cereal marketing liberalization in tanzania

There is considerable evidence that cereal market liberalization in Tanzania has been a success in spite of poor roads, shortage of capital and vehicles, and lack of market infrastructure and standardized measures. The legal status of the private sector is unclear, however, and public sector policies still favour a heavy official involvement in the marketing system. Farm-gate prices for maize fall off rapidly as one moves away from the primary marketing centres, but on-farm storage of maize poses farmers no insuperable difficulties. Successful implementation of liberalization calls for clarity and consistency in government policy, the reform of financial services, the sale of unused storage capacity to the private sector, the more active involvement of farmers in the liberalized system, the strengthening of extension services, and a policy for regulating interannual price variations.

The authors are with the National Re- sources Institute, Central Avenue, Chatham Maritime, Chatham, Kent, ME4 4TB, UK.

This is an edited version of a paper pre- sented at a workshop on ‘Trading Re- sponses to Food Market Liberalization in

Cereal marketing liberalization in Tanzania

Jonathan Coulter and Peter Golob

This article is based on a study carried out in mid-1991 to examine the progress of market liberalization in Tanzania. to identify problems which had arisen, and to suggest solutions and ways of helping the participants derive maximum benefit from the process.’ The article reviews the background to and impact of cereal market liberalization in Tanzania, noting in particular how many aspects of the ‘single-channel system’ have survived. Observations from the field are followed by comments on several contradictory aspects of the liberalization process. Finally, some conclusions on how the marketing system may best be improved are made.

Background

Pre-reform official policies towards cereals marketing since the early 1970s have involved: (1) pan-territorial pricing, with producer and consumer prices being invariable throughout the country regardless of location or transport costs; (2) elimination of private intermediaries, who were seen as exploitative; and (3) the state as the sole official provider of inputs and marketing services, through what we shall call the single-channel system.

Through the 1970s and early 1980s private trade was suppressed, though for much of the time a parallel market flourished. Official purchases of maize, the main staple, have never exceeded 14% of estimated maize production, fluctuating between 6% and 10% for most of the 1980s. Given that most maize is consumed on the farm, however,

Eastern and Southern Africa’ held in Ha- rare, Zimbabwe, 2-4 October 1991. The

official purchases have constituted a major, but declining, proportion of

authors wish to thank the Food and Agri- the quantity consumed in the cities. Gordon estimates that the open

culture Organization (FAO) for help in set- market only supplied 6% of the maize marketed in Dar es Salaam ting up this study and for the provision of local support; the Plant Protection Service

(henceforth DSM) in 198OB1, though by the middle of the decade this

(Ministry of Agriculture, Livestock Develop- figure had risen to around 50%.2 Nationwide, private traders are

ment and Cooperatives) for arranging currently estimated to handle 80-90% of marketed foodgrains.” visits in the Southern Highlands; and the Marketing Development Bureau (MDB)

Official trade was through the National Milling Corporation (NMC)

and the Institute of Rural Development and later through regional cooperative unions which were reintroduced

Planning for providing staff to assist with by the government in 1984 to take over procurement activities as the fieldwork. NMC withdrew from primary-level purchasing. Each cooperative union

‘Visits were made to Dodoma, Mbeya, was composed of a large number of primary village societies, which conr;nued OII page 421 acted as their agents in the supply of fertilizers and the purchase of

420 0306-9192/92/060420-l 1 @ 1992 Butterworth-Heinemann Ltd

continued from page 420 Iringa, Morogoro and Arusha regions, in- volving interviews with key officials, traders and groups of farmers. More detailed in- vestigation of the marketing systems was carried out in Mbozi, Njombe and lringa Rural districts, with two villages being vi- sited in each district. Refer to map in companion paper by Anita Santorum and Anna Tibaijuka, ‘Trading responses to food market liberalization in Tanzania’, also published in this volume of Food Policy, pp 431-442. ‘H. Gordon, ‘Open markets for maize and rice in urban Tanzania: current issues and evidence’, completed as part of PhD thesis for the Fletcher School, Tufts University, Medford, MA, 1988. 3Marketing Development Bureau, The Wholesale Trade in Grains and Beans in Tanzania, Dar es Salaam, 1992. 41bid. %f Santorum and Tibaijuka, op tit, Ref 1. ‘Gordon, op tit, Ref 2; Vanessa Scarbor- ough, The Current Sfatus of Food Market- ing in Tanzania, Wye College, Ashford, UK, 1989. 7Marketing Development Bureau, Aspects of the Open Market for Maize and Rice, Dar es Salaam, 1990.

