DraftAgro-processingStrategyfortheGovernmentof
Tanzania
Presentation
January2017
Agenda
Importanceofagro-processingtoTanzania’sindustrializationgoals
Approachtodevelopinganeffectiveagro-processingstrategy
Prioritizationofvaluechains
Agro-processingstrategy:Crowdingininvestmentsinthreezonalclusters
Annex
Valuechainprioritizationanalysis
Illustrativeexample:Dodoma/Centralclusters
Barriersacrossandwithinvaluechains
DiscussionQuestions
2
Theagro-processingstrategystemsfromASDPIIpillarstosupportTanzaniain
becomingamiddleincome,semi-industrializednationby2025
FiveYearDevelopmentPlan(FYDPII)Objectives
TheFYDPIIoutlinesboldambitionsforTanzaniatobecomeamiddleincome,
semi-industrializednationby2025
1
2
3
4
3
Agro-processingiscrucialtoTanzania’sindustrializationandbroadbased
economicgrowthoverthenextdecade
• TheAgriculturalSectoriscrucialtoTanzania’sindustrialization
andbroadbasedeconomicdevelopmentoverthenext
decade.Thesectorcontributesapproximately65%ofinputsto
theindustrialsector,makesup23%ofthecountry’sGDP,and
employsapproximatelytwo-thirds(67%)ofTanzania’s
workforce
• Agro-processingprovidesanopportunityforincreasing
incomesandcreatingjobsalongthevaluechainthrough
expansionofforwardandbackwardlinkagesintheeconomy.
Today,however,themajorityofcropsinthecountryare
marketedinrawformwithlittleornovalueaddition
• Tanzaniahastheabilitytoproducemostrawmaterials,
resultingfromfavorablesoilandagro-ecologicalzonesacross
thecountry
• Twotrendsthatsupporttheneedforagro-processing:
– Rapidurbanizationandaffordabilityisgrowingthelocal
demandforfoodproductsinTanzania. Forexample,
disposableincomeisallowingfamiliestopurchaseprocessed
rice,sugar,andedibleoil
– Alargeandgrowingfoodimportbill,especiallyforprocessed
food,testifiestothepotentialofdomesticagro-processing.
Source:SecondFiveYearDevelopmentPlan(FYDPII)2016/17– 2020/21
4
Agenda
Importanceofagro-processingtoTanzania’sindustrializationgoals
Approachtodevelopinganeffectiveagro-processingstrategy
Prioritizationofvaluechains
Agro-processingstrategy:Crowdingininvestmentsinthreezonalclusters
Annex
Valuechainprioritizationanalysis
Illustrativeexample:Dodoma/Centralclusters
Barriersacrossandwithinvaluechains
DiscussionQuestions
5
TheMinistryofAgriculturecanusethreeleverstocatalysegrowthinagroprocessinginTanzania
Leverstoagro-processinggrowth
Whatleverscanbeusedtounlockbarrierstothegrowthof
agro-processinginTanzania?Howcanthesebarriersbe
categorized?
Crosssectoral
Zonal
clusters
Valuechain
specific
• Effortstounlockbarrierssuchastax,trade,labor,
landandmain-streaminfrastructurethatare
cross-sectoralandneutralacrossallinvestors
• Thisiscoretocreatinganenablingenvironment
forbusinesses(includingagro-processors)tothrive
• Investmentstargetedtowardsclustersofinterlinkedvaluechains(e.g.dairy,meatandleather)
byunlockingcommonbarriersforasetofpublic
andprivateactorsincloseproximitywithina
regionalprocessinghub(e.g.Dodomaregion)
• Investmentstargetedtowardsspecificvalue
chains,particularlyaroundimproving
productivity.Forexample,improvingextension
servicesforallmaizesmallholderfarmers
• Thisistheapproachcurrentlytakenbythe
Ministry
CatalyticInvestments
Effort
Howcatalyticwillunlockingthebarriers
betodrivingagro-processinggrowthin
Tanzania?
Howmuchadditionalhumancapital
orfinancialresourcesneedtobe
providedfortheseefforts?
• Creatinganenablingbusiness
environmentforinvestorsand
operatorsacrosssectorsis
imperative
• MALFshouldcontinue
workingwiththePrime
Minister’sOfficeandother
Ministries
• Investmentstoremoveland,
infrastructure,talent,andtech
barrierswillbemostcatalyticfor
clustersofvaluechains
• MALFshouldinvestnew
resources forclustersof
valuechainsatthe
regionallevel
• Forspecificvaluechains,
improvingproductivitywillbe
criticaltoreachingthecountry’s
agro-processingcapacity
• MALFshouldrealign
currenteffortstowards
valuechainclustersin
priorityregions
6
MALFshouldcontinuetosupportthePrimeMinister’sOffice(PMO)in
unlockingcross-cutting barriersthatarelimitinginvestmentsacrosssectors
Descriptionofcross-cuttingbarriers
Tax
Trade
Crosssectoral
Action&MajorPlayers
• Theexistingtaxcodeandavenuesfortaxpaymentsarecomplexandcostly.
Currently,investorspaymultipletaxesthroughmultipleagencies(including
localtaxes);faceinconsistentapplicationofpre-profittaxonproduce(cess);
andpayVATonsomeagriculturalinputs,machineryandspareparts,despite
agri-inputsbeingdeclaredVAT-exempt
• ThroughthePAC’sTaxWorkingGroup,PMO,
MALF,MinistryofFinanceandothers work
toachievesimpletaxcodesandclear
implementationofVAT-exemptagriculture
relatedproducts
• Obtainingexportpermitsislengthyandcostlyrequiringmultipleprocedures
andvisitingmultipleagencies
• MisalignedtariffsandquotasoncommoditiesbetweenZanzibarandMainland
Tanzaniacreateloopholesforimportingcheap,counterfeitproducts
• ThroughthePAC’sTradeWorkingGroup,
PMO,MITI,MinistryofFinance,MALFand
others work toachieveeasyaccesstoexport
permitsandensureeffectiveuseand
implementationofprotectivepolicies
• Recenttemporarypolicies(suchasduty-freeimportsorexportbans)canbe
counterproductive.Althoughaimedtoimprovefoodsecurity,thesepolicies
createuncertaintyinmarketsandreducesthepriceofagricultureproducts
Labor
• LimitinglaborlawsarerestrictinginvestmentsacrosssectorsinTanzaniaasa
resultoflimitedtechnicalandmanagerialskillsavailabletothemlocally
• SEZs/EPZAsrestrictbusinessvisasforforeignlaborto2monthswitha5
personquota
• PMO,MinistryofLaborandMinistryof
ForeignAffairs work toeaseaccessto
foreignlabor,particularlyforagro-processing
inSEZs
Land
• Theprocessofaccessinglandiscostlyandlengthyforbothdomesticand
foreignagricultureandnon-agricultureinvestors,leadingtoamass
underutilizationoflandandlimitedinvestments.
• ThroughthePAC’sLandWorkingGroup,
PMOcoordinateseffortswithMALF,
MLHHSD,EPZA,PORALGandotherstoease
accesstolandforinvestors
• Thenationaltransportationinfrastructure,suchasmajorroads,seaportsand
airports,acrossthecountryremainsweak.However,thereareplansto
developthesefurther
• PMO,MinistryofWorks,MinistryofFinance
andMALF advocateforandalignmajor
infrastructureinvestmentstoopenregional
markets
Infrastructure
Source:USAIDFeedtheFutureandTanzaniaPartnershipandAccountabilityCommittee(PAC)– Land,TaxandTradeWorkingGroup;REPOA– Tanzania
MarketPan;OECD– OverviewofprogressandpolicychallengesinTanzania;DalbergAnalysis
7
Asprogressismadetocreateanenablingenvironment,thestrategy
shouldfocusongrowingregionalprocessinghubswithinzonalclusters
ZonalClusters
•
Tanzaniaisalargecountrywithvariousagroecologicalzoneshavingthecomparativeadvantage
forproducingspecificorasetofcommodities
(crops,livestock,fisheries)
•
Therearemanychallengesofprioritizingand
makinginvestmentsinvaluechainsatthenational
level:
• Investmentsarespreadthinacrosspriorities
• Investmentsarenotcatalyticinunlockingmultiple
valuechains
• Difficultyinprioritizingspendingandpromotion
activitiesacrossvaluechainsinmanyregions
Zonal
clusters
RegionalProcessingHub
•
Processingishighlydependentonland,electricity,
waterandotherinfrastructureinvestmentsare
highlydependentonlocation.Therefore,making
investmentstosupportprocessingineveryregion
maynotbecost-effective,givenexistingprocessing
firmsarehighlyunderutilized
•
Existingorplannedinfrastructurearecrowded
aroundspecificgrowingcityorregion.Forexample,
DodomaislinkedtoSingidaandTaboratoRwanda
andBurundi.However,Dodomaisalsolinkedto
Arusha,MbeyaandMwanza
Source:FiveYearDevelopmentPlanII;FAO–Agro-basedclustersindevelopingcountries:stayingcompetitiveinaglobalizedeconomy;Dalberganalysis
8
Withinaregionalhub,valuechainclustersallowMALFtomakecatalytic
investments,enableeconomiesofscaleandencouragesharedknowledge
Whatarethemajorvaluechain
clusters tobeprioritized?(E.g.
