Fish cage farming: Start-ups face uphill task to raise capital

Dar es Salaam. Considering that cage culture in Lake Victoria presents itself as a new socio-economic frontier with good returns and nutritional benefits, facilitating successful entry into it through finance and capacity building remains a difficult matter for most start-ups.

The practice is defined as rearing fish in cages, especially in existing bodies of water that cannot be drained. These include lakes, canals and rivers; many of which are shared resources – locally, nationally, and in some cases regionally.

The country’s current demand gap for fish is estimated at 300,000 tonnes, a substantial amount which is projected to ever increase due rapidly increasing population, economic growth and changing consumer habits.

On the other hand, the current fish production ranges from 325,000 to 380,000 tonnes annually, with around 97 percent of fish sourced from small-scale fisheries.

The cage culture is believed to have the capability to play a key role in bridging the demand for fish, which currently far outstrips supply.

Media reports indicate that Tanzanians consume hardly 8 kilos of fish per person per year, yet it has the potential to produce over 756,000 metric tonnes (required to meet the demand of 20.3 kg/person/year plus export).

Speaking to The Citizen, Mr Masumbuko Madata, a graduate in procurement, acknowledges the fact that Lake Victoria has potential for wealth creation, but he doubted if start-ups the chance to commence their operations.

“You need cash to earn cash. I was born and grew up in Nyamikoma Village along Lake Victoria in Busega District. Although fishing has been part and parcel of most households, my family only engaged in agriculture,” he says.

“After I had finished my studies, I thought of venturing into cage fish farming, but I never established one due to unavailability of the capital needed. I approached various financial institutions with my business plan but I never qualified for a loan.”

According to him, the requirements included need for practical experience with the said business for not less than three years, security requirements, as well as one year of banking relationship with clean records.

“I had none, hence never fulfilled my dream.”

Mr Madata was of the view that the demand for financial services in the fisheries sector is diverse and requires differential financial products and services which in turn would smooth start-ups’ entry into the fishing sub sector.

Although he thinks microfinance would be one of the means that will provide some loans he says it has limitations in terms of financing the capital investment needs of the fishing industry.

Mr Abdallah Hassan, an information officer from Economic and Social Research Foundation (ESRF), said in his recent presentation: “With diminishing amount of fish from wild catch and price of fish rising high, this seems to be a good opportunity to communities around the shores and to private investors.”

According to him, despite the fact that Tanzania has more opportunities – more water bodies, conducive climate and the large market, Uganda leads in cage culture in East Africa

The cost of an ideal commercial farming, a 2x2x2.5 cage which can hold 2,000 fisheries, is not less than Sh10 million but still start-up and operational capital constraints remain the bottleneck to the growth of cage culture farming.

Speaking in Mwanza recently, Livestock and Fisheries deputy minister Abdallah Ulega admitted that Lake Victoria has untapped potential on cage culture farming saying it is the right time to change the trend.

“It’s true that, despite its huge potential, Lake Victoria is largely untapped, but President Samia Suluhu Hassan’s administration working on this, by 2025, we’re envisioned to produce at least 600,000 metric tonnes per annum,” he explained.

According to him, the current national per capita fish consumption is far below the internationally recommended standard.

“Yields derived from traditional fishing have been declining, yet the demand is increasing, so the government is now encouraging commercial fish cage farming by identifying at least 30 potential areas for Lake Victoria in Mwanza and Bukoba to be precise,” Mr Ulega said.

The deputy minister revealed in order to attract more people into the sector, the government has eased some requirements which related to project approval by Tanzania Fisheries Research Institute (Tafiri) and National Environment Management Council (Nemc).

“Some of these requirements served as holdups to the development of the industry, many local investors failed. Therefore, things are changed as it is easier for a person interested in cage culture, to invest without any bureaucracy,” Mr Ulega insisted.

He added: “On top of that, the president has added another push by providing more Sh100 billion of which 60 percent is injected to fish production as by 2025 we need to produce 600,000 metric tonnes,” the deputy minister said.

“Out of the Sh60 billion is set aside for fishing development and production, Sh20 billion is for aquaculture development and in fact, 90 percent of the money is for Lake Victoria beneficiaries.”

According to him, individuals, groups, and established companies will qualify for the said loan, though 30 percent of disbursed credits will be for youth, whereby start-ups will have Sh65 million worth credits and those already in business will be able to loan up to Sh200 million.

“We intend to have 800 cages,” said Mr Ulega, adding, “The credit is a complete package whereby one will have a complete cage with its nets, adequate supplies of good quality feed for all levels, and fingerings.”

Mr Ulega had further noted that the highlighted initial project of 800 cages will need at least 3,500 tonnes of feed and 14 million fingerings, which is another investment opportunity for hatchery and feed production.

However, The Citizen has established that although the deputy minister encouraged start-ups to take advantage of the said loans, its requirements automatically disqualify them, for instance, section 1 sub section (d) of requirements reads: “He must have been in fishing for a period of at least three years and beyond.”

Furthermore, other bottlenecks for startups includes section 3 sub section (b), and (c), which require the provision of a 12-month bank statement, and detailed fishing information related to income and expenditure.

And this is why, Ms Asha Majani thinks those without an established business experience in the said sector, are likely to be left out as no financial institutions would provide them with access to capital needed.

She therefore added: “I the government has truly decided to push for cage fish farming, then it needs to create a conducive environment for the start-ups similar to what is happening in the agriculture sector whereby graduates receive training after which they are given equipped farm parcels to manage with market assurance.”

According to her, even if the government wants to empower the existing fishing communities, much has to be taken into account as in most cases, they are without banking history, and have little access to basic social services, including affordable financial services.

For his part, Mr Adam Malima, Mwanza Regional Commissioner, said: “At least 53 percent of his region is water – we haven’t fully utilised such an opportunity, I was told that 50 years ago, the lake had more than 40 species, but currently only five to six are available, let’s turn to cage farming,” He urged.

RC Malima explained that there is a huge market yet to be tackled in the US and Europe where Lake Victoria fish demand is increasing, but more market research is needed to make such farming conducive and profitable.

According to him, the Lake Victoria’s cage culture has great potential, and that Mwanza with its neighbouring regions (Simiyu, Mara and Kagera) should utilise the resource as it has an ideal climate for culturing tilapia and that demand for fish in the country is also booming.