nd rd march 2006 dar es salaam, tanzania. - betuco

VECO Tanzania National Stakeholders’ Workshop On

Smallholder Farmers’ Access to Markets in 2015

22nd and 23rd March 2006

Dar es Salaam, Tanzania.

VECO Tanzania National Stakeholders’ Workshop On Smallholder Farmers’ Access to Markets in 2015

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Acronyms AMF Access to Markets Framework AMSDP Agricultural Marketing Systems Development Programme BDS Business Development Services BET Board of External Trade CBI Centre for the Promotion of Imports from Developing Countries COMESA Common Market for Eastern and Southern Africa COOPIBO A Belgian NGO EAC East Africa Community Envirocare Environment and Human Rights Organisation ESA East and Southern Africa EU European Union EurepGAP Euro-Retailer Produce Good Agricultural Practices FAO United Nations Food and Agriculture Organisation FIDHUSCO Fidahussein & Company Limited FLO Fair Trade Labelling Organisation HACCP Hazard Analysis of Critical Control Points HPI Heifer Project International IS Institutional Strengthening ITC International Trade Centre METL Mohammed Enterprises Tanzania Limited MFIs Micro-Finance Institutions MIICO Mbozi, Ileje & Isangati Consortium MIS Market Information Services MMA Match Maker Associates Limited, PSD Consultants MVIWATA Muungano wa Vikundi vya Wakulima Tanzania (Swahili acronym for Confederation of farmers organisations) NGO Non Government Organisation OD Organisation Development PADEP Participatory Agricultural Development and Empowerment Project PASS Private Agricultural Sector Support Limited PESTEEL Political, Economical, Social, Technological, Environmental/Ethical and Legal PSD Private Sector Development R&D Research and Development SADC Southern Africa Development Community SHF Smallholder farmers SME Small and Medium Enterprises SNV Netherlands Development Organisation SUA Sokoine University of Agriculture TCCIA Tanzania Chamber of Commerce Industry and Agriculture TOAM Tanzania Organic Agriculture Movement TRALAC Trade and Law Centre in Southern Africa UDEC University of Dar es Salaam Entrepreneurship Centre UDSM University of Dar es Salaam USA United States of America VECO Vredeseilanden Country Office WTO World Trade Organisation


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Contents

ACRONYMS II

CONTENTS III

1. INTRODUCTION 1

1.1 What has been done until now 1

1.2 Re-structuring of Tanzania Government Ministries 1

2. METHODOLOGY 1

2.1 Stakeholder analysis 1

2.2 Desk study 1

2.3 Interviews 2

2.4 The Workshop 2

3. WORKSHOP PROCEEDINGS 2

4. RESULTS 3

4.1 From the desk study 3

4.2 From the stakeholder study 8

4.3 From the interviews 9

4.4 From the workshop 10

5. CONCLUSIONS 16

ANNEXES 17


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1. Introduction VECO Tanzania organised a national stakeholders’ workshop on smallholder farmers’ access to markets in 2015. This report summarises the processes which took place prior and during the workshop. Match Maker Associates Limited (MMA) – a private sector development consultancy facilitated the exercise. 1.1 What has been done until now So far the following has been done prior to the workshop; • Stakeholder analysis by VECO Tanzania country office. • Distributing of questionnaire on access to markets (ATM) to partners of VECO Tanzania,

summarizing the responses and holding a discussion during partners meeting of January 2006.

• Drafting a concept/discussion paper on basis of inputs from questionnaire and discussion held during partners meeting, face to face interviews as well as from desk study.

• Distributing of questionnaire on ATM as well as conduct face to face interview with key stakeholders

Then the workshop was prepared and conducted on March 22nd and 23rd, 2006 in Dar es Salaam. Analysis of findings and report writing was completed by 30th March 2006.

1.2 Re-structuring of Tanzania Government Ministries The debate on access to market is currently popular among development practitioners, local NGOs and the government. The new government which took over after general elections in December 2005 re-structured government ministries as deliberate effort to improve smallholder farmers and small and medium enterprises access to services including markets. The Ministry of Cooperatives and Marketing was dissolved. The directorate of Cooperatives was placed in the Ministry of Agriculture and Food Security and the ministry is now known as Ministry of Agriculture, Food and Cooperatives – MAFC. The directorate of Marketing has been placed in the Ministry of Industry and Trade and now the ministry is known as Ministry of Industry, Trade and Marketing – MITM. Another key ministry in regard to access to market is the newly formed Ministry of Infrastructure Development – MID, which replaces the former Ministry of Works – MoW.

2. Methodology 2.1 Stakeholder analysis A list of about 40 stakeholders was selected by VECO Tanzania Country Representative (Mr Jeroen De Wilde) and the list was complemented by additional list provided by MMA which also assisted VECO Tanzania to conduct a desk study and additional interviews and eventually facilitating the workshop. Some of VECO Tanzania more strategic partners were also included in the list because of their respective ‘market access’ themes within their organisations. 2.2 Desk study Match Maker Associates Ltd conducted a desk study on ‘market access’ debate. The study among others reviews previous studies on market linkages facilitation by various development practitioners, MMA own experience from various projects and from generic literature on value chain development, coordinated supply chains, etc. Consolidated responses from questionnaire on access to markets were also analysed and eventually, MMA wrote a concept paper, which was shared with all potential workshop participants prior to the workshop as a way of triggering discussion.


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2.3 Interviews VECO Tanzania distributed a questionnaire on access to markets (ATM) to its partners and then summarised the responses. Thereafter, VECO Tanzania held discussion on the subject during its partners meeting in January 2006. VECO distribution of questionnaire on ATM to other stakeholders received very few responses. At this juncture, MMA assistance was required to send more questionnaires and conduct face to face interviews with few other key stakeholders some of which were invited to attend the workshop. More than 34 responses were received. MMA summarised and consolidated all responses from ATM questionnaire and incorporated the issues when preparing the workshop concept paper. 2.4 The Workshop The general objective of the workshop was to map the key factors and the driving forces concerning smallholder farmers’ access to market. This information was distilled in a structured and interactive way, considering the threats and opportunities as they appear from the interviews, concept paper and stakeholders’ own experiences. Supplementary presentations by resource persons were made during the workshop to bring out more factors and forces from their own organisations experiences. During the workshop, the process flow included few presentations and group discussions geared towards achieving the following specific objectives; • Listing of key factors and driving forces

o Participants were facilitated to list the key factors and driving forces influencing the possible success or failure of smallholder farmers’ access to markets.

o Each factor and driving force was supported by a description that the participants considered to be the main relevant issue or feature of that particular factor or force.

o The participants then outlined the main positive impact and negative impact (influence of the outcome) for each short listed factor and driving force.

• Ranking of key factors and driving forces Participants were facilitated to rank each of the key factors and driving forces by identifying

o Its degree of impact for the success or failure of smallholder farmers’ access to markets o The degree of uncertainty as to how it will develop in future.

