Determinants of agro-processing small and medium enterprises sustainability in Sub-Saharan Africa: A resource-based analysis of sunflower oil enterprises in Tanzania

Abstract

Agro-processing small and medium enterprises (SMEs) serve as critical engines for industrial transformation, employment generation, and value addition across Sub-Saharan Africa, yet, their economic sustainability remains severely constrained by limited organizational capabilities and intensifying competitive pressures in increasingly globalized markets. This study examines the key determinants of economic sustainability among agro-processing SMEs in Tanzania, employing evidence from 384 sunflower oil processing enterprises in Singida Region, with data gathered through structured questionnaires administered face-to-face to SME owners, managers, employees and community members, complemented by key informant interviews and focus group discussions, within a quantitative cross-sectional design grounded in Resource-Based Theory (RBT). Structural Equation Modelling (SEM) revealed that managerial capability (β=0.841, p<0.001), innovation capability (β=0.911, p<0.001), financial management (β=0.840, p<0.001), and production efficiency (β=0.873, p<0.001) exert significant positive effects on economic sustainability, collectively explaining 82.6% (R²=0.826) of variance in enterprise performance. Notably, the external business environment demonstrated no statistically significant direct influence (β=0.029, p=0.604), indicating that firm-specific resources and capabilities constitute the primary drivers of sustainable performance. The strong negative correlation between internal and external factors (−0.687, p<0.001) suggests that SMEs compensate for external institutional weaknesses through enhanced internal resilience, consistent with evidence from Tanzania and Nigeria where weak policy implementation limits external support effectiveness, while contrasting with South African findings where stronger institutional frameworks enable external factors to exert greater influence. The study extends RBT application to agro-processing by demonstrating that strategic resources function as VRIN (valuable, rare, inimitable, non-substitutable) assets enabling sustainable competitive advantage even under adverse external conditions. Empirically, it provides the systematic evidence from Tanzania’s sunflower oil subsector, strategically important for national edible oil self-sufficiency and import substitution. The study concludes that long-term sustainability depends predominantly on strengthening internal organizational capabilities rather than relying on external support. Recommendations prioritize managerial capacity development, technological innovation adoption, financial management systems, and production efficiency enhancement, complemented by business environment improvements through supportive policies and infrastructure development, offering a replicable analytical framework for understanding SME sustainability determinants across Sub-Saharan African agro-processing contexts.