Dodoma)
Whatarethecommonneeds to
makethisvaluechaincluster
successful?(E.g.infrastructure,
talent)
Whattypesofinvestments should
theMinistryprioritizeforthis
cluster?(E.g.directinvestments,
financingfacilities,research)
Whatvalue-chainspecific
investments shouldtheMinistry
prioritizeinthisregion?(E.g.seed
varietyforsunflowervaluechain)
Zonal
cluster
• Acluster-basedapproachsupportsthegrowthofinter-linkedvalue
chains(e.g.dairy,meatandleather)byunlockingcommonbarriers
forasetofpublicandprivateactorsincloseproximity(e.g.
Dodomaregion)
• Therearebenefitstobuildingoutvaluechainclusterswithina
regionalhub:
‒ Catalyticinvestments:Governmentcanfocusinvestmentsthat
aremostcatalyticindrivingprocessingacrossanumberofvalue
chains.Forexample,packagingmaterialsareacommonneed
acrossvaluechains
‒ Economiesofscale:Regionalclustersencourageinter-firm
cooperationallowingfirmstoreacheconomiesofscale
(marketing,transportationandlogistics),particularlybeneficial
forsmallandmediumprocessorsandserviceproviders
‒ Sharedknowledge:Regionalclustersencouragesharingof
knowledge,researchandinnovationsbetweenpublic
institutionsandprivatecompanies
Source:FiveYearDevelopmentPlanII;FAO–Agro-basedclustersindevelopingcountries:stayingcompetitiveinaglobalizedeconomy;Dalberganalysis
9
Withinregionalhubs,MALFcanusetwomodelsofbuildingclustersof
prioritizedvaluechainbasedonsimilarrawmaterialsorend-products
RawMaterial-FocusedCluster
Product-FocusedCluster
Thisclusterisbasedontheproductionofrawmaterials
forprocessing(crop,livestockorfish)thatisprocessed
intodifferenttypesofnon-competingproducts(e.g.
cattlecontributestodairy,meatandleatherproducts)
Theclusterisbasedonsimilaritybetweentheendproductandmarkettypes,ratherthantheproduce.For
example,sunflower(A.1)andgroundnuts(A.2)canbe
processedintoedibleoilforsimilarmarkets
Cattle
Sunflower
Groundnuts
Dairy
Processor
Meat
Processor
Leather
Processor
Processor
Processor
Processor
Milk
Meat
Leather
EdibleOil
EdibleOil
SeedCake
Local
Markets
Urban
Markets
Regionalor
Foreign
Markets
Local
Markets
Urban
Markets
Regionalor
Foreign
Markets
Source:FAO–Agro-basedclustersindevelopingcountries:stayingcompetitiveinaglobalizedeconomy;Dalberganalysis
Zonal
cluster
10
TheMinistryofAgriculturecanmakecatalyticinvestmentstounlock
commonchallenges acrossvaluechainclustersattheregionallevel
Whatarethemajorvaluechain
clusters tobeprioritized?(E.g.
Dodoma)
Whatarethecommonneeds to
makethisvaluechaincluster
successful?(E.g.infrastructure,
talent)
Whattypesofinvestments should
theMinistryprioritizeforthis
cluster?(E.g.directinvestments,
financingfacilities,research)
Whatvalue-chainspecific
investments shouldtheMinistry
prioritizeinthisregion?(E.g.seed
varietyforsunflowervaluechain)
Zonal
cluster
Land: Identifylandforthedevelopmentofvaluechainclusters - close
toproductionofrawmaterials,existingprocessingactivityand
existingorplannedinfrastructure
Infrastructure: Makestrategicinvestmentsininfrastructurewithin
regionalprocessinghubs(e.g.energy,water)andinfrastructure
connectingregionalprocessinghubstoproductioninneighboring
regions(feederroads,storage)commonlyneededacrossvaluechains
Finance:Enablefinancingfacilitiesforassets,technologiesand
storagethat1)buildcommonaggregationanddistributionchannels,
and2)aligntoseasonalityofrawmaterials
Talent:Funduniversitiesintheregiontofillcommongaps in
technical,managerialandsoftskills.Thiswillallowforaflowofskilled
labourwithinandacrossvaluechains
Technology:Investinresearchofnewinnovationandtechnologies
thatenableprocessingcapabilities.Forexample,commonmillingor
crushingtechnologiesfordifferentcrops
Source:FAO–Agro-basedclustersindevelopingcountries:stayingcompetitiveinaglobalizedeconomy;Dalberganalysis
11
MALFshouldthenfocusonspecificvaluechainchallenges,particularly
productivity,tosupportstrongerlinkagestoregionalprocessinghubs
Whatarethemajorvaluechain
clusters tobeprioritized?(E.g.
Dodoma)
Whatarethecommonneeds to
makethisvaluechaincluster
successful?(E.g.infrastructure,
talent)
Whattypesofinvestments should
theMinistryprioritizeforthis
cluster?(E.g.directinvestments,
financingfacilities,research)
Whatvalue-chainspecific
investments shouldtheMinistry
prioritizeinthisregion?(E.g.seed
varietyforsunflowervaluechain)
Valuechain
specific
Thegrowthofagro-processinginanyregionreliesonthe
qualityandsustainabilityofrawmaterials.Productivitycanbe
amajorbottleneckforscalingandimprovingqualityof
processinginTanzania.Theseproductivitychallenges(e.g.
limiteduseofinputssuchasseedsandfertilizers,limited
extensionservices)arespecifictoaparticularrawmaterial
foundacrosszonalclusters.
Thereisaneedforawholevaluechainapproachtoprovidea
holisticpre- andpost-farmstrategy
Thereisanopportunitytocrowd-ininvestmentsforspecific
valuechainswithinpriorityregions wherethegovernmentis
drivinginvestmentstobuildvaluechainclusters
Forexample,thegovernmentcanfocuseffortstoincrease
productivityinthesunflowervaluechainthroughintroducing
seedvarietyandsupportingdemonstrationplotsinthe
Dodomaregion,wherethegovernmentisprioritizing
investmentstodevelopedibleoilandfeedprocessingclusters
12
Giventhisapproach,thestrategywillanswertwokeyquestionstoidentify
andunlockagro-processinginvestments
KeyQuestions
1
WHICH VALUE CHAINS?
Whataretheagricultural
valuechainsthathavethe
potentialtocontributeto
broadbasedeconomic
growth?
2
Description
•
•
•
WHERE TO INVEST?
•
Whereshouldthe
GovernmentofTanzaniamake
theseinvestments?
•
Process
TheMinistryofAgricultureshouldprioritizevalue
chains thatholdthegreatestpotentialforeconomic
transformationandbroadbasedgrowth?
