Tuesday 8 November 2011 SUPPORTING THE PROMOTERS OF THE GREEN REVOLUTION

Clove industryunder scrutiny

Growers’ club queries its liveliness, call for its overhaul

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By Gerald Kitabu

Two deadly dis-eases, Aphids andAmleria melea, arereportedly terror-ising green vegeta-tion and forests in

a good number of regions in thecountry. A local forest officerhas warned that the viral dis-eases require immediate atten-tion to contain and save greenplants.

The diseases attack plantroots, stems and leaves in de-forested and drought prone ar-eas, which previously hadmuchwater supply, but due to cli-mate change and wanton treefelling in particular, no longerhave enough water supply.

In the process, they virusescause thick layers of yellowish,blackish and whitish smallspots, something which, if notcontrolled, can kill plants,which could cause food shortagein the country.

While Amleria melea af-fects the roots of natural vege-tation especially acacia trees,Aphids is after the leaves andstems, and recently tomatoes,flowers, pawpaw, guavas, avo-cados and mangoes.

Regions under attackJohn Masam, central zone

Forest Officer, says all regionsin the country are at a big risk

of being affected by the diseaseswhich experts detected fiveyears ago. He says the diseasesare reportedly wreacking havocin Tanga, Rufiji, Kilwa as wellas Dodoma, Singida andManyara. Reports have it thatearly signs of the disease havealso been spotted along LakeTanganyika in Nkansi district,Rukwa region where vegetableshave suffered the attack fromthe deadly viral diseases.

“If bourders between oneregion and another are affected,it’s possible for natural forestsand vegetation in neighbouringregions to catch it,” cautions theforest officer.

According to him, climaticchanges coupled with unsus-tainable agriculture and min-ing activities are responsible forthe spread of the viruses caus-ing the diseases. “There is anurgent need to arrest the situa-tion because all regions are inone geographical location andthat the diseases know noboundaries,” he stresses.

Fruits not sparedAli Salumu, an agricultural

officer for Kirando, workingalong Lake Tanganyika whichis shared by Tanzania, Zambiaand the Democratic Republic ofCongo (DRC), says the diseaseshave also been detected in thearea especially on tomatoes,something which has affected

income levels of the people inthe area.

“There are signs of the dis-eases and they have started af-fecting green vegetables such astomatoes which has developedthick layers of yellowish, black-ish and whitish substances andsome tomatoes have withered,”he says.

Juma Chilumbalumba (70),a resident of Kirando says de-forestation in the areas is ram-part especially along the lakeand that it might have con-tributed to the spread of thediseases.

Rivers gone“When I was young, there

were many rivers such asRwamfi and Katongolo, whichthe whites said they could pro-duce power, but the rivers havesince disappeared due to hu-man activities, including farm-ing,” he informs.Chilumbalumba says the ten-dency by farmers to encroachshores of the lake for farmingactivities, particularly garden-ing, accelerates the shrinking ofthe Lake.

He urges responsible or-gans to make sure that theproblem of environment degra-dation along the lake shores isaddressed; otherwise, biodiver-sity will be adversely disturbedby increasing crop diseases, likeAphids and Amleria melea.

EDITORIALThe Guardian KILIMO KWANZA Tuesday 8 November, 2011

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The Guardian KILIMO KWANZACROP DIISEASES

Tuesday 8 November, 2011

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WHENour country was a British protec-torate, the colonial government endeav-oured to encourage settler farmers andthe colonial government itself to investin agriculture. The British, who had justannexed the country from Germany, in-

vested in a 100,000 hectares (about 405 sq km) wheat proj-ect in 1943.

Freddie Smith, the American national overseeing theproject, hired 30 tractors and various other implements andutilities from the US and even brought in technical expert-ise in the form of Italian prisoners of war from Somalia andEthiopia. But the project, which covered Ardai (Arusha),the slopes of Mount Kilimanjaro and Ngorongoro, was atbest only moderately successful.

This failure did not deter the colonialists and between1946 and 1951 they pumped in an estimated USD25 mil-lion in taxpayers’ money, a staggering amount even by to-day’s standards, into another failed agricultural scheme inKongwa, Dodoma.

The ‘groundnut scheme’ soon became the target of jokesacross the developed world for its failures. References tothe doomed ‘peanuts’ project even found their way intomovies.

Political independence in 1961 saw the new govern-ment trying to increase both agricultural output and in-vestments in agriculture. The period between 1961 and1980 saw the government adopting a range of slogans suchas “Chakula ni Uhai” (food is life), “Siasa ni Kilimo” (poli-tics is agriculture), “Kilimo cha Kufa na Kupona” (agricul-ture as amatter of life and death) and “Mvua za Kwanza niza Kupandia” (the first rains are for planting), all of whichsought to encourage agricultural activities, investment andoutput.

The trying economic times that defined the 1980s alsodefined agriculture in that era. Towards the end of thatdecade, the government took a more liberal stance on in-vestment, scrapping price restrictions on produce, allowingprivate importation of farm machinery and encouragingprivate investments in commercial agriculture.

The third phase government (1995 to 2005) imple-mented the Agricultural and Livestock Policy of 1997 anda number of other policies meant to improve the agricul-tural sector. These reforms saw the agricultural sectorrecord an annual growth rate of 6 per cent, up from the pre-vious average of 3 per cent. However, there was need formore investment in agriculture.

A 2001 review of agriculture in the country led to anumber of recommendations on the major factors impend-

ing investment in the sector. The exercise identified sixhigh potential investment areas for the private sector withappropriate support mechanisms from the government.

These areas related to seed production,outgrowers/contract farmers’ schemes, farm service cen-tres, produce marketing, agro-processing and investmentin irrigation infrastructure. The result of this and relatedreviews was the Kilimo Kwanza policy, which seeks tomodernise and commercialise agriculture in the country.

