HARNESSING INVESTMENT IN TANZANIA S AGRICULTURAL SECTOR FOR GROWTH Where to from here? ASMITA PARSHOTAM, RESEARCHER IN THE ECONOMIC DIPLOMACY PROGRAMME 22 NOVEMBER 2016
PRESENTATION OUTLINE 1. Socio-economic conditions in Tanzania what do we know thus far? 2. Tanzania s agriculture sector and challenges faced by smallholding farmers 3. Government led initiatives: investment policies and programmes in the agricultural sector 4. Private sector investment in Tanzania: all for personal gain? 5. PPP initiative: the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) 6. Cautions against mega-ppps for development 7. Where to from here?
Socio-economic conditions of Tanzanian farmers what do we know? - Tanzania is a LIC with an annual growth rate of 7% = fastest in East Africa - Agricultural hugely important to the economy - 31% of country s GDP - Employing 66 % of the country s workforce - Agricultural labour sector = 55% women workforce - Agricultural growth at 4.3% has fallen short of the government s 6% CAADP targets only 25% land usage and only 3% growth rate in land usage
Why is Tanzania s rural farmer at a disadvantage? - Minimal infrastructure and poor irrigation - Traders set prices and not market factors = no competition - Poor agricultural feed and inputs = volatilities in yield outputs - Marginal access to markets - Quantity and quality restrictions = farmers cannot meet international standards
Persistent challenges in Tanzania s regulatory/policy landscape - Unclear land tenure laws and unfair administration levies - Growing property disputes between smallholder farmers and mediumsized producers - Insufficient tax rebates and high VAT/tariff charges on agro-inputs (18% - 24%) - Agricultural Development Bank (2015) = inaccessible and lacks capital for smallholder producers
Private sector investment in Tanzania - Very successful at attracting FDI: US$ 1.87 billion in FDI inflows for 2013 - BUT no overarching framework for regulating FDI in Tanzania - PPP Act of 2010 (emphasizes infrastructure development) and National Agricultural Sector Policy of 2013 (identifies the private sector as farmers, exporters, distributors) - Unpredictable incentive structure for investors and PPP Centre not yet operational
Unstable investment trends in Tanzania for the agricultural sector FDI net inflows as a percentage of Tanzania's GDP 7 6 5 4 3 2 1 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: World Bank database
FDI flow and stocks as measured in US$ for 2009-2013 Year Flows in USD Stocks in USD 2009 29 million 231.3 million 2010 22.9 million 254.2 million 2011 31.4 million 285.6 million 2012 11.2 million 296.8 million 2013 10.3 million 307.1 million Source: Tanzania Investment Report, 2014
Government-led initiatives to reform Tanzania s agricultural sector - Business Linkages Programme (in partnership with UNCTAD) - Partnering with Airtel in 2011 = innovative ways to get market information to farmers - Technology skills transfers via local cooperatives and local investors - Mandatory CSR requirements in investment agreements for the protection of smallholder producers - Tax incentives and VAT deferment for 5 years after business operations commence
Private sector investment in Tanzania Success stories include: CETAWINO (Central Tanzania Wine Company): wine production Mount Meru millers: sunflower oil Tanga Fresh: dairy products Kilomero rice and sugar: also involved in the SAGCOT initiative
The changing face of investment in Tanzania Donor ODA spending on agriculture and rural development in sub- Saharan African countries for the period 1995 to 2012 Source: Oxfam, 2014
PPP initiative: Southern Agricultural Growth Corridor of Tanzania (SAGCOT) - Linking smallholding producers with commercial agriculture expanding their access to larger markets and infrastructure - Characterised by three key components: - Attracting investment into the area - Build capacity with TIC - SAGCOT Catalytic Trust fund
What makes SAGCOT different? - Donors and interested companies had special vehicles = support new and riskier longterm efforts - Weather insurance for smallholders (i.e. micro-insurance) = investment in new crop varieties, fertilisers, and sustainable technologies - Up to 85% of agricultural production = smallholder producers and farmers association - Land allocations between 3000 and 50,000 hectares = lease to investors, with the land surrounding these plantations reserved for smallholder farmers. - A Green Growth strategy that will address agricultural, social and environmental sustainability objectives.
Caution against PPPs for smallholder farmers - Involvement is conditioned by access to both financial capital and water - Less-developed areas can be further marginalised = remote and have less purchasing power - Inputs that threaten the sustainability of local ecological systems - Mega-PPPs that cannot adequately link smallholder producers to larger markets - Risks with contracted farming benefits limited to investors alone
Where to from here? Better farming methods and improve existing input measures Greater interaction between the private sector and government = distribute financing information to smallholder producers Communication and cross-sectoral relations must be improved by involving CSOs and farmers union Implementing non-protectionist policies that harness the producing potential of smallholder farmers through inclusion in domestic value chains, which will help facilitate their entry into regional markets Improve quality of legislation and policy coherence across the tax regime, land administration and investment regulations = help reduce reliance on donor support for agricultural projects Systemise incentives needed to promote more inclusive business models amongst large investors and equitable partnerships between private sector and smallholder farmers
THANK YOU