Tanzania - Basic economic report (Vol. 7 of 8) : Key issues in agriculture and rural development

Report No. 1616-TA Tanzania Basic Economic Report Annex VI-Key Issues in Agrculture and Rural Development December 1977 'astern Atnca Country Progfams I FOR OFFICIAL USE ONLY Document of the World dank Th: &cturr.;ent nas a restricted distribution and may be used by. recipients ornIv in the nerTormance rf t)eir oificial duties. Its cor.terts mav not otherxvose be di.closed wttho:vt W orid Bark auth,,nzat;on.  CURRENCY EQUIVALENTS l/ SDR 1.00 Tanzania Shilling (T. Sh.) 9.66 US$ 1.00 - Tanzania Shilling (T. Sh.) 8.30 T. Sh. 1.00 - US$0.12 TANZANIA 'FISCAL YEAR July lst -June 30th 11 In October 1975 the Tanzania Shilling was pegged to the value of the Special Drawing Rights (SDR) of the International Monetary Fund. The US Dollar/Tanzania Shilling exchange rate is therefore subject to change.  FOR OFFICIAL USE ONLY TANZANIA - BASIC ECONOMIC REPORT ANNEX VI KEY ISSUES IN AGRICULTURE AND RURAL DEVELOPMENT Prepared By Mr. F. S. O'Brien The full report consists of the following separately bound volimes: Main Report Annex I - Domestic Finance and Resource Use Annex II - Fiscal Implications of Universal Primary Education and Universal Rural Water Supply Annex III - Labor Market Allocation and Income Distribution Annex IV - Income Distribution and Growth: A simulation Model Annex V - Industry: Perspective and Strategic Choices Annex VT - Key Issues in Agriculture and Rural Development Annex VII - Approproate Technology in Tanzanian Agriculture. Some Empirical and Policy Considerations This doument has a mtictad distibution and may be used by recipietns only in the perfonnance of their officia duties. Its contents muy no ohrwise be discoed wthout Worik Bank authorization.  TABLE OF CONTENTS Page I. Introduction 1 II. The Agricultural Setting 3 III. Trends in Agricultural Development 6 A. Pre-Independence 6 B. Post-Independence 8 IV. Government Objectives, Strategy. Programs and Policies for Rural Development 13 A. Objectives 13 B. Strategy 14 (i) The Village Settlement Scheme 14 (ii) Ujamaa Villagization 1S (iii) The 1974 Villagization Campaign 19 C. Programs and Policies 20 (i) The Cooperative Movement 21 (ii) Parastatal Crop Authorities 24 (iii) Research and Extension 26 (iv) Credit 27 (v) Input Supply 28 (vi) Pricing Policy 30 (vii) S m=ary 33 V. Key Issues in Rural Development 33 A. Villagization 33 B. Governmental Organization 35 C. Incentives 36 D. Other Issues 37 E. Prospects for the Future 38 Statistical Appendix  List of Statistical Appendix Tables 1. Gross Domestic Product in Agriculture, 1964-1975 2. Fixed Capital Formation in Agriculture, 1966-1973 3. Marketed Production of Selected Crops, 1964-1975 4. Government Purchases of Major Food Grains 5. Volune and Price Trends of Major Agricultural Exports of Tanzania (Mainland), 1965-1975 6. Selected Producer Prices  ANNEB VI AGRICULTURE AND RURAL DEVELOPMENT I. INTRODUCTION 1. The purpose of this Annex is to review the major trends in the performance of the Tanzanian agricultural sector over the period since Independence, to examine the various programs and policy initiatives which the Tanzanian Government has introduced in its efforts to overcome the constraints facing agricultural production, and to assess the prospects for a higher rate of agricultural output growth in the future. Agriculture is the predominant sector in the Tanzanian economy and it provides the source of livelihood for the vast majority of the Tanzanian population. It has been the focal point of the Government's development strategy since Independence, both prior to and subsequent to the Arusha Declaration of 1967. However, it is perhaps the one sector where the economic results have been most disappointing. 1/ 2. Any assessment of the problems and prospects of the agricultural sector is difficult for at least two basic reasons: first, because informa- tion about the resource base and about yield-improving technical innovations is still woefully deficient, 2/ and, second, because the very rapid pace of Governmental interventions and policy changes prevents a ceteris paribus analysis of the underlying economic forces at work in the rural sector. The recent record of continuing institutional changes imposed on a traditional and conservative peasant agricultural society is the most striking aspect which confronts the observer of Tanzania's rural development efforts. As is stated in the main report, this record of institutional change makes evaluation of Tanzanian economic performance in all sectors difficult. 1/ "...the agricultural results have been very disappointing. Modern methods have not spread very quickly or very widely; the majority of our traditional crops are still being grown by the same methods as our forefathers used... In food production, for example, the increase in output has not kept pace with the increase in population.... Our agricultural production is too low to produce a surplus that can feed a larger urban population or maintain strategic reserves." Julius K. Nyerere, The Arusha Declaration, Ten Years After, Dar-es-Salaam, January 1977, pp. 19-21. 