Several principal findings emerged from the analyses conducted to test the hypotheses formulated to address the objectives of the present study. The present study started with estimations of the costs of producing ethanol and biodiesel by using various feedstocks. The estimated costs were then compared with their respective threshold production costs to find out whether ethanol and biodiesel produced in the country could compete with the traditional fossil fuels. The estimates of the production costs for ethanol are: 351, 570, 676 and 584 TZS/l for sugarcane, maize, sorghum and cassava respectively. At the same time the threshold ethanol production cost has been estimated to be 597 TZS/l. A quick comparison of the estimates of ethanol production costs and the threshold production cost shows that ethanol produced by using sugarcane, maize and/or cassava as feedstocks can easily compete with petrol. Thus it is appropriate to conclude that ethanol can be produced competitively in Tanzania.
Furthermore, the results show that the production costs for biodiesel are 601 and 648 TZS/l when using palm oil and jatropha as feedstocks respectively. These are slightly higher than the threshold production cost for biodiesel, which is estimated to be 580 TZS/l. A comparison of the estimates of the biodiesel production costs and the landed price for fossil diesel shows that the differences between those estimates are TZS 21 (US$ 0.02) and TZS 68 (US$ 0.05) when using palm oil and jatropha as feedstocks respectively. The small differences between the estimated biodiesel production costs and the fossil diesel landed price makes it reasonable to conclude that there is a realistic possibility of producing biodiesel profitably in the country.
Having estimated the average costs of producing biofuels from various feedstocks, the present study also estimated the amounts of ethanol and biodiesel that can be produced in Tanzania. The estimation of the quantities of ethanol and biodiesel that can be produced in the country was based on the estimates of the quantities of the various crops that can be produced for use as feedstocks for producing biofuels. The results show that the country can produce about 4010.10 and 1726.80 million litres of ethanol and biodiesel respectively per year. The annual demand for petrol and diesel in Tanzania were estimated to be 375 and 789 million litres respectively. Thus it is clear that the country can produce enough biofuels to meet the local demand. Given the high potential of producing biofuels in the country the present study recommends deliberate efforts to attract investments in biofuels production in the country.
Moreover, the present study assessed the effects of support measures, such as tax incentives, on the threshold world oil prices for biofuels produced by using various feedstocks in the country. The results show that providing tax incentives for biofuels producers would lower significantly the world oil prices at which biofuels produced in the country can compete with fossil fuels. For instance, complete VAT exemption has been found to reduce the world oil prices required for ethanol to be able to compete with fossil petrol from US$ 40 to 25 a barrel when using sugarcane as a feedstock; from US$ 65 to 45 a barrel when using maize/cassava as feedstock; and from US$ 75 to 55 a barrel when using sorghum as a feedstock. Regarding the threshold world oil prices for biodiesel production, the results show that supporting biodiesel producers by providing tax incentives would decrease the world oil prices at which the fuel can compete with fossil diesel from US$ 60 to 50 and US$ 65 to 55 a barrel when using oil palm and jatropha as feedstocks respectively. The sensitivity, of the minimum world oil price that is required for biofuels produced in the country to be able to compete with fossil fuels, to tax incentives makes it plausible to conclude that such measures can be used to attract investments in biofuels production in the country. It can be concluded further that tax incentives would be a very useful tool for supporting biofuels producers in the unlikely event of a drastic decrease of world oil prices.
The present study also estimated the potential impact of biofuels production on the incomes of small-scale sugarcane and jatropha producers in the country. This was aimed at determining the potential contribution of biofuels production to the country’s poverty
alleviation efforts. The results show that the use of sugarcane for producing ethanol would increase the net returns for small-scale sugarcane growers by 28%. In the case of jatropha, which at the time of data collection was produced in small quantities for producing soap, its use for biodiesel production would increase the net returns for small-scale producers of the crop by 53%. Since at the time of data collection there was a limited production of jatropha in the country, the present study also tried to determine the potential impact of using the crop as a feedstock for biodiesel production on the returns to land in the Tanzanian central plateau where the crop would be grown. The results show that the production of jatropha for producing biodiesel would increase the returns per hectare (compared to the returns from the other crop which is widely grown in the area considered, i.e. sorghum) by almost 90%. Moreover, the results show that the use of sugarcane and jatropha for producing biofuels would create about 1.8 million new employment opportunities for small-scale farmers in rural Tanzania. Also the results show that the production of biofuels would reduce the proportion of the rural poor living on less than one dollar a day by 31%. Therefore, it is plausible to conclude that the production of biofuels would contribute significantly in pulling small-scale sugarcane and jatropha farmers out of absolute poverty. The high potential impact of biofuels production on the incomes of small-scale farmers emphasises the significance of the recommendation to attract investments in ethanol and biodiesel production which was made previously.
Furthermore, the present study examined the relationship between profitability and farm size among sugarcane outgrowers. The analysis involved estimating the average profit (profit per hectare) for each of the farm households interviewed during the survey conducted for the present study. Then the variation in average profit with changes in farm size was established. The results show that the average profit increases with increasing farm size up to thirteen hectares from where it starts to decline. Given the observed profitability-farm size relationship, it can be concluded that: i) farm size is among the important determinants of profitability; ii) the relationship between farm size and profitability is not fixed, i.e. the effect of increasing farm size on farm profitability depends on the prevailing farm size. Whereas increasing farm size from one to two hectares is almost certainly going to increase average farm profit, increasing farm size from thirteen to fourteen hectares will at best result in no change in average farm profit. Thus it can be concluded further that very small farms can increase their profitability by
increasing their respective farm sizes. Furthermore, the increase in profitability (with increasing farm size) up to thirteen hectares and the subsequent slight decline beyond that size makes it plausible to conclude that the optimal farm size for sugarcane outgrowers is around thirteen hectares.
The profit estimates obtained during the assessment of the farm size-profitability relationship were used to determine the minimum farm size required for an average household to move out of poverty. The results show that almost all households which have farms which are less than three hectares have per capita incomes which are lower than the poverty line. Thus it is plausible to conclude that for sugarcane farming to be able to pull small-scale farmers out of poverty, farmers with small farms should be encouraged and supported to increase their farm sizes to at least three hectares.
The present study also tried to identify the main problems encountered by producers of potential feedstocks for producing biofuels. The results revealed that there were seven main problems which were reported by at least 50% of the respondents. The main obstacles which were reported by farmers and the corresponding proportions of respondents reporting them are: land shortage (72%), shortage of extension services (56%), unreliable markets (58%), low crop prices (78%), high input prices (62%), crop pests (65%), and lack of capital (71%). The large proportions of farmers reporting lack of capital, unreliable markets, low crop prices and high input prices make it reasonable to conclude that they are among the main problems encountered by the producers of potential feedstocks for biofuels production in their day-to-day farming activities. Lastly, the present study assessed the efficiency of sugarcane outgrowers in Morogoro. The decision to assess the efficiency of sugarcane producers was based on the fact that production efficiency is likely to influence feedstock costs and hence the feasibility of producing ethanol in the country. The results of efficiency estimations show that the average efficiency score among the sugarcane outgrowers is 60.6%. The low average efficiency score for the sugarcane outgrowers makes it plausible to conclude that there is widespread inefficiency among sugarcane outgrowers.