Cereal marketing liberalization in Tunzania

produce. These primary societies had a statutory monopoly over purchasing of crops at village level. Both the NMC and the cooperative unions proved equally inefficient, however, and the cost of supporting

them had grave consequences for the country’s financial system. By 1991 the cooperative unions had debts equivalent to three years’

turnover. As part of the structural adjustment programme which commenced in

1983, restrictions on interregional movements by private traders were gradually removed. The maximum quantity of grain that traders were allowed to handle at one time was raised from 30 to 500 kg, and all quantity restrictions on the movement of foodgrains were removed in 1987.” In 1988/89 traders were allowed to purchase from the primary societies, though not from farmers. In 1990 all restrictions on traders were lifted, and they were able to purchase wherever they wished. However, this dispensation was subject to local by-laws and regulations at district and regional level, which are still being used selectively to restrict movement of food and direct links between individual farmers and traders, creating considerable confusion and uncertainty amongst

traders. The Strategic Grain Reserve (SGR) was established in 1987. This has

a target grain stock of 150 000 tonnes, and is designed for the release of food supplies in the case of an emergency. The SGR was not designed as a buffer stock, and there is presently no formal mechanism to avoid large interseasonal or international fluctuations of prices. In practice the SGR has also been used as an income-support mechanism in surplus regions, particularly Ruvuma and Rukwa in the Southern Highlands where the private sector has been most reluctant to buy.

The impact of liberalization

Due to the long period of suppression, the system which has emerged from liberalization is less efficient than that of many developing countries. Wholesale traders characteristically have little capital, handle small volumes (not more than a truckload at a time, ie a maximum of 350 bags) and do not invest in vehicles or inter-seasonal storage of grains. Their operation is hampered by the poor state of the roads, a shortage of vehicles, a lack of market infrastructure, and above all the absence of any source of formal credit for private trading operations.’ There is limited integration of the country’s different markets,’ with restricted spatial flows reflected by high regional price fluctuations. Lack of market information and systems of communication between markets have increased the risks of trading, but this has been partially rectified by the broadcasting of regular market bulletins by the Market Develop- ment Bureau (MDB).

Despite these shortcomings, there is considerable evidence that liberalization has been a success, in terms both of improving the efficiency of resource allocation and of stimulating private entre- preneurship. For example, the margin between prices in the Southern Highlands and the coast has narrowed appreciably over the period of liberalization,’ while farm-gate prices have more closely reflected the differential costs of transporting to deficit areas. The cost of government support to NMC and the cooperatives has been reduced. Attractive producer prices, improved collection and timely payment appear to have contributed towards production surpluses in 1989 and 1990, and

421 FOOD POLICY December 1992

Cereul marketing liberalization in Turzzaniu

‘Gordon, op tit, Ref 2; Scarborough, op tit, Ref 6. ‘These observations refer purely to the marketing of cereals. In the case of cash crops liberalization has hardly begun, though it is understood that under a structural adjustment credit negotiated with the World Bank the government will ‘deconfine’ the primary marketing of export crops, and that parastatals will become simple price-setting agencies. “Similar restrictions applied in Arusha, while the authorities in Kilosa had reacted to the unusually low harvest by banning the export of foodgrains in quantities of more than 2 debes per person (a debe is a bucket holding 18-20 kg).

the country became a minor exporter. Research covering a total of seven major wholesale markets indicates that excess profits were not common in the private sector, that competition was not inhibited by ethnic domination, and that private sector costs are substantially lower.”

Survival of a singi~-channel system

The state’s involvement in crop marketing. however, still goes far beyond the function of ensuring food security for which the SGR was created. This is evidenced by the following observations.”

