Zanzibar Fruit Company Feasibility Study

Ramkishan Singh, February – April 2016
Zanzibar Fruit and
Vegetables Company:
Feasibility Study

Zanzibarfruitandvegetablescompany:Feasibilitystudy
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Executive summary
VSO, under its CASH project, has been supporting smallholder horticulture farmers in Zanzibar for over five years now.
The project has done exceptionally well in achieving its objectives. The major success has been in terms of improved
quality and quantity of the produce. This has been done through training on best agriculture practices and providing
inputs such as better quality seeds, fertilizers, and farm equipment.
However, the success in terms of connecting these smallholders to the high-end market (read hotels in Zanzibar) has
been limited. In the existing model, this is being done through Farmer’s Associations such as UWAMWIMA, JUWA, and
UWZ. These organizations not only lack the required capacity, but most importantly, they lack the aptitude to do
business. The hotels interviewed for a previous study showed a great deal of interest in supporting the local farmers. But
the reason that they are still buying fresh fruits and vegetable through their suppliers on the mainland is based on the
fact that no single trader or Farmer’s Association on the island has the capacity to supply required quality and quantity
in a timely manner. Initially, there were 12 high-end hotels that were buying local produce through the farmer’s
associations. But, gradually – on account of issues related to consistent supply of desired quality and quantity, the
number of hotels on board went down to four. Currently, the farmers are provided with a list of hotels with their phone
numbers whom they can call when they have produce to sell or vice versa. This is an ad hoc approach that does not
provide a long-term solution.
The purpose of this study is to determine the feasibility and desirability of a fruits and vegetable marketing company in
the islands of Zanzibar. The business of trading fruit and vegetables was chosen because of positive community response
to the idea, large and growing fruits and vegetable production on the islands, growing demand for fresh fruit and
vegetables from the sufficiently large hotel industry on the islands, and lack of coordination among the stakeholders to
fulfil this demand.
A mixture of desk based and primary research was used for this study. A previous report (Hotels Visit Report – CASH)
prepared by VSO staff was used to approximate the available demand for fresh fruits and vegetable. Whereas, primary
data collection was used to gather the information regarding production of fruits and vegetable. A survey of 175 farmers
and 21 traders was conducted for the purpose. A number of key informant interviews were also conducted to gather the
qualitative data regarding legal structure and taxation. The costs versus the revenues of the proposed business process
were estimated to determine its profitability and feasibility.
The study concludes that the proposed business would be both financially feasible and profitable as long as the initial
capital expenditure is provided through grants. In addition, the business will have desirable economic impacts on the
local economy in Zanzibar, providing farmers with a steady income – thus an infusion of spending across several sectors
on the economy and creating jobs. This study demonstrates the potential for agriculture and agribusiness as a viable
method for economic development.
Choosing between PLC and co-operative model as the legal form for the proposed enterprise, it was recommended that
VSO consider going for co-operative. A comparison between the two was carried out on issues such as the laws and
regulations governing these two forms of entities in Zanzibar, taxation, and the general perception of these from the
state.

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In order to ensure the success of the proposed enterprise, it’s crucial that it is managed by professionals until the local
capacity is built, this is expected to take at least three years. In order to ensure this, VSO may have to assume full control
of the operations and management of the enterprise for, at least, three to five years and withdraw itself gradually.
Finally, the establishment of the proposed social enterprise would build upon the good work undertaken over a number
of years by VSO in the CASH project, and help lift the horticulture farmers in Zanzibar to a new level of certainty on
income and provide greater incentive to expand both their production and product varieties.

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Table of contents
Executive summary.................................................................................................................................................................2
List of abbreviations................................................................................................................................................................5
Introduction ............................................................................................................................................................................6
The CASH project ................................................................................................................................................................7
Literature review.................................................................................................................................................................8
Methodology of the feasibility study................................................................................................................................10
Sampling........................................................................................................................................................................10
Methods........................................................................................................................................................................10
Assumptions and limitations.............................................................................................................................................10
Market analysis.....................................................................................................................................................................11
Demand side .....................................................................................................................................................................11
Supply side ........................................................................................................................................................................12
The Solution ..........................................................................................................................................................................13
Organisation and technical structure ...............................................................................................................................14
Legal structure ..............................................................................................................................................................14
Discussion of the operating environment.....................................................................................................................15
Tax.................................................................................................................................................................................16
Operations and planning...................................................................................................................................................17
Collection and transportation.......................................................................................................................................17
Storing and supply.........................................................................................................................................................18
Technological requirements .............................................................................................................................................19
IT....................................................................................................................................................................................19
Customer relationship management (CRM).................................................................................................................19
Software for inventory management and accounting..................................................................................................19
Accounting software.....................................................................................................................................................19
Cold storage ..................................................................................................................................................................19
Cooling vehicles for supply ...........................................................................................................................................20
Staffing requirements .......................................................................................................................................................20
Fulltime staff .................................................................................................................................................................20
Volunteer support to develop capacity ........................................................................................................................20
Financials...........................................................................................................................................................................21
Profit and loss projections ............................................................................................................................................21
Start-up costs ................................................................................................................................................................22
Balance sheets ..............................................................................................................................................................23

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Sources of finance/capital.................................................................................................................................................24
Conclusion, recommendations and long-term planning ......................................................................................................24
References ............................................................................................................................................................................26
Annexes.................................................................................................................................................................................28
1. List of traders interviewed........................................................................................................................................28
2. List of lead farmers Interviewed ...............................................................................................................................28
3. Questionnaire for lead farmers.................................................................................................................................28
4. Questionnaire for traders .........................................................................................................................................28
5. Financial statements.................................................................................................................................................28
6. Hotel Visit Report – CASH .........................................................................................................................................28
7. SWOT analysis for the proposed enterprise.............................................................................................................29
8. A VFM study graph showing outcomes of CASH.......................................................................................................29
9. An overall ranking of the products grown in Zanzibar..............................................................................................30
List of abbreviations
CASE Centre for the Advancement of Social Entrepreneurship
CASH Commercial Agriculture for Smallholder Farmers in Horticulture
CRM Customer Relationship Management
CUZA
DFID
EU
FDI
Cooperative Union of Zanzibar
Department for International Development
European Union
Foreign Direct Investment
FIFO
GDP
First in First Out
Gross Domestic Product
ICA
ICS
IT
JUWA
KE
Kg
KATI
MoA
MoF
MoT
NEF
International Co-operative Alliance
International Citizen Service
Information Technology
Jumuiya ya Uwokozi wa Wakulima Zanzibar (Zanzibar Farmer’s Association)
Knowledge Exchange
Kilogram
Kizimbani Agriculture Training Institute
Ministry of Agriculture
Ministry of Finance
Ministry of Trade
New Economic Foundation
NGO
SE
SME
Non-Government Organizations
Social Enterprise
Small and Medium Enterprise
TAHA Tanzania Horticulture Association
TRA
TSH
Tanzania Revenue Authority
Tanzanian Shilling
UWAMWIMA Umoja Wa Wakulima wa Mbogamboga na Matunda (Vegetable Farmer’s Association)
UWZ Umoja wa Walemavu Zanzibar (Association of Farmers with Disability)