Examplesincludeedibleoils,cashewnut
processing,fruitprocessing,dairyproducts,leather
products,grainmilling,andforestryproducts,
amongmanyothers
Thestrategywillusemarket-drivenandjob
potentialcriteriatofurthernarrowdownASDPII
priorityvaluechains
TheMinistryofAgriculturewillneedtoestablish
wheretomakeproductivity,finance,land,
infrastructure,technologyandtalentinvestments
aroundvaluechainclusters
Theselectionoffocusofazonalclusterandregional
processinghubwillbebasedonthelevelsof
productionandprocessingofvariousvaluechain
clustersintheregion,aswellasregionswithstrong
existingorplannedinfrastructure(e.g.storage,
roads),universitiesandsupportivepartners
13
Agenda
Importanceofagro-processingtoTanzania’sindustrializationgoals
Approachtodevelopinganeffectiveagro-processingstrategy
Prioritizationofvaluechains
Agro-processingstrategy:Crowdingininvestmentsinthreezonalclusters
Annex
Valuechainprioritizationanalysis
Illustrativeexample:Dodoma/Centralclusters
Barriersacrossandwithinvaluechains
DiscussionQuestions
14
1
Buildingonexistingresearch,theagro-processingstrategyfurtherprioritized
ASDPIIprioritycommoditiesusingmarketandjobpotentialcriteria
ASDPIIPriorityCrops
Crops
• Maize
• Rice
• Beans
• Cassava
• Pulses
• Legumes
• Horticulture
• Sorghum
• Millet
• Oilseeds(incl.sunflower
andgroundnut)
• Cotton
LivestockandFisheries
• Dairycattle
• Meat-beef
• Meat-goat
• Skin&hides
• Poultry
•
•
Market
Potential
•
•
•
Job
Potential
•
•
Barriers
andRisk
Localmarketpotential:Whatisthesizeandgrowth
potentialoflocalmarketsforprocessedcrop?
Regionalmarketpotential:Whatisthesizeandgrowth
potentialofregionalmarketsforprocessedcrop?
Globalmarketpotential:Whatisthesizeandgrowth
potentialofglobalmarketsforprocessedcrop?
Suitabilitytomeetdemand:WhatisTanzania’ssuitability
tomeetlocalandregionaldemand,basedoncurrent
productionvolumes,climateandsoiltype,easeof
increasingproduction?
Jobpotential: Whatistheestimatesizeofjobscreatedby
enablingagro-processinginthevaluechain?Whatisthe
qualityofpotentialjobsinthevaluechain?
SkillReadiness:Doestheworkforcehavetheskills
neededinordertotransitiontowardsagro-processingin
particularcrop?Whatistheeaseofbuildingoutthese
skills?
Barriersandrisks:Whatisthelevelofpoliticalinfluence,
regulatorybarriers,structuralbarriersforprivatesector
engagementwithinvaluechain?Howsusceptibleisthe
valuechaintoeconomicorclimateuncertainties?
15
Food
Products
MALFshouldprioritizeeightvaluechainstodrivetheagroprocessing
strategytowardsdecreasingimportdependenceandincreasingexports
Processed
grains
Horticulture
Edibleoils
Dairy
(excluding
maize&rice)
(Sunflower&
groundnuts)
Non-food
Products
1
(fruitsand
vegetables)
Fishfillet
Meat
(beefandgoat)
Key:
Import
substitution
Fertilizer
Leather
processing
Regionaland
foreigndemand
16
Agenda
Importanceofagro-processingtoTanzania’sindustrializationgoals
Approachtodevelopinganeffectiveagro-processingstrategy
Prioritizationofvaluechains
Agro-processingstrategy:Crowdingininvestmentsinthreezonalclusters
Annex
Valuechainprioritizationanalysis
Illustrativeexample:Dodoma/Centralclusters
Barriersacrossandwithinvaluechains
DiscussionQuestions
17
2
Basedontheprioritizedvaluechains,theMinistryofAgricultureshoulduse
fivecriteriatoselectpriorityzonalclusterstofocusagro-processingefforts
Criteriaforprioritizingzonalclusters
Selectregionswith:
• Productionlevel:Highproductionofprioritized
valuechains(buildingonexistingmappingof
agro-ecologicalzones)
Mara
Kagera
Arusha
Mwanza
Shinyanga
Kilimanjaro
•
Processinglevel:Potentialtoincrease
processingactivities
Kigoma
Tabora
Rukwa
•
Infrastructurelevel:Proximitytostrong
infrastructureorfutureinfrastructure
investmentsthathavebeencommitted(e.g.
mergewithUgandaoilpipeline)thatallow
accesstolocaland/orregionalmarkets
Manyara
Singida
Tanga
Dodoma
Pwani
Mbeya
Iringa
Morogoro
Lindi
•
•
Productivitysupport:Levelofextension,
businessdevelopment,andtechnological
providedtoagro-processors
Key
SAGCOTRegion
Ruvuma
Mtwara
Accesstomarkets:Proximitytobordersfor
distributiontoregionalmarkets
18
2
Therearedistinctzonalclustersemergingasprimaryareasofproductionfor
priorityvaluechainsandhighpotentialforprocessing
Primary Production Across Regions
Level of Processing Activities by Regions
22
Furniture, others
Machinery & Electric
Key
Metal & Allied
Building Materials
Sunflower, groundnut
Livestock (cattle, goat)
Sorghum, millet
Livestock, primarily pastoralists
Fruits & Vegetables
Dairy cattle
Fisheries
Chem, Plstc, Rubber
= 1 firm
Paper & Publishing
Timber & Wood
= 10 firms
Leather & Footwear
Textile & Garments
= 20 firms
Food, Bev, & Tob
Source:ClusterCompetitivenessReport(2009);TanzaniaNationalCensusofAgriculture2007; Dalberganalysis
19
2
TheMinistryofAgricultureshouldconsiderexistingandplanned
infrastructureinvestmentswithinthecountryinselectingzonalclusters
Key:
Thesebubblesrepresentthecitiesof
Tanzaniaandthesizeofthebubbles
indicatethepopulationsizeofthecity
ExistingAirport
ExistingPort
FutureAirport
FuturePort
Railway
FutureRailway
Road
FutureRoad
Source:PWC– AfricaGearingUp(2015-2017)
20
2
TheMinistryofAgricultureshouldinitiallycatalyzeagro-processingin3
zonalclusters:CentralZone,NorthernZone,andLakeZone
CentralCluster/Dodoma
•
•
•
Highproductionofsunflower,groundnuts,meat,andgrain
intheDodoma(andneighbouringSingidaregion)
Highconcentrationofandinvestmentsinprocessing
facilitiesinedibleoilandmeat
Majorroadandrailroadinfrastructurehasbeensetupfor
connectionstoDaresSalaam,RwandaandBurundi,as
wellasZambia,DRCandMalawiviatheSAGCOTregion
Mara
Kagera
Shinyanga
Kilimanjaro
Kigoma
Tabora
NorthernCluster/Arusha
•
•
•
•
Arusha
Mwanza
Pwani
Mbeya
Iringa
Morogoro
Lindi
LakeZoneCluster/Mwanza
•
•
•
Highpotentialforrapidlygrowingfishproduction
Highestnumberoffoodandnon-foodprocessingfirms
acrossTanzania,particularlydrivenbythecottonindustry
Existinginfrastructureandeaseofaccessingexport
markets,givencloseproximitytoUganda,Rwanda,Burundi,
DRCandKenya
Source:Dalberganalysis
Tanga
Dodoma
Rukwa
Highproductionoflivestockandfruitsandvegetables
Highconcentrationofunderutilizedprocessingcapabilities
Easeofaccessingexportmarkets,givencloseproximityto
KenyaandUganda
Stronglinkagestodomesticmarketsfacilitatedthroughthe
growingNortherntourismcircuit
Manyara
Singida
Key
ClusterA
Ruvuma
Mtwara
ClusterB
ClusterC
21
2
Withineachzonalcluster,thegovernmentshouldaskfourstrategicquestions
toprioritizeinvestments
ILLUSTRATIVE
Whatarethemajorvaluechainclusters tobe
prioritized?(E.g.Dodoma)
Mara
Kagera
Arusha
Mwanza
Shinyanga
Whatarethecommonneeds tomakethisvalue
chainclustersuccessful?(E.g.infrastructure,
talent)
Kilimanjaro
Kigoma
Tabora
Manyara
Singida
Tanga
Dodoma
Rukwa
Whattypesofinvestments shouldtheMinistry
prioritizeforthiscluster?(E.g.direct
investments,financingfacilities,research)
Pwani
Mbeya
Iringa
Morogoro
Lindi
Whatvalue-chainspecificinvestments should
theMinistryprioritizeinthisregion?(E.g.seed
varietyforsunflowervaluechain)
Ruvuma
Mtwara
22
Thank you!
