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181 Pages·2015·2.05 MB·English
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i GROWTH OF SMALL AGRO-PROCESSING FIRMS AND THEIR INFLUENCE ON EMPLOYMENT CREATION, TANZANIA VISENT KIPENE TISIMIA A THESIS SUBMITTED IN FULFILLMENT OF THE REQUIREMENTS FOR THE DOCTOR OF PHILOSOPHY DEGREE OF SOKOINE UNIVERSITY OF AGRICULTURE. MOROGORO, TANZANIA 2014 ii ABSTRACT The small agro-processing sub-sector accounts for over 80% of all firms in Tanzania. However, the firms have not been effective in absorbing new labour in the market, as reflected by the unemployment rate, which increased from 5% in 2001to 10% in 2011. The low rate of labour absorption has been partly attributed to the slow growth of small agro-processing firms, which grew by only 10%. Labour productivity also is perceived to be low. Hence firms within the sub-sector have not performed to their expected potentials. However, no in depth analysis has been done to confirm these facts, especially in relation to labour productivity and firms’ growth. This study examined the growth of small agro- processing firms and their influence on employment focusing on labour productivity in Mbeya and Morogoro Regions of Tanzania. A total of 102 firms represented different types and location in the study area. Time series and cross-sectional data were collected from sampled districts and firms. Employment creation trends, labour productivity performance and factors affecting the firm’s growth were examined using descriptive statistics and multiple regression analysis. The analysis show that about 63.6% of firms operated under capacity, hence employing below their potential due to low supply of raw- materials, inadequate capital, and poor marketing systems as well as high cost of energy. Labour productivity growth was influenced by experience, education, training and physical capital. Also the growth of firms was influenced by the value of raw-materials, manager’s education and energy cost. Small agro-processing firms in Morogoro Region grew faster (62.7%) compared to firms in Mbeya (37.3%). The difference may be due to Morogoro having better access to factor and product market hence having lower transport cost for inputs and reduced distribution cost of processed products. The study recommends that the government and non-governmental organizations to promote the production of high value of raw-material as contributing factor by 30% to growth of iii firms. Such interventions will have a significant effect in employment growth. Furthermore, the government and other non-governmental organization should improve human and physical capital, while emphasising technological innovation and adherence to processing products according to standards set by responsible authorities. iv DECLARATION I, VISENT KIPENE TISIMIA, do hereby declare to the Senate of Sokoine University of Agriculture that this thesis is my own original work done within the period of registration and that it has neither been submitted nor being concurrently submitted in any other institution. _______________________ ______________ VISENT KIPENE TISIMIA Date (Ph.D. Candidate) _______________________ ______________ Dr. EVELYNE LAZARO Date (Supervisor) _______________________ ______________ Prof. AIDA .C. ISINIKA Date (Supervisor) v COPYRIGHT No part of this thesis may be reproduced, stored in any retrieval system or transmitted in any form or by any means without prior written permission of the author or Sokoine University of Agriculture in that behalf. vi ACKNOWLEDGEMENTS I thank the Almighty God and our Lord Jesus Christ for giving me life, a chance for professional development and strength to make my dream of completing my PhD studies a reality. My sincere thanks and gratitude are also expressed to my supervisors, Dr. Evelyne Lazaro and Professor Aida. C. Isinika for assisting me greatly to fulfil my desire to complete this study. Their valuable advice, comments and constructive criticisms helped me to bring this piece of work to its present form. I am also thankful to Managers and members of staff from Tanzania Revenue Authority, SIDO, District Council officers and sampled firms from Mbeya and Morogoro Regions for the support in conducting this study. Special thanks are also extended to all academic members of staff and colleagues of the Department of Agricultural Economics and Agribusiness at Sokoine University of Agriculture for their constructive criticism and ideas during the process of developing this thesis. Finally, I’m deeply indebted to my wife, Judith Sanga, whose patience, inspiration and encouragement gave me strength during the entire period of my study. She made difficult times endurable. I am as well grateful to my late father and loving mother, to whom I shall always remain greatly indebted to for their unconditional, love, good advice, material support and for laying the foundation of my education. I say “Thank you Mum and thank you Dad” vii DEDICATION This work is dedicated to my parents, my mother Chelina and my late father Tisimia Kipene who laid the foundation for my education. viii TABLE OF CONTENTS ABSTRACT ........................................................................................................................ ii DECLARATION............................................................................................................... iv COPYRIGHT ..................................................................................................................... v ACKNOWLEDGEMENTS ............................................................................................. vi DEDICATION.................................................................................................................. vii TABLE OF CONTENTS ............................................................................................... viii LIST OF TABLES ........................................................................................................... xii LIST OF FIGURES ........................................................................................................ xiv LIST OF APPENDICES ................................................................................................. xv LIST OF ABBREVIATIONS AND ACRONYMS ...................................................... xvi CHAPTER ONE ................................................................................................................ 1 INTRODUCTION.............................................................................................................. 1 1.1 Background Information ............................................................................................ 1 1.2 Importance of Agro-processing Firms ........................................................................ 2 1.3 Policy Framework for Development of Agro-processing Firms ................................ 