THE BUSINESS PROFITABILITY OF SOLAR DRYING
OF FRUIT PRODUCTS FOR THE WIVES OF FARMERS
OF KARAGWE DISTRICT.
Sekiku Joseph and Jan Van Geffen
Introduction.
The enclosed brochure gives an extensive overview of the background,
the status and the aim of the project. Through donations from German (GTZ)
ISAT-GATE-GTZ Small Scale Fund, HIVOS and the Karagwe District Rural Development
Programme (KDRDP), FADECO has been able to build and distribute 31 Solar
Dryers over the past 45 month, that have been intensively tested and that
produce Solar Dried Fruit products on a daily basis during approx. 4-6
months of the year.
The project has now come to a stage whereby a further dispersion of solar
dryers throughout the district is of imminent importance to enable farmer's
wives to earn a substantial additional income from the sales of processed
fruit. An average increase in annual income of approx. Tsh 245.000 for
a farmers' family is considered within their reach.
(Costs are calculated at USD=TShs 1000) Appropriate currency conversion
should be made where necessary.
1. Cost and availability of fresh produce:
This is the most important thing to consider, but it should be remembered
that fruit in Karagwe is not sold by weight. For instance, bananas are
sold by bunches while paw paws or mangoes are sold by heaps.
The price of good quality fruit need to be low enough to justify production.
The average price given varies according to season and type of fruit in
question. The following is the average farm gate prices for different
fruits in the year considering average size fruit:
Sweet bananas Tshs 200/-(USD 20 cents) per bunch1 bunch
gives 3 kg dried product)
Pine apples Tshs 150'- (USD 15 cents) per fruit ,3 such fruits give 1
Kg of dried product)
Mangoes Tshs 100/- (USD 10 cents) per heap of 5 fruits (which produce
0.5 Kg of dried)
2. Variable cost pricing:
An average size bunch of sweet bananas will produce 3
Kg of dried product.
A 12 tray dryer produces on average 24 Kg of dried product.
8 average size bunches are required to fill the dryer, representing a
value of 8 x
Tsh 200 = Tsh1600 per cycle (USD 16).
The dryer is operated on average, twice per week, giving
24 x 2 = 48 Kg of dried bananas is produced per week
Dried fruit is sold to FADECO at its regional collection station every
two weeks.
The cost of a return journey is Tsh 1000/- (USD 1.00)
The cost of transport for operating the dryer once is Tshs 500/- (i.e.
2000/-)USD 2.00
The price obtained by the farmer for dried sweet bananas is Tshs 400/-
per Kg or
24 x 400 = Tsh 9600 / cycle (USD 96.00)
3. Family labour input versus the cost of hiring Women
Processing operations are rather labour intensive and involve people
in purchasing fruit, preparing and operating the dryer. (Final packing
and selling of the dried fruit is done by FADECO). Women are generally
executing the work of preparing the fruit (Peeling and cutting and loading
the tray's of the dryer. The 12 tray dryer can take 5 hours to fill with
one person working or about 2 hours with three women.
Typical Example:
Loading the dryer requires 2 -3 women for 2 -3 hours
Unloading the dryer requires one woman for about one hour.
Purchasing the fresh fruit, managing the dryer require more time.
Assume:
Time required to peel/ cut fruit and load/unload the dryer is 7 hours
1 hours is allowed for cleaning up activities
Cost of labour per day is Tshs 500/- (USD5 cents)
Working day is 8 hours
The dryer is operated twice per week for 8 drying months (i.e. 32 weeks)
Calculations:
Cost of operating the dryer = Tshs 500/- per cycle (USD 5 cents)
Cost of labour per year = Tshs 500/- x 2 x 32 = Tshs 32,000/- (USD 32.00)
Conclusion:
The total cost of labour per year is Tshs 32,000/- (USD 32.00), which
generally is considered an contribution of the wife to the family income.
4. Method of operation.
The fresh fruit is picked, washed, peeled, sliced and distributed over
the trays. The tray's are placed in the dryer and alternated every day.
After 2 day's of 9 hours in the sun the product has reached it's final
moisture content of approx. 15% and is packed in plastic bags, strip-closed
and bundled for transportation to the regional collecting station of FADECO.
5. Financing a dryer operation:
Most of the costs involved to build a dryer are made up from the materials
and labour costs in building it. For a typical 12 trays dryer, imported
materials for the dryer : solar plastic and nylon mesh cost about Tshs
118,600/- (USD 118.6). Note that, the price of Solar plastic and plastic
mesh would considerably be lower if it were ordered in bulk. (Retail price
of solar plastic and the Plastic mesh are Tshs 4,000/-(USD 4.00) and 1,800/-
(USD 1.80) per metre respectively). Bulk purchase of these materials would
lower them to Tshs 2000/- (USD 2.00) and 1200/-(USD1.20) respectively.
Earlier experiences with the construction of the 17 units in the field
and the availability of controlled bills of material show the following:
Cost for the construction of different sizes of dryers:
Standard 12 tray dryer
- Timber 91.9
- Solar Plastic (Visqueen) 88
- Plastic mesh 30.6
- Other materials 19.5
- Technical labour 20
Total costs USD 250
For investment purposes, we take the required capital for a 12 tray dryer
is USD 250.
6. Finance is therefore specifically required to cover:
Capital Costs:
The costs for the construction / purchase of a dryer are the most significant
investment for the business. The capital includes costs for utensils like
knives, buckets, brushes, hairnets, basins, detergents and the actual
cost of the dryer.
Working Capital:
This is required for purchasing dried fruit, buying consumable items (e.g.
packing materials), for maintenance & repairs, paying wages to central
staff and for transporting dried produce.
