Draft – Strictly Not for Quotation
19th ANNUAL RESEARCH WORKSHOP
MOBILE PHONES AND MICRO AND SMALL
ENTERPRISES (MSE) PERFORMANCE AND
TRANSFORMATION IN DODOMA, TANZANIA
By
Dr. V. Venkatakrishnan
Draft Working Paper
S1G
Presented at REPOA’s 19th Annual Research Workshop
held at the Ledger Plaza Bahari Beach Hotel, Dar es Salaam, Tanzania;
April 09-10, 2013
This preliminary material / interim, or draft research report is being disseminated to encourage discussion and critical comment
amongst the participants of REPOA’s Annual Research Workshop. It is not for general distribution.
This paper has not undergone REPOA’s formal review and editing process. Any views expressed are of the author(s) and do
not necessarily represent the views of REPOA or any other organisation.
1
Table of Contents
ACKNOWLEDGEMENT ....................................................................................................... II
INTRODUCTION .................................................................................................................. 1
SECTION I: SMES IN TANZANIA ........................................................................................ 2
SECTION II: LITERATURE ON ICT USE BY SMES ............................................................ 5
SECTION III: MOBILE PHONE SERVICES IN TANZANIA .................................................. 8
Teledensity of Tanzania .................................................................................................... 9
Market share of mobile operators in Tanzania ................................................................. 10
Voice minutes and SMS per user .................................................................................... 11
Unstable tariff for on-net mobile calls in Tanzania ........................................................... 12
Stable and low charges for SMS and high charges for off-net calls ................................. 13
High off-net calls tariff – challenge for further growth in the telecom sector ..................... 14
The Average Revenue Per User (ARPU)......................................................................... 15
SECTION IV: MOBILE PHONES FOR DEVELOPMENT IN TANZANIA ............................ 17
SECTION V: MOBILE PHONES AND SMES ..................................................................... 23
Mobile phones usage by African SMEs ........................................................................... 23
Smart phone applications for SMEs ................................................................................. 24
Mobile phones usage by Tanzanian SMEs ...................................................................... 24
SECTION VI: MOBILE PHONES USAGE AND MSE TRANSFORMATION IN DODOMA . 28
Research Methodology.................................................................................................... 28
Profile of the enterprises surveyed .................................................................................. 28
ICTs used by MSEs ......................................................................................................... 28
Ranking of mobile phone services usage for business purposes ..................................... 30
Mobile service providers subscribed ................................................................................ 30
Business related use of mobile phones by MSEs ............................................................ 31
Ranking of technological barriers for using mobile phones .............................................. 34
Cost of using mobile phone services ............................................................................... 34
SECTION VII: CONCLUSION AND RECOMMENDATIONS .............................................. 36
Summary and conclusion ................................................................................................ 36
Recommendations........................................................................................................... 38
SELECT REFERENCES .................................................................................................... 40
i
ACKNOWLEDGEMENT
The cooperation extended by all the respondents of this study is hereby
acknowledged. Mr Mnyaonga, Samora P, my former BA (Development Studies)
student who graduated in 2012 has helped in the survey of the MSEs at Dodoma.
My dear children Karthik and Gokul facilitated the data entry and analysis using
SPSS. My wife Kavitha has motivated me to use our personal resources for
undertaking this self-sponsored study. My thanks and appreciation to all of them;
however, the errors and omissions, if any, are mine.
ii
MOBILE PHONES AND MICRO AND SMALL ENTERPRISES (MSE)
PERFORMANCE AND TRANSFORMATION IN DODOMA, TANZANIA
V. Venkatakrishnan1
INTRODUCTION
Tanzanian Small and Medium Enterprise (SME) sector was said to contribute about
one-third of the GDP (Olomi, 2006:1). In 2010, the small businesses were estimated
to contribute about 27% of the GDP to the Tanzanian economy (URT, 2012b:16). It
has also been claimed that the micro and small enterprises (MSE) play a crucial role
in employment creation and income generation in many developing countries
(Kuzilwa, 2005: 131; Fjeldstad, Kolstad and Nygaard: 2006:1). With regard to many
African countries, the SMEs are stated to account for a significant share of
production and employment and are therefore directly connected to poverty
reduction (Wolf, 2001:2). Even in Malaysia, which has been cited as a relevant
model to Tanzania in the REPOA’s 18th ARW held in 2013, SME sector was
considered to be of great importance to the economy. Therein, it had been
recognized as the backbone of the economy and played a significant role in
generating employment, enhancing the quality of human resources, nurturing a
culture of entrepreneurship, supporting the large scale industries and opening up
new business opportunities. The SME sector in Malaysia reportedly employed about
5.6 million people, contributed 32% to Malaysian gross domestic product and 19% of
total exports of the nation (Selamat, Jaffar and Kadir, 2011: 135).
In Tanzanian context also, SMEs are seen as a key to the economic growth and
poverty reduction. The National Strategy for Growth and Reduction of Poverty
(NSGRP) has identified development of SMEs as among the key strategies to attain
the target of reducing poverty (URT, 2005). A study conducted in Dar es Salaam
has found that the small businesses contribute to alleviating poverty. It also showed
that the average incomes generated by surveyed businesses (both profit margins
and salaries) were above the basic and food poverty lines, much more for smallscale enterprises than micro-enterprises (Mnenwa and Maliti, 2008:viii)
1
Senior Lecturer, Department of Development Studies, University of Dodoma, Dodoma,
Tanzania; Email: venkatakrishnan64@gmail.com and Mobile Phone: +255 765 1597 44
1
SECTION I: SMES IN TANZANIA
It has been mentioned by Olomi (2005) that ‘according to the 2003 SME
Development Policy, micro enterprises are those engaging up to 4 people, in most
cases family members or employing capital amounting up to US$ 5,000 majority of
which fall under the informal sector. Small enterprises are mostly formalized
undertakings engaging between 5 and 49 employees or with capital investment from
US$ 5,000 up to US$ 200,000. Medium enterprises employ between 50 and 99
people or use capital investment from US$ 200,000 to US$ 800,000’. He also further
claimed that ‘the sector is however dominated by informal micro enterprises with an
extremely low incidence of graduation to formal small and medium size. The
enterprises remain marginal players, creating and sustaining low quality jobs and
unable to effectively contribute to economic competitiveness, exports, tax revenue
and economic growth’ (Olomi, 2005:1-2). The Table 1 displays the categories of
SMEs in Tanzania with the number of employees and capital investments based on
Government of Tanzania’s categorization. This official classification is considered
relevant for our purpose.
Table 1: Categories of SMEs in Tanzania with capital investments
Capital investment in
Category
Employees
machinery (Million Tshs)
Micro enterprise
1-4
Up to 5
Small enterprise
5-49
Above 5 below 200
Medium enterprise
50-99
Above 200 below 800
Large enterprise
100+
Above 800
Source: Omar (2008:6) and URT (2012b:23)
The Tanzanian Poverty and Human Development Report (PHDR) 2011 stated that
‘survey of the manufacturing sector has shown that out of the 25,000 manufacturing
enterprises operating in the country, 88% are microenterprises that engage 1-4
persons (60.3% engage 1-2 persons and 27.7% engage 3-4 persons). The PHDR
2011 further admitted that broad-based growth can only be realized through the
effective participation of MSEs in the growth process. However, it also lamented
about the entrepreneurship culture in Tanzania. It claimed that the under-developed
enterprise culture in Tanzania for both enterprises and facilitators of MSEs is partly
owing to the system that lasted for 20 years in which enterprise culture was
suppressed in favour of building a socialist society (URT, 2012a:146).
A recent (2013) review of the Tanzania SME Development Policy 2003 has provided
the basic data about the SMEs in Tanzania. According to this review, SMEs
constituted vast number of businesses: there were estimated to be more than 3
million SMEs (de facto MSEs) employing more than 5.2 million people in Tanzania of
which some 45% were located in urban and the remainder in rural areas; the
2
industrial sector encompassed some 25,000 enterprises, 97% of which had less than
ten employees (compared to 40 large manufacturing enterprises with 500+
employees, covering about one third of employment in industry). The estimated size
of the informal economy as a percentage of GDP had decreased over time: from
62.5% in 1991 to 43.6% in 2005 and 39.7% in 2010; the estimated size of the
informal sector as a percentage of GDP excluding agriculture is lower and moved
from 43.1% in 1991 to 30.1% in 2010 and 27.4% in 2010 (showing a gradual trend
from informal to formal) (Oyen and Gedi, 2013: 10).
It is also claimed that ‘since SMEs tend to be labour-intensive, they create
employment at relatively low levels of investment per job created’. Further, it was
considered that through business linkages, partnerships and subcontracting
relationships, SMEs have great potential to complement large industries
requirements. Moreover, they were expected to serve as a training ground for
entrepreneurship and managerial development and enable motivated individuals to
find new avenues for investment and expanding their operations (Economic and
Social Research Foundation, 2009:68-69).
A survey of MSEs in Tanzania conducted in 2011 has brought out the status of small
enterprises with regard to the various sectors. Based on their main activities, their
main products and services, and their location, these small enterprises were
allocated to various sectors according to the International Standard for Industrial
Classification (ISIC). Table 2 shows the number of enterprises and their relative
percentage in the different ISIC categories. The categories were then aggregated to
the broad sectors of trade (T), services (S) manufacturing (M), and other (O)
services.
