Food Security Int A Nazi A 2

FOOD SECURITY IN TANZANIA:
ENABLING ENVIRONMENT, OPPORTUNITIES & CONSTRAINTS

Abstract: Tanzania faces profound challenges ensuring its food security. The government will need sound
policies for all people to have physical and economic access to sufficient food to meet their dietary needs
for a productive and healthy life. This paper reviews the government of Tanzania’s current policies
affecting its food security and makes recommendations.
This Spring Semester, 2010, Capstone Workshop at Columbia University/SIPA, is sponsored by Booz Allen Hamilton.
It is intended to provide students the opportunity to produce original concept papers examining the implications of
regional and domestic trade policies on household food security in Tanzania, as well as the conditions that foster
the development of these policies. In this context, food security implies the ability of households in a given area to
access and utilize sufficient quantity and quality of food to support a healthy and active lifestyle. These concept
papers will provide Booz Allen Hamilton and its client, the US Agency for International Development, with insights
into further developing the AgCLIR program (Agribusiness Climate Legal and Institutional Reform), a USAID‐funded
project implemented by Booz Allen Hamilton.

Table of Contents
1 Overview of Tanzania’s Regional, Bilateral and International Trade Agreements:................................ 2
2 Land and Natural Resources ................................................................................................................... 4
2.1 Land Ownership: .............................................................................................................................. 4
2.2 Land Use for Agriculture: ................................................................................................................. 5
2.3 Water and Irrigation: ....................................................................................................................... 6
3 Impact of prices and investment policy on food security: ..................................................................... 7
3.1 Food Prices: ..................................................................................................................................... 7
3.2 Investment:...................................................................................................................................... 7
4 Crop Sector Value Chain: ........................................................................................................................ 8
4.1 Farm to wholesale: .......................................................................................................................... 9
4.2 Wholesale to retail: ....................................................................................................................... 11
5 Non-Agricultural sectors/ Natural Resources:...................................................................................... 13
5.1 Pastoralism .................................................................................................................................... 13
5.2 Forests ........................................................................................................................................... 13
5.3 Fisheries ......................................................................................................................................... 14
6 Recommendations................................................................................................................................ 15
Appendix: .................................................................................................................................................... 16
ENDNOTES................................................................................................................................................... 18
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 Tanzania’s 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 Tanzania’s 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
Tanzania’s 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.
1
1 Overview of Tanzania’s Regional, Bilateral and International Trade
Agreements:
Tanzania’s 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 of
Tanzanian 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 Tanzania’s trade agreements:
Tanzania’s 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, South
Africa, 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 with
Tanzania.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. Tanzania’s 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 is
poor infrastructure within Tanzania. Insufficient investment in the road network has resulted in
1
Tanzanian 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).
2
just 4,000 kilometers of Tanzania’s 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 country’s 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 country’s 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 highly

centralized, 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 continue
to 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: The government’s implementation of policies, taxes and tariffs
without employing an analytical framework ex-ante often leads to problems that threaten the
country’s 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 Tanzania’s milk is exported to
neighboring Nairobi for processing, from where it is re-imported for Tanzanian use.11
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5) Smuggling/Illegal trade: The implementation of ill-conceived taxes coupled with lack of local
markets 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. In
2007, USAID noted that inefficiency in clearing goods at borders was the main cause of
corruption 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 agricultural
products) are important indicators that have a direct bearing on food security. Tanzania’s 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 the
growth or composition of trade (exports/imports). Tanzania’s export basket in 2005 included
agricultural 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 relevant
food 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 Tanzania’s
cash crop producers.
2 Land and Natural Resources

2.1 Land Ownership:
4
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; Tanzania’s 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 president’s 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
Tanzania’s crop areas, oxen ploughs cultivate 20%, and tractors cultivate 10%. Of Tanzania’s 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 Tanzania’s agricultural sector as it has helped improve farmer
technology and connected smallholder farmers with out-grower schemes. FDI in agriculture fosters
5
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 Tanzania’s 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 irrigation
systems 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.
6
a) FDI in Agriculture: FDI has the potential to positively impact food security. Indicators of
increased 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 by
inefficient 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 with
access 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 awareness
and 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 country’s trade
balance, affecting the strength of the Tshilling. The groups of population most likely to be negatively
affected 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
7
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.
1) Capacity: TIC currently lacks the capacity to address the complicated and non-transparent
investment 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 business

