Profitability Analysis of Tree Growing in the Southern Highlands of Tanzania

Abstract

This study aimed at determining the extent to which the smallholder tree growers benefit from tree growing activities. It strove to accomplish the following: (i) analyse costs and benefits associated with tree growing activities; (ii) determine profitability indices; and (iii) assess economic status of respondents in the study area. Stratified random sampling technique was used to draw respondents. Mixed research methods for data collection were employed: household survey using semistructured questionnaire, key informants’ interviews, focus group discussions, and researcher’s direct observation. Data were analysed using Statistical Package for Social Sciences (SPSS) and Microsoft Excel computer programmes. Profitability was analysed by gross profit margin (GPM) and return on investment (ROI). Findings suggested that tree growing activities are profitable with GPM of 21% and ROI of 26%. ANOVA results showed no statistical difference within study districts between tree growers and non-tree growers. The possible explanation of this situation could be that tree growers have not invested much the benefits they get from tree growing into asset endowment. ANOVA results on household income revealed a similar pattern except in Njombe DC where there was a statistical significant difference in household income between tree growers and non-tree growers (F (1, 64) = 5.989, $P=0.017$ ). The effect size of the difference is medium (Eta = 0.08). It is concluded that tree growing activities in the Southern Highlands of Tanzania are economically profitable.