Already Tanzania's largest sector, agriculture continues to post positive trends

Agriculture is undoubtedly the largest and most important sector of the Tanzanian economy, with the country benefitting from a diverse production base that includes livestock, staple food crops and a variety of cash crops. The sector’s contribution to GDP has more than tripled in the last 10 years, supported by rising cash crop production, an emerging agro-processing segment and strong domestic demand for processed food.

At the same time, farmers and other sector stakeholders face considerable challenges in modernising the industry to increase yields, exports and value-added processing. Slowing export revenues; land acquisition hurdles; and smallholder farmers struggling to access economically viable technology, adequate storage facilities, markets and credit have affected private investment. Although the country’s food self-sufficiency ratio ranged from 88% to 125% between 1994 and 2015, according to government data, the nation continues to rely on imports to meet demand for sugar, edible oil and cereal crops.

The government is moving to address these challenges by reducing dozens of levies on the sector in the FY 2017/18 budget, targeting select industries for new investment under the current five-year development plan (FYDP) running to 2020/21 and – perhaps most importantly – moving forward on a major development project along Tanzania’s southern corridor that should attract billions of dollars of new private investment from inside and outside the country. These measures will support near- and mid-term growth targets as agriculture is set to continue its critical role in future industrialisation and macroeconomic expansion.

At a Glance

The Ministry of Agriculture (MoA) is responsible for agricultural development in Tanzania, with a mandate to provide policy guidance and services in support of a modernised, commercialised and competitive sector. There are nine agencies and 10 boards specific to cash crops operating under the MoA. Agencies include the National Food Reserve Agency, the Agricultural Seed Agency, the Tanzania Fertiliser Regulatory Authority and the Agricultural Inputs Trust Fund. The cash-crop boards include the Tanzania Tobacco Board, the Sugar Board of Tanzania, the Tea Board of Tanzania, the Cashewnut Board of Tanzania and the Tanzania Cotton Board.

Private sector stakeholders are represented by the Tanzania Private Sector Foundation and the Agricultural Council of Tanzania, which was established in 1999 as the Tanzania Chamber of Agriculture and Livestock, and rebranded in 2005. One particularly notable accomplishment of the council was the launch of the Tanzania Agricultural Development Bank in 2015. The bank aims to increase the current level of sector-specific lending (see analysis).

Tanzania’s agricultural sector is among the most diverse in East Africa. The country’s primary export crops include coffee, cotton, tobacco, cashew nut and tea. It also produces significant quantities of fruits and vegetables, pyrethrum – a plant used to make fertiliser – and sisal, which is derived from a species of agave plant and is used to create strong plant fibres for rope, twine and fabric.

Growing Conditions

Tanzanian agriculture is concentrated mainly in the coastal plains, northern and southern highlands, arid central plains, and the Lake Zone. The agricultural ecosystem is characterised by extreme rainfall variability and there are two rainy seasons: vuli (the shorter season from October to December) and masika (the longer season from February to May). Central regions are characterised by a uni-modal rainy season, with the msimu rains generally falling between November and April.

According to the most recent data available from the National Bureau of Statistics (NBS), the country’s total area under cultivation during the 2014/15 agricultural year was 17.26m ha, with two-thirds of product cultivated during the masika season and the remainder during the vuli season. Land attributed to major crops totalled approximately 11m ha. The MoA reported that a total of 331,364 ha of farmland was irrigated that year, 98% of which was located on the mainland and 2% on Zanzibar.

Employment & Exports

The sector remains an economic mainstay and the largest source of employment, with the Ministry of Finance and Planning (MoFP) reporting in the FYDP 2016/17-2020/21 that 67% of the workforce is engaged in agriculture. Data from the NBS shows that 11.3m people participated in agricultural activities during the 2014/15 season. Roughly 60% of operators were involved in crop production, 38% in crop and livestock activities, and 2% were solely engaged in livestock production.