However, one year into Kilimo Kwanza, a recent reporton barriers to agricultural investment shows that the in-centives in place do not match the levels of investment. Thereport mentions deterrent tax rates, inefficient tax admin-istration systems and persistent power woes as among thefactors limiting investment into the sector.

Others culprits are corruption and limited access to fi-nance, with macro-economic instability due to fluctuatinginflation and interest rates also playing a part in inhibitingagricultural investment. Also mentioned are inefficientcustoms and trade regulations that increase the cost of do-ing business and disrupt productivity, together with re-strictions by local authorities to traders and producers, es-pecially farmers.

With this in mind, it appears that 50 years after inde-pendence, we are still struggling to attract the kind of in-vestments in agriculture that would make a real differenceto the sector and eventually the national economy in gen-eral. Why, you may ask?

A study on the effectiveness of public policies inTanzania released by the Economic and Social ResearchFoundation (ESRF) in August 2010 noted with concernthat the effectiveness of public policies in Tanzania was be-low average, with the trade policy leading to mediocre out-comes. Only the transport policy rose above the averagemark.

With this grim historical outlook, we can only hope thatone day, preferably in the near future, our policy makerswill find the elusive secret to increasing investment in thebackbone sector and steer our agriculture in the right di-rection.

Investment in agriculture:Success well within reach

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Dairy sector inthe doldrums

Why agro-incentives fail topull enough investments

Wallace MauggoEditor

Deadly viraldiseases threaten

crops, forests

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COVER STORYThe Guardian KILIMO KWANZA Tuesday 8 November, 2011

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The Guardian KILIMO KWANZACOVER STORY

Tuesday 8 November, 2011

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…clove is backAfter over four decadesof decline andstagnation, clove – onceZanzibar’s backbonesector – is back with aprice bang andrenewed advocacy.

By Kilimo Kwanza Reporter

Scepticism about regeneration

Clove growers are scepticalabout the current regen-eration path taken by thegovernment and its agen-cies in an effort to bringto new life the clove in-

dustry in Zanzibar. The farmers feelthat focusing just on few issues likeprice to revive such a huge industrywon’t help a great deal.

The growers, through their club,the Zanzibar Clove GrowersOrganisation (ZACPO), want authori-ties to do more, in terms of policy aswell as law reforms, to fully regeneratethe production of the Isles key cashcrop.

In its final Clove Advocacy Reportcompiled by ZACPO Advocacy Projectexternal consultant Juma Ali Juma inJuly last year, the association statescategorically that restoring theZanzibar’s lost clove industry glory re-quires purpose actions to rework the

entire system – not just dealing with itspatches.

The report, which contains inputsfrom two independent consultants –Alex Mkindi and Zeinab Ngazy, callsfor the scrutiny of the entire sector, set-ting up of a strong foundation for its vi-ability and stability as well as exposingit to the new challenges in the globalarena.

“The government should commis-sion a thorough investigation into theactual clove production and export datato enable an independent, transparent,complete and authentic economicanalysis of the clove industry for in-formed decisions in the sector,” itstates.

ZACPO also calls for the speedingup of law and regulation reforms to im-prove performance with a view to mak-ing the industry at par with globalchanges and realities. It states: “Thegovernment should accelerate the paceof deregulation of the clove industry togive a new thrust in sector performanceas projected under market liberalisa-tion.

The study, whose thrust is advocat-ing the urgency of stepping up effortsgeared to revive the key cash crop inthe Zanzibar economy after decades ofdecline and stagnation, assesses theimplementation of a plan to revive theclove industry adopted by the govern-ment in 2004 – to establish to what ex-tent different recommendations putforward in there have been implement-ed. It also seeks to identify reasons fordeficiencies and give recommendationsaccordingly.

ZACPO states in the report that

the increase in production will dependon many factors, including adequateeducation and training for farmers ongood practices in clove husbandry andmanagement.

Disband ZSTCThe association recommends trans-

formation of the Zanzibar StateTrading Corporation (ZSTC) to facili-tate an efficient marketing of cloves un-der a liberalized environment, improv-ing production support and extensionservices to properly manage clove plan-tations as well as addressing poor hus-bandry practices during planting and

other field operations. The other recommendations are:

Deliberate efforts to improve clove re-search and development, provision ofclove support services, including appro-priate and targeted extension services,credit facilities, markets and price in-formation as well as having effectiveand capable groups to defend and pro-tect the interests of clove farmers anddealers.

ZACPO says despite disappointingyears, clove still contributes signifi-cantly to the gross domestic product(GDP) and export earnings (an averageof 6bn/- annually). It adds that the con-tribution shows that there are opportu-nities in the clove industry for reduc-tion of poverty and efforts to curb foodinsecurity, if constraints to local pro-duction and marketing are addressed.

ZACPO says a wealth of experi-ences on clove production, husbandryand management among the peer (oldgeneration), that is not currentlyshared among the youth is thereforedoomed to be lost. It notes that in re-cent years, the clove industry has beendeclining due to various problems in ar-eas of production, marketing and pro-cessing as well as smuggling.

Citing an example of Indonesia, theleading nation in the production of thecrop, the ZACPO report says the coun-try has embarked on a process of dereg-ulation of clove industry that involvesregulatory and structural changes thatresponds to the needs of main actors inthe national effort to rejuvenate the in-dustry.

ZACPO strongly recommends dis-bandment of the ZSTC and introduce

free market mechanisms to run the in-dustry for better performance. “Effortsshould also be made to activate localdemand for cloves especially industrialdemand for production of essential oils.The main instrument for rejuvenationof Indonesian clove industry was highlocal demand of cloves from kretek cig-arette manufacturers,” it stresses.