in 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 the
biggest hindrances to doing business. The World Bank 2006 Enterprise Survey indicates that
49.5% 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,23
whereby 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 on
agriculture. Bearing the above constraint, these small enterprises have a comparatively high
risk, high transaction costs and low volumes, limiting access to capital.
Indicators:
The indicators listed below will be helpful in assessing the price and investment policy’s 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 for
different 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. The
annual 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 useful
indicator to gauge when policies to boost domestic or foreign investment may be necessary.
4 Crop Sector Value Chain:
8
4.1 Farm to wholesale:
Agriculture generates 45% of Tanzania’s 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 Kikwete’s
administration, in collaboration with the Tanzania National Business Council, launched the Kilimo
Kwanza 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 fertilizer
subsidies 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.
9
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 company’s 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 in
agriculture, but also the result of regulations that the EU (which is Tanzania’s 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
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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 the
application 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 have
lower yields, addressing food security issues especially for subsistence farmers.
b) Monopoly/Monopsony index: Such an index for the market for inputs and procurement will be
helpful 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 market
prices 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.
11
Tanzania’s 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 kg
of 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. Tanzania’s 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 Tanzania’s agricultural GDP,40 the impact of lowered prices
on production levels of this crop has potentially large ramifications on food security.
1) Ethnic Grievances and Domestic Policies: Ethnic differences can affect domestic policy
outcomes 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.
12
a) Price controls: Control on prices (yes/no; $/unit). FEWS NET’s Markets Guide advises monitoring
price controls. In 1986, Tanzania removed price controls and staple prices increased by 140%.41
b) Input subsidy: Subsidies ($/unit) and tax rates. FEWS NET’s Markets Guide suggests that as
these 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 this
indicator will demonstrate reduced market outlets, increase stocks and lower returns.42
d) Import ban in neighboring country: An increase in this indicator will reduce market
opportunities, 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 as
pastoralism, 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 Pastoralism
Total 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 the
National Ranching Company; b) Pastoralism as a substitute to crop production; c) Agro-pastoralism,
which is combined herding and farming.
Tanzania’s 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 Forests
In Tanzania, forests occupy around 50% of total land area,47 and support the livelihoods of 87% of poor
13
rural households. Forestry is thus one of the fundamental activities to guarantee income and food
security as a supplementary source of food and non-agricultural income. For example, woodlands, a
low-density forest characterized by an open canopy,48 constitute 35% of Tanzania’s land area and create
730,000 jobs per year.
Three main problems in forestry practice threaten natural resources and food security. First, districts fail
to respond to villagers’ demands on use of forestland, which creates conflicts between both villagers
and authorities and urgency for agreements on joint management of forestlands. Second, poor roads
infrastructure combined with long distances from forests to the closest market (it takes villagers around
2 hours to reach the forest resource and 2 more hours to collect the forest produce) prevent villagers
from selling their produce, which discourages them from continuing in the market.49 For example, in the
Nanguruwe zone, women walk between 8 km to 16 km to collect the wild yam that is commonly eaten
in local diets.50 Third, there is an absence of transparency in the management of revenues generated
through commercial harvesting. Fourth, the failure of authorities to monitor illegal activities related to
natural resources depletion threatens forestry further.51
5.3 Fisheries
Tanzanian fishers’ contribution to GDP ranges between 1.6% and 3.1%. They are located both inland and
in coastal areas, with 90% of the total fishing being artisanal and only 10% being industrial. Moreover,
according to FAO, 17,000 people are involved in the aquaculture subsector; 14,000 in freshwater fish
farming; and 3,000 in seaweed farming.52
The value of fish imports was $540,000, and of fish exports was $145.2 million in 2005.53 Tanzania sells
sardines, prawns and Nile perch in markets abroad, while the rest of the fish is consumed locally.
Fisheries are a fundamental activity for food security because around 30% of the total protein intake of
the Tanzanian population is satisfied with the 10% of fish that is sold locally.
From its most productive lakes, Lake Victoria generates $186 million annually, and the Indian Ocean
Coast only $742,500 annually.
Fishery development is hindered by seven major obstacles: (i) inadequate knowledge of fishery data
bases and resources; (ii) inadequate quality of fish seeds used in aquaculture; (iii) inadequate extension
services; (iv) lack of funding for research; (v) poor access to capital for fishermen; (vi) lack of market
information; (vii) poor infrastructure for fish production and processing.54
Indicators
This section outlines the natural resource metrics that signal the risk of food insecurity. In general, these
indicators are easy to measure, but data accessibility may vary.
a) Pastoralism: i) Degraded rangeland as a percentage of the total rangeland. It reflects the loss of
productive capacity of land for livestock due to natural phenomena or human action; ii)
Livestock to cereal terms of trade (price of livestock/price of cereal), to be used in conjunction
with the number of livestock available in the markets. The livestock to cereal terms of trade
14
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, the
annual 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 currency
terms; ii) Percentage of fish stocks that are overexploited; iii) Change in the annual number of
fishing vessels committing a severe violation.3
6 Recommendations
On 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 require
careful 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
2
The 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.
15
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 Malawi’s subsidy for smallholder inputs
demonstrates this. The government of Tanzania should also address government policies that cause
inequality 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 Tanzania’s 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
16
Figure 2: Tanzania’s Principal Exports (2005)
Principal Exports $USM

