Horticulture Storage and Transport Infrastructure

Horticulture Storage and Transport Infrastructure

Photo by UNDP Tanzania

Horticulture Storage and Transport Infrastructure

Country
Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Infrastructure
Sub Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Infrastructure
Indicative Return
Describes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
> 25% (in GPM)
Investment Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Short Term (0–5 years)
Market Size
Describes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
< USD 50 million
Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.
< USD 500,000
Direct Impact
Describes the primary SDG(s) the IOA addresses.
Industry, Innovation and Infrastructure (SDG 9) Zero Hunger (SDG 2) Responsible Consumption and Production (SDG 12)
Indirect Impact
Describes the secondary SDG(s) the IOA addresses.
Decent Work and Economic Growth (SDG 8) Life on Land (SDG 15)

Business Model Description

Develop and operate storage and transport infrastructure systems to handle perishable horticulture products destined for domestic and export markets through a public-private partnership model, including through packhouses and cold storage facilities for transit products. The government establishes special infrastructure and dedicated zones, such as green belts at the port, to fastrack clearance of products.

Expected Impact

Improve handling of perishable products and reduce incidences of post-harvest losses.

How is this information gathered?

Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.

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Country & Regions

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Country
Region
  • Tanzania: Eastern Zone
  • Tanzania: Northern Zone
  • Tanzania: Southern Highlands Zone
  • Tanzania: Lake Zone
Learn more

Sector Classification

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Sector

Infrastructure

Development need
Infrastructure is both a facilitator for development and an attractive investment channel. However, the sector is faced with persistent structural challenges, including a heavy dominance of inefficient parastatals in infrastructure provision, accompanied by a poor track record for privatization and private involvement in utilities in the past (1).

Policy priority
The government is committed to develop quality and reliable infrastructure that promotes socio-economic development of Tanzania. Particular emphasis is placed on the provision of quality and safe construction works of roads, bridges, ferries, airports, buildings, mechanical, electrical and electronics in collaboration with private stakeholders (2).

Gender inequalities and marginalization issues
Despite legal protection granted by laws and enforcement mechanisms, discrimination against women in accessing infrastructure and especially land persists in Tanzania. It emanates from the frequent application of customary laws, and an unfamiliarity with formal laws among local leaders and authorities (3).

Investment opportunities introduction
Tanzania's strong growth in real GDP from 4.1% in 2021 and 5.8% in 2022 is expected to promote significant development in infrastructure needs, including human settlement and particularly modern housing facilities as well as waste and agricultural storage solutions (4, 5).

Key bottlenecks introduction
The growth rate of urban areas in Tanzania has often been higher than the capacity of authorities to cope with the provision of basic services, including delivery of planned, surveyed and serviced land for housing development as well as waste management and horticulture infrastructure (6).

Sub Sector

Infrastructure

Development need
Tanzania’s horticulture subsector wastes 50-70% of products after harvest due to lack of efficient infrastructures, such as transport, collection and storage centers. Critical logistics issues at the ports, airports, railways, road and cold transport infrastructure require attention in order to cater for the specific needs of the horticulture industry (7 ).

Policy priority
The government is committed to strengthen the logistical infrastructure related to packaging, storage and transport of perishable horticulture produce. It places an emphasis on fast-tracking the handling and clearance systems for horticulture products at the exit points (8, 9).

Gender inequalities and marginalization issues
Although organizations that promote exports exist in Tanzania, they do not actively engage women entrepreneurs in terms of capacity building to make use of export opportunities for example for horticulture produce, including marketing and transport infrastructure (10).

Investment opportunities introduction
Infrastructure opportunities for horticulture produce include refrigerated trucks and railway wagons, packhouses, green channelling systems at the ports, market infrastructure at strategic road transit locations, and cargo freighter operations (7, 11, 12, 13).

Key bottlenecks introduction
Challenges include inadequate electricity supply, lack of appropriately sized and affordable refrigerated trucks and limited cargo airfreighting, underdeveloped export facilities with inefficient clearance systems at exit points, and a lack of reliable data on production and inadequate off-taking activities (14,15).

