TABLE OF CONTENTS

CHAPTER ONE..........................................................................................................................................3
1.0 Introduction.....................................................................................................................................3
1.1 Background of the study....................................................................Error! Bookmark not defined.
1.2 Statement of the Problem..............................................................................................................12
1.3 Objectives of the Study..................................................................................................................13
1.3.1. General objectives of the Study.................................................................................................13
1.3.2. Specific objectives of the study.................................................................................................13
1.4 Research questions........................................................................................................................13
1.5 Significance of the Study................................................................................................................14
1.6 Scope of The Study.........................................................................................................................14
1.7 Organization of the Report................................................................Error! Bookmark not defined.
CHAPTER TWO.......................................................................................................................................16
LITERATURE REVIEW.........................................................................................................................16
2.0 Introduction...................................................................................................................................16
2.1 Definition of key terms and concepts...........................................................................................16
2.1.1 Un employment...........................................................................................................................16
2.1.2 Competition.....................................................................................Error! Bookmark not defined.
2.2 Theories and Conceptual Framework..........................................................................................17
2.2.3 Categories of Competition..............................................................Error! Bookmark not defined.
2.2.4 Industry Concept of Competition......................................................Error! Bookmark not defined.
2.2.5 Classes of Competition.....................................................................Error! Bookmark not defined.
2.2.5.1 Perfect Competition.......................................................................Error! Bookmark not defined.
2.2.5.2 Monopolistic Competition.............................................................Error! Bookmark not defined.
2.2.5.3 Oligopoly.......................................................................................Error! Bookmark not defined.
2.2.5.4 Duopoly.........................................................................................Error! Bookmark not defined.
2.2.5.5 Monopoly......................................................................................Error! Bookmark not defined.
2.3 Empirical Literature Review.........................................................................................................18
2.4 Gaps and Missing Links.................................................................................................................20
CHAPTER THREE....................................................................................................................................21
RESEARCH METHODOLOGY...............................................................................................................21
3.0 Introduction...................................................................................................................................21
3.1 Research design.............................................................................................................................21
3.2 Description of Study Area..............................................................................................................22
3.3 Statement of the Hypothesis.........................................................................................................22
The model of this study:............................................................................Error! Bookmark not defined.
3.4 Study Population.............................................................................................................................23
3.5 Sample size and sampling technique............................................................................................24
3.5.1 Sample size..................................................................................................................................24
3.5.2 Sampling Technique...................................................................................................................25
3.6 Data Collection Methods................................................................................................................26
3.7 Data Collection Instruments..............................................................Error! Bookmark not defined.
3.8 Estimation Technique........................................................................Error! Bookmark not defined.
References.............................................................................................................................................29
Appendix 1 Questionnaire...................................................................................................................31
INTERVIEW QUESTIONNAIRE.....................................................................................................31
CHAPTER ONE
INTRODUCTION

1.0 Background of the study

One among the challenges facing the Developing country is slow economic growth as well as the

burden of unemployment especially in rural areas. This study is mainly focus on analyzing the

contribution of Small-Scale businesses Enterprises towards unemployment reduction in Paje

Village South District of Unguja Zanzibar.

Zanzibar, which is a part of the United Republic of Tanzania, consists of two main islands

namely Unguja and Pemba and about 50 other small islands. The islands are located 40km off

the mainland coast of East Africa in the Indian Ocean between latitude 5 and 6 degrees South

and longitudes 39.5 and 40 degrees East. The two main islands are 50km apart separated by the

700-meter-deep Pemba channel. The total surface area of the islands of Zanzibar is 2,654 square

kilometers; Unguja is the larger of the two main islands has an area of 1,666 square kilometers,

while Pemba has an area of 988 square kilometers. The 1988 census indicated that the total

population of Zanzibar was 640,685. The population has risen to 984,531 in year 2002. The

population growth rate between 1988 and 2002 is 3.1 percent. It assumed population of Zanzibar

reached 1.57 million in the year 2011with a population growth rate of 3.1 percent per annum

(ZTA 2011). according to recent census conducted in 2022 Zanzibar population has grown up to

1,889,773 and the growth rate between 2002 and 2022 is 3.7 percent.

Socio-cultural formation in Zanzibar is a reflection of its contacts with foreign nationalities.

Through trade relations Zanzibar has integrated African Culture with those of Asia and Europe.

