Food Security Int a Nazi a 2

  • Upload
    lmm5

  • View
    215

  • Download
    0

Embed Size (px)

Citation preview

  • 8/7/2019 Food Security Int a Nazi a 2

    1/27

    FOODSECURITYINTANZANIA:ENABLINGENVIRONMENT,OPPORTUNITIES&CONSTRAINTSAbstract:Tanzaniafacesprofoundchallengesensuringitsfoodsecurity.Thegovernmentwillneedsound

    policiesforallpeopletohavephysicalandeconomicaccesstosufficientfoodtomeettheirdietaryneeds

    for aproductive and healthy life. Thispaper reviews the government of Tanzanias currentpolicies

    affectingitsfoodsecurityandmakesrecommendations.

    ThisSpringSemester,2010,CapstoneWorkshopatColumbiaUniversity/SIPA,issponsoredbyBoozAllenHamilton.

    Itisintendedtoprovidestudentstheopportunitytoproduceoriginalconceptpapersexaminingtheimplicationsof

    regionalanddomestictradepoliciesonhouseholdfoodsecurityinTanzania,aswellastheconditionsthatfoster

    thedevelopmentofthesepolicies.Inthiscontext,foodsecurityimpliestheabilityofhouseholdsinagivenareato

    accessandutilizesufficientquantityandqualityoffood tosupportahealthyandactive lifestyle.Theseconcept

    paperswillprovideBoozAllenHamiltonanditsclient,theUSAgencyforInternationalDevelopment,withinsights

    intofurtherdevelopingtheAgCLIRprogram(AgribusinessClimateLegalandInstitutionalReform),aUSAIDfunded

    projectimplementedbyBoozAllenHamilton.

  • 8/7/2019 Food Security Int a Nazi a 2

    2/27

    Table of Contents

    1 Overview of Tanzanias Regional, Bilateral and International Trade Agreements: ................................ 22 Land and Natural Resources ................................................................................................................... 4

    2.1 Land Ownership: .............................................................................................................................. 42.2 Land Use for Agriculture: ................................................................................................................. 52.3 Water and Irrigation: ....................................................................................................................... 6

    3 Impact of prices and investment policy on food security: ..................................................................... 7 3.1 Food Prices: ..................................................................................................................................... 73.2 Investment: ...................................................................................................................................... 7

    4 Crop Sector Value Chain: ........................................................................................................................ 84.1 Farm to wholesale: .......................................................................................................................... 94.2 Wholesale to retail: ....................................................................................................................... 11

    5 Non-Agricultural sectors/ Natural Resources: ...................................................................................... 135.1 Pastoralism .................................................................................................................................... 135.2 Forests ........................................................................................................................................... 135.3 Fisheries ......................................................................................................................................... 14

    6 Recommendations ................................................................................................................................ 15Appendix: .................................................................................................................................................... 16ENDNOTES................................................................................................................................................... 18

  • 8/7/2019 Food Security Int a Nazi a 2

    3/27

    1

    Introduction

    In 2006, the World Food Summit defined food security as: All people at all times have access to

    sufficient, safe, nutritious food to maintain a healthy and active life. The lack of food security has an

    impact on civil and national security. Therefore long-term solutions are required to address it.

    Broadly, the concept of food security is built on three pillars: i) Food availability: sufficient quantities of

    food are available to people on a consistent basis; ii) Food access: people have sufficient resources to

    obtain appropriate foods for a nutritious diet; iii) Food utilization: people have sufficient knowledge of

    nutrition and care practices and access to adequate water and sanitation to derive sustenance food.

    There is a direct and cyclical relationship between poverty and food insecurity, whereby poverty

    contributes to food insecurity, which contributes to poor nutrition, health, and cognitive development,

    which in turn contribute to poverty.

    In Tanzania, achieving food security presents a profound challenge to the government to implement

    social and economic policies to meet households dietary requirements. Currently, 22% of children are

    underweight at the age of 5, and 30% of Tanzanians live below the poverty line.1 Therefore, the aim of

    this paper is to review the government of Tanzanias policies towards food security, suggest indicators

    for measuring the impacts of these policies and make recommendations to improve the enabling policy

    environment. Accordingly, the paper is divided into five broad areas that directly or indirectly impact

    food security. This list is by no means exhaustive. Many of these areas are interlinked, and contribute to

    amplifying the effects on food security.

    The first section evaluates the effectiveness of Tanzanias regional and international trade agreements in

    improving availability of food. It also explores the potential for trade to improve access to food through

    cheaper imports and identifies key constraints to realizing the benefits of greater trade liberalization.

    The second section examines access to natural resources required for agricultural production. This

    section explores patterns of land ownership, land use for agriculture and access to water and irrigation,

    which affect all the pillars of food security.

    The third section evaluates the impact of food prices on different sections of the population, examines

    Tanzanias investment policies and identifies constraints to greater investments and improved price

    realization. The pricing and investment environment is significant as it has ramifications on access and

    availability of food in the country.

    Section four looks at the value-chain surrounding food, from farm to market and beyond. Gaps in the

    crop sector value chain can severely constrain access to, availability of, as well as the use of food.

    Section five evaluates the impact of the non-crop sectors particularly pastoralism, forestry and

    fisheries on the three pillars of food security and examines the major constraints, opportunities, and

    food security implications of these sectors in Tanzania.

    The concluding section makes recommendations on improving the policy environment in each of the

    aforementioned five sections.

  • 8/7/2019 Food Security Int a Nazi a 2

    4/27

    2

    1 Overview of Tanzanias Regional, Bilateral and International TradeAgreements:

    Tanzanias trade agreements have potential interlinks with all three pillars of food security as they can

    directly increase food production, thus improving food availability. Exports improve the incomes ofTanzanian producers, in turn enabling greater food access and food use. This section aims to evaluate

    the impact of these agreements, identifies constraints to the full realization of trade benefits, and

    suggests indicators that can be used to measure these impacts.

    Policy framework of Tanzanias trade agreements:

    Tanzanias trade policies are influenced by a set of partly interlinked forces. At the primary level,

    Tanzania is a member of a number of trade regimes.2 It participates in two major regional integration

    schemes - the East African Community (EAC), which consists of Kenya, Uganda, Tanzania, Burundi and

    Rwanda; and the Southern African Development Community (SADC), 3 which consists of Angola,

    Botswana, DRC, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, SouthAfrica, Swaziland, Tanzania, Zambia and Zimbabwe. Since 2005, the EAC has been a customs union and

    thus has a common external tariff framework. Due to its membership, Tanzania is also part of a free

    trade area within SADC. Further, the country receives non-reciprocal trade preferences from the

    European Union (EU) through an Economic Partnership Agreement (EPA). Tanzania is also a signatory to

    about a dozen bilateral trade agreements, which are mainly in the form of Joint Commissions.

    These agreements have spurred activity in many sectors of the Tanzanian economy. They have helped

    integrate Tanzania more deeply into the global economy to the extent that the EU is now its largest

    export market. However, Tanzania does not seem to have experienced large benefits from concessions

    offered by SADC and EAC. For instance, Kenya has consistently maintained a large trade surplus withTanzania.4 Moreover, Tanzania has the smallest fraction of intra-EAC trade at 22.8%, the bulk of which is

    imports.1 Except for the EU, where it ran a positive trade balance, Tanzania imported more than it

    exported to other SADC and EAC nations. As the import demand relative to the export demand

    increases, the prices of imports is bid up, signifying deteriorating terms of trade. Tanzanias bilateral

    agreements have also become largely redundant (except in the case of technical assistance) as the WTO

    discourages bilateral preferences.5

    Given the constrained impact of these trade agreements, it is therefore important to understand the

    various countervailing factors that have been offsetting the advantages that trade liberalization can

    potentially herald in the context of food security and access.

    Countervailing factors:

    1) Poor infrastructure: The first significant constraint to achieving food security through trade ispoor infrastructure within Tanzania. Insufficient investment in the road network has resulted in

    1Tanzanian trade grew by 37.4% in 2006 but this was because imports grew by almost 50% while exports grew 15

    %, leading to a deepening trade deficit (see Figure 1).

  • 8/7/2019 Food Security Int a Nazi a 2

    5/27

    3

    just 4,000 kilometers of Tanzanias 85,000 km road network being paved.6 Most of these

    unpaved roads are feeder roads in rural areas, and many routes become impassable after heavy

    rains. Trucks transporting agricultural goods are subject to weight restrictions and can only be

    filled to half their capacity, increasing transport costs for farmers and traders. The countrys two

    railway systems are also unreliable, with dilapidated infrastructure and outdated rolling stock.

    Further, capacity constraints at the Dar es Salaam port result in an average clearing time of 11

    days for consignments the highest amongst any East African port. 7 All of these factors make

    Tanzanian goods more expensive, impacting the countrys competitiveness.