It was clarified that stakeholders should not rate how uncertain the effects are that the factor or force will have on the smallholder farmers’ access to market but rather rating how uncertain the future developments of the factor or force are. For convenience, use of a scale of 0 to 10, where 1 = very certain and 10 = very uncertain was adopted and the same for impact i.e. 1 = insignificant impact and 10 = very high impact.

3. Workshop proceedings The workshop was attended by 37 and 33 participants in day one and two respectively. The participants were from the public sector i.e. MAFC, MITM and Board of External Trade – BET; the development practitioners i.e. Netherlands Development Organisation – SNV, ACDI-VOCA SEMMA Project, EPOPA Tanzania and VECO Tanzania as well as local NGOs including MIICO, Envirocare, Private Agricultural Sector Support Ltd (PASS), Tanzania Organic Agriculture Movement (TOAM) and MVIWATA. The private sector was actively represented by


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farmers, exporters – FIDAHUSSEIN & Company Ltd - as well as private consultants - Match Maker Associates Ltd - MMA. MMA was also the facilitator of the workshop. Day 1: At 9.00am, the Permanent Secretary of the Ministry of Industry, Trade and Marketing (MITM) gave an opening speech. This was followed by a group picture and introduction of participants. Introduction was done in such a way that participants were informed about the participants’ diversity of speciality and experience/practice in relation to access to markets. At 10.00am participants were introduced to the workshop objectives, specifically, what is expected from them and what should be achieved at the end of day two. After tea break at 11.00am VECO Tanzania country representative shared with the participants Vredeseilanden ambition and indicated where the national stakeholders’ workshop fitted in the entire process. During this presentation participants were also introduced to VECO Tanzania and its activities in the country since 1975. At 11.30am the concept paper was presented to trigger discussion before participants went into three pre-selected groups to start bringing up a list of key factors and driving forces. Brief descriptions were given to each factor and force. This exercise continued until 1.00pm when the participants took break for lunch. In order to bring out more issues (factors and forces) five more presentations were given, three of which between 2.00pm and 4.30pm. These presentations came from private sector (exporter) FIDAHUSSEIN & Company Ltd and development practitioners namely PASS and SNV. The day ended by group work on updating their lists of key factors and driving forces and essentially VECO and MMA (facilitator) consolidated the lists. This went on until lunch break. In the afternoon, 14 key factors and 9 driving forces were divided among the three groups in order to dream or project (positively and negatively) for each factor and predicting the positive and negative impact of each driving force. This exercise was time consuming and it took participants about two hours. Using rank of 0 to 10, these factors and forces were rated on their impact and averages established. Then in a smaller panel (of key participants) the level of uncertainty of each of the factors and forces were discussed and decided. The day was quite long but participants were patient until the workshop was officially closed by representative of MAFC at 5.30pm.

4. Results 4.1 From the desk study The desk study established that globalisation and liberalisation has made the African economy more integrated with the global economy. With gradual disappearance of the protective shield,

Day 2 The remaining two presentations from public sector were delivered between 9.00am and 10.30am. These were from resource persons from Agricultural Marketing System Development Programme - AMSDP and Ministry of Agriculture, Food and Cooperatives - MAFC. After tea break a consolidated list of key factors and driving forces was shared and group work continued to sharpen the description of each (factor and force).


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the domestic market is thrown open to international competition. Consequently, African agriculture has profoundly changed its role in global markets and national economies. Economic reforms have forced the withdrawal of the state from agricultural/commodity markets. Livelihoods have become increasingly commercialised. Rural households are restructuring the ways they manage their economic activities and are transforming their social relations. Access to markets in developing countries is becoming more difficult and therefore, is becoming of central focus to governments and development practitioners in the developing world. Key factors in this context were defined as issues which will influence smallholder farmers’ access to markets and which are within country control. A factor can have positive or negative impact (the future will tell), if something will have influence on the issue (negatively or positively) it is a factor. PEST analysis (now referred more as PESTEEL i.e. Political, Economical, Social, Technological, Environmental/Ethical and Legal analysis) can assist in identifying factors. Literature shows that African smallholder farmers (SHF) and agricultural small and medium businesses (Agro-SMEs) realise strong competitive advantages due to competitive wage labour and favourable climate and soil conditions. There is also relatively good market growth potential in this region for the agricultural products. However, in order to utilise these advantages fully and increase ‘access to market’ performance, there is need to improve the factors that affect performance in a negative manner. Lower ‘access to markets’ performance does not solely derive from external factors but also from forces such as geographical location, climate, and resource endowments as evidenced by relative success stories of SHF and Agro-SMEs in Kenya, Uganda and Ethiopia, which are largely similar to Tanzania in these respect. A number of factors are cited in various literature as impoverishing smallholder farmers’ access to markets in Tanzania. These include; Policy thrust Supportive policies influencing smallholder farmers’ access to markets in Tanzania include Agricultural marketing policy, Agriculture development policy and SME Development policy. These and other related policies are backed up by the ruling party manifesto. Infrastructure1 Rural infrastructure, in this context, includes investments that directly and indirectly affect productivity in agriculture and other rural non-farm activities. The main categories of economic infrastructural activity are investments in rural electrification, rural credit institutions, scientific agricultural research and extension, flood control and drainage, irrigation works, rural roads, rural transport, markets for inputs and outputs, storage structures and warehousing facilities, common property resources, and watershed development. In addition, it includes infrastructure for developing allied and non-farm activities like dairy development (i.e. improvement of dairy animals, milk collection and chilling centres) and agro-processing and other village industries and crafts. While some infrastructures like irrigation, credit and agricultural research enable the adoption of new technology, some others, like transport, provide intermediate services to facilitate interaction between productive activities.

1 Infrastructure generally includes both physical and social overhead capital. In that broad sense, infrastructure would include public utilities, ports, water supplies and electricity transport, public utilities, schools and hospitals transport, power, law and order, education, public health, communications, water supply, irrigation, and drainage.