Essential oils ZACPO further states in the report

that as a matter of priority, the govern-ment should workout and endorse com-plete privatization of the oil distillery inWawi, Pemba, to pave the way for in-

dustrial and commercial production ofessential oils that on one side will trig-ger local demand for cloves and itsproducts and on the other side will in-crease the share of Zanzibar in theflourishing global oil markets.

Clove contains 11 - 17 per cent es-sential oils, which is mostly eugenol –an effective unaesthetic. Clove buds es-sential oil is used in perfumery and,

By Kilimo Kwanza Writer

After experiencing steady declineand stagnation over the last fourdecades, the clove sector in

Zanzibar has shown the good signs ofcoming back with a bang. The come-back is signified by high prices of thecommodity in both local and interna-tional markets as well as prospects ofhigher yields. Essentially, the two fac-tors forecast robust economies of bothUnguja and Pemba – the two mainZanzibar islands – and improved farm-ers’ wellbeing in the near future.

It’s the time with a big difference byall standards. Farmers, who have beengrappling with disappointing pricesand extremely low production levelsover the years, the latest developmentssuggest the dawning of a new era ofhope.

Prices up threefold In a dramatic move, the Zanzibar

government announced in August thisyear that it has increased the price ofcloves to 15,000/- per kilo up from10,000/- hardly a month after raising itby 100 per cent from 5,000/- per kilo to10,000/- for Grade I a month earlier.

Zanzibar State TradingCorporation (ZSTC) director SuleimanJongo, who announced the price changein a statement issued by the Isles StateInformation Department, says themove is essentially geared to beef upfarmers’ income. According to him, akilo of Grade II clove will now fetch14,500/- and Grade III 14,000/-.

He attributes the rise in the price ofthe crop to increased exports in theglobal market, promising to continueraising the prices often. “The govern-ment has increased the price of clovesafter the world market increases. It willcontinue to do so in accordance withchanges in the global market,” Jongosays. Zanzibar Trade, Industry andMarketing minister Nassor Ahmed

Mazrui says the new prices were about80 per cent of the one prevailing in theworld market, assuring farmers thatthey will get more whenever prices ininternational markets go up. The in-crease, says the Minister, is encourag-ing because just few years ago, the

farmers got only half of the world mar-ket price.

However, farmers say these pricesdon’t benefit them much. ZACPO givesconflicting data on this. It says theclove price in the world market rightnow is about USD30 equivalent to50,000/-. “For that case, what the farm-ers are getting is roughly 30 per cent,not 80 per cent as Mazrui claims.”Citing another example, it says in 1998,farmers were paid between USD2.15and USD2.69 per kilo, which then wasaround half the selling price in interna-tional markets.

Regeneration plan President Ali Mohamed Shein car-

ries on an ambitious comprehensiveplan he inherited from his predecessorsto regenerate clove production in theSpice Islands, as the Zanzibar islandscommonly referred to for growing clove.

He briefed about the plan duringan official visit of Pemba, where he met

with farmers in clove fields to launch instyle, this year’s clove harvesting sea-son. Apart from promising to reviewprices of the crop, Dr Shein said thegovernment intends to spend 36bn/- inthe purchase of cloves from the farm-ers. The president also said his govern-ment intends to distribute over 500,000clove seedlings to the farmers free ofcharge annually over the next ten yearin a move to bolster production of thecash crop and in turn improve theirearnings.

Zanzibar Trade, Industry andMarketing minister Mazrui details themeasures announced by his boss whenlaunching the new clove buying seasonin August in Pemba that the move ispart of the implementation of govern-ment's ten-year Clove DevelopmentStrategy (CDS) adopted five years ago.

He says the strategy involves re-forming the Zanzibar State Trade

though less frequently, in pharmaceu-ticals.

The essential oil is also used in foodindustry in meat products, sauces andpickles, confectionery and bakery prod-ucts. Less expensive stem oil, pale yel-low, obtained after distillation is usedin the massage-market products and inmeat seasoning. Less expensive leaf oilis used as main source for production ofeugenol, which is used in analgesic andraw material for other chemical prod-ucts such as vanillin.

According to the organisation,Indonesia produced around 70 per centof world clove oil in 2005, followed byMadagascar. Tanzania and Comorosshare was 10 per cent and 2.4 per centrespectively. Singapore and India arethe leading importers.

In 2005 Singapore share wasaround 39 per cent or 21,416 tones oftotal world demand, while India repre-sented 13 per cent or 6,945 tonnes. ZA-CPO notes that during the same year,the European Union (EU) share was 5per cent or 2,739 tones.

ZACPO expresses optimism thatthe new market developments arefavourable for the Zanzibar clove in-dustry with her large underutilised es-sential oil distillery, which under prop-er liberalised arrangements, could beput under maximum utilisation andsignificantly contribute to increasedproduction of essential oils for export

Reversing the declineAs it has been pointed earlier,

cloves have been a major foreign ex-change earner in Zanzibar for the lasthundred and fifty years, before thespate of steady decline and stagnationover the last forty years – from an an-nual average of about 16,000 tonnes in1970’s to between 1,500 and 3,500tonnes in 2000’s.

So, to reverse the trend, ZACPOrecommends several interventions:Since, the clove market law of 1985,which provides that the ZSTC in thesole legal buyer and exporter of clovesin Zanzibar, has not been repealed, thegovernment leaders should be ade-quately sensitised to appreciate the im-portance of amending it.

The mass media should also be en-gaged to enlighten the general publicon the presence of the law; its negativeimpacts on the clove industry and theimportance of amending it to pave theway for private sector participation inclove marketing and development.

