Institutions, production and transaction costs in the value chain of organic tomatoes and sweet peppers in tourist hotels, Unguja and Arusha

The aim of this paper was to evaluate production and transaction costs in organic tomatoes and sweet peppers value chain. The study was conducted in Arusha and Unguja. A preliminary survey was conducted in 2014, and then a stratified sampling procedure was used to select a sample of producers, tourist hoteliers and suppliers. The regions Arusha and Unguja were selected purposively and key informant interviews and snowballing sampling procedures were also used. The Heckman's procedure was used to analyze factors affecting the probability and extent of participation in tomatoes and sweet peppers markets. The probit results from the Heckman's two-stage process show that ownership of assets such as storage facilities, transportation assets and being under contract farming or farmers cooperatives increased the probability of market participation, while the heckit results (OLS corrected for selectivity bias) shows that experience in marketing increased the quantities of tomatoes and sweet peppers marketed while high marketing costs such as mobile phone costs decreased the quantities of tomatoes and sweet peppers marketed. Organic producers' cooperatives and collective marketing strategies are the possible solutions to reduce transaction costs, improve access to the tourism market, and increasing shelf life by having collective storage facilities and transport. Policy changes that will ensure producers sell under cooperatives and collective marketing strategies should be implemented to improve producers' market access.