It could be seen that wholesale, retail trade, repair of motor vehicles constituted the
highest MSMEs in Tanzania i.e. 55.4% out of the total 3,162,887. This was followed
by accommodation and food service activities which constituted 26.4% of the total
MSMEs. Manufacturing accounted for 13.6% MSMEs. It has also been found out
that there were significantly more micro enterprises than small or medium sized ones
in all broad sectors. Out of 3,162,887 MSMEs, an overwhelming 3,074,736
amounting to 97.2% had 0-4 employees (micro-enterprises). Trade (1,710,884),
Services (942,596), Manufacture (406,426) and Others (14,830) were the sectors
among these micro enterprises. Only 88,150 enterprises had five or more
employees.
3
Table 2: MSMEs in Tanzania by sector
International Standard for Industrial
Number
Percentage
Broad Sector
Classification (ISIC) sector
Agriculture, forestry, and fishing
13178
0.4
O
Mining and quarrying
3684
0.1
M/O
Manufacturing
429050
13.6
M
Electricity, gas, steam, air conditioning supply
9849
0.3
S
Water supply, sewerage and waste management
1843
0.1
O
Wholesale, retail trade, repair of motor vehicles
1750897
55.4
T
Transportation and storage
14404
0.5
S
Accommodation and food service activities
836564
26.4
S
Information and communication
1791
0.1
S
Professional scientific and technical activities
9845
0.3
S
Administrative and support service activities
8742
0.3
S
Public administration, defense, social security
2670
0.1
S
Other service activities
80370
2.5
S
Total
3162887
100.0
Source: URT (2012b), Micro, Small and Medium Enterprises in Tanzania, National Baseline Survey
Report, Ministry of Trade and Industry and Financial Sector Deepening Trust, Dar es Salaam
According to this survey, the regional distribution of small business sectors indicated
that the numbers of trade, manufacturing, and service enterprises are higher in rural
areas than in Dar es Salaam, other urban areas, and Zanzibar. The highest
business densities were found in Mbeya (46%) and Dar es Salaam (45%), and the
lowest in Kagera (14%) and Manyara (17%) (URT, 2012).
4
SECTION II: LITERATURE ON ICT USE BY SMES
Consoli (2012) made a review of literature on determinant factors and the impact of
ICTs on SMEs. It was identified that the adoption and use of ICT could bring
benefits to SMEs in terms of efficiency, effectiveness, innovation, growth and
competitive advantage. The factors which inhibit and do not stimulate investments in
ICT were identified such as (a) financial: high initial investment and difficulty in the
access to credit (b) infrastructural: power, bandwidth and reliable internet connection
(c) organizational: lack of skilled staff and coherent strategy and (d) technological:
evolution of technology not very ‘user friendly’ without adequate training. Similarly
various determinant factors for ICT adoption such as top management commitment,
personal traits (education, age…), culture on information system, high-skills, learning
by doing processes (all related with the individuals), enterprise sizes, human capital,
organizational culture, workers participation (all concerned with the organization),
competitive pressure, customers’ innovation requirements and public policies (all
linked to environment), existing technology (technological) and macroeconomic costs
(economic) were identified (Consoli, 2012:93-94). Similarly, the impacts of ICT on
organizations were also listed out: efficiency, effectiveness and competitiveness,
innovative business and intangible benefits (all associated with the performance),
productivity growth, strategic growth and sales increase (all contributing to growth),
organization expansion, supply chain improvements and international
communication (all connected to expansion) and new products/services, product
quality and customer satisfaction (all linked to new products) (Consoli, 2012:95).
A study by Skopo et al (2006) on ICT adoption of Australian and Croatian SMEs
concluded that for adopting higher levels of IT/ICT like intranets, Australian SMEs
would need a combination of causal conditions in the order: technological support
present, government support absent but individualistic factors present. Further, it
mentioned that the IT/ICT in Croatia was not politically supported and is left to
individuals with their knowledge and IT skills. Other higher forms of IT/ICT were
adopted under the influence of technological factors with an obvious absence of all
other factors. With regard to Australian SMEs, ICTs were adopted mainly under the
influence of technological factors and factors of support by the government policy
(Skopo et al, 2006:39).
Skope, Ceric and Huang (2008) developed a model of ICT adoption by Chinese
SMEs. They concluded that adopting basic forms of IT/ICT by Chinese SMEs were
conducted under presence of technological and individualistic factors. It was
confirmed that for adopting IT/ICT in Chinese SMEs, there was no well developed
infrastructure and political support. That process was left for individualists and their
knowledge and IT skills to do it on their own. As to adopting other higher forms of
5
IT/ICT, they were introduced by the influence of technological factors with obvious
absence of all other factors.
Esselaar et al (2007b) undertook a study on the profitability of SMEs due to ICT use
in eight African countries including Tanzania. They found out that ‘within the SME
sector, ICTs played a role in reducing transaction costs (thereby increasing
efficiency) and increasing market access’. They cited the examples of new financial
products increasingly based on mobile or Internet platforms. Further, they mentioned
that finding new products, increasing customer awareness of the products available
and sourcing new markets were considerably easier using ICTs. They concluded
that ‘a combination of sector turnover production functions and the correlation
between profitability and value of ICT assets relative to the value of total fixed assets
suggested that use of ICTs might be more likely a cause of SME profitability’ (p.68).
Ismail, Jeffery and Belle (2011) researched about the use of ICTs by SMEs in South
Africa. This research confirmed that ICT use in an enterprise definitely added value
to the SME, with the highest rated value added being those of ICT helping the SMEs
to improve their customer satisfaction levels, as well as improving their levels of
service, which also affect the customer. Nevertheless, the study also found out that
many SME owners also thought of ICT as a greater expense to the enterprise as
compared to its added the value. These authors concluded that an overall lack of
understanding as to the benefits of ICT was evident amongst the SMEs sampled in
this research (p, 11).
Kiveu and Ofafa (2013) studied about the Kenyan SMEs’ use of ICTs for marketing.
They concluded that ‘the use of ICT for marketing by SMEs still remained low
despite SMEs having access to these tools. Majority of SMEs used ICT for
communication, social networking and general information acquisition’. They also felt
that there seems to be lack of awareness of the range of opportunities that ICT
offered for increased market access. According to them, limited use of ICT for
marketing can also be attributed to perceived high costs of appropriate applications,
security issues and limited knowledge and skills on some ICT applications e.g. ecommerce (p.42).
Lal and Peedoy (2006) focused on the ICT adoption by SMEs in Mauritius. They
contended that despite the claim of being a cyber-island, the adoption of ICTs in
SMEs is far from being an integral feature of Mauritian SMEs.
Cost of
communication and the lack of learning opportunities have been found as the major
impediments in the adoption of ICTs.
6
The experience of many African and other developing countries’ SMEs in use of
ICTs is mixed. Lack of steady electricity supply, poor and expensive internet
services, lack of ICT skills in case of Nigeria (Apulu, Latham and Moreton, 2013),
high investment costs, bad connections, limited human resources, current economic
situation, business partners not having any form of ICT and lack of legislative and
government support in case of Croatia (Skoko et al, 2006 :36-7), the high cost of
communications inflating the input cost to the business in many African countries
(Gilwald and Stork, 2008: ii) and high cost of devices and services in many African
countries (Wolf, 2001: 21) were cited as the reasons for low use of ICTs by SMEs.
7
SECTION III: MOBILE PHONE SERVICES IN TANZANIA
There is a significant growth in the use of mobile phones in Tanzania in the last few
years. The number of mobile subscribers increased from 126,646 in 2000 to 17.8
millions in March 2010 (Tanzania Communications Regulatory Authority, 2010 cited
by Lwoga, 2010:4). The data obtained from the Tanzania Communications
Regulatory Authority (TCRA) show that at the end of 2013, the number of mobile
phones in Tanzania has stood at 27,442,823.
A study by Gilwald and Stork in 2008 indicated that Kenyans were spending on an
average nearly 17% of their individual income on mobile communication, followed
closely by Tanzania (15.4%) and Senegal (14.2%) and they considered that the high
percentage of individual income spent on mobile is a reflection of the continued high
cost of services in Africa. It is also claimed by them that the cost of these services
were prohibitively high for majority of the population (Gilwald and Stork, 2008: 14-5).
Though the cost of mobile phone services provided by the dominant provider was
said to be relatively very high in Tanzania compared to many other countries in
Africa, the number of mobile phone subscribers is increasing substantially probably
due to mobile phones’ ease of use. Considering the fact that the computers and
internet access are still relatively more expensive than mobile handsets, the mobile
phone usage is likely to increase manifolds compared to other ICTs. The PHDR
2011 of Tanzania has also stated that ‘Mobile telephony has enormous potential for
development, for example, by facilitating greater access to market and health
information as well as financial services’ (URT, 2012a: 143).
The figure 1 shows the growth in the mobile lines growth in Tanzania from 1998 to
2013. It may be observed that in 1998, Tanzania had much less than one million
mobile connections. As on 2013, it had achieved a growth of more than 27 million
mobile lines covering almost all parts of the country. The years 2008, 2009 and
2011 witnessed substantial growth compared to many other years. Nevertheless, it
is noticed that the growth in mobile lines since 2011 has not been significant
compared to the previous years. It also can be claimed that the mobile phones
sector has almost stagnated and reached a plateau in post-2011. Drastic efforts are
needed from the leading service providers and the regulators to furthering these
achievements.
