Exporting vegetables in Tanzania: risky business, but highly profitable – if managed well
Rikolto (VECO) helps Tanzanian farmers to take profit of the rising demand of fresh vegetables and fruit. Jasmine Mushi, Agribusiness Advisor at Rikolto East Africa, explains.
Horticulture is the fastest-growing agricultural sector in Tanzania, recording an annual average growth of 9-13% over the last 7 years. One of the groups we have supported over the last 4 years has grown from nothing to over 700 farmers, generating sales of over US$ 210,000 each year. This group is MUUNGANO WA VIKUNDI VYA HORTICULTURE (MUVIKHO for short). It is their story I want to share today.
I am excited about the future for the farmers I work with as there are many opportunities in horticulture nowadays. One of the groups I have supported over the last 4 years is MUVIKHO. Personally, I really enjoy working with them because they are serious about their work and are growing as a result.
Jasmine Mushi - Agribusiness Advisor
MUVIKHO is an umbrella organisation of groups of vegetable farmers. They now have 15 groups that service lowland and highland areas around Arusha. This diversity allows them to supply many different vegetables to both local and export markets.
Rikolto (previously known as VECO East Africa) started working with MUVIKHO just after its formation in 2012, and we have supported them with the development and implementation of business plans to target both local and export markets. Our focus has been on passion fruit, peas and french beans due to their high demand.
We also supported MUVIKHO to become a service provider to their members, organised in small farmer groups. The services they offered began with a focus on agronomy but now include marketing and contract management services.
Demand for fruit and vegetables is very high, but production is expensive. Rikolto has helped overcome this by improving knowledge and supporting us to access start-up capital.
The Global GAP certificate was a game changer
An important game changer was when MUVIKHO obtained its own independent Global GAP certificate in August 2016, a kind of label for safe food (Good Agricultural Practice). Before that time, they sold exclusively to the export company which sponsored their Global GAP certificate. The company, as the owner of the certificate, dictated all the terms – price, volumes, schedules. Now they have their own independent certificate, meaning they are not tied to one buyer any more who had monopoly over their business. MUVIKHO can work with multiple exporters and they choose the one that offers the best prices and conditions.
As farmers learned of the new market opportunities and MUVIKHO services, more of them formed their own groups and joined MUVIKHO. This is how MUVIKHO has grown so rapidly and continues to grow. They are now known as the place to go for many other farmers who are interested in joining the horticulture movement.
When people now talk about MUVIKHO, they see it as a success story. But they faced many challenges in the beginning. First, they did not know which crops to choose. Now they grow just a few crops based on the market opportunities. We helped them to analyze the market. Then we supported them with agronomy experts. Even experts from Kenya came in, as some crops such as passion fruit are new to Tanzania! MUVIKHO then started up slowly in business not taking too many risks. I taught them to develop their own business model and later a five-year business plan. They have implemented part of this plan, such as the development of grading facilities which help to meet expectations from international buyers. They are now aiming to use their business history (track record) and business plan to obtain loans from banks to help more farmers join us. The biggest constraint these farmers face is really having access to capital.
Recently, I visited one of the more remote farmer groups that market their produce via MUVIKHO: Umoja Machimer. They have 48 members and the farmers are growing sugar snaps, snow peas and other leafy vegetables. It is truly a beautiful place up there in the hills, but these farmers face the greatest challenges. They have roads that can become impassable, very little access to electricity, no running water and no public transport. Despite this I feel very happy that, together with MUVIKHO, we have enabled these farmers to have a very successful business producing snow peas for supermarkets in Holland, Belgium and the UK. They also grow leafy vegetables for local market and local supermarkets.
The rapid growth of MUVIKHO shows that farmers are looking for an organisation that serves its interests and offers new opportunities. MUVIKHO has been able to attract farmers as it has provided good services and is enabling their members to have greater power in the market.
... to success story
How they managed to achieve this? Well, firstly we paid MUVIKHO to provide an agronomist who trained the farmers in record keeping, good agricultural practises and grading the produce. Secondly, we supported this group Umoja Machimer in understanding how to negotiate together for better prices. Eventually as the bonds between Umoja and MUVIKHO strengthened, which was also the result of MUVIKHO obtaining its own Global GAP certificate, Umoja now trusts MUVIKHO to do the contract negotiation on behalf of them and MUVIKHO now pays the full cost of the agronomist from the income it earns from its members. This is really a big step forward.
I see it as the start of something much bigger: the rapid growth of MUVIKHO shows that farmers are looking for an organisation that serves its interests and offers new opportunities. MUVIKHO has been able to attract farmers as it has provided good services and is enabling their members to have greater power in the market. They can now choose who to contract with based on a good knowledge of the market and good relationships with many local and export buyers. They do these negotiations on a seasonal basis so 2 to 3 times a year and can switch to a different buyer easily if needed. This has led to a better deal for MUVIKHO farmers.
I am so proud that I am part of this process. I also feel happy that we have enabled 320 women and 280 youth to be realize better returns from their farming business, as they are often an untapped resource in communities. There are still many challenges to overcome, but at least MUVIKIHO is functioning well, and farmers are reaping the rewards.
Looking at the figures, I see more profit as well as sales. A significant problem in the past was the very high level of rejects by the buyers. The rejection rate could be as high as 50% during the rainy season. Muddy roads lead delayed collection and deterioration in quality of produce leading to high rejection rate. Plus, with high supply during this season buyers find many excuses as to why the vegetables do not meet their quality standards: too ripe, strange colour, overgrown, wrong pods sizes … then some buyers would not even return the rejected produce. This was a massive loss for farmers and some farmers dropped out due to this. We therefore supported the construction of grading sheds with charcoal cooling systems. This addressed the spoilage caused by the long distances from the farms to the exporter cold rooms and contributed to rejection rates dropping from 25% in 2013 to 5% in 2017.
Targeting the demanding export markets helped the farmers to increase the quality standards of their vegetables, and at this moment it is highly profitable. At the same time, the produce is exported by air, which has an enormous CO2 cost. Sea transport is not an option, as the vegetables are highly perishable. We therefore support the farmers to shift to new, high quality markets in the East African region. But to make the MuVIKHO business truly sustainable, our colleagues support the farmers to focus on new markets in the region, where consumers also demand high quality and want to pay for it.
Facts & figures
- Annual sales of MUVIKHO to formal markets of over US $ 210,000 each year.
- 10 sales contracts with 6 companies since MUVIKHO obtained independent Global GAP certification (Serengeti Fresh, Mara Farming, Proxy Fresh, Frigoken, Homeveg, Flamingo, AXZ Ltd and Seedco Companies).
- Focus has been on passion fruit, peas and french beans due to their high demand: 232 tons of French beans and 52 tons of peas sold to exporters; 10 tons of vegetables sold to local supermarkets.
- Evolution of membership: starting up in 2012 – 817 members in 2017.
- Most people involved in horticulture are youth: 280 members of MUVIKHO are younger than 35 years old.
- Rejection rates dropped from 25% in 2013 to 5% in 2017.
- In 2016 the price paid for peas and French beans by export companies went up 20% due to strong competition between the companies to win contracts with MUVIKIHO.
- Growing fresh fruits and vegetables is therefore a good strategy for increasing small-scale farmers’ income. The average increase of income we observed is about US $500 per year.