    Poor transportation infrastructure also impacts food security within Tanzania as it restricts the

    flow of food from surplus to deficit areas. On the critical central railway line connecting Dar es

    Salaam with Dodoma, the Tanzania Railways Corporation operated seven trains per week prior

    to 2008; since then, service between these cities has been discontinued. The road network

    connecting central to western Tanzania is also largely unpaved. Thus while Tanzania could feed

    itself though domestic production, this food cannot be efficiently distributed, making it

    inaccessible or unavailable in some areas.

    2) Lack of coordination: Coordination of international trade agreements in Tanzania is not highlycentralized, limiting effective focus. While the Ministry of Industry, Trade and Marketing (MITM)

    has the lead in trade policy-making, the Ministry of Finance (which was earlier the lead policy-

    maker), the Customs Department and the EAC Secretariat continue to exert substantial

    influence in policy-making. This limits coordination.

    3) Protectionism: Despite the liberalizing strides made through these agreements, there continueto be a large number of products (859 in total) that are classified as sensitive and tend to

    receive substantial protection from competition.8 More generally, protection levels in Tanzania

    continue to remain comparatively higher than other EAC states as of 2008, only 13.4% of tariff

    lines were actually bound, 9 implying considerable potential for backtracking and changing tariff

    regimes.

    4) Lack of analytical frameworks: Thegovernments implementation of policies, taxes and tariffswithout employing an analytical framework ex-ante often leads to problems that threaten the

    countrys food security. For instance, the current trade regime prohibits the export of fish in

    order to encourage more value-added processing within Tanzania.10 This policy is biased against

    the lowest and poorest actor in the value chain, the fisherman, as it results in lower prices due

    to reduced demand for fish.

    In a similar vein, skewed domestic policies have also severely distorted the production of other

    items, like milk. Under earlier rules, all milk produced in a certain area had to be sold

    mandatorily to the local processor in that region, which created monopolies and limited the

    price that milk producers received, eventually leading to a drastic fall in milk supply. While this

    policy no longer exists, it has nevertheless rendered milk processing domestically unviable due

    to the supply constraints it has induced. Thus, much of Tanzanias milk is exported to

    neighboring Nairobi for processing, from where it is re-imported for Tanzanian use.11

  • 8/7/2019 Food Security Int a Nazi a 2

    6/27

    4

    5) Smuggling/Illegal trade: The implementation of ill-conceived taxes coupled with lack of localmarkets results in problems like illegal trade. For instance, fish smuggling from Tanzania to

    Kenya has become rampant due to the export tax and the absence of fish markets.12

    6) Corruption: Corruption is a huge impediment that prevents realization of benefits from trade. In2007, USAID noted that inefficiency in clearing goods at borders was the main cause ofcorruption among EAC states.13 From the 223 Clearing and Forwarding Agents (CFAs) in the

    region they interviewed, 52% felt that corruption was on the decrease everywhere, except

    Tanzania. The highest average clearing time among these countries was reported in Tanzania at

    5 days. Their study reported that almost 60% of Tanzanian consignments attracted a bribe and

    that for every 100 consignments; CFAs paid a total of $ 1,920 as bribes, the highest in any EAC

    country.

    Indicators:

    The Tanzanian economy has responded to and benefited from many of its trade agreements. However,

    in the context of food security, it is imperative to put in place credible monitoring and evaluation

    indicators to measure these impacts, coincident with more integrated, strategic and coherent national

    trade policy concepts. Examples of M&E metrics, in time series, would include but not be limited to:

    a) Tariff Levels: From the point of view of trade, average tariff levels (particularly for agriculturalproducts) are important indicators that have a direct bearing on food security. Tanzanias Trade

    Tariff Restrictiveness Index declined from 12% in 2000 to 9% in 2006 due to its trade

    liberalization measures.14 However, due to nontariff barriers, the Overall Trade Restrictiveness

    Index (OTRI) at 54% is much higher than other Sub-Saharan African (SSA) countries (20%).

    b) Growth/Composition of Trade: A measure for the impact of these agreements is to evaluate thegrowth or composition of trade (exports/imports). Tanzanias export basket in 2005 includedagricultural products (41.6%), manufactures (11.9%), and fuels and mining products, including

    gold (11.5%) (see Figure 2). Trade balance for specific agricultural commodities over time is

    another indicator within this category.

    c) Relative price levels: Price level, both internal and with relation to other countries is a relevantfood security indicator. For instance, wholesale prices of maize in different parts of Tanzania

    varied significantly during January 2010.15 In the northern region of Arusha, prices averaged

    around Tsh 44,000 per 100 kg, whereas in the central Dodoma area, prices averaged Tsh 55,000

    per 100 kg. Such regional price variations can have considerable impact on food security as they

    affect production and consumption incentives. Relative commodity prices with respect to other

    countries are also important indicators as they affect income earning potential for Tanzaniascash crop producers.

    2 Land and Natural Resources2.1 Land Ownership:

  • 8/7/2019 Food Security Int a Nazi a 2

    7/27

    5

    Land ownership and land policy are potentially interlinked with all three pillars of food security because

    a) land policy and credit constraints limit food availability, and b) the low amount of Foreign Direct

    Investment (FDI) in Tanzanian agriculture limits potential food access. Existing land policies prevent

    smallholders from owning and cultivating more land. The lack of access to credit prevents farmers from

    maximizing production since they cannot afford to invest in technology and agricultural inputs. The

    insufficient amount of FDI in agriculture prevents farmers from maximizing food production since

    smallholders do not benefit from economies of scale, year-round irrigation, access to improved

    technology, or access to credit.

    Prior to 1995, a land tenure system called the Right of Occupancy, classified lands as granted rights

    (statutory) or as deemed rights (customary). People granted land title under the Right of Occupancy land

    tenure system have rights to own that land as long as they occupy it, but new land laws approved in

    2001 have made land title and access more equitable across society, at least in theory. While land is

    categorized as general, village, or reserve land; Tanzanias president is the land trustee on behalf of all

    citizens, and the Commissioner of Lands presides over all land administration. However, power is

    somewhat decentralized as municipal and village councils have more power to manage local land titles

    and usages (see Figure 3).

    The Land Act No. 4 and Village Land Act No. 5 made land ownership laws more equitable for previously

    marginalized groups, but in practice, land ownership has not become more accessible due to credit

    constraints, and land policies restrict the transfer of land ownership without the presidents approval.

    Unfortunately, ownership of village land is not easily transferable, making it difficult for farmers to move

    farms or to acquire the additional land necessary for farm expansion. Banks are hesitant to lend money

    to village landowners since repossessing land is problematic. Food security would improve if

    smallholders benefitted from easier transfer of land ownership, and had access to credit that would not

    bankrupt them in unforeseeable circumstances, such as a season of bad weather.

    16

    2.2 Land Use for Agriculture:Improving smallholder productivity is crucial for Tanzania to become more food secure (see Figure 4).

    Smallholder farmers dominate agricultural activity and have average farm sizes of 0.9 to 3.0 hectares.

    Inefficient technology causes falling land and labor productivity, in addition to dependence on irregular

    weather patterns, which adversely affect crop and livestock management. Hand hoes cultivate 70% of

    Tanzanias crop areas, oxen ploughs cultivate 20%, and tractors cultivate 10%. Of Tanzanias 15.1 million

    hectares of arable land, only a third is cultivated. Only 0.1 million hectares are cultivated by medium and

    large-scale farmers. Small-scale subsistence farming is a cause and an effect of rural poverty since the

    hand hoe is less efficient at cultivating than oxen or tractors. Medium and large-scale farming benefit

    from economies of scale, the ability to irrigate year-round, access to modern technology, and the ability

    of farm owners to attract finance.17

    2.2.1 FDI in Agriculture:

    FDI has had a positive impact on Tanzanias agricultural sector as it has helped improve farmer

    technology and connected smallholder farmers with out-grower schemes. FDI in agriculture fosters

  • 8/7/2019 Food Security Int a Nazi a 2

    8/27

    6

    economic growth, and thereby reduces poverty and improves food security for the average Tanzanian.

    Increasing FDI in agriculture would improve agricultural productivity, and consequently increase farmer

    incomes. However, at present only 2.1% of total FDI inflow in Tanzania is directed toward agriculture

    even though agriculture accounts for over 47% of total GDP, and for 45% of total exports. Agriculture

    employs 89% of the total population. Therefore, increasing FDI for smallholder farmers would benefit

    households.18

    The lack of adequate FDI in agriculture is largely a product of supply side limitations rather than the

    absence of international trade agreements. Poor infrastructure makes Tanzanias commodities relatively

    expensive compared to the commodities produced by more efficient suppliers who benefit from a

    competitive advantage. The majority of smallholders lack institutional support, so crop productivity is

    vulnerable to shocks. In fact, of the meager 2.1% of FDI directed toward agriculture in the country, 90%

    goes toward smallholders involved with integrated out-grower schemes that link investors in processing

    operations directly to the agricultural producers themselves. Specific industries such as milk, sisal, tea

    and sugarcane have benefitted from out-grower schemes that are governed by managing firms.19

    2.3 Water and Irrigation:Irrigation has a direct bearing on improving agricultural output, therefore improving availability of food

    in Tanzania.