Gold 615
Cotton 122
Coffee 82
Cashews 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 New Development Total in 2017

(ha) until 2017 (ha) (ha)
Traditional & improved traditional 148,141 126,524 274,665
New (modern) smallholder schemes 35,847 26,734 62,581
Water harvesting 7,934 60,241 68,175
Total 191,922 213,499 405,421
Source: FAO
17
ENDNOTES
1
UNDP Human Development Reports, 2009, <http://hdr.undp.org/en/statistics>
2
World Bank, “Tanzania: Trade Brief”, 2008.
3
Southern African Development Community, 2010 <http://www.sadc.int/.
4
J. Kweka, “Impact of International Trade Agreements on Tanzania’s trade performance,” Friedrich Ebert Stiftung (FES),
Working paper 2004, <http://www.fes-tanzania.org/foa-economic-cotonou.php.
5
J. Kweka, 2004
6
USAID, “Tanzania’s Agenda for Action,” 2008, 177-192.
7
USAID, “Tanzania’s Agenda for Action,” 2008, 146.
8
USAID, “Tanzania’s Agenda for Action,” 2008, 136.
9
WTO, World Tariff Profile 2009, 7, http://www.wto.org/english/res_e/booksp_e/tariff_profiles09_e.pdf.
10
USAID, 2008, 136.
11
Catherine Riungu, “Tanzania milk prices collapse after Brookside exit,” The East African, May 2009,
http://www.theeastafrican.co.ke/business/-/2560/593162/-/5y59l6z/-/index.html.
12
NGO News Africa, “Tanzania: Tanga moves to curb fish smuggling,” Jan 2010,
http://www.ngonewsafrica.org/2010/01/tanzania-tanga-moves-to-curb-fish.html.
13
USAID, “Inefficiency in Clearing Goods is the Main Cause of Corruption in the Northern Corridor,” Feb 2008, in USAID
“Tanzania’s Agenda for Action” 2008, 146
14
World Bank, “Tanzania: Trade Brief”, 2008
15
Famine Early Warning Systems Network, “Tanzania monthly price bulletin,” Feb 2010,
http://www.fews.net/docs/Publications/Tanzania_2010_02_price%20bulletin.pdf
16
Bahati Mlole, “Land Policy Challenges for Policy Makers Tanzania Experience” www.fes-tz.de/doc/wr-land-policy.pdf 4-5
17
Peter Mukami, “Review of the Agriculture Sector” TNBC Agriculture Investors Roundtable Working Group (Dar es Salaam:
MADA, 2003) 12
18
Elibariki Msuya, “The Impact of Foreign Direct Investment on Agricultural Productivity and Poverty Reduction in Tanzania” 2.
http://mpra.ub.uni-muenchen.de/3671
19
Elibariki Msuya, “The Impact of Foreign Direct Investment on Agricultural Productivity and Poverty Reduction in Tanzania”
http://mpra.ub.uni-muenchen.de/3671/ 11
20
Country reports, Tanzania, 2010, Global insight
21
Enterprise Survey, World Bank http://www.enterprisesurveys.org/ExploreEconomies/?economyid=185&year=2006
22
Overview of Corruption in Tanzania, http://www.u4.no/helpdesk/helpdesk/query.cfm?id=201
23
World Bank, “Tanzania Pilot Rural Investment climate Assessment - Stimulating Non-farm Microenterprise Growth”, June
2007
24
World Bank, “Accelerated Food Security Program for the United Republic of Tanzania – Emergency Program Paper (Report
No: 48549-TZ)”, May 27, 2009.
25
Agricultural Council of Tanzania, “ Agriculture in Tanzania”, http://www.actanzania.org. Published in 2007. Accessed on April
17, 2010.
26
Ariga, Joshua and T.S. Jayne, “Can the market deliver? Lessons from Kenya’s rising use of fertilizer following liberalization”,
Policy Brief No. 7, Tegemeo Institute For Agricultural Development And Policy, July 2006.
27
FAO, Fertistat
28
"Tanzanian agriculture minister blames low productivity on farmer-saved seed", Daily News, Arusha, August 25 2008.
29
Balile, Deodatus, “Tanzanian parliament blocks government on GM seeds”, SciDev.net, November 28 2003.
30
“EAC Boss Advocates GM Food”, The Citizen, Thursday, 25 March 2010.
