Determinants of financial sustainability in private solid waste management firms: Evidence from Dar es Salaam, Tanzania using System GMM

Abstract

Financial sustainability is fundamental to the survival and continuity of private solid waste management (SWM) firms, yet evidence on its determinants remains limited, particularly in developing countries such as Tanzania. This study examines the determinants of financial sustainability among private SWM firms in Dar es Salaam using an unbalanced panel dataset of 36 firms collected via census sampling, covering the period from 2016 to 2023. Guided by Contingency Theory and Sustainability Finance Theory the study employed a longitudinal panel research design. Financial sustainability was measured using the Financial Self-Sufficiency (FSS) ratio, while the two-step System Generalised Method of Moments (System GMM) estimator was employed to analyse its determinants. The results reveal that financial sustainability is persistent over time (β = 0.572, p < 0.01) and is positively influenced by firm age, firm size, adoption of new technology, waste collection frequency, container collection, customers served, and operation in planned areas. Conversely, training, mixed technology adoption,  distance to the dumpsite and contract duration negatively affect financial sustainability. In contrast, mixed collection methods and operation in mixed areas were insignificant. The study concludes that both firm-specific and external factors influence financial sustainability, although their effects vary. Accordingly, municipal authorities should consider restructuring service contracts, while firm managers should invest in new technology to enhance financial sustainability.