Industry

Engineering and Construction Services

Pipeline Opportunity

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Investment Opportunity Area

Horticulture Storage and Transport Infrastructure

Business Model

Develop and operate storage and transport infrastructure systems to handle perishable horticulture products destined for domestic and export markets through a public-private partnership model, including through packhouses and cold storage facilities for transit products. The government establishes special infrastructure and dedicated zones, such as green belts at the port, to fastrack clearance of products.

Business Case

Learn about the investment opportunity’s business metrics and market risks.

Market Size and Environment

Market Size (USD)
Describes the value in USD of a potential addressable market of the IOA.

< USD 50 million

CAGR
Describes the historical or expected annual growth of revenues in the IOA market.

5% - 10%

Total importation of various cold storage facilities into Tanzania averaged USD 25,908,000 per year between 2016 and 2020, growing at CAGR of 5.2% (17). The country already has several commercial packhouses and collection centres, for example in Tengeru (Arusha), Njombe, Zanzibar, Kilimanjaro and Dar es Salaam (14).

Horticulture is the fastest growing industry within the agricultural sector with an annual average growth of about 11%. External market share has been increasing overtime. In 2019, total horticultural exports averaged USD 779 million, up from US 764 million in 2017 and US 618 million in 2016 (20, 22).

Indicative Return

GPM
Describes an expected percentage of revenue (that is actual profit before adjusting for operating cost) from the IOA investment.

> 25%

A feasibility study on cold storage technology for horticulture produce conducted in Zanzibar indicate an average gross profit margin of 42% after the second year of investment (18).

Investment Timeframe

Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.

Short Term (0–5 years)

Positive retained earnings (in terms of EBITDA) for investors using cold storage technology to preserve horticulture produce materialize progressively from the second year of investment with the increase in sales from farmers (18).

Ticket Size

Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.

< USD 500,000

Market Risks & Scale Obstacles

Business - Supply Chain Constraints

Horticulture storage and transport infrastructure may be constrained by an inability to guarantee a consistent domestic supply of raw material due to poor quality infrastructure, leading to post-harvest losses of up to 40-50%, which may need targeted interventions (18, 19).

Capital - CapEx Intensive

Horticulture storage infrastructure requires access to increasing amounts of energy. Cold storage is energy intensive. Poor rains in the past few years have led to water shortages. The situation has induced power crises hence increasing the cost of electricity in Tanzania. This may favour use of clean and affordable energy solutions and technologies, such as solar, which are capital intensive (31).

Impact Case

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Sustainable Development Need

Over 90% of the horticultural products produced in Tanzania are consumed in the country with only small percentage exported. This, is largely due to poor transport and storage infrastructure necessary to enhance their abilities to access regional and international markets. This makes it difficult for the country to promote competitiveness of productive sectors (5, 19, 21).

The level of food insecurity is high in Tanzania. 15% of rural households are food insecure, with 15% more at risk of becoming food insecure. Malnutrition also remains high despite the steady economic growth over the past decade. 16.8 million Tanzanians are chronically undernourished. Over 34% of children under the age of five are stunted and nearly 45% of women of reproductive age are anaemic (18, 34, 35).

Gender & Marginalisation

Women and youth are strongly involved in the production and marketing of horticulture products in Tanzania. However, their economic welfare is not optimized due to poor access to affordable cold storage and transport infrastructure. They are unable to store the products (particularly during the high season) to increase their shelf life and expand access to the premium markets. This challenge in further exacerbated by the fact that women, youth and other marginalized communities do not have adequate access to finance to facilitate acquisition of modern storge and transportation facilities (18, 19, 32).

Expected Development Outcome

Horticulture storage and transport infrastructure enhances the shelf life of the commodities and expands the volume of exports accessing the premium export markets. This ultimately increase earnings for all actors in the value chain (5, 18, 19, 32).

Improved storage and transport infrastructure has the potential to create new employment opportunities particularly to some of the 800,000 youth that enter Tanzania’s workforce each year. The opportunities can be in various segments of the value chain, including sorting and grading, packaging, delivery to exporters ‘factories or collection centers (19, 20).

Improvements in distribution networks and processes reduce transport-related losses, so that greater quantities of food reach market, while also improving end-product quality (19, 20, 33). This also improves the food security and nutrition situation among the Tanzanian population (18).