8
Figure 1: Mobile Phone Connections growth in Tanzania 1998-2013
Source: Data obtained from Tanzania Communications Regulatory Authority
Teledensity of Tanzania
Teledensity is calculated as the number of telephone connections for every hundred
individuals living in that area. Tanzania’s Teledensity at the turn of the 20th century
was very low. It was mostly depending on the landline phone connections provided
by the monopolistic public sector provider. Onset of liberalization of the telecom
sector has resulted in the leapfrogging in the Teledensity considerably due to the
mobile phone subscribers’ growth. The Teledensity which was 10% in 2005 has
reached 61% in the year 2013. The years 2008 (32%), 2009 (43%), 2010 (50%)
and 2011 (59%) have witnessed significant milestones in the telecommunications
history of Tanzania. While the numbers of mobile subscribers have increased, the
landline connections have been experiencing a steady decline. Nonetheless, the
period from 2011 to 2013 has seen very limited increase in the Teledensity. Further,
there are also indications that many individuals have been accessing the services
provided by different operators simultaneously due to very high interconnectivity
charges as the off-net charges of connecting from one service provider to another
service provider is considerably high. Thus, it is possible to arrive at a lower
Teledensity if the usage of more than one SIM is taken into account. The figure 2
displays the trend in the growth of Teledensity in Tanzania from 2005 to 2013.
9
Figure 2: Teledensity of Tanzania 2005-2013 (mobiles per 100 persons)
Source: Data obtained from Tanzania Communications Regulatory Authority
Market share of mobile operators in Tanzania
Vodacom was said to have pioneered many new features in Tanzania. It was the
first Tanzanian carrier to launch video call, video messaging and 3G HSDPA USB
Modem. As for January 11, 2008, Vodacom Tanzania was again the first and
exclusive company to provide a free E-mail ID via a phone number (Furutuni, n.d: 56).
Vodacom was the leading mobile service provider in Tanzania as on Dec 2013 and it
was closely followed by Airtel. The gap between these two operators is narrowing
down since June 2012. Tigo was very close to Airtel in their share till June 2010.
Since then the share of Airtel has increased and the gaps between Airtel and Tigo
have increased. The fourth largest mobile service provider, Zantel is just able to
maintain its voice subscription base at 2,000,000. The Figure 3 provides the picture
of voice subscriptions of these major telecom operators from Oct 2009 to Dec 2013.
10
Figure 3: Voice subscriptions of telecom operators in Tanzania: Oct 2009 to Dec 2013
Source: Data obtained from Tanzania Communications Regulatory Authority
Growth in the national traffic of on-net and off-net voice calls
The national traffic of on-net calls (calls made within the same service provider) has
almost trebled in Oct-Dec 2013 compared to April-June 2010. On the other hand,
the traffic of off-net calls (calls made from one service provider to another service
provider) have been stagnant for a long period till March 2013. Since the quarter of
April-June 2013, there has been a slow but steady growth in the off-net voice calls.
Figure 4: National traffic of on-net and off-net voice calls in Tanzania: April’10 to Dec’13
Source: Data obtained from Tanzania Communications Regulatory Authority
Voice minutes and SMS per user
The numbers of voice minutes and short-messages (SMS) per user have been
showing a mixed trend from April 2010 to April 2012. However, since July-Sep 2012,
it has been noticed that there is an increasing trend in these indicators per user.
These increases could be among the reasons for the increasing Average Revenue
11
Per User (ARPU) during this period. Will it display an upward trend if the tariff for
both on-net and off-net is reduced by the service providers?
Figure 5: Number of voice minutes and SMS per user in Tanzania: April 2010 to Dec 2013
Source: Data obtained from Tanzania Communications Regulatory Authority
Unstable tariff for on-net mobile calls in Tanzania
The data available for different quarters from April-June 2010 to Oct-Dec 2013 show
that Vodacom’s tariff for on-net mobile calls (i.e. Vodacom to Vodacom) remained
higher than other mobile service providers. It was comparatively very high at 240
Tshs during April-Sep 2010. Though it touched the rock bottom of 60 Tshs during
Oct 2010-Sep 2011, it has been increasing steadily since Oct-Dec 2011 and climbed
back to Tshs 225 in July-Sep 2013, just below its highest of Tshs 240 during the
period from April 2010 to Dec 2013. Even the other two leading mobile service
providers such as Airtel and Tigo which were pegging their tariff for on-net calls
much lower than Vodacom for a long period aligned with it since Jan-March 2013
and the tariff difference between these three leading operators has remained very
marginal till today.
12
Figure 6: Weighted and average tariff for on-net calls for major telecom operators in Tanzania:
April 2010 to Dec 2013
Source: Data obtained from Tanzania Communications Regulatory Authority
The next major mobile service provider, Zantel is maintaining a much wider gap with
the tariff of these three leading providers. The public sector’s TTCL has been
maintaining a lower tariff for on-net calls and it has been declining as well.
Stable and low charges for SMS and high charges for off-net calls
The usage of SMS among the younger age customers seems to be very high. The
analysis of data related to the tariff for the SMS, on-net and off-net calls indicated
that the SMS tariff remained almost constant. It was also comparatively lower than
both on-net and off-net calls since the beginning. As mentioned earlier, Vodacom’s
tariff remained higher for a considerable amount of time than other service providers
though the other two major providers such as Airtel and Tigo have narrowed the gap
in the recent past. The lower average tariff by these providers as shown in the
Figure 7 is due to the fact that they had much lower tariff for quite some time
compared to Vodacom. During the quarter Oct-Dec 2013, nothing much separates
this three leading service providers in terms of their tariff for the on-net calls as
shown in Figure
13
Figure 7: Average tariffs for major telecom operators in Tanzania: April-2010 to Dec 2013
Source: Data obtained from Tanzania Communications Regulatory Authority
High off-net calls tariff – challenge for further growth in the telecom
sector
The tariff for off-net calls in case of almost all the service providers seems to be
much higher than the on-net calls. The tariff barriers for calls originating from one
service provider to another service provider are likely to prevent the subscribers from
contacting the subscribers of the other service provider. That means that most of the
operators are operating like silos with very limited interconnectivity. Probably, this is
among the most important barriers as the national traffic between different service
providers seems to be very low. The leading mobile operator, Vodacom has brought
down the difference between the tariffs of on-net and off-net calls much lower in the
quarter Oct-Dec 2013. Contrarily, the second important mobile service provider has
increased the difference in the same quarter. The other major mobile service
provider, Tigo has also increased both the tariffs for on-net and off-net calls for the
same quarter and effectively it means that the gap between the off-net and on-net
calls in terms of their tariffs will continue to be a barrier for inter-connectivity between
the customers belonging to different mobile service operators. The next significant
growth in the mobile telephony in Tanzania could be achieved by bringing down the
gap between the off-net and on-net calls with regard to their tariffs. An indication to
that effect is seen since the quarter April-June 2013 as there seems to be a spurt in
the off-net call traffic in Tanzania.
14
Figure 8: On-net and off-net voice call tariffs for major telecom operators in Tanzania:
April-2010 to Dec 2013
Source: Data obtained from Tanzania Communications Regulatory Authority
The Average Revenue Per User (ARPU)
The Average Revenue Per User (ARPU) is an indicator of revenue generated by the
mobile phone / telecom service providers per customer. This is defined as the total
revenue divided by the number of customers. With regard to the mobile telephony, it
is not only the revenue billed to a customer by the mobile companies but also the
pre-paid charges paid by the customer and also the revenue generated by the
incoming calls from other service providers determined within the regulatory
interconnection regime. In case of Tanzania, the Figure 3 shows that the period
April-Sep 2010 observed a high ARPU which declined during the period Oct 2010Sep 2011. Again it kept on increasing from Oct 2011 and reached a very high of
about Tshs 34,000/- in Oct-Dec 2013 except the period April-June 2012 during which
there was minor decline. This very high ARPU could be explained as the result of
increased usage of minutes per user and growth in the short messages (SMS) and
also the resurgent high on-net and off-net call charges by the major telecom
operators since Jan 2013. The Figure 4 shows the growth of ARPU since AprilJune 2010 to Oct-Dec 2013.
15
Figure 9: Average Revenue Per User per month for Tanzania voice and SMS services: April2010 to Dec 2013
Source: Data obtained from Tanzania Communications Regulatory Authority
16
SECTION IV: MOBILE PHONES FOR DEVELOPMENT IN
TANZANIA
Mobile phones were reported to have been used in various sectors in Tanzania for
different purposes. Nyamba (2012) indicated that the largest increase in the use of
ICT has been in mobile phones. He claimed that mobile phones have penetrated
even the rural areas. Based on these, the researchers from Sokine University of
Agriculture, Morogoro alongwith their colleagues from other universities were
investigating whether mobile phones really can create an opportunity to address the
problem of poor coverage of agricultural extension services to maize farmers in the
Kilosa district, Morogoro Region. They were also focusing on the role of mobile
phones in improving coverage of agricultural extension services in Tanzania. As on
the time of reporting (2012), the project was still in the early stages and the results
were expected.