The government still announces annually an official producer price at which primary cooperatives are expected to procure from farmers throughout the country, regardless of transport costs. The producer price was of limited significance while it was below private market prices in all but the most remote parts of the Southern Highlands of Tanzania, but in 1991 it was more than doubled to 30 Tanzanian shillings (Tsh) per

kg. It is now official policy that the NMC restricts itself to milling and

ceases to operate as a parastatal trader. Nevertheless the NMC and certain cooperative unions are being employed as agents to procure and distribute the SGR. The SCR could be most economically managed by procuring wholesale quantities on the open market on an into-store basis and selling by public auction (except when food is needed for emergency relief). Procurement prices would reflect conditions of local supply and demand at the different storage locations. In reality procurement is being carried out through the single channel, with the primary societies buying from farmers at the pan-territorial producer price, and selling on to the agents of the SGR, which in most locations is the NMC. Similar arrangements apply to the distribution of grain.

Despite stricter lending criteria than in earlier years, it is likely that the cooperative unions will continue to receive bank credit for the purchase of cereals. This stands in stark contrast to the situation of smaller farmers and traders who have no access to formal credit.

Finally, in certain areas in the Southern Highlands, including Iringa Rural and Mufindi districts and Mbeya region, traders were free to operate and could buy directly from the farmers. In Njombe, however, traders were not allowed to buy from farmers but were obliged to deal with the primary societies, at the official price of 30 Tshikg, and only if the cooperative union did not wish to buy from them. Permits issued by the District Commissioner restricted the areas in which a trader could operate and the quantity he was allowed to purchase. Moreover, the trader had to pay no less than five separate levies and taxes.“’ Even in areas where trade was permitted, restrictions could be imposed when- ever regional or district authorities deemed there to be a shortage of

grain.

Observations from the field

On-farm storuge and losses

Farmers store maize for up to 10 months in traditional storage baskets (vihenge) or in bags. Vilzenge are cheap, between 1000 and 3000 Tsh for structures of up to 40 bags capacity, are easy to construct, and are a reliable means of keeping grain through the season. Much of the crop is sold in the immediate post-harvest period to meet household needs and



Farmer + primary society + NMC - SGR Figure 1. Single-channel marketing + co-op unions + SGR

structure. + private trade

to provide funds for inputs and hire of labour (eg for coffee-picking). However, farmers perceived an advantage in selling later when maize becomes scarce, and most of the surplus is sold in the first months of the new year.

There is a basic misconception that on-farm storage losses for maize in Tanzania are of the order of 15% of more.” Few quantitative studies of storage losses have been undertaken in Tanzania, but studies in the Tabora region’* and in Kenya, Malawi and Zambia” have shown that losses of local or locally improved maize varieties stored for up to 10 months rarely exceed 5%. However, much heavier losses are likely in those areas affected by the larger grain borer (LGB), a voracious pest of stored maize.

Availability of appropriate insecticides is of key importance to storing

hybrid maize, but this may no longer be the case if pest-resistant varieties, currently being developed at the International Institute for Tropical Agriculture, are released. Providing, therefore, that farmers have access to suitable extension advice, storage losses should not be a constraint to prolonged storage and realization of higher sale prices for maize.

The single-channel marketing system

The primary societies have no equity (ie shareholders’ capital) of their own, and in marketing crops simply act as agents for the cooperative unions or the NMC. They must obtain working capital as advances from the SGR, or as loans from the banks. The single-channel marketing structure may therefore be depicted as shown in Figure 1.

Primary societies may occasionally coordinate the sale of members’ grain to private traders. Marketing by primary societies is totally dependent on outside funding, and purchasing can therefore be spor- adic. In the past, farmers have delivered grain to the primary societies on the basis of promises of payment. This seems less likely in the future, however, as payment has often been delayed, sometimes indefinitely, or has been made net of deductions which have been disputed. As a result of such experiences, cooperatives are widely discredited among the farmers of Tanzania, and in regions nearer DSM they have effectively

“See M. Beier. CM. Falkenbera and N. abandoned the trade in maize. Njema, The Southern Highlands development and Food Security Needs of Tanza- nia: The Case of Rukwa Region, Govern- ment of Tanzania, Dar es Salaam, 1990; FAO, Comprehensive National Food Security Programme TCP/lJRT/0055. Phase One: Assessment and Issues Pap- er: The Nature of the Food Security Prob- lems in Mainland Tanzania. Synthesis, FAO. Rome. 1990.

