Promoting Tanzania rural businesses

What you need to know:

Entrepreneurs in rural areas face undercapitalisation, lack of management skills, deprived of logistic and transport equipment, being located in remote areas with low-income local customers and poor understanding of how to tap into retailing. Improving the conditions for rural entrepreneurs is imperative to grow the Tanzanian economy. But, to move the needle, the focus should be broadened from the professionalism and effectiveness of small rural firms to structural changes in the value chain in which they are working

Although CBO-management may be a challenge, some of the CBOs used the renewed productivity as a stepping-stone for further development and professionalisation as a firm. They started to differentiate management roles between individuals (such as timber purchasing, manufacturing, and sales) acting effectively as a company instead of acting as individual carpenters whom just timeshare the expensive machinery. Although we provided training in management, marketing and financial management it was a daunting task to incentivise MSEs to take the next steps in the professionalizing of their business: reaching out to retailers in cities, developing a marketing and sales strategy and developing the wood furniture activities into an integrated company with a growing number of employees were too big a change for most companies. In other words, the deep-rooted cultural habits to work as individuals on a local scale and the difficulties to grasp the complexity of managing a modern enterprise should not be underestimated in rural entrepreneurship projects. Promoting entrepreneurship is not only about providing financial means, equipment, and training managers in how to run a business. It is also about taking leadership, having the ambition to grow, and willingness to take the risk whenever necessary. Moreover, a business is usually only successful after several attempts, and therefore persistence to move on after failures is crucial.

Let’s first have a look at the professionalisation of the beekeeping activities. Professional beekeeping can only be executed with professional beehives such as top-bar and langstroth hives. These hives are expensive investments (Sh70.000 for a topbar) and can only be used profitably if enough hives are colonised and if colonies are producing enough honey. To be successful beekeepers have to learn to inspect hives every two weeks, they have to learn to split colonies and breed queens, and they have to provide forage whenever this is required. This is a radical change compared to the traditional way of beekeeping where wooden boxes are split trunks are placed in trees and harvested six months later. We observed is that there is a high attrition rate: many like to start beekeeping and buy hives but they underestimate the knowledge and continuous dedication that is required to keep bees in a profitable way.

The downstream activities in beekeeping show a less well known aspect of (rural) entrepreneurship. Without changing the downstream activities beekeepers would end up with poorly filtered honey gathered in buckets of 30 litres, which they sell to middleman at a low price. Quality assurance, packaging, labeling and access to the market are problems that can only be solved by developing a commercial entity that is responsible for these activities. The honey extraction equipment is expensive and minimum volume of honey is five ton per year. This implies that extra honey has to be produced through the introduction of professional bee farms in combination with the production of more beehives that can be sold to beekeepers. To keep the financing acceptable beekeepers pay yearly installments over a period of five years. Free courses and field trips should be organised to maximise learning of beekeepers. This, in turn leads to higher productivity and profitability.

How can these downstream activities be managed? There are different possibilities. We mention two options. In some regions a collection house is managed as a cooperative of many groups of beekeepers. This kind of participative management guarantees that the revenues of the collection house will benefit the beekeeper community too. However, cooperatives only work effectively with a trusted, knowledgeable and ambitious leadership and that has proven to be a challenge for several cooperatives. The second option is to set up a commercial entity to run the collection house activity. In this case attention should be paid to the relationship with the beekeeper community: the commercial entity can’t work with arms-length transactions with beekeepers. In contrast it has to develop strong nurturing relationships by providing free courses and helping beekeepers financially to buy beehives. So both options come with a caveat.

Promoting Tanzania rural businesses

What you need to know:

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