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VAT Value Added Tax
VFM Value for Money
VSO Voluntary Service Overseas
ZATI Zanzibar Association of Tourism Investors
ZIPA Zanzibar Investment Promotion Agency
ZRB Zanzibar Revenue Board
ZSSF Zanzibar Social Security Fund
Introduction
Zanzibar is a semi-autonomous region of Tanzania. It is composed of the Zanzibar Archipelago in the Indian Ocean, 25-50
kilometres off the coast of the mainland, and consists of many small islands and two large ones: Unguja (the main island,
referred to as Zanzibar) and Pemba. The capital is Zanzibar city, located on the island of Unguja. Its historic centre is
Stone Town, which is a world heritage site.
Over the last few years, Zanzibar has experienced a period of economic growth. The GDP has been rising consistently,
standing in 2013 at TSH 1,300bn (7.4% annual growth)1
. This economic growth has been fuelled by a strong flow of
Foreign Direct Investment (FDI) into the economy. In 2011, Zanzibar received USD 176m of new foreign direct
investment, which is a 319% increase from 2010 (Zanzibar Investment Report, 2013). Over 85% of this was in the
tourism sector alone. This influx of FDI has led to a thriving tourism industry in Zanzibar. A large number of high-end
hotels2
(national and international brands) have setup their units on the island. These hotels serve thousands of local
and foreign tourists every day.
The growth in the tourist industry has had a positive impact on horticulture sub-sector. The sub-sector has grown
significantly during the past few years. The net import for fruits and vegetables has gone down by almost half in the last
decade (TAHA, 2016). Not only does this save Zanzibar from spending scarce foreign exchange on imports; it also makes
a significant contribution to food security, nutrition, and economic growth. The horticulture production in Zanzibar is
contributed by a large number of smallholder farmers who produce a limited range of indigenous fruits and vegetables.
The area under agricultural cultivation is estimated at 4,617 hectares (Unguja: 4,057ha; Pemba: 560ha). The average
yield per hectare varies from 5 to 7 tonnes with a total annual production of around 10,000 metric tonnes. However, not
only are these figures below the Isles’ total annual requirement; they indeed are far below the potential yield levels
obtained in other regions.
This study evaluates feasibility – both economic and operational – of a desired social enterprise and discusses ways in
which it transcends current market inefficiencies to produce a favourable outcome for farmers. Part of this research is
an effort to help overcome the ideological barriers that keep us from realizing capitalism’s full social potential. Yunus
(2006) argues that capitalism centres on the free market. On one hand, he favours the strengthening of free market, but
on the other hand, he expresses his concerns about the conceptual restriction imposed on the players in the market.
The assumption that entrepreneurs are dedicated to the mission of profit maximization all their business lives insulates
them from other dimensions of life, such as political, emotional, and environmental. In some cases, there has been a
prioritization of economic values over social values which have widened the gap between rich and poor despite the
1
Economic Survey 2013 (Office of Chief Government Statisticians – Zanzibar)
2
As per the Revolutionary Government of Zanzibar (RGZ) website, currently there are 263 hotels, of which 20 are five star, operating
in Zanzibar.

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economic growth during the past decade. However, what is more important at this stage is that societies remain in a
self-reflective state and are willing to evaluate and alter their assumptions from time-to-time.
The following terms are used almost synonymously with social entrepreneurship to describe similar activities and
initiatives: social enterprise, social business, social capitalism, and social purpose venture. The terms social
entrepreneurship and social enterprise are used alternately to represent the same concept. Additionally, the term social
entrepreneur is used to denote those who start or operate social enterprise organizations.
The CASH project
The Commercial Agriculture for Smallholders in Horticulture (CASH) project was commenced in February, 2012. The
project is funded by Accenture, the Department for International Development (DFID) and European Union (EU) and is
implemented by VSO in collaboration with local partners such as UWAMWIMA, UWZ, and KATI. The project aims to
empower smallholder farmers to participate in the market and transform agriculture from a subsistence activity to a
profitable enterprise.
The project has three main objectives:
- Improve quality and quantity of the produce through training on best agriculture practices and providing inputs
such as seeds, fertilizers, and other equipment.
- Introduce revolving fund as a means of financing commonly used services and facilities.
- Improve farmers’ capacity to participate in higher return markets.
Since its inception, the project has done exceptionally well in achieving its Objectives3
. Through its network of 194 Lead
Farmers4
, the project is serving around 4000 smallholder farmers in Zanzibar. A number of long term (a year or more)
VSO volunteers who are experts in agronomy, marketing, SME development have worked on the project. Currently,
along with three international long term volunteers, there are 20 agronomists5
employed by CASH to support the
farmers.
During the past couple of years, smallholder farmers in Zanzibar have received all kinds of support from various national
and international development organisations and agencies. Gatsby Foundation, the Tanzania Horticulture Association
(TAHA), VSO, USAID, and other programs under the Ministry of Agriculture are chief among them. The work done by
these organizations has a clear impact on the quality and quantity of fruits and vegetables grown on the island.
The farmers interviewed for this study, however, reported that access to market is still a challenge. The success in
connecting the farmers to the high-return market - specifically hotels - has been very limited. Farmer’s Associations such
as UWAMWIMA and UWZ lack the required capacity and, most importantly, the aptitude to do the business. The Hotel
Visit report clearly highlights the apprehensions that the hotels have while dealing with farmers or their associations
directly:
“[…] yet respondent’s (read hotels) enthusiasm is tempered by the realities of business. Although sympathetic to
the plight of local farmers and reporting a desire to source locally grown produce, hotels are unlikely to support
a programme based on philanthropic virtue alone. In short, there is a need for the CASH project to present its
3
A Value for Money (VFM) study done by NEF Consulting. There is a table in the appendices that explains that objectives achieved.
4
To be a Lead Farmer in the CASH project, a farmer has to go through a number of trainings and meet certain criteria.
5
These are local youth trained by KATI on agriculture

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produce to the market in a business like fashion with a focus on consistent quality, quantity and continuity of
supply.”
The fact that the Farmer’s Association have more downward accountability to famers than they have towards hotels
puts the interest of the hotels in jeopardy. Procuring fresh fruits and vegetables from farmers and supplying to hotels is
not the primary activity of the associations. They are registered as NGOs and are legally prohibited from carrying out
commercial activities. They can, however, facilitate the farmers in doing business with the hotels/traders.
On one hand, the Farmer’s Associations have done exceptionally well in terms of improving the quality and quantity of
the produce. On the other hand, they have failed to tap into the high return market. Initially, there were 12 hotels that
were procuring local produce via UWAMWIMA alone. The produce was collected by UWAMWIMA staff and supplied to
the hotels on board. After sometime, everyone started complaining. Farmers were upset because of late payments.
Hotels on the other hand had issues regarding quality of produce and consistent supply. The number of hotels gradually
came down to eight making it unviable for UWAMWIMA to continue this activity. Currently, the farmers are provided
with a list of hotels with their phone numbers whom they can call when they have produce to sell or vice versa. This is
an ad hoc approach that does not provide a long-term solution.
The only option left to farmers is to take their produce to one of the three vegetable markets in Zanzibar town. In some
cases when the demand is high, the traders - especially those supplying hotels – buy produce directly from farms. In
both these cases the farmers’ low bargaining power limits the price they receive for their produce. According to the NEF
report (New Economic Foundation, 2015) although they were not considered at CASH’s planning stage, traders are
currently benefitting greatly from the improved produce as a result of the project’s interventions. If left unaddressed,
farmers – the primary stakeholders of the CASH project – may not benefit as much as intended from the project.
Literature review
“How to save the world? Treat it like business (Eakin, 2003)”
This apparent paradox stated by New York Times columnist Emily Eakin is an interesting starting point for the
investigation of social entrepreneurship, because how can benevolence and business be mixed and how can these
different aspects interact in a way that brings about social change (Martin, M. Larsen, 2012)?
The concept of social entrepreneurship has become well established in business. A major theme has been the creation
of value through innovation (Schumpeter, 1951; Drucker, 1985). Having been applied more recently to social concerns,
the concept has taken on a variety of meanings. Many books and articles are written about the characteristics of
organizations engaged in social entrepreneurship (Dees, 1998; 2007; 2008; Nicholls, 2006; Bornstein, 2004; Yunus,
1991). It has also become part of the curriculum of many leading business schools. There are associations devoted to
studying and implementing social entrepreneurship, and there are numerous websites from where one may gather
information about the concept and how to practice it (Alvord, Brown, and Letts, 2004).
However, this variety of material on social entrepreneurship leaves us wondering exactly what social entrepreneurship
is? Is it optimising the operations of non-profit organizations through sound business practices as some seem to suggest
(Reis, 1999), or is it a more radically different approach to the business of ‘doing good’? It is said that “social
entrepreneurship is emerging as an innovative approach for dealing with complex social needs” (Johnson, 2000: 1),
especially in the face of diminishing public funding. But, what is it that makes this approach so promising? Indeed, part
of answering these questions rests on understanding what the phenomenon is (Thiemboonkit, 2013)?