Despite the many negative experiences, farmers often perceive

cooperatives to have some utility, because: (a) they allow the farmer easier access to inputs, this being of particular importance in outlying communities; and (b) by offering to buy maize at the official price, the cooperative union may force private traders to pay more. In addition to this it should be remembered that for most non-food crops trade has not been liberalized and the cooperatives are still monopoly buyers.

12PT ‘Golob, “The Larger Grain Borer cam- paign in Tabora and related areas’, Project Private sector marketing

Progress Report (CGP/URP/071/AUL), Ministry of Agriculture, Dar es Salaam,

The chain by which maize is marketed from Mbozi district (Mbeya

March-August 1986. region) to DSM is as shown in Figure 2. Farmers sell mostly to village 13P.S. Tyler and R.A. Boxall, ‘Post-harvest loss reduction programmes: a decade of

buyers or resident wholesale traders in rural assembly centres on the

activities; what consequences?‘, Tropical paved highway. Closer to DSM, for example around Iringa, the chain

Stored Products Information, Vol 50, 1984, tends to be shorter, with the interregional trader more often covering pp 4-13. the role of resident wholesaler.

FOOD POLICY December 1992 423


Primary level marketing

+r

Secondary level marketing

4

L

Figure 2. Marketing chain for maize linking Mbozi district with Dar es Salaam.

Table 1. Variations in price of maize in Mbozi district, Mbeya region.

Price per bag

(T-W

Price to farmer (small lots) 1800 Price to village buyer

(selling eg IO bags) 240&2600 Price delivered to resident

wholesale trader in Vwawa (for at least 10 bags) 3000

Price to non-resident trader 320&3300 Expected price in DSM, about 5500

Freight costs to DSM were 1500 Tsh per bag by road, 1300 Tsh by rail. A bag weighs approximately 115 kg.

424

- Farmer

7 Villijge buyer

4 * Resident Wholesale P trader

II u

+ Inter-regional trader G

Local retailer (non-resident)

1 Dalali

I Local consumers

= commission agent (in DSM)

1 Local wholesaler or retailer (in DSM)

v Consumers in DSM

The marketing system is highly competitive, but inefficient due to traders’ very low level of capital accumulation. Many wholesale traders can buy only a few bags, and have to pool resources to hire trucks. Only a few of the larger interregional traders have the resources to hire a rail wagon, which requires a minimum of 200 bags and advance payment of the hire charge. Carriage between the Southern Highlands and Dar es Salaam is largely on vehicles returning from Zambia. Hiring is very time-consuming. Traders may wait as long as a week to hire, often camped beside the road with their merchandise.

Primary marketing, ie assembling small lots for interregional shipment, appears to be less efficient than secondary marketing. While grain is available close to the main highways, traders are loath to venture far afield. In a village on the Njombe Plateau, 51 km off the main highway, we were told that traders had never tried to buy (official discouragement is believed to have been partly responsible). Prices fell off fast from wholesale assembly points and from main highways, as can be seen from the examples of villages 15 km off the main highway in Mbozi district given in Table 1.

Based on these and similar data for Makambako and Iringa districts, it is calculated that for villages between 15 and 45 km off the main highway the cost per km travelled for primary marketing (wholesale assembly) is between 9 and 40 times the cost of secondary marketing (shipment and sale in DSM). Much of this differential can be attributed to the poor quality of the roads serving the villages, and the nature of the primary buyer’s activity, which involves assembling small, dispersed lots of grain. However, also of importance are the high opportunity cost of capital, which puts the buyers in a strong position vis-&vis farmers who need ready cash, and a general shortage of vehicles.

Maize is traded by volume and the 90 kg jute bag is the standard measure used in procurement and at the wholesale level. During its life a jute bag expands and in reality traders pack around 115 kg in this standard bag, leaving farmers in considerable doubt about how much they are selling. Market transparency at the primary level is therefore considerably less than desired.