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Social infrastructure includes activities like access to schools, primary health centres, safe piped drinking water, and sanitation; pavement of streets and building of community centres. While investment in economic infrastructure primarily plays a complementary role in increasing productivity of existing assets, generating more employment for labour and providing increased access to urban markets including labour markets, investment in social infrastructure results in creating a healthy working environment as well as facilitating human capital formation in rural areas. Poor economic and social infrastructure can impede smallholder farmer access to market. This is because transaction costs will be high and therefore become un-affordable. Absence of institutional infrastructure (i.e. supportive regulatory environment, availability of service providers, etc.) also can impoverish smallholder farmer access to market. Even if good policies have been put in place, if they are not enforced, they can be useless. Over reliance on rain fed agriculture Most of Tanzanian smallholder farmers (SHF) rely solely on rain in their farming activities. During drought season, most of them fail to produce. The absence of irrigation schemes inculcates the whole situation. It has been established that Africa irrigates 4% of available irrigation land whereas its counterpart in Asia irrigates 40% of available land. It has been established that for some potential market opportunities available (for some product lines as e.g. paprika, passion fruits, and vanilla) complementary irrigation is necessary if the SHF is to reach economically viable volumes. This can be assured through construction of local dams and harvesting rain water. Agronomy practice Uncontrolled quality and availability of seeds has also lead SHF to use poor quality seeds, something which results in poor quality harvest. Unreliable supply of inputs has lead to rampant use of inferior quality seeds, uncontrolled pesticides, fertilisers, etc. Most of SHF in Tanzania are exposed to expensive integrated pest management techniques, mainly because of the ecological factors or use of inferior seeds or improper land use patterns e.g. horticultural producers (especially tomatoes in Kilimanjaro and Arusha regions) use strong pesticides because of prevalent diseases. Stringent standards for EU and USA markets i.e. pesticide regulations, HACCP, EurepGAP2, quality, etc make it difficult for SHF to be accepted in such markets. There are less specialised extension service providers especially from the government (i.e. agronomy skills, business skills, ‘process-specific’ abilities) in regard to newly promoted high value crops, e.g. paprika, vanilla, hibiscus, speciality coffee as well as in mariculture e.g. hatcheries of prawns, fattening of mud crabs, to mention but a few. In some cases for instance in Mbeya region buyers offer extension services themselves as embedded services (e.g. spray pesticides) into farmers’ fields and installing own pulping machines at village levels. Access to capital In Africa, and Tanzania in particular, the financial sector considers some activities putting them on high risk exposure when offering loans. These activities include farming, fishing, mariculture and food processing, to mention but a few. Banks are risk averse and cost of capital especially for SME and SHF is very high. The banks interest rates in Tanzania are among the highest in the region. Most SHF, therefore, find it difficult to access credit facility and always lack collateral if the facility is available. Linking to global value chains through exporters is difficult due to

2 The EurepGAP protocol defines the elements of good agricultural practices (GAP). It includes topics such as Integrated Crop Management (ICM), Integrated Pest Control (IPC), Quality Management System (QMS), Hazard Analysis and Critical Control Points (HACCP), worker health, safety, welfare and environmental pollution and conservation management.


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almost all above mentioned factors but also due to the high risk involved by the chain leader when deciding to include financially weak SHF into the chain. Labour The productive group of population in rural areas in Tanzania are moving to town centres (Urbanisation of poverty) where their skills are less needed and by doing so, they are leaving behind old people and children. For instance vanilla in Kagera region is labour intensive crop but labour scarcity has caused production and yield to be low. During pollination some farmers are forced to use children and at times this interferes with school timetable. Post harvest handling, packaging and processing technologies Tanzania lacks an established vibrant distribution system that can deal with post harvest handling, packaging and processing prior to export. Most farmers’ produce is wasted due to poor post harvest handling and storage and when it comes to horticultural products, excess production beyond local market consumption capacity is wasted. These wastes account for as high as 50% of total harvest (Africa average) whereas in other developing countries (Asia average) the waste is as low as 25%3. Driving force in this context was defined and considered to be outside our direct country control. Driving forces can consist, for example, of certain political or economical/market trends, technological developments or large scale environmental degradation. To deal with one’s own question or to make one’s own country decision, however, it is important to recognise and understand these driving forces and their impact. Current market forces have become extensive and they touch all levels of society from the smallest remote household to the international trade organisations. They are dynamic, complex, with numerous actors and playing fields that are not levelled. There are a few strong actors that determine the rules in the market place and these make it increasingly difficult for smallholder farmers to participate equitably. The result has been increased poverty in the face of increased production. The driving forces behind the current situation of smallholder farmers’ access to market include; Global markets conditionalities Coordinated supply chains are rapidly increasing in importance especially in global food markets. These global value chains are commercial tools for competitive strategies, assuring quality food safety and better logistics. They serve high end markets, especially in industrial/developed countries, but increasingly also in developing countries in urban areas with relative high incomes. However, the share of production in developing countries marketed through coordinated supply chains (global supermarket chains) is still small. There is a widespread fear that smallholder farmers will be excluded from coordinated supply chains. Empirical evidence is mixed; there are abundant examples of successful inclusion (horticulture in Arusha, cereals and pulses from Morogoro, Dodoma, Ruvuma, Shinyanga) as well as of painful exclusion (fruits and vegetable producers in Morogoro, Mwanza, Kagera, marine products in the Tanzania Coastal belt, etc). In some cases, economies of scale and scope are such that only large enterprises can compete successfully in global markets (mariculture, fisheries, horticulture, etc), but in many other cases there is no level playing field. Analysis of forces that contribute to inclusion or exclusion in global chains indicates that there 3 Extract from NEPAD report chapter 7 ‘Going for Growth and Poverty Alleviation’


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are market failures contributed by (relative) weak competitiveness of smallholder farmers. Hence public and development practitioners’ intervention can be warranted. Issues of concern for drivers of coordinated supply chains include; cost, benefits and risk, control and management, food safety, economies of scale and scope, investment climate i.e. Governance and geography (cost, benefits and risk), logistics (infrastructure) and sectoral focus: Natural resources, agriculture (food chains), manufacturing, etc. Information technology revolution Information technology (IT) development is changing the way information flows between countries. Marketing places are quickly substituted by ‘marketing spaces’ on the Internet. Movement of orders and money (transactions) are changing drastically and market information is becoming easily available ‘just a click’ away. In Tanzanian context this gives more powers to buyers and to a large extent less or limited (bargaining) power to the smallholder farmers. Accessibility to information technology at farmer household level is still a dream yet to be achieved. IT is giving buyers an upper hand and better bargaining power. The current trend by most exporters in Tanzania can be seen to be flexible but ad hoc; at the moment most of them if not all scan what is available from farmers and what is demanded by the world markets. Through their analysis (risk, cost and benefits) they decide what to buy, how much to buy and what not to buy; at what price and where and to whom to sell. Farmers remain price takers and risk takers, sometimes not sure whether they will sell next years’ crop. Regional socio-economic trends Tanzania is in the middle of reformulating the East Africa Community (EAC) and the consequences of the cooperation could influence smallholder farmers’ access to markets. The zero-tariff (Customs Union) now allows free movement of products within the region and competitiveness of SME and smallholder farmers will be influenced. To a large extent, our neighbours (Kenya and Uganda) have comparative advantages in the way their farmers have been exposed to liberalised markets. Their regulatory systems are much better developed compared to Tanzania. Tanzania has withdrawn from the Common Market for Eastern and Southern Africa (COMESA) in 2001 because of what it describes as the "high membership costs" of being in both the Southern Africa Development Community (SADC) and COMESA. Because of that decision, it is estimated that industries in Tanzania have lost at least US$80 million to Kenya and Uganda slowing growth of about 30 major manufacturing firms. It is, however, proper to observe that Tanzania benefits from being part of the latter (SADC) and that this outweighs such costs. The country exported goods worth about US$144 million and US$148 million in 2003 and 2004 respectively, while it exported goods worth US$39 million and US$118 million to SADC over the same periods (TRALAC, 2006). The circumstances under which Tanzania pulled out of COMESA have now changed as political developments in DR Congo, Sudan and Somalia present the possibility of a big market emerging in those countries. Tanzania is strategically located in the COMESA region. It has infrastructure linkages with seven neighbouring countries, some of which are members of both SADC and COMESA, making it a major transit facilitator by rail, road and water. It is understood that the Ministry of Industry, Trade and Marketing has proposed to the government that the country rejoins COMESA. COMESA also has the distinction of being the fastest scheme with the EAC being the runner-up and SADC struggling on behind. As mentioned earlier, the EAC has managed to become a Customs Union in 2005, while COMESA launched its Free Trade Area (FTA) in 2000, but with only nine of the twenty COMESA members participating in the agreement. In contrast, SADC only plans to implement a FTA in 2008. (TRALAC, 2006)