Calandro, Stork and Gillwald (2012) reported the main findings of the 2011/2012 ICT
access and usage household and individual survey in 11 African countries. They
found out that ‘although the Internet penetration in most countries is still very low,
more than 70% of Ugandans and 67% of Ethiopians Internet users first used the
Internet on a mobile phone. In Tanzania, Namibia and Nigeria about half of the
population use the Internet first on a mobile. The growing importance of the mobile
phone to access the Internet is also stressed by the responses to the question
“Where did you use the Internet in the last 12 months?” Either complementarily to
computer access or exclusively, above 80% of Internet users in Namibia, Uganda
and Ethiopia access the Internet via a mobile phone. For South Africa, Kenya,
Nigeria, Tanzania and Rwanda Internet is accessed through a mobile phone by 70%
of Internet users’ (page 3).
Chambo et al (2013) conducted a study at ten secondary schools in Kilimanjaro
Region. The findings of the study indicated that majority of students had mobile
phones and had access to internet connectivity. However, the study concluded that
m-learning platforms that were in place were not viable solution in all contexts and
not necessarily the best solution (Chambo, et al, 2013:698).
The study by Mtega et al (2012) investigated how mobile phones have been used for
teaching and learning purposes at Sokoine University of Agriculture (SUA). Most of
the respondents of this study reported to use traditional mobile learning applications
including text messages and calls. Few respondents had smart phones with a
number of m-learning applications and most of them were teaching staff. These were
able to create upload, download and share academic resources through their smart
phones while others recorded and stored files in their phones. It was also found that
17
among teaching staff many were not aware of the capacity of their mobile phones
such that they underutilized them (Mtega et al, 2012:118).
With regard to fishermen in Tanzanian, Myhr and Nordstrøm (2006) found that the
fishermen used mobile phones to find buyers and thus cut the time for bringing the
fish to the consumers, which led to better quality and higher prices for their products
and also made them less vulnerable to loss due to a damaged catch. The fishermen
were also able to reduce the amount of spoiled fish while in search of a market buyer
(Myhr and Nordstrøm, 2006).
Souter et al. (2005) conducted a study in Mozambique, Tanzania and India. They
stated that the potential of mobile phones, in order to reduce vulnerability, lied in
people’s ability to obtain information that allowed them to deal with seasonal factors
(e.g. weather information), to reduce the imbalance between themselves and those
they trade with (e.g. price information) and to respond more quickly and effectively to
shocks. This study showed that those engaged in business activities and those of
higher economic status believed that the use of mobile phones has brought them
significant economic benefits (Furuholt and Matotay, 2011: 6).
Sife et al. (2010) have done a survey on the contribution of mobile phones to rural
livelihoods and poverty reduction in Tanzania. They concluded that the phones
contributed by expanding and strengthening social networks; increase people’s
ability to deal with emergencies and increased the efficiency of travel and business
activities (Furuholt and Matotay, 2011: 6).
A study conducted by Furuholt and Matotay in Babati, Tanzania during 2009 and
2011 found out that possibility to own or access a mobile phone had brought radical
changes to the way Tanzanian farmers communicated, received information and
supported decision making. Further, it revealed some of the unusual new usage and
the impact brought about by mobile phone usage (Furuholt and Matotay, 2011: 8-9).
This study found out that during preparation for farming and cultivation, farmers used
mobile phones, mostly when calling agricultural extension officers for agricultural
related advice, about prices and types of seeds and organizing manure and
fertilizers. As farmers spend most of the time in the farm areas in the villages, the
phones also helped them in communicating with agrovets shops, seeking information
about types of seeds and fertilizers to be used given the nature of the season. For
example, due to delays of the rains, farmers were sometimes advised to use shortterm seeds. They were also able to communicate with extension officers to enquire
about subsidized fertilizers and seeds. Another popular type of mobile phone usage
during preparation, cultivation and planting was for mobilizing of labour from distant
farms and villages. For some farmers, mobile phones were useful when they needed
to hire and negotiate prices for tractors for cultivation purposes. It was also reported
18
that the harvesting season was the peak season for the farmers and at that time
mobile phone usage increased. During this season, the farmers mostly used their
mobile phones in the following ways (arranged in order of importance): calling
market centres, agents, players and dealers for prices; selling crops via mobile
phones; organizing for storage and booking warehouses; collecting information and
ordering of preservative chemicals and contacting distant family members (Furuholt
and Matotay, 2011: 10-12). Reduced vulnerability for the rural farmers, information
transparency and opportunity for doing additional businesses were cited as the other
benefits of usage of mobile phones.
Kadigi et al (2013) had developed an electronic mobile phone Information and
Communication Technology (ICT) system namely, “e-Ng’ombe” in an attempt to
tackle the pitfall of information asymmetry between producers and other actors in the
value chain of indigenous beef cattle in Mwanza region, Tanzania. The authors are
optimistic that when successfully adopted and up-scaled to the national level, eNg’ombe has the potential of addressing the problem of information asymmetry. It
might be noted that the system is under implementation and further details are
awaited.
Lund (non-dated) has brought out information on a mobile-phone based experiment
called ‘wired mothers’ to improve the maternal and neonatal health in Zanzibar. The
pregnant women were linked to a primary health care centre through the use of
mobile phones for receiving standard text reminders for care appointments. They
also could call the primary provider in case of acute or non-acute problems. Wired
mothers’ cards with phone numbers of health centre were also distributed to these
mothers for this purpose. Results of this experiment are not yet known.
Hassan and Semkwiji (2011) have focused on the role of mobile phones on
sustainable livelihood in Arusha and Unguja (Zanzibar). The main service obtained
through mobile phones was information delivery including economic related
information such as business news, weather conditions, types and prices of different
commodities like new handsets, social information like on ceremonies, deaths, and
sickness as well as religious news. They observed that mobile phone technology
was believed to increase household income, especially for those engaging
themselves in mobile phone business industry, such as selling airtime, running
telephone kiosks, agents of m-banking and those employed by the communication
service providers. A considerable number of respondents for this study (36%)
preferred to receive business related information such as sources and prices of
agricultural inputs and other commodities, agro-produce markets and prices, the use
of m-pesa service etc. Other preferences mentioned were education related news,
entertainment-sports, political and other government events, transport issues like
19
weather, fares, employment information, educational health services and national
and international economic news (p.15).
Dias et al (non-dated) have shown that SMS-based data transmission system in
combination with open source tools can be feasibly implemented within the social
worker community in Tanzania. They also claimed that ‘the SMS-based technology
will help supplement the current paper form method for data collection within this
community while improving the efficiency and timeliness of transmitted data.
Additionally, the affordability of SMS compared with alternative avenues for
information communication, render this approach more feasible to and adoptable by
the end user; the Para-Social Workers (PSWs) at the ward or village level’ (Dias, et
al, non-dated:8).
A study conducted at the District Educational Offices at Iringa Municipal and Iringa
Rural, Tanzania found out that perceived ease of use, costs of usage, possible side
effects of usage and the compatibility of the technology were the factors influencing
the attitudes towards using the mobile phone at work. It concluded that the
employees of the two District Education Offices in general had a positive attitude
towards using the mobile phone. However, the study found out that mobile phone
was not quite compatible with the then working conditions as it was not possible to
sign an SMS with a signature, as the technology and the work situation not yet were
perfect for them to use the mobile phone (Dahl and Lövgren, 2011: 66-7).
Another study was conducted in 2009 in Tanzania (Iringa) and Jamaica focusing on
women’s use of mobile phones. It found out that compared to an early study ‘Mobile
Phone and Poverty Alleviation: A survey study in rural Tanzania’, which was
conducted in 2008, the disparity of mobile phone ownership between men and
women was lower in 2009. The ratio of women to men in the previous study was
about 1 to 3 while in the 2009 study it was around 1 to 1.5. The later study predicted
a better future trend for women and mobile phone technologies in rural Iringa. The
study of 2009 also found out that there were advantages such as faster
communication in cases of emergency (i.e. sickness or death), reduction of
transportation costs, making the business practices easier and solving many family
problems which have made the mobile phone an accepted tool in rural Iringa
(Ngumbuke, 2010: 79-80 and 84).
Contrarily, Kihwele and Bali (2013:101) based on their study in four secondary
schools in Dodoma concluded that parents and teachers agreed that students with
mobile phones performed poorly and misbehaved more often than students without
mobile phones. They recommended, in order to have value-based control system for
appropriate use of mobile phones, providing proper education on mobile phone use
and re-introducing censorship board to control the quality of contents on websites.
20
Similarly Molony (2006), though has identified a good number of entrepreneurs using
ICT in various ways to enhance their business prospects, found out that it is a
challenge to make interconnection affordable for more users as coverage further
expands into rural areas. It was claimed that only when interconnection is
affordable, majority of Africans can regularly employ mobile phones and attempt the
even greater challenge of applying the Internet for the ‘developmental’ uses (Molony,
2006:348)
Dusabe et al have also devised mobile phone based text messaging service
focusing on sexual and reproductive health referral services for implementation in 9
intervention communities in Mwanza region. This is based on the text messaging
feature of any basic mobile phone. The intervention will run for 18 months from June
2012 to January 2014 (including 7 weeks pretest). Within a period of 10 months, 45
drug stores have enrolled on the system and 15 dispensaries and 3 health centres
have agreed to collaborate with them. More than 800 patients with various RH
conditions have been referred from drug stores to dispensaries and health centres
(Dusabe et al, non-dated).
