Economic analysis of medium scale agricultural enterprises in a predominantly smallholder agriculture sector
Philip, Damas / 2001

Sub Saharan African countries are faced with lagging food production and pervasive poverty. Most of these countries, including Tanzania, depend heavily on agriculture for their economic development and meet their food requirements from domestic production, imports and food aid. Increasing agriculture production is thus a high-priority topic in Sub Saharan Africa, including Tanzania. This study is motivated by the failure of the efforts, by the Tanzanian government and international and non-governmental organizations, to support smallholder farmers to achieve the expected targets and hence the need to seek for a more responsive alternative target for support that will lead to the achievement of the desired improved production in the Tanzanian agriculture sector. The study tests the hypothesis that there is an unexploited potential for modernizing the Tanzanian agriculture sector through promotion of medium scale farming. To test this hypothesis the study investigates the profitability of medium scale agricultural enterprises in Tanzania using 233 dairy and sugarcane farms located in Morogoro as a case study. In this study profitability was measured by Economic Farm Surplus (EFS) and Gross Margin Analysis (GMA) for the dairy and sugarcane/paddy farms respectively. Literature on previous studies in this area focused on small-scale enterprises and has highlighted the importance of the size of the agricultural enterprise on productivity of agro-based enterprises. Thus the present study aimed at observing the trend of profitability of agro-based enterprises with increasing farm size. In order to capture the effect of the changing farm size on profitability, the selected dairy and sugarcane/paddy enterprises were grouped into seven and nine categories for dairy and sugarcane respectively. Prior to the estimation of multiple regression models for the two types of enterprises i.e. dairy and sugarcane, a simple comparison of mean EFS and GM analyses for the different size categories was conducted deploying the anal~ of variance (ANOVA) technique. The ANOVA indicated the existence of significant differences in the levels of the EPS and GM for the different farm size categories Three multiple regression models were estimated to establish the relationship between size and profitability. The results revealed that the productivity of an enterprise positively influenced by the size, access to credit facilities, access to extension services and farmer's level of education. The results from this study suggest that Tanzanian medium scale agro-based enterprises have a very high potential for growth if supplies with a favorable environment. In order to stimulate the growth of medium scale enterprises in the country drastic policy changes that will make sure that the needs medium scale farmers take a central part in the agriculture policy are required.