Fruit and Vegetable Processing

November 2022

Indicative Return:

10% – 15%

Investment Timeframe

Short Term (0–5 years)

Business Model Description

Provide and operate machinery and technology for the commercial processing of fruits and vegetables, such as mangoes, oranges, pineapples and avocados, into high value added products, such as juices concentrates, organic pulps and purees. Raw material supply comes from smallholder farmers through a contract farming model.

Expected Impact

Improve nutritional levels, provide employment opportunities and enhance industrialisation towards regional trade and integration.

Regions

Northern, Eastern, Southern Highlands, Lake

Sector
Food and Beverage > Food and Agriculture

Direct Impact SDGs:

Indirect Impact SDGs:

Sector
Food and Beverage

Development need: Agriculture is the main stay of the Tanzanian economy, contributing about 24% of GDP. As a key driver for the economy, it can help to achieve major national priorities. Despite the potential, the sector suffers from a number of challenges, including low productivity and limited value addition (1).

Policy priority: The Tanzanian government recognizes agriculture as central to realizing its objectives of socio-economic development. It is committed to promote value addition in agriculture in order to increase the overall sector competitiveness. There is also commitment to use science technology to improve agriculture productivity and quality (3, 4, 5).

Gender inequalities and marginalization issues: Although agriculture employs over 70% of women, they are faced with a myriad of constraints in terms of access to land, credit, extension services and markets. As a result, women end up engaging in inferior, low quality jobs and earn far less compared to men (11).

Investment opportunities introduction: Tanzania has a significant supply gap for edible oil for domestic consumption. This presents an opportunity for investment in local processing for edible oil. The current production capacity is only 36% of total edible oil demand (6, 7).

Key bottlenecks introduction: The most common weakness for the majority of agriculture commodities in Tanzania is the slow pace of productivity increase. This is caused by multiple factors, including seeds, inputs like fertilizer and pesticide, watering, harvesting, drying and processing (4).

Subsector
Food and Agriculture

Development need: The food industry faces several challenges including: lack of sufficient medium and large-scale processing activities; inadequate market development and weak industry linkages. Local markets are ill-structured, have unclear models/systems with inadequate information and very long chains which inhibits profitable businesses (2).

Policy priority: The government of Tanzania has identified edible oil as a strategic commodity for reducing food imports and promoting domestically produced food commodities. The choice of the product is supported by the fact that Tanzania’s large national demand for edible oil requires imports to meet about 60% of demand (5).

Gender inequalities and marginalization issues: Tanzanian women have limited decision-making power, unfavourable regulations, and biased socio-cultural norms, which reduces their access to finance, land, technical training, labour-saving equipment and other productive resources. As a result, barriers are stifling their potential to be leaders of technological invention, entrepreneurship, and legal and regulatory change throughout the agriculture sector (10).

Investment opportunities introduction: Product segments with potential market opportunities are premium oils sold mainly in urban centres, economy oils for sale across the country, crude oil targeting consumption in crop-growing areas, and refined palm that can be sold nationwide (9).

Key bottlenecks introduction: Although edible oil shows promise both in terms of seed production and processing, it still faces challenges in realizing its full potential. The major challenges include the availability of improved seeds, limited financial support, and stiff competition for the domestically produced edible oils from imports (8).

Market Size and Environment
Critical IOA Unit

Tanzania’s aggregate production of vegetables and fruits has grown at CAGR 7% and 4%, respectively, in recent years. This creates a reliable raw material base for large-scale processing (17). The market is projected to register a CAGR of 6.7% during the forecast period of 2021-2026. The growing demand for derived products and an increase in consumer awareness of healthier alternatives are among the factors driving the market growth (13).

Tanzania exports an average of 10% of total fruits and vegetables produced. This corresponds to a value of USD 779 million per year. A calculation of the corresponding value of local consumption provides a domestic market size of USD 3.5 billion after adjusting for post-harvest losses, which are estimated at 50% (8). A significant part of this can be attributed to fruit and vegetable processing.

Tanzania has started exporting processed products to neighbouring countries, including fruit juices to DR Congo and Comoros averaging USD 14, 171,000 between 2014 and 2018 (12). This equates to a CAGR of 8% (1,35)

Indicative Return

10% – 15%

A feasibility study conducted by World Agroforestry Centre and Wild Research Alliance on production of indigenous fruit juice concentrate at Tabora, Tanzania indicates a Gross Profit Margin of 13.8% of gross value of production (15).

A feasibility study for the establishment of a facility for processing canned green beans at Tengeru, Arusha indicates a net profit margin of 18.3% (19).

Investment Timeframe

Short Term (0–5 years)

A feasibility study for the establishment of a facility for processing canned green beans at Tengeru, Arusha shows that the operations will be profitable from year 1 onwards (19).

Ticket Size

USD 500,000 - USD 1 million

Market Risks & Scale Obstacles

Fruit and vegetable processing may be constrained by an inability to guarantee a consistent domestic supply of raw material due to poor quality infrastructure, such as cold chain facilities, and resultant high post-harvest losses, which may need targeted interventions (1).

