Profitability of Avocado Production for Export Trade amongst the Smallholder Farmers in Rungwe and Hai Districts, Tanzania

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.