TANZANIA CEREAL STORAGE SCOPING MISSION (REQUEST TO FAO TO HELP ADDRESS CEREAL LOSSES)

Activities and findings

Cephas Taruvinga Technical Adviser on PH Losses (FAO/AU)

CURRENT CHALLENGES AND OBJECTIVES OF THE STUDY

Objectives: Identify the causes of post-

harvest losses

Analyse the scope of a potential FAO intervention

Prepare the road map for an intervention

Challenges: Post-harvest losses of grains about 40 percent in

remote areas

Inadequate storage facilities and management capacity

Limited market access.

Weak linkages with national and international cereal markets

Unexploited production and export potential in Eastern Africa,

Partially achieved national food security.

SCOPING METHODOLOGY

Literature reviews were made Consulted key stakeholders in the cereal

value chains. Government of officials in various Ministries Technical and financial development

partners Commercial actors and their organizations. Field visit was made to Dodoma Visited urban and district markets, including

Kibaigwa market.

CONTEXT AND FIRST CONCLUSIONS

In 2014 cereal production was approximately 11 million tonnes(FAOSTAT).

National self-sufficiency rate of maize is estimated at 120 percent by the MALF.

Exports increased steadily since 2005, but declined due to export bans for national food security reasons.

Tanzania is a potential maize producer for the whole of East Africa. Lack of storage capacity forces Tanzania export maize at low

prices. Domestic and international trade and market policies prevent

farmers obtaining better prices and increase risks for the formal commercial sector.

CONTEXT AND FIRST CONCLUSIONS

Informal markets accounts for ~80% of maize remaining is handled by NFRA from rural buying posts or from established farmers’ organizations / cooperatives.

Informal marketing arrangements place farmers in a weaker position.

Exports to neighbouring countries are unregulated. Market margins are high due to inefficiencies in supply chains, Prices vary greatly between harvesting and periods of scarcity. Actors with access to storage, financial services are able to take

advantage of price fluctuations. Post-harvest losses are significant

Key supply chain actors

1. Small holder farmers (0.5 to 2mt) (food security)

2. Small holder farmer (3 to 5 mt) (the emerging farmer)

3. Village /community level4. Middle level5. District markets6. NFRA7. Agro processors

STRUCTURE OF THE POST-HARVEST SYSTEM

Community/village level These range between 200 to 600 tons Total national storage for such warehouse is about 82 000 tons which is 1.2% of total production In the last decade community storage has been widely promoted (COWABAMA) The majority of these warehouses are underutilised. Underutilisation can be attributed to informal markets that handle ~ 80% of marketed production

Household level – two types of farmersThe food insecure and the farmer with excess to market (emerging farming)The emerging farmer produce for the market 3 to 5 tons Underserved in terms of storage, transportation and general supportHigh cost per unit of available technology to store grain for commercial useThis farmer is left vulnerable to brokers, buyers and agro-processors

PERFORMANCE OF THE POST-HARVEST SYSTEM

PERFORMANCE OF THE POST-HARVEST SYSTEM

Middle level (3000 to 5000 tons)

THE MISSING MIDDLE

PERFORMANCE OF THE POST-HARVEST SYSTEM Middle level (3000 to 5000 tons) Normally located in district capitals, trading centers - commercial, wholesale, SGR, export

trading

Very few are available in Tanzania at the moment except NFRA, agro-processors like Bakhresa but not used for grain trading or warehouse receipt system.

Those available are remotely located and need refurbishing or were converted to other uses

Some investments were undertaken with project support, but their number is limited

No multinational player is active on the domestic market in this sector for locally produced cereals.

No specific Government policy to promote or encourage this sector and as a result the informal sector is dominant.

This is missing middle is critical for the development of a formal grain market.

District markets These are informal markets for commodity trading They form the dominant marketing channels of cereals in Tanzania. On average, each region has 2 or 3 markets making them more than 52 district markets. More than 80% of all commodities produced are sold through these district markets. Brokers, buyers representing processors, and institutional buyers converge to the district

market for all their grain requirements. Individual farmers bring their grain and meet any of the numerous buyers or brokers and

“agree” on a price and the farmer is paid cash. Even institutional buyers, international traders and wholesalers procure their grain from

informal markets or have their networks of brokers.

