will be produced and delivered to the customers. The organisational plan provides the human resources needed and their roles for the implementation of the business. Finally, the financial plan reflects cost implications of all items from all sections of the business plan in order to inform the prospective financial performance of the business.

The following learning tasks will expand your knowledge of how to develop a business plan using the selected business idea:

Business Description

Task 6.5

Use Table 6.4 to describe the business based on the business idea selected in Task 6.3.

Table 6.4: Business description

S/N	Items	Details
1.	Proposed business name
2.	Business location
3.	Owner's details
4.	Mission
5.	Vision
6.	Core values
7.	Products
8.	Legal structure of the business

Industrial Analysis

Task 6.6

Use Table 6.5 to list possible strengths, weaknesses, opportunities, and challenges or threats of your proposed medium-sized business.

Table 6.5: Industrial analysis

S/N	Items	Details
1.	Strengths
2.	Weaknesses
3.	Opportunities
4.	Challenges or threats

Market Assessment

Task 6.7

1. Use Table 6.6 to list the Key Success Factors (KSF) in line with your business idea.

Table 6.6: Key success factors

S/N	List of Key Success Factors (KSFs)
1.
2.
3.
4.
5.

2. Use Table 6.7 to list the types of customers you are likely to serve and their profiles or characteristics.

Table 6.7: Type of customers

S/N	Customer type	Profile or characteristics
1.	Customer A
2.	Customer B
3.	Customer C

3. Use Table 6.8 to describe the profile of your competitors.

Table 6.8: Profile of competitors

S/N	Competitor	Strengths	Weaknesses
1.	Competitor A
2.	Competitor B
3.	Competitor C

4. Project your sales using Table 6.9 for at least three years. Remember to note down all the assumptions used in projecting the sales. The forecast can be both in quantity and value (TShs). The estimates of Year 2 can base on Year 1 likewise Year 3 may depend on Year 2.

Table 6.9: Sales projection

S/N	Customer group	Year 1 (Qty/TShs)	Year 2 (Qty/TShs)	Year 3 (Qty/TShs)
1.	Customer A
2.	Customer B
3.	Customer C

Marketing Plan

Task 6.8

1. Use Table 6.10 to state at least three marketing objectives that you are likely to achieve over a period of three years. The objectives may be in terms of profitability, market share, awareness, price leadership, brand equity and many others. Remember, they should be Specific, Measurable, Achievable, Realistic and Time bound (SMART).

Table 6.10: Marketing objectives

S/N	Marketing objective (for example increase market share by 5% in the year 20XX)
1.
2.
3.

2. Use Table 6.11 to identify your marketing strategies in the upcoming three years in line with your proposed medium-sized business venture.

Table 6.11: Marketing strategies

S/N	Marketing mix variable	Year 1	Year 2	Year 3
1.	Product strategies
2.	Pricing strategies
3.	Promotion strategies
4.	Distribution strategies

3. Use Table 6.12 to state the amount of money you will use in implementing the marketing strategies proposed in question 2.

Table 6.12: Marketing expenditure

S/N	Strategies	Year 1 (TShs)	Year 2 (TShs)	Year 3 (TShs)
1.
2.
3.
4.
Total marketing expenditure

Operations Plan

Task 6.9

1. Use Table 6.13 to respond to the following questions:

Table 6.13: Operation resources

S/N	Questions	Responses
1.	What are the justifications for business location suggested (example: proximity to customers, or and raw materials)?
2.	What size of land is required to start and operate the medium-sized business? Is it expected to be purchased or rented?
3.	What kind and number of premises do you need?
4.	Are there special facilities or equipment needed? State them.
5.	Who are the suppliers of the resources needed? State them.
6.	What are the labour requirements to produce or deliver products?
7.	What are the product delivery plans in place?

2. Use Table 6.14 to list inputs needed to produce or deliver the services at the start of the business.

Table 6.14: Input costs

S/N	Inputs	Amount (TShs)
1.	Raw materials
2.	Consumables (example filters, and bags)
3.	Others

3. Use Table 6.15 to establish the production plan (for businesses related to the manufacturing of physical goods).

Table 6.15: Production plan

S/N	Products	Year 1	Year 2	Year 3
1.	Product A
2.	Product B
3.	Product C

Management and Organisational Plan

Task 6.10

Present the organisation structure of the proposed business. In each position identified in the organisation structure provide the details as indicated in Table 6.16.

Table 6.16: Staff profile

S/N	Position	Duties/responsibilities	Qualifications	Salary
1.
2.
3.
4.

Financial Plan

A financial plan provides details of the roadmap through which the business will undertake its financial activities to realize its objectives. It serves as an important component of a comprehensive business plan providing a clear projection of the business's financial performance over a specific period of time. The following are the sample components that may be used to provide details in the financial plan:

Task 6.11

1. Use Table 6.17 to estimate the initial and working capital requirements to start your medium-sized business.

Table 6.17: Initial and working capital requirements

S/N	Item/particulars	Amount (TShs)
1.	Machines
2.	Land acquisition
3.	Motor vehicle(s)
4.	Working Capital (Operational expenses for at least the first three (3) months)
Total funding needed

2. Use Table 6.18 to establish the possible sources of funds.

Table 6.18: Sources of funds

S/N	Sources of funds	Amount (TShs)
1.	Own savings
2.	Family loan
3.	Family investment partner(s)
4.	Micro-credit scheme
5.	Bank loan
6.	Equity partner
7.	Venture capital company
8.	Other
Total expected funding

3. Use Table 6.19 to list all the key assumptions for forecasting the income to be generated.

Table 6.19: Key assumptions

S/N	Assumptions
1.
2.
3.
4.
5.

