manssamussa
New Member
- May 2, 2024
- 2
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In Tanzania, the problem of poverty and unemployment persists even though various efforts are taken to combat poverty. Efforts taken to combat poverty have produced only a modest decrease in poverty which coupled with a rapid population increase translated to increase in number of poor people in absolute terms. Further, the problem of poverty in the country is substantial as more than 26 million Tanzanians are living below the internationally recognized extreme poverty line of 1.9 USD. Apart from having majority of Tanzanians living in extreme poverty situations, the level of poverty vulnerability is also very high with three out of four Tanzanian falling back to poverty after moving out of it.
Lately, various reports have indicated that Tanzania’s population is very youthful with 68% of country’s population aged 15 to 35. This age range indicate that majority of Tanzanians have the right age to be engaged in productive economic activities, however, this age category is marred with unemployment challenges. Furthermore, unemployment concerns also affect women who various studies have shown that men have more chances of employment and also are paid higher than women. Therefore, Tanzania is tasked with creating employment opportunities for the youth and women population. Towards achieving decent work and economic growth, the key requirement is full and productive employment and decent work to all men and women. Further, for countries to achieve the goal of decent work and economic growth they have to encourage entrepreneurship and job creation opportunities.
Towards encouraging entrepreneurship and job creation in order to fight against poverty, the government decided to exploit its financial muscle and purchasing power to empower special groups (youth, women, elderly and people with disabilities). On one hand, the government decided to use its financial muscle by obliging all councils (city, municipals, towns and district) to set aside 10% of the domestic revenue collections as affordable loans to be disbursed to special groups to support various entrepreneurial motives and business development. This financial arrangement has proved futile due to several challenges. The notable challenge being the non-repayment of disbursed loans that led to suspension of issuance of loans until a new arrangement is conceived. On the other hand, the government used its purchasing power through public procurement by introducing a special group procurement preference scheme (SGPPS). Through SGPPS, the government imposed an obligation that public entities set aside 30% of their annual procurement volume dedicated to purchasing from special groups.
Deriving from the understanding that government institutions are big consumers, it is expected that special groups will have markets readily available for their commodities. While it is a decent decision by the government to create market opportunities for special groups, inadequate access to capital renders the special groups financially incapable to exploit market/economic opportunities. Limited access to capital by special groups affects their ability to win government awarded procurement contracts and subsequently effectively execute awarded contracts. Thus, to improve special groups chances of winning and effectively execute procurement contracts it is important to link the government’s financial arrangement and procurement preferential scheme for special groups.
LINKING 10% COUNCIL’S LOANS AND 30% PROCUREMENT VOLUME
To ensure that special groups are awarded and successfully execute government procurement contracts, it is imperative that special groups are financially capacitated. Herein, a mechanism is proposed to financially capacitate the special groups through using the 10% loans administered by the local governments. When special groups are financially capacitated using the 10% government loans and use it to execute government awarded procurement contracts, the principal benefits are two-fold. First, the loans disbursed contribute to the financing required by special groups to acquire equipments and materials needed to discharge government procurement contracts. Secondly, the government will have an assurance that the loans disbursed were used for productive economic activities from which the loan repayment will be made/deducted from.
The linkage of 10% loans and special group procurement scheme shall be through contract financing. When a government organization advertise procurement opportunity for special groups, the special groups willing to participate in the tendering process will have to provide evidence of financial capability to discharge the contract among other things. To illustrate financial capability (amidst financial incapability) to discharge the contract, special groups will have to secure a letter of intent to fund from a bank tasked with issuing the 10% loans to special groups. Thus, the government has to relinquish the loan disbursement responsibility to a bank or banks. The letter of intent will act as evidence of financial ability to discharge procurement contracts. Henceforth, special groups shall be awarded procurement contracts based on technical qualification and lowest evaluated tender. Upon winning the procurement contract, the special group will formally secure loan up to 75% of the contract sum to enable effective discharge of contract. Once the contract has been successfully completed, the government organization shall pay the special group the contract sum from which the bank will deduct the principal plus interest of the prior disbursed loan and any surplus shall be retained by special group as profit. The purchasing organization shall act as a facilitator for loan repayment by taking into account the deductions submitted by the bank when paying the special group. The deduction shall not be monthly but rather based on one-time deduction from contract sum paid. This means loan interest shall be computed for the duration of the contract.