District markets – Kibaingwa Market

KIBAIGWA MARKET: difference of incoming and outgoing volumes - losses to farmers

Average annual losses of 3,650 tonnes or TZS 1.3 billion

Total losses of nearly 44,000 tonnes or TZS 16 billion between 2005 and 2016

Chart1

20052005

20062006

20072007

20082008

20092009

20102010

20112011

20122012

20132013

20142014

20152015

20162016

Millions of TZS

Tonnes

Difference (tonnes)

Cost (million TZS)

2298.4

344.76

4060.9

844.6672

-2934.5

-396.1575

-9004.3

-2503.1954

-6234

-2200.602

-4105.8

-1207.1052

-13857.42

-4960.95636

-6276.27

-3156.96381

-2054.21

-1142.14076

-5848.75

-2076.30625

-4798.234

-2322.345256

4945.39

2744.69145

Dispatches

TAKWIMU YA MAHINDI YALIYOTOKA SOKO LA KIBAIGWA KWENDA MASOKO YA NNJE 2004 - 2016

2004200520062007200820092010201120122013201420152016

MWEZITANITANITANITANITANITANITANITANITANITANITANITANITANI

JANUARY3383.22795.1547635204346193352376401.342238.283355.447240.48338.24

FEBRUARY3659.516394671257141931219.54557.446207.222311.921640.183862.74667.46

MARCH3765.51409.1451421345907777.424554.66978.151545.082097.083556.38832.85

APRIL3825.7709.642771485449645652303.4438901416.121617.42673.681392.51

MAY3855826.590015960725198169729.47176.434952.462277.892526.465127.54

JUNE81802260148631220384451083320264.3616265.6812774.0610672.863157.849270.27

JULY310083276112.312292127629704998822645.319759.241097911334.033486.944227.6

AUGUST48696459.58583.21057612717689010346.581345113460.410446.314808.362228.847918.98

SEPTEMBER84805186.77842.487991097232736926.44165018891.124778.714129.651619.993832.83

OCTOBER40103451.45371.9653811043.338917335.42102615700.575494.611141.6876.462777.06

NOVEMBER72264496.14468.66608867639336015112405632.785725.468552.62722.492481.17

DECEMBER82274016.84880.55453.5747519676087.4492082501.025259.528293.28602.492787.48

TOTAL3591258606.446898.293068.591518.36429675842.8129952.54102863.9567921.589920.3932554.7941653.99

Receipts60904.850959.190134825145806271737116095.1296587.6865867.2984071.6427756.55646599.38

Dispatches58606.446898.293068.591518.36429675842.8129952.54102863.9567921.589920.3932554.7941653.99

Difference (tonnes)2298.44060.9-2934.5-9004.3-6234-4105.8-13857.42-6276.27-2054.21-5848.75-4798.2344945.39

Cost (million TZS)344.76844.6672-396.1575-2503.1954-2200.602-1207.1052-4960.95636-3156.96381-1142.14076-2076.30625-2322.3452562744.69145

200520062007200820092010201120122013201420152016

tzs/kg150208135278353294358503556355484555

tzs/tonne150000208000135000278000353000294000358000503000556000355000484000555000

Dispatches

Millions of TZS

Tonnes

Difference (tonnes)

Cost (million TZS)

Receipts

Millions of TZS

Tonnes

Difference (tonnes)

Cost (million TZS)