The socio cultural mix is reflected in the islands architecture, way of life, language and the racial

mix of its people. Kiswahili is a lingua franca for the country, however other languages like

English, Arabic, Italian and French are also in use.

Figure 1: Zanzibar Population by Region2022

Number of people

893,169

272,091 271,350 257,290

195,873

Urban west North Pemba South Pemba North Unguja South Unguja

Source: Zanzibar Population Census 2022

While the importance of the Small-Scale businesses Enterprises /SME sector and the informal

sector is acknowledged internationally, outlining what exactly shapes the SMEs has proven to be

a challenging task (Desouza and Awazu,2006). The official definitions of SMEs differ from

nation to county, have quite a wide spectrum, tend to differ significantly, and are often being

amended.

there is no single, uniformly accepted definition of a small firm (Storey, 1994). Firms differ in

their levels of capitalization, sales and employment. Hence, definitions which employ measures

of size (e.g., number of employees, turnover, profitability and net worth) when applied to one

sector might lead to all firms being classified as small, while the same size definition when

applied to a different sector might lead to a different result.

Small Scale businesses Enterprises definitions can be broadly categorised into two, “economic”

and “statistical” definitions. Under the economic definition, a firm is regarded as small if it meets
the following three criteria: (1) it has a relatively small share of their market place; (2) it is

managed by owners, or part owners, in a personalised way and not through the medium of a

formalised management structure; and (3) it is independent in that it is not part of a larger

enterprise.

The “statistical” definition, on the other hand, is used in three main areas: (1) quantifying the size

of the small firm sector and its contribution to GDP, employment and exports; (2) comparing the

extent to which the small firm sector’s economic contribution has changed over time; and (3) in a

cross-country comparison of the small firms’ economic contribution.

A ‘Small Scale business’ is official defined as amended by the National Small Business

Amendment Acts of 2003 and 2004 (NSB Act) as: “… a separate and distinct business entity,

including co-operative enterprises and non-governmental organizations, managed by one owner

or more which, including its branches or subsidiaries, if any, is predominantly carried on in any

sector or sub sector of the economy ...”.

This study adopts the definition that Small Scale businesses Enterprises are those with total

asset base (excluding real estate) of range between 1 million Tsh to 50 million Tsh capital and

employing less than 50 people full time workers.

Kadiri (2012) suggested that in the business world small and medium enterprises development

has continued to be a well-accepted phrase because this sector acts as a mechanism for the

generation of employment, countrywide development, and poverty decline and economic

development. The SMEs have more employment opportunities as compared to a major firm as

well as multinationals firms, (Lussier & Pfeifer 2001) viewed that in the open economy the

significance of small enterprises as the main job provider, innovator, and foundation of growth is
broadly known. Organization for Economic Cooperation and Development (1999) observed that

general environment for private enterprises in developing countries is formed by a huge figure of

actors and institutions such as central government ministries, local administrations as well as

economic institutions. Informal sector and Small and Medium Enterprises (SMEs) contribution

to employment generation and improved livelihood of families has drawn a significant attention

of both researchers and policy makers in most of the developing countries including Zanzibar

(National Baseline Survey Report 2012).

Kadiri (2012) suggested that in the business world small and medium enterprises development

has continued to be a well-accepted phrase because this sector acts as a mechanism for the

generation of employment, countrywide development, and poverty decline and economic

development. The SMEs have more employment opportunities as compared to a major firm as

well as multinationals firms.

It is widely accepted that the micro, small and medium size enterprises (MSME) sector has the

potential role to provide livelihood for a considerably large number of people in least developing

countries like Zanzibar and others in the region. In Zanzibar, micro enterprises are considered the

sanctuary and sphere of the many poor in both rural and urban area for their livelihood (Zanzibar

household survey Studies confirm that a larger proportion of the Zanzibar population engage in a

wide variety of economic activities and depends on SMEs as a source of income for their

survival. However, operations of SMEs are constrained by the taxation system, power supply,

skills, regulations and corruption. These are critical investment determining factors not only in

Zanzibar, but also in other countries in the region such as Tanzania Mainland, Kenya, and

Uganda.
 The findings show that Urban is home for most enterprises (54.5%) compared to rural (45.4%).

There are big variations between regions and between districts in terms of SMEs distribution.