- Q&A 23
Agenda
Importanceofagro-processingtoTanzania’sindustrializationgoals
Approachtodevelopinganeffectiveagro-processingstrategy
Prioritizationofvaluechains
Agro-processingstrategy:Crowdingininvestmentsinthreezonalclusters
Annex
Valuechainprioritizationanalysis
Illustrativeexample:Dodoma/Centralclusters
Barriersacrossandwithinvaluechains
DiscussionQuestions
24
Agenda
Importanceofagro-processingtoTanzania’sindustrializationgoals
Approachtodevelopinganeffectiveagro-processingstrategy
Prioritizationofvaluechains
Agro-processingstrategy:Crowdingininvestmentsinthreezonalclusters
Annex
Valuechainprioritizationanalysis
Illustrativeexample:Dodoma/Centralclusters
Barriersacrossandwithinvaluechains
DiscussionQuestions
25
1
Previousvaluechainprioritizationsareprimarilybasedonanassessment
ofthemarketsituationforeachvaluechain
ReportDescription
WorldBank2014
AgYeesReport
IIDS 2025
USAIDCOMPETE
AgriFinAccelerate
The reportassesses
comparativeadvantage
ofVCs;strongdatafor
importsubstitutionand
exportpotential
Thereportprovides a
marketassessmentof
processedfoods;
Employmentdatanot
availableforeachVC
Tanzania’sIndustrial
strategyidentifiescore
valuechainsbasedon
demand assessment
data
Thisreport prioritizes
valuechainsbasedon
foodsecurityand
povertyreduction
criteria
The focusofthis
prioritizationwason
thesizeofsmallholder
farmerseachvalue
chainreaches
Local market
demand
Regionalmarket
demand
Globalmarket
demand
Suitabilitytomeet
demand
Jobpotentialin
production
Jobpotentialin
processing
Skillsreadiness
Barriersandrisks
Acrossthesestudies,valuechainshavenotbeenprioritizedbasedonanassessmentof
thelaboursituation,barriersandriskswithineachvaluechain
Source:WorldBank(2014)– Tanzania:ProductiveJobsWanted;AgrifoodYouthEmploymentandEngagementStudy(2016);IntegratedIndustrial
DevelopmentStrategy(2025);USAIDCOMPETEAnalysis(2009);AgriFinAccelerate– TanzaniaLandscapeAnalysis(2016)
26
1
Amongtheshortlistedvaluechains,sevenvaluechainsshowpotentialfor
creatingproductionandprocessingjobsinthefuture
ValueChain
Production
Currentjobs
Processing
Jobgrowth
Currentjobs
Skillreadiness
(Yes/No)
BarriersandRisks
Wheat
4%
Yes
•
Wheatimportedforprocessing
Sugar
3%
Yes*
•
Importbanisriskyforfuturesustainability;fluctuationin
sugar;poorweatheraffectsproduction
Fruit/Veg
5%
No*
•
Unstructuredvaluechain;limitedseedvariety
Dairy
4%
No*
•
Limited improvedbreeds,storageinfrastructureisweak
Edible oil
~4-7%
Yes
•
Processorsunderutilized;Localpreferenceforunrefinedoil
Nuts
9%
Yes*
•
CashewIs highlypolitical
Processed grains
(exc.maize&wheat)
0.5%
Yes
•
Lightprocessingiscommon,limitedpreferenceforhighqualityproducts
Meat
2.5%
No
•
Market preferenceforunprocessedmeat
Fertilizer
~4%
No
•
Lowdemand;requirestrongdistributionnetworks
Light wood
manufacturing
3.7%
Yes
•
Highlyreliantonstrongtrade logistics;illegalloggingisa
majorchallenge
Paper
3.7%
No
•
Fluctuatingpulp prices;competewithplasticforpackaging
Leatherprocessing
2.5%
No
•
Hidesandskinssmuggledtoneighboringcountries(Kenya)
Fishprocessing
3.6^
No
•
Unstructuredvaluechain;sustainabilitypressures
Definitions:
• Currentjobsinproduction: Thisisaqualitativeassessmentoftherelative sizeofcurrentjobs,basedontheestimateofthenumberofSHFsinthevaluechain
• Jobgrowthinproduction: Thisisthegrowthofjobsinproductionforeachvaluechain,representedbytheexpectedgrowthrateofproductionofthevaluechain
• Currentjobsinprocessing:Thisisaqualitativeassessmentsoftherelative sizeofprocessingjobs,basedonthenumberofprocessingjobsperfirm
• Skillreadiness:ThisisdeterminedbythecurrentlevelofprocessingactivitiesinTanzaniaandtheskillneededtomovevaluechaintowards furthervalueaddition
Source:TanzaniaNationalCensusofAgriculture2003and2007;FeedtheFuture(2015),TanzaniaPolicyResearchBrief#2;EulerHermes,GlobalPaper
Report;LightManufacturinginTanzania;Rabobank– TanzaniaSugar;TanzaniaInvest– AgricultureGrowthRate2011-2016
27
Agenda
Importanceofagro-processingtoTanzania’sindustrializationgoals
Approachtodevelopinganeffectiveagro-processingstrategy
Prioritizationofvaluechains
Agro-processingstrategy:Crowdingininvestmentsinthreezonalclusters
Annex
Valuechainprioritizationanalysis
Illustrativeexample:Dodoma/Centralclusters
Barriersacrossandwithinvaluechains
DiscussionQuestions
28
Dodoma providesanopportunityforedibleoilandmeatprocessing,asa
resultof,largeproductionvolumesandemergingprocessingcapabilities
KeyopportunitiesandinvestmentsinDodoma
•
•
ValueChain
EdibleOil
Crops
ILLUSTRATIVE
NationalSocialSecurityFund(NSSF)andCerealsandOtherBoardsofTanzaniahaveinvestedTshs.