    At present, most irrigation areas correspond to surface irrigation and are used mainly by smallholders.

    Moreover, only by a small amount of large-scale farmers use sprinkler irrigation; while less than 1% of

    the total number of irrigated areas use groundwater; and few cases use drip water. Methods of

    irrigation are predominantly rudimentary. Modern irrigation accounts for 35.8 thousand ha; traditional

    irrigation is spread across 122.6 thousand ha, improved traditional irrigation is used on 25.5 thousand

    ha, while the potential of rain water harvesting has not been estimated. The lack of modern irrigationsystems can be attributed largely to the absence of data for planning and the lack of funding, trained

    personnel, and national coordination.

    The National Irrigation Development Plan (See Figure 5), to be completed by 2014, calls for Removing

    Sectoral Constraints and Implementation of Irrigation Infrastructure. However, progress has been slow

    due to poor institutional development and funding. It is therefore necessary to tackle the severe lack of

    collateral and decrease transaction costs in order to enable widespread modern irrigation, enhance food

    production, and improve food security for Tanzanians.

    Indicators:

    The Tanzanian government has taken measures to improve land policy laws, but in practice, the transfer

    of land ownership remains limited. Smallholder agricultural output, especially for food crops, would

    improve with easier transfer of land ownership, improved access to credit, and increased FDI in

    agriculture.

  • 8/7/2019 Food Security Int a Nazi a 2

    9/27

    7

    a) FDI in Agriculture: FDI has the potential to positively impact food security. Indicators ofincreased FDI in agriculture are: i) The number of land parcels available at the land bank; and ii)

    the average size of registered land parcels.

    b) Smallholder Access to Technology and Credit: Smallholder productivity is constrained byinefficient technology and anti-credit land policies that make farmers unable to benefit from

    gaining economies of scale. Indicators include: i) Percentage of cultivation by tractors; and ii)

    percentage of smallholders with access to loans from the formal banking sector.

    c) Water and Irrigation: i) Depletion of ground water tables; ii) percentage of the population withaccess to water resources and; iii) percentage of sprinkler and drip irrigation systems.

    3 Impact of prices and investment policy on food security:Food prices and investment policies have direct and indirect influences on the three pillars of food

    security. Food prices have direct influence on food access. Higher food prices are associated with more

    limited food access for the poor. Therefore, proper investment policies will help not only increase farm

    productivity, which could raise food availability while easing food prices; but also to increase awarenessand education of the public to increase food access.

    3.1 Food Prices:High food prices not only increase the income for producers, but also increase the cost of purchasing

    food for consumers. At present, the influence of high global food prices and estimated low food

    production in Tanzania is likely to put an upward pressure on food prices in the country.

    In the short-run, since Tanzania is a net-importer of foods, it is likely to experience deteriorating terms

    of trade and to pay a larger food import bill. This has a direct and negative impact on the countrys trade

    balance, affecting the strength of the Tshilling. The groups of population most likely to be negativelyaffected are net food buyers that comprise urban residents, small farmers, fishing communities, and

    pastoralists. High food prices are also likely to adversely impact those producers who are net buyers in

    value terms, because they sell at low prices at harvest time to finance essential needs, and buy back at

    high prices later in the marketing season.

    In the long-run, higher food prices may stimulate the agricultural sector through greater investment in

    production and research. However, this would occur only if constraints facing smallholders like lack of

    technology and financing are effectively addressed.

    3.2 Investment:Tanzania has an open-door policy towards foreign investors. The current government has brought in

    several pro-investment legislations and incentives. The Tanzania Investment Centre (TIC) was

    established under the Tanzania Investment Act (1997) as a one-stop-shop for investor facilitation. The

    Act also provides both fiscal and non-fiscal incentives for investors. Fiscal incentives include exemption

    of import duty and VAT on project/capital goods. Non-fiscal incentives include features such as

    automatic immigration quotas to Tanzanian investors (of up to 5 persons) and guaranteed unconditional

  • 8/7/2019 Food Security Int a Nazi a 2

    10/27

    8

    transferability of: (i) net profits or dividends of the investment, (ii) payments in respect of foreign loans,

    (iii) remittance of proceeds net of all taxes and other obligations, (iv) royalty fees and emoluments, and

    (v) benefits to foreign personnel.

    Countervailing factors:

    1) Capacity: TIC currently lacks the capacity to address the complicated and non-transparentinvestment clearance processes, to collect comprehensive and timely data for the research

    needed to facilitate both policy making and investment decision-making.

    2) Bureaucracy: Bureaucratic intransigence continues to pose a severe obstacle to doing businessin Tanzania as in the rest of East Africa. Investors looking to start up businesses in Tanzania

    often complain about the level of red tape associated with issues such as the issuance of

    business licenses, company registration, building permits, land certificates and taxation.20

    3) Corruption: Corruption is an endemic problem in Tanzania and is often cited as one of thebiggest hindrances to doing business. The World Bank 2006 Enterprise Survey indicates that49.5% of the surveyed companies report that they expect to make informal payments to achieve

    specific goals.21 According to the 2006 IFC-World Bank Enterprise Survey, 20% of the companies

    surveyed expect to give gifts or make informal payments to get an operating license, and 32% to

    get a construction permit.22

    4) Seasonality: More than 75% of Tanzanian enterprises are heavily affected by seasonality,23whereby farmers sell their produce when prices are lowest and buy inputs for the next cropping

    season when prices are highest.

    5) Access to finance: Most enterprises in the rural areas are small scale and engage in or rely onagriculture. Bearing the above constraint, these small enterprises have a comparatively highrisk, high transaction costs and low volumes, limiting access to capital.

    Indicators:

    The indicators listed below will be helpful in assessing the price and investment policys impact on food

    security, especially in facilitating future research and policy decision making:

    a) Annual Share of Expenditure on Food per household: The share of expenditure on food fordifferent households (categorized by income) could reflect the influence of food prices on food

    access and utilization.

    b) Inflation: Consumer Price Index helps indicate the status of food security in the country. Theannual CPI has increased from 5.1% in the year of 2001 to 12.1% in the year of 2009, indicating

    worsening food access for the average Tanzanian.

    c) Agricultural investment: Level of Domestic Investment/FDI in agriculture can be a usefulindicator to gauge when policies to boost domestic or foreign investment may be necessary.

    4 Crop Sector Value Chain:

  • 8/7/2019 Food Security Int a Nazi a 2

    11/27

    9

    4.1 Farm to wholesale:Agriculture generates 45% of Tanzanias GDP, much higher than the average for Sub-Saharan Africa

    which is 15.3%. According to a 2009 World Bank survey, domestic agriculture also provides more than

    95% of Tanzania's annual domestic food requirement.24 However, agricultural productivity is extremely

    low by world standards, and by one estimate, a Tanzanian farmer produces only enough food to feed 2

    people, when compared with an EU farmer who can feed 130 people.25 This is both an immediate threat

    to securing access to food, as well as an opportunity for growth where some specific policy changes can

    yield substantial improvements in productivity, which will have positive downstream effects on health,

    incomes and exports.

    This sub-section examines policies relating to inputs into agricultural production, and the procurement

    and pricing of agricultural outputs and finds that concentrations of market power and thin financial

    markets are an important constraint on growth. This is largely a result of piecemeal and uncoordinated

    reforms in agriculture since Tanzania attained independence in 1961. In 2009, President Kikwetes

    administration, in collaboration with the Tanzania National Business Council, launched the KilimoKwanza or Agriculture First policy, which focuses on improving agricultural productivity. A World Bank

    funded project has been providing targeted seed and fertilizer vouchers in a phased manner since 2008.

    The project aims to provide these direct subsidies to 3 million farmers by the end of 2010; however, an

    impact evaluation is pending and the effectiveness of the project is unclear at this time.