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Scholars, such as, Reis, (1999) note that social entrepreneurship is the incorporation of business practices into the non-
profit sector, while others (e.g. Henton et al., 1997) say it is the incorporation of social value in the economy. These
varying descriptions are possible because there is currently no authoritative definition for the concept. Yet, even with
this wide range of interpretations, a number of strong themes in social entrepreneurship have emerged. Innovation;
social impact; sustainability; societal transformation; individual or citizen driven change; challenging existing structures;
merging traditional sector boundaries; and building a more inclusive market system, all characterize social
entrepreneurship.
The world is facing myriad of socio-economic problems today. There are many reasons that social problems such as
hunger or hunger-related disease are so resistant, one of which is the ideological limitation in the way society’s most
basic systems have been constructed (Yunus, 2006a; 2006b). Nicholls (2006), in other words, notes that the narrow
interpretation of capitalism is at the heart of the ideological failure to conceptualize a more socially economic order that
the world is suffering from. Yunus (2006) argues that in this narrow interpretation we create a one-dimensional human
being to play the role of entrepreneur. We insulate him from other dimensions of life, such as religious, emotional,
political, and social dimensions. S/he is dedicated to one mission in life – to maximise profit. This theory resulted in the
perception that you are contributing to the society and the world if you are just concentrating on squeezing out
maximum for yourself. When you get your maximum, everyone else will get his/her maximum. Hence, at the heart of
this failure is the division and categorization of society’s most basic entities: the for-profit and non-profit sectors. We
have compartmentalized and segregated social value from economic value in this construction in such a way that does
not allow the two to integrate and capture the multi-dimensional nature of the human beings (Yunus, 2006a). This has
led to the inability of each sector to do a sufficient job of meeting the social need, a problem that has gained attention in
recent years.
The general problem with non-profit is that they are trying to serve too many masters, as the management guru Peter
Drucker sees it (Drucker, no date; cited in Bronstein, 1998). In order for non-profits to be effective and competitive,
Drucker had some blunt advice for them: if your products/services are not number one or two in the market, kill them.
Rather than trying to be all things to all people, concentrate on doing the best job possible in few, carefully chosen areas
(Sterne, 1998). But, it is not easy to kill programs however economically unviable they are, especially if they are the pet
projects of board members or funders. This has not only earned a greater scepticism for the non-profit sector, but a
subsequent financial pressure as well (Johnson, 2000). On one hand where the non-profit sector is being criticized for
not being able to integrate the positives of free market, the for-profit, on the other hand, is facing increased pressure
regarding its failure to deliver social benefits (Johnson, 2000). In these circumstances, social entrepreneurship emerges
as a socially and economically efficient combination of these entities. It becomes a significant driver of social innovation
and transformation of various fields (environment, health, education) and thus seizes the opportunity that the
aforementioned two seem to have missed in order to improve systems, invent new approaches and advance sustainable
solutions that create social value.
Social entrepreneurship is also believed to have opened windows for private and non-profit sectors to partner and
overcome the problems faced and also in serving the social needs as Jeb Brugmann and C. K Prahalad (2007) have
suggested. They argue that “the liberalization of markets is forcing executives and social activists to work together. They
are developing new business models that will transform organizations and lives of poor people everywhere”. However,
the question worth asking here is why this move from being adversaries to partners? What is evident from the cases
reviewed during this study and the scenario explained above is that the private and non-profit sectors need each-other
to achieve their respective goals. On one hand, companies require NGOs local knowledge and community-based

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marketing techniques to set up successful enterprises. On the other hand, NGOs need the business discipline, urgency
and professionalism that corporations bring to their operations.
In conclusion, this can be said that the phenomenon of social entrepreneurship is on the rise, in research as well as in
practice. The first part of this study highlights the concept’s basic characteristics, it’s emergence at the global level, and
how it fills the void left by private and non-profit sector in serving the poor; the second part is focused on the economic
feasibility of the proposed social enterprise in Zanzibar. The concept has been successful in the past and will be even
more needed in the future in order to balance market failures, insufficient state allocation of social services and the
socially pervasive paradigm of money.
Methodology of the feasibility study
A mixture of desk based and primary research was used for this study. A previous report (Hotels Visit Report – CASH)
prepared by VSO staff was used to approximate the available demand for fresh fruits and vegetable. Whereas, primary
data collection was used to gather the information regarding production of fruits and vegetable.
Sampling
To complement the data from a previous research (Value Chain Analysis – VSO ICS), 21 fruits and vegetable traders were
interviewed to gather the information regarding market price for the produce. Since the proposed business – at least for
the first year – will be sourcing the produce from the 194 Lead Farmers, and looking at the heterogeneous profile, it was
decided to interview all of them rather than a representative sample. However, during the survey only 175 of them were
interviewed as some of the Lead Farmers were travelling outside Zanzibar or were not available for reasons beyond their
control. As for the traders, a Convenient Sampling method was followed considering the time constraint and availability
on their part.
As for the qualitative data collection – regarding issues related to legal structures and taxation – extensive interviews
and discussions were held with Cooperative Union of Zanzibar (CUZA), Registrar of Companies, Zanzibar Revenue Board
(ZRB), Tanzania Revenue Authority (TRA), Zanzibar Investment Promotion Agency (ZIPA), and a private consultant
agency, SISI Consultant.
Methods
For the quantitative data collection – regarding price and production – surveys were conducted. 14 local agronomists,
who have worked with the farmers under CASH, were used to carry out these surveys. A workshop was conducted to
train the researchers on necessary skills needed for the survey. Mock interviews were done to familiarise the
researchers with the practicalities of data collection. The researchers were run through the questionnaires to make sure
that they understood the questions. The questionnaires were pre-tested and based on the feedback, necessary changes
were made before starting the full-fledged survey.
For the qualitative data collection, unstructured key informant interviews were conducted with the respondents
mentioned above. Data was captured in the form of hand notes.
Assumptions and limitations
The study is based on the assumption that the overall demand for fresh fruits and vegetables in Zanzibar exceeds the
overall production and that whatever quantities of fruits and vegetables being produced on Zanzibar can be sold locally.
This assumption is based on various previous reports/research previously conducted by VSO.