Sustainable Development Need

Tanzania’s agricultural sector is characterized by limited value addition. The share of fruits and vegetables in manufacturing is very small at on 4-12% (1, 10).

Malnutrition remains high in Tanzania despite the steady economic growth over the past decade. 16.8 million Tanzanians are chronically undernourished. Over 34% of children under the age of five are stunted and nearly 45% of women of reproductive age are anaemic (1, 30).

Expected Development Outcome

Fruit and vegetable processing improves the food security and nutrition situation among the Tanzanian population (1).

Horticulture can provide jobs for some of the 800,000 youth that enter Tanzania’s workforce each year. The industry employs about 4 million people, which makes it a major employer within the agriculture sector (1, 10, 31).

Fruit and vegetable processing contributes to Tanzania’s aspiration of becoming a semi-industrialized country by 2025 though the enhanced manufacturing activities (16).

Primary SDGs addressed

Secondary SDGs addressed

Directly impacted stakeholders

People: The general population and low-income groups get increased access to affordable and nutritious food products, enhancing their food security levels.

Gender inequality and/or marginalization: Women and youth obtain income generation opportunities with growth potential.

Indirectly impacted stakeholders

Planet: Sustainable processing methods reduce the negative impact of the food industry on the environment, and lower post-harvest losses contribute to greater resource efficiencies.

Corporates: Other actors in the agricultural value chain benefit from demand for their services, such as transporters, packaging companies and certifiers.

Outcome Risks

External factors, such as solid waste build-up in processing sites due to operational failure, for example due to frequent power outages, may result in environmental hazards and health danger to people.

Increased industrial activity through fruit and vegetable processing may exacerbate pollution levels with negative health and biodiversity consequences for people and planet.

If the contract farming model is set up in a way that challenges small-scale farmers to participate and honour obligations, it may skew opportunities towards large-scale farmers and exclude those most in need.

Impact Risks

High levels of post-harvest losses may limit the availability of sufficient raw materials as inputs for processing and hence reduce the expected impact.

If no deliberate efforts are in place to enhance the skill base of women and youth, the processing activities may provide opportunities to those already served and hence limit the expected impact.

Impact Classification

B—Benefit Stakeholders

What

Fruit and vegetable processing improves nutritional levels, provides employment opportunities and enhances industrialisation towards regional trade and integration.

Who

Farmers, especially small farm owners and farm households, benefit from new opportunities to supply raw material, and especially the rural population obtains enhanced skills in agro-processing and additional job opportunities through fruit and vegetable processing.

Risk

While the fruit and vegetable processing model is proven, input availability and the target focus on women and youth requires consideration.

Impact Thesis

Improve nutritional levels, provide employment opportunities and enhance industrialisation towards regional trade and integration.

Policy Environment

Third National Five-Year Plan (FYDP 3): Aims to address the challenges of horticulture by investing as well as creating an enabling environment for the private sector to invest in storage, transport and logistics, accreditation laboratories and building capacity to the existing professionals (3).

Agriculture Sector Development Program Phase 2: Provides a strategic policy framework for promoting agriculture commercialization and value addition as well as developing market access for all priority commodities (4).

Tanzania Horticultural Development Strategy 2012- 2021: Envisages facilitating the development of the horticultural industry so as to improve nutritional status, increase incomes and reduce poverty while increasing productivity and quality of the produce (21).

National Agricultural Policy of 2013: In recognition of the role of gender in agriculture, it emphasizes the need to promote technologies which reduce farm drudgery given that women are involved in most activities that are strenuous, manual and highly time consuming (22).

Tanzania Agriculture and Food Security Investment Plan (TAFSIP), 2011‐12 to 2020‐21: Outlines government measures in the agricultural sector to contribute to the national economic growth, household income and food security (28).

Financial Environment

Financial incentives: In 2021, the European Union (EU) and the Government of Tanzania launched AGRI-CONNECT, a flagship programme to support sustainable agriculture for a total of EUR 100 million. AGRI-CONNECT focuses on the development of horticulture, coffee and tea value chains, including processing activities (26).

Fiscal incentives: Tanzania offers 0% import duty on project capital goods, raw materials and replacement parts for agriculture, animal husbandry and fishing, including for fruit and vegetable processing. It also offers 100% capital expenditure in the agricultural sector (27).

Regulatory Environment

Crops Laws (Miscellaneous Amendments) Act, 2009: Amends various crops laws with a view to rationalizing roles and functions of Crop Boards, their financing and to provide for other related matters (25).

Food Control Act, Chapter 344: Outlines regulations for importing food into Tanzania, including the necessary permits the importer has to comply with (29).

Plant Health Act, 2020: Has come into play following the dramatic spread of transboundary plant pests and after diseases have increased dramatically in recent years (23).

Plant Protection Act, 1997 and Plant Protection Regulations, 1999: List the pesticides registered in Tanzania (24).