    4.1.1 Inputs:

    Fertilizers & Pesticides: On average Tanzanian farmers used 4.8 kg/ha of fertilizers annually during

    1996-2002. Although this was an increase of 47% over the 1990-95 period; it compares poorly to

    neighboring Kenya, which averaged an annual 31.8kg/ha.26 Most smallholder farmers do not use farm

    inputs like fertilizers/pesticides because of high prices. Since Tanzania progressively stopped fertilizersubsidies between the 1980s and 1990s, fertilizer to crop-price ratios doubled in this period, effectively

    reducing fertilizer use and productivity. This has adversely affected access to these inputs for

    smallholder farmers. Tanzania also has high rates of soil nutrient loss; from 2002 to 2004 there was an

    average loss of 61kg/ha. This may be attributed to the inability of farmers to maintain improvements in

    soil fertility needed to stimulate productivity growth, improve food security and raise rural incomes all

    of which require substantial increases in fertilizer use. Staples like rice and maize have the highest per

    hectare use of fertilizers, which makes stable and low-cost access to fertilizers a pre-requisite for food

    security. This makes the price of and access to fertilizers important indicators of food security.27

    Seeds: The two main issues related to seed inputs are seed recycling and the use of GM-seeds.Approximately 93% of the seeds used each planting season are recycled from the previous crop.28 This

    does afford a cheap way for farmers especially smallholders to access inputs; however, it also means

    a lower use of higher yielding varieties of crops. Part of the reason for low use of improved seeds is

    inadequate supply.

    The Gates Foundation, Monsanto, and the Kenyan Agriculture Research Institute are developing drought

    resistant GM Maize, which would specifically address the agro-climatic conditions of East Africa.

  • 8/7/2019 Food Security Int a Nazi a 2

    12/27

    10

    However, GM crops are banned across most of East Africa. In Tanzania, they were banned by Parliament

    in 2003.29, 30 Although GM seeds can secure significant improvements in agricultural output, the nature

    of patent protection and suspicions about seed companys motives are an impediment to widespread

    adoption.31

    The ban on GM seeds is not only perceived as a regulatory bottleneck that is preventing investments inagriculture, but also the result of regulations that the EU (which is Tanzanias largest trading partner)

    imposes on GM crop imports. These EU regulations are currently under adjudication at the WTO, and

    any policy changes in Tanzania or East Africa are unlikely before that dispute is resolved.

    4.1.2 Pricing, Procurement and Marketing:

    Commodity Parastatals and Cooperatives: In the post independence era, parastatal agencies including

    the cash crop commodity boards, and cooperatives had the dual and conflicting role of monopsonistic

    buyers on the one hand, and regulators and input providers on the other. Since the 1980s the state

    monopsonies have been dismantled and the markets have been liberalized.32 However, cash crop and

    export parastatals still provide most of the inputs to farmers for their respective crops and have

    monopsonistic control over exports. Parastatals are also the primary channel through which government

    delivers subsidies to farmers.33 Although farmers can purchase inputs directly on the open market, this

    is rare especially for smallholder farmers.

    The domestic procurement system has been progressively taken over by the private sector, which now

    accounts for 95% of the procurement and marketing. The private sector in turn is dominated by few key

    players like Mohammed Enterprises, which are big enough to stave off competition from new local

    firms, and may influence regulators to protect their markets from domestic and foreign competition.

    Futures Markets: Developing an agricultural futures market may contribute to reduce price fluctuations

    and set better expectations for farmers. This can be particularly helpful for smallholder farmers who rely

    on intermediaries to gather information about future demand and force them into a cobweb response

    model. Although Tanzania does not have a commodities futures market of its own, Bourse Africa, a

    Botswana based company, is in talks with Tanzanian regulators to establish a market. It is not clear

    whether Bourse Africa intends to provide access to smallholder farmers directly or be conduits for large

    holders and traders. However, the development of an accessible and effective futures market in

    Tanzania or Africa could reduce risks, provide more stable returns, and attract more private capital to

    the agriculture sector. Moreover, the capital markets are very thin in Tanzania, with only one stock

    exchange, which currently has only 15 listed companies. In the absence of deep financial markets, it is

    conceivable that a Futures Market might in fact encourage speculative price fluctuations or, as in the

    Ethiopian experience, it might have no substantial effect on price stabilization. 34

    Indicators:

    Seeds and fertilizers are essential inputs, to the agricultural production process that affect the

    productivity. The economic structure of the market for outputs, including the monopsonistic practices of

    procurement agencies and output price uncertainty, feedback into the ability of farmers to invest in

  • 8/7/2019 Food Security Int a Nazi a 2

    13/27

    11

    inputs and therefore productivity. Listed below are select indicators, which will help concisely

    understand the progress in this section of the agricultural value chain in Tanzania.

    a) Agricultural Productivity: Average per hectare yields, and the response of yields to theapplication of fertilizers and improved seeds tabulated by farm sizes, to capture the impact of

    economies of scale and better target policies to small-holder farmers who are likely to havelower yields, addressing food security issues especially for subsistence farmers.

    b) Monopoly/Monopsony index: Such an index for the market for inputs and procurement will behelpful in understanding the effect of agricultural market reforms including encouraging

    competition, and establishing a futures market on food security.

    c) Price Fluctuations: An index of price fluctuations especially relating to farm gate and marketprices would be helpful in understanding the effect of a futures market on agriculture

    productivity and food security.

    4.2 Wholesale to retail:The government of Tanzania has three categories of domestic policies to improve food availability and

    access: consumption policies, production policies, and trade policies. It has commonly employed

    consumer price controls, producer taxation and subsidies, and export bans. This section proposes

    frameworks for analyzing these policies and indicators and applies them to Tanzania and the region.

    Consumer Price Controls:

    Price controls endanger food availability, access and utilization. Their enforcement results in shortages

    and resource misallocation. Their disregard results in black markets and high transaction cost. The rise in

    agricultural commodity prices due to scarcity tempts governments to set price ceilings or subsidize

    consumption. Producers exit the market at these low prices, decreasing food availability. Poor

    governments cannot finance such subsidies over time and return to high prices. Disaggregating subsidies

    per economic class eases the financial burden.

    Tanzania set price ceilings on four hundred commodities with the Regulation of Prices Act of 1973. This

    resulted in perpetual shortages of most price-controlled items.35 An IMF-sponsored recovery program

    realigned the prices of controlled commodities with market prices in 1986.

    Producer Taxes and Subsidies:

    Taxing producers decreases food access and availability, while subsidizing producers enhances this. As

    the majority of their citizens are involved in agriculture, poor governments tax agricultural producers to

    raise revenue. Taxes incentivize producers to decrease output, promoting subsistence agriculture. Yet,

    subsidies incentivize increased agricultural production and lower food prices. Poor governments

    typically cannot reliably finance subsidies without foreign support. Disaggregating subsidies by farm size

    reduces this burden and improves production. Subsidizing agriculture limits its exposure to price

    fluctuations.

  • 8/7/2019 Food Security Int a Nazi a 2

    14/27

    12

    Tanzanias government structure complicates its agricultural taxation. The Local Government Act of

    1999 devolved revenue, which raised power to 114 local government authorities (LGAs) from the central

    government. LGAs place a 1-5% ad-valorem tax on exports and food crops but provide few services in

    return.36 This results in an uneven tax structure and increases regional disparities in food security.

    Tanzania introduced a producer subsidy in five provinces in 2003. Farmers received vouchers for 100 kgof fertilizer or seeds redeemable at private input retailers. This raised agricultural production and gained

    votes in the 2005 election. The vouchers reached the poor, yet fertilizer and seeds prices increased. The

    subsidy expanded in 2008, comprising 28% of the government budget.37

    Export Bans and Taxes:

    Export bans and taxes hinder food access as they lower prices in the domestic market,38 reducing

    incentives for producers to cultivate more. This results in greater dependence on imports for food

    security. Taxes also cause greater disruptions in the production and consumption of non-staple

    agricultural commodities, since their price elasticity is higher. Tanzanias National Trade Policy of 2003

    opposes export bans. It promotes non-traditional exports, value-addition to agricultural exports,

    simplifying export procedures, and international marketing. In practice, Tanzania does institute export

    bans. It banned raw cashew nut exports in 2009, despite opposition from farmers.

    Ban on maize exports: In 2008, the Tanzanian government imposed a ban on maize exports and

    imported 300,000 tons of maize to improve food availability after eight regions faced shortages. 39

    Tanzanian farmers responded by smuggling maize into Kenya, where prices were about 30% higher than

    in Tanzania. Farmers unable to smuggle their crop reduced production and used cheaper, less effective

    inputs. Given that maize accounts for 30% of Tanzanias agricultural GDP,40 the impact of lowered prices

    on production levels of this crop has potentially large ramifications on food security.

    Countervailing factors:

    1) Ethnic Grievances and Domestic Policies: Ethnic differences can affect domestic policyoutcomes for food access, availability and utilization. Tanzania has two flashpoints for ethnic

    cleavages and food security: Zanzibar and restrictions on in country grain flows. Ruling and

    opposition parties have clashed over autonomy and ethnic issues on the islands of Zanzibar.

    These clashes threaten food security, as Zanzibar relies on food shipped from the mainland.

    Tanzania restricts citizens from transporting over 0.5 tons of grain outside the region of its

    production. This results in regional and ethnic inequalities that could produce future conflict.