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The study also has a geographical boundary. Literature and cases on social entrepreneurship from mainland Tanzania
and some other countries have been reviewed. The development of social enterprises (SEs) in Tanzania is at the nascent
stage. This means a large proportion of sources considered in this study are from the developed North and a few other
countries - such as Bangladesh and India – that have made progress with similar models.
Many of the cases reviewed for this study were legally identified as non-profit organizations. As discussed in details in
the later section on Legal Structure. This is, in part, due to the lack of appropriate legal structure that might host the
hybrid forms of social enterprises found elsewhere. However, for the purpose of this study, organizations identified as a
social enterprise in existing literature, or by a foundation or venture philanthropy organizations are considered.
The 175 farmers interviewed for this study cannot qualify as the true representative of all farmers in Zanzibar. These
farmers have been the beneficiaries of the CASH project for over 5 years. A large number of smallholders in Zanzibar is
yet to be benefited from these kinds of support.
Market analysis
The purpose of this section is to bring forward the need for an intervention from the market’s point of view. From the
various meetings/interviews and literature review, it is evident that the exiting value chain for fresh fruit and vegetables
does not meet the expectations of the market - the hotels.
Below is an analysis of the current market situation and the gaps that exist. A solution to overcome this and to help all
the stakeholders in the value chain is presented in the following section.
Demand side
According to existing literature and multiple discussions with VSO/UWAMWIMA staff members, it is well established
that the overall demand for fresh fruits and vegetables in the islands exceeds the overall supply. The Value for Money
study (2015)6
conducted by New Economic Foundation quotes:
“Despite the significant growth in tourism over the last 20 years; Zanzibar is under-cultivated with 80% of the
vegetables and fruits supplied to the hotel industry coming from outside the island.”
However, data gathered suggests that farmers are currently producing much more than 20 % of total demand for
produce, and that market failure plays a large role in preventing existing supply from meeting demand. Most of the
hotels have their suppliers on the mainland to supply things that are not grown on the island. And as for the products
that are grown in Zanzibar, hotels do not have confidence that one single trader or farmer’s association can consistently
supply the required quantity and quality in a timely manner. So, rather than having multiple suppliers on the island and
still having to import produce (that are not grown in Zanzibar) from mainland, hotels indicated that they would prefer to
have a single point of contact that can meet all their needs consistently.
What is clear is that importing fruits and vegetables from the mainland is costly for hotels when compared to procuring
locally. Although these outside sources meet the volume, variety and size requirements of hotels, they fail to deliver
fresh produce. Normally, the produce from outside Zanzibar takes three or more days, post-harvest, to reach the hotels
by which time quality, in terms of freshness, is poorer than that of the best locally produced goods. This is another
reason why hotels would prefer the local produce over importing from mainland.
6
Value for Money (VFM) study – CASH project

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Hotels interviewed in the previous research mentioned that they have tried sourcing local produce through the farmer’s
associations but they faced issues regarding timely and consistent supply and so many no longer source from the
associations directly. Hotels expect the farmers associations to operate like businesses; just as hotels are upwardly
accountable to their customer, they need their supply chain to be similarly professional. On the other hand the Farmer’s
Associations cite a lack of downwards accountability, blaming the hotels for not paying on time, as the reason for the
breakdown of commercial relationships.
Supply side
The primary quantitative data regarding the production of fruits and vegetable collected for this study clearly suggests
that the production of fruits and vegetables on the island has increased significantly in recent years. The charts below
show the kinds and quantities of fruits and vegetable grown on the island (Data collected for this study).
The products marked with (*) are bought/sold in bunches, not kgs. Since there is no standard size for bunches, it was not possible to convert them into kgs.
292650
218875
176880
164138
101010
95800
93075
88863
82346
55980
37415
20910
12075
9625
6531
4450
4450
3797
3020
2080
1009
1000
560
210
32
10
10
CUCUMBER
EGGPLANT
PASSIONFRUIT
TOMATO
WATERMELON
OKRA
PINEAPLE
GREENPAPPER
AMARANTH*
MANGOS
PAPAYA
ORANGES
PUMPKIN
CHINESE…
BANANA*
CABBAGE
AFRICAN…
ZUKINI*
HOTPEPPER
POTATO
JACKFRUIT
LIMES
ONION
BEETROOT
BASIL
CORIANDER*
AVOCADO
PRODUCTION (IN KG/BUNCHES)

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Training on best agricultural practices, better quality seeds, and other supports provided under projects such as CASH
has helped the farmers to graduate from being subsistence to having surplus to sell. Access to irrigation facilities have
also improved. 86 per cent7
of respondents report having unrestricted access to at least one reliable source of water8
,
allowing for year round cultivation.
The main challenge now is to connect these farmers with the high-return markets, the hotels in Zanzibar. VSO, through
CASH project, tried doing this via its partner NGOs such as UWAMWIMA, UWZ, and ZUWA in Zanzibar. However, for the
reasons explained in previous sections, this model did not work largely because of issues of accountability and business
planning that need to be addressed if farmers are to profit fully from their improved production. The farmers’
association are staffed by the farmers themselves. The associations are well placed to respond to issues relating to
agricultural production and immediate post-harvest activities (downwards accountability), but less well placed to
understand and respond appropriately to commercial relationships (upwards accountability).
The Solution
In order to guard against stock shortages, hotels are currently sourcing fresh fruit and vegetables from multiple traders.
This is because no single trader/business currently has capacity to consistently supply the desired quality and quantity
week in week out. To manage this risk hotels use multiple sources/traders to buy produce. They also buy the produce
from the mainland Tanzania via traders there, especially during the peak tourist season, this comes at an increased cost
to hotels.
This presents an opportunity for the proposed enterprise to enter into the market9
. To ensure the regular supply of the
desired quality produce, the existing network of Farmer’s Association will/can be used. These associations are working
with the farmers closely on the production side. The associations – funded by various national and international
organizations – are providing the farmers with agriculture know how, credits to buy farm inputs/tools such as material
7
The remaining 13 per cent of farmers whom do not have access to adequate irrigation facilities and can only grow crops during the
rainy season are working with the CASH project to change this.
8
This could be their own bore/open well, municipal water supply or a neighbour’s well
9
A SWOT analysis for the proposed enterprise is presented in the appendices
13%
42%
11%
33%
1%
Irrigation methods
Only grow during rainy season Have bore/open well
Share neighbor's bore/open well Use municipal water supply
Do rainwater harvesting

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required for drip irrigation, and other related services. Using this existing network of farmer’s associations will not only
be cost effective for the proposed business but will also promote local ownership of the initiative. On one hand, the
CASH project, in partnership with the Farmer’s Associations, will continue to support the farmers on the production side.
The proposed enterprise, on the other hand, will provide the farmers with an assured market for their produce. The
enterprise will be responsible for collecting, sorting, storing, packing, and supplying the produce.
However, there will still be times – especially during the peak tourist season – when the supply from farmers will fail to
meet contractual obligations with hotels; conversely, during the high production season (rainy season in Zanzibar), the
business might have extra produce to sell. To minimize the risk in either situation, sourcing from/selling into the open
market is advisable. Also, going forward, a third party contact should be setup on the mainland so as to import the items
that are not grown on the islands and/or to export things that are in excess quantity.
Importantly, by separating roles relating to upwards and downwards accountability, a social enterprise will help address
crucial issues by simplifying relationships. What must be assumed is that the farmers unions and the enterprise will
operate with a single aim. Farmers associations will be free to be fully downwardly accountable to farmers by
predominantly dealing with productive capacity and immediate post-harvest practices. In its new role, the enterprise
will manage commercial relationships with the buyers and ensure the whole operation remains upwardly accountable to
all stakeholders.
Organisation and technical structure
This section is in two parts: the first part discusses the possible legal forms that the proposed enterprise can take.
Considering the objectives of the enterprise and the current legal environment in Tanzanian, two suitable legal forms are
identified; these legal forms are then discussed. The second part of this section discusses the operations and planning.
Issues such as business operations, technical requirements, and staffing needs are considered here.
Legal structure
Existing debates and attempts to categorise social enterprises all focus on the function and efficiencies of institutions
(SEs) more so than legal structures. In terms of legal constructs, there is no categorising yet. While legal structure will
decide the origin and nature of the funds it attracts, non-profits, private limited, trusts/societies, co-operatives etc.
might all be considered here. However, because the proposed enterprise needs to be at least majority owned by/on
behalf of the farmers, the only suitable legal forms are Co-operative union and Public Limited Company. These two types
or organisation and their legal structure are explored below.
Cooperatives union
A co-operative is a group of people who work together voluntarily to meet their common economic, social, and cultural
needs through a jointly owned and democratically controlled enterprise. Co-operatives are based on the values of self-
help, self-responsibility, democracy, equality and solidarity. Co-operatives are voluntary organizations and its
membership is open to all persons who are able to use their services and willing to accept the responsibilities of
membership, without any discrimination10
. The members elect a management committee that is responsible for carrying
out the business that the co-operative is involved in. The management committee - acting on behalf of the members -
can enter into an agreement with other organizations including the government, or raise funds from external sources.
However, this is to be done by ensuring the democratic control by their members and maintain their autonomy.
10
Zanzibar Cooperative Development Policy - The Revolutionary Government of Zanzibar, April, 2014

