Review of Agricultural Policies in the United Republic of Tanzania 2005-2011 The MAFAP Project Happy Pascal MAFC / Solomon Baregu ESRF / Nganga M. Nkonya MAFC / Festo Maro - COSTECH / Lutengano Mwinuka Univ. Dodoma / Jesús Barreiro-Hurle FAO / Agriculture, Livestock and Water Parliament Committee Dodoma, 20 th April 2013 With the financial support of 1
Presentation Outline 1. The MAFAP Project 2. MAFAP in Tanzania 3. Overview of outputs 4. Selected results 5. The way forward
Presentation Outline 1. The MAFAP Project 2. MAFAP in Tanzania 3. Overview of outputs 4. Selected results 5. The way forward
Bill and Melinda Gates Foundation funded project implemented by FAO and OECD Ultimate objective: informed decision making to ensure that policies and investments are supportive of agricultural development, the sustainable use of natural resources and enhanced food security Through: Improved capacity to monitor policies affecting agriculture and food systems Better informed policy dialogue at national, regional and international levels
MAFAP basics: where...
Presentation Outline 1. The MAFAP Project 2. MAFAP in Tanzania 3. Overview of outputs 4. Selected results 5. The way forward
MAFAP timeline in Tanzania First scoping mission in 2010 [inclusion of Tanzania as MAFAP intensive country] Second scoping mission in 2011 [identification of partners] Signature of agreements with partners October 2011 Capacity building workshop November 2011 Data gathering and analysis November 2011 November 2012 Presentation of MAFAP to ASCG [April 2012] Presentation of initial results to ASCG [November 2012] Final report launched [Second quarter 2013]
MAFAP implementation in Tanzania Institutional partner Department of Policy and Planning Ministry of Agriculture, Food Security and Cooperatives Technical partner Economic and Social Research Foundation (ESRF) Agricultural sector consultative Group MAFAP secretariat Agricultural Development Economics Division (ESA) Trade and Agriculture Directorate (TAD)
Presentation Outline 1. The MAFAP Project 2. MAFAP in Tanzania 3. Overview of outputs 4. Selected results 5. The way forward
10 Technical notes: a. Maize b. Wheat c. Rice d. Coffee e. Cotton f. Sugar g. Pulses h. Milk i. Cashew nuts j. Public Expenditure
10 Technical notes 1 Country Report: a. Overview of existing policies b. Analysis of price incentives and public expenditure c. Policy Coherence d. In depth analysis of maize export ban
10 Technical notes 1 Country Report 1 Country Profile
10 Technical notes 1 Country Report 1 Country Profile 5 Policy Briefs: a. Sugar b. Wheat c. Cotton d. Coffee e. Rice
10 Technical notes 1 Country Report 1 Country Profile 5 Policy Briefs Policy dialogue with stakeholders and policy makers
In your folders: Country Profile Country Report Executive Summary Policy Brief - Sugar Policy Brief - Wheat
Presentation Outline 1. The MAFAP Project 2. MAFAP in Tanzania 3. Overview of outputs 4. Selected results 5. The way forward
Price Incentives
IMPORTS EXPORTS THINLY TRADED
Disincentives Incentives IMPORTS Sugar 20.00% 10.00% 0.00% -10.00% -20.00% -30.00% -40.00% 2005 2006 2007 2008 2009 2010 Observed NRP at farm gate Adjusted NRP at farm gate Import tariff of 100% with ad-hoc exemptions during the period 2008-2010 Even when prices are higher at the wholesale level (i.e. the tariff works at wholesale level) farmers do not benefit from them due to very high processing costs in Tanzania. Protection to farmers in 2007 coincided with low production and increased exports which led to competition by mills for sugar cane
IMPORTS Wheat Import tariff of 35% which is reduced to 10% as of 2007. The level of protection follows this trend however as of 2008 the reduction in the protection does not lead to lower prices. Incentives for production also include high costs for handling at the port of Dar es Salaam and lack of competition in the import market. During 2009 and 2010 imports at lower tariff do not reflect lower protection which coincides with increased exports of wheat flour.
disincentives incentives IMPORTS Cow Milk 100% 80% 60% 40% 20% 0% -20% 2007 2008 2009 2010 Observed nominal rate of protection at point of competition Adjusted nominal rate of protection at point of competition Import tariff of 60% with reduced tariff for Kenya and Uganda (effective tariff always above 50%) Domestic prices are isolated from internationsl prices and variations in protection relate to variation on international markets No data on farm gate prices but only a very limited % of farmers get this protection
IMPORTS Rice 300.00% 250.00% Net exporter 200.00% 150.00% 100.00% 50.00% 0.00% -50.00% 2005 2006 2007 2008 2009 2010 Observed nominal rate of protection at farm gate Adjusted nominal rate of protection at farm gate Import tariff of 75% lead to higher domestic prices and avoiding cheap imports as declared by President Kikwete BUT other factors also affect higher prices including excessive marketing costs along the value chain When international prices started raising the level of incentive was reduced, probably due to decreasing margins along the value chain and/or impact of releases of maize from NFRA. As of 2007 the liberalization of the rice market results in incentives to farmers reduced and mantained for traders.