    The potential for ethnic grievances to impact food security should not be underestimated. This

    occurred during the 2008 election violence in Kenya.

    Indicators:

    Several indicators measure the influence of government policies on food security in Tanzania. The most

    important to consider are the level of price controls and subsidies, the percentage of export tax on food

    staples and the existence of import bans.

  • 8/7/2019 Food Security Int a Nazi a 2

    15/27

    13

    a) Price controls: Control on prices (yes/no; $/unit). FEWS NETs Markets Guide advises monitoringprice controls. In 1986, Tanzania removed price controls and staple prices increased by 140%.41

    b) Input subsidy: Subsidies ($/unit) and tax rates. FEWS NETs Markets Guide suggests that asthese levels increase, subsidies will increase production and availability, and lower prices.

    c) Export taxes: Taxes on export of staple commodities and export bans (%). An increase in thisindicator will demonstrate reduced market outlets, increase stocks and lower returns.42

    d) Import ban in neighboring country: An increase in this indicator will reduce marketopportunities, lower returns and reduce incomes. It will also result in more local supplies, and

    an increase in food availability.43

    5 Non-Agricultural sectors/ Natural Resources:The depletion of natural resources by human activities and climate change decreases the food supply

    and the amount of nutrients people is able to consume. Therefore, natural resources availability affects

    food security and utilization. In Tanzania, activities that depend on natural resources availability such aspastoralism, fisheries, forestry, and agriculture constitute the main sources of income for rural

    populations. However, the natural resource endowment is on a steady decline.44

    5.1 PastoralismTotal livestock land is 350,000 square km; represents 39.6% of the total land area, and 87.3% of the total

    agricultural land area; and comprised 5.9% of GDP in 2006.45 The Masai are the largest group of

    pastoralists, but this activity involves 4.9 million households in the country, from which 36% raise

    livestock (1% being purely pastoralists and 35% agro-pastoralists).

    Pastoral activities are undertaken in three major ways: a) Commercial ranching practiced mainly by theNational Ranching Company; b) Pastoralism as a substitute to crop production; c) Agro-pastoralism,

    which is combined herding and farming.

    Tanzanias national strategy targets a 9% growth in livestock in 2010 to reduce poverty and guarantee

    food security. However, this goal is challenging, as livestock average annual growth in the last decade

    was 2.7% due to climate change, population growth, and lack of water.46 These factors and the lack of

    recognition of livestock in national policies are pushing pastoralists into agricultural activities in order to

    diversify risk, and to allow their cattle to graze on cropland.

    In the dry season, grazing opportunities are limited, and livestock quality can decline, thus reducing

    prices and pastoralists' potential income. This condition usually coincides with a fall in cereal supply that

    raises cereal prices, forcing livestock sales at low prices. Sometimes, high mortality rates in livestock

    push down their supply thus increasing the relative livestock to cereal price ratio. In these cases, higher

    livestock prices do not necessarily mean an improvement in pastoralists living conditions.

    5.2 ForestsIn Tanzania, forests occupy around 50% of total land area,47 and support the livelihoods of 87% of poor

  • 8/7/2019 Food Security Int a Nazi a 2

    16/27

  • 8/7/2019 Food Security Int a Nazi a 2

    17/27

    15

    reflects the purchasing power of pastoralists who buy staple food and sell livestock. However,

    this ratio can increase for many reasons,2 and to avoid misinterpretations it can be useful to

    consider the number of livestock in the market.

    b) Forests: i) Rate of deforestation. It reflects the loss of productivity of forests. In Tanzania, theannual change in the rate of deforestation between 2000 and 2005 was -1.1%.

    c) Fisheries: i) Terms of trade for fish products (price of exports/price of imports) in local currencyterms; ii) Percentage of fish stocks that are overexploited; iii) Change in the annual number of

    fishing vessels committing a severe violation.3

    6 RecommendationsOn Trade Agreements:

    As an immediate measure, the government of Tanzania would benefit by employing a Regulatory Impact

    Analysis (RIA) approach to understand the implications of various commercial policies. RIA entails a

    structured examination of the objectives and impacts of the area to be regulated. It would requirecareful examination of the data, assumptions made, definitions of affected population and expectations

    about market dynamics. RIA would also provide a systemized way through which officials can compute

    all relevant costs and benefits of regulation, even if they are not easily quantifiable. Such a system can

    be easily implemented with appropriate technical guidance and support by donor agencies.

    In the long run, the government should also seek to use more sophisticated and accurate techniques like

    Computable General Equilibrium (CGE) models to simulate the impact of different tariffs or agreements

    on domestic prices, level of exports and imports, production and structural adjustments. These models

    could be a focus of capacity building and integration into decision-making as the skill-set and expertise

    of officials develops.

    On Land Policy:Tanzania needs to formally register land parcels into a property registration system so

    citizens can benefit from legally recorded land ownership. Farmers will struggle to receive access to

    credit without having legal documentation of their land ownership. Banks would also be more likely to

    lend to farmers if repossessing land became easier. With a population of 40 million people, and one land

    parcel per every 4.9 people, there are over 8 million land parcels to register. Improved land access for

    poor and vulnerable people is inadequately addressed in The National Land Policy, and the programs

    designed to implement land laws are inadequately funded. For example, in 2008 the approved allocation

    for the rural land title certification program represented only 5.3% of the expected cost. 55

    FDI in agriculture would increase if an outgrower scheme were developed that connected smallholder

    production through all phases, and provided smallholders with knowledge on a continual basis at a low

    cost. Integrated outgrower schemes involving specific industries would benefit Tanzania by linking

    investors to agricultural producers, which would increase FDI and improve food security.56

    2The livestock to cereal terms of trade can increase: if the quality of livestock increases (consequently the price of

    livestock increases), if livestock demand is high, if livestock supply is low; holding the price of cereals constant.3

    For example: fishing without a proper license, without adequate fishing equipment, or in a restricted zone, etc.

  • 8/7/2019 Food Security Int a Nazi a 2

    18/27

    16

    On Investments: Cooperatives could lower the cost of food production through collective purchasing

    power, greater productivity and technology use, which would help smallholders reap the benefits of

    economies of scale.

    On Crop Sector Value Chain:The key determinant of future growth in the agriculture sector is the

    development of a deep and competitive market in inputs, production, and procurement as well as in the

    financial sector. The small number of powerful private players may be able to provide more efficient

    economic outcomes in the short run, but increasing the number, scale and quality of the firms operating

    in these sectors through purposive policy actions is imperative. Small and medium scale Tanzanian

    entrepreneurs need to be provided a secure environment where they can domestically add value to raw

    agricultural output and be protected from predatory activities of larger established players.

    To enhance its food security, the government of Tanzania should also avoid consumer price controls,

    producer taxes, and export bans and taxes. Producer subsidies are the most efficient way to increase

    agricultural production and income. The government of Malawis subsidy for smallholder inputs

    demonstrates this. The government of Tanzania should also address government policies that causeinequality to avoid political instability affecting food security.

    On Natural Resources: Pastoralism can contribute to biodiversity conservation and fire prevention.

    Given its importance in the economy, it is imperative that adequate measures be put into place to

    safeguard pastoralist livelihoods.57 There is also a need to empower environmental committees to be

    fully operational bodies at the village level, addressing their own natural resource problems.

    There is great potential to develop Tanzanias fisheries, particularly the processed fish industry. The FAO

    has recommended canning the local Dagaa sardines from Lake Tanganyika, and the Silver cyprinid from

    Lake Victoria. Another opportunity for canned products are pelagic fishes like tuna, mackerel and

    swordfish which predominate in the Exclusive Economic Zone (EEZ).