Financial Performance

Task 6.12

1. Use Table 6.20 to project the profit and loss of the business.

Table 6.20: Income statement for the year ending……

Particulars	(TShs)	(TShs)
Sales/income		XX
Cost of sales:
Opening inventory	XX
Add: Purchases	XX
Less: Closing inventory	(XX)
Cost of goods sold		(XX)
Gross profit		XX
Less: Other expenses
Rent	XX
Electricity	XX
Business rates	XX
Depreciation expense	XX
Irrecoverable receivable expenses	XX
Total expenses		XX
Net profit/Net loss for the year		XX

2. Use Table 6.21 to project the financial strengths of the business.

Table 6.21: Statement of financial position as at......

Particulars	(TShs)	(TShs)
Assets
Non-current assets
Premises	XX
Plant & equipment	XX
Vehicles	XX
Furniture & fittings	XX
Land	XX
Total non-current assets (A)		XXX
Current assets
Inventory	XX
Receivables	XX
Bank	XX
Cash	XX
Prepayments	XX
Total current assets (B)		XXX
Total Assets (A + B)		XXX
Capital and liabilities
Capital
Capital at start	XX
Add: Profit for the year	XX
Less: Drawings	XX
Total capital at close (C)		XXX
Liabilities
Non-current liabilities
Loan from XX	XX
Other non-current liabilities	XX
Total non-current liabilities (D)		XXX
Current liabilities
Payables	XX
Accruals	XX
Other current liabilities	XX
Total current liabilities (E)		XXX
Total liabilities (D + E) = F		XXX
Total capital and liabilities (C + F)		XXX

Task 6.13

Prepare a comprehensive business plan for a business of your choice.

Exercise 6.2

1. What constitutes an operations plan as part of the business plan?
2. Identify and discuss the components of a well-packaged business plan.
3. What would you consider important in developing a management and organisation plan for a business?

Project Work

You have noted that the majority of the medium-sized business owners lack skills for writing a business plan. Prepare a business plan training checklist for the business owners.

Chapter Summary

1. In ranking the business ideas, it is important to consider several factors including market availability, uniqueness of the product or idea, compatibility of the idea with legal requirements and promoter's capability to manage the proposed business and ability to raise the required capital for the business.
2. In mind mapping a business idea, it is important to use appropriate business model such as Business Model Canvas (BMC).
3. The key components in developing the business plan are business description, industrial analysis, market assessment, marketing plan, operations plan, management and organisation plan and financial plan.
4. The business description component includes the business name, owners' details, mission and vision, products, as well as legal status.
5. Industrial analysis focuses on the internal and external aspects of the proposed business. The internal aspects are the strengths and weaknesses whereas the external ones include the opportunities and threats or challenges.
6. Market assessment evaluates the key success factors, profile of customers and competitors.
7. A marketing plan includes the marketing objectives, product description, pricing, promotion, distribution, strategies and predicted expenditure.
8. An operations plan contains the basic information on the rationale of business location, size of the area required, premises, facilities, and equipment needed. In addition, it includes raw materials, labour requirements, utilities, production and delivery plans.
9. A management and organisation plan presents the organisation structure, qualifications of the various categories of staff, job description, and salaries or remunerations of the key positions.
10. A financial plan outlines the funds needed, sources of funds and expected financial performance by providing details on the income statement, statement of financial position, and cashflow statement.

Revision Exercise

1. What are the possible sources of business ideas?
2. Describe the criteria used in ranking business ideas.
3. What are the key aspects to consider when screening business ideas?
4. Being an expert in business planning, you have been invited by Tanzania Chamber of Commerce, Industry and Agriculture (TCCIA) to address owners of Medium Enterprises (MEs) who argued against developing a business plan. They stated that developing a business plan is a tedious exercise that is time consuming and wastage of resources. Prepare a presentation that explains how you would address them on why they should embark on developing a business plan.
5. What are the key steps in the development of the business plan document?
6. Kimatare Enterprise Ltd. has embarked on producing bottled water. The business is expected to be marketed widely in Dar es Salaam and Coast Regions. The Company intends to target low and middle-income earners. The bottled water products are in different Stock Keeping Units (SKUs) including: 500ml, 1,000ml, 1,500ml, 1,700ml and 2,000ml. The distribution strategy will involve strategic agents (operating on exclusivity rights), wholesalers, and retailers. The targeted retailers include supermarkets, petrol station food marts, kiosks, hotels and restaurants. The owner plans to launch the business in January next year, however before the official launch, management has approached you and would like to have more details on how the Business Model Canvas (BMC) can help in conceptualising their business. Prepare and present the BMC based on the information given and your experience.
7. Based on your experience in business planning processes, describe the following:
   1. The relationship between marketing plan and market assessment.
   2. The relationship between marketing plan and operations plan.
   3. The relationship between marketing plan and financial plan.
8. With examples, briefly describe the key components of a marketing plan section.
9. What would you include in developing a financial plan for your medium-sized business?

Conducting a Project in Business Studies

Select an area of your interest related to Business Studies, then design and conduct a project.