31
Keeler, Rachel, “Kenya: Gates Foundation and Monsanto to develop GM seeds for small farmers”, Ratio Magazine, November
26 2009.
32
Bevan, David, Paul Collier & Jan Gunning, Agriculture and the policy environment: Tanzania and Kenya. Pg. 65
33
Telephone Interview with Prof. Aloyce Kaliba, Southern University Business School, Baton Rouge, Louisiana. Interview
th
conducted by Gautam Bastian on 25 Feb 2010 at 4.10pm EST
34
Hassan, Seid, “The dangerous hype behind Ethiopian Commodity Exchange,” Ethiopian Review, July 30th, 2009.
35
Rugumisa, S. M. H., and Joseph Semboja. “Price Control in the Management of an Economic Crisis: The National Price
Commission in Tanzania.” African Studies Review, Vol. 31, No. 1(Apr. , 1988), Pp. 47-65.
36
Temu, Andrew. “The compatibility of trade policy with domestic policy interventions affecting the grains sector in Tanzania.”
Sokoine University of Agriculture. PPT.
18
37
Kjaer, 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/16744
40
Food, Agriculture and Natural Resources Policy Analysis Network (FANRPAN), “USAID Tanzania: Agricultural sector
assessment,” 2006.
41
Bonnard, Patricia and Megan Sheahan. “Markets, Food Security and Early Warning Reporting.” FEWS NET MarketGuidance,
No. 6. October 2009.
42
43
44
Speech of his Excellency Benjamin William Mkapa. President of the United Republic of Tanzania. World Food Summit. 1996
<http://www.tanzania.go.tz/livestock.htm>
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
<http://www.mifugo.go.tz/documents_storage/LIVESTOCK%20INDUSTRY%20DAIRY%20DEVELOPMENT%20IN%20TANZANIA%2
0-%20LATEST3.pdf>
46
Nori, M., et al. Browsing on fences: Pastoral land rights, livelihoods and adaptation to climate change. International Land
Coalition. 2008. <http://www.iied.org/pubs/pdfs/12543IIED.pdf>, 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
<http://dailynews.habarileo.co.tz/magazine/?id=6127>
47
Missano, H. et al. Dependency on forest and trees for food security, FAO Corporate Document Repository, Forest Department
<http://www.fao.org/docrep/x5325e/x5325e0g.htm>
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 <http://www.fao.org/docrep/v6585e/V6585e16.htm>
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 Department
<http://www.fao.org/fishery/countrysector/naso_tanzania/en>
53
FAO. National Fishery Sector Overview, The United Republic of Tanzania. 2007
<ftp://ftp.fao.org/FI/DOCUMENT/fcp/en/FI_CP_TZ.pdf>
54
FAO. National Fishery Sector Overview, The United Republic of Tanzania. 2007
<ftp://ftp.fao.org/FI/DOCUMENT/fcp/en/FI_CP_TZ.pdf>
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
Håkan, 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.doc 5-6.
59
J.M. Lusagga Kironde, “Improving Land Sector Governance in Africa: The Case of Tanzania”
http://siteresources.worldbank.org/INTIE/Resources/L_Kironde.doc 6.
19

TANZANIA Commodity Policy Brief

Cashew May 2010

Abstract
Cashews are an important cash crop in southern coastal Tanzania and a key component to the country’s
food security. Cashew production provides labor opportunities, an opportunity for capital investment,
and household income. The cashew value chain starts with input suppliers and ends with the export of
crops to buyers for processing and re‐export. The inefficacy of the Cashew Board, a decline in crop
quality, and a lack of local processing, constrain Tanzania’s cashew sector. The government can improve
this situation by replanting cashew trees and by developing a domestic processing industry.