ZACPO also recommends the for-

mation or identification of a specific in-stitution mandated to guide the dereg-ulation process. To this effect, a stake-holder committee comprising membersfrom the private sector and the govern-ment should be created for following upthe amendment procedures. He alsocalls for deliberate steps to facilitatethe tabling of a Bill on the issue in theHouse of Representatives. On produc-tion support services and extension, itrecommends promotion of farmers’ ed-ucation and awareness, including re-vising curriculum for primary and sec-ondary education to include subjects oncloves history, production, husbandryand management of plantations.

ZACPO also recommends the use ofmass media such as radio and televi-sion to raise farmers’ awareness andprompt actions in clove rehabilitation;facilitate the use of effective and tar-geted extension approaches such asgroup training in seminars and work-shops, demonstration plots and farmerfield schools to promote and arouse in-terests of various stakeholders on clovereplanting schemes as well as planta-tion management.

According to the organisation, amajor clove development project thatwill include research, extension andtraining on clove development to re-es-tablish and manage clove plantationsshould be established to promote provi-sion of incentive schemes and packagesto farmers who plant new cloveseedlings and successfully managethem to fruition stages.

Other recommendations include re-search and development on market ex-ploitation and promotion. ZACPO saysthere have been very little efforts, ifany, on the clove market promotion andexploitation at regional and interna-tional levels. “This has mainly beencaused by lack of commercial dy-namism and vitality, a characteristicinherent in the private sector, but lack-ing in the public sector domain. The

growing regional economic integrationprovides the opportunity for the ex-panded market for Zanzibar cloves andits byproducts,” it states.

To solve the problem, ZACPO rec-ommends that private sector participa-tion in the clove marketing should takea new approach to include exploitationof opportunities in the regional mar-kets such as the East African Common(EAC) and Southern AfricaDevelopment Community (SADC).

“Exploit possibilities for value addi-tion on cloves that will yield to productsthat could be used in regional cosmet-ics, perfumery and medicinal indus-tries. Establish Cloves and Spice tradefares in Zanzibar to promote cloves andspice products that could also be at-traction to tourists and as such linkingthe clove industry with the flourishingtourism industry,” ZACPO stresses.

Readiness to competeRegarding the preparedness to

compete, ZACPO says: “It’s a well-es-tablished fact that the Zanzibar cloveindustry is facing increasingly strongcompetition in the world market.

Over the years, however, there hasbeen a generally diminished interest onthe part of the government in Zanzibaron the clove sector, save for the finalproduct (cloves) that is strongly andeven militarily handled through theZSTC.”

The lack of interest has depletedthe sector of the motivational policies,fund allocation for research and devel-opment and targeted training of farm-ers and staff, says the ZACPO. Recordsfrom other competitors show a com-pletely reverse trend. They are givingthe clove sector due priority in terms ofappropriate and responsive sectoralpolicies, motivating farmers, targetedresearch and development funding.

“In a nutshell our competitors inthe world clove markets are adequatelyprepared for competition whileZanzibar is not,” states ZACPO in the

report, suggesting promotion and facil-itation of investments into the clovesector, focusing on trained personnel,funded research, motivated farmersand supportive policies. These tools,ZACPO concludes, should help clovedevelopment and preparation for com-petition by learning from the competi-tors’ strategies.

Way forward ZACPO states categorically that

the major stumbling block to the imple-mentation of the 2004 study recom-mendations is the Clove Market Law of1985 as well as the congruent existenceand mandates of ZSTC. “This meansthat the amendment of this law anddisbanding of ZSTC should be taken asa priority advocacy agenda in all subse-quent engagements between the gov-ernment and non-state actors on thissubject area”.

ZACPO also stresses on three otherimportant points: A need for the gov-ernment to honour its commitment toimplement recommendations of the2004 clove study; a detailed cost benefitanalysis of the ZSTC to validate theZACPO findings; and engaging theZanzibar Business Council in accelerat-ing changes envisaged in the clove in-dustry. “The quantitative and qualita-tive evidence provided through thisstudy should complement the courte-ous effort to deregulate and subse-quently liberalize the clove sector forthe benefits of the people of Zanzibar,”it closes.

Growers query its liveliness, call for its overhaul

Clove industry under scrutiny

…new hope as prices soar

“The growers,through theirorganisation,Zanzibar CloveProducersOrganisation(ZACPO), wantauthorities to domore to fullyregenerate thesector, in terms ofpolicy as well as lawreforms

“There areopportunities in theclove industry forreducing povertyand curbing foodinsecurity

“The mass mediashould also beengaged toenlighten thegeneral public

CONTINUES PAGE 6

Dr Shein upbeat about clove sector

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MECHANISATIONThe Guardian KILIMO KWANZA Tuesday 8 November, 2011

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The Guardian KILIMO KWANZAPOLICY

Tuesday 8 November, 2011

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By Kilimo Kwanza Reporter

Purpose

Tanzania has put in place anumber of investment in-centives for agriculture,but studies show that theamount of investmentsobtained in return are not

enough. Interestingly, returns fromnumerous incentives in the backbonesector appear to be few compared toother countries offering similar pack-ages.

In response to the anomaly, theBEST-AC supported the AgriculturalCouncil of Tanzania (ACT) inDecember, 2009 to commission an as-sessment to the sixth pillar of KilimoKwanza, which focuses on incentivesfor attracting investments in the agri-cultural sector in the country.

The report on the assessment wasintended to develop a solid policy pro-posal of incentives to make the key sec-tor competitive as well as enable it toattract new domestic and foreign in-vestments.

ACT says in the report compiled byindependent consultant, ProfessorDeogratias Rutatora of SokoineUniversity of Agriculture (SUA), thatthe study was necessary to address de-terrents to investing in the sector. Italso shows that the following factorsaffect its growth in Tanzania:Inadequate technical support, includ-ing research and extension servicesunder explored opportunities, particu-larly markets and lack of financial sup-port and services, i.e. long term financeat affordable interest rates.