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Organic and fair trade (niche) markets Fair Trade and organic farming movement have been in existence for more than 40 years; trading and campaigning movement between Southern producers and Northern buyers and consumers has been limited. Characteristics of Fair Trade, market size and segmentation as well as the key organizations are fluctuating. The future trends of these markets will definitely influence access to markets for smallholder farmers. In Tanzania there are various initiatives promoting fair trade and organic markets through technical and financial assistance. 4.2 From the stakeholder study Conceptualisation of access to markets using a framework was instrumental at identifying key stakeholders. Access to market framework (AMF), which was explained in the concept paper, was adopted and used as a tool for analysing context (actors, factors and forces) under which access to market occurs. The framework was a device which helped to identify stakeholders, their position and their respective roles in access to market processes. Most of the stakeholders were identified therefore, in reference to their respective roles. The main features of the framework depicted in Figure 1 below, therefore; included; • The market players i.e. seller (in this case smallholder farmer) and buyer (in this case local

traders and exporters) guided by marketing basic principles (demand and supply), and the environment in which they operated

• Key factors (including impoverishing factors, political, economical, social, technological, environmental and legal factors), which influence access to markets and/or creating market imperfection.

• Driving forces (socio-political, economic and marketing forces) including international forces external to the local environment.

• Business services (developed from Business Development Services (BDS) market development paradigm), which are required by market players to support their transaction to take place.

Firstly, the framework emphasises that smallholder farmers and buyers (market) require a comprehensive package and not only one or few components. It is necessary to note that the buyers (local and international) too may require some of these services in order to play their role effectively. Secondly, a distinction is made between service providers in the different components and facilitators (essentially the capacity developers of service providers). These service providers could be from primarily private sector, but also from government and specialised NGOs. The facilitators have an option, if desirable, to intervene at the market side in order to understand how markets function so as to avoid distortional effects and be able to develop markets for services. The ultimate vision in this framework is that farmers and buyers will eventually work on business principles as trust and business experience develops. Facilitators are depicted in dotted boxes implying that they are there to develop capacity of local business services providers (as well as to create or promote awareness at community levels for such services), so that service providers can offer relevant services to either farmers or other market players. The end picture to judge success of facilitation is when the facilitator agenda becomes redundant, market forces play a role and that facilitators withdraw and move on. It is from this background that stakeholders were selected from Seller i.e. farmers’ representatives; Buyers i.e. trading and exporting company; Service providers i.e. specialised NGOs (e.g. PASS, Envirocare, MIICO, and MVIWATA); Facilitators i.e. development practitioners (VECO, SNV, DAI PESA, ACDI-VOCA, CARITAS, etc) and government agencies i.e. MITM, MAFC, BET, MAFC – PADEP Project, etc.


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Figure 1: Access to Market Framework

6 Source: Adapted from VECO Tanzania literature and modified. 4.3 From the interviews The interviews established that, the concept of market access, access to markets or market linkages has as many definitions as practitioners and is used interchangeably. Some definitions developed by practitioners include but not limited to the following; “Market access is the concept that describes the sum total of all skills acquired through experience or training that enable a farmer to get and maintain regular customers to his/her produce … in other words it is a long term marketing relationship between a seller and a buyer.” Ngoda, S.C., AMSDP “This is a concept whereby producers of a certain product or commodity can sell to certain market outlet/niche. The market outlet could be a conventional market, specialty market, organic market or a fair trade market. The linkage could be individually to a company or collectively through associations. ” Kikoka, L., SNV PTC

Demand for these services

FARMER (Seller)

Supply

Supply of Service 1

Supply of Service 2

Supply of Service 3

Supply of Service 4 Supply of

Service 5

Supply of Service 6

Transactions in the market chain (products and money)

ENVIRONMENT

Influenced by impoverishing factors

NGO’s, government agencies including local government, as suppliers of services, and private companies

National policies

Regional and International forces

Other forces

Ruled by political, economic, social, technological, environmental, legal factors

FACILITATORS e.g. VECO, Government FACILITATORS e.g.

VECO, Government

Ruled by Economic

and market forces

Embedded Services

MARKET (Buyer)

Demand


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It was clear, however, that the essence of market access concept is geared towards improving access. This improvement can be achieved through coordination of various actors and market players (sellers and buyers) and when necessary supported/facilitated by an external party. Facilitator in access to market has a lot of questions needing answers before interventions. There are key issues on equity, poverty reduction, power differences between seller and buyer and risk of exclusion of smallholder farmers (SHF) and small and medium enterprises (SMEs). There are concerns about food security, environment and biodiversity, gender and competitiveness of SMEs and SHF in particular market or coordinated supply chain. There is also need for clarity whether the focus should be local, regional or international market. 4.4 From the workshop KEY FACTORS 1. Extension services 2. Quality of inputs (seeds, fertilisers, pesticides, farm implements, etc) 3. Attitude towards agriculture, knowledge & innovation, mindset of farmers, education

(entrepreneurship development) 4. Policy issues, policy access 5. Group cohesiveness, farmers organisations, limited number of capacity building institutions 6. Market linkages 7. PPP, coordination of stakeholders 8. Market distortion, subsidy, import taxes 9. Technology, research development & agro-processing 10. Access to rural finance 11. Environmental degradation 12. Rights to production resources (land, water, forest, etc) 13. Investment ownership 14. Infrastructure DRIVING FORCES 1. Aid dependence 2. Market liberalisation, unfair trade, monopoly of multinationals 3. Tariff barriers & trade negotiations, trade agreement 4. Stringent standards and quality regulations 5. Global warming & natural calamities

Group work brought up a number of key factors and driving forces. Interestingly, most groups brought up same or similar issues, which underline the importance of such issues. Groups were made in such a way they form a good mix of stakeholders from public and private sector, development practitioners, NGOs and farmers representatives. The following key factors and driving forces were concluded to cause significant influence on smallholder farmers’ access to markets. Presentation from Mr M. Rizvi, General Manager

Fidahussein & Company Limited


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6. Geographical location – distance to external markets 7. Changes in consumer needs, tastes and preferences 8. Labour costs/ skills 9. ICT Table 1 and table 2 narrate brief descriptions of key factors and driving forces as follows; Table 1: Key factors and their brief description S/No Key Factors Brief description 1 Extension

services • Demand driven extension service to respond to market needs is

what smallholder farmers should seek. • Coordinated extension services from public, private and

development practitioners will improve productivity and cost effectiveness among smallholder farmers.