3.7billionforthepurchaseofgrainandsunflowermillingmachinesforthedevelopmentofa
modernprocessingfactory
RecentmoveofgovernmentofficestoDodomawillsourcefurtherfundingforinfrastructure
development(road,airports)aswellasgrowlocalmarketforprocessedfood
Current productionlevels
Currentprocessingactivity
• Sunflower
• Groundnuts
• 63,000tons of
sunflower(50-60%of
nationalproduction
fromDodomaand
neighboring,Singida)
• 19,000tonsof
groundnuts
• Thereare94processors(65% urban) in theDodomaregion.Only33processorsare
registeredunderCEZOSOPA
• Onaverage,7,560MTofKernelsareprocessedtoprovide2,268MTofsunfloweroil
annually
• Fewprocessorsinclude:NyemoInvestment,JackmaEnterprises,HeshimayaJikoand
KisasaSupplies
Meat
• Cattle
• Goat
• 1.5millioncattle
• 1.2milliongoats (third
largest)
• Dodomahassetupamodernabattoirwithimprovedhygienicstandardsofurban
retailing.The abattoirhasthecapacitytoslaughterabout200cattleand200small
ruminantseachperday
• There areanemergingnumberofprivatemeatprocessingplants,includingtheMeat
TechnologyTrainingCentre
Grain
• Sorghum
• Bulrush
millet
• 82,000tonsofsorghum
• 16,240tonsofbulrush
millet;leading
productioninlongrainy
seasons
• Despiteproductionlevels,lowlevelofprocessingintheDodomaregion;Majorityof
grainisprocessedbybreweriesintheDodomaandSingidaregions
• TheNationalSocialSecurityFund(NSSF)andothersmadeinvestmentsingrainmilling
machinesinDodoma
Source:AgricultureProductionSurvey2002/03– CropReport;AgricultureProductionSurvey2002/03– RegionalReport:DodomaRegion;Local
InvestmentClimate– SunflowerValueChainforDodomaregion;UnitedRepublicofTanzania– SunflowerSectorDevelopmentStrategy(2016– 2020)
29
MinistryofAgricultureshouldclusterinvestmentsarounddairy,meat,
leather,edibleoilandfeedprocessinginDodoma
ILLUSTRATIVE
Agrovets
Cattle
Sunflower
Groundnuts
Processor
Processor
Seedcake
Edibleoil
Inputsuppliers
anddistributers
Goats
Slaughter
House
Energy
Dairy
Processor
Meat
Processor
Leather
processing
Local
Markets
Urban
Markets
Foreign
Markets
Poweredby
energyproduced
fromgrainbyproducts(Husks)
GrainsByProducts
Feed
Processor
Foreign
Markets
Local
Markets
Source:AgricultureProductionSurvey2002/03– CropReport;AgricultureProductionSurvey2002/03– RegionalReport:DodomaRegion;Local
InvestmentClimate– SunflowerValueChainforDodomaregion;UnitedRepublicofTanzania– SunflowerSectorDevelopmentStrategy(2016– 2020)
Urban
Markets
30
Strategicinvestmentsacrossproduction,processinganddistributionin
Dodoma’slivestockandedibleoilclusterwillhelprealizeitsfullpotential
ILLUSTRATIVE
Production
Processing
Market
• Linkagesbetweenprocessors:Strong • LocalMarketPreference: Thereisa
• Productivity:Accesstoimproved
linkagesbetweenmeatandlivestock
growinglocaldemandforrefined
breedsofcattle toimprovequalityof
processorstoensureoptimal
edibleoil
milkandmeatproducts.Thisisa
treatmentofhidesandskins
majorbottleneckforthecluster
• Packaging:Importedpackaging
becauseprocessorsare
materialsforbothmeatandedibleoil
underutilized,particularlyinthedry • Technology:
• Livestock:Givenlinkagesbetween
productsdriveupcostsandmake
seasons
processors,technologyneedstobe thennotcompetitive.Buildpackaging
updatedandoptimizedtoensure
industryprimarilythroughtalent
• Infrastructure: Singidaisthesecond
limitedlossofproducts
developmentandfinancingfacilities
largestproducerofsunflowerand
• EdibleOil: Useofcommon
groundnuts.Therefore,feederroads
technologiestoprocesssunflower • Infrastructure:
fromSingida toDodomafor
andgroundnuts
• Dodoma– Dar:Strongroadandrail
transportationofsunflowerand
infrastructurefromDodomatoDar
groundnuts
• Finance: Limitedaccesstofinancefor
esSalaamandMwanzaforthe
smallerprocessorsacrossvalue
distributionofprocessedproducts
• Talent:Despiteavailabilityofchilling
chains,customizedforlimited
tourbanmarkets.Arusha,the
plantsandinsomecasescooling
secondlargestcity,hasstrong
facilities,thereislimitedcapabilityto cattle/goatsduringdryseason
livestockprocessingpotential
maintaintechnologythatfrequently
• Talent: Supplyofmanagerialand
• Dodoma– Kenya:Cheapairfreight
breakdown
technicalcapabilitiesacross
logisticstoexportmeatandleather
processingofvaluechains
toforeignmarkets
31
Fourinvestmentsshouldbeprioritizedtocatalyseagro-processingacross
valuechainsclustersintheDodomaregion
ILLUSTRATIVE
Need
Action
Priority
Effort
Land
Selectlandand investinfrastructure(electricity,water,storage)forthisclusterofvaluechains.
Landselectionshouldtakeintothesizeoflandrequiredbasedontheprocessingpotentialof
theland,proximitytoproductionsites,landsuitabilityforcommercialproduction,and/or
proximitytoexistingslaughterhousesoraggregationpoints.Forexample,costsforelectricity
andtransportmakesunfloweruncompetitiveagainstPalmOilindomesticmarkets
High
High
Talent
Invest inbuildingthecapacityofUniversityofDodomaandtheMeatTechnologyTraining
Centretotrainlabourforcefor:
• Equipmentoperations,maintenanceandmanagementforallvaluechains
• Managerialcapabilitiestoscalesmallandmediumprocessors
• Technologiesandinnovationsaroundpackagingaswellaspackagingrequirementsand
preferencesforurbanandforeignmarkets
• Animalhusbandrytoenhancecattleproductivityandgrowfeedprocessing
High
High
Technology&
Research
Investintransformingthe AgriculturalResearchInstituteinDodomaintoahubforresearchand
innovationforthelivestock,edibleoilandanimalfeedprocessing.Thisincludesconducting
marketresearchforprimaryproducts,researchandimplementationofnewtechnologies,as
wellashostingtechnicalconferencesandtradeshows
High
High
Finance
InpartnershipwiththeTanzaniaAgriculturalDevelopmentBank,facilitatetheprovisionof:
• Workingcapitalfordairy,meatandleatherprocessors,particularlydesignedtoadaptto
lowsupplyofcattleduringdryseasons
• Assetfinancingtosetupcoldstoragefacilitiesormillingequipment
• Workingcapitalforpackagingandlogisticsservices
High
Med
32
Investmentsininfrastructureneedtobealignedwithexistingeffortswithin
theMinistryofAgricultureandtheMinistryofWorks
ILLUSTRATIVE
Need
Action
Priority
Effort
Infrastructure–
Feeder roads
InpartnershipwithMinistryofWorks,investinfeederroadsbetweenDodomaclustersand
strategicproductionsitesinSingida.Thisinvestmentshouldbeaccompaniedbyappropriate
storagefacilities,particularlyforlivestockormilk
Med
Low
InfrastructureMarkets
InpartnershipwithMinistryof Works,investinupgradingroadandrailinfrastructureto
improveaccesstourbanmarkets,suchasDaresSalaamandMwanza.Theseinvestmentsare
alreadyunderwayaspartofthetradecorridorslinkingtheDaresSalaamporttoKigaliand
therefore,hasnotbeeprioritizedashighfortheagro-processingstrategy
Med
Low
Marketing
Launch advertisingcampaigntogenerategrowthinlocaldemandforrefinededibleoil(from
sunflower,groundnuts,simsimandothers)ashealthierovertheuseofunrefinedoil(current
marketpreference).Growingdemandislowpriorityuntilproductioncapabilitiesareableto
consistentlymeetexistingdemand
Low
Low
33
Productivityofcattle-keepingandsunflowerproductionisamajorbottleneck
fortheedibleoilandlivestockvaluechainclusters
ILLUSTRATIVE
Value Chain
ProductivityChallenge
Action
Priority
Effort
Cattle- Dairy
Therehasbeenanincreaseinproduction,based
ongrowthofcattlepopulation
• IntroduceimprovedcattlebreedintotheDodomaregional
cluster,alongsideafinancingfacilityandtrainingprogram
tailoredtosupportsmallholderfarmersthroughthe
AgriculturalResearchInstituteinDodoma
High
High
• IntroduceimprovedcattlebreedintotheDodomaregional
cluster,alongsideafinancingfacilityandtrainingprogram
tailoredtosupportsmallholderfarmersthroughthe
AgriculturalResearchInstituteinDodoma
High
High
• IntroduceimprovedgoatbreedintotheDodomaregional
cluster,alongsideafinancingfacilityandtrainingprogram
tailoredtosupportsmallholderfarmersthroughthe
AgriculturalResearchInstituteinDodoma
Med
Med
Yieldhasstagnatedasaresultoflocalgeneric
cowsproducing0.5-2litresperlactatingcow.