Market information

Farmers were found not to rely greatly on market information bulletins, but generally based their marketing decisions on information from neighbours or traders in the district concerned. Wholesale traders,

FOOD POLICY December 1992

Cereal markering liberalization in Tanzania

however, do listen to the market information bulletins. An announce- ment of attractive prices is apt to result in many traders simultaneously shipping to DSM and flooding the market. While such experiences are unfortunate for the trader, they suggest that the information is having the desired effect of increasing market competitiveness.‘” However, the absence of a reliable telephone service continues to be a major hindrance.

14Eighty-five per cent of traders inter- viewed by the Marketing Development Bureau (op tit, Ref 3) listened to the MDB radio broadcasts. Sixty per cent of these were positive about the broadcasts. The majority of the remaining 40% were hostile because they found it harder to negotiate a good price with farmers, now well aware of market prices.

Farmer participation in the marketing chain

Contrary to Gordon’s findings of 1988, it is unusual for active farmers to engage in interregional grain trading. In places close to wholesaling centres, maize can easily be transported by bicycle or headload, but elsewhere it is normal for farmers to sell in their own villages. They sell to the local primary society, visiting wholesale buyers or other farmers who act as village buyers, assembling grain for sale to wholesale traders. We observed in most farmers a particularly passive attitude towards cereals marketing. Farmers did not appear to have considered the

possibility of organizing independently to secure a better price.

Farmers’ other areas of concert1

Notably it was found that farmers’ main concern was with input supply, not marketing. Cooperative unions no longer provide credit, so cash must be paid for (heavily subsidized) fertilizers, which to a large extent are now distributed by private traders. Nevertheless, farmers often experienced difficulty obtaining the inputs, due to lack of transport and untimely availability. There was also concern about the cost, quality and availability of hybrid seed.

Cash flow difficulties appear to be an underlying cause of many farmers’ problems. Few farmers have bank accounts, although the National Bank of Commerce has started to promote savings and credit departments within primary societies to improve accessibility. Absence of credit results in the need for a major cash outlay on inputs, and forces farmers to sell produce when prices are low. In the Mbozi Plateau coffee is the most important cash crop, and maize surpluses are used to finance inputs and labour for picking coffee. Lack of cash makes it difficult to hire vehicles so as to procure inputs and better market crops, placing the buyer in a strong bargaining position.

Contradictory aspects of liberalization

Liberalization enjoys widespread support in Tanzania, above all from farmers and traders, but also from a number of high-level officials in government. Nevertheless, adaptation to the changes has been difficult for the Tanzanian body politic, for the following reasons.

Liberalization has come about due to economic necessity and donor pressure, rather than through conviction. Former policies and cam- paigns against walanguzi and economic saboteurs have also had a powerful effect on public attitudes.

There is a fear that farmers will not obtain remunerative prices under a liberalized system. This fear has subsided in the last two years since farmers have benefited from unusually high prices due to a scarcity of maize. In most places prices remained higher than the official producer price, at least until this was raised to 30 Tsh/kg in 1991. However, low prices since liberalization in parts of the Southern Highlands pose a


Cereal marketing liberalizatiorl in Tanzarriu

political problem for the government. For many years these areas have been encouraged to grow maize by the effects of pan-territorial pricing and subsidized fertilizer. It is now planned to increase the price of fertilizers from 10% to 80% of their economic cost by 1994/95. With increased input prices and maize having to bear the true cost of marketing from these outlying areas. production becomes less attractive to farmers, who were once urged to plant as a matter of national importance.

Officials are reluctant to see any reduction in their administration and interventionist powers due to concerns over food security, in particular a possible repetition of the famine of 1983184. Food security tends to be equated with self-sufficiency, and the idea put forward by donors that Tanzania can export from some regions while importing into others tends to be dismissed. There is c~)nsiderable reluctance to be placed in the position of relying on food aid, a concern which is increased by belief that food crises in Sudan and Ethiopia will be given priority.

