Tanzania - Agro-Processing Tanzania-Agro-Processing
Tanzania’s primary agro-ecological zones are the coastal plains, northern highlands, southern highlands, and central arid plains. The agro-ecosystem is characterized by dry land and extreme rainfall variability, which limits productivity and contributes to land degradation, leaving smallholder farmers’ livelihoods vulnerable to weather-related and other agricultural-related shocks.
The most common food and cash crops in Tanzania are maize, cassava, sweet potatoes, bananas, sorghum, and sugar cane. Multiple factors influence the farmer’s choice of crops, including: 1) physical factors, such as 1) soil quality and water availability; 2) economic factors, such as marketability and seed prices; 3) personal preferences of the household; 4) crop profiles, including crop yield and pest resistance; and 5) resource availability such as machinery and fertilizer.
Corn (Maize)
Corn is Tanzania’s primary staple crop and production is widely distributed across agricultural development zones and regions, adapted to agro-ecologies ranging from near sea level to 2,400 meters (m) above sea level, depending on the variety. Corn productivity is very low in spite of its importance to the country’s food security and economic well-being. The main agro-ecologies, however, fall within 500-1500 m. The Southern Highlands Zone and Lake Zone occupy approximately 26 percent and 25 percent, respectively, of Tanzania’s corn harvesting area. These are followed by Eastern (13 percent), Northern (12 percent), Western (10 percent), Southern (8 percent), and Central (6 percent) zones. Small-scale farmers produce 85 percent of national production while medium and large-scale farmers make up ten and five percent respectively.
Tanzania’s export trade is largely opportunistic, often illegal and depends on many internal and external factors. Periodic export bans have discouraged traders from seeking large export contracts and encouraged illegal routes: either by bribing government officials at customs posts or illegal transport through bush ‘panya’ routes across Tanzania’s highly permeable borders. The countries receiving Tanzania corn are Zambia, Malawi, Rwanda, Burundi, the Democratic Republic of Congo (DRC) and Kenya.
| Marketing Year (Jul/Jun) | 2014 | 2015 | 2016 | 2017 (E) | 2018(F) |
Local Production (MMT) | 6.8 | 6.0 | 5.0 | 5.3 | 5.4 |
| Total Imports (MMT) | 5.0 | 5.0 | 1.0 | 2.0 | 2.0 |
| Imports from the U.S. (MMT) | 0 | 0 | 0 | 0 | 0 |
(F) FAS/Dar es Salaam estimates and forecasts, respectively
Wheat
Wheat is Tanzania’s fourth most important crop after corn, cassava and rice. Approximately 100,000 ha are currently devoted to wheat production. Over 90 percent of Tanzania’s wheat comes from the northern (Arusha, Kilimanjaro, and Manyara regions) and southern highlands (Iringa, Mbeya regions). The northern highlands consists of primarily large-scale production, but the southern highlands are composed of primarily small-scale farmers.
Two companies based in Dar es Salaam dominate the wheat milling industry-controlling most of the Tanzania market. Because wheat consumption is highest in urban areas, population growth in major cities like Dar es Salaam, Mwanza and Arusha is expected to boost demand for wheat products, especially pasta, biscuits, and breakfast cereals.
The current production of about 100,000 tons per year accounts for only 10 percent of total domestic consumption with the remaining 90 percent supplied by Russia, Australia, Canada, Germany, and Brazil. Tanzania’s imports an estimated $225 million USD per year in wheat. Wheat imports from the United States are primarily for Food Aid programs.