Key constraints
1. Inefficacy of Tanzania’s Cashew Board, including conflicts of interest.
2. Decline in crop quality over the past decade.
3. Lack of local processing capacity for cashews in Tanzania.

Opportunities
1. Replant cashew trees.
2. Develop a domestic processing industry.

Cashew Production in Tanzania
150
Thousand Tons
100
50
0
2000
2001
2002
2003
2004
2005
2006
2007
2009
Cashew Production

This Policy Brief was prepared for Booz Allen Hamilton by Columbia University’s School of International and Public Affairs
through the Capstone Workshop sponsored by Booz Allen Hamilton. The views expressed in this Policy Brief do not
necessary reflect the views of Columbia University or Booz Allen Hamilton. For more information, please contact Suzanne
Hollman at sph2103@columbia.edu.
TANZANIA Commodity Policy Brief: Cashew

Overview

Cashews are an important cash crop in southern coastal Tanzania and a key component to the country’s
export earnings and food security. They provide labor opportunities, an opportunity for capital
investment, and household income. Households rely on this income for essential food purchases from
January through June when other crops are harvested i . Cashews accounted for 15% of Tanzania’s
exports by value in 2009 (99,300 tons worth $72M). ii Most cashews are exported for processing.

Cashews are well suited to Tanzania. Cashew trees are grown for their kernels which are an ingredient in
daily food dishes and desserts. The country ranks in the top ten largest producers worldwide. The largest
producers are India, Brazil and Vietnam. However, Tanzania’s crop has declined since the 1970s due to a
constraints listed below as well as a lack of inputs and aging cashew trees. While the area harvested has
increased from 90,000 Ha in 2000 to 94,000 Ha in 2008, the production has fallen from 121,200 tons to
99,100 tons, and the yield has fallen from 12,466 Hg/Ha to 10,542 Hg/Ha during the same period. iii

Cashews are the primary cash crop for smallholder farmers in southern coastal Tanzania. Over 280,000
households grow cashews on 400,000 hectares in mono or mixed‐crop production systems. iv The
average cashew farmer occupies one to two hectares of trees and intercrops them with cassava, grain
staples and legumes. Smallholders are organized into cooperatives to aggregate services and funds.
Large, private plantations occupy 2,000 hectares on average.

Cashew trees resist drought and have modest soil quality requirements. They thrive in deep, friable,
well‐drained loam soils without hardpan, and can adapt to stony and sandy soils without impairing
productivity. The tree requires weeding for its first three years of growth, preferably hoeing. v It then
produces flowers and nuts, and can be harvested.

In the regions of Mtwara and Lindi, income from cashew production determines smallholders’
household income and consequently their purchasing power for food items. This income typically lasts
from the marketing period, starting in January, through the cereal (maize, sorghum and rice) harvest in
June. Some areas also grow coconuts, ground nuts, cassava, and sesame. Farmers subsist on these
harvests until the cashew harvest begins in November.

The inefficacy of the Cashew Board, a decline in crop quality, and a lack of local processing, constrain
Tanzania’s cashew sector. The government can improve this situation by instituting a program to plant
new trees and by fostering a domestic processing industry. Cashews are important to food security in
Tanzania. Cashew production requires limited skills and capital investment, making it ideal for
smallholder farmers. It is considered a poor person’s crop for poor soils. vi

Value Chain Description

The value chain for cashews in Tanzania begins with input and seed suppliers to smallholder farmers and
continues with labor intensive harvests and the marketing of crops to local traders. It ends with the
export of the raw crop to buyers, primarily in India, for processing.

Inputs:
Cashew trees respond to fertilization but will produce nuts without purchased inputs. A bearing cashew
tree typically requires 500g of nitrogen, 100g of phosphorus and 250g potassium annually. vii Tanzanian
farmers use polyclonal seeds and grafting for propagation. Few cashew trees have been planted in
Booz Allen Hamilton/Columbia SIPA Capstone Workshop, Spring 2010 2


recent decades, and grafting now is less common than in the 1970s. The rural distribution system for
agro‐chemicals lacks funds, reliable suppliers and proper infrastructure.

