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Reforming Tanzania Agricultural Sector: A Poverty Perspective

The World Bank. Reforming Tanzania Agricultural Sector: A Poverty Perspective. Presented by: Waly Wane Senior Poverty Economist World Bank Poverty Reduction & Economic Management. Presented during:. AgCLIR Conference USAID & World Bank Dar es Salaam - Tanzania. Feb. 1, 2010.

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Reforming Tanzania Agricultural Sector: A Poverty Perspective

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  1. The World Bank Reforming Tanzania Agricultural Sector: A Poverty Perspective Presented by: Waly Wane Senior Poverty Economist World Bank Poverty Reduction & Economic Management Presented during: AgCLIR Conference USAID & World Bank Dar es Salaam - Tanzania Feb. 1, 2010

  2. The Cashew Sector • There are roughly 360,000 cashew growers in Tanzania (Ag. Census 2003) • Most of them are smallholders with an average acreage around 2.9 • 88% have less than 2 acres • Most of them are poor e.g. Ruvuma survey 2004 P0=63.3% and P0c=75.8%

  3. Cashew Sector – Institutional Framework • The actors • Producers: smallholders and few big farms • Primary Societies serve as the link between farmers and buyers • District Executive Officer • Buyers: Private traders or Cooperative Unions • Processors and exporters: 20 to 30% national production • Regulators: Today is CBT

  4. Cashew Sector – Recent Reforms • The Warehouse Receipt System (2007) • Buyers can use cashew production as collateral (WRS) • Reemergence of single marketing channel • Introduction of auction • The Tanzanian WRS is not “standard” practice WRS • Warehouses played marginal role • Financing Banks are at the heart of the system

  5. How Did the Reform Work? WRS • Farm gate price as % of export price • Farmers respond to incentives • If history is a guide: Area dedicated to cashew is likely to shrink under current system

  6. Who Did the Reforms Work For? A tale of 3 Districts

  7. Coffee Sector – Institutional Framework • The actors • Over 450,000 smallholders (75% have <2acres) and few large estates • Most of them poor 56% Ruvu; 40.4% Kili • Buyers: Farmers Assoc. or Coop. Unions • Private traders barred to buy directly from growers • Tanzania Coffee Association • Regulators: Today is TCB • The Moshi Auction

  8. Coffee Sector – Institutional Framework • Regulatory Framework • One license rule • Multiple licensing requirement • Village Veto • Local Taxation • Weights and Measures • Contingent (on quality) contracting (creates information asymmetries)

  9. Effect of Early Reforms • Producer price initially rose before falling substantially • Tanzania’s small coffee growers receive a very low price at the gate relative to others

  10. Comparing Two Institutional Frameworks:Rakai (UG) vs. Kagera (TZ) • Kagera • Coffee marketed through KCU (~124 PS) • 75% farmers belong to KCU • Farmers have to sell to KCU through PS • KCU uses contingent contracting • Rakai • Coffee farmers are independent, only 10% belong to an association (NUCAFE) • NUCAFE does not buy coffee; gives TA • Sell their crops to privately owned

  11. Comparing Two Institutional Frameworks:Rakai (UG) vs. Kagera (TZ) (Cont.) • Final Outcomes • Low KCU prices • Farmers incentivized to sell to private (unauthorized) even Uganda (Illegal) • Kagera output seems to find its way to Rakai • Switching patterns away from coffee are emerging (De Weerdt 2006)

  12. Maize Sector – Institutional Framework • The actors • Maize grown by 65% of crop growing households across the country • Smallholders are again the large majority with few medium to large growers • Buyers: • Small village-based traders • Larger non village-based traders • Large public sector and other buyers • No cooperatives since liberalization

  13. Maize Sector – Key Features • Number of traders depends on season • Many traders during harvest season • Sharp reduction in traders during lean season because of high search costs • Distance to market matters a great deal

  14. Marketing Costs in Maize • Transport charges make up 83% of marketing costs • Why are transportation costs so high? • Trucking industry is competitive

  15. Marketing Costs in Maize • Why are transportation costs so high? • Non-tariffs measures such as bribery at roadblocks or weighbridges are high • Local cess often mentioned seems not to be prohibitive • Even the impact of the export ban seems ambigous

  16. Reducing Transport Costs • Improve public investments • Best to improve rural roads • In Tanzania rural roads have been neglected

  17. A Overarching Lessons • To increase productivity and help lift the smallholders out of poverty • Restore competition • Prioritize infrastructure • Government can be the answer But it is not Always the answer • GoT should find right balance • Better design and target policies

  18. Switching Farmers • Farmers, especially smallholders can switch out of non profitable crop • They also adopt crop that can help them sustain their livelihood such as bananas • Incentives matter

  19. Poorer households switched out of coffee

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