Agricultural exports comprise around 30% of total exports and 65% of inputs to the industrial sector, according to the FYDP. However, value-added manufacturing activities are limited at present, and the agricultural export base is dominated by raw products and vulnerable to climate change.

Recent Growth

The NBS reports that agriculture’s contribution to GDP at current prices has expanded enormously since 2006, rising from TSh6.77trn ($3.1bn) that year to hit TSh9.43trn ($4.3bn) in 2008, TSh15.49trn ($7.1bn) in 2011, TSh22.13trn ($10.1bn) in 2013 and TSh26.35trn ($12bn) in 2015. The crop production segment accounted for TSh14.19trn ($6.5bn) in 2015 – or 54% of the total – followed by livestock at TSh7.14trn ($3.3bn), forestry at TSh3.15trn ($1.4bn) and fisheries at TSh1.87trn ($850.5m).

In recent years, however, agricultural growth rates have been lagging behind targets. The sector grew by 3.4% in 2014 and 2.3% in 2015 against an annual goal of 7%, according to the MoFP. As the wider economy develops to become more service and industry oriented, agriculture’s share of GDP has dropped off from 29.1% in 2005. It fell to 28.4% in 2006, 26.3% in 2010, 23.8% in 2012, and 23% in both 2014 and 2015. By comparison, industry’s share of GDP grew from 19.4% in 2005 to 22.2% in both 2014 and 2015.

Sector Strategy

Unveiled in June 2016, the FYDP 2016/17-2020/21 is the nation’s second such five-year roadmap. It feeds into the wider objectives of Tanzania Development Vision 2025, which aims to see the country become a middle-income, semi-industrialised state. The strategy highlights value-added agro-processing and improvements to productivity as important support mechanisms for industrialisation. According to the development plan, productivity has improved in areas such as maize, rice, oilseeds, livestock and fisheries, but NBS data shows that key cash crops including cotton, coffee and tobacco have been in decline in recent years, hampering agro-processing growth.

Total agricultural land under irrigation is relatively low at 10%, yet much higher than the sub-Saharan African average of 3.7%, according to the UN Food and Agriculture Organisation (FAO). However, the development plan says that current and future investment in irrigation is “not encouraging”. Labour numbers are more promising, though, with the plan reporting that between 2007 and 2013 the agricultural workforce rose by an average of 3.3% annually – the highest growth rate of any sector.

The FYDP includes schemes for major interventions in the agricultural sector, including improving value chains, developing skills, increasing commercialisation, funding new research and development, enhancing infrastructure and improving access to credit. While agriculture accounts for approximately 30% of total exports today, the plan envisions the sector accounting for at least 25% of all exports in the year 2020/21 and then up to 36.7% in 2025/26. Agriculture’s contribution to GDP is forecast to increase from 29.1% in 2016 to 29.4% in 2020/21 and 32% in 2025/26, while the plan targets boosting the sector’s real growth rate from 3.4% in 2015 to 7.6% in 2020/21 and 13.1% in 2025/26.

Food Security

Another important priority for the country is food security, with major improvements targeted by 2020. The government aims to reach a food self-sufficiency ratio of 140% by that year, and reduce stunting and vitamin-A deficiencies in children younger than five years old to 28% and less than 25%, respectively. Staple crop production will play an important role in meeting these objectives. The NBS reports that Tanzania’s primary staple crops are maize, rice, millet and wheat – although several of these have seen production contract in recent years due to droughts. Nonetheless, these crops have recorded an overall positive growth trend since 2009.

Maize production, which dominates the staple crop segment, grew from 3.32m tonnes in 2009 to 5.1m tonnes in 2012, reaching a seven-year peak of 6.73m tonnes in 2014 before falling by 12.3% in 2015 to 5.9m tonnes. At the same time, wheat production rose from 94,000 tonnes in 2009 to a high of 167,000 tonnes in 2014. Production then fell by 56.9% in 2015 to 72,000 tonnes, its lowest level since 2010. Millet production, likewise, soared from 204,000 tonnes in 2009 to reach 1.25m tonnes in 2014, but fell by 19.2% to 1m tonnes in 2015.

