A review of the Hand in Hand Initiative’s Financial & Economic Analysis of the Soybean Value Chain in Tanzania
Tanzania’s agricultural sector is sitting on an underexploited goldmine — and a new analytical report from the Hand in Hand Initiative in Tanzania is making the case, with numbers, for why now is the time to act on soybeans.
The report, produced in collaboration with Tanzania’s Ministry of Agriculture, presents a comprehensive financial and economic analysis of the soybean value chain, zeroing in on the Ruvuma region as a priority investment zone. What it reveals is a story of vast potential, a significant supply gap, and investment cases that are, on the evidence presented, genuinely viable.
A Crop Whose Time Has Come
Soybean is a significant crop in Tanzania due to its nutritional value and versatile applications at both household and industrial levels. Increasing soybean production offers several benefits, including reducing the country’s reliance on imports and preserving foreign exchange reserves — with Tanzania generating USD 75 million through soybean exports in 2021 alone.
The growth trajectory of the crop over the past decade is striking. According to the Ministry of Agriculture, soybean production in Tanzania rose from 8,100 MT in 2012 to 25,900 MT in 2022. Projections are equally encouraging: the Report Linker, a trade-based statistics database, estimated that production would reach 32,310 MT by 2026, growing at an average rate of 4.5% year on year.
Yet production numbers alone tell only part of the story. The market potential for soybean end products in Tanzania is substantial, given the country’s total population of approximately 60 million people and a significant number of animals. Tanzania has the largest livestock population in Africa, with approximately 36,584,883 cattle, 26,580,497 goats, 9,087,935 sheep, 3,670,229 pigs, and 97,940,331 chickens.
The Supply Gap: An Opportunity in Plain Sight
Despite this growth, a critical imbalance persists between what Tanzania produces and what it needs. According to the Songea Namtumbo Cooperative Union (SONAMCO) and information from the Ministry of Agriculture, the annual demand for soybean in the country is approximately 140,000 MT, while the current domestic production stands at around 30,000 MT per year. As a result, Tanzania relies on soybean imports from neighboring countries like Zambia and Malawi to bridge this supply deficit.
This gap — more than 110,000 MT annually — is not merely a problem. The report frames it as an opening. In-country off-takers are competing with foreign buyers who also buy soybean from local producers, testifying to significant market potential and scope for investment in various stages of the soybean value chain.
Why Ruvuma?
The report does not scatter its investment recommendations across Tanzania broadly. Instead, it anchors its analysis firmly in the Ruvuma region, and for good reason. The Ruvuma Region offers favorable conditions for industrial development and thriving businesses in the soybean value chain. With a population of over 1.56 million people, the region benefits from its strategic location within the Mtwara-Lindi Economic Growth Corridor, linking it to neighboring countries.
The land resources in Ruvuma alone are a compelling argument. According to a Ruvuma agriculture regional officer, the total arable land is estimated to be 4.0 million hectares, of which 930,082 hectares are currently used for agricultural crop cultivation. Additionally, the Agricultural Seed Agency (ASA) already has 3,500 hectares of land for agricultural seed production in the Ruvuma region suitable for soybean seed multiplication. Most of the land is already cleared, with access to power, water, and access roads, and is open to both public and private investors through a Public Private Partnership modality.
The region’s connectivity adds further weight. The region is well connected with tarmac roads and has access to air transportation. Additionally, the presence of Mtwara port — located some 661 kilometres away — facilitates efficient transportation and trade opportunities.
Three Investment Cases, Three Compelling Returns
The heart of the report is its analysis of three investment modules: seed multiplication, extension services, and processing facilities. Each is subjected to a rigorous five-year financial model, adjusted for real-world uncertainties including farmer adoption delays, legislative timelines, and climate variability.
1. Seed Multiplication
The seed multiplication investment case is grounded in a clear demand signal. In the Ruvuma region, there is an estimated 6,750 hectares available for soybean farming, with a basic seed requirement of 0.1 MT per hectare, translating to an annual seed demand of 675 MT.
The financial case is robust. Based on the analysis, an investment cost of 949,192,000 Tanzania shillings — equivalent to US$379,676 — in soybean seed multiplication demonstrates profitability, with a stable profit margin of 10.1%. The payback period is estimated at 3.45 years, indicating a relatively quick return on investment. The Net Present Value (NPV) amounts to TZS 26,800,548.85, and the Internal Rate of Return (IRR) is calculated at 8.57%.
2. Extension Services
The extension services model takes a different but equally compelling approach. In this model, the entity allocates resources to provide comprehensive extension services to smallholder and medium scale farmers based on a commission structure tied to their revenues. By enhancing farmers’ yields from 1.3 MT per hectare to 2.2 MT per hectare, the extension service provider would be entitled to a portion of the increase — initially proposed at 0.1 MT per hectare, amounting to TZS 110,000 per hectare, equivalent to USD 50.