Prices

TAKWIMU YA MAHINDI YALIYOINGIA SOKO LA KIBAIGWA KWA MWAKA 2004 - 2016

2004200520062007200820092010201120122013201420152016

MWEZITANITANITANITANITANITANITANITANITANITANITANITANITANI

JANUARY4059.527955409383538061215432245759.541815.143166.225577.606368.36

FEBRUARY3043163954203825302892952544.424475958.361746.022997.76409.53

MARCH3511.81408428127254280471928524057.21096.181684.812698.54936.38

APRIL3536709.65872275640937501529.32233.941440.61151.471476.561750.26

MAY3521.5826.594286581738485710458.47481.325602.242806.521930.255527.79

JUNE761122601005210162797710971985717666.312731.1810996.622776.528565.25

JULY481510040740491851101999691265720047.618886.6613279.7414029.623604.8211059.24

AUGUST9403855589379638107256226977816489.6143039099.0215109.582799.727221

SEPTEMBER60794940860774941030535355672142508768.665548.9411777.891683.083605.07

OCTOBER420936086114822480932822529378745693.035003.328365.811060.662446.9

NOVEMBER74004538596179156735344047208921.54756.754515.536877.04645.542383.19

DECEMBER79503941429872165753150247458047.32506.284777.046360.04505.52326.41

TOTAL3985660904.850959.190134825145806271737116095.1296587.6865867.2984071.6427756.55646599.38

TARIFA YA SOKO LA KIBALIGWA

TARIFA YA BEI YA MAHINDI KUANZIA MWAKA 2004 - 2016

MWEZI2004200520062007200820092010201120122013201420152016

Tzs/kgTzs/kgTzs/kgTzs/kgTzs/kgTzs/kgTzs/kgTzs/kgTzs/kgTzs/kgTzs/kgTzs/kgTzs/kg

JANUARI129282136343376446370360756485300620

FEBRUARI131273135326359450364390744426317631

MARCHI137292137332341342344420739440405520

APRILI148308147325368245347445682462455425

MEI136282113305318210352422421480450470

JUNI144202107293305215389450425300471478

JULAI126143195130230299238361429432280510453

AGOSTI126134164132236333268350465657280565490

SEPTEMBA127134155136246335253354555443270542543

OCTOBA129152136140273370274357615443275569495

NOVEMBA131169128145290386278352750445280600704

DISEMBA132243110164309450295354737481288620829

Total129150208135278353294358503556355484555

200520062007200820092010201120122013201420152016

tzs/kg150208135278353294358503556355484555

tzs/tonne150000208000135000278000353000294000358000503000556000355000484000555000

Industrial processors The major users of grain.

Their visibility as buyers of grain is obscure and they do not generally purchase directly from farmers.

They use intermediaries/brokers who source from district markets where farmers bring their grain.

Because of huge volumes and the amount of money involved, this has made their brokers more powerfulsuch that they can set the market price.

The grain is transported in 20 to 30 ton lots to processing facilities in Dar es Salaam.

The grain when procured cannot be traced back to farmers

The use of informal markets by large players, including processors, has contributed to the underutilisation of warehouses at village and the middle level and weakened farmers’ marketing power.

Large agro-processors could play a key role in formalizing grain markets by using formal channels.

There is scope for public-private partnerships to promote formal market development by leveraging the market power of agro-processors.

Characterised by poor handling and storage facilities. Lack of Grade & standards and the use of 90 kg and 120 kg bag instead of

standard 50kg results in poor quality grain. Informal marketing system are risky because they cannot be expanded in

event of bumper harvests (as happened in 2015) Lack of adequate storage and formal market system causes high price

variability and strong seasonality of prices; Weak formalized linkages with export markets leads to high volumes of

informal cross-border trade

CAUSES OF LOSSES AND THEIR EFFECTS

Dominance of bulking by brokers with short term interest and renting seeking behaviour.

Farmers have less bargaining power at district market Underutilization of commercial storage facilities results in lack of incentives

to invest aggregation and storage systems. Agro-processors use untraceable commodities through brokers who under

pay farmers (corporate irresponsibility) Unregulated trading make informal trade even more pervasive The regulatory environment (export bans) contribute to the risks for large-

scale formal investments

CAUSES OF LOSSES AND THEIR EFFECTS

POLICY OPTIONS TO FORMALIZE GRAIN MARKETS IN TANZANIA

Promote a cereal marketing system that proactively assures quality management at every step of the value chain. The final outcome being a well structured cereal trading system that is transparent to all actors, the output of which is grain

differentiated by quality and absorbed through national and regional markets

Hard and soft infrastructure: Investment in decentralized mid-level warehousing located between the local and end markets Promotion of support services for quality and inventory management. Grades & Standards and use of 50kg bag both for grain quality and worker rights

Public-private partnership: There is scope for public-private partnerships to promote formal market development by

leveraging the market power of agro-processors. Public funding sources for district-level warehouses could be leveraged through NFRA and leased

to investors under PPP agreement. Agreements could include stipulations on purchase from farmers organizations or licensed traders only.

POLICY OPTIONS TO FORMALIZE GRAIN MARKETS IN TANZANIA

Facilitate formalization by embracing entrepreneurship:

Simplify registration and licensing systems: set up one-stop shops for registering businesses or obtaining trade licenses; rationalizing business registration and licensing regime by deploying user friendly IT-based systems

Currently, to register a new business in Tanzania, it takes roughly 28 days and costs almost 50% of the average income per capita for an individual to follow eleven separate registration procedures (World Bank EBA, 2017).

Incentives are crucial to encourage formalization. Retroactive regulations on taxation should be avoided in all circumstances for businesses that formalise.

Simplify tax administration as sometimes a complex system is a greater disincentive than tax rates.

Dialogue with informal market actors to understand their constraints (including resistance to formalisation) and generate buy-in. It is essential that the relationship between government and informal traders moves away from mutual suspicion towards mutual support.

Source: FAO. 2017. Formalization of informal trade in Africa: Trends, experiences and socio-economic impacts. Rome

THANK YOU

Source: FAO. 2017. Formalization of informal trade in Africa: Trends, experiences and socio-economic impacts. Rome

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