2/ It must also be stressed that analysis of past production trends is constrained by lack of reliable data. Information on total production of major cash crops which are purchased entirely or largely by Governmental agencies and on agricultural imports and exports is reasonably accurate, but similar estimates for production and consumption of the major food crops, the bulk of which are consumed on the farm by subsistence producers or sold in private markets, are at best only guesses. Both benchmark data and trend series are unreliable. Neverthe- less, despite the paucity of accurate data, the overall levels and trends of activity in the rural sector can be determined to a sufficient degree to permit description of the major problems which confront Tanzanian policymakers.  -2- 3. In preparing this Annex the basic economic mission has not carried out new research on the agricultural sector as a whole. (However, important original research on technologica'l choices in agriculcural production has been a part of the basic mission and the findings and policy implications of this research are presented in Annex VII. In addition, an in-depth analysis of the trends in rural and urban incomes and the consequences for production, employment and unemployment is contained in Annex III.) This Annex is rather a synthesis and review of recent research and experience on the problems of Tanzania's rural sector. Our starting point is the World Bank's major survey of the sector wnich was issued in December 1974. 1/ That report provided an excellent review of past developments in the agricultural sector and a comprehensive analysis of development issues, including the ujamaa village movement, the incentive framework, problems of the marketing system, the cooperative movement and the extension services, and the need for greater emphasis on production. However, it is necessary to move beyond the sector report because the nature of certain sectoral issues has changed and because a number of important policy changes have occurred since it was issued. 2/ Nevertheless, many of the issues raised in that report are still relevant and many of the conclusions which it reached are still valid. Finally, the sector report was limited in scope; rather than encompass all components of the agricultural sector it concentrated on the smallholder sector and on the opportunities for improving rural living standards through increased smallholder production. No attention was given to forestry and fishing or to irrigation, and the livestock subsector was dealt with only briefly. This Annex will likewise concentrate on the problems of the smallholder sector because this is the area where the Tanzanian Government is focusing its own attention. 17 Tanzania Agricultural and Rural Development Sector Study (3 volumes), Report No. 541a-TA, December 10, 1974. This is only the latest in a series of World Bank surveys of Tanzania's agriculture. See also, The Economic Development of Tanzania, the Johns Hopkins Press, Baltimore, 1961, Chapters 4-11; The Economic Development and Prospects of Tanzania, Report No. AE-7, March 18, 1970, Vol. II, Agriculture and Rural Development; and The Economic Development and Prospects of Tanzania, Report No. AE-26, June 22, 1971, Annex I, Agriculture and Rural Development. 2/ In particular, the sector report was finalized prior to the mass villagiza- tion campaign of 1974/75 and thus could not anticipate the extent to which the rural society and economy would be modified by the sudden shift of millions of peasant households. At the same time the Government's earlier emphasis on collective production has, for the moment at least, given way to "block farming" and to individual plots in the new villages. In addition, there have been major modifications over the past three years in the status of cooperative societies, in input distribution and crop marketing systems and in the Government's pricing policy in agriculture. Furthermore, a significant reorientation has been taking place in the allocation of public investment funds and new production-oriented agricultural programs have been introduced. In updating the analysis and conclusions of the sector study it is necessary to include some assessment of the implications of these new factors. _R -_ _ _ z =~~~~mili  4. In this Annex we first briefly describe the agricultural setting and the constraints which the natural environment imposes. Next we review the cutput performance of the agricultural sector. This review concentrates cn the post-Independence period, and particularly on the last ten years (roughly coinciding with the post-Arusha Declaration period), but because some of the recent problems of the sector are linked. with trends which began during the colonial period, the pre-Independence era is examined briefly. This is followed by presentation of the objectives of the Tanzanian Govern- ment for the rural sector, as they have been expounded in a series of develop- ment plans and policy statements, and by examination of the record of govern- mental strategies, programs and policies for agricultural development. In the same section we analyze these strategies, programs and policies to determine their compatibility with the overall objectives, their internal consistency, the effectiveness with which they have been implemented, and the likelihood that they can successfully overcome the constraints to rural development. A final section reviews the central issues brought out