Download Facilitating Equitable Agriculture Development in

FACILITATING EQUITABLE
AGRICULTURE DEVELOPMENT IN
SUB-SAHARAN AFRICA:
THE CASE OF TANZANIA
By
The Economic and Social Research Foundation
(ESRF)
Presented in a Workshop on Promoting
Agriculture-Climate-Trade Linkages in the EAC
(PACT EAC)
23rd February 2012
Outline

Introduction:
Agriculture and Poverty
 Policy Framework
 Objectives


Analysis and Discussion of the Study Findings:
Nature and Challenges of Agriculture
 Stakeholders’ Roles and Interactions
 Towards Equitable Terms of Trade
 Challenges facing the Private Sector


Conclusion and Recommendations
Introduction

Impact of macro economic reforms adopted by TZ:
 Have
enabled the country to sustain growth of GDP at
a rate of not less than 6% since 2001;
 Integrated domestic economies with the rest of the
world; and
 Lead to increased inflow of FDIs.
 innovations
in production, processing and organization skills
in mining, banking, telecommunication, hotels and other
industries
…Cont

Despite such an impressive economic performance
over a decade, little has been registered in terms of
poverty reduction and livelihoods:
 2007
HBS - poverty declined from 35 to 33% within
a period of 5 years
 This trend is a challenge on economic growth and
poverty reduction initiatives including the TDV 2025
…Cont

High GDP growth has been accompanied by:
 increases
public spending over the years with fiscal
deficit peaking to almost 6.6% of the GDP
 budgetary pressures that could bring bad impacts eg:
price surge, capital flight and exchange rate
misalignments
 inflationary pressures (4.5% in 2002 to 12.1% in
2009, and 19% currently)
 export earning instability
 Thus,
deteriorating livelihoods of most Tanzanians
Agriculture and Poverty in Tanzania

Agriculture has remained an important sector:
 Employment
(about 80%)
 Contribution to GDP (about 26.5%)
 Has
declined overtime due to growth in other sectors
(service) and poor performance of the sector
 Export
Earnings (about 24%)
 Supply of raw materials for domestic industries (about
65%)
 Supply of food consumed in the country (about 95%)
 The country has the potential to produce enough food
for the entire EAC region given land suitable for food
production and other advantages
…Cont

But overall sector performance is dismal:
Food supply lags behind demand
 The sector growth rate is low
 The sector GDP contribution is also low
 At 80% employment rate in agriculture is too high
Lack of sufficient investment in terms of putting appropriate
technology, credits and removal of all forms of constraints for
value addition
In addition, the sector is dominated by small-scale farmers who
are less educated and uninformed as well as use rudimentary
technology; leading to low productivity and food insecurity
Dominated by rain-fed agriculture
Higher levels of poverty compared to the urban areas





…Cont




The vagaries of climate change
Lack the necessary credentials to access loans, lack
insurance schemes to hedge against risks and face
unpredictable Government policy
The effect of market liberalization which have made
smallholder farmers vulnerable and without any form of
safety net to insulate them
Poorly developed infrastructure to improve marketing and
distribution of food
…Cont

Agricultural share to GDP has been decreasing since 2000:




For example, between 2000 and 2009 its share to GDP has
been making a gradual decline from 29% in 2000 to 25% in
2009 and 26% in 2010
The service sector contributes the largest share in total GDP
contributing an average of 45% per annum between 2000
and 2010
Though marginally, the GDP share of the service sector has
been rising overtime
Likewise, the industry sector’s share to total GDP has been
rising overtime despite the fact that its share is lower than
that of agriculture
…Cont
Sector Contribution to Real GDP in Percentage
Year→
Sector↓
Agriculture
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009p 2010p
29
29
28
27
27
26
25
25
26
25
26
Industry
17
18
18
19
20
20
20
21
21
22
22
Services
45
45
46
46
46
46
47
47
48
48
48
Other
7.5
7.5
7.5
7.4
7.4
7.3
7.5
7.5
9.5
9.8
9.5
BoT (2010)
…Cont
Sector Contribution to Real GDP in Percentage
50
45
40
GDP Share (%)
35
30
25
20
15
10
5
0
2000
2001
2002
2003
2004
2005
2006
Year
Agriculture
Industry
Services
Other
2007
2008
2009p
…Cont
•
•
•
•
Likewise, agricultural sector has persistently registered a
lower growth rate compared to industry and service sectors
While agriculture has been growing at an average of 4%
between 1998 and 2009, industry and service sectors have
been growing at an average of 8.3 and 7% respectively
(The average growth of GDP between 1998 and 2009 is
6.4%)
Thus, the main reasons why economic growth in Tanzania over
the past decade has not been associated with poverty
reduction especially in rural areas is that agricultural sector
which support nearly 80% of the population has been
growing relatively slowly compared to other major sectors
Growth is therefore happening in non-agricultural sectors
…Cont
Growth Rates of Total GDP, Agriculture, Industry and Services
12
P
E
R
C
E
N
T
A
G
E
10
8
6
4
2
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
YEAR
Agriculture
Industry
Service
GDP
2007
2008
2009
…Cont
Percentage of the Population below Basic Needs and Food Poverty
Lines in Tanzania Mainland
HBS
Basic
Needs
Poverty
1991/92
38.6
Change in
Headcount Ratio:
Basic Needs
Poverty
--
2000/02
35.7
- 2.9
18.7
- 2.9
2007
33.3
- 2.4
16.5
- 2.2
Source: URT (2002c) and URT (2007a)
Food
Poverty
Change in Headcount
Ratio: Food Poverty
21.6
--
Policy Framework

