Cost Efficiency Of Small Scale Sunflower Processors In Dodoma Region In Tanzania

ABSTRACT

This study was undertaken to analyse the cost efficiency of sunflower processing firms in Dodoma Region. The specific objectives were to: (i) analyse the level of cost efficiency, and (ii) determine the factors affecting the cost efficiency in small scale sunflower processors. Simple random sampling was employed to select 70 sunflower processors from Kongwa and Dodoma urban districts in Dodoma Region who were then interviewed using a semi-structured questionnaire. Data analysis techniques included the collating field data and decomposing it into descriptive statistics and estimating translog cost frontier. Descriptive statistics showed that cost of raw materials accounted for 61.21% of total cost of production (whereby sunflower seed accounted for 94.5% of raw material cost, transport cost (5.1%), and storage cost (0.5%)) followed by cost of fixed assets (22.68%), overhead costs (11.45%), and labour (4.67%). The sunflower processing sub-sector is dominated by male (92.7%) compared to 7.8% of their female counterpart. Empirical results also indicate that the average cost efficiency of sunflower processors was 112%; however, this ranged from 110% to 129%. Additionally, the output elasticity and cost elasticities due to materials, energy and transport significantly affected the total cost of sunflower oil production. Formal education, type of machine used by processors, access to finance had positive effect on the Cost Efficiency (CE) while membership to processors’ association had negative effect on CE. In general, the study found that the high cost of production of sunflower oil was due to high sunflower seed prices and unreliable power supply which significantly affect sunflower processors’ in Dodoma Region. The study recommends a number of measures to enhance sunflower processing efficiency in the study area to include: improving processors’ skills through capitalizing on specific efficiency-enhancing trainings e.g. KAIZEN’s and TFDA’s; upgrading the type of machinery i.e. integrating the currently in use Chinese technology with the up-coming iii Indian technology; improvement of individual processor’s credit rating through relocation of plants to the municipality’s planned industrial area which well versed with requisite infrastructure (building, electricity, water etc.), expanding creditor base to include also non-bank and other informal lenders, building internal competencies for processors in developing their business plans in a manner that enables them to have better appraisal of their financial transactions.