Incentives Among others, the report mentions

the following agricultural incentivesprovided by the government to in-

vestors: zero-rated duty on capitalgoods, all farm inputs including fertil-izer, pesticides and herbicides; and fa-vorable investment allowances and de-ductions on agricultural machineryand implements.

Others are: deferment of valueadded tax (VAT) payment on projectcapital goods; imports duty drawbackon raw materials for inputs for exports;zero-rated VAT on agricultural exportsand for domestically produced agricul-tural inputs; indefinite carry-over ofbusiness losses against future profit for

income tax; and reasonable corporateand withholding tax rates on divi-dends.

The report also identifies barriersto agricultural incentives. They are:deterrent tax rates; inefficient tax ad-ministration system; persistent powershortages; limited access to finance;and corruption – when seeking servic-es in public offices and institutions.

Others are: macro-economic insta-bility due to fluctuating inflation andinterest rates; inefficient customs andtrade regulations, which increase the

cost of doing business and affects pro-ductivity; and restrictions by local au-thorities to traders and producers, par-ticularly farmers.

Generally, the report concludesthat Tanzania has put a number ofagro-investment incentives – some aresimilar to those in other countries un-der this assessment – Malaysia,Nigeria, Malawi, Zambia and Ghana –but, the same don’t make the sector at-tractive to make it pull enough invest-ments as expected.

“The barriers to agro-investments

discussed in the assessment make thecost of doing business in Tanzaniahigher than other countries; as a resultthey put off or scare away the in-vestors,” said the ACT report.

Recommended policy reforms ACT recommends in the report

that the government should first iden-tify the causes of concern among exist-ing and potential investors in the for-mulation of investment policies

“It is strongly recommended thatadministrative and financial supportshould be given to courts and tax-re-lated agencies with a view to enhancecapacity and effectiveness while for-mulating regulations for greater trans-parency,” it says.

It also recommends adoptions ofstrategies for integrating small andmedium enterprises (SMEs) into theworld markets as well as enhancingsustainable high quality production byorganising smallholder producers orprocessors to access technologies andcredit in groups. The ACT report alsocalls for review of legislations to up-date them because most of them wereenacted in 1990s during the era of lib-eralisation and privatisation, appeal-ing for sound strategies to address allthe obstacles to investment in agricul-ture.

“It is strongly advocated that thelegal and policy environment shouldenable farmers to increase their creditstatus by improving the security of col-lateral types through property laws asproposed by the World Bank in 2004.Property rights should be developedvery clearly to facilitate agro-financingand secure rights for lenders and bor-rowers,” the ACT report states.

Way forward Generally, the ACT report states

that while Tanzania is strategicallyplaced to continue to ride on its successin attracting local and foreign invest-ments, many areas of the agriculturaland allied sectors could use reform, re-vision and improvement to attractmore investors in the agricultural sec-tor.

The Tanzania’s dairy sector,which is currently grappling witha myriad of setbacks includingeconomic losses due to lack ofcompetitiveness, has a long wayto go in achieving better perform-ance today and in the future. Thisrequires reforms geared to give ita new life. Policy and law reformsare particularly crucial, as thisstudy indicates…

Daunting task ahead

Reviving the dairy indus-try against the backlog ofpoor management whichhas resulted into the de-cline in the competitive-ness as well as great

losses in revenues and jobs, is a daunt-ing task. The Tanzania MilkProcessing Association (TAMPA) hasconducted a detailed study with thesupport of the Business EnvironmentStrengthening for Tanzania-AdvocacyComponent (BEST-AC) in 2007/2008to assess the extent and the impact ofover-regulation on business in thedairy sector.

The study found that 15 regula-tions were in force to guide the sector.Then, TAMPA recommended that thelegal and regulatory framework shouldbe reformed to make the sector morecompetitive. It also came up with a pol-icy proposal that will be used to influ-ence policy change on improving com-petitiveness of the dairy sector throughrationalisation of the regulatoryframework.

The objective of the policy reformstudy arose from the concern about thedecline in competitiveness and per-formance of the sector. According toTAMPA, the policy reforms are intend-ed to address the regulatory burdenwhich increases the cost of doing busi-ness and contributes to the decline incompetitiveness of the sector.

The report, which was submittedby Dr Goodluck Urassa and Dr KassimMchau, finds that the main cause of in-efficiency is the regulatory burdenwhich increases the cost of doing busi-ness. The policy proposal will be usedas a tool for influencing local and cen-tral government authorities to ratio-nalise and harmonise overlapping reg-ulations in the sector.

The proposal was developed bycombining research data and informa-tion, views of stakeholders gatheredfrom various workshops and regulato-ry authorities, and secondary informa-tion from relevant documents and lit-erature.

According to TAMPA, findingsfrom various sources indicate that theimpact of declining performance of thedairy sector on the economy ofTanzania is enormous.

Key regulatory issuesThe main regulatory issues affect-

ing competitiveness of the sector andthat require harmonization includemultiple uncoordinated inspections ofpremises. Two major kinds of regula-tions are involved here, those aimed atfood hygiene which are normally doneby the Tanzania Foods and DrugsAuthority (TFDA) The TanzaniaBureau of Standards (TBS), Tanzania

Dairy Board (TDB) and Zoo-sanitaryand those safeguarding the safety ofemployees, that is Occupational Safetyand Health Association (OSHA).

Multiple uncoordinated testing ofproducts is another cumbersome regu-latory issue which involves periodictesting of all kinds of processed milkand dairy products.

Despite the high testing fees, themain cost here is the market opportu-nity lost in waiting for the results andthe necessary permits. There is alsothe issue of unco-ordinated inspectionsof premises and testing of dairy prod-ucts, multiple licensing, lack of ration-ale for inspection as well as clear pro-cedures and division of responsibilities.