SMEs in Zanzibar are dominated by the micro-enterprises with between 1 and 2 employees (72

percent). However, this study reveals that overtime employment opportunities in terms of the

total number of workers employed by the business firms has tended to increase. Both the

business register and business census indicate that majority of businesses (SMEs) are owned by

families. This is mainly intended to ensure security of assets as well as a means of minimizing

operating costs.

Most areas of Zanzibar have a lot of resources. What is missing is the entrepreneurial drive and

skills to see the opportunities and to have the drive, vision and ability to exploit them profitably.

A great deal of capacity building of rural communities and entrepreneurs is required to stimulate

their drive and imagination and to impart business skills. SMEs in Zanzibar would also require

appropriate financial services and/or credit accessibility, and market accessibility.

Table 1: Distribution of Small Businesses by Area

Number of 2014/15 2019/20

Business Rural Urban Total Rural Urban Total

1 72.0 65.7 68.5 73.0 62.1 67.1

2 24.7 29.6 27.4 20.2 29.3 25.2
3 2.5 3.9 3.2 6.0 6.6 6.3
4+ 0.9 0.8 0.9 0.7 2.0 1.4
Total Percent 100 100 100 100 100 100

Total Number 48,338 60,389 108,727 66,580 79,975 146,555

of businesses

Source: Zanzibar Household Budget Survey (2019/2020)

Unemployment has been defined differently by various international agencies. Unemployment is

well defined as the situation of which an individual is staying without having an official job of or

existing without a job or percentage of individuals which are capable to work and keenly looking

for jobs but they are unable to get a job, unemployment reveals the inability of a national

economy to make full utilizations of labor available (World Bank, 2022). Absence of labor force

renovation increases the number of jobless individuals leading to high rate of unemployment. A

high amount of jobless indicates an insufficiency in the labour market, expanding poverty and

low living standard.

According to ILO (2018) unemployment is well-defined as the share of the labor force that is

without work but available for and seeking employment.

According to Chinedu (2017), concluded that more than 90 colleges and universities in every

year produce thousands of graduates still companies mark them as unqualified for the vacancies

available. This results in a frustration that brings social crimes like robbery, drug trafficking,

illegal migrations to developed nations, prostitutions just to ensure better standard of living.

Kemi and Dayo (2018) stated that the problem of unemployment is in various dimensions. There

is a situation of unemployment in which people tend to gain little income that will meet their

basic needs, a situation where people work on the jobs that do not match with their level of

education and experience and a worst scenario whereby people tend to look for jobs but it

difficult to get, others are ready to start up their own small enterprises but hindered by the

existing poor macro-economic situations.

According to Swai (2014) the problem of unemployment in Tanzania and other African nations

have been growing disregarding determinations to train mutually children and adults. In the

current periods there has been raised anxiety above the catastrophic excess of social prospective,

specifically for the young generations, as greatest number of the youth are jobless or
underemployed. It is understood that employment is a significant factor for any persons,

specifically for the young as they are moving in the direction of old age. Relatives and

universities tragedy a vibrant part in assisting adolescences exploration professions that equal

their powers and welfares and in assisting them comprehend the prominence of constructing

elementary labor abilities so they are ready for employment (NCWD, 2012).

Table 2 Unemployment rate (national definition)

Source: (Integrated Labour force Survey 2020/21)

Figure 2: Percentage of Unemployed Persons Aged 15 Years and Above by District,

2019/20 HBS
 30.3

14 15.8

6.2 6.5 7.2 7.3

4.9 3.9
2.4 1.6
A B i i A B e i e i
i i a ti in ji
n i i et en ak an
az
n
az
n K us M ri
b
ri
b W ew ch ko
k k K a a h e M
as as ag
h
ag
h ic ak
K K M h
M M C

Source; Zanzibar Household Budget Survey 2019/20

The distribution of unemployed persons as highlighted in Figure 2 above shows that Mjini

district has the highest proportion of unemployed persons (30.3 percent) while Kusini has the

lowest proportion (1.6 percent).

Performance of the private sector is closely tied to how well a country promotes the development

of new business, how much and how fast existing business are able to grow and become more

efficient, and how well enterprises that sell in international markets compete. Small Scale

businesses play crucial roles on income generations that may contribute to the un employment

reduction especial in rural areas.