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All cooperatives in Zanzibar are governed by the Co-operative Societies Act, (1986)11
. The sector has a three-tier
structure comprising of primary cooperatives, secondary cooperatives (unions), and an apex body. The responsibility for
coordinating cooperative development is vested under the Department of Cooperatives within the Ministry of
Empowerment, Social Welfare, Youth, Women, and Children. The mandatory area of the Department includes
registration of cooperative societies, facilitation of cooperative education and training, auditing, monitoring and follow-
up of co-operative societies. There are four main sectors, namely: (i) finance, (ii) agriculture (including livestock and
fisheries), (iii) small-scale manufacturing and handicrafts, and (iv) tourism, in which cooperatives in Zanzibar are
operating.
Public Limited Company
A public limited company (PLC) is the standard legal designation used for a company that has offered shares to the
general public and has limited liability12
. A public limited company’s stock can be acquired by anyone and the liability of
shareholders is limited to potentially losing the amount paid for the shares. Being a PLC allows a firm to sell shares to its
investors to raise capital. Only PLCs may be listed on a Stock Exchange to trade its shares.
A company, public or private, in Zanzibar is registered under/governed by the Company Decree, Cap 153. The rules and
regulations around PLCs in Zanzibar are, however, a bit ambiguous. This is mainly because Zanzibar does not have many
resident corporations registered as PLCs. Nor is there a Zanzibar stock exchange where a PLC might be registered and
shares traded in order to raise capital. Companies in Zanzibar wishing to become a PLC choose to register at Dar es
Salaam’s stock exchange on mainland Tanzania.
Discussion of the operating environment
Even though the state has introduced a few policies in past two decades aiming at liberalizing Zanzibar’s economy and
promoting its resources for global markets, in general the private sector in Zanzibar still remains highly regulated. In a
ranking of 183 global economies, Zanzibar falls at 155th
place – 21 places behind Dar es Salaam in 131st
place (World
Bank, 2010). On the ease of starting a business and registering property, Zanzibar would rank 162nd
and 170th
,
respectively. The relatively poor performance is mostly due to the high number of procedures and the high cost
associated with them. Starting a business requires 10 steps, 2 more than the global average. It takes around 28 days to
comply with all registration requirement to set up a limited liability company and start to operate. While incorporation
with the Company Registrar in Zanzibar is relatively simple and takes less than a week, the post-incorporation
procedures – such as preparing a company seal, applying for all required tax numbers from TRA and ZRB, obtaining a
business licence, registering with the Zanzibar Social Security Fund (ZSSF) and with the National Insurance Corporation,
11
The Co-operative Societies Act, No. 4 of 1986
12
Information retrieved from http://www.investopedia.com/terms/p/plc.asp

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and submitting employees’ contract at the Labour Commission – take up to 18 days to complete.
On the other hand, the regulation and oversight present in the non-profit sector are significantly fewer. The state’s co-
operative policy is to simplify the procedures as much as possible and to adopt a self-regulatory system. Grey areas in
law constructed within the non-profit sphere worldwide have turned out to be favourable for social entrepreneurs. This
has helped them to bypass the regulatory limitations. While social enterprises do strive towards sustainability, neither
financial self-sufficiency nor profit generation is mandated. The criteria by which social enterprises are identified are
generally a mix of social impact, sustainability/financial self-sufficiency, innovation, scalability and entrepreneurship. As
a result, the most common form of social enterprise is the ‘hybrid’13
model of a for-profit and non-profit organization
that can generate some income, but still accepts or relies on philanthropic donations to continue its operations. This is
also because in most cases, the initial capital that is required to start a business that is driven by a social cause is huge
and can make the business look unviable.
The department of co-operatives in Zanzibar produced a draft of its new policy in 2009. There are numerous
amendments/policy objectives that are proposed in the draft – if implemented with good intentions – can change the
way the co-operative sector is working. Some of these policy objectives are as under:
- To reverse the trend of state controlled co-operatives and promote autonomous self-help co-operatives that are
member-based, economically viable and strong
- To comply with the International Co-operative Alliance (ICA) standards
- To support the establishment of viable co-operative financial institution
- To encourage internal co-operative capital formation
- To protect co-operative business operations against unfair competition
- To recognize and support small producer group initiatives so that they can become economically strong co-
operatives
- To support and encourage the provision of co-operative education, training, and research services that focus on
member empowerment
The Director of the government’s co-operative department in Zanzibar stated that the department has already started
working to reach these objectives. However, these activities have not been verified as they fall outside of this study’s per
view. The Director displayed great enthusiasm to collaborate with VSO in promoting the co-operative movement in
Zanzibar. Based on these observations, considering the initial capital requirement, the attitude of the state towards
private sector and the support available to co-ops, it is recommended that VSO use a co-operative model for the
proposed enterprise.
Tax
As for the taxation, there are two main authorities involved in tax collection from businesses, namely: Tanzania Revenue
Authority (TRA) and Zanzibar Revenue Board (ZRB) who also collect Value Added Tax (VAT).
13
In India, for example, a majority of SEs are registered under Sec 25 of the Companies Act 1956. The companies registered under
this section have all the positives of being a private limited and are still allowed to accept grants. The only condition is that the
proceedings made from the operations have to be used for development purposes. However, this kind of hybrid model is yet to
emerge in Tanzania.

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VAT
Some products are highly taxed at point of sale and some are exempted from VAT, thus the amount of VAT paid by a
business varies greatly depending upon the nature of the product(s) with which it is dealing. According to the ZRB, every
business - irrespective of its legal form - must be registered for VAT unless their product(s) is/are exempted from VAT or
gross sales are below TSH 30 million per year. However, in the latter case, a business is required to be registered for
stamp duty and to pay 3 percent of its gross sale as stamp duty.
Business revenue tax
The business revenue tax - irrespective of a business’s legal form - is charged at 30 percent of the profits and is collected
by the TRA. A business can approach the Ministry of Finance and can apply for income tax exemption if the sole purpose
of the business is socio-economic development of underprivileged communities and if the profits made by the business
are not shared by few individuals but by the community at large.
From a practical point of view, it is far easier to get tax exemption being a co-operative as compared to a company. The
perception of co-operatives – from the government in particular – is that they are a fragile entity that needs all kinds of
support necessary to achieve its objective. Companies, on the other hand, are perceived by tax authorities as
opportunistic entities solely interested in profits.
Operations and planning
For the administrative purposes, Unguja the main island of Zanzibar, is further divided into six districts; North A, North B,
West, Urban, Central, and South. The main town on Zanzibar which houses a majority of high-end hotels and all the
three main vegetable markets is in Urban district. Most of the agro-production, however, happens in the other five
districts. Farmers from these districts bring their produce to the main markets in Stone Town to sell. For lower quality or
for smaller quantities of produce farmers currently use local government markets in their areas - Kinyasini vegetables
market in North A, for example – as it does not makes economic sense to travel all the way to markets in Stone Town.
Some of the hotels located further away from Stone Town, may also buy fruits and vegetables from these local markets.
Collection and transportation
Currently, most small-scale vegetable producers personally take their produce to sell in local markets, despite the high
transaction costs involved. The produce is normally loaded onto a local bus (daladala) or sometimes a private vehicle is
used. Traders are likely to hire or use their own vehicle to transfer the produce from farm or port to market and
between markets and to consumer. Some larger hotels and restaurants tend to have their own transport. In almost all
cases, packaging is usually inadequate – commodities are thrown into baskets or sacks, which are handled poorly –
leading to considerable damage and wastage.
To avoid this damage/wastage, the proposed enterprise plans to use a standard size plastic crate to carry and store the
produce. These crates can be stacked one on top of other, which makes it easier to store and also saves space. Farmers
can be provided with the crates at a nominal price. Four collection centres (one each in North A & North B districts and
two in Central district) will be setup to collect and grade produce. The farmers in the respective areas will come to these
centres (during the stipulated hours) to supply their produce. They will use the crates to bring the produce to the
collection centres. Each collection centre will be provided with two electronic weighing scales (one 0-10kg capacity and
the other up to 100kg). To ensure the quality of the produce, strong quality standards will need to be established.
Collection centres should not accept sub-standard produce. Payments to farmers shall be made upfront when produce is
submitted to the collection centres. A collection vehicle (a medium size truck) will then collect the produce from all the