Marketing Year (Jul/Jun) | 2014 | 2015 | 2016 | 2017 | 2018(F) |
| Local Production (TMT) | 167 | 72 | 100 | 100 | 100 |
| Total Imports (TMT) | 940 | 913 | 845 | 1.20 | 1.20 |
| Imports from the U.S. (TMT) | 14 | 82 | 0 | 0 | 0 |
(F) FAS/Dar es Salaam estimates and forecasts, respectively
Rice, Rough
Rice is Tanzania’s second most important food crop comprising 2.7 percent of the national Gross Domestic Product (GDP). According to the GOT, 18 percent of farming households grow rice and they consume about 30 percent from their harvest, while the rest is absorbed into the domestic market. Dar es Salaam is the principal end-market for rice and accounts for 60 percent of the domestic market. In general, Tanzanians prefer locally produced aromatic rice and purchase unpacked rice from small retail stores or farmers’ markets. Demand is forecast to outpace local production leading increased importation of rice. Currently Tanzania imports rice from China, India, Indonesia, Pakistan, and Vietnam. In 2015, the EAC revised the common external tariff (CET) to seventy five percent ad valorem or $345 per ton, whichever is higher.
| Marketing Year (May/April) | 2014 | 2015 | 2016 | 2017 | 2018(F) |
Rough Production (TMT) | 2.6 | 3.0 | 3.0 | 3.0 | 3.0 |
| Total Imports (TMT) | 198 | 220 | 240 | 260 | 230 |
| Imports from the U.S. (TMT) | 0 | 0 | 0 | 0 | 0 |
(F) FAS/Dar es Salaam estimates and forecasts, respectively
Sugar
Tanzania produces only 58 percent of its sugar consumption due to the high cost of production, processing inefficiencies, and inadequate marketing. The 42% demand gap is met by about USD 132 million in sugar imports from other countries, primarily Brazil and India. Because Tanzania’s sugar tariff at 10% is lower than the EAC common external tariff of 25-100%, it is less protectionist than some other countries. The market is less protected from imported sugar than in other countries. Despite this fact, the GOT has consistently claimed that it wants to attract new investments into the sector.
Consumer-Oriented Agricultural Products
An expanding middle class, increasing urbanization, and a developing food service sector drives growth in demand for consumer-oriented agricultural products. Tanzanians make the majority of their household purchases from family-owned shops known as dukas. Supermarkets are gradually becoming popular, especially in big cities like Dar es Salaam, Mwanza and Arusha. Tanzanians spend one-fifth of their income on consumer-packaged goods (CPG), driven largely by food. Personal care essentials (e.g. Toothpaste) and beverages (e.g., carbonated soft drinks, tea, energy drinks) are the most popular categories. Prime drivers for purchase decisions include recommendation, affordability, availability and familiarity.
The food service sector (hotels, restaurants, and institutions) has recently attracted U.S. investment interests and a few U.S. food service franchises (Pizza Hut, KFC and Subway) have already established outlets in Tanzania’s leading cities The growth of consumer-ready food imports has however been negatively affected by Tanzania’s strictly liability clause on genetically engineered (GE) food products.
Tanzania aims to transit from low to middle-income economy by 2025. This means the consumption habits of the population will transform to a large extent bringing about a wider market for green agricultural products. To achieve these objectives Tanzania under the previous Kikwete administration had adopted the Big Results Now (BRN) inititive which had the following goals in the agricultural sector.
- Increase agriculture’s growth through commercial farming models
- Improve smallholder farmer incomes and ensure food security by 2015
- Focus on the three priority sectors of maize, rice and sugarcane and extend this focus to other priority crops such as oilseeds and horticulture
- Cultivate 350,000 hectares of new commercial land and 330,000 hectares of smallholder farmland
- Produce 150,000 tons of new sugar crop production, 290,000 tons of new rice production and 100,000 tons of new maize production by 2015
- Enhance 78 smallholder rice irrigation and marketing schemes through professional management
- Develop 275 collective warehouse based marketing schemes (COWABAMA) targeting at linking maize farmers to the market
Opportunities
Investment in agro-processing industries entails adding value, and improvement of standards of quality. The following are key areas:
- Fruit/ Vegetable processing: A large variety of fruits and vegetables are produced in Tanzania. The most important fruits include mangoes, oranges, pineapples, passion fruits, bananas, avocados, jackfruits, papayas, peaches, pears, guavas and grapes. The main vegetables include tomatoes, okra and chilies. Annual Tanzania production is 2.75 million of tons of fruits and vegetables but only 4 percent is processed. There is a significant potential for provision of heavy equipment for commercial farming and processing of fruits and vegetables for the locals as well as export markets. A large variety of fruits and vegetables are produced in Tanzania.