Other crops have recorded a more positive performance. Rice paddy production jumped from 885,000 tonnes in 2009 to a high of 2.65m in 2010, then moderated to 1.46m in 2011 and 1.17m in 2012. Production has risen again in recent years, however, to 1.3m tonnes in 2013, 1.68m in 2014 and 1.94m in 2015 – a 15.2% increase over 2014 levels. Cassava production was up 17.9% in 2015 to hit 1.96m tonnes, while bean and banana production rose by 6.5% and 12.3%, respectively, in the same year.

Supply Strains

In April 2017 the FAO reported that two consecutive below-average harvests have left low-income households in Arusha, Kilimanjaro, Pwani and Tanga “stressed” under the Integrated Food Security Phase Classification system. It noted that as of late March 2017, roughly 309,000 refugees and asylum seekers were living in the border regions of Kigoma and Kagera, due to violence and instability in Burundi and the Democratic Republic of the Congo, further straining the food supply.

The organisation reported that maize prices have increased sharply in Tanzania in recent months, doubling between September 2016 and March 2017 in Iringa and Arusha, and rising by 60% in Dar es Salaam over the same period. Maize prices rose by an average of 55% year-on-year in March 2017, with the FAO reporting that these are “near record” levels, exacerbated by poor vuli crop production and uncertain prospects for the main msimu harvest.

The FAO reports that the country produced an estimated 10m tonnes of aggregate cereals in 2016 – 9% more than the average of the previous five years – while cereal import requirements for the 2016/17 marketing year were estimated at 1m tonnes, including 190,000 tonnes of rice. This represents a 6% increase over 2015/16 and a 10% rise over the average of the previous five years. At the end of 2015 the UN Office for the Coordination of Humanitarian Affairs reported that there were 424,000 people in Tanzania at risk of food and livelihood insecurity – approximately 7% of the total population.

Private Investment

Increased private sector investment in all aspects of the agricultural value chain will play an important role in reducing food imports, improving food security, and supporting mid- and long-term development plan targets. The government is particularly seeking out new foreign financing for the flagship project Southern Agricultural Growth Corridor of Tanzania (SAGCOT) to quickly develop that region’s agricultural potential.

Following years of delays after the project was announced at the World Economic Forum on Africa 2010 in Dar es Salaam, the World Bank announced in March 2016 that it had approved a $70m facility for the programme. The entire project seeks to mobilise $2.1bn of private sector investment under a public-private partnership model. SAGCOT is expected to dramatically improve smallholder farmers’ links with domestic and international markets, a critical consideration given that 80% of farms in the country are no larger than 2.2 ha (see analysis). The US International Trade Administration (ITA) reported in April 2016 that the government had, by that date, already allocated 63,000 ha of land for development under SAGCOT to be used for the cultivation and processing of sugarcane and rice. These wide-reaching efforts should see production levels of key cash crops return to growth in the coming years, helping boost value-added processing in the cotton, sisal, cashew, livestock, oilseed crop, coffee and tea segments.

Cotton

A potentially critical support mechanism for industrialisation, Tanzania’s cotton industry is one of its agricultural mainstays. According to the MoFP, between 350,000 and 500,000 smallholder farms grow cotton crops, and the income from this touches 40% of Tanzania’s population. The Shinyanga region accounts for 60% of total production, followed by Mwanza at 25%, Mara at 8%, Tabora at 4% and Kagera at 2%. Together these regions comprise the Western Cotton Growing Area, which has seen export growth average 9.8% since 2000. The remaining 1% is grown in the Eastern Cotton Growing Area. Tanzania’s primary cotton markets include China and Indonesia – each receiving 24% of all cotton exports – Vietnam (12%), Thailand (11%) and India (9%).