Most of Tanzania’s cashew trees are old, planted in the 1970s. This increases the production cost of
cashews, as they require more fertilizer to uphold yields. A cashew research station in Mtwara has
developed cloned seeds that mature quickly and double yields. These seeds would decrease the
production cost of cashews.

Markets:
Farmers harvest cashews by reaping the nuts after they fall. This occurs over several months and is
labor‐intensive. Men, women and children collect the nuts in gunny bags or baskets. Harvesters dry the
cashew nuts on floors or mats of bamboo. Cashew apples fall with the nuts and are kept for secondary
processing, often into alcoholic beverages.

Farmers market their harvests to private merchants. The prices farmers receive for their cashews
depend on international and domestic market conditions, production costs, and taxes. Tanzania’s
Cashew Board issues an indicative price for farmers before the marketing seasons. The government of
Tanzania then buys the cashews from these middle men and auctions them to export‐buyers. When
Indian farmers have a surplus, Tanzanian buyers and farmers receive lower prices.

Post Processing:
95% of Tanzania’s cashew crop is exported to India for processing. viii Indian factories manually process
cashews for export, often to London, as well as for domestic consumption. These factories also process
India’s cashew crop. Exporting unprocessed cashews limits the possibilities to add value to the crop. Less
than ten processing facilities operate in Tanzania. Entrepreneurs in Dar es Salaam have opened factories
that profitably imitate India’s manual refining techniques. ix

Export of Raw Cashews:
The export sector depends on a liberalized trade regime to allow raw exports at a low cost. Prior to the
1990s, the government of Tanzania restricted exports of raw cashews to foster the domestic processing
industry. Subsequently, cashews comprised an increasingly insignificant share of Tanzania’s exports
because of the high cost of domestic processing. Export earnings on cashews rose 27% after the
restrictions were removed. x

The government of Tanzania’s tax structure raises the producer prices for cashews. The sector is taxed
highly at the local and central level. Traders pay a district tax of Tanzania Shillings (Tshs) 100 per kg of
raw nuts. Traders also pay a license charge of Tshs 60,000 per district of operation. Exporters pay 3% of
the value of their shipment to the Cashew Board. xi Exporters and traders pass these costs on to farmers,
constituting about 18% of their gross margin. xii

The government of Tanzania collects taxes on gross sales instead of gross margins or profits. This
penalizes cashew farmers when international and domestic prices are low. Tax levels also vary by
district. The sum of taxes on the freight on board price was 22% in 2010. xiii This creates an uneven
incentive structure for farmers and traders, and encourages inter‐district smuggling.

This value chain began with the commercialization of cashews in Tanzania in the 1950s. Production
declined in the 1970s and 1980s. Financial difficulties in cooperatives caused nuts to go unsold. This


lowered the farmers’ share of the export price. Consequently, domestic and donor‐funded mechanized
cashew processing facilities went bankrupt.

The cashew sector rejuvenated in the 1990s, benefiting from Tanzania’s economic liberalization. The
government licensed private buyers of cashews in 1992 and removed price controls in 1993. It
liberalized trade policies to allow the export of unprocessed nuts and depreciated its exchange rate.
Purchasers also began to pay farmers on time and in cash. Export earnings rose from $4M in 1990 to
$107M in 1998 as a result. xiv As of 2009, the cashew value chain in Tanzania suffered from poor rains
and below‐normal production. This reduced incomes from cashew sales and reduced the purchasing
power of farmers for food and non‐food items.

Key Constraints

The cashew sector in Tanzania faces three key constraints: the function of the Cashew Board; a decline
in crop quality; and, a lack of local processing.

1. The Cashew Board faces conflicts of interests regulating and marketing cashews. It sets export
prices and earns tax revenue based on these prices. The Cashew Board may be tempted to set
an unfair price to earn more revenue. It was created as a non‐governmental organization to
regulate and promote cashew quality, advise the government, and carry out research and
development. The Cashew Board began in 2001 to purchase cashews from local traders to sell
to exporters, earning tax revenue from these sales. It continued to tax exporters while not
paying taxes. xv It competes against the private sector with the advantage of state support and
regulatory power. These activities are contrary to its missions and inhibit its impartiality.

Tanzania’s 2001 cashew harvest was complicated by conflicting regulations and an
uncompetitive indicative price. The Cashew Board issued a regulation that cashew exporters
must ship in sisal bags instead of traditional jute bags. The regulation intended to support local
jute producers. Farmers and local traders protested the regulation, because sisal bags cost
substantially more than jute bags. The minister of agriculture annulled the regulation. The
Cashew Board also announced an indicative price for cashew sales so far above market prices
that buyers were unwilling to pay. Farmers refused to sell, and crops went bad.