Gender & Marginalisation

Infrastructure improvement creates employment opportunities for women and youth in various segments of the value chain. In turn, they also get a chance to improve their skills in these areas through technology transfer for example for the construction packhouses (18, 19).

Primary SDGs addressed

Industry, Innovation and Infrastructure (SDG 9)
9 - Industry, Innovation and Infrastructure

9.1.2 Passenger and freight volumes, by mode of transport

Current Value

1,569,536 tons of freight (cargo) transported by railway lines in 2020/21. 6.3 tons of export cargo to neighbouring countries handled in 2020/21 (5).

Target Value

2,162,258 tons of freight (cargo) transported by railway lines in 2025/26. 10 tons of export cargo to neighbouring countries handled in 2025/26 (5).

Zero Hunger (SDG 2)
2 - Zero Hunger

2.4.1 Proportion of agricultural area under productive and sustainable agriculture

2.1.2 Prevalence of moderate or severe food insecurity in the population, based on the Food Insecurity Experience Scale (FIES)

Current Value

Volume of total horticultural production per year estimated at 6,556,102 tons in 2020/21. Average agriculture growth rate and productivity growth currently estimated at 5% at 4.0% (5).

Total population in moderate and severe food insecurity estimated at 11,000,000 and 5,876,000, respectively (36).

Target Value

Volume of total horticultural production per year projected at 14,600,000 tons in 2025/26. Tanzania targets average agriculture growth rate of 6.1% by 2025/26 and productivity growth of 4.7% (5).

N/A

Responsible Consumption and Production (SDG 12)
12 - Responsible Consumption and Production

12.3.1 (a) Food loss index and (b) food waste index

Current Value

Food waste estimate per capita equivalent to 119 (kg / capita / year). This is equivalent to 6,907,649 tonnes per year (37).

Target Value

N/A

Secondary SDGs addressed

8 - Decent Work and Economic Growth
15 - Life on Land

Directly impacted stakeholders

People

Farming communities, especially those living in the hinterlands, benefit from storage and transportation options enhancing the utilisation of their produce.

Gender inequality and/or marginalization

Women and youth are able to sell increased volume of products due to expanded shelf life.

Planet

The environment benefits from waste management, particularly from reduction of food waste, which reduces damage and conserves scarce resources.

Corporates

Companies involved in the manufacture and selling of machineries, accessories and facilities for cold storage and transport infrastructure (e.g., cold rooms, freezer units, refrigerated wagons and containers) obtain business opportunities from the ongoing infrastructure projects.

Public sector

The government benefits from increased ability to promote infrastructure efficiencies, which in turn leads to additional tax revenue from increased exports.

Indirectly impacted stakeholders

People

The general population obtains greater access to horticulture products as well as job opportunities in the employment intensive industry.

Gender inequality and/or marginalization

Women, the rural and urban poor communities as well as youth are able to secure employment opportunities in different segments of value chain as a result of expanded activities in storage and transport infrastructure.

Corporates

Small companies enjoy expanded opportunities to sell products to corporates from small shops.

Outcome Risks

Failure to adhere to good quality practices in handling horticulture products on transit and exit points may produce negative effects on the product, ultimately contributing to food losses (7, 13).

With expanded activities and modernization of the horticulture sector in Tanzania, there is a likelihood of increased GHG emission. This is largely because fresh food transport system is a cold chain where large volumes of energy is needed to keep raw food in safety condition. Research has shown that the environmental impact of energy use particularly in GHG emission will continue to be felt in developing countries as they upgrade their cold storage infrastructure systems (38).

Impact Risks

Low volumes of horticulture products may lead to suboptimal utilisation of storage and transport infrastructure, which may limit the expected impact (17, 19).

Lack of parallel efforts to improve the normal distribution networks via roads, airports and rail transportation systems, and energy sources may limit the expected impact because they are the bedrock on which the cold storage and transport infrastructure is yoked. The two systems complement each other (33).

Poor accessibility and low affordability for small-scale farmers may limit the expected impact because the storage and cold transport infrastructure requires heavy capital expenditure, which are ordinarily beyond the reach of small-scale farmers (18, 33).

Impact Classification

B—Benefit Stakeholders

What

Horticulture storage and transport infrastructure improves handling of perishable products and reduces incidences of post-harvest losses, contributing towards a competitive horticulture industry.