by this overview of Tanzania's rural sector and makes certain general recommendations concerning the broad outlines of government policy in the future. II. THE AGRICULTURAL SEmTING 5. Tanzania is situated just south of the equator, and most of the country, with the exception of the coastal belt, is located on the central African plateau at altitudes ranging between 1,000 and 1,500 meters. The total land area of mainland Tanzania is slightly over 880,000 km2. With a total population of some 15.3 million (mid-1976 estimate), overall population density is low -- approximately 17 persons per km2. However, less than 10 percent of the total surface area is considered suitable for cultivation and much of this is of inheren-ly low fertility. At the present time only about 5Z of the total land area 1'L used for crop production. The remainder consists primarily of rough grazing areas (52Z) and of woods and forests (43%). Some further expansion of cultivated area will be possible to accommodate a growing rural population, but most of the uncultivated land is of lower fertility than that currently in use. It has been estimated that irrigation and flood control might add some 1.6 million ha (less than 2Z of total land area) to the stock of cultivable land. 1/ However, the economic viability of further irrigation development has not been adequately investigated. 6. The topography to a large extent determines the rainfall pattern with most of the country experiencing a single rainy season during the period November-May. For most annual crops, depending on elevation, planting tends to be concentrated in October-January, with harvesting in May-August. The point which must be stressed is that many parts of the country receive insufficient rainfall for crop production, while throughout most of the country the rainfall pattern is highly erratic, varying in timing during the rainy season and in total volume from year to year, with periodic droughts 1/ The area currently under irrigation is estimated to be only about 130,000 ha.  -4- causing widespread hardship. Much of the center of the country is semi- arid while the higher altitude areas in the south and north experience relatively high rainfall. (The drier areas also have generallv lower soil fertilitv.) As a result of the rainfall pattern the people have historically tended to live on widely scattered farmsteads (shambas) with much of the population and economic activity concentrated around the periphery. This, in tuwrn, has increased the cost of providing trans?ort links and other infrastructure. 7. While all Tanzanian agriculture shares certain common aspects, there is wide variation in the natural environment with a great diversity in soil types and fertility, in elevation, climate and rainfall. There is also a wide variation in population density and land use and in access to markets. This leads to substantial variation among regions in growing conditions (there are over 200 different agro-economic zones in Tanzania) and in type of crops grown. For example, the maize growing season varies from around 90 days to over 200 days, depending principally on elevation. While maize is the main staple food crop, Tanzania also produces large harvests of cassava and bananas and significant amounts of sorghum, millet, wheat and rice. There is also a wide variety of cash/export crops produced. Agricultural products account for over 80 percent of Tanzania's export earnings, but no single export crop is dominant. The leading export crops over the past 15 years have been coffee, cotton, cashews and sisal, but none of these has accounted for more than 25 percent of total export revenues. I/ 8. Tanzania is predominantly a nation of small peasant farmers. An estimated 94% of the population lives in che rural areas, 90%. of the economically active population is engaged in agriculture, and smallholders cultivate almost 90% of the area under crops. The agricultural census of 1972 reported a total of approximately 2.5 million farms of which 832 were below 2 ha in size and 97% were below 5 ha. Large scale agriculture comprises a few estates engaged in coffee and tobacco production and state farms concentrated in wheat, rice, sugar, sisal and livestock. Estate production has diminished sharply in importance since Independence 2/ because of nationalizations, and the state farm program remains small. 9. The pattern of farming which developed in response to Tanzania's natural conditions was that of shifting cultivation or the "bush-fallow" system which is common in many parts of Africa. This pattern of cultivation 1/ These four commodities have accounted for a very high but declining proportion of mainland exports during the entire post-World War II period. Their share was 74 percent in 1948/49, 63 percent in 1957/58, 55 percent in 1965, and 52 percent in 1975. However, over this period their relative importance has shifted considerably, with sisal in particular, dropping from 57 percent of total exports in 1948/49 to 7 percent in 1972. 2/ In 1961 only 900,000 ha, or about I percent of total land area, was occupied by estates owned by non-Africans. However, these estates accounted for 35 percent of total marketed agricultural production and 45 percent of agricultural exports. IBRD, The Economic Develooment of Tanganvika, p. 20. ME=