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collection centres and bring to the central cold storage facility in Stone Town. Considering the quantities of the produce
and in order to optimize the operating costs, the collection should be done on alternate days. On the first day, the
collection vehicle will visit the collection centres in North A and North B districts. On the second day, it will go to the
centres in Central district. And the cycle continues.
For the first year, the proposed business plans to source its produce from the 194 Lead Farmer who are spread across
Unguja Island. However, only 175 Lead Farmers who were interviewed for the study have been considered for first year
revenue projections. Each Lead farmer supports and mentors 15-20 additional smallholder farmers. Going forward, the
proposed enterprise will increase the amount of produce collected by asking Lead Farmers’ to source additional quality
produce from group members who are ready to participate.
For further information on route plan and contact details for each collection centre, please follow the link https://www.google.com/maps/d/edit?mid=zcJNOI-
SwvyY.kTlcjw1aYHgY
Storing and supply
In order to make sourcing, sorting and supplying fresh fruits and vegetables more efficient, a central
warehouse/collection/cold storage facility is required. This facility should be big enough to store 4-5 days’ worth of
supply in case there should be an unforeseen situation affecting the collection of the produce. A facility that can house
around 20,000 kg of fruit and vegetables should be big enough even taking into consideration the expansion of the
business for next 4-5 years. The facility should ideally be located in or near to one of the vegetable markets in stone
town. However, considering the size of the market and the number of farmers/traders coming there to buy/sell the
fruits and vegetable every day, Mwanakwerekwe market will be the best location for the facility. The ideal space for this

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would be an independent property that has enough space for housing the cold room, office space, and parking for the
vehicles.
A small size cooling truck will be needed to supply the produce to the clients. For collection, however, an ordinary
freight truck (non-cooling) may be used for collection as the produce will be fresh and it will not take more than two
hours to transport it to the storing facility. So there is practically no risk of produce going bad. But, once the produce
enters the cooling facility and the temperature is brought down from, say, 25C to 10C, it will be risky then to take it in a
non-cooling truck to supply.
The first in first out (FIFO) model of stocking should be followed at the storing facility. And appropriate inventory
management software should be put in place for better stock management. As also mentioned above, a buffer stock of
4-5 days’ worth of supply should be maintained at all times to guard against any sourcing related uncertainty.
Technological requirements
IT
Two desktop computers, one each for operations and accounting, will be needed. Buying a good quality licensed
antivirus is also advisable. One small sized printer, with the facility of photocopy and scan, will be needed. An internet
connection with reasonable speed will be needed as well.
Customer relationship management (CRM)
CRM software is a category of software that covers a broad set of applications and software designed to help businesses
manage customer data and customer interaction, access business information, automate sales, marketing and customer
support and also manage employee, vendor and partner relationship. While the phrase customer relationship
management is most commonly used to describe a business-customer relationship, CRM systems are used in the same
way to manage business contacts, clients, contract wins, and sales leads.
Small business CRM software will be a big enabler for the proposed enterprise helping to manage all operations in an
efficient and in a business like fashion. In case fulltime staff are not equipped with the necessary IT skills to be able to
make the most out of it, a VSO Knowledge Exchange volunteer should be requested to train the designated staff. Most
software vendors also provide some preliminary IT training to help the businesses.
Software for inventory management and accounting
A simple Inventory Management software used by small super markets will suffice. However, there is a fair chance of
getting this inbuilt within the CRM software. This needs to be further explored with the vendor.
Accounting software
Even though simple Tally software might meet basic requirements, using accounting software that is used locally by
accounting institutions will support a working relationship with local accountants.
Cold storage
Considering the perishable nature of the products, the cost and availability of the technology (for cooling) is critical.
Since 4-5 days’ worth of supply will be stored in the warehouse, there should be a good quality cooling system in place
so as to maintain the quality of the produce. Two quotations were received from Zanzibar Hotels & Catering Supplies
and OZTI East Africa for constructing a cold room.

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Even though the electricity supply in Zanzibar is fairly reliable, it is still necessary that we have a backup generator set for
any power cuts.
Cooling vehicles for supply
Other than a small size mini truck for collection, one mini truck/van with cooling facility will be needed for supplying the
produce to hotels and other potential clients. There are two small cooling vans sitting in Dar office that were bought
under CASH project. These can be used for the supplying the produce to the hotels. However, since they are bought
second-hand and haven’t been operational for quite some time now, some repairing/maintenance work will be needed.
Staffing requirements
Fulltime staff
The table below suggests the number of fulltime staff with required skills and experience needed for the proposed
enterprise.
Profile No. of Posts Ed. Qualification & Exp.
CEO/GM 1 Master’s Degree in Economics/Business Management with 5+
years of
work experience in similar organization
Sales & Marketing Manager 1 Degree in Marketing/Business Management with 2+
years of experience
in sales/marketing
Finance Manager 1 Degree in Finance or Business Management with Finance as major
subject, 4+
years of work experience
Warehouse/Stock Manager 1 Degree in Procurement or Business Management with Operations as
major subject, 2+
years of experience
Driver 2 Secondary education with 5+
years of driving experience on commercial
vehicle
Helpers 2 Secondary education
Office Assistant 1 Secondary education with basic computer skills
Volunteer support to develop capacity
Some of the fulltime positions mentioned above can be filled by the long term VSO volunteers, especially if the required
skills are not available locally. A local counterpart may be assigned to these volunteers to build his/her capacity. Short
term Knowledge Exchange (KE) volunteers can be used to put systems such as CRM in place and train the fulltime staff
to insure sustainability.

