AGRICULTURE AND AGRO-PROCESSING IN TANZANIA A STATEMENT TO THE COMMONWEALTH TANZANIA INVESTMENT CONFERENCE (DAR ES SALAAM 10 – 12 SEPTEMBER, 2001) BY HON. CHARLES N. KEENJA, (MP.) MINISTER FOR AGRICULTURE AND FOOD SECURITY

 The economy of Tanzania is heavily dependent on agriculture.  The agricultural sector contributes 50% of GDP. and approximately 60% of the country’s foreign exchange earnings. Food production accounts for approximately 55% of the agricultural GDP. followed by  livestock production which accounts for 30%.  95-97% of the food consumed in the country is produced locally with imports accounting for less than 5% with annual variations depending on weather conditions.  It is, however, estimated that 41.8% of families do not get enough food or food of adequate nutritional quality due to either the families not producing enough food or not having the means with which to produce enough food.  As incomes improve due to the current efforts to reduce poverty, food consumption both in quantity and quality, is likely to increase and this calls for expansion of the area under cultivation and greatly improved productivity.

 2.     Over the last decade, agricultural growth has been very modest, an average of 3.5%, slightly higher than population growth estimated at 2.8%.  The increase in production is attributable to expansion in area cultivated rather than to improved productivity.  Productivity for most crops can be increased by as much as five times by adoption of improved agricultural practices.

 

Selected Indicators of Agricultural Sector Performance

 1990 – 1998

 

Total Real GDP Growth (percent p.a.)

Real Agricultural Growth (percent p.a.)

Real Growth in Agricultural Exports (percent p.a.)

Share of Agriculture in GDP (percent p.a.)

Share of Agricultural Exports in Total Exports

1990-1993

2.8

3.3

7.5

48.4

56.0

1994-1998

3.3

3.2

6.8

50.0

56.2

 

 Source:      URT/WB, Tanzania Agriculture: Performance and Strategies for Sustainable Growth, February 2000 (draft).

3.     With the exception of ‘estate crops’ such as sugarcane, tea, sisal and to a lesser extent tobacco, food and cash crops are predominantly produced by small scale farmers who cultivate between 0.2 ha. and 2.0 ha. with an average of 1.2 ha. per capita per annum.  In most regions, there is room for increasing the area cultivated and if improved farming technologies were also adopted production and productivity could be greatly enhanced.

4.        Tanzania is endowed with abundant resources for agriculture with an arable area estimated at over 43 million ha. (42% of total land area).  It is estimated that 10.1 million ha, or 23% of the arable land is under cultivation while an estimated 26 million hectares out of 50 million ha. suitable for livestock production, (approximately 50%) are currently in use.  Thus Tanzania has a large untapped land resource.

5.     The 1997 Agricultural Sector Policy and the recently approved Agricultural Sector Development Strategy (2001) require that agriculture should be commercialised with production, processing and marketing being assigned to the private sector, while the government remains with regulatory and support services.  It is the intention of the government to take steps which will enable the peasantry to increase the area under its cultivation, and to greatly increase productivity while at the same time improving the quality of crops produced.  There is room for medium and large scale farmers to contribute to the implementation of this intention through various partnerships with the small scale farmers for mutual benefit.

6.     The Agricultural Sector Development Strategy gives various reasons for the dismal growth of the agricultural sector over the past ten years.  In short, agriculture was not profitable due to various reasons, including sporadic changes in world market prices, taxation and over regulation.  All Central Governmendt taxes which could be removed have been so removed while local authority taxes have been fixed at less than 5% and most marketing regulations have been discontinued.  In the near future, crops can be exported across our borders freely and we hope that this will lead to increased farm gate prices which will encourage farmers to increase production. Any deficits of food will be filled in by imports from the World market.

 7.        Tanzania has comparative advantage in the production of virtually all food and export crops.  Increased production of food crops will find ready markets in almost all the neighbouring countries which are likely to continue having food deficits in the foreseable future.  We are members of the East African Community and SADAC and this gives us access to those markets.  We can also access markets in the Mid-East, Europe and the Far East.

The Way Forward

8.     We must take steps to enhance production and productivity by the smallholder farmers as already stated.  This is important because agriculture is the only sector which can give them their food and cash requirements and thus reduce poverty.  At the same time we need to attract investments into medium and large scale farming so as to exploit the abundant natural resources available and to benefit from markets in this region as well as export markets outside the region.  We are working out modalities to enable people retrenched from public and private service to join medium scale farming by retraining them and by enabling them to get agricultural inputs and advice.

9. I urge those attending the CBC meeting who would like to invest in agriculture to do so in Tanzania where we have abundant land and water resource and where the climate is favorable for the cultivation of many types of crops.  The country enjoys political stability and is pursuing investor friendly policies.

 10. At present, almost all banks in the country do not give loans to agricultural undertakings.  We cannot expect the agricultural sector to grow without investing in it.  It is also a fact that without growth in the agricultural sector, which is the lead sector of the economy, all other sectors, including banking, will remain stunted.  I request the CEOs of the various banks represented here to re-consider their lending policies infavour of lending to agriculture for the benefit of the whole economy.  My ministry is intending to arrange meetings with the banking community to discuss ways in which the banking sector could contribute to the development of agriculture in the country.

