Tanzania: Study Calls for Govt Role in Sugar Industry

30.09.2016

A new study released yesterday by Policy Research for Development (REPOA) called for government involvement in the sugar industry to increase efficiency and stimulate sustainable productivity for sugarcane out-growers.

According to the study, the state intervention beyond its regulatory functions is critical in the current global sugar industry context, where competitiveness is replacing preferential and compartmentalised markets.

Speaking to journalists in Dar es Salaam, REPOA Executive Director, Dr Donald Mmari, said that in the past sugarcane outgrowers contributed a significant share of sugarcane production between 50 and 60 percent but institutional barriers have been limiting their further growth.

According to Dr Mmari, between 1995/96 and 2008/09, outgrowers in Kilombero increased their share of cane production from 30 to 44 percent of the total cane processed in 2009 by the Kilombero Sugar Company.

In Mtibwa, however, the share of out-growers' cane declined from 57 to 49 per cent by 2009 while in 2013 the share declined slightly in Kilombero but remained significant at 39 per cent.

He, however, said that in Mtibwa the share declined alarmingly fast to 19 per cent by 2013, a situation which was attributed to the implementation of Cane Supply Agreements (CSAs) which met with many obstacles.

"These barriers included lower price of cane compared to Kilombero, delayed payments to growers, unfavourable allocation of daily cane delivery from outgrowers, and limited out-grower support services," he said.

Dr Mmari said that the state intervention is critical in designing special incentives for agricultural finance to address credit market failures. "Financing of common infrastructure and equipment for productivity-enhancing farming practice also requires a different approach beyond market solutions alone such as brokering longterm agricultural finance for transforming the farming practices of out-growers," Dr Mmari said.

He said the government should also consider making policy changes related to land use plan to enable blockfarming development, to invest substantially in sensitising growers and to strengthen intermediary organisations so as to reduce doubt towards horizontal coordination.

According to him horizontal coordination refers to the linking of transformation activities at the farm level to promote uniform application of best practices, shared managerial maintenance activities are serviced by outgrowers themselves.

The study further revealed that, while vertical coordination of cane growers in the country through intermediary organisations has enhanced market linkages and reduced transaction costs both methods should be applied to increase productivity and efficiency in sugar production.

He said that while out-grower intermediaries have proved to be important vehicles for vertical coordination, reducing transaction costs and brokering access to essential agricultural services, they fall short of mediating uncertainty related to the timing and reliability of supply.


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