Related to this, the Zanzibar small and medium enterprises (SMES) development policy places a

strong emphasis on strengthening the development of entrepreneurial institution and number of

governments polices give priority to the development of micro, small and medium enterprises,

these include an act to establish Zanzibar Micro, Small and Medium Industrial Development

Agency, the firm was established for the purpose of facilitate, promote the development of

micro, small and medium enterprises in Zanzibar .The absence of appropriate measure to ensure
the extent in which the Small Scale businesses perform the duty to combat the social and

economic problem such as un employment especially in the rural areas, the policy will not attain

the goal of promote the Small Scale businesses Enterprises as well as to solve country problem

such as un employment.

Hence this study is very important for measure the extent in which the Small Scale businesses

operated at different rural areas of Zanzibar, contribute in un employment reduction at these

areas as well as to the whole country.

1.2 Statement of the Problem

It is estimated that about a third of the GDP originates from the SME sector(Informal Sector

Survey 1991), micro enterprises operating in the informal sector alone consisted of more than 1.7

million businesses engaging about 3 million persons, that was, about 20% of the Tanzanian

abour force. Though data on the SME sector are rather sketchy and unreliable, it is reflected

already in the above data that SME sector plays a crucial role in the economy. Since SMEs tend

to be labour-intensive, they create employment at relatively low levels of investment per job

created. At present, unemployment is a significant problem that Tanzania has to deal with.

Estimates show that there are about 700,000 new entrants into the labour force every year. About

500,000 of these are school leavers with few marketable skills. The public sector employs only

about 40,000 of the new entrants into the labour market, leaving about 660,000 to join the

unemployed or the underemployed reserve. most of these persons end up in the SME sector, and

especially in the informal sector.

Due to decline of employment opportunities in the rural areas such as Paje Village in Zanzibar

at the formal sectors a lot of people tend to engage in Small Scale Business activities day to day
in order to overcome the unemployment problem. However, it remains unknown the extent to

which these initiative businesses have succeeded in reducing the employment gap and finally to

reduce the poverty of the people. So, there was a need for the Small-Scale Business stakeholder

to be aware in analysing the big contribution of these enterprises to the employment generation

in Paje Village.

1.3 Objectives of the Study

The objective of the study was identified in two categories namely general and specific objective

of study.

1.3.1. General objectives of the Study

Generally the study aims at analyzing the contribution of Small Scale businesses Enterprises

towards un employment reduction in Paje..

1.3.2. Specific objectives of the study

The study specifically intended to achieve the following objectives.

i. To investigate the extent in which the number of SSBE increasing in Paje Village.

ii. To evaluate the personal income earning of the owners generated by SSBE.

iii. To investigate the extent to which SSBE in Paje Village promote local resource

utilization.

iv. To investigate the employment generation capacities of SSBE in Paje Village.

1.4 Research questions

i. What is average monthly profit (net capital income) of the owner of the businesses in

this business?

ii. How many numbers of employees that employed in this business?

 iii. What is the extent in which business activities intend to promote local resource

utilization?

iv. What is the extent in which the number of small scale businesses enterprises

increasing in Paje Village?

1.5 Scope of The Study

This study will be conducted in the Paje village which is located at the South East Cost in the

South District of Unguja Island in Zanzibar. It will be focus on the Small-Scale businesses

owner’s and people who are employed in this sector.

This study will cover the analyzation of small-scale business on that village at the year of 2022.

1.6Significance of the Study

i. The study may assist the academics to fill the literature gap in relating to small scale

business enterprises to labor market.

ii. The thesis may help those researchers to assess the type and form of business that

generate the desired profit to the rural people of Zanzibar

iii. It is also significant to those academicians to overcome the problems of increasing

unemployment in Zanzibar.

iv. The study will aid Ministries and NGO’S who are in an implementation on Policy and

Strategies of economic growth and un employment reduction at Zanzibar.

CHAPTER TWO

LITERATURE REVIEW

2.0 Introduction
This chapter presents what other scholars have written about the small-scale businesses and

employment concept. Conceptual concepts provide the definition of the key terms used in the

study, theoretical review discusses the concept of SMEs and employment in general, empirical

review presents the views of researchers on the variables of the study as guided by the purpose of

the study accordingly, Also, this chapter will look onto the conceptual framework which guides

this study and lastly presents the research gap.