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Financials
Profit and loss projections
Tsh Tsh
'000 '000
Sales (from Sales Tab) see note 1 2,368,430
Less Cost of Goods Sold 1,496,781
Less spoilage (5% allowance) see note 2 118,422
Less collection costs see note 3 7,000
Total Cost of goods sold 1,622,203
Gross Revenue 746,228
Operating Expenses
Bank Fees 600
Communications (Phone & Internet) 4,000
Depreciation 28,226
Electricity Office 1,500
Electricity - Cold Store see note 4 6,000
Insurance -Fixed Assets Total of USD 500 per annum 1,100
- Staff Ins (3% of salaries) 5,760
Licences & Fees First year only 500
Marketing Activities 15,400
Maintenance (buildings & equip) 12,000
Office Supplies & Cleaning see note 5 12,000
Rent USD1,000 per mth 26,400
Sales Tax (Zanzibar Revenue Board) 3% of gross sales (note 6) 67,500
Transport - delivery / freight outwards 14,000
Travel costs and allowances 12,000
Training see note 6 0
Wages & salaries 192,000
398,986
Net Profit Before Income Tax 347,241 Tsh '000
Projected income tax (note 7) TRA - 30% of Net Profit 104,172
Profit after Tax 243,069 Tsh '000
Zanzibar Fruit and Vegetable Company
Projected Profit & Loss Statement for first 12 months of operation

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Start-up costs
Estimated Annual
CAPITAL EXPENDITURE BUDGET Tsh Life - Years Straight Line
Depreciation
Pre fabricated vegerable cold store
Supply 13,820
Installation 5,200
Transport 3,125
USD 22,145 48,719,000 10 4,871,900
Back up Generator for Cold room USD 18,000 39,600,000 10 3,960,000
Pick up truck - collect produce from collection centers
quotes to be obtained estimate USD 30,000 66,000,000 10 6,600,000
Desktop PC's x2 USD 1,390
Printer USD 257
Software USD 18,440
20,087 44,191,400 5 8,838,280
Packaging Crates
Product Crates these to be supplied to farmers for delivery of produce, storage and used
for conveyance and delivery to customers
Indicative pricing (subject to negotiation) Tsh 20,000 each
Numbers required
Initial estimate 500 10,000,000 5 2,000,000
Weighing Scales 1x small & 1 x large at each location
3 collection centers and 1 Cold store
4 Table Top scales 0 to 15 kg 466,102 each 1,864,408
4 Platform scales 10 to 1-0 kg 974,576 each 3,898,304
5,762,712 5 1,152,542
Delivery Trolleys 1,500,000 10 150,000
Processing Packaging tables 2,000,000 15 133,333
Fire Extinguishers / Safety Equip 200,000 10 20,000
Office Furniture & Fixtures - Tables, Chairs air Cond. 5,000,000 10 500,000
Working capital based on 3 months purchases 350,000,000
Cover cash flow mismatch (pay on purchase / 30 payment
from Customers) plus operating expenses.
TOTAL ESTIMATED START UP CAPITAL 572,973,112 Tsh
INCLUDING WORKING FUNDS
Estimated annual depreciation 28,226,056

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Balance sheets
Notes:
Tsh '000 Tsh '000
ASSETS
Current Assets
Cash at Bank 350,000 511,167
Accounts Receivable 0 200,000 2
Stock on Hand (estimate) 14,300 3
725,467
Fixed Assets
Cold Store & Generator 88,319 88,319
Less Provn. for Depreciation 8,832 79,487
Vehicles 66,000 66,000
Equipment 68,654 68,654
194,747
TOTAL ASSETS 572,973 920,214
LIABILITIES
Current Liabilities
Taxation Liability 0 104,172
Total Liabilities 0 104,172
Owners Equity
Retained Earnings 0 243,069
Establishment Grant 572,973 572,973 1
Total Owners Equity 572,973 816,042
Total Liabilities & Owners Equity 572,973 920,214
Notes:
1. Balance Sheet is predicated on assumption that the start up funds of Tsh 573 million is provided
by way of a grant and that the Company has no liabilty to repay that grant.
2. Accounts receivable has been assumed as one months projected sales.
3. Stock on Hand is estimated as 3 days of average purchases.
(purchases of Tsh 1,496,000 / 313 (6 days per week) x 3)
PLUS 12 MONTHS
Projected BALANCE SHEET as at:
COMMENCEMENT DATE COMMENCEMENT DATE

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To gain a full understanding of the financial statements, especially the Sales and Purchases figures in the Profit & Loss
Statement, please refer to the various tabs on the spreadsheets provided.
The “Sales” and “Cost of Goods Sold” figures were developed by several steps:
1. The Production spreadsheet sets out the total fruit and vegetable production by the lead farmers (Tot. Prod tab),
it also shows how the product buy and sell pricing was derived (Prod Pricing tab).
2. The Purch & Sales tab in the P&L workbook then shows how the product production and buy/sell pricing were
combined to come up with the figures for Sales and Cost of Goods Sold in the P&L.
3. The “Notes” tab on the various spreadsheets is also important as they set out the assumptions that are inherent
in the numbers used.
Sources of finance/capital
The farmers are not in a position to raise funds that can meet the requirement for start-up capital which is around USD
260,000; around 60 percent of which will go towards meeting working capital requirements. VSO need to raise funds for
this. The start-up capital can come as mix of grant and soft loan. However, for the calculation purposes here, it is
assumed that the whole start-up capital will be raised in form of grants. That is why neither there is provisioning done
for interest payment/repayment of loan in the P&L account nor any liabilities shown in the balance sheet
It is worth mentioning here that the grant part is needed to buy the fixed assets for the first time only. The projected
P&L account has a provision for depreciation which means that the enterprise can and will be in position to replace
these assets in due course without having to need external support.
Conclusion, recommendations and long-term planning
From this study it seems evident that an enterprise of this nature is feasible and will benefit both farmers and the hotels.
But, the devil is in the details. Once you start calculating the amount of capital expenditure one has to spend in order to
get the enterprise up and running, you begin to think whether this is possible or not, considering that the farmers
themselves can never raise enough capital to meet the requirement. Perhaps that is the reason why many
researchers/experts on the topic of social entrepreneurship have suggested that a social enterprise should adopt a
hybrid model whereby it can accept some charitable funds to get it off the ground. However, the underline condition
remains that the enterprise should – in order to be financially sustainable in future – be able to cover its running costs
from its operations. Considering this, the proposed enterprise is financially viable as long as it can manage to raise funds
to support the initial capital expenditure. The financial analysis shows that the enterprise can not only take care of its
operating costs, it can also manage to replace the fixed assets in future without having to need external support.
As for the legal structure, it seems that in the given situation going for co-operative model is the best choice. Unlike
countries that recognize the role of SE sector in addressing social needs and have subsequently developed legal
structures that support their development, Tanzania is yet to legislate for ‘hybrid’ legal form that are fit for purpose.
The proposed enterprise should be registered as secondary co-operative society. It’s the second level of the three tier
co-operative structure in Zanzibar. Any five or more persons can form a primary co-operative society. A majority of the
farmers that CASH works with are already organized in groups which can be registered as primary societies. These
primary societies then can go on to form a secondary society. As per the Co-operative Act 1986, secondary societies are
formed to perform the following, but not limited to, tasks:

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- To collect from primary societies to process, and to deliver for marketing various products
- To procure and distribute various inputs required by its member primary societies
- To provide finance for the purchase of various products for its member primary societies
- To establish, operate, and maintain large scale farms for agricultural production
- To manage, supervise, and coordinate the activities of member societies
- To acquire, maintain, and operate building and equipment for the assembling, warehousing, and transporting of
agricultural products belonging to member primary co-operative societies
- To provide accounting and audit services to member societies
If the proposed enterprise is to succeed it is crucial that it is managed by professionals until the local capacity is built,
this is expected to take at least three years. In order to ensure this, VSO may have to assume full control of the
operations and management of the enterprise for, at least, three to five years. This arrangement can be made possible
by signing an agreement with board/management committee of the co-operative, which is legally possible. However, it
is advisable that VSO discusses this with the department of co-operatives beforehand14
. VSO may want to make it its
primary condition for the support/investment that it brings. VSO can also assume an advisory position on the board of
the co-operative. But, again, this needs to be further explored with the department.
The CASH project is also experimenting with processing some of the fruits and vegetables grown on the island. This is
being done in partnership with the Ministry of Agriculture. However, there is no clarity as to who will be
running/managing should this initiative becomes a mainstream enterprise. A current VSO volunteer working on the
project shows concerns over leaving this to the Ministry to manage. Since this project – if operational – will be selling
processed fruits and vegetable based products, this has to be done by a business entity. VSO or the Ministry are not
legally meant for carrying out business activities. So one of the wild recommendation here is to bring this initiative under
the proposed enterprise. This will be very cost effective as the proposed enterprise will already have its sourcing and
supplying channels and other infrastructure in place. A lot of money can be saved that the initiative – if chooses to be a
separate business entity – will have to incur on overheads. In case of any technical reason, if this does not work out and
that VSO/Ministry do decide to have this initiative registered as a separate legal entity. The proposed enterprise, in that
case, can still be a supplier for the raw material that the processing business will need for its operations.
Going forward, more emphasis might be put on producing Organic/Fairtrade products and a separate product category
can be created in order to tap into the premium market. Some high-end hotels and high-income residents – mostly
expats – in Zanzibar might be target market for these products. The promotion of Organic/Fairtrade agriculture can be
done through trained extension workers and through certification (e.g. Tanzania Organic Certification Association
TanCert). In case the enterprise starts processing/manufacturing products such as juice, sauces, and preserves, there is a
greater possibility to tap into the tourist market15
.
Zanzibar has a substantial expat community living/working in and around Stone Town on the main island. An average
size family – two adults with two kids – spends something between TSH 100k to 150k on their weekly shopping for fruits
and vegetables. It will be worth considering for the proposed enterprise to serve this niche market. The worth
mentioned fact here is that the enterprise need not to make any extra investment in order to serve this market. All the
needed infrastructure will already be in place. On the other hand, however, this can generate a significant revenue on
14
The Director of Co-op Department, Mr. Simba, when interviewed, was in full agreement for this kind of arrangement with VSO.
15
As per the RGZ website, Zanzibar received around 200,000 foreign tourists last year and the number is expected to grow year-on-
year.

