Connect with us

Tanzania

Tanzania’s agricultural sector decline impedes quality of growth of the economy

Published

on

Recent macroeconomic trends in Tanzania show a sustained GDP growth rate averaging 7% per annum over the past one and a half decades. However, the rate of poverty reduction in the country has remained dismal, leading to questions regarding the quality of its growth, including its sectorial composition.

A notable feature of this trend is slow growth in agricultural sector, averaging 4% during the same period, which is much below the targeted growth of 10% needed to induce significant reduction of poverty. The relationship between agricultural growth and poverty reduction is rooted in economic structure that allocates factors of production, particularly labor and capital, and the underlying technology conditions that determine labor-output and earning relations.

In a country like Tanzania, where its labor force is predominantly (66.3%) engaged in agriculture and 85% of all the poor (who fall below the poverty line) is in rural areas, growth in agricultural sector is necessary for poverty reduction.

Various studies have established that agricultural productivity growth is a central condition for economic growth and transformation in developing countries. This is because agriculture provides for the best opportunity for the majority of the workforce in developing countries such as Tanzania to not only get employed but also trade their way out of poverty.

Indeed, research has shown that agriculture driven growth is up to four times more likely to reduce poverty than growth generated from any other sector in developing economies. Efforts to improve efficiency and productivity in Tanzania’s agricultural sector are therefore crucial for transforming livelihood at the bottom of the pyramid.

Based on the results from a Survey conducted in 2016 by OXFAM Tanzania, findings revealed that improving farmers’ livelihoods would entail concerted efforts by the government to avail to farmers, quality and affordable seeds, fertilizer, agricultural infrastructures, subsidies, extension services, markets, information alert, affordable loans, and areas for pastures.

The survey was conducted following critical challenges of poverty reduction Tanzania has been facing despite a remarkable GDP growth over the past two decades. This is because economic growth in Tanzania is not inclusive, in that sectors contributing to this growth employ fewer people.

Meanwhile, agriculture continues to employ the majority of people in Tanzania. It is against this background that any efforts to improve livelihoods of the people should thus be geared towards transforming the agricultural sector with special attention on smallholder farmers who occupy a significant portion of the workforce of the economy.

Every solution designed by the government must therefore be geared towards addressing such challenges confronting peasant farmers in the country. In this context, a study was set out to examine the challenges facing farmers and their respective solutions.

Sustainable Livelihood Framework was used to inform the analysis of the study. Findings, however, show that a typical smallholder farmer in Tanzania is youthful, married, poor, equipped with low level of education, and having many children (at least four). These characteristics usually entangle farmers in the vicious cycle of poverty.

Transforming agriculture is thus the only way out for most of these farmers. Further, farmers face diverse challenges on daily basis. It was thus logical to draw these challenges from farmers. Some of the challenges drawn from these farmers were as follows:

  • Lack of access to loans
  • Inadequate subsidies
  • Access to market
  • Information alert on agriculture-related issues
  • Persistent drought
  • Availability of quality and affordable seeds
  • Access to pastures
  • Availability of technical advice
  • Availability of quality and affordable fertilizers
  • Availability of agricultural infrastructures and
  • Availability of water.

Approaches farmers employ to solving their problems

Some of the solutions suggested by farmers to address this challenges they face are by and large neither sustainable nor appropriate for productive farming.

Also, coping mechanisms that farmers use to solve their challenges include:

  • Securing loans from friends and relatives
  • Migrating to access markets and pastures, fertilizers and water
  • Using readily available inputs such as natural fertilizers
  • Prioritizing only important needs
  • Cultivating crop which are drought resistant
  • Forming groups for both animal keepers and farmers for easy access of loans and helping them in case needs arise
  • Applying irrigation
  • Avoiding to burn crop remnants so as they can be recycled as fertilizers
  • Selling some of kept animals and
  • Borrowing from relative and friends.

Ways government can solve challenges

It is interesting to note that the majority of farmers continue to place their trust on government when it comes to problem solving. Priority areas that these farmers would like the government to concentrate on while helping them include ensuring:

  • Availability of quality and affordable seeds
  • Availability of advice from experts
  • Availability of quality and affordable fertilizer
  • Availability of quality agricultural infrastructures
  • Availability of subsidies
  • Access to markets
  • Availability of information alert
  • Availability of affordable loans
  • Availability of pastures for feeding animals and
  • Access to water.

Priorities of smaller scale farmers

Farmers’ priority areas could only be met if the government allocates enough funds to agricultural sector.

However, the government has not only failed to adhere to its commitment on the Maputo Declaration that requires African Union member states to allocate at least 10% of national budget to agricultural sector but also an alarming declining trend on funds allocated to agriculture can be observed over the course of past four years.

The decline in budget allocation to agricultural sector in real terms has meant that some of the key services cannot be accessed by farmers. Such services include:

  • Subsidies
  • Quality seeds
  • Quality pesticides and insecticides
  • Extension services
  • Information alert relevant to farming
  • New/improved agricultural infrastructure
  • Farming techniques training
  • Accessibility to markets and
  • Availability of loans.

It is therefore strongly argued at this juncture that the government of Tanzania needs to rethink its position and allocate more funds to the agricultural sector. In fact, doing so will be in line with Tanzania’s Vision which aspires that Tanzania should become a semi-industrialized country by 2025 with agro-processing being at the center of the said industrialization process.

It is also remarkably interesting to note that farmers cultivate crops and keep animals that fall under priority agricultural products that have been earmarked in the Second Five Years Development Plan as raw materials for envisaged industries.

Therefore, to understand the challenges and priorities of farmers in their activities, the government must be involved in their activities in terms of ensuring availability of subsidies, loans, quality inputs, infrastructure, information alert, extension services as well as access to markets by farmers.