An export ban would threaten the current use of India as the processing destination for
Tanzania’s cashews. Kenya provides an instructive example. The government of Kenya banned
the export of raw cashews in 2009 to force producers to sell to domestic processors. Previously,
65% of Kenya’s cashews went to India and China. xvi The government also established the
National Cereals and Produce Board as the sole purchaser of cashew crops.

Kenyan cashew farmers continued to sell to local traders because of the low prices offered by
domestic processors and lax enforcement by the National Cereals and Produce Board. In 2010,
processors are paying Sh34 per kg of cashews, while local traders offer Sh38. Prior to the ban,
1kg of cashews fetched Sh60. xvii Cashew production has fallen from 14,000 to 10,000 tons over
the past year, and the income generated has similarly declined from $3.75M to $3.25M. xviii The
export ban has benefitted Tanzania, as Kenyan exporters have moved operations there.

2. Tanzania’s cashew exports have deteriorated in quality. Over the past decade, the country’s
grading systems have loosened. Extension agents supervised the grading of cashews prior to


market liberalization in the 1990s. Traders, the National Agricultural Products Board
warehouses, or farmers, are now responsible and face conflicts of interest when grading
cashews that they later sell to exporters. The grading regime is now fluid and poorly regulated.
They grade the cashew nuts into two categories: standard or under grade. Standard nuts contain
less than 0.25% weight by foreign matter and less than 13% by weight of damaged nuts, under
grade constitutes the nonconforming nuts. Studies estimate that 80% of nuts are standard. xix
Therefore exporters pay less per kg of cashews.

3. Tanzania lacks a competitive processing industry, and this reduces the possibilities to add value
to its exports. India has dominated cashew processing with manual facilities comprised of high
skilled workers working at low prices. If India or African countries produce large cashew crops,
the demand for Tanzania’s exports decline. This threatens farmers’ incomes and food security.
Tanzania can avoid this by diversifying its export locations or redeveloping its domestic
processing industry. Entrepreneurs in Dar es Salaam have opened manual facilities but their
capacity is limited. xx

Recommendations / Interventions

The government of Tanzania can resolve these constraints with the following policy actions: planting
new cashew tress; and, developing a domestic cashew processing industry. This will help Tanzania to
expand its production levels, increase the value added prior to export and improve its food security.

1. The government of Tanzania should lead an aggressive replanting program for cashew trees. It
should provide subsidized access to faster maturing varieties of seeds. The program should take
place over several years to allow farmers to slowly replace their existing cashew trees. This will
allow farmers continued cash flow, as new cashew trees take three to four years to produce
nuts. The government should disseminate cloned seeds that mature more quickly and double
yield. A research station in Mtwara developed such varieties in the 1990s. xxi

Most cashews trees in Tanzania were planted in the 1950s and 1960s. Their yields have
significant decreased recently. The tree’s lifespan is about fifty years depending on the
environment. xxii A replanting program will increase yields and lower production costs. This will
increase farmer income, improve their access to food and enhance farmer livelihoods.

2. The government of Tanzania should help establish a domestic cashew processing industry.
Donor‐funded mechanized processing factories in Tanzania closed in the 1970s because of the
high cost of financing. The government should provide financing and technical assistance to
build and run manual processing facilities. These depend on low wages and skilled labor.
Tanzania has a competitive advantage over India in wages, and its workforce is becoming better
educated. xxiii The government should begin by supporting the domestic industry that emerged in
2001 and now processes 5% of the crop. xxiv

A domestic processing industry will increase the value of cashew exports, increase employment
opportunities and raise workers’ wages. The value added for a manual processing worker is
$3.20 per day, assuming similar productivity to India. xxv This is above Tanzania’s average wage.
The industry could employ up to 20,000 workers to process the country’s entire crop. xxvi This will
improve the workers’ incomes and access to food, enhancing food security in Tanzania.