Reserve funds:
This is a safety net amount to cover for unforeseen circumstances such
as fruit loss, poor weather, damages to the dryer.
7. Variable costs:
7.1 Repairs and maintenance:
The dryer requires periodic repairs and maintenance. This cost is taken
at 10% per year of the cost of the dryer. This is roughly taken to be
10% of USD 250=(USD 25.00)
7.2 Transport Costs:
This involves delivering the products to one of the 5 central collection
stations. The transport costs to the station depend on how far the farmer
is from the station. Most farmers will combine several businesses while
travelling and thus offsetting some of the costs.
It is also possible for farmers to reduce the costs by sharing where
one farmer could transport products for other farmers in the area. It
means that costs are shared between several producers. It is assumed that
a farmer would deliver his output (96 kg of dried product) twice a month
to the station. The cost involved is estimated at Tsh 1.000/- (USD 1.00)
7.3 Financing costs and depreciation of the dryer:
The life span of the dryer is estimated at 5 years. If the initial investment
of the dryer is Tsh 250,000/-(USD 250.00), the annual depreciation can
be calculated at 20%= (USD 50.00)
An interest of 10% per annum over the outstanding balance is taken as
a compensation to make available the necessary funds, amounting to Tsh
25.000/= (USD 25.00) per annum.
8. POTENTIAL PROFITABILITY FOR THE FAMILY (WITH / WITHOUT PAID WOMEN -
LABOUR )
Two cases are considered:
CASE A: The dryer is being provided by FADECO and operated without
loan
borrowing money and using unpaid family labour :
Dry one type of fruit (Sweet bananas)
Operate the dryer for 8 months per year (32 weeks)
Dry fruit two times a week, producing 24 kg dried bananas per cycle.
Sell dried fruit at the centre two times a month
Have labour provided by the women of family, not formally paid for
Have all profits return to the family
Expected total annual output approx. 85% of theoretical = 1300 kg.
Variable costs:
a) For the fruit:
Price per one average size bunch [a] 200/-
Typical number to fill dryer [b] 8 bunches
Cost to fill 1 dryer of 12 trays [c= a x b] 1600/-
Cost of fresh fruit per year assuming two operations per week for 8 months
i.e. a total of 32 weeks per year [d = c x 2 x 32] 102,400/-
b) For transport:
Typical cost of one return trip to the centre [e] 1,000/-
Cost per year (assuming two visits per months for 8 month s per year
[f = e x 2 x8] 16,000/
c) Miscellaneous 6.600/-
TOTAL VARIABLE COSTS = [d] + [f] = 51,200 + 16,000 = Tshs 125.000/-
c) Fixed costs:
Repairs and maintenance per year
Value of the dryer [g] 250,000/-
% of the dryer for R & M [j] 10
Repairs & Maintenance per year [k = g x j%] 25.000/-
TOTAL FIXED COSTS = [k] = Tshs 25.000/-
EXPECTED TOTAL ANNUAL COSTS OF FRESH
FRUIT AND OPERATING EXPENSES = Tshs 150.000/-
REVENUE
This is obtained by selling the dried fruit: For instance the income per
one batch of product :
Typical price received for dried fruit / Kg [l] 400/-
Typical quantity of dried sweet bananas per drying operation
[m] 24 Kg
Income generated per cycle [n = l x m] 9.600/-
Revenue per year ( assuming 2 operations per week for 8 months i.e. 32
weeks per year
[o = n x 2 x 32 ] = 614.400/-
Allow for 15% losses and / or inefficiencies will generate an
EXPECTED TOTAL REVENUE approx. = [ o ] = Tshs 520,000/-
Assessing net Revenue
This is the potential profitability per year of operating a solar dryer:
Costs:
Variable costs total [p = d + f] 125.000/-
Fixed costs total [q = I + k] 25.000/-
Totals costs [r = p + q] 150.000/-
Gross Revenue: Income from Dried fruit [ o ] = Tshs 370,000/-
EXPECTED ADDITIONAL ANNUAL REVENUE
[ s = o - r ] = TShs 370.000/-
This will mean that the dryer generates a net revenue of Tshs 370.000/-
per year assuming that it is being operated reasonable efficiently; that
there are no capital or interest payments to be made to buy the dryer
and no direct charges for labour.
From the net revenue the farmer has to refund the investment of FADECO,
which enables the farmer to earn the revenue and pay interest over the
amount involved at
10% /annum.
FADECO invested Tsh 250.000,=. The refund period is estimated to be 2
- 3 years i.o.w. Tsh 100.000,= per year plus Tsh 25.000/- interest.
Refunds of capital and interest will be deducted from the price of the
fruit, paid to the farmer (Tsh 400,= / kg) at Tsh 125.000 / 1300 kg =
Tsh 100 /kg,
resulting in a net selling price of Tsh 300 / kg.
The farmer reaps some good returns equivalent to TShs 30.500/- per month
during 8 months or a Net Return per working day of Tshs 1100/-
Note : Original income would have been 8 bunches x 2 x 32 at Tsh 200
/ bunch = Tsh 102.400,= / year.
AFTER REFUNDS AND INTEREST PAID THERE WOULD BE AN
INCREASE IN NET ANNUAL INCOME OF Tsh 245.000/= (+ 240 %)
CASE B : Assume money has been borrowed to buy the dryer and labour
is being
paid for operating the dryer the increase in net annual income would
be approx. Tshs 200.000/- (USD 200.00)
Conclusion:
These calculations show that, solar drying can be profitable
in the long run. There are several parameters to consider which are not
treated here. One would have to consider the size of the market, the quality
of the products, the taste of her target consumers, etc.
Here you are. Give it a try. You would in position to overcome
poverty.
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