Bogan et al (2009) presented a mobile phone-based application called CommCare
which helped community health workers (CHWs) to provide home-based care and
social support to HIV, tuberculosis and other chronic patients in Tanzania. The
application guides the CHWs through a series of questions which they answer using
the phone’s number pad. It was stated that initial findings showed that the phonebased system is generally viewed positively by the users and by the clients as more
discreet and better for privacy than the paper-based system.
Modi (2013) has identified that in Tanzania there were four mobile-phones based
health programs that have the potential to help a large number of people: “Phones
for Health”, “SMS for Life” (both supported by government partnerships with private
organizations) and e-IMCI and Project Mwana (both supported by non-profit and
research organizations). She listed out the ways in which the Phones for Health will
enable increasing flow of information between different health systems. By texting or
calling patients and local health workers of disease status, directions for taking
medicine, or local health issues to be aware of, the program was expected to create
an education channel and it also aimed to create a ‘culture of information seeking’.
It was reported that “SMS for Life” used mobile phones, SMS messages and
electronic mapping technology to track stock levels of medication at health facilities
to increase access to malaria treatment medication and reduce the number of deaths
due to malaria. According to Roll Back Malaria Initiative (2010), the “SMS for Life”
ran as a pilot program for six months in three districts in Tanzania and the results of
the pilot were positive (Modi, 2013).
21
Hoefman et al (2012:42) brought out the experiences of using mobile phone
technology to influence uptake and delivery of Medical Male Circumcision (MMC)
among male adolescents and men in Northern Tanzania. Three categories of MMC
information in the form of short message were sent out to individuals who opted to
be included in the campaign: ‘TOHARA’, meaning ‘Text to learn advantages of
MMC’; second with the keyword ‘WAPI’ meaning ‘Text to learn where to access
MMC’ and third with the keyword ‘BAADA’ which delivered Post-operation text
messages to individuals who had undergone MMC. The study claimed that it was
possible to use mobile phone short messaging as a measure to increase uptake of
MMC. It also found out that, of the 11401 unique individuals who requested to know
the advantages of MMC, 417 (3.7%) requested for post-circumcision information, an
indication that they actually underwent MMC.
Ringo and Busagala (2012:72) undertook a study on the role of mobile phones in
community policing (sungusungu) in Dodoma Region of Tanzania covering Dodoma
Municipality, Bahi and Chamwino districts. This study found out that a greater
portion (20.6%) of respondents used mobile phones to report crime incidents than
other technological means. The statistical analysis indicated that the proportion was
significant (p < 0.01).
Wetengere (2013) found that lack of market information, unfamiliarity with packing
and transporting the products, lack of storage facilities and time consuming were the
marketing constraints facing farmers. This study brought out that the use of mobile
phones have provided timely and accurate market information, widened market
options, improved negotiation power and maintained freshness of the products.
Further, mobile phones have reduced losses and saved time and money. As a result,
the income of the farmers has increased tremendously (Wetengere, 2013:1).
Mobile-money transfer services (MMT) popularly known as m-pesa, tigo-pesa and
ezypesa are based on the text-based message service of mobile phones. As on
September 2013, it was reported that there were 134,158 mobile money agents
serving 40% of the population and occupying 19% of the landmass. There were
30.3 million mobile money subscribers in September 2013 (accounts) or 90% of
adults were having mobile money accounts of which 9.9 million or 43% of adults
were considered to be active users. The MMT covers areas like P2P (remittances),
P2B (bill payments, loan repayments, etc) and P2G (tax payments). Many studies
have been conducted in different parts of Tanzania in this regard (Komba, 2013;
Venkatakrishnan and Ngilangwa, 2013; Senso and Venkatakrishnan, 2013 and
Ngilangwa and Venkatakrishnan, 2014).
22
SECTION V: MOBILE PHONES AND SMES
Mobile phones usage by African SMEs
A survey conducted during 1999-2000 in Tanzania and Kenya revealed that mobile
phones were considered to contribute significantly to regional market expansion by
most enterprises, followed by fixed phones and faxes. The percentage of firms that
used mobile phones was increasing much faster in these countries than the other
technologies (Wolf, 2001: 12 and 14; Matambalya, and Wolf: 2001: 12). Mobile
phones were considered to contribute significantly to regional market expansion by
most enterprises, followed by fixed phones and faxes (Matambalya, and Wolf: 2001:
15). A study by Kinda and Loening showed that improved access to markets by
SMEs would have the strongest effect on employment growth followed by access to
rural finance. This study found out that rural cell communication was ranked third in
this context. It was considered to reduce transaction costs and facilitating market
information (Kinda and Loening, 2010:197 and 200). An earlier survey of 14 African
countries has found out that ‘within the SME sector, ICTs play a role in reducing
transaction costs (thereby increasing efficiency) and increasing market access;
mobile phones have overtaken computers as tools in supporting the running of
SMEs, given their prevalence and accessibility’ (Esselaar, et al, 2007a:98-9).
It has been considered by Esselaar, et al, (2007b:68) that mobile technology is both
an advantage and disadvantage for SMEs. It was considered as an advantage
because it provided an SME with a low cost base yet the ability to communicate with
suppliers and customers very easily. Contrarily, it was also cited as a disadvantage
because of its limited functionality in terms of its ability to develop as an SME
develops. With the existing technology, it was said that mobile phones cannot be
used to track inventory, provide cash flow and income statements, or even more
basically, produce formal letters, marketing campaigns or brochures. Therefore,
these authors suggested that ‘a policy focus should be to either encourage the
development of SME-specific tools for mobile handsets or to encourage lower ICT
(specifically computer) costs’.
Ilahiane (2011) studied about the mobile phone usage and the transformation of
social and economic ties of micro-entrepreneurs in urban Morocco. It has been
argued by him that mobile phone use expanded the productive opportunities of
certain types of activities by enabling social networks, reducing risks associated with
employment seeking, and enabling bricolage or freelance service work, leading to
higher incomes. Further, it has been demonstrated how the use of mobile phones
for bricolage jobs began to transform, rather than simply augment and reinforce, the
social and economic ties of micro-entrepreneurs (Ilahiane, 2011:31).
23
Smart phone applications for SMEs
According to Esselaar et al (2007a), the mobile phones have many advantages as
they can be used with little training and increasing number of people have mobile
phones and this is resulting in benefits due to the network externality effect.
Contrarily, many other forms of ICTs such as fax machine and post box have a
rapidly declining network effect as fewer people continue to use them. Nevertheless,
mobile phones have limited functionality in terms of their ability to develop as any
SME develops and they also have high usage charges (p.92 and 99). However, the
smart phones are breaking these barriers. In May 2013, taking advantage of mobile
internet, Indiamart.com has introduced an Indiamart mobile site m.Indiamart.com
and an Android app on Google Play aiming at easing business possibilities of SMEs.
It is reported to connect users to 1.2 million suppliers and 6.5 million buyers on its
platform. MTN South Africa has also introduced MTN mobile fleet management
solution for SMEs in South Africa. Smart mobile applications are also being
experimented in Kenya to turn the mobile phone into a vital tool for any business
(Kisini 2012). Thus, new frontiers using mobile phones are emerging specifically for
SME sector. It is expected that with these developments, the mobile phones will
become much handier for the SMEs.
Mobile phones usage by Tanzanian SMEs
The SMEs in Tanzania are also expected to benefit by using the mobile phone
services covering a range of functions like information, finance, supply and delivery.
The Tanzania Chamber of Commerce Industry and Agriculture (TCCIA) have been
offering a phone enquiry service eventhough the most information enquiries are
reported to come from outside Tanzania. M-payments through mobile phones are
also growing in Tanzania. Mobile phones are also used in the service delivery by the
Ministry of Agriculture to inform farmers on food/commodity prices (Oyen and Gedi,
2013: 31-2). Melchioly and Sæbø (2010) based on an exploratory study in Morogoro
found out that ‘SMEs in the research area claimed to have improved their economic
efficiency as a result of using mobile phones in business operations and it was
possible due to the subsequent free flows of business information. Utilization of
mobile phones by SMEs enhanced productivity and economic growth within the
SMEs. Mobile phones seemed to have become powerful enablers for the SMEs,
whose impact can range from enhanced financial transactions, wealth generation
and its distribution due to the simplified information flows’ (p.11).
A recent review of the Tanzania SME Development Policy 2003 has found out that
the Tanzanian SMEs have witnessed increase in the use of mobile phone services
(financial services and information services) (Oyen and Gedi, 2013: 11). Thus
information based economy is becoming important to them. It might be worth noting
24
that even in a developed city like Johannesburg, mobile phones have become a vital
component of everyday economic welfare amongst those operating small market
enterprises in the city centre (Hyde-Clarke, 2013:149).
Taking into consideration the miniature size of the substantial number of enterprises
in Tanzania, it might be difficult and less cost-effective for them to use other
Information and Communication Technologies (ICTs), compared to the mobile
phones. In stark contrast to the era of very low tele-density prior to the introduction
of mobile phones in Tanzania in 1994 and previous high cost of mobile services
regime, the innovative uses of new telecommunications, particularly the mobile
phones is considered to contribute to the development of various sectors including
SME sector. Fishermen in coastal Tanzania, pastoralists in many regions of
Tanzania through the LINKS project and small farmers in various regions seem to
have experienced the benefits of using mobile phones to further their livelihoods.