• Continuous updating skills of extension officers in response to newly promoted products will respond to market needs.

• There should be deliberate link between extension and research agencies.

2 Quality of inputs • Sustainable delivery infrastructure • Affordability and availability of the inputs • Good link with research and extension

3 Attitude towards agriculture

• Focus to production for existing market • ‘Farming as business’ • Entrepreneurial spirit • Promotion of agricultural activity as a viable venture for university

graduates. • Collaboration and exchange with best practices elsewhere.

4 Policy • Enterprise development should be promoted at all levels in order to enhancing farming as business

• Good policies should be enforced (agricultural policy and strategies, agricultural marketing policy, SME development policy, etc)

5 Group cohesion • Smallholder farmers will be empowered through their organisations.

• Deliberate efforts should be made to increase competence of farmers’ organisations and their leadership.

6 Market linkages • Linkages should be created to appropriate technology, which is ecologically sound, productivity enhancing, socially just and economically viable.

• Encourage strong producer organisations that promote value addition, which leads to shortened market chains.

7 PPP, Coordination of stakeholders

• Producer organisation should be empowered to work jointly with other stakeholders and ‘joint actions’ should emphasise

o Transparency o Good governance o Honest brokering o Win-win strategy for all stakeholders

8 Market distortion • Internal markets should be promoted to increase competitiveness • Government should enforce standards in collaboration with other


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key stakeholders to protect/reduce dumping from imported products.

9 Technology, R&D, agro-processing

• Farmer-extension-research linkages should be improved to increase productivity and access to pre-determined markets

• Timely feedback from researchers • Applied research to respond to market (consumer) needs

10 Access to rural finance

• Micro finance sector should be developed to cater for farming activities.

• Current initiatives should be tailored to meet specific smallholder farmers’ demands and cash flows.

11 Environmental degradation

• If agricultural and industrial activities are environmental friendly, smallholder farmers will produce more sustainably.

• Enhancement of environmental restoration would increase access to product resources.

• Enhancement of environmental policies, laws and regulations by government (central and local) will reduce environmental degradation.

• Political interference should be discouraged 12 Rights to

production resources

• Land, water and forest resources increase farmers’ asset base and access to them will improve their production base and hence productivity

13 Investment ownership

• If smallholder farmers are capacitated to be in partnership with investors, they will have increased their financial base.

14 Infrastructure • Proper infrastructure (good rural roads, village storage, physical markets, rural based service providers, access to market information) will improve farmers competitiveness, bargaining power and essentially access to markets

Table 2: Driving forces and their brief description S/No Driving force Brief description 1 Aid dependence • The future of Tanzania should be more on control of internal

revenue collection, monitoring and improvement so as to reduce aid dependent budgets.

2 Market liberalisation

• The current tendency is subsidies to farmers in other countries creating unfair competition within TZ.

• Genetically modified organisms (GMO) including agricultural crops will influence demand and supply dynamics.

3 Tariff barriers, trade agreements, trade negotiations

• Current trade negotiations (Doha round, SADC, EAC, and COMESA, etc.) will influence the smallholder farmers’ access to markets.

• There is need to have regional collective discussions. 4 Stringent

standards • Traceability, strict production and post harvest handling procedures

will keep smallholder farmers on their toes. This calls for support from other stakeholders.

5 Global warming and natural calamities

• Early warning signals – information to farmers will make them aware of their crop choices.

• Environmental conservation should be encouraged. 6 Geographical

location • Very difficult to change our country location (in terms of distance) in

relation to EU and USA markets.


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• Improved infrastructure (physical, ICT) and specialising on high valued crops where Tanzania has comparative advantage (ecological) could still attract western buyers.

7 Changes in consumer needs and preferences

• Lifestyle, health consciousness and increase in disposable income are forces influencing consumers to demand high valued products and these make standards to change continuously. The challenge is for farmers to cope with these changes timely.

8 Labour costs and skills

• Competitive labour costs backed up with high skill levels could attract foreign investors in the country.

9 ICT • Establishment of tele-centres will revolutionise and influence smallholder farmers access to market related information

Furthermore, as summarised in annex 1, positive and negative dreams for factors and positive and negative impact for driving forces were done as depicted in table A1 and table A2 respectively. Essentially, rating impact and uncertainty from 0 to 10 was done as shown in table 3 below;

Dreaming for impact of key factors and driving forces to smallholder farmers’ in 2015, facing the camera from left to right are group two members Professor Deogratias Rutatora, Nsanya Ndanshau and Frida Urio.


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Table 3: Assessment of level of impact and uncertainty for key factors and driving forces – year 2015

This was essentially depicted in the matrix as shown in Figure 2 below.

4 Impact was taken from average of three group work, whereas, due to time pressure but also difficulty in conceptualizing, a smaller plenary with representative from all groups established rates for uncertainty.

GROUP 1

GROUP 2

GROUP 3 TOTAL AVERAGE

KEY FACTORS IMPACT4 UNCERTAINTYExtension services 10 9 8 27 9.00 6 Quality of inputs 8 10 8 26 8.67 4 Attitude change 5 10 7 22 7.33 8 Policy 6 1 7 14 4.67 5 Group cohesion 9 10 7 26 8.67 4 PPP & Coordination of stakeholders 6 5 7 18 6.00 3 Market linkages 9 10 8 27 9.00 4 Market distortion subsidy, import taxes 4 8 9 21 7.00 2 Technology, R&D & agro-processing 10 9 7 26 8.67 7 Access to rural finance 10 10 9 29 9.67 4 Environmental degradation 6 10 8 24 8.00 4 Rights to production resources 5 10 8 23 7.67 6 Investment ownership 4 5 6 15 5.00 8 Infrastructure 9 10 10 29 9.67 5 DRIVING FORCES Aid dependence 7 5 6 18 6.00 3 Market liberalisation 6 5 7 18 6.00 0 Tariff barriers & trade negotiations, trade agreement 8 5 7 20 6.67 6 Stringent standards and quality regulations 9 8 7 24 8.00 1 Global warming & natural calamities 6 10 7 23 7.67 1 Geographical location – distance to external markets 7 2 5 14 4.67 0 Changes in consumer needs, tastes and preferences 5 7 8 20 6.67 2 Labour costs/ skills 5 8 6 19 6.33 4 ICT 7 9 8 24 8.00 1