    Appendix:

    Figure 1: Tanzanian Trade (1999-2004)

    Source: USAID, "Tanzania's Agenda for Action," 2008

  • 8/7/2019 Food Security Int a Nazi a 2

    19/27

    17

    Figure 2: Tanzanias Principal Exports (2005)

    Principal Exports $USM

    Gold 615

    Cotton 122

    Coffee 82Cashews 54

    Tea 30

    Source: USAID, "Tanzania's Agenda for Action," 2008

    Figure 3: Basic Population and Land Data on Tanzania

    Area Type Size

    Land area 881,289 km2

    Water area 61,495 km2

    Total Population 33,584,607 (2002 Census)

    Population Density 38 people per km2

    Population Growth p.a. 1988-2002 2.90%

    Average household size 4.9

    Source: Kironde58

    Figure 4: Types of Land Use in Tanzania

    Type of Land Area (millions of hectares)

    Small holder cultivators 4.1

    Large-scale agriculture 1.1

    Grazing land 35

    Forests and Woodland 44

    Other Land 4.4

    Arable Land 3.6

    Source: Kironde59

    Figure 5: Irrigation development plan until 2017

    Type of Water Management Existing 2002

    (ha)

    New Development

    until 2017 (ha)

    Total in 2017

    (ha)

    Traditional & improved traditional 148,141 126,524 274,665

    New (modern) smallholder schemes 35,847 26,734 62,581

    Water harvesting 7,934 60,24168,175Total 191,922 213,499 405,421

    Source: FAO

  • 8/7/2019 Food Security Int a Nazi a 2

    20/27

    18

    ENDNOTES

    1UNDP Human Development Reports, 2009,

    2

    World Bank, Tanzania: Trade Brief, 2008.3Southern African Development Community, 2010

  • 8/7/2019 Food Security Int a Nazi a 2

    21/27

    19

    37Kjaer, Anne Mette, and Ole Therkildsen. Do ethnicity and elections affect policy outcome in Tanzania and Uganda? ECPR

    General Conference. September 10-12, 2009. Potsdam.38

    Josling, Tim and Siddhartha Mitra. IPC Position Paper: Agricultural and Rural Development Policy Series. International Food

    & Agricultural Trade Policy Council. January 2009.39

    http://www.africanews.com/site/Tanzania_bans_maize_export_to_curb_famine/list_messages/1674440

    Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN), USAID Tanzania: Agricultural sectorassessment, 2006.41

    Bonnard, Patricia and Megan Sheahan. Markets, Food Security and Early Warning Reporting. FEWS NET MarketGuidance,

    No. 6. October 2009.42

    Bonnard, Patricia and Megan Sheahan. Markets, Food Security and Early Warning Reporting. FEWS NET MarketGuidance,

    No. 6. October 2009.43

    Bonnard, Patricia and Megan Sheahan. Markets, Food Security and Early Warning Reporting. FEWS NET MarketGuidance,

    No. 6. October 2009.44

    Speech of his Excellency Benjamin William Mkapa. President of the United Republic of Tanzania. World Food Summit. 1996

    45

    Njombe, A. and Msanga, Y. Livestock and Diary Industry Development in Tanzania. Department of Livestock Production and

    Marketing Infrastructure Development, Ministry of Livestock Development 2010

    46

    Nori, M., et al. Browsing on fences: Pastoral land rights, livelihoods and adaptation to climate change . International LandCoalition. 2008. , also: Kironde, Lusugga. Property and Urban Development:

    Protecting the land rights of vulnerable groups IV: Pastoralists and hunters and gatherers. Daily News July 2, 2008

    47

    Missano, H. et al. Dependency on forest and trees for food security, FAO Corporate Document Repository, Forest Department

    48

    Thomas, P. and Packham, J. Ecology of Woodlands and Forests: Description, Dynamics and Diversity, Cambridge University

    Press, 2007, 4.49

    Robinson, E. and Kajembe, G. Changing Access to Forest Resources in Tanzania, Environment for Development, Discussion

    paper series, EfD DP 095-10, April 2009.50

    Dembner, S.A. Forest-dependent livelihoods: links between forestry and food security, FAO Foresty Department, Corporate

    Document Repository 51

    Ministry of Natural Resources and Tourism, et al. Insights into forestry, governance and national development: Illegal Logging

    in Southern Tanzania, Policy Brief.52

    FAO, National Aquaculture Sector Overview: United Republic of Tanzania , Fisheries and Aquaculture Department53

    FAO. National Fishery Sector Overview, The United Republic of Tanzania. 2007

    54

    FAO. National Fishery Sector Overview, The United Republic of Tanzania. 2007

    55

    Mukandala I.M. (2008), An Evaluation of the Effectiveness of Rural Land Title Certification Programme in Tanzania: The Case

    of Mbozi District, Mbeya Region, MSc (Real Estate) Dissertation, Ardhi University.56

    Elibariki Msuya, The Impact of Foreign Direct Investment on Agricultural Productivity and Poverty Reduction in Tanzania

    http://mpra.ub.uni-muenchen.de/3671/10-12.57

    Hkan, S. and Shabani, L. Traditional Pastoral Communities Securing Green Pastures Through Participatory Forest

    Management: A case Study from Kiteto District, United Republic of Tanzania. 2002.58

    J.M. Lusagga Kironde, Improving Land Sector Governance in Africa: The Case of Tanzania

    http://siteresources.worldbank.org/INTIE/Resources/L_Kironde.doc5-6.

    59 J.M. Lusagga Kironde, Improving Land Sector Governance in Africa: The Case of Tanzaniahttp://siteresources.worldbank.org/INTIE/Resources/L_Kironde.doc6.

    http://mpra.ub.uni-muenchen.de/3671/http://siteresources.worldbank.org/INTIE/Resources/L_Kironde.dochttp://siteresources.worldbank.org/INTIE/Resources/L_Kironde.dochttp://siteresources.worldbank.org/INTIE/Resources/L_Kironde.dochttp://siteresources.worldbank.org/INTIE/Resources/L_Kironde.dochttp://mpra.ub.uni-muenchen.de/3671/
  • 8/7/2019 Food Security Int a Nazi a 2

    22/27

    This Policy Brief was prepared for Booz Allen Hamilton

    TANZANIA Commodity Policy BriefCashew May 2010

    AbstractCashewsareanimportantcashcropinsoutherncoastalTanzaniaandakeycomponenttothecountrys

    foodsecurity.Cashewproductionprovides laboropportunities,anopportunityforcapital investment,

    andhouseholdincome.Thecashewvaluechainstartswithinputsuppliersandendswiththeexportof

    crops to buyers for processing and reexport. The inefficacy of the Cashew Board, a decline in crop

    quality,andalackoflocalprocessing,constrainTanzaniascashewsector.Thegovernmentcanimprove

    thissituationbyreplantingcashewtreesandbydevelopingadomesticprocessingindustry.

    Keyconstraints1. InefficacyofTanzaniasCashewBoard,includingconflictsofinterest.2. Declineincropqualityoverthepastdecade.3. LackoflocalprocessingcapacityforcashewsinTanzania.Opportunities

    1. Replantcashewtrees.2. Developadomesticprocessingindustry.

    0

    50

    100

    150

    2000

    2001

    2002

    2003

    2004

    2005

    2006

    2007

    2009

    Thousand

    Tons

    CashewProductioninTanzania

    CashewProduction

    by Columbia Universitys School of International and Public Affairsthrough the Capstone Workshop sponsored by Booz Allen Hamilton. The views expressed in this Policy Brief do notnecessary reflect the views of Columbia University or Booz Allen Hamilton. For more information, please contact SuzanneHollman at [email protected].

  • 8/7/2019 Food Security Int a Nazi a 2

    23/27

    TANZANIA Commodity Policy Brief: Cashew

    OverviewCashewsareanimportantcashcropinsoutherncoastalTanzaniaandakeycomponenttothecountrys

    exportearningsandfoodsecurity.Theyprovidelaboropportunities,anopportunityforcapital

    investment,andhouseholdincome.Householdsrelyonthisincomeforessentialfoodpurchasesfrom

    JanuarythroughJunewhenothercropsareharvestedi.Cashewsaccountedfor15%ofTanzanias

    exportsbyvaluein2009(99,300tonsworth$72M).iiMostcashewsareexportedforprocessing.

    CashewsarewellsuitedtoTanzania.Cashewtreesaregrownfortheirkernelswhichareaningredientin

    dailyfooddishesanddesserts.Thecountryranksinthetoptenlargestproducersworldwide.Thelargest

    producersareIndia,BrazilandVietnam.However,Tanzaniascrophasdeclinedsincethe1970sduetoa

    constraintslistedbelowaswellasalackofinputsandagingcashewtrees.Whiletheareaharvestedhas

    increasedfrom90,000Hain2000to94,000Hain2008,theproductionhasfallenfrom121,200tonsto

    99,100tons,andtheyieldhasfallenfrom12,466Hg/Hato10,542Hg/Haduringthesameperiod.iii

    CashewsaretheprimarycashcropforsmallholderfarmersinsoutherncoastalTanzania.Over280,000

    householdsgrowcashewson400,000hectaresinmonoormixedcropproductionsystems.ivThe

    averagecashewfarmeroccupiesonetotwohectaresoftreesandintercropsthemwithcassava,grain

    staplesandlegumes.Smallholdersareorganizedintocooperativestoaggregateservicesandfunds.

    Large,privateplantationsoccupy2,000hectaresonaverage.

    Cashewtreesresistdroughtandhavemodestsoilqualityrequirements.Theythriveindeep,friable,

    welldrainedloamsoilswithouthardpan,andcanadapttostonyandsandysoilswithoutimpairing

    productivity.Thetreerequiresweedingforitsfirstthreeyearsofgrowth,preferablyhoeing.vItthen

    producesflowersandnuts,andcanbeharvested.