Tanzania is also considered to be a successful example of mobile-phone money
transfer services known as m-pesa, tigo-pesa, airtel money and ezypesa offered
through the various mobile phone service providers. Many Tanzanian SMEs are
also using the mobile-phone money services for their business transactions. A study
conducted by InterMedia in 2013 focused on the use, barriers and opportunities for
the mobile money in Tanzania. It found out that ‘about one-fifth (21 percent) of
registered users of Vodacom M-Pesa used mobile money for business purposes
versus 12 percent each of Airtel Money and Tigo Pesa registered users. Of those
registered m-money users who used m-money for business purposes, the majority
purchased inventory. It was found out that out of 191 respondents covered for this
study, 74% said that mobile money is more likely to be used for transactions with the
suppliers than with the customers, 23% claimed that it could be used for receiving
payments from the customers, 10% indicated payment for bills and only 7%
mentioned payment to the employees. There was no difference among rural, urban
and peri-urban registered users in the way they used m-money for business’
(InterMedia, 2013:17-18).
Nickerson (2013) studied about the mobile payments among the micro
entrepreneurs in Kenya and Tanzania. It has been observed by this study that there
were marked differences in attitudes and behaviors between Kenyan and Tanzanian
micro entrepreneurs. It was found out that the Tanzanian micro entrepreneurs
demonstrated less usage of mobile payments. It was mentioned that Tanzanians
had less personal experience with mobile payments and thus less favorable views of
benefits of mobile payments on their businesses. The study found correlations
between the level of usage of mobile payment for paying suppliers/receiving
payment from customers and the number of new hires, increase in the number of
customers and business income growth. The correlation was the highest between
25
the level of usage of mobile payment for paying suppliers and business income
growth. It was claimed that this observation along with the data related to mobile
adoption factors implied that in some cases micro entrepreneurs have yet to fully
exploit the benefit of mobile payments (Nickerson, 2013: 92-93).
The survey on MSEs in Tanzania found out that ‘the small businesses surveyed did
not use the internet for doing business. Only a few (0.5%) used the internet for
getting information on products and markets, and almost none used it for orders with
suppliers and customers. A very few (0.6%) used it for sending and receiving emails’
(URT, 2012b: 37).
With regard to computer ownership and usage by the MSEs the above said survey
indicated that ‘Very few small businesses owned a computer or laptop. Those who
owned a computer used it mainly for business correspondence (0.5%), business
records (0.5%), accessing the internet (0.3%), providing computer services to
customers (0.1%), selling products and services online (0.0%), or private use (0.1%)’
(URT, 2012b:37).
Nevertheless, ownership and usage of mobile phones seem to be more prevalent
compared to the internet and computer. This survey found out that ‘About 59% of
small business owners owned a mobile phone. The percentage was much higher in
Dar es Salaam (77.8%) and other urban areas (70.9%), but considerably much lower
in rural areas (47.2%). About 30.7% of small business owners who did not own a
phone used the phone of someone else in their household or someone close to them
(URT, 2012b:37).
Mobile phones were mainly used various purposes by these MSEs as shown below
(URT, 2012b:38). Prominent among them are placing orders (57.4%), following up
on clients (48.65%) and sending and receiving SMS (26.2%). Sending and receiving
email and surfing the internet were used to a very limited extent.
• Placing orders (57.4%)
• Transferring money to family or friends (3.7%)
• Transferring vouchers/ sending air time (5.1%)
• Following up on clients (48.65%)
• Sending and receiving SMS (26.2%)
• Sending and receiving email (0.1%)
• Surfing the internet (0.2%)
• Buying telephone services (0.3%)
• Mobile banking (0.3%)
• Talking to customers (Skype) and other people (6.4%)
• Visiting social websites (5.0%)
• Communicating with business partners (1.1%)
• Getting information on price changes (1.0%)
• I don’t use mobile phones (13.6%)
26
The survey also found out the details about the service providers of mobile phone
services to the MSEs. Though Vodacom was the leading service provider of mobile
phone services to MSEs, in case of Dar es Salaam, Tigo was the leader in this
regard. However, in other urban areas and rural areas, Vodacom retained the
leading position in providing mobile phone services to MSEs. The once monopoly in
providing the telephone services in Tanzania, TTCL is having a very low market
share of the mobile phone services among the MSEs as well. The Table 3 provides
the detailed information in this regard.
Table 3: Small business owners per mobile phone provider by area
Company
Total
Dar es Salaam
Other Urban
Rural areas
Vodacom
948,210
145,181
428,582
373,737
Zain
834,208
107,597
277,831
445,610
Tigo
670,671
302,462
219,460
133,707
Zantel
101,317
17,997
22,603
4,992
TTCL
10,598
4,418
5,155
1,026
Others
108
0
0
108
2,565,112
577,655
953,631
959,180
Source: URT (2012b:38)
27
Zanzibar
710
3,170
15,042
55,635
0
0
74,557
SECTION VI: MOBILE PHONES USAGE AND MSE
TRANSFORMATION IN DODOMA
Research Methodology
This section is focusing on how the micro and small enterprises in one of the
strategic cities in Central Tanzania, i.e. Dodoma are making use of the mobile
phones for undertaking their business operations. Some of the variables covered for
this study are, the nature and dimensions of the MSE business functions undertaken
using mobile phones like order placing, delivery of services and goods and
payments. It also brings out how the mobile phones have transformed the
functioning of the MSEs and have contributed for their efficiency. The barriers in
using the mobile phones such as costs, limited applications and other infrastructural
issues also have been brought out. About 75 micro and small enterprises in the
Central Business district of Madukani/ One-way and surrounding business areas
Uhindini, SabaSaba, Jamatini, Terminal Bus Stand and Makole and suburban areas
like Kizota and Kikuyu were be covered for this study. Enterprises having less than
50 employees were covered based on the stratified random sampling. The owners,
managers and employees making use of the mobile phones for the business
purposes of these MSEs were surveyed using a questionnaire.
Profile of the enterprises surveyed
Out of the 75 micro and small enterprises surveyed for the study at Dodoma urban,
58 (81.7%) had less than five employees; nine (12%) had 5-10 employees and only
four (5.33%) had more than 10 employees. Among the respondents, 16 (21.3%)
were owners, 10 (13.3%) were managers and the remaining 47 (62.7%) were
employees. Multiple purpose business enterprises (17), food and related enterprises
(10), stationery shops (6), mobile phones, electronics related enterprises (8), timber
related enterprises dealing with furniture and carpentry (5), clothes and dress
materials (6), hardware and building materials enterprises (6) and cosmetics (5)
were the major category of the business enterprises surveyed. Hair dressing
saloons, plastics products suppliers, guest houses, lodges, mini-super markets, bars,
medical store, decoration materials shops, utensils shops and automobile and car
spare parts constituted the remaining business enterprises surveyed at Dodoma in
March 2014.
ICTs used by MSEs
Ordinary mobile phones were highly used by these MSEs compared to any other
ICTs. Fax machines, landlines, emails, internet and traditional ICTs like Post Box
were used only to a limited extent. The smart phones usage is also not significant
28
but relatively better than others. Mobile money is the second most important ICT
used by these MSEs as displayed in the Table 4.
Table 4: Degree of usage of various ICTs by MSEs
Intensity
High
Moderate
ICTs
7
Fax machines
(9.3)
Ordinary
75
mobiles
(100)
18
Smart phones
(24)
27
47
Mobile money
(36)
(62.7)
7
Emails
(9.3)
1
15
Internet
(1.3)
(20)
Post box
-
-
Others
-
1
(1.3)
Low
Not at all
Total
3
(4)
65
(86.7)
-
-
75
(100)
75
(100)
10
(13.3)
1
(1.3)
1
(1.3)
3
(4)
57
(76)
1
(1.3)
58
(77.3)
58
(77.3)
74
(98.7)
71
(94.7)
75
(100)
75
(100)
75
(100)
75
(100)
Source: Field Survey (2014)
Most of the respondents have started to use the phones/mobile phones in the recent
years; 36 (48%) started using them during the period 2006-2010 and 22 (29.3%)
started using them during 2011-2013. Those who started using them during 20012005 constituted 13.3% and the remaining 6.7% had the experience of using them
prior to 2001.
Table 5: Number of ordinary and smart mobile phones and SIM cards used by MEMEs
Frequency
1
2
3
4
5
6
7
8
Ordinary
1
15
17
22
11
6
1
2
mobile
(1.3%)
(20%)
(22.7%) (29.3%) (14.7%)
(8%)
(1.3%) (2.7%)
phones
SIM cards
2
5
18
26
10
5
3
6
for mobile
(2.6%) (6.7%)
(24%)
(34.7%) (3.3%) (6.7%) (4.0%)
(8%)
phones
Smart/touch
6
8
4
0
0
0
0
0
phones
(8%)
(10.7%)
(5.3%)
Source: Field Survey (2014)
NIL
0
0
57
(76%)
It could be seen that owing multiple mobile phones and SIM cards from multiple
service providers is widely prevalent among the MSEs surveyed for this study. More
than 75% of those surveyed had three or mobile phones. Similarly more than 90%
of them had three or more SIM cards. High off-net call tariff could be one of the
major reasons for this phenomenon.