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Figure 2: Impact and Uncertainty Matrix - Tanzania

INVESTMENT OWNERSHIP

ACCESS TO RURAL FINANCE

TECHNOLOGY – R&D

ENVIRONMENTAL DEGRADATION

EXTENSION SERVICES

ATTITUDE CHANGE

QUALITY OF INPUTS

GROUP COHESION

PPP – COORDINATION OF STAKEHOLDERS

RIGHTS TO PRODUCTION RESOURCES

MARKET LINKAGES

MARKET DISTORTION SUBSIDY

10

5

5 10

0 IMPACT

UNCERTAINTY

POLICY INFRASTRUCTURE

STRINGENT STANDARDS

AID DEPENDENCY

LABOUR COSTS AND SKILLS

ICT MARKET LIBERALISATION

TARIFF BARRIERS, TRADE AGREEMENTS

CHANGE IN CONSUMER NEEDS

GEOGRAPHICAL LOCATION

GLOBAL WARMING, NATURAL DISASTERS

Key Driving force Key factor

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5. Conclusions • Access to markets for smallholder farmers and small and medium enterprises is ongoing

debate of interest beyond VECO Tanzania and its partners. The attitude of public, private, development practitioners and civil society dialogue is emerging and is encouraged by the government. Partly this has been manifested by a good turn up for and lively participation in the VECO Tanzania national stakeholder workshop on the subject.

• Future commitment of all stakeholders to undertake ‘joint action’ in interventions is

envisaged.

• Government policies are proactive in responding to some of the factors and driving forces brought up in this process. The major policies which have explicit strategies to support smallholder farmers’ access to markets include agricultural policy, agricultural marketing policy and SME development policy. Implementations of these policies are at early stages.

• From the generated lists of key factors and driving forces it is clear that one organisation

cannot respond to all of the issues. This underlines the call for ‘joint action’ now and in the future.

• What is also seen as critical weak points for Tanzania include;

o Market for critical business services is still very low, at least for smallholder

farmers in their locality o Rural financial service in Tanzania is generally very weak, coupled with limited

outreach, and also quite underdeveloped despite ad hoc initiatives by few actors.

• Global (Doha round discussions) and regional (COMESA, SADC, EAC) trade dynamics are to a large extent going to shape future competitiveness of Tanzanian smallholder farmers and SMEs access to local, regional and international markets.

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Annexes ANNEX 1: Table A1: Key factors - Looking forward year 2015 S/No Key factor Positive dream Negative dream 1 Extension services • Commercialisation of farming

• Increased responsiveness of farmers to market needs

• Extension services might be commercialised and be expensive to smallholder farmers

2 Quality and availability of inputs

• Production increased due to high quality inputs • Improved quality of products

• Inputs might be very expensive for smallholder farmers

3 Attitude towards agriculture

• Increased government support to agriculture • Farming is practiced as business • Increased investments (private) in agriculture

• Stagnant production • Oversupply hence low prices

4 Policy • Increased policy awareness at all levels • Policies are enforced and key challenges

addressed • Good enforcement of government laws to trigger

vibrant markets

• Farmers are confused and become weaker to lobby for their rights

• Enforcement of policies which are difficult to implement

5 Group cohesion • Strong farmers organisation which push smallholder farmers marketing agenda

• Weak farmers organisation will cause marginalisation of smallholder farmers

6 Market linkages • Increased productivity, quality and income 7 PPP, Coordination of

stakeholders • Enhanced efficiency • Improved working relationship

• Emergence of duplication of interventions • Less impact to smallholder farmers’

empowerment and efficiency. 8 Market distortion • Fair play ground (prices, products, services) • Smallholder farmers unable to compete

even on domestic market. 9 Technology, R&D,

agro-processing • Increased competitiveness of Tanzanian products

due to value addition on farm, and during post harvest processes.

• Tanzanian products failing to excel in international market due to inferior qualities.

10 Access to rural finance • Increased ability to take up new opportunities • Improved culture of saving

• Marginalisation of smallholder farmers who have limited access to financial resources

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11 Environmental degradation

• Conducive environment for sustainable agriculture • Prolonged drought and reduced soil fertility due to man made environmental degradation.

12 Rights to production resources

• Increased investment of smallholders in farming, fishing and mariculture activities

• Fair distribution of resources • Expansion of non farm activities • Increased production and employment creation

• Landlessness • Urban migration – increasing urban

poverty and crime

13 Investment ownership • Job creation • Increased income • Increased access to capital and hence collateral

• Marginalisation of the weakest

14 Infrastructure • Farmers will be able to bulk and attract big buyers, store their produce until when the price is right

• Interaction between buyers and farmers will be enhanced.

• Cultural contamination • Spread of diseases • Increased road accidents

Table A2: Driving forces - Looking forward year 2015 S/No Driving force Positive impact Negative impact 1 Aid dependence • More free to set country own strategies and

development agenda without interference from donors

• Donor conditionalities • Threat of loosing sovereignty

2 Market liberalisation • Tanzania will be able to penetrate niche markets where prices are premium

• Tanzanian enterprises will become more competitive

• Agriculture in Tanzania might turn to be a not economical viable activity

• Tanzanian produce might be sold at a low – give away price.

3 Tariff barriers, trade agreements, trade negotiations

• More/stronger voice through regional blocks • Growth of domestic markets • Increased export markets

• Poor competitiveness due to inferior products

4 Stringent standards • Smallholder farmers are able to penetrate global markets

• Due to limited competence, smallholder farmers might be discouraged and failed to tap global market potential

5 Global warming and • Minimised risks related to environment • Deteriorating productivity at farm level

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natural calamities 6 Geographical location • Increased access to markets due to comparative

advantage of Tanzania location within African region.

• Improved logistical and distribution system for post harvest handling, value addition and export transportation.

• Tanzania products to be less competitive due to distance to final (consumers) market

• Less competitive distribution infrastructure

7 Changes in consumer needs and preferences

• Diversification of agro produce • Evolution of new skills • Diversified market outlets

• Unstable income due to slow pace of farmers to adopt to consumer changes

8 Labour costs and skills • Increased local and foreign investment in Tanzania• Increased employment • Increased technology and revenue

• Exploitation of human rights

9 ICT • Every community /village level will have tele-centre for smooth and timely information about market trends (price, quality issues, product ranges, buyers, quantities, etc)

• Cultural contamination

Group two busy summarising key factors and forces description Various presentations trigger factors and forces. Attentive participants; from left to right, Dr Damian Gabagambi, Limbe, Sezia and Dr Ramadhani Matondo.