Risk

While the model of horticulture storage and transport infrastructure is proven, product volumes, quality of distribution networks and farmers accessibility and affordability require consideration.

Impact Thesis

Improve handling of perishable products and reduce incidences of post-harvest losses.

Enabling Environment

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Policy Environment

Tanzania Horticulture Development Strategy, 2012-2021: Emphasises on infrastructure investment as a means for developing a robust and competitive horticultural sector capable of supplying high quality produce for domestic, regional and international markets (8).

Third National Five-Year Plan, 2021 (FYDP III): Aims to address the challenges of horticulture by investing as well as creating an enabling environment for the private sector to invest in storage, transport and logistics (5).

National Construction Policy, 2003: Aims at improving the capacity and effectiveness of the construction industry to meet the national economic demand for infrastructure facilities, including for the horticulture industry (25).

National Transport Policy, 2003: Supports appropriate development strategies and establishes a strong infrastructure base and services in all major towns and other centres of socio-economic activities and growth (27).

Financial Environment

Fiscal incentives: Tanzania offers import duty and VAT exemption on deemed capital goods, including building materials, utility vehicles and equipment that is required for horticulture storage and transport infrastructure, among other things (33, 34).

The Bagamoyo Special Economic Zone provides quality infrastructure complemented by an attractive fiscal package, business support services, cluster formation and minimal regulations, which is particularly for horticulture activities, including storage and transportation (26).

Regulatory Environment

Plant Protection Act, 1997: Governs the import and export of plant and plant products and ensure fulfilment of international commitment on agriculture trade (39).

Export Processing Zones Act, 2002: Facilitates the creation of international competitiveness for export growth. Issues related to the horticulture sector, particularly for the establishments of large-scale production and infrastructure facilities, are also guided by the act (40).

Surface and Marine Transport Regulatory Authority Act: Provides regulations and the code of conduct for clearing and forwarding agents (30).

National Institute of Transport Act, 1983: Provides for the establishment of the institute to provide facilities for training in techniques of transport management, automobile mechanics and transport operations (31).

Marketplace Participants

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Private Sector

TAHA Fresh. Farm to Fork Ltd, BRAVO Logistics (T) Ltd, East Africa Fruits Farm & Company Limited, EAT Fresh Ltd.

Government

Ministry of Agriculture, Ministry of Industry and Trade, TanTrade, Tanzania Ports Authority, Tanzania Railways Authority, Tanzania Road Transport Agency, Tanzania Horticulture Association (TAHA), Tanzania Investment Centre (TIC), Tanzania Export Processing Zones Authority (TEPZA).

Multilaterals

World Bank Group (WBG), African Development Bank (AfDB), European Union (EU), United Nations Development Programme (UNDP).

Non-Profit

Tanzania Agriculture Council, Tanzania Food Gardening Network (TaFoGa Net), FinTrack, TechnoServe, Enterprise Works, Private Agricultural Sector Support Trust (PASS).

Target Locations

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country static map
rural

Tanzania: Eastern Zone

The Bagamoyo Special Economic Zone is a large cluster that can provide storage infrastructure for horticulture products and well as fastracking clearance to export markets (26).
urban

Tanzania: Northern Zone

The Northern Zone has high intensity of horticulture activities to warrant investment in storage and cold storage infrastructure. There are reliable rains in two seasons and with an average rainfall greater than 700 mm. It also enjoys good links to airfreight via Kilimanjaro International Airport and Jomo Kenyatta International Airport (19).
semi-urban

Tanzania: Southern Highlands Zone

The Southern Highlands has high intensity of horticulture activities to warrant investment in storage and cold storage infrastructure. A high-altitude climate with lower day and night temperatures, low humidity, altitudes from 1,564 m to 2,600 m above sea levels and one rainy season. The Songwe International Airport in Mbeya can be used as an export hub for horticulture, if upgraded (19).
semi-urban

Tanzania: Lake Zone

The Lake Zone has high intensity of horticulture activities to warrant investment in storage and cold storage. Localized conditions vary according to proximity to Lake Victoria, which are ideal for growing vegetables, especially capsicums cabbages, tomatoes, eggplants, beans, onions, mangoes and sweet bananas (19).