2.1 Operational Definitions

2.1.1 Micro, Small and Medium Enterprises.

A small-scale enterprise, also called mom and pop store by some in the United States, is a

business that is privately owned and operated, with a small number of employees and relatively

low volume of sales (Hashim 2005). Small business SMEs are normally privately owned

corporations, partnerships, or sole proprietorships.

In the United State and Canada SMEs generally include SMEs with less than 500 employees.

The EU define as a medium size enterprise as one with 250 employees and small enterprises are

one with less than 50 employees and micro as one with maximum 10 employees (Ganbold 2008).

In case of Tanzania, micro enterprises are those engaging up to 4 people. In most cases family

members or employing. capital amounting up to Tzs 5.0 million. The majority of micro

enterprises fall under the informal sector. Small enterprises are mostly formalized undertakings

engaging between 5 and 49 employees or with capital investment from Tshs.5 million to

Tshs.200 million. Medium enterprises employ between 50 and 99 people or use capital
investment from Tshs.200 million to Tshs.800 million. (Tanzania Small and Medium Enterprise

Development Policy 2002).

This is illustrated in the table below:

Table 3 Categories of SMEs in Tanzania

Category Capital Employees Investment in Machinery (Tshs.)

Micro enterprise 1–4 Up to 5 mil.

Small enterprise 5 – 49 Above 5 mil. to 200 mil.

Medium enterprise 50 – 99 Above 200mil.to 800 mil.

Large enterprise 100 + Above 800 mil.

Source: Tanzania Small and Medium Enterprises Development Policy 2002.

The SME according to Zanzibar development Policy as shown in the tables

below;

Table 4: SME Size Classified by Employment in Zanzibar

Category Capital Employees % of total establishments

Micro enterprise 1–4 90.0%

Small enterprise 5 – 19 06.5%

Medium enterprise 20 – 99 03,55%

Source: Zanzibar SMEs Development Policy 2006

2.2.2 Un employment

Un employment referred to all persons who during specified reference period (e.g. one week)

were without work i.e. those who are not in paid employment or self-employment and were
currently available for work, un employment rate provide the measure for unused labor force of a

country. (Integrated Labour force Survey 2020/21)

2.3 Empirical Literature Review

This part presents a review of the literature related to the purpose of the study, The review is

commenced in order to remove the repetition of what has been done and provide a clearer

understanding of the existing knowledge base in the problem area. Various studies have

investigated SMEs contributions focusing on employment creation as following:

(International Journal of Financial Research 2019) undertaken a study to find out how SMEs

contribute to the economy in terms of employment generation and its impact on the economic

growth of the country, the study selected 255 randomly from Swat marble industries. A

questionnaire was constructed and distributed to the selected respondents. The responses were

collected and analyzed using the Statistical Package for Social Sciences (SPSS) analytical tool,

the study exposes that SMEs play a vital role in employment generation finally analysis proved

that there is a positive relationship between SMEs and unemployment reduction.

(The International Journal of Development and Economic Sustainability of Jordan 2019)

conducted research which depicted that (SMEs) contribute 98% of Jordanian enterprises and

their Employees represent around 60% of the labor force with a total product count around 50%

of the GDP, the study used different figures and charts which proved that SMEs play an essential

role in the economic development in Jordan. since they provide the majority of new jobs

opportunities and produce much of the creativity that leads economic progress SMEs have been

identified as the prevailing form of enterprise and the most important driver of employment

(OECD, 2017). World Bank report (2020) stated that total labour force of unemployment rate
decline from 4.36% in 2013 to 2.67% in 2019, this occurred also because of various

contributions of SMEs in Oman economy.

ILO (2013) Small and medium-sized enterprises (SMEs) play a key role in job creation,

providing two thirds of all formal jobs in developing countries and up to 80 per cent in low-

income countries mainly in Sub-Saharan Africa. Some of the studies focus SMEs sector’s

contribution to the GDP and employment that it generates in the economy. SME sector has been

playing a very important role in development, employment generation and poverty alleviation in

African economies. About 85% of the manufacturing employment in Ghana is provided by the

SME sector. This sector consists of 92% of business and contributes 70% of the GDP in Ghana.

