Agriculture sector can be made to tick more

 

In Summary

Development of domestic markets and regional integration are essential in creating larger and more integrated frameworks that, in conjunction with enhanced regulatory convergence, will help to attract investment, increase productive capacities and therefore foster sustainable economic growth and development.

With a population close to 45 million, 95.5 million hectares of land and a rich natural resource base, Tanzania has much potential for growth driven by the transformation of the agricultural sector and sustainable development of its natural resources.

There is broad consensus that increased agriculture productivity and value chain development are key in strategies to boost the competitiveness of the Tanzanian economy. Yet, as highlighted in the 2013 African Economic Outlook, although Tanzania has managed to maintain overall macroeconomic stability, underperformance in the agriculture sector – which employs 75 per cent of the workforce – continues to be a prime factor in jobless growth and chronic underemployment, impacting negatively on efforts to alleviate poverty. Despite fluctuations in world market prices for agricultural commodities, I indeed believe that the country possesses comparative advantages. This is notably the case through local production of food crops such as cereals or horticulture products which have a high potential as export commodities given the expanding food market in the neighbouring countries. Some other crops have also strong potential in both international and regional markets, and the interest shown by the private sector, both domestic and international, in commercial farming could offer a unique opportunity for Tanzania to become the famous food export hub.

Nonetheless a number of factors continue to hamper the capacity of Tanzania to fully tap into this potential. We know that productivity and profitability remain low because of supply-side constraints ranging from availability and quality of inputs, poor infrastructure, limited research and extension, limited availability of financial services and persisting weaknesses in the land administration system. These weaknesses discourage the adoption of modern methods of farming and investments in agro-industries by the private sector.

The “cost of doing business report” recently published by the World Bank, also indicates that Tanzania has lost 9 positions as compared to 2012 and is ranked 139 over 189, losing two positions, on the ease of trading across borders. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to extra costs and delays for exporters and importers, stifling trade potential.

Development of domestic markets and regional integration are essential in creating larger and more integrated frameworks that, in conjunction with enhanced regulatory convergence, will help to attract investment, increase productive capacities and therefore foster sustainable economic growth and development. While the East African Community (EAC) has made some progress in promoting community-wide tariff reduction and harmonization, non-tariff barriers (NTBs) still stand in the way of free trade in goods. There are challenges for both food and cash crops. The use of export permits as a way to monitor and regulate staple food trade is a good example of such barriers. And we have all witnessed how disruptive the use of road blocks inspections can be. They take precious time and are often prone to corruption due to unclear regulations and standards which can be serious impediments to both domestic marketing and cross-border trade. When transaction costs are high, they are sometimes translated into higher prices for consumers but in most cases it is translated into lower farm-gate prices for farmers. Lower prices then result in lower incentives for farmers to increase output and productivity, keeping food staple production below potential. Government policies that seek to monitor and regulate trade may have negative impacts on producers if they discourage exports or do not take into consideration high transaction costs.