- Cashew nut Processing: Cashews are a major cash crop in Tanzania and production has risen to 120,000 tons annually. However, only about 10 percent of the cashew nuts produced within the country is processed in Tanzania. There is an opportunity in rehabilitating old plants or establishing medium-scale processing plants.
- Oil seeds: Tanzania still imports a lot of edible oil. Processing of oilseeds locally is now on the rise, therefore there is potential in supplying oil pressing and processing equipment. Common oil seeds produced in the country include sunflower, sesame, groundnuts, palm oils, etc.
- Textile and apparel: Tanzania produces abundant cotton but only 20 percent is locally processed. The sector has great investment potential in establishing fully integrated textile mills as well as plants for cotton ginning, yarn fabric production (spinning, weaving and printing) and cut, make and trim (CMT) units. With the high level of unemployment and the high availability of raw material there is a very great potential for establishing clothing factories that can produce garments for export.
- Leather sector: Tanzania has a large livestock population (17.7 million cattle, 12.5 million goats and 3.5 million sheep) and produces about 2.6 million pieces of raw hides and skins annually. A large portion is exported raw and only 10 percent is processed. Investment opportunities in the leather sector include establishment of modern tanneries and leather finishing production units.
- Meat and Dairy Sector: Given the large livestock population, the country is ideal for meat processing, packaging and processing of dairy products. Investment opportunities include establishment of meat processing plants, dairy products processing plants and cattle ranches.
Opportunities exist in the chemical industries also as there is local demand for fertilizers and pesticides. Investors can establish manufacturing operations in the Special Economic Zones (SEZ) using either the SEZ User License or SEZ Export User License and enjoy the lucrative incentives provided by the scheme. Among existing investment sectors in Tanzania are agro processing, textile and garments, lapidary, leather processing, fish processing, forest and forestry products.
Challenges
- Foreign access to land can be complex and bureaucratic
- Sporadic bans on export or import of various goods
- Local financing for agriculture growing but still limited; high interest rates
- Coop unions, crop boards, minimum prices hinder free market competition
- Low productivity of smallholder manual labor
Food processing investments rely on imported machinery and technologies. Machinery and equipment for the following are in the greatest demand:
- Production of fruit concentrates and juices and all forms of fruit and vegetable canning
- Cashew nut processing
- Specialty coffee processing
- Sugar cane processing at sugar factories
- Fish processing and packaging for export
- Meat processing and packaging from both cattle and game meat
- Production of processed dairy products such as sweetened condensed milk, milk powder, infant milk formula, butter, margarine, ice cream, yogurt, cheese, etc.
- Horticultural packaging, including cut flowers and fresh vegetables.
- Quality storage technologies
- Irrigation pivots
- Tractors, mechanization
In addition, the existence of an abundant supply of cotton provides significant opportunities for investment in the textile industry, which can leverage duty free access to the U.S. market under the African Growth and Opportunity Act (AGOA). Export markets for processed agricultural goods include the East African Community, the EU (duty free access), the Gulf States, and Asia.
Tanzania has an ambitious plan to prioritize agriculture for economic growth. The private sector led Agricultural Sector Development Program Phase II (ASDPII) initiative and the establishment of the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) have been endorsed by the Government of Tanzania. The GOT through SAGCOT has allocated 63,000 hectares under the Mkulazi Project. The land will be used for cultivation and processing of sugarcane and rice. This project is an important step in achieving the GOT’s objectives for the agricultural sector. These strategies are being linked to the Agricultural Sector Development Program through Tanzania’s Comprehensive African Agriculture Development Program (CAADP) country investment plan. The United States has pledged to improve global food security through Feed the Future, a broad-based agricultural development strategy with the goals of reducing poverty, improving nutrition, and building resilience through comprehensive country-led plans.
Web Resources
Ministry of Agriculture
Ministry of Industry and Trade
Tanzania Investment Center
Confederation of Tanzania Industries
African Growth and Opportunity Act
Southern Agricultural Growth Corridor
Feed the Future
CAADP
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