Furtherloweredbylackoffarmereducation,
poornutrition,diseaseandweakextension
services
Cattle- Meat
Theindigenouscattlegrowsslowlytoalight
matureweightcomparedtoimprovedbeef
breeds(suchasBoran)reachingoptimalweight
in3years
• Givenhighproportionofhouseholdsreceivingextension
services,focusonimprovingexistingextensionservicesto
supporttheuseofimprovedcattlebreedintheDodoma
cluster,stronglylinkedtotheAgriculturalResearchInstitute
Thequalityofmeat(tasteandfatdistribution)
fromlocalbreedsislowagainstthedemandof
upperinternalmarketsandexport
Goats
Theindigenousgoatshavelimitedandslow
growth(25-30kgmatureweight),while
improvedgoatsreachslaughterweightof40kg
inlessthan18months
Thequalityofmeat(tasteandfatdistribution)
fromlocalbreedsislowagainstthedemandof
upperinternalmarketsandexport
Source:UnitedRepublicofTanzania– SunflowerSectorDevelopmentStrategy(2016– 2020); REPOA– Socio-EconomicFactorsLimitingSmallholder
GroundnutProductioninTaboraRegion
34
Productivityofcattle-keepingandsunflowerproductionisamajorbottleneck
fortheedibleoilandlivestockvaluechainclusters
ILLUSTRATIVE
Value Chain
ProductivityChallenge
Action
Priority
Effort
Sunflower
Thereislimitedhigher-qualityseedsavailablein
themarket;Seedcertificationcantake2-3years
• WorkwithTanzaniaAgriculture,FoodandDrugAuthority
(TAFDA)andTanzaniaOfficialSeedCertificationInstitute
(TOSCI)tofast-trackseedvarietyverificationandregistration
processforedibleoilseeds,basedonresearchconductedin
otherEastAfricancountries
High
Med
Med
Low
Limitedavailabilityofagriculturalinputs,
includingfertilizersandpesticides
• EstablishseedproductionrequirementsbetweenagroprocessorsandASA/TASTA
• Supportdemonstrationplotsofimprovedseedvarietiesand
improvedagriculturalpracticesforsmallholderfarmersto
adopt.Ensurethesedemonstrationplotsareaccompanied
withfinancingfacilitiesforfarmers
Groundnuts
Groundnutisasourceofhouseholdnutrition,
notsoldforprocessing
Productionperhectareislowcomparedto
estimatedminimumyields,esp.indryseasons.
Costofinputishigherthanearringsbymargins
• Expandextensionservicestoensurethatsmallholder
groundnutfarmershaveaccesstohigh-yieldinggroundnut
seedvarieties,agro-chemicals,andimprovedfarminputs
• Provideafinancingfacility(throughtheTanzaniaAgricultural
DevelopmentBank)designedfortheseasonalityofgroundnut
production
Source:UnitedRepublicofTanzania– SunflowerSectorDevelopmentStrategy(2016– 2020); REPOA– Socio-EconomicFactorsLimitingSmallholder
GroundnutProductioninTaboraRegion
35
ArushaandKilimanjaro regionsshowssignificantopportunitytogrow
processingacrossdairy,meataswellasfruitsandvegetables
KeyopportunitiesandinvestmentsinArushaandKilimanjaro
•
•
•
•
ValueChain
Crops
Easeofaccessingexportmarkets,givencloseproximitytoKenyaandUganda
StronglinkagestodomesticmarketsfacilitatedthroughthegrowingNortherntourismcircuit
Climateconditionsarefavourabletolivestockkeepingandproductionoffruitsandvegetables
ArushaandKilimanjaroregionshavethethirdandforthlargestplantedarea(Ha)withirrigationin
Tanzania,thehighestpercentoftotalplantedarea(%ofregion),amoderatenumberofhouseholds
sellingcrops,andlargestproportionofhouseholdsreceivingextensionservices
Current productionlevels
Currentprocessingactivity
Dairy
• Cattle
• 240,000 improveddairy
cattleinArushaand
Kilimanjaro
• Arushaproduces12%of
thecountriesmilk
production
• Thereare5operatingprocessorsinArusha(30-60%capacity,avg.productionof3100
litersperday),includingInternationalDairyProducts,MountainFree,ArushaDairy,
KijimoDairyandLongido
• Brookside (T)Ltdisnotinoperation(capacityof45,000litersperday)
• Kilimanjarohas9operatingprocessors(27-60%capacity;avg.productionof510liters
perday)
Meat
• Cattle
• Goat
• Thehighestnumberand
density ofcattlein
Arusha(1.2million
heads)
• Thehighestnumberand
density ofgoatsin
ArushaandKilimanjaro
• ThetwomodernabattoirsinArushaaretheArushaMeatCompanyLimited(AMC)
ownedbyArushaMunicipalCouncilandHappySausages. MeatKingisan additional
meatprocessingplant
• High-classbutcheriesserveasmallportionoftheredmeatmarket,mainlyhigh-class
hotelsandrestaurantsinthecity,andwealthyindividuals
• 26,000tonstotal; 69%
ofproductionfrom
onionsandtomatoes
• ProcessorsintheArusha/Kilimanjaroregion, includeDarsh(tomatoes).Moreexporters
offreshfruitandvegetablesinthemarketincludingHomeVegFoodsandSerengeti
Fresh
Leather
Fruits &
Vegetables
• Onions
• Tomatoes
• More…
• Kilimanjarohasa higherconcentrationoftanningfacilities,includingMoshiLeather
Industries(IPS),AfroLeatherIndustries(100hides),HimoTanners(250hides,3000skills
perday).Arushahasonetanningfacility
Source:NationalSampleCensusofAgriculture2007/08– LivestockSector;NationalSampleCensusofAgriculture2002/03- RegionalReport:Arusha
Region;LivestockSectorDevelopmentStrategy(2010);SNV– ReadMeatforLocalandExportMarkets(2008)
36
MinistryofAgricultureshouldclusterinvestmentsarounddairy,meat,
leather,fruitsandvegetablesclustersinthegreaterArusharegion
Agrovets
Cattle
Fruit
Vegetables
Processor
Processor
Chips/Flour
Canned
Inputsuppliers
anddistributers
Goats
Slaughter
House
Dairy
Processor
Meat
Processor
Leather
Processor
Local
Markets
Urban
Markets
Foreign
Markets
Juice/Beer
Local
Markets
Urban
Markets
Source:AgricultureProductionSurvey2002/03– CropReport;AgricultureProductionSurvey2002/03– RegionalReport:DodomaRegion;Local
InvestmentClimate– SunflowerValueChainforDodomaregion;UnitedRepublicofTanzania– SunflowerSectorDevelopmentStrategy(2016– 2020)
37
Strategicinvestmentsacrossproduction,processinganddistributionin
Arusha’svaluechainclusterwillhelprealizeitsfullpotential
Production
• Productivity:Accesstoimproved
breedsofcattleandseedvarietyto
improvequalityofproduce.Thisisa
majorbottleneckforthecluster
becauseprocessorsareunderutilized
• Infrastructure: Kilimanjarohasa
largeproductionoffruitsand
vegetablesaswellaslivestock
population.Therefore,feederroads
fromKilimanjaro toArushafor
transportationofrawmaterials
• Finance:Buildcoldstorageand
aggregationfacilitiesbetween
KilimanjaroandArusha
• Talent:Despiteavailabilityofchilling
plantsandinsomecasescooling
facilities,thereislimitedcapabilityto
maintaintechnologythatfrequently
breakdown
Processing
Market
• Linkagesbetweenprocessors:Strong • Packaging:Importedpackaging
linkagesbetweenmeatandlivestock
materialsforbothmeat,fruitand
processorstoensureoptimal
vegetableproductsdriveupcostsand
treatmentofhidesandskins
makethennotcompetitive.Build
packagingindustryprimarilythrough
• Technology:
talentdevelopmentandfinancing
• Livestock:Givenlinkagesbetween
facilities
processors,technologyneedstobe
updatedandoptimizedtoensure
• Infrastructure:
limitedlossofproducts
• RoadorAirInfrastructure:Cheap
andreliableaccesstoairfreightor
• Finance: Limitedaccesstofinancefor
roadlogisticstoexportprocessed
smallerprocessorsacrossvalue
goods
chains,customizedforlimited
cattle/goatsduringdryseason
• Talent: Supplyofmanagerialand
technicalcapabilitiesacross
processingofvaluechains
38
Fourinvestmentsshouldbeprioritizedtocatalyseagro-processingacross
valuechainsclustersintheDodomaregion
Need
Action
Priority
Effort
Land
Selectlandand investinfrastructure(electricity,water,storage)forthisclusterofvaluechains.