As has been stated time and again, transforming agriculture is the only way to achieve inclusive growth and in turn improving livelihoods of the poor more especially the farmers. Investing in agriculture should thus be a no brainer to the government of Tanzania.

Continue Reading
Advertisement
Click to comment

Tanzania

Tanzania’s economy to grow by 6.8% in 2019

Published

on

The World Bank suggests Gross Domestic Product (GDP) growth in Tanzania to likely slowdown to 6.6% for the year 2018 from a 7.1 per cent expansion in 2017.

This year 2019, the Bank estimates that Tanzania’s economy will grow by 6.8 per cent and rise to 7.0 per cent in 2020.

But the government expects Tanzania’s economy to grow by 7.2 per cent in 2018 and accelerate to 7.3 per cent in 2019, despite a slowdown in credit to the private sector and rising bad loans in the country’s banking sector.

The state-run National Bureau of Statistics (NBS) said in December that Tanzania’s GDP grew by 7.0 per cent in the first half of 2018 from a 6.7 per cent rise in the same period a year-ago, while the country’s inflation rate dropped to a 10-year low in November, helped by slower rises in food prices.

National Bureau of Statistics – Tanzania

“In fast-growing countries, such as Rwanda and Tanzania, the (economic) expansion will be supported by public investment in infrastructure and strong agricultural growth,” said the World Bank in it 264-page report.

“Inflation is expected to pick up across the (Sub-Saharan Africa) region in 2019, reflecting the pass-through of currency depreciations during 2018 and domestic price pressures among metals exporters and non-resource-intensive countries … price pressures are likely to intensify in Kenya, Tanzania and Uganda.”

Tanzania’s annual headline inflation rate rose marginally to 3.3 per cent in December from 3.0 per cent in November, the lowest inflation in a decade.

The International Monetary Fund (IMF) warned last month that a credit squeeze coupled with a slowdown in government spending could dampen prospects for faster economic growth in Tanzania.

The lender, which warned that nearly half of Tanzania’s 45 banks are vulnerable to adverse shocks and risk insolvency, forecast the economy by 6.8 per cent this year.

The government plans to raise spending by 2.4 per cent in the 2018/19 fiscal year with the fiscal deficit expected to increase on the back of higher infrastructure spending.

The fiscal deficit is seen reaching 3.2 per cent of GDP in 2018/19 fiscal year (July-June), up from around 2.1 per cent in 2017/2018, according to data from the Ministry of Finance and Planning.

Elsewhere, the growth of the global economy is expected to decelerate to 2.9 per cent this year compared with the three percent in 2018, the World Bank said in the report, citing elevated trade tensions and international trade moderation.

A slump in the global economy will continue in the coming year, with 2020 growth estimated at 2.8 per cent, according to the report.

“Risks to the regional outlook are tilted to the downside. On the external front, slower-than projected growth in China and Euro Area, which have strong trade and investment links with Sub-Saharan Africa, would adversely affect the region through lower export demand and investment,” the World Bank said.

“Moreover, Sub-Saharan African metals producers would likely be among the hardest hit by escalating trade tensions between China and the United States, as metals prices would fall faster than other commodity prices as a result of weakening demand from China.”

Sharp currency declines would make the servicing of foreign currency-denominated debt, already a rising concern in the sub-Saharan African region, more challenging, the Bank said.

Overall, real GDP growth is estimated 6.6% in 2018, down from 7.1% in 2017. The services sector was the main contributor to GDP (39.3%). Private investment was the main demand-side contributor (63.9%). The external sector stymied economic growth as the current account deficit increased (despite the real depreciation of the Tanzanian shilling), due to a higher volume of imports in 2018 than in 2017. The increase is due largely to increased imports of transport equipment, building and construction materials, industrial raw materials, and petroleum products for large public investment projects, such as the Standard Gauge Railway. The import bill also increased as a result of the rise in the price of key commodities, such as crude oil.

The fiscal deficit increased to an estimated 3.9% of GDP in 2018, due to increased capital spending on infrastructure projects. Public debt increased to an estimated 39.3% of GDP in 2018 from 38.2% in 2017. External debt accounted for about 74.9% of total public debt in 2018. The risk of debt distress remains low because public external debt, at 34.5% of GDP, is mostly concessional.

Monetary policy was more accommodative in 2018 than in 2017. This increased domestic liquidity and reduced lending rates, leading to greater private credit supply. Due to improved food supply, inflation eased to an estimated 3.5% in 2018.

Tailwinds and headwinds

The medium-term outlook is positive, with growth projected at 6.8% in both 2019 and 7.0 in 2020, supported by large infrastructure spending. Headline inflation is projected to marginally increase to 5.2% in 2019 and 5.1% in 2020 due to increased government spending.

But the positive outlook faces several downside risks: growing private sector concerns about economic policy uncertainty and increased domestic arrears that could derail the government’s fiscal consolidation and harm the private sector.

Key economic development challenges include slow progress towards inclusive growth, infrastructure bottlenecks, and vulnerability to climate change. Poverty and income inequality remain high despite high economic growth. Infrastructure bottlenecks are most notable in the transport and energy sectors. Reliance on rain-fed agriculture has exposed farmers to income shocks. And inefficient public enterprises present a fiscal risk. One of the development challenges on the social front is youth unemployment, which increased to 7.3% in 2016, compared with 5.7% in 2012.

Key opportunities include peace and political stability, abundant natural resources, a strategic geographic location, and immense development potential for tourism. The Export Zone Processing Agency established in 2008 to accelerate manufacturing exports and help the country achieve structural transformation has helped attract close to $1 billion in foreign direct investment and revive the manufacturing sector into one of the fastest growing in Africa.

 

Continue Reading
Advertisement
Advertisement

Trending