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Challenges Facing Food Processing Mses in Tanzania

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Challenges Facing Food Processing Mses in Tanzania Challenges Facing Food Processing MSEs in Tanzania A Qualitative Case Study of the Sunflower Oil Industry in Babati, Manyara Author: Mikaela Ekblom Supervisor: Vesa-Matti Loiske Södertörn University | School of Science, Technology and Environmental Studies Bachelor's thesis, 15 ECTS Environment and Development | Spring 2016 1 Abstract Food processing micro- and small-scale enterprises (MSEs) play an important role in the national economic development of Tanzania. Though many of them have great growth potential, they face a number of constraints hindering further development, and large amounts of cooking oil are imported each year. The aim of thesis has therefore been to identify and analyse the different factors affecting these MSEs in order to find out which the major growth challenges are. The case study is mainly based on individual semi-structured interviews with sunflower oil processors and farmers in Babati districts, conducted in February and March 2016, and earlier research and studies on the topic of MSE growth make up the theoretical framework used for analysis of the data. The findings show that there are indeed numerous challenges facing these processors, and the major constraint was found to be lack of capital; an issue causing or worsening a majority of the other challenges at hand. Other problems are related to raw material, equipment & electricity for processing, regulations, market accessibility, and competition. These obstacles need to be overcome in order to enable the industry's expansion within and outside of Tanzania, and further research is recommended. Keywords: Agribusiness; Micro and small-scale businesses; Firm growth; Food value chain; Agro-processing Cover photo: Sunflower farm, Babati © Mikaela Ekblom 2016-02-16 Acknowledgements Stockholm, June 2016 Before getting started, I would like to take this opportunity to show my gratitude to everyone who made this thesis possible. First of all, I would like to thank my supervisor Vesa-Matti Loiske for being of great assistance before, during and especially after the weeks of field- work. Thanks also to Mr Ally Msuya for arranging accommodation, field assistance, and trans- portation for us students during our three weeks in Babati. Also, thanks to my field assistant Mwanahamisi Hussein for finding me suitable respondents and translating their answers to English. Thanks to Thobias Ditrick and James Godliving for standing in as extra field assistants, and to Revocatus Rweyemamu for his coordinating efforts. Also, a big thanks to our driver Deogratias Shirima for safely taking us to the places we needed to go, remote or central. I am also very thankful to all informants of this study for taking time from their busy jobs to answer my questions. Furthermore, I would like to thank my family and friends for believing in me and supporting me throughout the process. Your support has been of enormous help! Finally, I would like to thank Södertörn University for the opportunity to do fieldwork in Tanzania. It was a wonderful learning experience I will never forget. Asanteni sana! ________________________ Mikaela Ekblom [email protected] List of abbreviations BERAS Building Ecological Recycling Agriculture and Societies DC-MSE Micro and Small-scale Enterprise based in a Developing Country GDP Gross Domestic Product ISO International Organization for Standardization MBO Membership Based Organization MEDA Mennonite Economic Development Associates MFI Microfinance Institution MSE Micro and Small-scale Enterprise MSME Micro, Small and Medium Enterprise NGO Non-Governmental Organization RLDC Rural Livelihood Development Company SIDA Swedish International Development Cooperation Agency SIDO Small Industries Development Organization SME Small and Medium-sized Enterprise SSA Sub-Saharan Africa TBS Tanzania Bureau of Standards TAFOPA Tanzania Food Processors Association TASISO Tanzania Small Industries Organization TCCIA Tanzania Chamber of Commerce, Industry and Agriculture TFDA Tanzania Food and Drugs Authority UMAMBE Babati Sunflower Millers Association Definitions Agribusiness - “agriculture regarded as a business; more specifically, that part of a modern national economy devoted to the production, processing, and distribution of food and fibre products and by-products” (agribusiness, 2016). Food processing - “any of a variety of operations by which raw foodstuffs are made suitable for consumption, cooking, or storage. […] Food processing generally includes the basic preparation of foods, the alteration of a food product into another form (as in making preserves from fruit), and preservation and packaging techniques” (food processing, 2016). Import substitution - “economic policy adopted in most developing countries from the 1930s to the 1980s to promote industrialization by protecting domestic producers from the competition of imports” (import substitution, 2016). MSEs, SMEs, or MSMEs? - Enterprises are categorized based on the size of the firm, but to date, there is no universally accepted definition (Ngasongwa, 2002). However, when referring to the enterprises targeted in this thesis, the term MSEs will be used in accordance with Tanzania's Small and Medium enterprise development policy (see Table 1). Because their capital investment in machinery is unknown, the categorization will be entirely based on the number of employees. Other authors base their categorization on other definitions1, and whatever definition they have chosen will be used when referring to their respective studies. Table 1: The different sizes of firms in Tanzania (Ngasongwa, 2002, p. 3). 1 For example, the European Commission uses another definition: http://ec.europa.eu/growth/smes/business- friendly-environment/sme-definition/index_en.htm Table of contents 1. INTRODUCTION...................................................................................................................1 1.1 Why study MSEs in a developing country?.....................................................................1 1.2 Why target food processing businesses in Tanzania?.......................................................2 1.3 Why focus on sunflower oil production in Babati?..........................................................2 1.4 Problem statement............................................................................................................3 1.5 Purpose & research questions...........................................................................................4 1.6 Outline..............................................................................................................................4 2. BACKGROUND.....................................................................................................................5 2.1 Study area.........................................................................................................................5 2.2 The industry sector in Tanzania........................................................................................7 2.2.1 Development vision and policies..............................................................................7 2.2.2 Assistance to the sector.............................................................................................8 2.3 The food processing sub-sector........................................................................................8 2.3.1 Regulations governing the food-processing sector...................................................9 2.4 Processing techniques.....................................................................................................10 3. THEORETICAL FRAMEWORK.........................................................................................11 3.1 Financial resources.........................................................................................................11 3.2 Raw material...................................................................................................................12 3.3 Equipment & electricity for processing..........................................................................13 3.4 Regulations.....................................................................................................................14 3.5 Market accessibility........................................................................................................15 3.6 Competition & demand..................................................................................................15 3.7 A summary of the identified factors...............................................................................16 4. METHOD..............................................................................................................................18 4.1 Data collection................................................................................................................18 4.1.1 The case study approach.........................................................................................18 4.1.2 Selection of respondents and key informants.........................................................18 4.1.3 Semi-structured interviews.....................................................................................19 4.1.4 Collection of secondary data..................................................................................20 4.2 Critical reflections..........................................................................................................21 4.2.1 Challenges during the fieldwork.............................................................................21
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