Landselectionshouldtakeintothesizeoflandrequiredbasedontheprocessingpotentialof
theland,proximitytoproductionsites,landsuitabilityforcommercialproduction,and/or
proximitytoexistingslaughterhousesoraggregationpoints
High
High
Talent
Invest inbuildingthecapacityofUniversityofArushaandtheArushaMeatCompanyLimited
(AMC)totrainlabourforcefor:
• Equipmentoperations,maintenanceandmanagementforallvaluechains
• Managerialcapabilitiestoscalesmallandmediumprocessors
• Technologiesandinnovationsaroundpackagingaswellaspackagingrequirementsand
preferencesforurbanandforeignmarkets(particularlyforfruit/vegetableprocessing)
High
High
Technology&
Research
Investintransformingthe AgriculturalResearchInstituteinArushaintoahubforresearchand
innovationforthelivestockandfruit/vegetableprocessing.Thisincludesconductingmarket
researchforprimaryproducts,researchandimplementationofnewtechnologies,aswellas
hostingtechnicalconferencesandtradeshows
High
High
Finance
InpartnershipwiththeTanzaniaAgriculturalDevelopmentBank,facilitatetheprovisionof:
• Workingcapitalfordairy,meatandleatherprocessors,particularlydesignedtoadaptto
lowsupplyofcattleduringdryseasons
• Workingcapitalforpackagingandlogisticsservices
High
Med
39
Fourinvestmentsshouldbeprioritizedtocatalyseagro-processingacross
valuechainsclustersintheDodomaregion
Need
Action
Priority
Effort
Infrastructure–
Feeder roads
InpartnershipwithMinistryofWorks,investinfeederroadsbetweenArushaclustersand
strategicproductionsitesintheKilimanjaroregion.Thisinvestmentshouldbeaccompaniedby
appropriatestoragefacilities,particularlyforlivestockormilk
Med
Low
Productivity
(Value-Chain
Specific
bottlenecks)
AspartofMALF’sexistingeffortstoimproveagricultureproductivity,prioritizeproductivity
investmentsforprioritizedcropsorlivestock.Forexample,prioritizeintroductionofimproved
cattlevarietiesforimprovedqualityofdairyandbeefinthegreaterArusharegion
High
Med
InfrastructureMarkets
InpartnershipwithMinistryof WorksandPresident’sOffice,assessthecostofupgradingroad
infrastructureversusairfreightservicestoimproveaccesstoborderingcountries,Kenyaand
Uganda
Low
Low
40
Agenda
Importanceofagro-processingtoTanzania’sindustrializationgoals
Approachtodevelopinganeffectiveagro-processingstrategy
Prioritizationofvaluechains
Agro-processingstrategy:Crowdingininvestmentsinthreezonalclusters
Annex
Valuechainprioritizationanalysis
Illustrativeexample:Dodoma/Centralclusters
Barriersacrossandwithinvaluechains
DiscussionQuestions
41
Therearefourprinciplestocreating,socializingandexecutingasuccessful
agro-processingstrategy
RationalandImplications
Employment
growth
Localand
regional
markets
Privatesector
engagement
Fullvaluechain
development
• Thecoreobjectiveofdevelopinganagro-processingstrategyinTanzaniaistoaddresstheveryrapidgrowthin
Tanzania’slaborforce.Tanzania’srapidlygrowingyouthpopulationshouldbedrivingthecountry’sagenda,as
youthunder25accountfor66%ofTanzania’spopulation
• Thiswillinfluencetheprioritizationofvaluechains.Forexample,currentinternationalexports(e.g.coffee,
cotton,tobacco)areimportantbutcannotbethefoundationofastrategy,astheyinvolvetoofewfarmsandfirms
• ManySmallandMediumEnterprises(SMEs)arelikelytoemploymorepeoplecomparedtolargecompaniesfor
thesamelevelofoutput,therefore,willbeafocalpointoftheagro-processingstrategy
• Theprimaryfocusshouldbeaddressinglocalandregionaldemand.Regionalmarketsarelargerandprovidean
environmentinwhichlocalfirmscangrowandbecompetitive.Regionaldemandexpandsthemarketfor
Tanzanianproducts,allowsthecountrytogrowitsscaleofproductionandthusreduceunitcosts.Inthelongterm,
agro-processinginTanzaniacanmoveuptheproductsophisticationladderforhighervalueaddedandeventual
expansionoutsidetheregionintoglobalmarkets
• ThiswilldeterminethetypesofvaluechainsthatTanzaniacancompeteinregionally
• Privatesectorengagementiscriticalindevelopingandimplementingtheagro-processingstrategy.Private
sectorplayersarefacingsignificantchallengesthatpolicyandplanningeffortsoftenoverlook.Asaresult,private
sectorengagementwillstrengthenthebuy-inandeffectivenessofthestrategy
• Thereisaneedforawholevaluechainapproachtoprovideaholisticpre- andpost-farmstrategytowards
industrialization.IfTanzanianprocessingcompaniesaretorespondtorapidgrowthinlocalandregionalmarkets,
theyneedreliablesuppliesofsufficientrawmaterial(ofadequatequality)fromlocal(preferably)ornearby
regionalsources
Source:Source:FSDT“Micro,SmallandMediumEnterprisesinTanzania”(2012);UNCDFReport(2016);Dalberganalysis
42
Tanzaniafacesanumberofoverarchingbarriersacrossvaluechains
nationally
Agricultural
Productivity
Innovative
Finance
• Thequalityofproducereceivedfromsmallholderfarmersoftendoesnotmeetthequalityrequirementsofregionalandglobal
markets.TheaveragefoodcropproductivityinTanzaniais1.7tonperhectare,whereasgoodagriculturepracticesshouldresult
inyieldsof3.5-4.0tonsperhectare.Thisstemsfromlimiteduseandhighcostsofinputs(fertilizers,highqualityseeds,etc.)
• Qualityoftrainingprovidedbygovernmentextensionworkersvariesfromregiontoregion,givenfundingisallocatedatthelocal
governmentlevel. NGOshavesteppedintocomplementagronomicsandfarmerstrainingprovidedtosmallholderfarmers
• Accesstofinancialproductsforsmallandmediumagro-processorsislimited. Over50%ofagribusinessesareexcludedoruse
informalfinancialmechanisms.Afewbanksprovideloansinselectconditions,suchasusingwarehousereceiptsascollateral
• Accesstofinanceforsmallholderfarmersisimportantforthesuccessofagro-processors. Smallholderfarmersareunableto
financeinputs,limitingthequalityofproducethatmeetsglobalqualityrequirements.Largeagro-processorsoftenhavetoactasa
financersforsmallholderfarmers;limitingtheirscaleinthelong-term
Technology
Efforts
• TherearelimitedtechnologiesavailableinTanzaniato improvepackaging,qualitycontrolandcommunicationforagroprocessingfirms.Theneedforquality-enhancingtechnologiesismoreimportancethancost-reducingtechnologies
Talent
Capabilities
• Humancapitalandmanagerialexpertisearecritical,especiallyforsemi-processesandconsumption-readyproducts.Business
supportsystemsareneededtosupportsmallerandmedium-sizedagribusinessscaletomeetdemand
• Therearelimitedskillstocreateandusenewtechnologiesforvalueadditionandprocessingactivities
Land
• SpecialEconomicZoneandExportProcessingZoneshavefallenshorttosupportthegrowthofagro-processinginTanzania,in
theabsenceofanationalagro-processingstrategywithclearlyprioritizedvaluechainsandregions.Thereareover30agroprocessinginvestmentsintheSAGCOTregionthathavenotbeenrealizedresultingfromvaryingbarriers,includinglandissues
• Weakinfrastructure(includingroads,water,electricity,storage)isabarriertothegrowthofagro-processing.Bothsmallerand
largerfirmsarefacedwithincreasedcostsofgenerators,lossofprocessedproductsandupkeepofstoragefacilities
Infrastructure
• DespiterecentinvestmentsinrailandroadintheSAGCOTregion,studiesshowfarmersfaceupto40%lossofharvestand
reducedqualityofproduceneededforprocessinginTanzania
Source:USAIDFeedtheFutureandTanzaniaPartnershipandAccountabilityCommittee(PAC)– LandWorkingGroup;REPOA– Tanzania MarketPan;OECD–
OverviewofprogressandpolicychallengesinTanzania;AgribusinessforAfrica’sProsperity;DalbergAnalysis
43
Productioncapacity,particularlyavailableforcommercialpurposesisa
majorbottleneckforsunfloweroil,grainanddairyprocessinginTanzania
Value
Chains
EdibleOil
Sunflower
Groundnuts
Valuechain
cluster
Barriers toAgro-processinggrowth