According to the analysis, the investment cost of 301,000,000 Tanzania shillings, equivalent to US$120,400, proves to be profitable. The profit margin stabilizes at 26.1%, the NPV is estimated at TZS 25,423,469.22 equivalent to US$10,169, and the IRR is calculated at 9.93%. The Payback Period is determined to be 3.82 years.
3. Processing Facilities
The processing facilities investment case suggests establishing soy processing factories in high soybean producing areas — including Namtumbo, Songea, and Madaba districts in the Ruvuma region. This decentralized approach ensures accessibility and market availability for soybean producers in these districts, promoting local economic development and enhancing the value chain.
The investment of 454,600,000 Tanzania shillings, equivalent to US$181,840, proves to be profitable, with a profit margin stabilizing at 3.5%. The NPV is estimated at TZS 48,560,179 equivalent to US$19,424, and the IRR is calculated at 10.39% — higher than the required rate of return. The Payback Period is 3.2 years.
The Broader Investment Climate
Beyond the sector-specific case, the report situates these opportunities within Tanzania’s generally attractive investment environment. Tanzania boasts significant untapped investment potential in its agricultural sector. Of 44 million hectares of arable land, only 10.8 million hectares (24%) are currently under cultivation. The potential for irrigation covers 29.4 million hectares, but a mere 727,280.6 hectares (2.5%) are currently irrigated.
Tanzania’s policy environment is also supportive. The Tanzania Investment Centre (TIC) offers streamlined services for permits and approvals, protection of private property rights through membership in international organisations like the Multilateral Investment Guarantees Agency (MIGA) and the International Centre for Settlement of Investment Disputes (ICSID), and a favorable 10% import duty on semi-processed goods.
For soybean specifically, policy momentum is building. The government has implemented various measures to promote domestic production and processing of soybean oil, including levying a 10 percent Customs Duty on imports for one year, up from the previous rate of 0 percent — a move designed to encourage the production of edible oil seeds within the country and reduce foreign currency spent on oil imports.
Social and Environmental Dimensions
The report does not sidestep the harder questions. On employment, the picture is positive. The findings indicate a notable increase in job opportunities along the entire value chain, specifically from 1,674 in the current scenario to 2,401 in the planned scenario, attributed to higher production levels resulting from increased access and use of high quality soybean seeds.
On gender, increased production and processing facilities will result in the increase of youth and women ownership, as well as the number of youth and women employed in the planned scenarios, with the degree of empowerment measured from the number of established profitable enterprises and youth/women led agribusinesses.
Environmentally, the report is candid about trade-offs. The results indicate an increase in GHG emissions due to the higher production levels achieved by small and medium farmers in the planned scenario. However, the impact of food loss is expected to decrease in the planned scenario due to the implementation of additional processing facilities and extension services along the value chain. The report calls for adoption of environmentally friendly practices and technologies across the value chain to offset these emissions.
Challenges That Remain
The report is measured rather than triumphalist. It acknowledges that soybean production in Tanzania faces several challenges, including limited access to improved quality seeds, agricultural advisory and extension services that are yet to be improved, and a cost of production perceived to be higher than that of countries from which substitute soybeans are imported — attributed to low yield caused by limited use of agricultural inputs, machinery, and unavailability of appropriate seeds at affordable cost.
On price risk, soybean prices can fluctuate due to domestic and global supply and demand factors, with both high potential impact and high probability — requiring diversification of marketing strategies, exploration of alternative markets, and the establishment of agricultural market information systems accessible to all stakeholders.
Verdict
This is a report that makes its case methodically and with enough financial granularity to be taken seriously by both public sector planners and private sector investors. The three investment modules it presents are not aspirational sketches — they are costed, stress-tested, and adjusted for the realities of doing agricultural business in Tanzania.
Despite Tanzania not currently holding a cost advantage in soybean production, the report argues it remains critical to pursue investments in this area, leveraging the abundance of resources and the potential for cost reduction through technological advancements — and that the significant market demand underscores the importance of adopting measures for food security.
With a domestic supply gap of over 110,000 MT, a livestock population that is the largest on the continent, and investment returns that clear reasonable financial thresholds across all three modules, the soybean value chain in Tanzania presents a rare convergence of need, resource, and readiness. The Hand in Hand Initiative has done the analytical groundwork. The question now is who steps in to plant.
This review is based on the Financial & Economic Analysis of Soybean Value Chain, published by the Hand in Hand Initiative in Tanzania, 2023, with support from the Permanent Secretary, Ministry of Agriculture, United Republic of Tanzania.