Where as in South Africa, this sector contributes to 52-57% of the GDP and provides 61% of

employment. SMEs constitute 91% of the formal business in South Africa. The authors also

suggest appropriate strategy for the improvement in Ghana and South Africa, (Abor and Quartey,

2010). the small and medium enterprises have a significant role in the economy of Pakistan and

therefore to develop this sector the government has taken few good decisions to crake the

difficulties of small and medium enterprises. The strength of any economy of the world,

especially of Pakistan needs the birth of small and medium enterprises in large numbers (Qureshi

et al. 2013),

(Philippe Mustar 2002) conducted a study using quantitative analysis of Ministry of Industry

data (databases with information on some 23,000 businesses with over 20 employees) based on

the contribution of high growth SMEs to job creation, the study had two faces one it involves the

analysis of firm-level data, with a view to identifying growing SMEs to determine their growth

trajectories. the study use "Mustar index" to measure the growth of those firms corresponding

with their contribution to job creation, the findings show that small firms exhibit higher net job
creation rates than large firms. At the same time, significant flows of gross job gain co-exist with

large flows of gross job losses, especially among small firms.

2.4 Research Gaps

In spite of the numerous empirical studies on the roles of small scale enterprises in

poverty reduction and employment generation in rural areas, including the ones reviewed

above, no empirical study has examined the important enterprise in the Small Scale

Business Enterprises that could create jobs and reduce poverty in rural areas. This study

is attempt to fill this gap in the literature and provide the foundation for evidence-based

on the contribution of Small Scale Business Enterprises to poverty reduction and provide

the conclusion of which type of the business operated be highly 6solve economic

challenges of unemployment and poverty facing low income people in the rural areas
CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction
This chapter present the methodological framework that will be employed in this study on the

contribution of SMBE on un employment reduction. The chapter has seven sub-sections namely;

research design, study area, study population, sample size and sampling techniques, data

collection methods, data collection instruments data analysis methods,

3.1 Research design

According to Kothari (1993), research design is defined as the conceptual structure within which

the research is conducted. The study adopted Panel Data [Time series and Cross-section Data] so

as to analyse the impact of SME to un employment reduction This method is considered to be

appropriate because it provides …. A design technique used in this study is “Random sampling

technique” The reason for using this research design is that it allows all members of the group or

population to have an equal and independent chance of being selected for the sample. Random

sampling technique will be employed when selecting the employees at operational level. This

will be done to avoid bias.

The quantitative and qualitative approach will be used in the study to analyse the collected data

from the questionnaire. The data will be collected from SMIDA, Zanzibar Chief of Government

Statistician. MKUZA III, and other reliable sources such as internet.

Primary data will be used the most in analyzation of this research; it collected from different

businesses owners and people who are employed in Small Scale businesses at that rural area

(Paje’s village).
3.2 Description of Study Area
The study will be conducted in Paje village. Paje is a village in Zanzibar. It is on the East Coast

of Zanzibar Island (Unguja) between the villages of Bwejuu and Jambiani. The village is

widespread from about 1km South (Bwejuu) on 5km strip to the South (Jambiani). You can drive

here from Stone Town in 34-40 minutes by car or motorbike. The whole village can be reached

by foot, or you can make a visit around by bicycle or by taxi. According to the National Bureau

of Statistics Tanzania in the census of 2012 the total area of Paje is about 34.89 km2 with density

of 93.1 in h/km2. Paje had a population of about 3,245 (2012 population census). Paje village is

an amazing coral beach of white sand that slopes gently down on a aquamarine background. The

simplicity of the inhabitants and their receptions are touching. The larger population of Paje

derives their livelihood from farming, fishing and engaging in hospitality business of tourism. In

recent years, the dominant activity in all the villages in the east coast is the collection of algae.

Due to the higher interaction of the people at Paje from different areas of Zanzibar and the

mainland of Tanzania as well as the better businesses environment, the SMES take a greater

position of economic activities among the citizens. Hence considerate the contribution of these

SMES to un employment reduction in Paje is very crucial aspect.

3.3 Statement of the Hypothesis

This study used linear regression economic model to test the hypothesis of zero impact on

independent variable to dependent variable. It examine whether the independent variables has

the significance impact to dependent variable or not. In this study Profit Margin is used as an

indicator of un eployment reduction and so is a Dependent variable while Small Scale

Businesses Enterprises in term of Investment Capital and Number of employees are

Independent variables.
The model of this study:

PMt = ß0 + ß1ICt + ß2Et + €t

Where as:

PM = Dependent variable (Profit Margin/ Capital income)

ß0 = Constant term that indicates the amount of Profit Margin when there is no any impact of

Independent Variables.

