Investment Opportunities in Sisal for Tanzania

The global demand for sisal is fragmented and declining due to competitiveness with cheaper substitutes. High-quality fiber products have a larger market value than low-quality products. Tanzania is the global leader in high-quality sisal production, due to historically organized producers, despite limited innovation. The sisal market is in transition as production and usage trends shift. Brazilian production is declining steeply due to smallholder farmers moving out of the sisal business, following numerous years of drought and low returns. East African production has been volatile due to irregular rains. Tanzanian production is moving away from estate farming, changing a long-established industry norm of buying from large estates. Global production has seen an overall decrease in the last 20 years with the rise of cheaper substitutes. This is most pronounced with Brazilian low-quality sisal, which can readily be substituted compared to high-quality fiber from most producers. The price of fiber has increased faster than the decline in supply, suggesting the development of a niche market. Tanzania's production of high-quality fiber is recognized as superior to Brazilian sisal due to its central processing. Tanzanian sisal has several strengths, including being a legacy crop with over 30 well-established estates and businesses, designated as a strategic crop, and growing well in arid areas with limited inputs required for profitability. The ports of Tanga and Dar es Salaam can easily export sisal around the world. Most processors operate at around 30% capacity due to low demand for finished products given price competitive substitutes. Most processors only process to fibers given higher operational costs in semi-processing and ease of market access. Sisal is drought-resistant, but it benefits from inputs for increased yields and better fiber quality. Estates have historically dominated production since the colonial era, as sisal requires huge tracts of land to realize healthy margins. Regional labor is readily available, with 50 people per hectare required for land preparation and harvesting. Large estates have their own spinning mills, and the obtained wet fiber is dried in the sun for 1-2 days, after which it is brushed to make it softer and baled into 250kg stocks. Smallholder sisal farmers predominantly operate in the Lake Zone, with an average land of 8ha. The market for smallholder sisal is the domestic and regional market for final products, while cooperative and commercial farmers produce at higher quality for exports. Most processors operate under capacity, and the availability of mobile sisal processing machines in Tanzania has increased with donor support, leading to low-quality fiber. Farmers currently do not use inputs due to a lack of financing and extension workers, and the crop is seen to grow well on its own.