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ANNEX 2: BIBLIOGRAPHY Field, M., Hitchins, R. and Bear, M., 2000 ‘Designing BDS interventions as if market matter’ USAID – Microenterprise Best Practices. Humphrey, J., 2005 ‘Shaping Value Chains for Development: Global Value Chains in Agribusiness’ GTZ, Federal Ministry for Economic Cooperation and Development. Kees, Cornelis L.J. Van der Meer, 2006 ‘Exclusion of small-scale farmers from coordinated supply chains. Market failure, policy failure or just economies of scale?.’ In R. Ruben, M. Slingerland and H. Nijhoff (Eds.), Agro-food chains and networks for development., pp 209 – 217. The Netherlands MMA, 2005 (a) ‘The essence of market linkages facilitation’ Handout 1, Market Linkages Facilitation Training. MMA, 2005 (b) ‘ Framework for increasing smallholder farmers access to markets’ Handout 2, Market Linkages Facilitation Training.

TRALAC, 2006 (TRALAC -Trade and Law Centre for Southern Africa) is a not-for-profit organisation, building trade law capacity in the southern Africa region; in governments, the private sector and civil society (www.tralac.org ).

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ANNEX 3: QUESTIONNAIRE Access to markets for sustainable produce for small-scale family farmers Questionnaire Objective: To gather various stakeholders’ views on market access for small-scale family farms as possible inputs to scenario building (projecting the potential future or how the world might unfold in the coming 10-15 years) with the end in view of anticipating issues and concerns. 1. What is your concept in general of:

a) Family farms? b) Market access/ linking farmers to market

2. What do you think is the current situation of market access for family farmers in a) In Tanzania in general? How it may be different?

3. Do you think the situation will be the same 10 years from now? YES … NO … Why? a) In Tanzania in general? In what way will it be different? Please explain b) What will be the desirable and/or non-desirable outcome given your views in a)?

Desirable Non desirable 4. What do you think will be needed for Tanzania to move towards a situation

where there is a better market access for family farms? 5. What could have happened in the past that

a) Could have led to the current situation of market access for family farms? b) Could provide lessons on what to do or avoid ensuring better market access?

6. What do you think are decisions to be made or actions to be undertaken

immediately to improve current level of market access of family farms? a) In Tanzania, in general?

7. If you have the responsibility and the means to change things in terms of market access for family farms:

a) What will you do and why? b) What factors or activities not yet considered would you include enhancing

market access and why?

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ANNEX 4: LIST OF PARTICIPANTS S/N NAME ORGANISATION DESIGNATION 22/3/2006 23/3/20061 Jeroen De Wilde VECO Tanzania Ag. Country Representative √ √ 2 Veneranda Mgoba MAFC Principal Coop. Officer √ √ 3 Nsanya Ndanshau SNV Northern Portfolio Business Advisor √ √ 4 Dr. Gabagambi Sokoine University Lecturer √ √ 5 Prof. Rutatora Sokoine University Professor √ √ 6 Peniel Uliwa Match Makers Ltd. Director/ Consultant √ √ 7 Frida Urio ACDI-VOCA SEMMA Project Business Advisor √ √ 8 Lawrence Limbe VECO Tanzania Program Coordinator Chunya √ √ 9 Jerome Maimu VECO Tanzania Program Coordinator Same √ √ 10 Kenya C. Kenya MITM Planner √ √ 11 Fidea Mgina MITM Economist √ √ 12 Loyce Lema ENVIROCARE Director √ √ 13 Jordan Gama TOAM Executive Secretary √ √ 14 Stephenson C. Ngoda PMO – AMSDP Assistant Program Coordinator √ √ 15 N.L. Nyachia MITM P/Secretary √ 16 Ray Mujunguli EPOPA Tanzania Consultant, O/A √ √ 17 Highlands Lumambo BET Senior Trade Policy Officer √ √ 18 Masud A. Rizvi FIDHUSCO Business Exporter √ 19 Theresia Msaki MAFC PAE √ √ 20 Bismark Mwansasu FISEDA Consultant √ √ 21 Donat Senzya PELUM Tanzania Advocacy officer √ √ 22 Edmond Ringo Match Makers Ltd. Consultant √ √ 23 Baraka Mwabenga MIICO Executive secretary √ √ 24 Charles K. Sanga MIICO (Mbozi) Farmer √ √ 25 Emmanuel S. Mwantobe MIICO (Isangati) Farmer √ √ 26 Henry F. Wejja MVIWATA Marketing officer √ √ 27 Cornel Mushi MVIWATA Farmer √ √ 28 Marcelina Charles MVIWATA Farmer √ √ 29 Betram M. Mtenga VECO Tanzania Farmer √ √

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30 John E. Mkamba MAFC For AD-CPS √ √ 31 Zephania Mposo BIS Tanzania Markets specialist √ √ 32 Langelika Kalebi PASS Morogoro BDO √ √ 33 Philip Sazón CARITAS Southern Highlands

Network Advisor √ √

34 Felix Andrew IPP Media/ The Guardian Journalist/ reporter √ 35 M/s Tertula Swai PADEP Private Sector Officer √ √ 36 Dr. Ramadhani Matondo SUA Tutorial Assistant √ √ 37 Alexander Fernando DAIPESA Advisor √ TOTAL 37 33

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ANNEX 5: ADDITIONAL PICTURES

Opening speech by honourable Mr Nyachia, Permanent Secretary, Ministry of Industries, Trade and Marketing, centre is workshop facilitator, Mr Edmond Ringo, consultant with Match Maker Associates Ltd and far right is VECO Tanzania Country Representative, Mr Jeroen De Wilde.

Presentation of policy thrust by Mrs Theresia Msaki, Principal Agricultural Economist, Ministry of Agriculture, Food and Cooperatives.

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Participants’ active participation was highly appreciated. Stakeholders manage to interact and share experiences. Caught by our camera above; from left to right Mrs Veneranda Mgoba, Principal Cooperative Officer, Ministry of Agriculture, Food and Cooperatives, Mrs Tertula Swai, Private Sector Development Officer PADEP Project Ministry of Agriculture, Food and Cooperatives and Mrs Loyce Lema Executive Director of Environment and Human Rights Care

Discussions continued even during tea/coffee breaks from left to right, Mr Mkamba, Maimu, Frida, Langelika, Phillip, Gama, Ray and Nsanya

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Active listening during group presentation of key factors and driving forces.

VECO Tanzania Country Representative Mr Jeroen De Wilde gave short and well prepared vote of thanks in local national language ‘Swahili’ just after official closure by representative from Ministry of Agriculture, Food and Cooperatives.