Very powerful vested interests are tied up in the single-channel system, at village, district, regional and national level. When the Government of Tanzania authorizes private trade to compete with the single-channel system dominated by the Party, it inevitably sets off a rearguard action to defend the interests of the former monopoly.

Due to the differing concerns and interests involved, there have been

some notable inconsistencies in the way liberalization has been im- plemented. Above all, the former policies and legislation have not been abolished. The private sector has no legal status, and the cooperative unions are still the sole agencies legally entitled to purchase from farmers. ‘Woarding’ is still legally an offence. At the same time, district and regional authorities are free to intervene in the cereals market in contravention of the new policies, and official cooperatives are allowed to impose levies on their private competitors.

Attempts by district and regional authorities to restrict the access of traders are more likely to force trade into more clandestine channels, with depressed farm-gate prices compens~~tillg for the increased risk of trading and in some cases the cost of bribes. Amani and Maro report that restrictions and lack of official encouragement to the private trade have a negative effect on food security in rural areas in Tanzania.‘5 Inconsistencies are also evident in the survival of pan-territorial pricing, the SGR’s exclusive reliance on the NMC and cooperative unions as agents, and in bank lending and village storage policies.

Conclusions

In recent years a number of recommendations to improve the marketing system have been made, but implementation has been limited. Rather than reiterate these recommetldations, we highlight the issues that we believe are of the most fundamental importance. These are as follows:

l clarity and consistency in government policy;

l reform of financial services;

l more active involvement of farmers in the liberalized system;

15H.K.R. Amani and W.E. Maro, House- a strengthening the extension services;

hold Food Security in Tanzania: Prelimin- 0 policy for regulating overall price levels. ary ~jndjngs from Four Regions, Depart- ment of Economics, University of Dar es In addition to these topics, we make some observations concerning the Salaam, 1990. place of ‘village stores’ in a liberalized marketing system.


The private marketing system which has so far developed is rudimentary and undercapitalized. Conventionally, consultants seeking to improve marketing systems recommend enhancing the state’s role in supporting the private trade. However, in Tanzania we should recognize the financial limitations under which public institutions operate, and traditional hostility or apathy towards traders. For this reason we suggest a number of approaches to make farmers (who have the strongest vested interest in market efficiency) the initiators of marketing improvements:

l With the cooperation of the authorities, improvements can be made in the trading infrastructure, building better access roads and public marketing facilities (such as hard standings protected against the rain). The system of village markets may be developed for wholesale trading, or auctions may be organized to attract traders in larger numbers. The auctions can also be used to introduce the weighing of bags, instead of the present unquantifiable system. Farmers may form savings and loans associations, of the kind which are presently being encouraged by the banks. Farmers may carry out primary-level marketing on a cooperative basis, selling larger volumes to interregional traders at higher prices than those received by individual farmers selling their grain to local traders. Despite their attractions, cooperatives have a poor record in Africa in the marketing of staple foods.” This may largely be attributed, however, to the way in which they have been organized and the fact that governments have used them for political and administrative purposes. There is a case for testing

0

‘%. Lele and R.E. Christiansen, Markets, Marketing Boards and Cooperatives in Africa: Issues in Adjusfment Policy, MADIA Discussion Paper 11, World Bank, Washington, DC, 1989.

Cereal marketing liberalization in Tanzunirr

Clarity and consistency in government policy

The growing realization that market liberalization is indispensable to

improving the economy is countered by vested interests and fears of disruption making parts of the population worse off. While aid is at times used as a lever in favour of liberalization, it can also make it easier to postpone reform.

The interests of farmers will be best served by allowing the market to operate freely. The legal position of the private trader should be made clear, policies should be uniformly enforced throughout the country, and public sector trading should be limited to that required to achieve a few clearly defined objectives, such as the prevention of famine and promoting sufficient incentive to producers to allow self-sufficiency in a normal year.

Reform of financial services

The marketing system will perform more efficiently if more capital is available for trade and storage. Credit should be available on the same terms to any kind of business engaging in trading activities, subject to creditworthiness and suitable guarantees. Banks can advance loans based on a variety of types of collateral, including land. houses, stores, vehicles and produce held in authorized warehouses. Inventory credit, using produce as collateral, offers great potential for quickly increasing the liquidity of traders, since it is straightforward to administer and provides a high level of security to the lender. Institution of a law on bankruptcy is also urgently required.