Review of agriculture, trade and investment policies
has established evidences of the linkages between
them:
investment policy focuses on ensuring that investments are
increasing in different sectors including agriculture
 Trade policy provides a framework under which agriculture
can transform in the liberalized economy through increased
trade
 But in order to attain agricultural development, there is a
need of increasing both foreign and domestic investments
 It is from this perspective; these policies are considered to
be complementing each other

…Cont


Tanzania is among few African countries which has
been able to attract a high level of FDIs
But the largest share of these FDIs are directed into
mining and services sectors
 where
the dominant players, especially in mining sector,
are multinational companies which are highly
mechanized and provide few jobs
 Such investments are not pro-poor

Agriculture (where majority are making their living)
does not attract FDIs
Study Objectives


To examine the relationships between the
agriculture policy makers, farmers, investors and
traders and their role/contribution to the policy
formulation and implementation
To identify positive and negative elements in the
policy framework that either facilitate or hamper
positive interaction and equitable ToT among
farmers, investors and traders
Methodology

Both primary and secondary data collected:


Primary data was collected using an interview guide while secondary
data was collected from institutions such as The Ministry of Agriculture,
Food Security and Cooperative, Economic and Social Research
Foundation Library, the National Website, etc.
Respondents were drawn from different actors engaged in
agriculture:




The interviews focused on establishing constraints, interactions by
stakeholders, power and ability to influence existing policy and how they
affect equitable interaction between stakeholders
The survey intended to gauge whether there was an equal inclusion in policy
formulation or change among actors
Role of associations formed by different actors was also established.
We were particularly interested in the lobbying and advocacy function of
associations or group and their outcome.
The Study Findings - Nature and Challenges of
the Sector





Agricultural employment very high – an indication of
agricultural underdevelopment
Growth in volume of agricultural production not
consistent with food security or poverty reduction
Low technological uptake eg: productivity enhancing
factors such as improved seeds and fertilizer leading to
low productivity
Dominated by small scale farmers and rain fed
agriculture – an indication of absence of irrigation
Low intensity activity - an indication of non
attractiveness of capital investment
…Cont




Land acquisition and ownership is a serious problem
Contract Farming has been introduced in very few
areas
Value addition is constrained by lack of skills and a
weak private sector
Misconception of market liberalization or free
market
Stakeholders Roles and Interaction










Farmers
Private Traders
Non-Governmental Organizations (NGOs) for Farmers
Private Sector Organizations
Government Institutions
Warehouse Receipt Agency
Crop Marketing Board
Agricultural Research Institutes (ARI)
Local Government Authority
Agencies In-charge of Standards
Towards Equitable ToT Among Stakeholders









Inefficient Marketing System
Access to Financial Services
Dry Weather Conditions
Provision of Extension Services
Ad hoc Policy Problems
Access to Agricultural Inputs
Tax or Crop Levy
Plant/Land compensation
Unattractive producer price
Problems Facing the Private Sector









Lack of Steady Supply of Crop Produce
Problem of Electricity
Transaction Costs
Expectations of Farmers and Private Sector
Role of the Government
Lack of Skills
Capital Deficiency
Policy Environment and Legal Framework
Knowledge on safety and standards
Conclusion




Agriculture is dominated by small farmers and there are few
medium and large scale farmers;
Agriculture is constrained by many factors such as lack of
access to credit, marketing infrastructure, market
information, agricultural inputs (technology), storage
facilities and insufficient supportive services such as
extension services;
Farmers use different mechanisms to influence policy
depending on their scale of production;
While large scale farmers use their association or even
individual firm to lobby for a particular policy change,
NGOs represent smallholders in policy review or lobbying
and advocacy for policy change -
…Cont




This important activity is complemented by politicians
particularly members of parliament who normally pressurize
the Government to implement or change specific policies
which are not favorable to the sector;
The role of traders is to purchase farm produce from the
farmers, process and then supply them either to domestic or
foreign markets;
Like large farmers, traders also have associations which
present their interests in policy design. Private investors are
found to have more lobbying power than the smallholder
farmers;
Different abilities and approaches for lobbying and
advocacy used by each group is one of the reasons for
inefficiencies within the marketing system.
Recommendations

A number of support services are required to attract private sector
in agriculture and be able to implement successfully the ‘Kilimo
Kwanza’ strategy:



Resources are therefore needed to build up infrastructure such as
irrigation and rural roads and ensure that there is sufficient and reliable
electricity
Both the government and the Private Sector must work hard towards
empowering small scale farmers by way of promoting farmers
groups and associations or cooperatives to foster information
sharing and reduce transaction costs of reaching them
Establishment of Warehouse Receipt System (WRS) should be scaled
up and introduced to other crops subsectors as well
…Cont


Private sector should scale up their activities and
ensure profits are equitably distributed to all actors
along the supply or value chain. Approaches such
as contract farming will be relevant
A few large scale farmers and small scale farmers
should operate as partners where the later will be
suppliers of raw materials to large scale farmers
Thank You!