29
Ranking of mobile phone services usage for business purposes
With regard to the usage of various mobile phone services, voice calls seem to be
most important service used by the MSEs of this study. An overwhelming 71% of
the respondents indicated that voice calls are the most important mobile based
services used for business purposes. This was followed by mobile money services
as about 25% of the respondents ranked it as the most important mobile phone
based service. SMS also seems to be widely used by the respondents as it was
ranked as the second ranked service by about 45% respondents and 49% ranked as
the third most important service. Considering the micro nature of most of the
enterprises surveyed, it is not surprising to note that accessing internet, emails,
social networks and other mobile based services were not under use. The Table 4
provides these details.
Table 6: Ranking of mobile phone based services used by the MSEs
3
4
5
6
7
Not
applicable
-
-
-
-
-
-
37
(49.3)
32
(42.7)
3
(4)
1
(1.3)
1
(1.3)
10
(13.3)
1
(1.3)
2
(2.7)
-
-
-
-
-
-
-
-
-
1
(1.3)
9
(12)
-
56
(74.7)
57
(76)
57
(76)
71
(94.7)
Rank
1
2
Voice
calls
Mobile
money
53
(70.7)
1
(1.3)
19
(25.3)
20
(26.7)
34
(45.3)
22
(29.3)
Internet
-
-
Emails
-
-
-
Social
networks
-
-
-
SMS
1
(1.3)
Source: Field Survey (2014)
Others
-
-
-
3
(4)
6
(8)
-
-
1
(1.3)
Missing
1
(1.3)
2
(2.7)
1
(1.3)
2
(2.7)
2
(2.7)
2
(2.7)
2
(2.7)
Uses of mobile phones for market development for these MSEs were also
discussed. It was found out that all the surveyed enterprises were using it for
obtaining information about the new products. Contacting the potential customers
(97.3%), finding out new markets and higher access to market information (96%
each) and expanding to new markets (85.3%) were also cited as the uses of mobile
phones for these MSEs for market development.
Mobile service providers subscribed
Vodacom seems to be leading service provider as 81.3% MSE customers ranked it
as number one service provider. Tigo is ranked second important service provider
by again 81.3% MSE customers. About 88% of them ranked Airtel as the third most
important service provider to them.
30
Table 7: Leading mobile phone service providers to the MSEs
Mobile service providers
Vodacom
Tigo
Airtel
Zantel
Rank
1
61
(81.3%)
10
(13.3)
3
(4.0%)
2
9
(12%)
61
(81.3%)
4
(5.3%)
0
0
3
4
(5.3%)
3
(4%)
66
(88%)
1
(1.3%)
4
1
(1.3%)
1
(1.3%)
2
(2.6)
10
(13.3%)
Source: Field Survey (2014)
Business related use of mobile phones by MSEs
Most of the MSEs surveyed for this study indicated that they were using the mobile
phones for various business related purposes. They were not only making voice
calls to their business contacts like suppliers of goods, customers and transporters,
but also were receiving calls from these business contacts. It might be borne in
mind that most of them were not familiar with the smart phones or their applications.
They were using mostly ordinary mobile phones. About 61% of the respondents
covered for this study indicated that they used to make between 6-10 calls per day to
the suppliers of the goods and services related to their businesses.
Table 8: Business related voice calls traffic from and to the MSEs
Number of calls made to per day (outgoing)
Business contacts
No calls
1-5
6-10
11-15
26
46
3
Suppliers
0
(34.7%)
(61.3%)
(4%)
2
31
36
5
Customers
(2.7%)
(41.3%)
(48%)
(6.7%)
9
54
12
0
Transporters
(12%)
(72%)
(16%)
Number of calls received from per day (incoming)
37
34
4
Suppliers
0
(49.3%)
(45.3%)
(5.3%)
2
38
29
6
Customers
(2.7%)
(50.7%)
(38.7%)
(7.9%)
9
54
12
Transporters
0
(12%)
(72%)
(16%)
Source: Field Survey (2014)
Out of the remaining 34.7% indicated that they used to make 1-5 voice calls per day
to their suppliers. These respondents were also making calls to their customers and
48% of them informed that they were making 6-10 voice calls per day to their
customers. Transporters of goods were also contacted by a considerable number of
respondents to track the goods and 72% of the respondents claimed that they used
to make 1-5 voice calls per day to the transporters.
31
The respondents were also receiving calls from the suppliers, customers and
transporters. The Table 8 indicates that 49.3% of the respondents were receiving 15 voice calls per day from the suppliers and 45.3% were receiving 6-10 calls per day.
Customers were also making calls to these MSE respondents. It could be seen that
50.7% of the respondents used to receive 1-5 voice calls per day from their
customers. Further queries were also raised to these respondents about the
purposes and intensity of calls from the suppliers. The Table 9 provides the details.
Table 9: Purposes of calls to the suppliers and the intensity of use
Intensity
High
Moderate
Low
Not at all
Purposes
Searching for
5
49
21
0
suppliers
(6.7)
(65.3)
(28)
Preliminary
26
49
0
0
negotiation
(34.7)
(65.3)
32
37
6
Placing orders
0
(42.7)
(49.3)
(8)
Tracking
24
50
1
transport of
0
(32)
(66.7)
(1.3)
supplies
Making
33
29
13
payment for
0
(44)
(38.7)
(17.3)
supplies
Complaints
10
56
9
about the
0
(13.3)
(74.7)
(12)
supplies
0
2
73
others
0
(2.7)
(97.3)
Source: Field Survey (2014)
Total
75
(100)
75
(100)
75
(100)
75
(100)
75
(100)
75
(100)
Placing orders (42.7%) and making payment for the supplies (44%) were the
purposes which were ranked very highly by the respondents for contacting the
suppliers. Searching for suppliers (65.3%), placing orders (49.3%), making payment
for the supplies (38.7%) and tracking transport of supplies (32%) were considered as
falling under moderate use category. It seems that tracking the transport of supplies
(66.7%) and preliminary negotiation (65.3%) were considered by a considerable
amount of respondents as low priority issues for making voice calls.
Similarly, the MSE respondents were requested to indicate the purposes for which
the customers were contacted by them and the intensity of contacting them for these
purposes. The Table 10 displays the details. Compared with the suppliers, the
voice calls to the customers were less and even the purposes did not have high
intensity of usage. Informing about the availability of goods (54.7%), receiving
payment for the goods (41.3%) and tracking transport of goods (21.3%) were
considered to the purposes that received moderate rating by the MSE respondents
for contacting the customers. It could be concluded that contacting the customers
was not a high priority for the MSE respondents compared to the suppliers.
32
Table 10: Purposes of calls to the customers and the intensity of use
Intensity
High
Moderate
Purposes
10
41
Informing about availability of goods
(13.3)
(54.7)
16
Tracking transport of goods
0
(21.3)
3
31
Receiving payment for the goods
(4)
(41.3)
6
Complaints about the goods
0
(8)
Others
0
0
Low
Not at all
23
(30.7)
58
(77.3)
40
(53.3)
60
(80)
2
(2.7)
1
(1.3)
1
(1.3)
1
(1.3)
9
(12)
73
(97.3)
Source: Field Survey (2014)
With regard to the general benefits of using mobile phones for the business
purposes, a significant number of the respondents (90.7%) indicated that they
benefited due to (a) reduction of travel costs (b) early arrival of supplies / goods and
(c) lessening of travel frequency.
Table 11: Contributions of mobile phones in facilitating the growth of business
Not
Rank
1
2
3
4
5
6
applicable
Increased
19
16
35
4
number of
(25.3)
(21.3)
(46.7)
(5.3)
customers
Enlarged
21
24
24
4
business
(28)
(32)
(32)
(5.3)
operations
Better
access to
35
32
7
market
(46.7)
(42.7)
(9.3)
information
Improved
2
7
63
1
1
contact with
(2.7)
(9.3)
(84)
(1.3)
(1.3)
suppliers
Superior
1
1
53
19
customer
(1.3)
(1.3)
(70.7)
(25.3)
services
Others
4
1
3
66
(5.3)
(1.3)
(4)
(88)
Source: Field Survey (2014)
Missing
1
(1.3)
1
(1.3)
1
(1.3)
1
(1.3)
1
(1.3)
1
(1.3)
They were also further queried about the specific benefits related to their business
growth due to use of mobile phones. They ranked the contributions like increased
number of customers, enlarged business operations, better access to market
information, improved contact with the suppliers and superior customer services
among many others.
Better access to market information (46.7%), enlarged business operations (28%)
and increased number of customers (25.3%) were ranked as the most important
contribution of the mobile phones. They were also ranked as the second most
33
important contribution by 42.7%, 32% and 21.3% of the respondents of this study.
Increased number of customers was mentioned as the third most important
contribution of mobile phones by a considerable number of respondents (46.7%).
Other contributions worth mentioning were improved contact with the suppliers
(84%) as the fourth ranked benefit and superior customer services (70.7%) as the
fifth ranked benefit. These details are provided in Table 11.
Ranking of technological barriers for using mobile phones
Network failure related problems seem to be the highly ranked problem as 93.3%
respondents considered that as the most important technological barrier is using the
mobile phones for the business purposes. Limited interconnectivity (or it could be
related with the high tariff for off-net calls) was considered as the next major problem
as it was ranked as the second most important problem by 76% of the respondents.