Endnotes

i
Tanzania Food Security Outlook. USAID. FEWSNET. January to June 2010.
ii
“Tanzania: Cashewnut exports up.” Tanzania. The Citizen. Date uncertain.
iii
FAO. Food Stat. Cashew nuts, with shell in Tanzania from 2000 to 2008 for Area Harvest, Yield and Production Quantity.
http://faostat.fao.org/site/567/DesktopDefault.aspx?PageID=567#ancor
iv
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
institutional background of the Tanzanian cashew industry. In: Proceedings of the international Cashew and Coconut
Conference; Trees for life –the key to Development. Pp.76‐83. Biohybrids International Ltd, Reading UK.
v
Ohler, J. G. 1979. Cashew. Koninklijk Instituut voor de Tropen, Amsterdam. 260pp.
vi
Davis, Kristin. “Cashew.” Echo Technical Note. 1999. www.echonet.org.
vii
Behrens, Rüdiger. Cashew as an Agroforestry Crop: Prospects and Potentials. Margraf Verlag. 1996.
viii
Sijaona, M. E. R. Assessment of the Situation and Development Prospects for the Cashew Nut Sector. UNCTAD/WTO. ITC
Global Trust Fund. Project INT/W3/69. July 2002.
ix
Mitchell, Donald. Tanzania’s Cashew Sector. Africa Region Working Paper Series. No. 70. June 2004.
x
Ibid.
xi
Katinila, N. A., S. H. Shomari and J. M. Mdadila, 2001. Status of cashew nut Industry in Tanzania. Paper presented to the
st
subregional Technical Workshop on Development of the Cashew subsector in Eastern and Southern Africa, 29th to 31 October,
Maputo, Mozambique.
xii
xiii
Binswanger‐Mkhize, Hans and Madhur Gautam. “Towards and Internationally Competitive Tanzanian Agriculture.” A World
Bank Draft Report. Dar es Salaam. March 22, 2010
xiv
xv
Ibid.
xvi
Kihara, Githua. “Kenya: Processing of Cashew Nuts Seen Booming Due to Exports Ban.” Business Daily. Nairobi. December 29,
2009.
xvii
Kihara, Githua. “Kenya: Cashew Nut Farmers Turn Back to Brokers.” Business Daily. Nairobi. February 9, 2010.
xviii
Ibid.
xix
Ohler, J. G. 1979. Cashew. Koninklijk Instituut voor de Tropen, Amsterdam. 260pp.
xx
xxi
Ibid.
xxii
Davis, Kristin. “Cashew.” Echo Technical Note. 1999. www.echonet.org.
xxiii
xxiv
Ibid.
xxv
Ibid.
xxvi
Ibid.

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2 Land and Natural Resources ................................................................................................................... 4

2.1 Land Ownership: .............................................................................................................................. 4

2.2 Land Use for Agriculture: ................................................................................................................. 5

2.3 Water and Irrigation: ....................................................................................................................... 6

3 Impact of prices and investment policy on food security: ..................................................................... 7

3.1 Food Prices: ..................................................................................................................................... 7

4 Crop Sector Value Chain: ........................................................................................................................ 8

4.1 Farm to wholesale: .......................................................................................................................... 9

4.2 Wholesale to retail: ....................................................................................................................... 11

5 Non-Agricultural sectors/ Natural Resources:...................................................................................... 13

5.1 Pastoralism .................................................................................................................................... 13

5.2 Forests ........................................................................................................................................... 13

5.3 Fisheries ......................................................................................................................................... 14

Policy framework of Tanzania’s trade agreements:

2) Lack of coordination: Coordination of international trade agreements in Tanzania is not highly

2 Land and Natural Resources

2.2 Land Use for Agriculture:

2.2.1 FDI in Agriculture:

2.3 Water and Irrigation:

3 Impact of prices and investment policy on food security:

3.1 Food Prices:

2) Bureaucracy: Bureaucratic intransigence continues to pose a severe obstacle to doing business

4 Crop Sector Value Chain:

4.1.2 Pricing, Procurement and Marketing:

4.2 Wholesale to retail:

Consumer Price Controls:

Producer Taxes and Subsidies:

Export Bans and Taxes:

5 Non-Agricultural sectors/ Natural Resources:

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

Principal Exports $USM

Figure 3: Basic Population and Land Data on Tanzania

Area Type Size

Figure 4: Types of Land Use in Tanzania

Type of Land Area (millions of hectares)

Figure 5: Irrigation development plan until 2017

Type of Water Management Existing 2002 New Development Total in 2017

TANZANIA Commodity Policy Brief

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

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

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

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

Booz Allen Hamilton/Columbia SIPA Capstone Workshop, Spring 2010 6

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