ß1 = Slope coefficient that show the % increase in dependent variable when Investment Capital

increase by 1 unit.

ß2 = Slope coefficient that show the % increase in dependent variable when Number of

employees increase by 1 unit.

IC = Investment Capital of the business

E = Number of Employees in the business.

€t = Stochastic error term.

Table 7: Explanatory Variables used in the Empirical Analyses

Name of Variable Description of Variable Expected Sign

IC Investment Capital of the business +

E Number of Employees in the business +

The tests of this model are:

HO: ß1 = 0 and ß2 = 0
 HA: ß1 ≠ 0 and ß2 ≠ 0

Where as:

HO: ß1 = 0 and ß2 = 0 are our null hypothesis that the coefficient of independent variable has

no significance impact to dependent variable.

HA: ß1 ≠ 0 and ß2 ≠ 0 are our alternative hypothesis that the coefficient of independent

variable has an impact to dependent variable. The impact may be Positive or Negative.

The hypotheses which were tested are as follow:

 HO: Small Scale Businesses Enterprises do not reduce un employment rate in Paje

Village.

 HA: Small Scale Businesses Enterprises reduce un empolyment rate in Paje Village.

3.4 Study Population

The population is defined as the entire group of individuals, events or objects having common

observable characteristics from which the researcher draws respondents. In other words,

population is the aggregate of all who conform to the given specification (Kothari, 2006).the

study population will include the SMEs owners employee from operational level in Small and

Medium Enterprises in Paje village.

3.5 Sample size and sampling technique

3.5.1 Sample size

Sampling is the procedure a researcher use to gather people, places, or things to study. It is a

process of selecting a number of individual or objects from a population such that the selected

group contains element representative of the characteristics found in the entire group (Orodho
 and Kombo, 2002). This study adopts the definition that Small Scale businesses Enterprises are

those with total asset base (excluding real estate) of range between 1 million Tsh to 50 million

Tsh capital and employing less than 50 people full time workers.

The table bellow shows the total Samples which are randomly selected from sampling by

figures in different small scale businesses sectors which are operated at Paje Village.

Table 2: Randomly Samples Selected

Sectors Population Sample size Percentage of

size Sample size

Transport(taxi) 40 5 16.7

Tours (Operator & guide) 5 4 13.3

Bungalows 4 3 10.0

Restaurants & bars 6 4 13.3

Sea foods Suppliers 2 2 6.7

Stationary 2 2 6.7

Mini Markets 2 2 6.7

Shops 19 3 10.0

Video Library 3 2 6.7

Mamalishe/Babalishe 8 3 10.0

TOTAL 89 30 100.0

Source: Field data (2022)

3.5.2 Sampling Technique

The types of sampling technique that will be employed in this research is called "Random

sampling", interviewees. Random sampling is a process of selecting a sample that allows all
members of the group or population to have an equal and independent chance of being selected

for the sample. The researcher will use Random sampling to select 60 respondents among stake

holders of hospitality business of tourism in the Paje village. Random sampling technique will be

employed when selecting the hospitality institutions at operational level. This was done to avoid

bias. Adam and Kamuzora (2008) described the advantage of this technique and said that; it is

less expensive and quick for selecting a sample. Therefore, in this type of sampling items was

selected depending on the suitability in relation to the study.

3.6 Data Collection Methods.

Both primary and secondary methods of data collection will be utilized. Primary method consists

of structured questionnaires and interviews which shall be employed to those who are seen

difficult to use questionnaires.

The secondary method consists of references into previous scholar work on SMEs, textbooks and

journals.

3.6.1 Primary Data

Primary data was collected through questionnaire and interview with “Key informant members”.
Owie (1997: 8).