Overlaps and compliancecost

The analysis of regulations ofthe Dairy industry shows that inareas where there are overlaps ofregulation more costs are in-curred by the private sector andcompetitiveness is greatly affect-ed. Areas of regulatory overlapsinclude registration and licens-ing, as well as inspection.

Under the cost of compliance,the study analysed the costs ofcompliance for a small milk pro-cessing enterprise with the dailycapacity of 6,000 litres. The costfigures extracted indicate costsrelated to registration, licensing, in-spection and permits. The analysisalso takes into account one-off and re-curring costs as well as other costs in-curred due to over-regulation. In orderto establish the real impact of the reg-ulations, the value of time taken tocomply is estimated and included inthe total costs.

Therefore, the business costs for a6,000 litre-capacity entreprises will beas follows: Starting the business12,325,000/-, running it 48,895,090/-and the time spent on various activi-ties, including licensing and inspec-tion, over 820 hours.

TAMPA notes that when the studywas conducted, there were no fees forweight and measures. Based on thefees introduced in October last year,the fees for weight and measures forthe sample enterprise is at least500,000/-, making the cost of startingand running business for the sampleenterprise to reach over 70m/-.

Bleak pastAccording to statistics from the

Ministry of Livestock Development,the formal milk processing has de-clined by more than 80 per cent overthe last 15 years following the closureof business of 13 dairy plants. Currentgovernment statistics show that mostprocessing plants are working at lessthan 30 per cent of their installed ca-pacity, resulting in only 105,000 litresprocessed per day, down from 496,000litres recorded in previous years whenthe sector was doing better.

Giving more details, TAMPAquotes statistics from the Ministry ofLivestock Development indicating thatin 2009, the country had an annual in-stalled capacity to process 325,600litres per day, but operated at an aver-age rate of less than 100,000 litres.

“The national per capita consump-

tion of milk is 41 litres per annumwhich is low compared to the FAO rec-ommended level of 200 litres and onlya small proportion (10 per cent) of mar-ketable surplus milk filters into the ur-ban markets and processing plants an-nually. This is despite the fact thatTanzania ranks third in Africa interms of livestock population afterSudan and Ethiopia, with an estimat-ed 19 million cattle,” says TAMPA.

Neighbours doing betterThe following table compares

Uganda, Kenya and Tanzania, interms of the number of cattle eachcountry has and the amount of milkprocessed:

Comparatively, Uganda processes

more than 500,000 litres per day andKenya more than 1,000,000 litres perday. Studies indicate that the impact ofthe declining performance of the dairysector on the country’s economy isenormous.

When the current level of the sec-tor performance is compared with theprevious performance, the country haslost 9,601 jobs per annum as a result ofthe decline in the capacity of the dairysector. The country also loses the in-come tax amounting to 12.91bn/- an-nually due to declining performance ofthe sector.

NOTE: The above statistics havebeen sourced from the TAMPA sampleand do not represent data for the wholecountry.

Best way outTAMPA recommends in the report

that the best way to salvage the sectorfrom further decline is through effec-tive coordination of regulatory servic-es, proper laws and support to milkproducers.

“Joint inspection will save costsand production days per processor peryear. On the side of regulators, en-forcement costs will decrease throughshared resources and wider coverage ofclients in a given time,” it says, adding:

TAMPA also calls for the amend-ment of the laws to get rid ofmultiple licenses to recogniseeach of the issuers of licenses.Only one license should be is-sued and should be recog-nised by all other agencies.This will not only save timebut will reduce the cost of do-ing business and increasecompetitiveness.

The report also ralliessupport for TAMPA to per-form compliance services toits members on cost recoverybasis. This will increase thesalience of TAMPA as well asits influence in the public do-

main. Additionally, rregulatory agen-cies will benefit by achieving higherrates of compliance among its clienteleper unit cost of follow-up.

TAMPA says the TDB should bestrengthened to do more than regulat-ing the industry. This can be achievedby increasing the staffing capacity ofthe TDB, capacity building throughtraining and development, sharing ofresources with other regulators and in-creasing the budget allocated to theBoard.

The move will improve the capaci-ty of TDB to deliver most of the regu-

latory and other functions more effec-tively as well as reduce the cost of milkprocessors to comply with the regulato-ry framework.

“It will enable regulators to har-monise most of their functions throughTDB and reduce the costs in executingtheir regulatory functions,” says theTAMPA report.

The report also calls for the devel-opment of the criteria and standardprocedure for inspection system for en-terprises to cooperate more.Regulatory authorities will increase ef-ficiency of implementing their regula-tory functions and be able to share thefindings generated by the authoritygiven the role of executing particularfunctions.

If the recommended reforms areimplemented, performance of enter-prises and of the dairy sector in gener-al is expected to improve. From thestudies done by TAMPA and TDB, thetotal annual saving for the firm withthe capacity of processing 6000 litresper day would be 15,137,467/- and theannual saving for the sector based onthe current capacity is 218,383,190/-. Ifthe capacity of the sector is restored to325,600 litres per day, the total annu-al saving would be 821,459,875/-. If thesector processes 50 per cent of the milkproduced at present (2,000,000 litres),the total annual saving will be5,045,822,333/-.

The savings are significant giventhe fact that this is just one of the fac-tors affecting the sector. The countrywould also benefits by regaining somejobs and revenue lost due to over-regu-lations. There could also be a lot of oth-er benefits, including commercialisa-tion of the dairy sector and reducingimportation of milk and milk productsto save foreign currency. “This wouldenable other sectors to learn from thedairy sector and institutionalise goodregulatory practices by introducingnew legislations,” says TAMPA.

Successful reform of the regulatoryframework requires sustained politicalsupport to undertake significantchanges in the legislative, regulatoryand institutional framework. TAMPAbelieves this will enable the sector tochange its current status for the better.