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top of serving hotels. If the enterprise can design a basket that has the main fruits and vegetable products that can last
for a week for an average size household, this can be a big hit. Not to mention, the profit margins will also be high in this
case. A couple of expat household that I visited during this study showed a great interest in supporting an initiative like
this.
In terms of product portfolio, there are around 27 products (both fruits and vegetable) that are grown on Zanzibar.
There is a huge variation in the quantities of these products being produced. An overall ranking16
of these products was
done based on two criteria; the quantity produced for a particular product and how many farmers are growing that
product. They are ranked from 1 – 27, where one being the highest rank and 27, the lowest. In the beginning, it is
advisable for the enterprise to focus on supplying hotels with the products with higher ranks, especially when the
relationship is in form of enforceable contracts. Unless a reliable and sizable supply is ensured for the products with
lower ranks, the enterprise should avoid supplying them to the key buyers. This may, however, discourage hotels to
come on board in the beginning as they prefer to have a supplier with a broad range of products.
From the procurement side, however, the enterprise should buy every product from the farmers that it will serve. Since
the proposed enterprise plans to use the open fruits and vegetable market as its fall back17
option. The products that are
not supplied to the hotels can be sold in the open market. There are two benefits of doing this. One the farmers will be
more willing to participate if they were to sell all their produce at one point of sale rather than selling part of it to the
enterprise and still having to go to the open markets to sell the rest. Two, this will help the enterprise reaching
economies of scale and thus bringing down the operational costs.
References
Alvord, S. H., Brown, L. D., & Letts, C. W. (2004). Social entrepreneurship and societal transformation. Journal of Applied
Behavioural Science .
Bornstein, D. (2004). How to change the world: Social entrepreneurs and the power of new ideas. Oxford: Oxford
University Press.
Brugmann, J., & Prahalad, C. K. (2007). Cocreating business's new social impact. Harward Business Review.
Dees, J. G. (1998). Enterprising Non-profits. Harward Business Review .
Dees, J. G. (2007, March/April). Taking Social Enterprises Seriously. Society , pp. 24-31.
Dees, J. G., & Joan, E. (2008). The Challenges of Combing Social and Commercial Enterprises. Business Ethics Quarterly.
Doing Business in Zanzibar. (2010). Retrieved from World Bank: http://www.doingbusiness.org/reports/subnational-
reports/zanzibar
Drucker, P. F. (1985). Innovation and Entrepreneurship. New York: Harper & Row.
Foundation, N. E. (2015). The Value for Money. Zanzibar: VSO, Tanzania.
16
The chart that shows this ranking is available in the appendices
17
In case of short supply the enterprise will procure from the open market in order to meet its contractual obligations. And if there
is excess produce, it can be sold in the open market.

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2016
Henton, D., Melville, J., & Walesh, K. (1997). The age of the civic entrepreneur: Restoring civil society and building
economic community. Nationa Civic Review, (pp. 149-156).
James, S., & Frank, G. (2015). Hotel Visit Report. Zanzibar: VSO, Tanzania.
Johnson, S. (2000). Literature review on social entrepreneurship. Canadian centre for social entrepreneurship.
Martin, M. L. (2012). Social Entrepreneurship, A single case study of a social entrepreneurship in Danish non-for-profit
sector.
MoA. (2000). Zanzibar Agriculture Sector Policy. Zanzibar: Ministry of Agriculture, Livestock, and Environment.
MoF. (2002). Zanzibar Poverty Reduction Plan. Zanzibar: Ministry of Finance and Economic Affairs.
MoF. (2002). Zinazibar Vision 2020. Zanzibar: Ministry of Finance.
MoT. (2004). Zanzibar Tourism Policy Statement. Zanzibar: Ministry of Trade, Industry, and Tourism .
Nicholls, A. (2006). Social Entrepreneurship: New models of social change. New York: Oxford University Press.
Reis, T. (1999). Unleashing the new resources and entrepreneurship for common good: A scan synthesis and scenario for
action. Battle Creek: W. K. Kellogg Foundation.
Revelutionary Government of Zanzibar. (2016, April 4). Retrieved from
http://www.zanzibar.go.tz/index.php?rgo=tourism
Schumpeter, J. A. (1951). Entrepreneurs, Innovations, Business Cycles, and the Evolution of Capitalism. In R. V.
Clemence. Cambridge.
TAHA. (2016). Horticulture in Tanzania. Dar es Salaam: TAHA.
Volunteers, I. (2015). Value Chain Analysis; Fruits and Vegetables. Zanzibar: VSO, Tanzania.
VSO. (2007). Market Assessment and Value Chain Development, Unguja. Zanzibar: VSO.
Yunus, M. (2006). Free Market Economy. Nobel Lecture. Oslo, Norway.
Yunus, M. (2006). Social business entrepreneurs are the solution. Skoll World Forum on Social Entrepreneurship at
Oxford University. Packages Corporation Limited.

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Annexes
1. List of traders interviewed
List of traders
interviewed.xlsx
2. List of lead farmers Interviewed
List of Lead Farmers
interviewed.xlsx
3. Questionnaire for lead farmers
Questionnaire for
Lead Farmers.docx
4. Questionnaire for traders
Questionnaire for
Traders.docx
5. Financial statements
CAPEX BUDGET
APR16 v3 20 apr.xlsx
Profit & Loss
statement.xlsx
Projected Balance
Sheet.xlsx
Production.xlsx
6. Hotel Visit Report – CASH
CASH Hotel Visit
Report.docx

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7. SWOT analysis for the proposed enterprise
Strengths Weaknesses
- Many years of supply-side capacity building work
done by VSO and partners organization
- The available network of farmer’s associations
- Lack of competition from a sizable competitor
- Pro-poor model
- Professional support from VSO
- Pro-poor model
- Lack of business mindedness among the locals
- Lack of start-up capital
Opportunities Threats
- Fresh start with a business mind-set to address the
challenges exposed through CASH
- Tap into the potential market which has no sizable
competitor serving it
- Ambiguous laws and regulations governing the
businesses in Zanzibar
- Excessive taxation levied by the government
- State’s involvement with the co-operatives
8. A VFM study graph showing outcomes of CASH

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2016
9. An overall ranking of the products grown in Zanzibar

Zanzibar Fruit Company Feasibility Study

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