Although cotton production has shown a net positive growth trend since 2006, levels never quite bounced back to the high of 378,000 bales recorded in 2005. Some 267,004 bales were harvested in 2009, rising to 357,130 in 2013, but sinking to 246,767 and 203,312 bales in 2014 and 2015, respectively. Cotton export revenues fell by 30.5% in 2015 to $38m alongside the lower production level.

Tanzania’s cotton industry may actually benefit from being underdeveloped and overlooked, with the MoFP reporting that rising labour costs in leading global cotton markets have opened new opportunities for the country to compete on a price basis (see Industry & Retail chapter). In April 2017 the government announced that several levies would be abolished on cash crops as part of the 2017/18 budget in order to support growth opportunities in cotton, coffee, tobacco and tea (see analysis).

Challenges remain, however, as input delivery is often delayed and cotton lint is of low quality, with yields often reduced by diseases. Price uncertainty also remains a chronic challenge for producers given global price fluctuations. Adoption of improved cottonseed and other crop husbandry techniques in the Lake Zone could lift between 302,500 and 600,000 people out of poverty, according to the FYDP, boosting the zone’s economy by up to 12%.

SISAL

Sisal has been cultivated in Tanzania since German colonial times, with the country standing as the world’s largest sisal producer until 1961. Production has recorded a volatile but overall positive growth trajectory since 2002, rising from 23,000 tonnes that year to reach 33,039 in 2007, dipping to 24,091 in 2010, and recovering to record 34,875 in 2013 and 39,204 in 2015, a 14-year high.

According to regional media, Tanzania is set to benefit from resurgent international demand for natural twine and plant fibres after the global sisal market took a hit with the advent of new synthetic fabrics and fibres, and the country aims to overtake Brazil to become the top global exporter once again. Indeed, NBS data indicates that sisal became the country’s third-largest agricultural export earner in 2015 after cashew nuts and tobacco, with receipts soaring by 865% to hit $162.2m against $16.8m in 2014 and $10.9m in 2011.

Beyond rope and twine, agave plants can also be processed into sweet syrup, and one of the industrialisation interventions in the current FYDP includes the establishment of an agave syrup factory in Tanga. The facility is planned to be financed by the Public Service Pensions Fund and it is expected to be operational by December 2019.

Produce

A variety of other produce is grown in Tanzania. The country’s most popular fruit crops include mangoes, oranges, pineapples, passion fruits, bananas, avocados, jackfruits, papayas, peaches, pears, guavas, tomatoes and grapes. Vegetable production is dominated by okra and chilis.

Vegetable and flower export revenues surged in 2015, rising by 153% over the $62.9m recorded the previous year to reach $159.1m. This growth trend has been building for several years, with the segment’s exports totalling $30.8m in 2010. A 2015 report on Tanzanian horticulture by the Netherlands Enterprise Agency credits steady European demand and shrinking flower hectarage around the world for the pick-up in Tanzania’s flower exports, and growing middle classes in Tanzania’s export countries for the increased demand for vegetables.

The ITA reports that the country grows around 2.75m tonnes of produce annually, although just 4% of it is processed locally. This low percentage leaves significant potential for the provision of heavy equipment for commercial farming, as well as fruit and vegetable processing.

Cashews

Cashew nut production has recorded a positive performance in the last 15 years. The NBS reported that mainland production rose from 78,000 tonnes in 2002 to 121,070 in 2010 and 160,000 in 2011. Although production did not exceed 130,000 tonnes between 2012 and 2014, it surged to 197,933 tonnes in 2015 – a 60% increase over 2014 levels. This enabled the crop to surpass tobacco as the nation’s top agricultural export earner.

Cashews were one of three cash crops to report export revenue growth in 2015, reaching $234m compared to $96.9m in 2011. Just 10% of cashew production is currently processed in the country, according to the ITA. Investment in this area could lead to the rehabilitation of old plants or the launch of new medium-scale processing plants.

Sugar

The last 10 years have seen sugar demand increase to reach an aggregate 580,000 tonnes in 2016/17. Household demand has been steadily growing, with annual sugar consumption at 445,000 tonnes. Industry demand for sugar has also increased, hitting 135,000 tonnes.

