Tanzania's tea sector : constraints and challenges

245 Environmentally and Socially Sustainable Development December 2004 Findings reports on ongoing operational, economic, and sector work carried out by the World Bank and its member governments in the Africa Region. It is published periodically by the Knowledge and Learning Center on behalf of the Region. The views expressed in Findings are those of the author/s and should not be attributed to the World Bank Group. IMPORTANT NOTICE: Effective November 2004, Findings and InfoBriefs will only be available electronically. Register your e-mail address at www.worldbank.org/afr/ findings to continue receiving the electronic version. Tanzania's Tea Sector: Constraints and Challenges' Tea was first planted in Tanza- a quarter of Tanzania's tea produc- nia in 1902, when German settlers tion during the early 1980s. Most introduced the crop to the Agricul- of the smallholder tea leaf went to tural Research Station in Amani the eight Tea Authority-owned fac- and Rungwe. Commercial produc- tories for processing, and the rest tion began in 1926 and increased to factories owned by the estates. considerably after World War II, Despite its apparent success, when the British took over the tea there were numerous signs of dis- plantations. By 1960 Tanzania's tress in the smallholder sector tea production reached 3,700 tons which were vividly summarized in of made tea (a little less than 0.5% a World Bank report in 1983. In- of world's total of 800,000 tons). terestingly, the report was written Before independence, tea was when the smallholder sector was produced on estates, a common at its peak, implying that while the practice in Africa and South Asia. sector appeared healthy, the fun- All tea-related matters were damentals were poor. By the mid- handled by the Tanganyika Tea 1990s, smallholders' share dropped Board. Smallholder tea farming below 10 percent and by 1998 it fell begun during the 1960s. In 1968, to 5 percent, the lowest level since the government initiated a full- tea was introduced as a small- fledged smallholder tea develop- holder crop. Contributing to the ment program, and all aspects of decline were low prices and late smallholder tea marketing and payments by the Tea Authority, old trade were turned over to the Tan- and inefficient processing facto- zania Tea Authority which as- ries, inadequate use of inputs, run- sumed a wide array of responsibili- down transport equipment, poorly ties. maintained feeder roads (i.e., roads The Authority promoted small- connecting farms to tea factories), holder tea production, typically on and low yields due to failure to adopt plots of about a third of a hectare. new varieties. Findings Tea expansion was assisted by the The problems of the industry donor community, including two were reflected in the estate sector World Bank lending operations. only in a limited way. When Tan- Smallholders accounted for about zania nationalized most large com-  panies during the 1960s and early ward reform was privatization of regulatory and development func- 1970s, tea estates were ex- the two nationalized estates, a pro- tions of the Tea Authority. The Tea empted--with two exceptions in cess that extended from 1988 to Act of 1997 established the Tea the East Usambaras. The 1993. Initially, the government Board of Tanzania and the Tanza- Kwamkoro estate (630 hectares) considered three options: do noth- nia Smallholder Tea Development was nationalized in 1967 and the ing and let the estates and their Agency. Their functions were set Bulwa estate (680 hectares) was factories close; let the estates con- out in the Tea Regulations of 1999. "bought" by the government in tinue producing at a loss with mini- The Tea Board is responsible for 1971. Before nationalization the mal renovation over the next 10 regulating tea cultivation and pro- two estates together produced more years, by which time their residual cessing, licensing tea blenders and than 1,800 tons of made tea. Pro- value would be zero; or fully reha- packers, licensing and controlling duction dropped to 300 tons in the bilitate the estates with external tea exports and imports, collecting mid-1980s as almost two thirds of assistance. The third option was statistics on the tea industry, and the original 1,300 hectares were selected, mainly for political rea- representing the government in abandoned. The factors behind the sons. international tea forums. The Tan- deterioration were similar to those The Commonwealth Develop- zania Smallholder Tea Develop- in the smallholder sector. ment Corporation, a statutory cor- ment Agency is responsible for pro- Public research on tea also ran poration of the British Government moting and developing the small- into major problems. Before inde- was invited to purchase a 60 per- holder tea sector, advising the Min- pendence, research for the East Af- cent equity share in the estates, istry of Agriculture and Food Secu- rica tea producing region was con- with the rest to be retained by the rity on tea industry matters, offer- ducted by the Tea Research Insti- Tea Authority. They would form a ing extension services to tute of East Africa. Following the joint venture to rehabilitate the es- smallholders, and monitoring the collapse of the East African Com- tates. The incremental funding privatization of Tea Authority fac- munity in 1977, the research pro- was estimated at