UNCTAD Expert Meeting. "Enabling small commodity producers in developing countries to reach global markets"

Transcription

1 UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT UNCTAD Expert Meeting "Enabling small commodity producers in developing countries to reach global markets" Organized by UNCTAD Commodities Branch Web: December 2006 Mtibwa Outgrowers Scheme: A model for small holder cane production in Tanzania by Mr. Reuben Matango Chairman, Mtibwa Outgrowers Association The views expressed are those of the author and do not necessarily reflect the views of the UNCTAD Secretariat, nor do they imply the expression of any opinion whatsoever on the part of the secretariat of UNCTAD concerning the legal status of any country, territory, city or area, or of its authorities or concerning the definition of its frontiers or boundaries.

2 MTIBWA OUTGROWERS SCHEME (A Model for Small holder commodity producers in developing countries to reach markets) A TANZANIAN CASE STUDY PRESENTATION (AT UNITED NATIONS EXPERTS MEETING GENEVA) by REUBEN R. MATANGO B.A. Hons, M.A. (Sociology UDSM) Diploma in Public Admin-Sweden MTIBWA OUTGROWERS ASSOCIATION P.O. Box 41 MTIBWA, TANZANIA TEL (0) CELL (0) rmatango05@yahoo.com Organized by UNCTAD, GENEVA December 11th 13th, 2006

3 OUTLINE Background Tanzania Sugar Industry Mtibwa Outgrowers Scheme Poverty reduction Impact Impact of EU reforms Constraints Conclusion

4 BACKGROUND (TANZANIA) Population: 36 Million GDP: 14 Billion Tshs. Agriculture: 46% of GDP, 83% of employment FDI: Agriculture lagging behind

5 BACKGROUND (SUGAR INDUSTRY) /68: Private ownership 1967/ : Government ownership 1998 present: Privatization

6 OUTGROWER ASSOCIATIONS Smallholder farmer groups are on the increase Active agents in poverty alleviation Sugar industry: 3 outgrower associations, plus apex association (TASGA) Outgrowers represented on Sugar Board of Tanzania Outgrowers not represented in company boards Mtibwa outgrowers scheme contributes more than 56% of cane to the sugar factory.

7 SUGAR OUTGROWER ASSOCIATIONS Organized and registered in 1996 Vision and Mission of MOA Key Objectives: Represent farmers interests to government and other forums/advocacy Source (grant and loan) funds for use by members Educate farmers on crop husbandry and entrepreneurship skills Acquire machinery, equipment and inputs for cane development Environmental conservation

8 SUGAR OUTGROWER ASSOCIATIONS Achievements: - Tripled membership between Mtibwa Outgrowers Association has acquired limited machinery and equipment - Created employment - All three associations have established SACCOS - Increased members cane production by % - Has established Transport association - Secured very limited investments and Operations

9 POVERTY REDUCTION IMPACT Through an increase in the number of cane growers, from 25 founders to 5000 in Through increased sugarcane production for outgrowers association members. Catalysts for this were the development of a reliable market for cane, as well as an increase in cane prices.

10 MTIBWA - SUGARCANE GROWERS INCOME GROUPS 1997/98 (Government minimum wage tshs 240,000 p.a) 7% 1% Farmers with revenue below 240,000 29% 63% Farmers with revenue btn 240,000/= and 1,000,000/= Farmers with revenue btn 1,000,000/ and 5,000,000/= Farmers with revenue above 5,000,000/=

11 MTIBWA - SUGARCANE GROWERS' INCOME GROUPS 2004/05 3% Farmers with revenue below 240,000 20% 31% Farmers with revenue btn 240,000/= and 1,000,000/= Farmers with revenue btn 1,000,000/= and 5,000,000/= 46% Farmers with revenue above 5,000,000/=

12 MTIBWA - SUGARCANE GROWERS' INCOME GROUPS 2005/06 28% 4% 23% Farmers with revenue below 240,000 Farmers with revenue btn 240,000/= and 1,000,000/= Farmers with revenue btn 1,000,000/= and 5,000,000/= 45% Farmers with revenue above 5,000,000/=

13 POVERTY REDUCTION IMPACT Observations: New cane farmers tend to feature in the second column (<Tshs. 240,000/year) or pie charts (1-5). Over the period, there is a reduction in the proportion of farmers earning less that Tshs. 240,000 pa, even as total farmer numbers increase over the period. Increased revenue is due to increased production and/or cane price increases. Improvement of factory parameters raises cane quality and value.

14 Compared to: - Malawi $153 - Brazil $133 POVERTY REDUCTION IMPACT However, production costs are too high, both for cane growers and at factory level, negatively impacting poverty reduction efforts. Growers: - Average cost/ton Tshs. 17,887 - Gross revenue/ton Tshs. 9,082 Factory: - Mtibwa $ /ton - Kilombero $275/ton

15 IMPACT OF EU REFORMS Outgrowers paid on Division of Proceeds (DOP) basis will suffer. Any loss of income from EU exports is shared between outgrowers and the company. Loss of $2.8 million/year at Mtibwa and Kilombero estimate, based on current DOP of 51%. Outgrowers revenue of 19.8 Billion a year will drop Population of 180,000 directly affected by this. Tanzania as a whole stands to lose an estimated Euros 11 million/year for years to come.

16 IMPACT OF EU REFORMS Many small holders will be forced to exit. Financial institutions with exposure to sugar industry will be adversely affected. Foreign exchange and government revenue will fall. Employment and income will fall. Provision of social services will be impaired. Rural development efforts in general will suffer.

17 MAJOR CONSTRAINTS Low literacy levels, lacking training/skills. Poor infrastructure, increases costs and losses. Lack of irrigation, unreliability of Agricultural production. Lack of investment and operations finances. Those availed have higher interest rates of 18 30% on loans. Outgrowers excluded from national legal financial players. Lack of protection for outgrowers markets, prices, standards and representations in company Boards. Absence of collaterals, (considered high risks to loans). Many taxes eat away farmers and millers profitability. Low cane prices, Delayed payments to farmers a disincentive to farmers. Monopsony business with concentration of powers and exclusivity.

18 CONCLUSION Cane production is helping to improve the livelihoods of many outgrowers in Tanzania, as their increasing numbers suggest. Nonetheless, their situation remains precarious even under existing conditions, with high costs reducing their income. Under the proposed EU reforms, the livelihoods of millions are under threat. Mitigating measures, including improved efficiency and diversification, require significant time and resources.

19 CONCLUSION cont.. Currently, the timeframe for subsidy removal (4 years) is fa too short. And the EU proposal to provide Euros 190 million to the 18 affected countries is a fraction of the estimated costs of addressing the impact of subsidy reduction/removal. Need to revisit the experiences of LDCs in relation to AGOA and EBA where grass root populations have/will never benefit. Deliberate changes in legal, financial, infrastructure, technology necessary before integration of small holder farmers into global markets. Need for UNCTAD to advise governments on imminent changes.

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