Small businesses in Tanzania and South Africa ‘miss out on agribusiness’


By The Citizen Reporter

Dar es Salaam. The inclusion of small and medium-sized enterprises (SMEs) in the processing of agricultural products remains marginal in both Tanzania and South Africa, a comparative study showed.

Market concentration is cited as a major obstacle for small players in South Africa, while weak organization, low capitalization and an unstructured market have made Tanzanian SMEs fail.

Research in the two countries with diverse economies looked at the processing of corn, dairy products and citrus fruits. It identifies unfavorable market structures and inadequate policy intervention as other common factors undermining the inclusion of small businesses.

Supported by the UK Economic and Social Research Council (ESRC), the study involved the Economic and Social Research Foundation of Tanzania (ESRF), the Center for African Studies (CAS) at the University of Edinburgh and the Center for Competition, Regulation and Economic Development. at the University of Johannesburg, South Africa.

Small businesses are said to have a significant presence in maize milling and dairy processing in Tanzania and, albeit to a lesser extent, citrus processing in South Africa. SMEs manage around 90 percent of maize milling in Tanzania, but lack of capital limits their ability to purchase adequate quantities of quality maize from farmers, unable to compete with well-funded, networked large-scale processors. In contrast, in South Africa, only 20 large companies accounted for 80 percent of ground maize and dominate the market. The structure of value chains in this country is perceived as unfavorable to small players, despite a radical reconfiguration in favor of SMEs in the 1990s.

There are fears that market concentration could push small businesses into bankruptcy.


There are also more SMEs involved in dairy processing in Tanzania than in South Africa, but Tanzanian small businesses have applied limited added value. Only 14 percent of the 2.5 billion liters of milk produced each year in this country is processed, mostly by around 80 micro-dairy processors processing less than 5,000 liters per day. There are three large companies each with the capacity to process over 50,000 liters per day.

In Tanzania, 90 percent of milk is produced by small-scale cattle herders and sold directly to households through hawkers and vendors; while in South Africa, 80 percent of the milk produced is marketed through formal channels by 130 processors, five of whom control 60 percent of sales.

When it comes to the cultivation and processing of citrus fruits, the comparative study draws two parallels. While the crop is cultivated on a small scale in three regions of Tanzania, with insignificant industrial processing, citrus production and processing in South Africa is a dynamic activity, with the country being the world’s second largest exporter.

The study found that the fruits produced in Tanzania are mixed varieties with low lactose content and unsuitable for processing high-value juices. The situation is attributed to the low contribution of Research and Development on cultivation as well as the extension service to citrus growers.

There is therefore no strong participation of SMEs in the processing of fruits because the product is sold on the farm to intermediaries who bring it to the city to use it as table fruit or to resell it to agents of the processors. Kenyans for export.

On the other hand, processed and fresh citrus fruits from South Africa are marketed locally and exported to the EU and the regional market. As with corn and dairy, the industry is dominated by large corporations, but there is notable participation from smaller players, primarily black farmers, who are also exporters.

Technologically, small businesses engaged in maize milling in Tanzania rely on obsolete hammer mills while some of the medium and all large businesses use roller mills, which are considered modern and more efficient.

The largely unbranded products of SMEs are marketed in medium and small-sized stores and street markets, while the large millers, who produce in bulk and at lower unit cost, dominate the market in the larger towns of Dar es Salaam, Mwanza, Mbeya and Dodoma.

All large-scale millers comply with the micronutrient fortification requirements of their products and are regularly monitored for compliance with health and safety requirements. These measures are less rigorously followed by small- and medium-scale millers. Some of the large-scale millers’ products are exported to neighboring countries.

According to research findings, large players in the South African dairy industry use anti-competitive tactics and abuse of purchasing power, which tend to exclude small processors. Supermarket chains, which handle a large volume of dairy sales, were also found to impose conditions that inhibited small businesses.

The study shows that low milk production compromises the participation of SMEs in dairy processing in Tanzania and recommends the modernization of the national dairy cattle herd, which has only three percent improved breeds, to increase milk production. Formal milk trade channels should be established and business regulatory reforms adopted to better organize the sub-sector.

Tanzania was found to have significant political support for maize production, but paid little or no attention to the role of SMEs in processing. The report calls for a comprehensive approach on the part of Tanzania and South Africa to enable small businesses to modernize technologically and economically. Strong development banks would help capitalization in Tanzania.

However, policy interventions in favor of SMEs in South Africa will inevitably be more complex and costly.

In terms of stakeholder organization, while South African citrus growers have a strong association and use the power of growers to negotiate with stakeholders for better terms of trade, Tanzanian growers have proven to be weakly organized.

The report calls for state intervention to revive citrus production in Tanzania by re-establishing the institutional framework necessary for the organization and development of the sector.

The benchmarking study focused on the factors determining innovation and inclusion in agribusiness, the challenges in promoting the participation of SMEs in the process, and how to use the results to support the development. industrial policies at national and regional levels.

The research results were presented during a webinar at the end of August with speakers from Copenhagen Business School, the London School of Economics and the universities of Oxford, Manchester, Roskilde, Edinburgh and Johannesburg, among others.

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