Return on Investment (ROI) of Micro and Small-Scale Enterprises (MSEs) in Tanzania: The Fruit and Vegetable Processors

Abstract

This paper focuses on the financial performance in terms of returns on investment of Small-Scale enterprises in Tanzania, and fruits and vegetables processing sub-sector in particular. The agriculture sector is multifunctional in nature, and contributes to economic development and food security. However, the smallholder food processing enterprises in Tanzania do not access well the opportunities created by market, thus outstanding returns of their business is less likely. In that regard, this paper presents analyses of Micro and Small scale Enterprises (MSEs) fruit and vegetable processors, specifically on returns from their investments. The sample enterprises were collected during field work carried out in Dar es Salaam, Morogoro, Coast and Tanga regions of Tanzania. The crosssectional and panel data were gathered from 140 MSEs of four respective regions. This study employs Return on Investment (ROI) tool is to assess MSE's investment return levels in each study location. The ROI ratio of enterprise provides picture of its financial performance. The results show a less returns on investment of study enterprises, i.e. on average an investment of TZS 1 yields TZS 0.16 cents as gain and TZS 0.84 cent loss. The main factors associated to MSEs' returns are balance of production of processed products depending on avalilabilityof markert; number of MSEs doing more or less same kind of business 'competition' at speceficic location;; access to basic market information; business improvement services; access to supportive bodies; and manager-owners' general education level and experience in business activities. Further, for study MSEs the forecasted return on investment results promises gain to become four hundred more per TZS 1, on average. That is if their manager-owners invest profits collectively in each study location. Thus, this paper mainly proposes to merge MSEs and form cooperatives. Generally, the paper makes two major contributions. First, it gives empirical evidences regarding return on investment of fruit and vegetables processing MSEs in Tanzania. Second, it constructs a basic step in understanding how smallscale fruit and vegetables processors are organised and can be transformed to bring significant impact on their business, in turn on Tanzanian economy as a whole.