References

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    • (1) Tanzania Invest, 2022. https://www.tanzaniainvest.com/construction/realestate.
    • (2) United Republic of Tanzania, 2022. Ministry of Works and Transport Strategic Plan, 2021/22 – 2025/26.
    • (3) Kerbina Joseph Moyo, 2017. Women’s Access to Land in Tanzania. The Case of the Makete District. Royal Institute of Technology (KTH) Stockholm.
    • (4) Kerbina Joseph Moyo, 2017. Women’s Access to Land in Tanzania. The Case of the Makete District. Royal Institute of Technology (KTH) Stockholm.
    • (5) United Republic of Tanzania, 2021. Third National Five-Year Plan (FYDP 3).
    • (6) International Journal of Social Science Studies Vol. 6, No. 12; December 2018.
    • (7) Tanzania Horticulture Association, 2019. The Horticulture Industry in Tanzania, Opportunities, Challenges and Way Forward.
    • (8) Horticultural Development Council of Tanzania, 2012. Tanzania Horticultural Development Strategy 2012-2021.
    • (9) The United Republic of Tanzania, 2021. Ministry of Agriculture, National Horticulture Development Strategy & Action Plan.
    • (10) International Labour Organization, 2014. Women’s Entrepreneurship Development in Tanzania: Insights and Recommendations.
    • (11) China.or.cn, 2020. Tanzania to acquire refrigerated train wagons for ferrying perishables. http://www.china.org.cn/world/Off_the_Wire/2020-10/24/content_76840158.htm.
    • (12) Tanzania Investment Centre, 2021. Investment Guide for Tanzania.
    • (13) United States Agency for International Development, 2020. Case Study Growth of Tanzania’s Horticulture Sector: Role of TAHA inn Reducing Food Loss.
    • (14) Match Maker Associates, 2017. Mapping of Production of Fruits and Vegetables in Tanzania.
    • (15) International Trade Centre, 2022. TradeMap Trade Statistics.
    • (16) Tanzania Horticulture Association, 2019. The Horticulture Industry in Tanzania, Opportunities, Challenges and Way Forward.
    • (17) International Trade Centre, 2022. TradeMap Trade Statistics.
    • (18) Tanzania Horticulture Association, 2021. Feasibility Study for Cold Storage Technology in Zanzibar.
    • (19) East African Community Secretariat, 2021. Fruits and Vegetable Strategy and Action Plan, 2021-2031. https://www.eacgermany.org.
    • (20) East African Secretariate, 2021. Post Harvest Loss Management Strategy and Action Plan for the Fruits and Vegetables Value Chain.
    • (21) Kingdom of Netherlands, 2017. Horticulture Study: Mapping of Production of Fruits and Vegetables in Tanzania.
    • (22) United Republic of Tanzania, 2003. Construction Industry Policy.
    • (23) United Republic of Tanzania, 2013. Bagamoyo SEZ Master Plan.
    • (24) United Republic of Tanzania, 2003. National Transport Policy.
    • (25) United Republic of Tanzania, 2003. Construction Industry Policy.
    • (26) United Republic of Tanzania, 1998. Land Act.
    • (27) United Republic of Tanzania, 2016. Surface and Marine Transport Regulatory Authority Act (Cap. 413).
    • (28) United Republic of Tanzania, 2004. Investment Promotion Act No. 6.
    • (29) United Republic of Tanzania, 1983. The National Institute of Transport Act.
    • (30) United Republic of Tanzania, 2022. Standard Incentives for Investors. https://investment-guide.eac.int.
    • (31) United States Agency for International Development, 2022. Agriculture and Food Security Program in Tanzania. https://www.usaid.gov/tanzania/agriculture-and-food-security.
    • (32) FAO, 2022. https://www.fao.org/sustainable-development-goals/indicators/212/en/.
    • (33) UN Environmental Programme, 2021. Food Waste Index Report.
    • (34) Alexandria Engineering Journal, 2016. Sustaining the shelf life of fresh food in cold chain – A burden on the environment.
    • (35) United Republic of Tanzania, 1997. Plant Protection Act.
    • (36) United Republic of Tanzania, 2002. Export Processing Zones Act.