More active involvement of farmers


Cereal marketing liherulization in Tunzania

their utility in a more liberal environment. Ensuring that each member has a financial stake in the cooperative would also enhance the probability of success. Once established, the range of services could be extended to include other services such as input supply.

0 In some communities farmers may prefer to organize smaller informal groupings, along kinship or other lines.

The state can support this process through provision of a secure legal framework, and through education and training. Such an approach is envisaged in the new cooperative law, but will be difficult to implement in practice. Apart from cutting across entrenched vested interests, it requires major changes in attitudes at all levels, not least among farmers themselves who have come to set the state as a provider (of subsidized inputs, marketing services, etc), rather than a agency which fosters their own self-reliance.

Strengthening the extension services

Some farmers are having difficulty storing their grain through not knowing simple preventive techniques. To solve this problem the extension services should be strengthened, particularly in the way they transfer information to the farmer. At the same time it is important to ensure that farmers have access to suitable insecticides.

Dissemination of information and advice to farmers is provided by the extension services of MALDC. Experiences and opinions of various local and expatriate personnel indicate that the Training and Visit (T&V) system, introduced under the World Bank-funded National Agricultural and Livestock Extension Rehabilitation Programme, is not suitable for the extension of storage technology in Tanzania. It is too rigid to meet the needs of the farming community, and pays insufficient attention to the understanding of farmers’ needs.

It is essential that any designs of farm stores recommended for massive dissemination are simple modifications of traditional structures and do not attempt to introduce sophisticated high-cost innovations. There is no need to develop a new storage technology, but simply to accelerate the dissemination of what is already known.

Policy for regulating overullyrice levels

In view of the country’s present budgetary and administrative difficulties, a very simple system is needed which ensures that prices are kept within reasonable limits, while allowing minimal interference with the day-to-day operation of the market.

As far as possible price stability should be promoted through trade. Within Tanzania, trade should be promoted by better roads and encouragement to the private sector (through a supportive legal environment, credit, market information, telecommunications, etc). The case for wider interregional trade is strong, particularly with countries to the south and west of Tanzania. Contrary to the commonly held belief that African countries experience gluts and deficits at the same time, maize harvests in Tanzania are negatively correlated with those of most Southern African countries. ”

“A. Ngondo and A. Kottering, ‘Tanzania: In a deficit year Tanzania can import economically through DSM, and

comprehensive food security programme; use the imported maize to feed the population in this city. Maize could

Phase 11 - marketina’. first draft of reoort be auctioned at prices related to the import parity price, thereby obtained from FAO, &r es Salaam, 1491. providing a disincentive to draw off supplies from the Southern High-


Table 2. Estimate of farm-gate prices in Mbozi district in surplus and deficit years (1991 costs).

Price of maize at DSM (US$) Price in Tsh Movement charge (2.5%) Notional charge for storage and interest on capital (5%)

Parity price for shrpments of 10 tonnes or more Less margin for int~rr~gional shipment

Official rate’

1lOC 25 300

632

1 265

23 403e

20 000

Surplus year Parallel rat@

1lOC 39 600

990

1 960

36 630e

20 000

Official rate=

1404 32 200

805

1610

34 715’

20 000

Deficit year Parallel rateb

140d 50 400 1 260

2 520

54 180’

20 000

Wholesale buyer’s selling price (Mbozi) Less primary marketing margin

3 403 16 630 14715 34 180 2500to14500 2500t014500 2500to 14500 2500t014500

Farm-gate price -11 097 to 903 2130to14130 715 to 12 215 19680 to 31 680

Notes All values in Tsh unless otherwise stated. a Official rate: US$l = 230 Tsh. b Parallel rate: US$l = 360 Tsh. ’ Fob d Cif. e Export parity. ’ Import parity.