5 1.4 Problem Statement...................................................................................................... 7 1.5 Justification of the Study ............................................................................................ 8 1.6 Objectives ................................................................................................................. 10 1.6.1 Overall objective ........................................................................................ 10 1.6.2 Specific objectives ...................................................................................... 10 1.7 Research Questions .................................................................................................. 11 1.8 Research Hypotheses ................................................................................................ 11 1.9 Shortcoming of the Study ......................................................................................... 13 1.10 Organization of the Study ......................................................................................... 14 ix CHAPTER TWO ............................................................................................................. 15 LITERATURE REVIEW ............................................................................................... 15 2.1 An overview of agro-processing firms ..................................................................... 15 2.2 Post Structural Adjustment Programme Policies for Agro-processing Development............................................................................................................. 19 2.2.1 National policies during 1985 - 1990s ....................................................... 19 2.2.2 National Policies After the year 2000 ........................................................ 20 2.3 Post Structural Adjustment Programme and Institutional Changes ......................... 22 2.3.1 Tanzania food, drug and cosmetic act ........................................................ 22 2.3.2 Tanzania Standards Act .............................................................................. 23 2.3.3 National Industries Licensing and Registration Act .................................. 24 2.3.4 Local Governments Acts ............................................................................ 24 2.3.5 Small Industries Development Organization Act ....................................... 25 2.3.6 Tanzania Industrial Research Development Organisation ......................... 25 2.4 Employment Status in Agro-processing Sub-sector ................................................. 26 2.5 Labour Productivity Performance ............................................................................ 27 2.6 Effect of Labour Productivity Growth on Employment Creation ............................ 30 2.7 Growth and Sustainability of Small Agro-processing Firms in Tanzania ................ 31 2.8 Analytical issues ....................................................................................................... 33 2.8.1 Industrialization for economic growth and employment creation ............. 33 2.8.2 Theories on employment ............................................................................ 35 2.8.3 Evaluation of agro-processing firms .......................................................... 36 2.8.3.1 Evaluating firms for employment creation .............................. 37 2.8.3.2 Evaluation of labour productivity ............................................ 37 2.8.3.3 Evaluating the growth of small agro-processing firms ........... 40 2.9 Conceptual Framework ............................................................................................ 41 x CHAPTER THREE ......................................................................................................... 44 RESEARCH METHODOLOGY ................................................................................... 44 3.1 Description of the Study Area .................................................................................. 44 3.2 Research Design ....................................................................................................... 45 3.3 Analytical Framework .............................................................................................. 46 3.3.1 Labour productivity model ......................................................................... 46 3.3.2 Firms’ growth model .................................................................................. 51 3.4 Sampling and Sample Size ....................................................................................... 54 3.5 Sampling Methods .................................................................................................... 55 3.6 Sample Size .............................................................................................................. 56 3.7 Data Collection ......................................................................................................... 57 3.8 Data Processing ........................................................................................................ 59 CHAPTER FOUR ............................................................................................................ 62 RESULTS AND DISCUSSIONS .................................................................................... 62 4.1 Chapter overview...................................................................................................... 62 4.2 Types of Firms According to Products Processed .................................................... 62 4.3 Ownerships of Small Agro-processing Firms .......................................................... 63 4.4 Technologies Used by Small Agro-processing Firms .............................................. 65 4.5 Standards of Processed Products in Small Agro-processing Firms.......................... 67 4.6 Number and Trends of Small Agro-processing Firms Established .......................... 70 4.7 Performance of Small Agro-processing Firms ......................................................... 75 4.7.1 Employment creation trends ....................................................................... 75 4.7.2 Creation of seasonal employment .............................................................. 81 4.7.3 Capital investment in relation to jobs creation ........................................... 82 4.8 Labour Productivity .................................................................................................. 84

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The small agro-processing sub-sector accounts for over 80% of all firms in Employment creation trends, labour productivity .. 2.3.1 Tanzania food, drug and cosmetic act . employ up to 49 workers (MIT, 2002) supported the Small Scale Industries Development Organization (SIDO) since its.
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