TITLE:
Profitability of Avocado Production for Export Trade amongst the Smallholder Farmers in Rungwe and Hai Districts, Tanzania
AUTHORS:
John Boniphace, Reuben M. J. Kadigi, Joseph Rajabu Kangile
KEYWORDS:
Avocado, Tanzania, Profitability Analysis, NPV, BCR, IRR
JOURNAL NAME:
Open Journal of Business and Management,
Vol.11 No.6,
November
28,
2023
ABSTRACT: The growth of an investment with perfect cash flow
is the aim of every investor. Avocado is emerging as one of the important “new
export crops” in developing countries and smallholder farmers are expected to
benefit enormously from the production and selling of the crop. Based on this
proposition a study was conducted to investigate the profitability of avocado
production among the smallholder farmers in Hai and Rungwe districts in
Tanzania. The study employed a multistage random sampling method to select the
sample households and primary data were collected from 120 smallholder farmers
producing avocado for exportation. The Cost and Benefit Analysis (CBA) approach
was employed to analyse the viability of avocado production in the study areas.
Specifically, the Net Present Value (NPV), Benefit Cost Ratio (BCR), and
Internal Rate of Return (IRR) were used as metrics of economic viability. These
metrics were calculated using the discounted rate of the Bank of Tanzania (BoT)
for fixed accounts. The study findings suggest that the production of avocado
for exportation yielded high NPV, BCR, and IRR. Its IRR ranged from 11.11% to
14.60% which was far higher than the BoT rate for fixed accounts of 2.16%
indicating that the investment in avocado production for foreign trade was
economically viable.