Disincentives Incentives Disincentives Incentives EXPORTS Pulses PEAS BEANS 35% 250% 30% 25% 20% 15% 200% 150% 100% 10% 5% 0% -5% 50% 0% -50% -10% 2005 2006 2007 2008 2009 2010-100% 2005 2006 2007 2008 2009 2010 Observed nominal rate of protection at farm gate Adjusted nominal rate of protection at farm gate Observed nominal rate of protection at farm gate Adjusted nominal rate of protection at farm gate The situation shows incentives for farmers irrespective of the option considered in the analysis This means that domestic prices are higher than that of exported commodities: Tanzania is suffering higher food prices than could be expected Need for better integration of the beans market to assure: Lower prices for consumers Higher prices for producers
Disincentives Incentives EXPORTS Coffee 20.00% 10.00% 0.00% -10.00% -20.00% -30.00% -40.00% 2005 2006 2007 2008 2009 2010 Observed NRP at farm gate Adjusted NRP at farm gate Disincentives mainly related to maket power of buyers at the auction Impact of district cess is less important than overall disincentives (5% versus 20% disincentives on average) Not clear explanation for reduction of disincentives during 2007-2009
Disincentives Incentives EXPORTS Cotton 20% 10% 0% -10% -20% -30% -40% -50% -60% 2005 2006 2007 2008 2009 2010 Observed NRP at farm gate Adjusted NRP at farm gate Very low level of processing in Tanzania, most exports are raw cotton not combed or carded. Disincentives linked to two aspects: High level of levies and taxes on cotton (estimated at 40.000 TzSh per ton) Very low ginning out turn of cotton factories in Tanzania compared to international standards Need to assess the potential of increasing processing in Tanzania as a way to improve the incentives for farmers.
EXPORTS Cashew nuts 30% 20% 10% 0% -10% -20% -30% -40% -50% 2005 2006 2007 2008 2009 2010 2011 Observed nominal rate of protection at farm gate Adjusted nominal rate of protection at farm gate Overall disincentives to farmers Export tax Room for further improvement of the Warehouse receipt system Revenues from export tax only marginally revert to the sector No increase in domestic processing of cashew nuts
Thinly traded Maize Export ban 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% 2006 2007 2008 2009 2010 Net importer Observed nominal rate of protection at farm gate Adjusted nominal rate of protection at farm gate Volatile impact on farmers of policies and lack of market integration however overall not too important (max 20%) IMPORTS - Interventions by NFRA more than compensate the incentives provided by the tariff when TZA is a net importer (2006 and 2008) while excessive marketing costs provide disincentives when NFRA is not active (2010). EXPORTS The export ban prevent farmers from obtaining higher prices (2009); when there is no export ban the lack of storage forces domestic prices to be higher than value obtained from exports.
Price Incentives Public expenditures
percentage of national budget Agriculture support may be higher than we think 18% 16% 14% 12% 10% 12% Maputo declaration target 8% 9% 8% 3% 4% 6% 4% 6% 6% 2% 4% 5% 4% 0% 2006/07 2007/08 2008/09 2009/10 2010/11p Agricultural specific expenditure Rural development expenditure
I. Agriculture-specific payments directed to the sector as a whole Infrastructure 1.2% Inspection (veterinary /plant) 0.3% Extension 10.3% Training 23.0% Storage 8.3% Marketing 4.5% 2008/09-2010/11 average Other 5.9% Payments to producers - input subsidies 27.8% Agricultural research 14.9% Payments to producers - other 1.4% Pyments to processors 2.6% Storage 0% Infrastructure 1% Inspection (veterinary/plant) 1% Extension 5% Marketing 3% 2006/07-2007/08 average Other 6% Payments to producers - input subsidies 46% Payments to producers - other 1% Committee on Agriculture, Livestock Training and Water 23% Agricultural research 13% Payments to processors 1%
II. Agriculture supportive expenditures mostly in rural infrastructure Rural health 12% Rural infrastructure - roads 42% Rural education 21% Rural infrastructure - water and sanitation 14% 2006/07-2007/08 average Other 0% Rural infrastructure - other 0% Rural infrastructure - energy 11% Rural health 29% Rural infrastructure - roads 41% 2008/09-2010/11 average Rural education 11% Other Rural Committee on Agriculture, Livestock 0% and Water infrastructure - other 0% Rural infrastructure - energy 9% Rural infrastructure - water and sanitation 10%
Aid is consistent with national priorities bln TSh 400 350 300 250 200 150 100 50 0 donor national
Billion TSh Most of the expenditure is not commodity specific 600 500 support to all commodities 400 300 support to groups of commodities 200 100 0 2006/07 2007/08 2008/09 2009/10 2010/11(p) support to individual commodities
Share of administrative costs remains high 2006/07 2007/08 2008/09 2009/10 2010/11 p Administration costs 16 17 26 33 37 Policy transfers 84 83 74 67 63 Total agricultural budget 100 100 100 100 100 based on data for MAFC and MLFD
Disbursement rates have not been as high as they could specially for policy transfers billion TSh 2006/07 2007/08 2008/09 2009/10 2010/11 p Total expenditures in support of food and agriculture budgeted amount 616.0 891.7 1143.3 1198.9 980.1 actual spending 584.5 878.4 825.1 759.3 947.2 actual as a share of budget (%) 95 99 72 63 97
Price Incentives Public expenditures Main Messages
Public expenditure on agriculture is declining overall, and its focus is shifting from rural development to agriculture-specific expenditure. In general farmers received higher prices compared to international prices, though this positive gap is decreasing. Market access is a significant constraint especially between farm gate and wholesale levels Current policies and weak market performance make food more expensive for consumers, while reducing prices for producers of exported commodities.
Take away from this presentation Public expenditure: A. Avoid further reductions of expenditure to agriculture; B. allocate more investment to infrastructure that facilitates market functioning (roads, storage, market information systems, etc.); C. agriculture needs expenditure also in improving the live conditions of rural areas.
Take away from this presentation Agricultural Policy: A. reduce policy volatility (tariff exemptions); B. support commitment to remove export bans; C. increased production without better market functioning and more value addition will not allow for fast agricultural growth; D. focus on monitoring policy implementation.
For additional information please visit: www.fao.org/mafap Asante Sana