Dairy sector in the doldrums

…new hope as prices soarCorporation (ZSTC), currently the solebuyer, processor and distributor of thecrop, to be able to oversee reforms fo-cusing on reviving the crop and boost-ing production. According to Mazrui,the government has allocated about30bn/-, equivalent to USD20 million, forthe ambitious plan to bring the clove in-dustry back to life.

However, ZACPO believes the gov-ernment is not committed to the plan.“The government is cheating the farm-ers on this because the clove develop-ment strategy was developed since May2004 and to date nothing has been im-plemented. Even what is now referredto as ZSTC restructuring is nothing,

but an economic comedy by its nature,”it says.

Z’bar clove branding President Shein also told the farm-

ers that his government intends tobrand Zanzibar cloves in order to differ-entiate them from that produced in oth-er parts of the world, includingIndonesia and Madagascar.

He said he strongly believed thatcloves produced in Zanzibar, which wasonce the world number one producerand exporter of the crop, was far bettercompared to those grown in other partsof the world.

Clove smuggling Dr Shein says latest planned meas-

ures, including branding of clovesgrown in Zanzibar, will help curbsmuggling. Clove smuggling is current-ly high in the Isles where dhow traderstransport the crop to Kenya where theysell it at a higher price. Mazrui informsthat between 2001 and 2009, Kenyasold 9,510 kilograms of cloves, worthUSD16m. East Africa’s biggest econo-my does not produce cloves.

Zanzibar's first vice-presidentMaalim Seif Sharif Hamad, who havebeen directly involved in government-led efforts to curb smuggling of the cropoutside the country says, the govern-ment of national unity (GNU) currentlyruling the Isles, will award up to 20 percent of the market price of confiscatedcloves to anyone with information

which may lead to the arrest of clovesmugglers.

“Since the government has hikedclove prices there is no justification forclove smuggling, which denies the gov-ernment revenues and leaves clovefarmers in poverty,” argues the vice-president.

Growth prospects Zanzibar exported 2,000 tonnes of

cloves last year and anticipates buying3,000 tonnes from farmers, this season,says Mazrui, ruling out any possibilityof liberalising the Isle’s clove industry.ZACPO questions the authenticity ofthe report, as the ZSTC “is always notwilling to report” on the export and itsactual income.

"We’ll consider [liberalising it) afterthe government has revived the crop.We need to revive the industry throughCDS before thinking of liberalising it,”he stresses, adding: "Let us educatefarmers about the risks of privatisingthe industry."

Clove production in Zanzibar is pro-jected to grow from an annual averageof about 4000 tonnes recorded in 2008to about 4500 tonnes in 2018, an in-crease of 12.5 per cent in output if spe-cific plans and strategies will be workedout soon, an expert in the clove industrypoints out. During the same period, thefarmers also expect an increase in rev-enue from USD10.7 million to aboutUSD11.8 million, a modest increase ofabout 10 per cent.

Why agro-incentives fail toattract enough investments

FROM PAGE 4

s.no. Country Estimated Number of Cattle Milk Processed per Day1. Uganda 5.4 million More than 500,000 litres2. Kenya 13 million More than 1,000,000 litres3. Tanzania 21.3 million 105, 000 litres

Litres in “000”

Years

MECHANISATIONThe Guardian KILIMO KWANZA Tuesday 8 November, 2011

8

Speed up power projects

The Confederation ofTanzania Industries(CTI) has called upon thegovernment to speed upimplementation of theprojects earmarked to ad-

dress the on-going power problem.The CTI believes this will save billionscurrently being lost as a result of un-reliable power supply.

The call is contained in a set ofrecommendations put forward by theCTI in its July 2011 report entitled:“Challenges of Unreliable ElectricPower Supply to Manufacturers inTanzania”. The report is a policy re-search paper submitted to energy sec-tor stakeholders, which focuses on ad-vocacy for ensured reliable electricitysupply to manufacturers.

Specifically, it was intended topresent to the stakeholders factsabout intermittent power outages fac-ing manufacturers in the country.“The paper is a product of policy re-search which examined the major rea-sons for unreliable electricity supply tomanufacturers and to draw strategiesto overcome the challenges,” it states.

Its findings are based on variousdocuments reviewed, the study of 60sampled manufacturing firms experi-encing the challenge of unreliableelectricity supply and views of otherkey stakeholders in the sector.

Losses due to outagesAccording to the CTI, the govern-

ment has been losing an estimated9.5bn/- annually in revenue collectionsdue to interrupted power supply. Onthe other hand, a survey conducted byCTI for 60 companies involved showsthat manufacturers have been losingaround 3bn/- annually despite usingtheir own costly means of power gen-eration at times. And above all,around 7,341 jobs are lost as produc-tivity is reduced and competitivenessof the industry is undermined.

As manufacturers get hit hard bythe power blues, the agriculture sectortoo gets affected, states the CTI.

“The milk industry for example isdirectly affected since milk processingis interrupted by the power cuts,” itsays. Farmers who depend on sellingtheir produce such as fruits, cashewnuts and vegetables for processingalso get affected.

For who would buy things theyare not sure of using? Additionally, thefactories manufacturing agriculturalinputs are also affected, for exampleMinjingu.

To help the farmers and all thosedepending on the manufacturing sec-tor for their livelihood, CTI advisesthat emphasis should first be given tothe stability of voltage supplied to en-sure quality of energy received bymanufacturers. “If the planned proj-ects could be completed within thescheduled time-frame, the problem oflow voltage and shortage could be rea-

sonably reduced,” reads the CTI re-port in part.