18Feeding DSM from the Southern High- lands is expensive for Tanzania, costing as much as 2000 Tsh per bag more in transport costs than supplies from nearby locations. Beier et al (op tit, Ref 11) suggest that areas to the north and south of DSM be developed to supply maize to the city, and that roads are built to facilitate migra- tion into these areas. rgNgondo and Kottering, op cif, Ref 17. 2oPersonal communication, World Bank. “However if, as the World Bank now proposes, Tanzania becomes a small net exporter, the cost in a peak production year could easily rise to twice that level. Depending on Tanzania’s ability to open up markets in Southern Africa, the cost might be reduced.


lands and the centre of the country. Ix Available surpluses would tend to be redirected to other deficit areas, such as Mwanza and Singida. This response would be facilitated by better north-south road connections,‘” vehicle availability and better rail services on the Central Line.

In a surplus year it is more difficult to regulate price levels. Without

public sector intervention prices will tend to fall to export parity levels. which. given the farge distances involved, are likely to be very low in some producing regions. Farm-gate prices in Mbozi district in a surplus year (assuming that Tanzania can only export through DSM) have been estimated. Using standard per tonne marketing margins based on those found during our field trip, the farm-gate prices range from a highly negative figure (-11 097 Tsh) to 14 130 Tsh per tonne, depending on the location of the farm and whether the dollar export price is converted into shillings at the official or the parallel rate. This result should be compared to the case where maize is priced on the basis of import parity, with farm-gate prices ranging from 715 Tsh to 31 680 Tsh per tonne (see Table 2).

Annual variations in the size of the crop resulting in disproportionate swings in the profitability of maize production will have a disruptive effect on the rural economy. This might be avoided by a policy of sustaining prices at around the import parity level. To do this the government would buy up excess production in surplus years, and if necessary export it at a loss. To minimize cost, grain would be procured at the stores on a competitive basis, without recourse to single-channel mechanisms. No official producer price would be announced but farmers would be encouraged to organize to ensure that they obtain the best possible share of the prices paid at the government warehouses.

The historical coefficient of variation of maize production is about 10%.20 Given that the country is on average about self-sufficient in maize, this means that, at current levels of production, surpluses in excess of 250 000 tonnes are unlikely in most years. Assuming that it costs US$44 per tonne to subsidize exports, the cost to the country of buying and exporting 250 000 tonnes of maize would be about US$ll million, or about 0.24% of the gross national product. In most years the cost would be fess than this. Given the objective of maintaining producer incentives, the cost does not seem unreasonable.”

However, the cost would be much greater if these stocks were

inefficiently managed, as at present. There is also a danger that without a fundamental shift in attitudes towards the private sector, buying-up of surpluses would occur before means of facilitating private exports to neighbouring countries had been exhausted. Therefore until basic policies have been clarified in principle and in practice it would be inadvisable for Tanzania to embark on a scheme of this nature, however desirable on theoretical grounds.

A final comment is reserved for village storage policy. About 960 village stores with average capacity of 300 tonnes have been constructed under the Rural Structures Programme. Until recently the government was totally committed to providing such stores for the majority of villages in the country. The underlying reason for this policy is to provide overflow storage capacity in surplus years, and to reduce the losses that might otherwise occur if large quantities of grain are stored on the farm.

As already discussed, however, grain can be cheaply and effectively stored on the farm provided that correct protective measures are taken, whereas past experience of cooperative unions and the NMC shows that large losses can occur in off-farm storage if management and pest control are poor. Moreover, under the present cooperative system it is most unlikely that farmers will wish to entrust their own grain to a village store, for fear of deterioration, theft, or unauthorized sale by the union.

Villagers belonging to a voluntary association or cooperative might want to store collectively in a permanent structure to use the grain as collateral for inventory credit, or to store grain in locations close to all-weather highways where they can attract traders. Partly to assist in such endeavours, it is recommended that existing off-farm storage

22Ngondo and Kottering, op tit, Ref 17. facilities, the total capacity of which is around 2.2 million tonnes2’

This covers village, cooperative, NMC and (approximately equal to Tanzania’s total annual maize production, most

SGR stores. of which is unutilized), should be sold off to the privater sector.


cereal marketing liberalization in tanzania

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