Community-investor partnership: the case of sugarcane production in Tanzania
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1 Community-investor partnership: the case of sugarcane production in Tanzania Emmanuel Sulle Researcher, PLAAS PLAAS
2 Introduction This study assesses the role of sugarcane outgrowers in the Tanzanian sugar industry after the liberalisation policies of 1980s aimed at increasing productivity and efficiency It examines the structure of partnership between the investor and the community (outgrowers) To-date, neither local nor external demand for sugar is met Sugar companies expansion strategies into public and village lands are leading into land-based conflicts To circumvent these challenges companies are opting for alternative business models such as outgrowers schemes
3 Desk research Methodology Field research and interviews with farmers and key stakeholders in the sugar industry: Dar es Salaam, Morogoro and Kilombero in individuals and group interviews 33 interviews with national and local stakeholders
4 Conceptual framework Outgrowing, a type of contract farming, has been ambivalently endorsed by recent studies (World Bank & FAO 2013) Renewed attention on contract farming needs to be understood in the context of life after structural adjustment, in which governments rolled back the provision of credit, subsidies and extension services to farmers (Key and Runsten 1999, Oya 2012) Contract farming - an agreement between unequal parties: companies, government bodies or individual entrepreneurs on the one hand and economically weaker farmers on the other (FAO 2001: 1)
5 Tanzania s sugar industry The performance of sugar industry can be best understood in 3 periods: before and during independence; after nationalization; and after privatization Before Tanzania s independence in 1961, the sugar industry was run by private investors. Following the Arusha Declaration in 1967, the state nationalized all the privately-owned industries and estates All privatized between 1998 and 2001 With govt maintaining 25% shares in only 2 of the 4 companies
6 Community - investor partnership Kilombero Sugar Company Ltd (KSCL) was a State Plantation privatised to Illovo in 1998 KSCL is now owned: 55% by Illovo, which is itself a subsidiary of Associated British Foods (since 2006); 20% by ED&F Man, a commodity trader; and 25% by the Tanzanian government KSCL has a total of 8,022 ha under cane KSCL has a total of 4,500 employees Generates its own electricity & an ethanol distillery is under construction It buys cane from 8,000 registered farmers with 11,900 ha under cane
7 Terms of agreement Cane Supply Agreement stipulates the division of proceeds (DoP) as negotiated by the company and out growers associations: Outgrowers receive US$ 35.6 /tonne before adjustments for sucrose levels and actual sales are made (2013/14) Current DoP is 57% and 43% for outgrowers and company respectively
8 Performance after privatisation Sources: Illovo Sugar Ltd annual reports, World Bank 1974, Mbilinyi and Semakafu 1995, SBT 2014 and interviews
9 Export vs Imports Source: Massimba et al 2013
10 Positive gains Lumpsum income to households essential for investments, construction etc Improved livelihoods to some? Improved social services in the area i.e. schools, health and water
11 Growing challenges In recent years as a result of increased outgrowers production, their cane is hardly fully harvested in a given season: KSCL milling facilities are operating at full capacity the ongoing arbitrary importation of sugar in the country The outgrowers payments are delayed As a result farmers do not earn highly needed income to recover production costs, and sustain their lives Payments are delayed for those whose cane has been harvested
12 Growing challenges KSCL and farmers associations are both interested in seeing more cane growing Currently there is mix perception from our respondents Should farmers turn some of the cane growing fields to food crops or Should the company increase its crushing capacity and farmers expands their areas under cane? There seems to be a bleak future too if cane is expanded Reliance on cane growing means little room for food crops If you depend too much on sugar you will die of hunger, said one young woman Farmers are looking for rice and maize growing fields in non-cane growing areas, living aside their children This seriously affect their children upbringing Emerging commuter families
13 Growing challenges Land is accumulated by few elites Land scarcity and declining sugar profitability are making it difficult for small outgrowers and new comers to join the industry Given this context we need to answer these questions How to make contract farming work for the poor Africans? How can the states protect outgrowers against cheap sugar imports?
14 MPs action points Improve the oversight functions of parliament and district and village councils Enhance accountability, responsibility and transparency of the sugar boards, the millers and outgrowers leadership Ensure contracts are fair and respected by all parties Put in place an effective, participatory and transparent framework for issuing sugar import licences and permits Ensure that farmers are supplied with efficient and timely extension services and inputs
15 MPs action points In public private partnerships, make explicit the roles for the state, firms and donors Ensure sufficient public and private investment in infrastructure roads and irrigation under strict and transparent supervision Ensure lessons learned from this case inform future development in sugarcane and agriculture at large
16 Aksanteni sana! Thank you very much
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