Potential to lose the password was cited as the third ranked problem by 46.7% of the
respondents. Poor quality handsets (30.7%), recurrent short supply of electricity,
limited applications of the ordinary mobile phones and the potential to lost the
password (21.3% each) were ranked as the fourth most important technological
barriers in making use of the mobile phones for the business purposes.
Table 11: Technological barriers in using mobile phones for business transformation
Rank
1
2
Poor quality
3(4)
handsets
Frequent network
70
2(2.7)
problems
(93.3)
Limited
2(2.7) 57(76)
interconnection
Recurrent
electricity
1(1.3)
shortage
Limited
applications of
mobile phones
Potential to lose
7(9.3)
Password
Others
Source: Field Survey (2014)
3
4
5
6
7
Not
applicable
16
(21.3)
23(30.7)
9(12)
15(20)
1(1.3)
4(5.3)
-
-
-
-
-
-
9(12)
-
2(2.7)
2(2.7)
-
-
5(6.7)
16(21.3)
25(33.3)
16(21.3)
-
9(12)
5(6.7)
16(21.3)
6(8)
8(10.7)
2(2.7)
20(26.7)
35(46.7)
16(21.3)
6(8)
8(10.7)
-
-
-
-
-
1(1.3)
-
71(94.7)
Cost of using mobile phone services
The respondents were also queried about the cost of using mobile phone services.
Many of them indicated that their overall expenditure on using mobile phone services
was increasing. They also cited the reasons such as (a) frequent network problems
while communicating (62.7%) (b) increased frequency of use (61.3%), (c) increased
tariff (61.3%), (d) high interconnectivity tariff between different mobile phone
34
operators (60%) and (e) repeated need to change the faulty handsets (40%) as
shown by the percentage of respondents indicated in the parentheses. Despite all
these problems, a considerable amount of respondents (62.7%) claimed that their
usage of mobile phones was increasing over a period of time whereas 28% of them
stated that it was reducing and 9.3 indicated that it was stagnant. The respondents
were also requested to rank technological problems faced by them in using mobile
phones for their business purposes. These are shown in the Table 12.
35
SECTION VII: CONCLUSION AND RECOMMENDATIONS
Summary and conclusion
The years 2008, 2009 and 2011 witnessed substantial growth in mobile phones in
Tanzania. Nevertheless, since 2011 the growth has not been significant compared to
the previous years and the mobile phones sector has almost stagnated and reached
a plateau in post-2011. The years 2008 (32%), 2009 (43%), 2010 (50%) and 2011
(59%) have witnessed significant milestones in the Teledensity and
telecommunications history of Tanzania. The Teledensity has reached 61% in 2013.
The national traffic of on-net calls (calls made within the same service provider) has
almost trebled in Oct-Dec 2013 compared to April-June 2010. On the other hand,
the traffic of off-net calls (calls made from one service provider to another service
provider) has been stagnant for a long period till March 2013 though since the
quarter of April-June 2013, there has been a slow but steady growth in the off-net
voice calls. The numbers of voice minutes and short-messages (SMS) per user
have been showing a mixed trend from April 2010 to April 2012 though since JulySep 2012, there is an increasing trend in these indicators per user.
The second and third positioned mobile service providers such as Airtel and Tigo
which were pegging their tariff for on-net calls much lower than the market leader
Vodacom for a long period aligned with it since Jan-March 2013. The weighted and
average tariff difference between these three leading operators has remained very
marginal till today since then. The tariff for off-net calls in case of almost all the
service providers seems to be much higher than the on-net calls and hence most of
the operators are operating like silos with very limited interconnectivity. The tariff
barriers for calls originating from one service provider to another service provider are
likely to prevent the subscribers from contacting the subscribers of the other service
provider.
The period April-Sep 2010 observed a relatively high Average Revenue Per User
(ARPU) which declined during the period Oct 2010-Sep 2011. Again, it kept on
increasing from Oct 2011 and reached a very high of about Tshs 34,000/- in Oct-Dec
2013 except the period April-June 2012. This very high ARPU could be explained as
the result of increased usage of minutes per user and growth in the short messages
(SMS) and also the resurgent high on-net and off-net call charges by the major
telecom operators since Jan 2013.
The MSEs surveyed at Dodoma during March 2014 have been using mobile phones
for various business purposes. Compared to the other ICTs such as landlines, fax
machines, emails, internet, smart mobile phones etc, their use of ordinary mobile
36
phones for the business purposes seem to be much higher and this high usage of
mobile phones have transformed the way in which they are conducting their
business operations. The smart phones usage is also not significant but relatively
better than others.
Most of the respondents have started to use the phones/mobile phones in the recent
years; 36 (48%) started using them during the period 2006-2010 and 22 (29.3%)
started using them during 2011-2013. Owing multiple mobile phones and SIM cards
from multiple service providers is widely prevalent among the MSEs surveyed for this
study.
Vodacom, Tigo and Airtel were the leading service providers in case of mobile
phones (mentioned in the order of usage). The usage of mobile phones is generally
considered to be increasing despite the perceived higher tariff for the off-net calls
and increasing cost of using mobile services. For reasons related to the high off-net
tariffs and consequent limited interconnectivity between the mobile service providers,
most of the respondents of the study have been using more than three mobile
phones and SIM cards from different mobile service providers.
Voice calls, SMS services and mobile-money transfer were the three most important
mobile based services used by the respondents in that order. Considering the micro
nature of most of the enterprises surveyed, accessing internet, emails, social
networks and other mobile based services were under very limited use.
With regard to the outgoing calls, the suppliers, customers and transporters (in that
order) were receiving 6-10 voice calls per day from the respondents of the MSEs. In
case of incoming calls that were received from the business contacts. Again
suppliers, customers and transporters were the ones who were making calls to the
MSE respondents. Placing order and making payment for the supplies were the
most important purposes of using mobile phones with regard to the suppliers.
Similarly with regard to the customers, informing the customers about the availability
of goods and receiving payment for the supply of goods were cited as the most
important purposes of mobile phones. However, contacting the suppliers seems to
be more prevalent than contacting the customers. The use of mobile phones seems
to have reduced the cost of travel, the frequency of travel and facilitated the early
arrival of goods needed by the MSEs.
Increased number of customers, enlarged business operations, better access to
market information, improved contact with the suppliers and superior customer
services were cited as the major benefits of mobile phones for the growth of the
businesses. With regard to market development, obtaining information about the
new products, contacting the potential new customers, finding out new markets,
37
higher access to market information and expanding to new markets were cited as the
benefits (listed in the order of importance).
Network failure related problems, limited interconnectivity (or it could be related with
the high tariff for off-net calls), potential to lose the password, poor quality
handsets, recurrent short supply of electricity and limited applications of the ordinary
mobile phones were indicated as the important technological barriers in making use
of the mobile phones for the business purposes. Many of the respondents were also
not familiar with the features of the smart phones and hence not accessing emails,
internet or social networks for the business purposes through the mobile phones.
Recommendations
Though mobile phones have been widely used in Tanzania, there is an indication
that the mobile phone sector has stagnated since 2011. Drastic efforts are needed
from the leading service providers and the regulators to furthering the achievements
of mobile phones growth and to overcome the stagnation. Reducing the tariff for both
on-net and off-net calls is essential in this regard. If the tariff for off-net calls is
reduced, it will increase the overall customer base for each service provider as they
will be accessible to customers of other service providers.
Further, efforts have to be made to popularize Multi-Media Messaging Service
(MMS) similar to that of Short Message Service (SMS) among younger generation of
Tanzanians. The traffic of SMS is increasing considerably. The handsets being
used by many of the MSE owners and employees seem to have limited capability for
undertaking some of the business functions. As the MMS has more potential for
addressing some of the shortcomings faced MSMEs in terms of mobile phone
applications for the business, it is desirable that the service providers make
campaigns about its uses. This will also increase the traffic in this segment and
consequently make an impact on the revenue of the service providers.
Enabling conditions have been created for the next and higher level of usage of
mobile phones. The Teledensity has reached a very high level. Mobile-money
transfer services have also reached major business locations of Tanzania. There is
a need to upgrade the telecom market moving away from mere voice calls
dependence to data transmission based services. This is needed to ensure that
there is a greater uptake of smarter applications of mobile phones such as accessing
internet, emails and mobile-money transactions.
Unless these issues are
addressed, the enterprises will use the mobile phones merely to make voice calls
and make financial transactions with the suppliers.
38
Awareness of the uses of the mobile-money transfer services needs to be increased.
Further, efforts are needed from the mobile-money transfer service providers to
ensure that inter-service provider collaboration is achieved to enlarge the uses of
these services for making payments for purchase of goods and services. Though
there are efforts in bigger towns like Dar es Salaam to enlist outlets accepting
mobile-money transfers, further consolidation is necessary. Moreover, there is a
need to reduce the cost of transactions for bulk and bigger mobile-money
transactions to ensure that businesses adopt that in a large scale.
The Government of Tanzania, market regulators and other market players need to
make concerted efforts to address the issues of poor quality handsets, limited
interconnectivity between operators due to higher off-net tariff, lack of stable
electricity supply, frequent network problems, lack of knowledge about smart phone
applications and consequent low usage of higher level applications. If these are
addressed it will be possible for the MSMEs to convert themselves from merely using
voice calls and SMS to data transmitters and users leading to transformation of the
sector.
39
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