PROCESSING OF AGRICULTURAL CROPS

11.        Most of the crops produced in this country are sold unprocesed to traditional and world markets.  In almost all cases, these crops are processed in the countries which inpat them and then re-imported into Tanzania.  Thus Germany is the second biggest exporter of coffee after Brazil and fruit juices in our shop shelves are imported from the Middle East.  This situation is ridiculous but worse still, prices of raw commodities are usually very low in the world market and are prone to erratic fluctuations.  With green coffee, world prices are as low as they were in 1900 and are not likely to appreciate in the near future.

12.   The solution is processing of most crops which we produce.  Crop processing has the following advantages:

(a)        In some cases, processing and packaging open new markets for the crop.  For example, the main market for raw cashewnuts is India but processed cashewnuts, ‘kennels’, have ready markets all over the world.

 (b)          Value addition due to processing can be as must as three times the price of the raw commodity.  For example, prices of products made from sisal twine  – ropes, carpets etc. may rise from USD. 650 per ton of twine to USD 1800 for manufactured products.

(c)           Processing may make it possible for products to be sold in the local market.

(d)          Other advantages include employment generation, ease of storage, including elongation of shelf life,  transportation etc.

13.   The government places a very high priority in crop processing and packaging due to the advantages listed above.  Progress in the processing of maize, tea and wheat has been encouraging due to establishment of new facilities and more efficient use of capacity previously owned by public corporations.

14.   Last season we had a bitter experience with the marketing of raw Cashewnuts.  Prices dropped from over Tshs. 600/= per kg. in the previous season to less than Tshs. 200/= per kg. a fall of approximately 67%.  It is true that world prices were lower in the last season than they were in the preceding season but the situation was made worse by the monopoly which India enjoys.

15.        Production of cashewnuts has been rising steadily over the last decade reaching 127,000 tons in the 1999/2000 season.  Starting this year, we intend to process most of the cashewnuts produced in the country so that we can export kennels rather than raw cashewnuts.

16.   We have eleven cashew processing factories which have remained unoperative since 1996 when the last factory was closed down.  We intend to service these factories and bring them back into production.  We invite interested investors to buy or to rent these factories to repair them and to bring them back into production.  We are also exploring the possibility of establishing small scale facilities at village level so that some of the cashewnut processing can be done at that level.

FRUITS

17.        Another group of crops which need processing are fruits to prepare juices, jams etc. and tomatoes.  Currently, there are two small factories at Iringa.  Every year large quantities of fruits and tomatoes go to waste in Dar es Salaam, Morogoro, Coast and Tanga regions due to lack of processing facilities.  We need investments in this area.    I am aware that a local businessman is planning to build a fruit processing plant in Dar es Salaam.  We need more factories in Tanga, Kibaha and Iringa to cope with current fruit production which is likely to increase in response to availability of reliable markets and adequate price inantive.   The possibility of exporting fruits to markets in the region and in Europe and Asia is yet to be explored and the private sector is urged to look into the ways of exploiting this possibility.

 

COTTON

18.   In the 1970s. the country invested quite heavily in the construction of spinning and textile mills.  Most of the mills were closed down due to various reasons.  Most of the mills have now been privatized and we hope that the new owners will bring them back into production.

 19.        There is a lot of room for the construction of new modern textile and spinning mills which will enable us to sell cotton yarn and clothing to the USA. under AGOA, to the European Market as well as to the local market.  We also need additional ginning capacity, particularly in the Eastern Cotton Zone.

 OIL SEEDS

20.         Most oils and fats used in the country are imported from the Far East, particularly  from Malaysia.  Importation of cheap oils has had adverse effects on the production and processing of oil seeds in the country.  Steps are being taken to encourage farmers to resume production for such oil seeds as sunflower, groundnuts, simsim etc. and the response has been encouraging.  Additional oil mills will eventually be required to process the oil seeds which will be produced.

 

SUGAR CULTIVATION AND PROCESSING

Sugar Production

        The privatization of three sugarcane estates and the processing facilities has been another success after that of Tanzania Breweries Limited and Tanzania Cigarette Company.  Sugar production has increased and there is hope now that the country could be self sufficient in sugar within the next ten years.

        A fourth sugarcane plantation, Kagera Sugar Company, will be privatized  soon and when it resumes production, a further 52.000 tons of sugar will be produced per year.  Areas for more sugarcane plantations have been identified in the Mara and Mtwara regions and interested investors are welcome.  More areas for sugarcane plantations can be identified if there is demand for them i.e. if investors come forward.

21.   The Government is aware of the problems affecting agriculture and agro-processing in the country and some decisive steps have already been taken to reduce taxes so as to make agriculture more attractive and profitable to existing farmers and new investors.  We are aware that some problems still need attention, for example electricity tariffs are too high and big farmers have complained about high prices of diesel.  The Government is looking into the remaining problems and appropriate steps will be taken in due course.  We shall continue to dialogue with the stakeholders in the sector and, in partnership, to take such steps as will further strengthen the sector.  The Agricultural Sector will continue to be led by the private sector with the government providing support and regulation mechanisms.