Production of household sugar registered 326,909 tonnes in 2016/17, up from 262,879 tonnes in 2013/14. Meanwhile, industrial sugar is produced entirely abroad, leaving the country’s aggregate annual sugar demand gap at about 255,000 tonnes, which is met through imports.

Total sugarcane production rose from 1.81m tonnes in 2003 to 3.15m tonnes in 2011. The figures have moderated in the years since, falling to 2.98m tonnes in 2013 before climbing to 3.03m in 2015/16.

It would be possible to double in-country sugar production over the medium term, according to the plan, but the government and private sector will first need to address challenges like excessive sugar imports; low sugarcane yields; the rising cost of primary inputs; the lack of infrastructure development, incentives to attract large-scale investments and access to credit facilities; and inadequate research, training and biosecurity services.

Edible Oils

Import requirements for edible oils are also high. The development plan reports that Tanzania spends more than $150,000 on edible oil imports annually, despite extremely rapid growth in the domestic output of oilseed crops. Indeed, NBS figures show that sunflower production has expanded more than three-fold since 2011, from 786,902 tonnes that year to 2.76m tonnes in 2014, and increasing a further 4.5% to 2.88m tonnes in 2015. Groundnut production rose 182% between 2011 and 2015 to 1.84m tonnes, and sesame oil production jumped by 229% over the same period to register 1.17m tonnes. Palm oil production increased by 144% to 41,475 tonnes in 2015, and soya production rose by 141% to 6030 tonnes in the same year.

The FYDP reports that with increased output and efficient practices, Tanzanian oilseed crops could hold significant potential to anchor a competitive domestic industry. However, out of 300,000 tonnes of edible oil demand in 2015, only 40% was sourced domestically. The plan intends to reduce oil import dependency through increased local processing, with a scheme to boost domestic output from 100,000 tonnes annually in 2015 to 250,000 tonnes in 2020/21 and 600,000 tonnes by 2025/26. This will be achieved by focusing on research and the availability of quality seeds, and developing the oilseed value chain to encourage investment in processing.

Coffee & Tea

Coffee and tea remain important cash crops for farmers in Tanzania. Production of cured coffee beans rose substantially over 2014, from 51,763 tonnes to 82,058 tonnes in 2015. Exports rose as well, from 44,100 tonnes to 58,000 tonnes. Corresponding export revenue was up 20.2% to $146m in 2015. Tea production, meanwhile, resulted in 45,750 tonnes of black tea and 46,230 tonnes of blended tea in 2015. Exports stayed stable between 2014 and 2015, with each year recording approximately 29,000 tonnes. However, the value of tea exports dipped 5.9% in 2015, bringing in revenue of $43m compared to $45.7m the year before.

Livestock

Looking beyond crops, livestock production including meat, dairy products, and skins and hides continues to hold great potential for future expansion. The NBS reports that total meat production has risen significantly since 2009, from 452,230 tonnes that year to 532,711 tonnes in 2012 and 597,757 tonnes in 2015. This resulted in an average annual growth rate of 19%.

Milk production has also risen significantly, from 1.6bn litres in 2009 to 2.06bn litres in 2015, while the number of skins and hides grew from 5.6m in 2009 to 6.45m in 2014, the most recent year for which statistics are available. The development plan also targets reviving the country’s leather industry to support mid-term industrialisation, creating new opportunities for private investment in meat and dairy production (see Industry chapter).

Outlook

The diversity of Tanzania’s agricultural sector leaves it well positioned to benefit from substantial investment inflows in the coming years, with the SAGCOT programme set to catalyse private sector involvement in value-added agro-processing and budget announcements that highlight the sector’s critical importance to employment, exports and industrialisation (see analysis).

Although land acquisition challenges, lower yields and rainfall dependency have recently limited growth in some areas, and leave the sector and its dependents vulnerable to shifting weather patterns, agricultural growth – particularly in cash crops – is set to remain on a positive trajectory in the next few years.