Darsh Industries Ltd. (DIL) is the biggest tomato processor in Tanzania, with a 60% share of the market for purchased tomatoes in the Iringa area. In 2014, DIL began the implementation of a USD 5.1 million project to increase their tomato processing capacity with tomato paste concentrate and ketchup being the primary products (12).

Private sector

TAHA Fresh, Wade Rain Irrigation systems; Balton Tanzania Ltd; TriaChem (T) Ltd, Syngenta TZ. Ltd, Bayer East Africa Ltd, BASF Tanzania Limited, Arysta Life Sciences Tanzania Ltd, Yara International and Suba-Agro Trading & Engineering Co. Ltd (SATEC).

Government

Ministry of Agriculture, Ministry of Industry and Trade, Tanzania Trade Development Authority (TanTrade), Tanzania Export Processing Zones Authority (TEPZA), Tanzania Investment Centre (TIC).

Multilaterals

African Development Bank (AfDB), European Union (EU), World Bank (WB).

Non-Profit

United States Agency for International Development (USAID), Tanzania Horticulture Association (TAHA), Tanzania-Non State Actors (TNSA), Agriculture Council of Tanzania (ACT).

Public-Private Partnership

Southern Tanzania Agriculture Growth Corridor (SAGCOT): Agribusiness companies, farmer organizations, CSOs, and government agencies work together to boost agricultural productivity, through the commercialization of smallholder agriculture. (37).

Sector & Subsector Sources

1) East African Community (EAC) Secretariat, Fruits and Vegetable Strategy and Action Plan, 2021-2031.
2) World Bank Group, Transforming Agriculture, Realizing the Potential of Agriculture for Inclusive Growth and Poverty Reduction, 2019
3) United Republic of Tanzania, Third National Five-Year Plan (FYDP 3), 2021
4) United Republic of Tanzania, Third National Five-Year Plan (FYDP 3), 2021 )
5) Research on Poverty Alleviation (REPOA), Enhancing Competitiveness of Horticultural Industry in Tanzania, Policy Brief, May 2021
6) UNDP, Mainstreaming, Acceleration and Policy Support (MAPS)
7) Women’s Economic Leadership in Agriculture Markets, 2013.
8) Tanzania Horticulture Association, Horticulture Industry Markets Access Strategy (HIMAS), 2021
9) EAC Secretariat, AfriTrade and Enterprise Advisory Services, A Sector Guide for Processed Fruit Juice in the East African Community, 2019.
10) Tanzania Horticulture Association, Horticulture Industry Markets Access Strategy (HIMAS), 2021.
11) United Republic of Tanzania, Agricultural Sector Development Plan 2 (ASDP-2)

IOA Sources

12) World Agroforestry Centre and Wild Research Alliance, A Feasibility Study on Production of Indigenous Fruit Juice Concentrate at Tabora, Tanzania, 2008.
13) World Bank Group, Horticulture Mapping Study – Tanzania, 2018
14) Mordor Intelligence, Tanzania Fruits and Vegetables Market – Growth, Trends, Covid-19 Impact, and Forecasts (2022 – 2027)
15)TnzaniaInvest.com/industrialisation
16) ATEAS, Sector Guide for Processed Fruit Juice in The East African Community, 2019
17) ITC, Value Chain Analysis for Processed Avocado in Tanzania, 2019)
18) Mordor Intelligency, Tanzania Fruits and Vegetables Market – Growth, Trends, Covid-19 Impact, and Forecasts (2022 – 2027
19) UNDP/AGRILEAD Ltd, Feasibility Study for Establishment of a Facility for Processing Canned Green Beans at Tengeru Area in Arusha City, 2022
20) United Republic of Tanzania, Vision 2025
21) Tanzania Horticultural Development Strategy 2012- 2021
22) United Republic of Tanzania, National Agricultural Policy of 2013
“23) National Parliament of Tanzania, May 22 2020

24) GoT, Plant Protection Act, 1999
“25) GoT, Crops Laws (Miscellaneous Amendments) Act, 2009

26)EU/GoT: Joint Press Release, 2021, https://eeas.europa.eu/delegations
27) EAC Investment Guide, United Republic of Tanzania Standard Incentives for Investors
28) Tanzania Agriculture and Food Security Investment Plan (TAFSIP, 2011‐12 to 2020‐21:
29) Food Control Act, Chapter 344
“30) USAID, Agriculture and Food Security program in Tanzania: https://www.usaid.gov/tanzania/agriculture-and-food-security

31) ILO, Joint Programme on Youth Employment, Tanzania: https://www.ilo.org/africa/countries-covered/tanzania
32) Tanzanian Food Security and Health https://www2.shu.ac.uk/PDAN/tanzanian_food_security_and_health.html
33) Tanzania Horticulture Association, Industry Position Paper, 2020
34) USAID/TAHA, Potential areas to invest in Horticulture in Tanzania
35) ITC Trademap (2018), https://www.trademap.org/Index.aspx
36)https://country-profiles.unstatshub.org/tza#goal-8
37) https://country-profiles.unstatshub.org/tza#goal-8