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ANNEX 6: TANZANIA EXPORT PROFILE Tanzania’s largest export product is fish, followed by coffee. Other significant export categories include tea, spices, ores, slag, ash, fruit, nuts, and tobacco. The EU, India, and Japan are Tanzania’s largest trading partners. Substantial trade is also carried out with Kenya. Tanzania’s 2004 exports under AGOA and its GSP provisions were valued at $3.6 million in 2003, mostly apparel, representing about 15 percent of its total exports to the United States. Economic Strengths and Potential Growth Sectors • Coffee: The potential for growth in the coffee sector is considerable. Coffee factories are operating at approximately one-quarter of installed capacity. Recent changes in regulations helped to promote market diversification, e.g. by facilitating export to niche markets commanding premium prices. There have also been efforts to improve traceability of coffee production, which in turn enhances branding. • Horticulture: Tanzania has a potential to increase its exports of a wide range of fruit, vegetables, and flowers. The climate and growing conditions are ideal for a wide variety of fruits and vegetables. Potential export markets include regional countries, the Middle East, and Europe. Unprocessed cashew nuts are considered a non-traditional export. The government is promoting this product for export and is trying to acquire updated technology for its 12 processing plants. Tanzania’s Board of External Trade has identified pepper, chilli, paprika, cardamom, cinnamon, vanilla, turmeric, and ginger as potential export growth products. Potential markets for expanded spice production are the EU, the United States, Japan, and the Middle East; however, government representatives note that quality and packaging standards would have to improve to meet market requirements. Cold storage facilities at the major airports have been improved in recent years, which could help to boost exports. In addition, changes in the tax regime related to the aviation industry have provided incentives for airlines with excess capacity to transport high value agriculture products. • Agribusiness: The majority of Tanzania’s agricultural exports are not processed. However, the government is starting to focus on downstream processing and great potential reportedly exists for growth in agro-processing. Opportunities also exist in processing and packaging fruit and vegetables, dairy products, and meats, as well as manufacturing spirits from molasses produced by sugar processing factories. • Fisheries: Rescinding the export ban on foreign trawlers could increase fish exports. Opportunities also exist to increase offshore fisheries, (i.e. fish farming, prawn farming, mud crab fattening, etc.) that could result in additional export capacity. There are concerns, though, about the long-term viability of the fish and fish-products industry because of the uncertainty of fish reserves, especially in Lake Victoria. • Minerals/Petroleum: Various mineral and energy products have potential for export growth. The mining sector is expanding, and Tanzania is expected to become the third largest gold producer in Africa. The government has eliminated many impediments that restricted foreign ownership of mineral production enterprises. It anticipates that petroleum will be discovered off the coast, although it is unclear if the deposits will be commercially viable. The government is seeking investors for seven of 12 exploration blocks with potential gas and petroleum deposits. • Tourism: This is one of the fastest-growing sectors in Tanzania and the largest foreign currency earner. An increasing number of travellers from East Asia, India, the United States, and Europe are drawn to Tanzania’s wildlife safaris, deep-sea fishing, mountain climbing, and nature treks. The growth in this sector has stimulated significant investment in hotels, restaurants, and ground service facilities. • Textiles and Apparel: The government has supported the export of textiles and apparel as one of the major sectors for growth, and Tanzania has begun to export apparel to the United States under AGOA. The identification of textiles and apparel as a potential export sector is,

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however, dampened by the increasing international competition stemming from the removal of global quotas in 2005. • Wood and Leather: Wood exports have increased significantly, from $2.4 million in 2001 to $18.9 million in 2003. The government is encouraging the sale of processed wood products such as handicrafts, instead of timber or logs. Livestock numbers have been growing consistently in recent decades, and opportunities reportedly exist for the export of leather and leather products. Major Challenges to Export Growth • Business Environment: Investors looking to start and maintain a business face several obstacles. When registering property, investors encounter twice as many procedures as other countries in the region. Most of Tanzania’s employment indicators are also worse than the regional average; however, the country scores better than the regional average on enforcing contracts. Although Tanzania’s economic freedom is on par with the regional average, its trade policies are notably worse than regional averages. Policy implementation can be slow and sometimes inconsistent. For example, at the same time when the government is trying to promote an increase in downstream production, the taxes on handicrafts have increased. The EPZ faces many challenges, including poor infrastructure and lack of space. Industry has raised concerns about local governments’ imposition of unofficial taxes as products transit between regions and districts, which raises the cost of production and causes shipping bottlenecks. Other deterrents to business development include a weak legal system and the tax regime. Foreign investors may not currently own land and also face difficulties in obtaining documentation such as town planning certificates and building permits. • Financial Services Constraints: The financial services sector is not well developed. Even though the financial sector has been liberalized, only five percent of farmers have access to bank credit. There are few banks and average interest rates are around 15 percent. Because the government owns all of the land in Tanzania, small-scale farmers and other borrowers are unable to use land as collateral. Instead, land can be leased for 33, 66, or 99 years, depending on its use, and the president can revoke leases, increasing investment risk. • Packaging Challenges: Investments are needed to develop and improve the packaging industry to meet quality, strength, and environmental-friendly requirements. New packaging companies are emerging, but they are unable to fill the demand for export to some large markets or for certain sectors, such as horticulture and spices. • High Production Costs: Raw materials are expensive, and the average import tariff in 2003 was 13.6 percent. Among East African Community members, electricity costs are the highest in Tanzania and service is sporadic. The high cost of electricity is a serious impediment to attracting new businesses. • Limited Production Capacity: Productivity in the rural sectors is low because of the limited access to modern technology, manufacturing equipment, and inputs. Producers are generally slow to change their operational practices to increase efficiency. Industry representatives have lamented that producers cannot satisfy large quantities demanded by certain export markets, and transportation costs increase when producers are unable to fill containers for shipments. For example, handicrafts producers are fragmented and not centrally located, making it difficult to fill orders and educate producers about management. • Access to Market Information: Tanzanian producers generally lack a clear understanding of overseas quality requirements and consumer preferences. The cost of travelling to foreign market trade shows and sending samples overseas is prohibitively expensive. • Inadequate Infrastructure: The road network suffers to up to 25 years of neglect and decay. Only 4.2 percent of the total road network is paved. Feeder roads are inaccessible from production sites to distribution centres and ports, making it difficult for businesses to operate outside of Dar es Salaam. Because of poor roads, the cost of transportation is high. The cost to

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transport a 20-foot container from Arusha to Dar es Salaam is roughly the same amount as shipping from Dar es Salaam to Europe. Although communication with producers in rural areas has improved with the increased use of mobile phones, the inadequate transport infrastructure hampers the retrieval of products from remote areas. Postal and fixed line phone services are weak; fixed line telephone services are unreliable and international service is expensive and inconsistent. • Other Factors: There is a lack of technical capacity to meet customs procedures and SPS standards. One of the most significant impediments to growth in the coffee sector is taxation. Taxes are high – 50 to 70 percent – and the tax code is complicated. In addition, the Coffee Board limits the number of export licenses applicants can obtain. • Smuggling: Mineral sector export growth is hindered by pervasive smuggling of tanzanite into Kenya. For example, Kenya is the leading exporter of tanzanite, despite the fact that this gemstone can only be found in Tanzania. Smuggling is induced in part by porous borders and burdensome licensing and regulations applied to the export of tanzanite.

nd rd march 2006 dar es salaam, tanzania. - betuco

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