Power demand to triple 2020The report says despite govern-

ment attempts to solve the powerproblem it’s unlikely to meet the pop-ulation demand, given the currenteconomic growth. It is estimated thatthe demand for electricity in terms ofpopulation will triple from the current14 per cent to 42 per cent by 2020. It istherefore suggested that other strate-gies should be adopted to increasepower generation and supply.

The power demand is 800 MW.This covers 14 per cent of the popula-tion as a way to reach 42 per cent 2000MW needed, which is equivalent to200 per cent. There is a big challengeto reach the 3000 MW by 2020.

Despite current efforts to redressthe situation, manufacturers are stillexperiencing obstacles of intermittent

power supply, frequent rationing andoutages. “Manufacturers also experi-ence poor service quality, power cutswithout notice, unplanned power stop-pages and interruptions, voltage fluc-tuations, phase failures and unbal-anced voltages,” says the CTI report.

Machinery gets damaged frompower fluctuations and instabilities.To recover production costs incurredin the process, manufacturers areforced to increase prices which in turnundermine competitiveness or re-duced their profit margin and there-fore undermine investment.

Outages scare away investorsPower interruptions have been

scaring away prospective investors invarious sectors. Those wishing to ex-pand their businesses also have beendiscouraged. The study discusses anumber of factors, as major root caus-es of power challenges facing manu-facturers.

They include policy hindrances,under which the CTI says there are noexplicit provisions binding theTanzania Electric Supply CompanyLimited (Tanesco) or any other energyproducers to assure reliable electricitysupply. The report also cites poorly co-ordinated policies that hinder privateinvestors’ effective participation in theenergy sector to compete with Tanescomonopoly. “Power generation, trans-mission and distribution problems fac-ing Tanesco are due to worn out infra-structure amid unsolved fate of thefirm’s privatisation,” the report says.

Why not adopt alternativesources?

The CTI recommends in the re-port the adoption of alternativesources of energy, natural gas in par-ticular, which it says could be en-hanced to produce electricity ratherthan relying on unreliable seasonalrains. “We suggest the government tofacilitate Tanesco in capitalisation ofthe new power generations plannedfor the interim period of 2010-2013,”the report says, adding: “[The] govern-ment needs to foster its commitmentto speed up implementation of theElectricity Act, 2008 in order to en-courage private investments in mini-power grid operations”.

CTI also wants the law be re-viewed to formally open the door forprivate investments in non-renewableenergy sources like thermal.

“Private investors are given a lim-it of production of only 10MW respec-tively. CTI does not see why thisshould be so given the country’s chron-ic power problem,” states the CTI re-port. Additionally, the Confederationalso appeals for the waiver of importduty on equipment used in the gener-ation, transmission and distribution ofelectricity to reduce the cost. “This isbecause most equipment used in thepower sector are expensive and hencecontributing to high cost of electricityin Tanzania,” the CTI concludes.

KILIMOKWANZADIRECTORY

FINANCETanzania Investment Bank Ltd (TIB)Tel: +255 22 2411101-9Private Agricultural Sector Support (PASS)Tel: 023-3752/3758/3765

Bank of TanzaniaP.O. Box 2939, Dar es Slaam, Tanzania

WATER AND SANITATION

Dar es Salaam Water and Sewerage Authority(DAWASA) – Tel: +255 22 276 0006

Dar es Salaam Water and Sewarage Corporation(DAWASCO) Tel: +255 22-2131191/4

Drilling and Dam Construction Agency (DDCA)Tel: +255 22 2410430/2410299

Energy and Water Utilities Regulatory Authority Tel: +255 22 2123850, 22 2123853

Water and Environmental Sanitation ProjectsMaintenance Organization (WEPMO)Tel: +255 22 2410738, 716 099959

Ministry of WaterTel: +255 22 245 1448

INDUSTRY SUPPORT ANDASSOCIATIONS

Small Industries Development Organization(SIDO) – Email: dg@sido.go.tz, info@sido.go.tz

ANSAF - P.O. Box 6370, Dar es Salaam

CNFA - info@cnfatanzania.org

Tractors LimitedCells: +255 784 421606, 786 150213

Consolidated Holdings Corporation (CHC)Tel: 255 (022) 2117988/9

Vocational Education and Training Authority(VETA) – Tel: +255 22 2863683/2863409

Export Processing Zones in Tanzania (EPZ)Tel: +255 22 2451827-9

Agricultural Economics Society of Tanzania(AGREST) – Tel. +255-23 260 3415

Tanzania National Business Council (TNBC)Tel: +255 22 2122984-6

Tanzania Agriculture Partnership (TAP)Tel: +255 22 2124851

Tanzania Milk Processors Association (TAMPA)Tel: +255 222 450 426

Rural Livelihood Development Company (RLDC)Tel: +255 26 2321455

Tanzania Cotton BoardTel: +255 22 2122564, 2128347

Horticultural Development Council of Tanzania (HODECT)Cell: +255 789 222 344; Fax: +255 27254 4568

TATEECO Ltd – Tel: +255 784 427817

AGRO-PROCESSING

ERTH Food - Tel: +255 22 2862040

MUKPAR Tanzania Ltd Tel: +255 28 250038/184

ASAS Diaries Limited - Tel: +255 26 2725200

Tanga Fresh – Tel +255 27 2644238

NatureRipe Kilimanjaro LimitedTel: +255 22 21 51457

EQUIPMENT

Achelis Tanganyika Ltd+255 22 2700 760 or +255 784 300 084

National Service Corporation Sole (SUMAJKT)Cell: +255 717 993 874, 715 787 887

AGRO-INPUTS

Minjingu Mines & Fertilizers LtdTel: +255 27 253 9259 250 4679

CTI: Adopt alternative powersources to salvage economy

“Power generation,transmission anddistributionproblems facingTanesco are due toworn outinfrastructure amidunsolved fate of thefirm’s privatisation