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

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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.

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Tanzania

Tanzania Economy to decline to 6.6% in 2019

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Tanzania’s economy remains buoyant, thanks to the stability of major macroeconomic indicators, according to a Bank of Tanzania report. Inflation remained in single digits, while money supply in the economy rose during the year ending May 2019, the BoT says in its Monthly Economic Review (MER) for June 2019. Another notable development during the period was the rise in the importation of capital goods for ongoing mega infrastructure projects.

This is in line with President John Magufuli’s endeavor to build world-class infrastructure, which is expected to greatly reduce the cost of doing business in the country. The projects include the 2,100-megawatt Stiegler’s Gorge hydroelectricity station and standard gauge railway. With the government embarking on various measures to improve liquidity in the economy, the cost of borrowing also went down, BoT figures show, while food prices were generally stable.

These positives outweighed the impact of a fall in exports of goods and services, as well as shrinking foreign exchanging reserves and increased national debt, among others. The review shows that the annual inflation rate remained at 3.5 per cent, which was below the targeted five per cent, and this helped to maintain the stability of prices of goods and services.

Tanzania is also currently food sufficient, although increased demand for maize in neighboring countries is putting pressure on prices of the commodity in the domestic market. According to the review, the extended broad money supply growth jumped to 5.8 per cent in May this year from 4.8 per cent recorded during the year ended in May 2018.

The improvement of broad money supply was a result of the growth of domestic credit to both the government and private sector. The recovery of the domestic credit market indicates increased lending to the private sector. The BoT review shows that credit to the private sector grew by nine per cent from 2.9 per cent, indicating borrowers’ increased confidence in the banking industry.

This was experienced as individual banks were lowering their interest rates as part of implementing an accommodative monetary policy by the BoT. The review shows that the average interest rate dropped to 17.17 per cent from 17.53 per cent, thus stimulating borrowers’ appetite. A decreased was also recorded in gross official reserves, which amounted to $4.3billion, covering about 4.2 months of projected imports of goods and services.

However, this was above the country’s benchmark of not less than 4.0 months, but below the East African Community’s 4.5 months. Another indicator which fell slightly during the period under review was exports of goods and services, which dropped to $8, 514.4 million from $8, 578.7 million.

Exports of traditional crops declined to $533.9 million from $1,140.3 million, manifested in all traditional crops, except coffee and cotton. However, non-traditional goods exports, which account for 78.9 per cent of goods exports, increased to $3, 499.2 million from $3, 142.7 million, largely driven by gold exports.

The value of gold– which accounted for 38.6 per cent and 48.9 per cent of total goods and non-traditional exports, respectively – grew by 15.4 per cent to $1, 716.7 million on account of increased volume. Domestic revenue realized by the government in May 2019 amounted to Sh1.28 trillion from Sh1.30 trillion. Out of the collections, Sh1.2 trillion was collected by the central government and Sh50.4 billion was local government authorities’ collections from own sources. Tax collections amounted to Sh1.1 trillion, accounting for 87.4 per cent of domestic revenue.

In May 2019, expenditure amounted to Sh1.8 trillion, of which recurrent expenditure was Sh1.06 trillion and development expenditure was Sh741.7 billion. The level of external debt stock, comprising public and private sector debt, amounted to $21.6 billion, having increased by $1.07 billion from May 2018. The increase was mainly on account of new disbursement, with recent sustainability reports indicating that Tanzania’s debt is still stable.

Tanzania’s economic growth slowed to 6.6% year on year in the first quarter of 2019 from 7.5% in the same period a year earlier, official data shows, weighed down by softer construction, agriculture and manufacturing activity.

A leaked report from the IMF said earlier in 2019 that Tanzania’s economy has not been expanding as fast as official figures suggest. It said lower growth was partly due to President John Magufuli’s “unpredictable and interventionist” policies.

In the first quarter, construction, the biggest driver of GDP, grew 13.2%, compared with 15.6% a year ago, the state-run national bureau of statistics said.

However, growth in the mining sector, which has been the target of repeated government interventions, rebounded to 10.0% from a 5.7% decline during the same period in 2018. Tanzania is Africa’s fourth-largest gold producer.

“The growth of the mining sector was mainly due to an increase in production of gold, coal and diamonds,” said the bureau.

Magufuli embarked on an ambitious programme of industrialisation after coming to power in late 2015, investing billions of dollars in infrastructure, including a new rail line and a major hydropower plant and reviving the national airline.

But critics say government intervention in mining and agriculture have discouraged investment. Foreign direct investment has slumped and private sector lending growth dropped below 4% in 2018, from an average of 20% from 2013-2016.

Agriculture, which accounts for about a third of economic activity, also slowed in the first quarter of 2019, with crop production growing 6.0% compared to 8.9% in the same period in 2018, the statistics bureau said.

In 2018 the government sent the military to seize the cashew harvest, the main export crop, after complaints by farmers that prices offered by brokers were too low. Manufacturing, another key GDP contributor, grew 4.8% in the first quarter compared with 5.3% a year earlier.

Tanzania’s economy grew 7% in 2018, according to the government, which has forecast 7.1% growth in 2019. Earlier in July, however, the World Bank released its own estimates that said Tanzania’s economy grew 5.2% in 2018.

Following the World Bank report, Tanzania said it might revise its 2018 GDP growth rate after meetings in August. In April, a leaked report from the IMF predicted lower growth of about 4%-5% in the “medium term”. The IMF report said there were serious weaknesses in Tanzania’s official data.

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