This arrangement ensures that special groups aren’t disqualified from participating and eventually awarded procurement contracts on the premise of financial incapability. Moreover, the surplus after being paid the contract sum contributes to capital accumulation that will enable special group to expand operations over the next few years with the right financial cunning. Expansion of operations will lead to creation of employment opportunities and streamline poverty alleviation efforts. On the other hand, the government will achieve the objective of empowering special groups while also recovering the loans disbursed.
Lately, various reports have indicated that Tanzania’s population is very youthful with 68% of country’s population aged 15 to 35. This age range indicate that majority of Tanzanians have the right age to be engaged in productive economic activities, however, this age category is marred with unemployment challenges. Furthermore, unemployment concerns also affect women who various studies have shown that men have more chances of employment and also are paid higher than women. Therefore, Tanzania is tasked with creating employment opportunities for the youth and women population. Towards achieving decent work and economic growth, the key requirement is full and productive employment and decent work to all men and women. Further, for countries to achieve the goal of decent work and economic growth they have to encourage entrepreneurship and job creation opportunities.
Towards encouraging entrepreneurship and job creation in order to fight against poverty, the government decided to exploit its financial muscle and purchasing power to empower special groups (youth, women, elderly and people with disabilities). On one hand, the government decided to use its financial muscle by obliging all councils (city, municipals, towns and district) to set aside 10% of the domestic revenue collections as affordable loans to be disbursed to special groups to support various entrepreneurial motives and business development. This financial arrangement has proved futile due to several challenges. The notable challenge being the non-repayment of disbursed loans that led to suspension of issuance of loans until a new arrangement is conceived. On the other hand, the government used its purchasing power through public procurement by introducing a special group procurement preference scheme (SGPPS). Through SGPPS, the government imposed an obligation that public entities set aside 30% of their annual procurement volume dedicated to purchasing from special groups.
Deriving from the understanding that government institutions are big consumers, it is expected that special groups will have markets readily available for their commodities. While it is a decent decision by the government to create market opportunities for special groups, inadequate access to capital renders the special groups financially incapable to exploit market/economic opportunities. Limited access to capital by special groups affects their ability to win government awarded procurement contracts and subsequently effectively execute awarded contracts. Thus, to improve special groups chances of winning and effectively execute procurement contracts it is important to link the government’s financial arrangement and procurement preferential scheme for special groups.
LINKING 10% COUNCIL’S LOANS AND 30% PROCUREMENT VOLUME
To ensure that special groups are awarded and successfully execute government procurement contracts, it is imperative that special groups are financially capacitated. Herein, a mechanism is proposed to financially capacitate the special groups through using the 10% loans administered by the local governments. When special groups are financially capacitated using the 10% government loans and use it to execute government awarded procurement contracts, the principal benefits are two-fold. First, the loans disbursed contribute to the financing required by special groups to acquire equipments and materials needed to discharge government procurement contracts. Secondly, the government will have an assurance that the loans disbursed were used for productive economic activities from which the loan repayment will be made/deducted from.
The linkage of 10% loans and special group procurement scheme shall be through contract financing. When a government organization advertise procurement opportunity for special groups, the special groups willing to participate in the tendering process will have to provide evidence of financial capability to discharge the contract among other things. To illustrate financial capability (amidst financial incapability) to discharge the contract, special groups will have to secure a letter of intent to fund from a bank tasked with issuing the 10% loans to special groups. Thus, the government has to relinquish the loan disbursement responsibility to a bank or banks. The letter of intent will act as evidence of financial ability to discharge procurement contracts. Henceforth, special groups shall be awarded procurement contracts based on technical qualification and lowest evaluated tender. Upon winning the procurement contract, the special group will formally secure loan up to 75% of the contract sum to enable effective discharge of contract. Once the contract has been successfully completed, the government organization shall pay the special group the contract sum from which the bank will deduct the principal plus interest of the prior disbursed loan and any surplus shall be retained by special group as profit. The purchasing organization shall act as a facilitator for loan repayment by taking into account the deductions submitted by the bank when paying the special group. The deduction shall not be monthly but rather based on one-time deduction from contract sum paid. This means loan interest shall be computed for the duration of the contract.
This arrangement ensures that special groups aren’t disqualified from participating and eventually awarded procurement contracts on the premise of financial incapability. Moreover, the surplus after being paid the contract sum contributes to capital accumulation that will enable special group to expand operations over the next few years with the right financial cunning. Expansion of operations will lead to creation of employment opportunities and streamline poverty alleviation efforts. On the other hand, the government will achieve the objective of empowering special groups while also recovering the loans disbursed.
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