    IntheregionsofMtwaraandLindi,incomefromcashewproductiondeterminessmallholders

    householdincomeandconsequentlytheirpurchasingpowerforfooditems.Thisincometypicallylasts

    fromthemarketingperiod,startinginJanuary,throughthecereal(maize,sorghumandrice)harvestinJune.Someareasalsogrowcoconuts,groundnuts,cassava,andsesame.Farmerssubsistonthese

    harvestsuntilthecashewharvestbeginsinNovember.

    TheinefficacyoftheCashewBoard,adeclineincropquality,andalackoflocalprocessing,constrain

    Tanzaniascashewsector.Thegovernmentcanimprovethissituationbyinstitutingaprogramtoplant

    newtreesandbyfosteringadomesticprocessingindustry.Cashewsareimportanttofoodsecurityin

    Tanzania.Cashewproductionrequireslimitedskillsandcapitalinvestment,makingitidealfor

    smallholderfarmers. Itisconsideredapoorpersonscropforpoorsoils.vi

    ValueChainDescriptionThevaluechainforcashewsinTanzaniabeginswithinputandseedsupplierstosmallholderfarmersand

    continueswithlaborintensiveharvestsandthemarketingofcropstolocaltraders.Itendswiththe

    exportoftherawcroptobuyers,primarilyinIndia,forprocessing.

    Inputs:Cashewtreesrespondtofertilizationbutwillproducenutswithoutpurchasedinputs.Abearingcashew

    treetypicallyrequires500gofnitrogen,100gofphosphorusand250gpotassiumannually.viiTanzanian

    farmersusepolyclonalseedsandgraftingforpropagation.Fewcashewtreeshavebeenplantedin

    Booz Allen Hamilton/Columbia SIPA Capstone Workshop, Spring 2010 2

  • 8/7/2019 Food Security Int a Nazi a 2

    24/27

    TANZANIA Commodity Policy Brief: Cashew

    recentdecades,andgraftingnowislesscommonthaninthe1970s.Theruraldistributionsystemfor

    agrochemicalslacksfunds,reliablesuppliersandproperinfrastructure.

    MostofTanzaniascashewtreesareold,plantedinthe1970s.Thisincreasestheproductioncostof

    cashews,astheyrequiremorefertilizertoupholdyields.AcashewresearchstationinMtwarahas

    developedclonedseedsthatmaturequicklyanddoubleyields.Theseseedswoulddecreasethe

    productioncostofcashews.

    Markets:Farmersharvestcashewsbyreapingthenutsaftertheyfall.Thisoccursoverseveralmonthsandis

    laborintensive.Men,womenandchildrencollectthenutsingunnybagsorbaskets.Harvestersdrythe

    cashewnutsonfloorsormatsofbamboo.Cashewapplesfallwiththenutsandarekeptforsecondary

    processing,oftenintoalcoholicbeverages.

    Farmersmarkettheirharveststoprivatemerchants.Thepricesfarmersreceivefortheircashews

    dependoninternationalanddomesticmarketconditions,productioncosts,andtaxes.Tanzanias

    CashewBoardissuesanindicativepriceforfarmersbeforethemarketingseasons.Thegovernmentof

    Tanzaniathenbuysthecashewsfromthesemiddlemenandauctionsthemtoexportbuyers.When

    Indianfarmershaveasurplus,Tanzanianbuyersandfarmersreceivelowerprices.

    Post Processing:95%ofTanzaniascashewcropisexportedtoIndiaforprocessing.viiiIndianfactoriesmanuallyprocess

    cashewsforexport,oftentoLondon,aswellasfordomesticconsumption.Thesefactoriesalsoprocess

    Indiascashewcrop.Exportingunprocessedcashewslimitsthepossibilitiestoaddvaluetothecrop.Less

    thantenprocessingfacilitiesoperateinTanzania.EntrepreneursinDaresSalaamhaveopenedfactories

    thatprofitablyimitateIndiasmanualrefiningtechniques.ix

    ExportofRawCashews:The

    export

    sector

    depends

    on

    a

    liberalized

    trade

    regime

    to

    allow

    raw

    exports

    at

    a

    low

    cost.

    Prior

    to

    the

    1990s,thegovernmentofTanzaniarestrictedexportsofrawcashewstofosterthedomesticprocessing

    industry.Subsequently,cashewscomprisedanincreasinglyinsignificantshareofTanzaniasexports

    becauseofthehighcostofdomesticprocessing.Exportearningsoncashewsrose27%afterthe

    restrictionswereremoved.x

    ThegovernmentofTanzaniastaxstructureraisestheproducerpricesforcashews.Thesectoristaxed

    highlyatthelocalandcentrallevel.TraderspayadistricttaxofTanzaniaShillings(Tshs)100perkgof

    rawnuts.TradersalsopayalicensechargeofTshs60,000perdistrictofoperation.Exporterspay3%of

    thevalueoftheirshipmenttotheCashewBoard.xiExportersandtraderspassthesecostsontofarmers,

    constitutingabout18%oftheirgrossmargin.xii

    ThegovernmentofTanzaniacollectstaxesongrosssalesinsteadofgrossmarginsorprofits.This

    penalizescashewfarmerswheninternationalanddomesticpricesarelow.Taxlevelsalsovaryby

    district.Thesumoftaxesonthefreightonboardpricewas22%in2010.xiiiThiscreatesanuneven

    incentivestructureforfarmersandtraders,andencouragesinterdistrictsmuggling.

    ThisvaluechainbeganwiththecommercializationofcashewsinTanzaniainthe1950s.Production

    declinedinthe1970sand1980s.Financialdifficultiesincooperativescausednutstogounsold.This

    Booz Allen Hamilton/Columbia SIPA Capstone Workshop, Spring 2010 3

  • 8/7/2019 Food Security Int a Nazi a 2

    25/27

    TANZANIA Commodity Policy Brief: Cashew

    loweredthefarmersshareoftheexportprice.Consequently,domesticanddonorfundedmechanized

    cashewprocessingfacilitieswentbankrupt.

    Thecashewsectorrejuvenatedinthe1990s,benefitingfromTanzaniaseconomicliberalization.The

    governmentlicensedprivatebuyersofcashewsin1992andremovedpricecontrolsin1993.It

    liberalizedtradepoliciestoallowtheexportofunprocessednutsanddepreciateditsexchangerate.

    Purchasersalsobegantopayfarmersontimeandincash.Exportearningsrosefrom$4Min1990to

    $107Min1998asaresult.xivAsof2009,thecashewvaluechaininTanzaniasufferedfrompoorrains

    andbelownormalproduction.Thisreducedincomesfromcashewsalesandreducedthepurchasing

    poweroffarmersforfoodandnonfooditems.

    KeyConstraintsThecashewsectorinTanzaniafacesthreekeyconstraints:thefunctionoftheCashewBoard;adecline

    incropquality;and,alackoflocalprocessing.

    1. TheCashewBoardfacesconflictsofinterestsregulatingandmarketingcashews.Itsetsexportpricesandearnstaxrevenuebasedontheseprices.TheCashewBoardmaybetemptedtoset

    anunfairpricetoearnmorerevenue.Itwascreatedasanongovernmentalorganizationto

    regulateandpromotecashewquality,advisethegovernment,andcarryoutresearchand

    development.TheCashewBoardbeganin2001topurchasecashewsfromlocaltraderstosell

    toexporters,earningtaxrevenuefromthesesales.Itcontinuedtotaxexporterswhilenot

    payingtaxes.xvItcompetesagainsttheprivatesectorwiththeadvantageofstatesupportand

    regulatorypower.Theseactivitiesarecontrarytoitsmissionsandinhibititsimpartiality.

    Tanzanias2001cashewharvestwascomplicatedbyconflictingregulationsandan

    uncompetitiveindicativeprice.TheCashewBoardissuedaregulationthatcashewexporters

    mustshipinsisalbagsinsteadoftraditionaljutebags.Theregulationintendedtosupportlocal

    juteproducers.Farmersandlocaltradersprotestedtheregulation,becausesisalbagscostsubstantiallymorethanjutebags.Theministerofagricultureannulledtheregulation.The

    CashewBoardalsoannouncedanindicativepriceforcashewsalessofarabovemarketprices

    thatbuyerswereunwillingtopay.Farmersrefusedtosell,andcropswentbad.

    AnexportbanwouldthreatenthecurrentuseofIndiaastheprocessingdestinationfor

    Tanzaniascashews.Kenyaprovidesaninstructiveexample.ThegovernmentofKenyabanned

    theexportofrawcashewsin2009toforceproducerstoselltodomesticprocessors.Previously,

    65%ofKenyascashewswenttoIndiaandChina.xviThegovernmentalsoestablishedthe

    NationalCerealsandProduceBoardasthesolepurchaserofcashewcrops.