Productivity
Finance
Technologies
TalentCapabilities
Land
Infrastructure
Thereisadequate
accesstoChineseand
Indiancrushing
equipment
Trainingneedsinclude:
• Qualitystandards
andcontrol
• Storagetechniques
• Packaging(material
imported)
• Integratedpest
management
• Managerial
Landaccessibilityand
certificationisa
constrainttosunflower
production,not
groundnutproduction
Minimalstorage
facilities/technologies
arerequiredacrossVC;
However,postharvest
storagelossfrom
storageiscausedby
pests(72%ofloss)
Manyprocessing
firmsareunderutilized
• Limitedhigher
qualityseeds;23yearsforseed
certification
• Limitedlinkages
betweensmall&
largerefiners
Limitedfinancefor
improvedseedsfor
increasedproduction
Grain
processing
Sorghum
Millet
Productionhas
increased,however,
majorityofgrains
producedis
consumedathome
orsoldtobreweries
Financingforbrewing
equipmentforlocal
beerandimproved
processingequipment
forflour
Limiteduseof
advancedtypesoffarm
mechanization,ox
ploughandother
laboursaving
technology
Limitedneedfor
processingcapabilities,
millingiscoreto
culture
Investorsface
challengesinacquiring
landforprocessing
(similaracrosssectors)
Storagefacilities,
coolingcollection
pointsareneeded
Fruits&
Vegetables
Fruitsaregrownin
gardensratherthan
farms,therefore,
scattered.Fruit
varietiesarenot
alignedwith
processingneeds
Limitedfinancing
availableforagroprocessingequipment
andvehiclesfor
transportingproduce
toprocessingsites
Climatesmart
technologies,suchas
loworwooden
greenhouseare
neededtoimprove
production,however,
expensive
Trainingneedsinclude:
• Qualitystandards
andcontrol
• Storagetechniques
• Packaging(material
imported)
• Managerial
• Transportand
logistics
Investorsface
challengesinacquiring
landforprocessing
(similaracrosssectors)
Coldchainstorageare
criticaltoreducepostharvestloss
Highriskoffinancing
processingmachines
(particularlyforexport
markets),given
underutilization
Productionof
tomatoesconsistent
thaninKenya
Key:
Majorbarrier
Moderatebarrier
Needforimproved
refiningtechnologies;
andtalenttransferon
theuseoftechnology
Investorsface
challengesinacquiring
landforprocessing
(similaracrosssectors)
Farmerstravel6kmto
findmarkets
Limitedpackaging
materialslocally
Flightstoexport
productstomarketsin
Europeareunreliable
andspace-constrained
Lowbarrier
Source:UnitedRepublicofTanzania– SunflowerSectorDevelopmentStrategy(2016– 2020);Dalberganalysis
44
Limitedcoldstoragefacilitiesandtransportincreasepost-productionand
post-processinglossesfordairy,meat,leatherandfishprocessing
Value
Chains
Dairy
Cattle
Valuechain
cluster
Barriers toAgro-processinggrowth
Productivity
Cattlemilk
productionis
growingat4%per
year.Seasonality
canreduce
processors
utilizationby50%
Limitedimproved
cattlefordairy
production(<1%)
Meat
processing
Cattle
Goat
Domesticmarket
preferences
disincentivesquality
Leather
processing
Limitedattentionis
paidtohidesand
skinsforfurther
processing
Fish
processing
Asmallpercentage
offarmersare
engagedinfish
farming;resultingin
lowlevelsof
production
Finance
Technologies
TalentCapabilities
Land
Somechillingplants
runonsubpar
equipmentthat
frequentlybreakdown
Limitedtraininginmilk
handling,chilling
equipment
maintenance,and
qualitycontrol
Landisnotamajor
barrierforproduction.
Oftenresorttozero
grazing
Limitedaccessto
finance,particularlyfor
smallerprocessors
Higherriskforfinancial
institutionsduetolow
profitability,
particularlyduringdry
season
Financewasnot
identifiedasamajor
barrier
Forsmallprocessors,
businessskillsarea
barriertoaccessing
financeandupgrading
equipment
Investorsface
challengesinacquiring
landforprocessing
(similaracrosssectors
Infrastructure
Storagecentersare
available
Fewchillingplants,
expensiveandnotall
operational
Costofelectricity,
packagingand
transportmakeit
uncompetitive
Coolingfacilitiesand
mobilecoolers
requiredfor
transportation
Limitedskillsrequired,
however,largeneed
forsanitationand
cleanlinesstraining
Investorsface
challengesinacquiring
landforprocessing
(similaracrosssectors
Limitedtransportation
andcoolingfacilities
Limitedbarriers
Limitedskillstocare
forhidesandskins;
technicalskillsfor
furtherprocessing
Investorsface
challengesinacquiring
landforprocessing
(similaracrosssectors
Limitedtransportation
andcoolingfacilities
Coldchainsrequiredto
transportprocessed
fish
Difficultyobtaining
suitablepersonnelfor
laboratorypostsand
fishqualitycontrol
procedures
Investorsface
challengesinacquiring
landforprocessing
(similaracrosssectors
Storagefacilities
influencesdurabilityof
fish.Frozenfishcanbe
transportedbyrailand
roadnetworksseverelyaffectedby
weather
Key:
Majorbarrier
Moderatebarrier
Lowbarrier
Source:LivestockSectorDevelopmentStrategy(2010);SNV– ReadMeatforLocalandExportMarkets(2008);FAO– TheNilePerchProcessingIndustryin
Tanzania
45
Agenda
Importanceofagro-processingtoTanzania’sindustrializationgoals
Approachtodevelopinganeffectiveagro-processingstrategy
Prioritizationofvaluechains
Agro-processingstrategy:Crowdingininvestmentsinthreezonalclusters
Annex
Valuechainprioritizationanalysis
Illustrativeexample:Dodoma/Centralclusters
Barriersacrossandwithinvaluechains
DiscussionQuestions
46
Discussionquestion#1
• Privatesectorplayersmayrequireadditionalincentivestoinvestintheagriculturesector.
Localprocessingfirmsareoftensupportedthroughsubsidies,taxexemptionsorimport
bansinordertoprotectandgrowlocalprocessingcapacity.
• Althoughincentivepackagesmaybehelpful,theyoftenbenefitlargerfirmsandarenot
sustainable.Onceincentivepackagesareremoved,productsbecomeuncompetitivein
domestic,regionalandforeignmarkets
• Ifincentivepackagesweretobeprovided,theyshouldbetargetedtosmallerfirmsand
limitthevalueandlengthofthesubsidyinordertosustainablyincreaselocalproduction
andprocessingcapabilities
Whatincentivepackagesarenecessarytoincrease
privatesectorinvestmentsinagro-processing?How
shouldtheseincentivepackagesbestructured?
47
Discussionquestion#2
• TherearemanyongoingeffortstoimprovethegeneralbusinessenvironmentinTanzania,
aimedatgrowingprivatesectorinvestmentsacrossallsectors.Althoughtheseeffortswill
helpunlockgeneralbarriersfaced,theymaynotbespecificallytargetedtounlockbarriers
facedbyinvestorsinterestedinagro-processing
• Additionalimprovementstothebusinessenvironment– beyondincentivepackaged–
maybeneededspecificallytosupportagro-processing, giventhenatureoftheagriculture
sector
Takingastepbackfromincentivepackages,arethere
additionalimprovementswithinthebusinessenvironment
thatwouldbemostneededforagro-processing?
48
Discussionquestion#3
• Agricultureproductivityisamajorbottleneckforthegrowthofagro-processingin
Tanzania.Smallholderfarmersproducemajorityofrawmaterialsusedforagro-processing.
Limiteduseofinputs(seedvarieties,fertilizers,agro-chemicals),adequatestoragefacilities
foraggregationandtransportation,unstructuredvaluechains,andmorebarriersreduce
thequalityofrawmaterialsneededforforeignmarkets
• Largescalecommercialfarmscanbehighlycontrolledforagronomicpracticesand
therefore,moreproductiveinproducinghigh-qualityrawmaterials.Large-scale
commercialfarmingcandisplacesmallholderfarmers,causingconcernformany
governmentsinterestedinmaintaininglowunemploymentrates
• Outgrowerschemescanbeaneffectivetooltomanageproductivitywhilemaintaining
sourcesofincomeforsmallholderfarmers
Howdoweensurethatweimprovethequalityof
rawmaterialsforprocessing,whilesupporting
smallholderfarmers?
49