3.7.1 Questionnaires
This is a written list of questions that was answered by respondents so that information could be
collected from the answers sources- (Hornby 2001). For the purpose of this study, open-ended
and closed-ended questions was used because such questionnaire can be answered in the absence
of the researcher and hence freed respondents to express themselves without any influence from
the researcher. Questionnaire is an important research instrument to use since it gathered data
over a large sample (Kombo and Trompt 2006). Before the questionnaire being administered,
they was tested to the respondents to ensure its clarity, (Adam and Kamuzora 2008).
3.7.2 Interview
According to Kothari (2006) an interview is a set of questions administered through oral or
verbal communication or is a face-to-face conversation between researcher and respondents.
In this particular study the selected respondents was asked questions in order to find out what
they do understand concerning the impacts of SMEs on un employment reduction. This method
provided the possibility to compare the answers that helped to inform the research further. Also,
this tool permits the researcher to ask more complex and follow up questions which will not be
possible in the questionnaires.

3.6.2.1 Secondary Data

3.6.2.1.1 Documentary Review.

Documentary reviews are the source of information which are contained in the published and un
published documents, reports, statistics, manuscript, letters or diaries possessed by individuals,
institutions and organizations. (Kothari 2008) suggests that, this method is used when they were
found reliable, suitable and adequate in the present study. One advantage of using this method is
that it is available more cheaply, quicker and less cost (Kombo and Trompt, 2006).
The researcher will also use internet in order to get more information about the topic in different
parts of the world. The researcher will assess small business documents produced internally and
other instructive documents and manuals received from different authorities. Such documents
include8: Monthly, Quarterly and annual reports, Audit reports, Studies conducted by other
researchers, and Zanzibar economic Bulletin.

3.7 Data Analytical Methods.

The data was presented and analyzed in a manner that will allow for easy analysis and testing,
using the statistical package for Social Scientist (SPSS). The same package has been ever used
by (Mungal, A 2014 and Festus, A 2011) in their studies concerning with cash management.
Once the data has been imported into a SPSS spreadsheet, part of the analysis will base on
descriptive statistics to describe the responses, characteristics of the data and information. The
responses from the interviews were coded, summarized and entered in a computer, whereas data
coded from interview guide was entered into the computer and was analyzed by the Microsoft
Excel software. The factor scores were calculated for each respondent by using the sum of the
relevant questions.
This analysis will help this study to make a prediction about the dependent variable based on its
covariance with all the concerned independent variables (Kothari, 2004). The same models used
by Rwanyaga Godwin (2011). The OLS regression method was applied because the goal of OLS
is to closely fit a function with the data. It does so by minimizing the sum of squared errors from
the data. The OLS regression was used so as to reach the stated specific objectives. Most
descriptive statistical analysis was also used to analyze data.
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Appendix 1 Questionnaire
INTERVIEW QUESTIONNAIRE
Dear respondent, I am a student pursuing a MSc Economics and Finance at Zanzibar University.
Following the requirements for finalizing my study, I am required to conduct this comprehensive
research that deal in analysis the contribution of business competition in the hospitality sector of
the tourism industry towards un employment reduction in Paje Village in Zanzibar, and for its
successful completion, you are requested to complete this questionnaire, all responses will be
held with utmost confidentiality, and you are at liberty to withdraw from the study if you feel
uncomfortable in any way.

1.0 Biographical information based on the respondent:

1.1 Age
18-25 26-39 40+

1.2 Gender

Male Female

1.3 Highest level of education attained

None Primary Secondary Tertiary

1.4 Your position in the business: Owner Manager Director

2.0 Information Based On The Business:

2.1 What is the form of business ownership you use?

Sole proprietorship Partnership

Limited liability Corporations

3.0 How many numbers of employees that are employed in this business?
 …………………………………………………………………………………………..

4.0 How many number of tourist arrival per month to your business?

…………………………………………………………………………………………..

5.0 What is average monthly net profit (net capital income) in this business?

…………………………………………………………………………………………..

6.0 What is the extent of business competition in the hospitality sector of the tourism
industry in Paje Village?

None Low Medium High

Why?

…………………………………………………………………………………………

…………………………………………………………………………………………

…………………………………………………………………………………………

…………………………………………………………………………………………

7.0 What are the types of competition in the hospitality sector of the tourism industry in
this business?

………………………………………………………………………………………………
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8.0 How this type of competition conducted in the hospitality sector of the tourism in this
business?
 ………………………………………………………………………………………………
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9.0 What is the extent in which these types of competition in hospitality sector of the
tourism generate employment opportunity in your business?

None Low Medium High

Why?

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…………………………………………………………………………………………

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Thank you very much for your participation