    Kenyancashewfarmerscontinuedtoselltolocaltradersbecauseofthelowpricesofferedby

    domesticprocessorsandlaxenforcementbytheNationalCerealsandProduceBoard.In2010,

    processorsarepayingSh34perkgofcashews,whilelocaltradersofferSh38.Priortotheban,

    1kgofcashewsfetchedSh60.xviiCashewproductionhasfallenfrom14,000to10,000tonsover

    thepastyear,andtheincomegeneratedhassimilarlydeclinedfrom$3.75Mto$3.25M.xviiiThe

    exportbanhasbenefittedTanzania,asKenyanexportershavemovedoperationsthere.

    2. Tanzaniascashewexportshavedeterioratedinquality.Overthepastdecade,thecountrysgradingsystemshaveloosened.Extensionagentssupervisedthegradingofcashewspriorto

    Booz Allen Hamilton/Columbia SIPA Capstone Workshop, Spring 2010 4

  • 8/7/2019 Food Security Int a Nazi a 2

    26/27

    TANZANIA Commodity Policy Brief: Cashew

    marketliberalizationinthe1990s.Traders,theNationalAgriculturalProductsBoard

    warehouses,orfarmers,arenowresponsibleandfaceconflictsofinterestwhengrading

    cashewsthattheylaterselltoexporters. Thegradingregimeisnowfluidandpoorlyregulated.

    Theygradethecashewnutsintotwocategories:standardorundergrade.Standardnutscontain

    lessthan0.25%weightbyforeignmatterandlessthan13%byweightofdamagednuts,under

    gradeconstitutesthenonconformingnuts.Studiesestimatethat80%ofnutsarestandard.xix

    Thereforeexporterspaylessperkgofcashews.

    3. Tanzanialacksacompetitiveprocessingindustry,andthisreducesthepossibilitiestoaddvaluetoitsexports.Indiahasdominatedcashewprocessingwithmanualfacilitiescomprisedofhigh

    skilledworkersworkingatlowprices.IfIndiaorAfricancountriesproducelargecashewcrops,

    thedemandforTanzaniasexportsdecline.Thisthreatensfarmersincomesandfoodsecurity.

    Tanzaniacanavoidthisbydiversifyingitsexportlocationsorredevelopingitsdomestic

    processingindustry.EntrepreneursinDaresSalaamhaveopenedmanualfacilitiesbuttheir

    capacityislimited.xx

    Recommendations/InterventionsThegovernmentofTanzaniacanresolvetheseconstraintswiththefollowingpolicyactions:planting

    newcashewtress;and,developingadomesticcashewprocessingindustry.ThiswillhelpTanzaniato

    expanditsproductionlevels,increasethevalueaddedpriortoexportandimproveitsfoodsecurity.

    1. ThegovernmentofTanzaniashouldleadanaggressivereplantingprogramforcashewtrees.Itshouldprovidesubsidizedaccesstofastermaturingvarietiesofseeds.Theprogramshouldtake

    placeoverseveralyearstoallowfarmerstoslowlyreplacetheirexistingcashewtrees.Thiswill

    allowfarmerscontinuedcashflow,asnewcashewtreestakethreetofouryearstoproduce

    nuts.Thegovernmentshoulddisseminateclonedseedsthatmaturemorequicklyanddouble

    yield.AresearchstationinMtwaradevelopedsuchvarietiesinthe1990s.xxi

    MostcashewstreesinTanzaniawereplantedinthe1950sand1960s.Theiryieldshave

    significantdecreasedrecently.Thetreeslifespanisaboutfiftyyearsdependingonthe

    environment.xxiiAreplantingprogramwillincreaseyieldsandlowerproductioncosts.Thiswill

    increasefarmerincome,improvetheiraccesstofoodandenhancefarmerlivelihoods.

    2. ThegovernmentofTanzaniashouldhelpestablishadomesticcashewprocessingindustry.DonorfundedmechanizedprocessingfactoriesinTanzaniaclosedinthe1970sbecauseofthe

    highcostoffinancing.Thegovernmentshouldprovidefinancingandtechnicalassistanceto

    buildandrunmanualprocessingfacilities.Thesedependonlowwagesandskilledlabor.

    TanzaniahasacompetitiveadvantageoverIndiainwages,anditsworkforceisbecomingbetter

    educated.xxiiiThegovernmentshouldbeginbysupportingthedomesticindustrythatemergedin

    2001andnowprocesses5%ofthecrop.xxiv

    Adomesticprocessingindustrywillincreasethevalueofcashewexports,increaseemployment

    opportunitiesandraiseworkerswages.Thevalueaddedforamanualprocessingworkeris

    $3.20perday,assumingsimilarproductivitytoIndia.xxvThisisaboveTanzaniasaveragewage.

    Theindustrycouldemployupto20,000workerstoprocessthecountrysentirecrop.xxviThiswill

    improvetheworkersincomesandaccesstofood,enhancingfoodsecurityinTanzania.

    Booz Allen Hamilton/Columbia SIPA Capstone Workshop, Spring 2010 5

  • 8/7/2019 Food Security Int a Nazi a 2

    27/27

    TANZANIA Commodity Policy Brief: Cashew

    EndnotesiTanzaniaFoodSecurityOutlook.USAID.FEWSNET.JanuarytoJune2010.iiTanzania:Cashewnutexportsup.Tanzania.TheCitizen.Dateuncertain.

    iiiFAO.FoodStat.Cashewnuts,withshellinTanzaniafrom2000to2008forAreaHarvest,YieldandProductionQuantity.

    http://faostat.fao.org/site/567/DesktopDefault.aspx?PageID=567#ancoriv

    Topper

    C.

    P.,

    P.

    J.

    Martin,

    N.

    Katinila,

    L.

    P

    Kikoka,

    R.

    lamboll,

    P.

    A.

    L.

    Masawe

    and

    S.

    H.

    Shomari,

    1998.

    The

    historical

    and

    institutionalbackgroundoftheTanzaniancashewindustry.In:ProceedingsoftheinternationalCashewandCoconut

    Conference;TreesforlifethekeytoDevelopment.Pp.7683.BiohybridsInternationalLtd,ReadingUK.vOhler,J.G.1979.Cashew.KoninklijkInstituutvoordeTropen,Amsterdam.260pp.

    viDavis,Kristin.Cashew.EchoTechnicalNote.1999.www.echonet.org.

    viiBehrens,Rdiger.CashewasanAgroforestryCrop:ProspectsandPotentials.MargrafVerlag.1996.

    viiiSijaona,M.E.R.AssessmentoftheSituationandDevelopmentProspectsfortheCashewNutSector.UNCTAD/WTO.ITC

    GlobalTrustFund.ProjectINT/W3/69.July2002.ixMitchell,Donald.TanzaniasCashewSector.AfricaRegionWorkingPaperSeries.No.70.June2004.

    xIbid.

    xiKatinila,N.A.,S.H.ShomariandJ.M.Mdadila,2001.StatusofcashewnutIndustryinTanzania.Paperpresentedtothe

    subregionalTechnicalWorkshoponDevelopmentoftheCashewsubsectorinEasternandSouthernAfrica,29thto31stOctober,

    Maputo,Mozambique.xii

    Mitchell,Donald.TanzaniasCashewSector.AfricaRegionWorkingPaperSeries.No.70.June2004.xiii

    Binswanger

    Mkhize,

    Hans

    and

    Madhur

    Gautam.

    Towards

    and

    Internationally

    Competitive

    Tanzanian

    Agriculture.

    A

    World

    BankDraftReport.DaresSalaam.March22,2010xiv

    Mitchell,Donald.TanzaniasCashewSector.AfricaRegionWorkingPaperSeries.No.70.June2004.xv

    Ibid.xvi

    Kihara,Githua.Kenya:ProcessingofCashewNutsSeenBoomingDuetoExportsBan.BusinessDaily.Nairobi.December29,

    2009.xvii

    Kihara,Githua.Kenya:CashewNutFarmersTurnBacktoBrokers.BusinessDaily.Nairobi.February9,2010.xviii

    Ibid.xix

    Ohler,J.G.1979.Cashew.KoninklijkInstituutvoordeTropen,Amsterdam.260pp.xx

    Mitchell,Donald.TanzaniasCashewSector.AfricaRegionWorkingPaperSeries.No.70.June2004.xxi

    Ibid.xxii

    Davis,Kristin.Cashew.EchoTechnicalNote.1999.www.echonet.org.xxiii

    Mitchell,Donald.TanzaniasCashewSector.AfricaRegionWorkingPaperSeries.No.70.June2004.xxiv

    Ibid.xxv

    Ibid.

    xxviIbid.

    http://faostat.fao.org/site/567/DesktopDefault.aspx?PageID=567#ancorhttp://faostat.fao.org/site/567/DesktopDefault.aspx?PageID=567#ancorhttp://www.echonet.org/http://www.echonet.org/http://www.echonet.org/http://www.echonet.org/http://faostat.fao.org/site/567/DesktopDefault.aspx?PageID=567#ancor