Evaluation of the Political and Institutional Level

Agricultural policies encompass both food security and agricultural trade policies, but neither in Tanzania nor in Zambia is there an explicit policy existing for each sector.

The policy matrix focuses solely on those stakeholders affected by the corresponding policies in the respective country, either in Tanzania or Zambia; e.g., it does not allow any conclusions on the effects of Tanzanian policies on Zambian consumers and vice versa. Within the scope of the matrix, farmers may be simultaneously considered as consumers.

By filling in the matrix, the conflict of interest between the policy goals of food security and agricultural market liberalization was striking in both countries. The measures cannot be assigned to one single policy since they pursue different goals; e.g., fertilizers are subsidized to intensify production for agricultural growth on the one hand and to ensure food security on the other. The matrix is described in accordance with Table 10; for the detailed policy matrix for both countries see Tables A25 and A26 in the annex.

Food Security and Agricultural Policies

Governments in both, Tanzania and Zambia subsidise fertilisers to intensify agricultural production with the aim of increasing the level of national food security.

In Tanzania, fertilizers are distributed to increase agricultural growth and production or food availability at the same time. Farmers who receive subsidized fertilizers are able to reduce production costs for food staples. However, in many areas fertilizers are distributed belatedly; thus not allowing the farmers to use the input at the most appropriate time, with a smaller increase in yields compared to results after delivery in good time. This may indirectly lead to unpredictable yields and tradable crops for

62 Assessment of the Field Survey Results traders which in turn may cause supply-side constraints in the long run. Like in Tanzania, the Zambian Government subsidizes fertilizers to assure national food security and to foster agricultural growth simultaneously. The Fertilizer Support Programme (FSP) should stimulate maize production and operate on a refund scheme. Fertilisers are given out by co-operatives; this means that only farmers organised in co-operatives actually benefit from the programme, especially when the co-operative is affiliated to the ruling party.

Source: Own compilation (2009).

Both countries, Tanzania and Zambia, pursue various protectionist policy measures to ensure national food security. By giving out export or import licences, the Governments seek to control the export or import of specific food commodities.

These formal procedures are centralised and cumbersome, and reduce incentives for traders to get involved in formal cross-border trade. They may rather tend to get involved in informal cross-border trade, either on the Tanzanian or the Zambian side.

In the Tanzanian case, traders are much more affected by these procedures than the Table 10: Synopsis of the Policy Matrix

Policy/Strategy/Institution Goals Intensification of domestic production

Food Security and Agricultural Policies:

Kilimo Kwanza (2009), Agricultural Development Sector

Strategy (2001)

Food security at national and household level

Agricultural Trade Policy:

Kilimo Kwanza (2009), National Trade Policy (2003)

Creation of a diversified and competitive export sector

Tanzania

National Food Reserve Agency National food security

Intensification of domestic production Food Security and Agricultural

Policies:

Fifth National Development Plan (2006),

National Agricultural Policy (2004)

Food security at national and household level liberalization, creation of an export-driven and competitive middle-income economy by

2015

Zambia

Food Reserve Agency Contribution to stabilisation of national food security and market prices

Assessment of the Field Survey Results 63 export ban because it is very hard for them to fulfil formal procedures.

There are a few food security measures that differ between Tanzania and Zambia.

Tanzania has currently imposed an export ban on food staples to assure national food security. The ban is legalised through the Export Control Act which aims to stock up food and stabilise prices to supply food to deficit regions. It is generally imposed on a temporary basis. However, in Tanzania, the ban has presently been in existence for a longer period and has created considerable, negative effects on farmers and traders. First, it has reduced incentives for Tanzanian farmers to intensify their production. Since export markets are more or less closed, prices on local markets tend to decrease from their perspective. While the minority of the farmers sell directly to the Tanzanian National Food Reserve Agency (NFRA), the majority sell to middlemen who trade with the NFRA or other parts of Tanzania.

Domestic trade also is not attractive for farmers because middlemen purchase at lower prices when trading with Central or Northern Tanzania. These lower prices result from the high transportation costs because of bad transport connections (especially in Rukwa Region). In comparison with domestic trade, cross-border trade with Zambia or the DRC is more attractive because of the short transport connections from both, Mbeya and Rukwa Regions, to nearby Zambia. Secondly, the decision-making for imposing the export ban remains unpredictable and intransparent for export traders. Subsequently, the ban hampers formal export trade as well as market development. Traders involved in cross-border trade face reduced incentives to participate in the market since they are not allowed to export officially and, consequently, tend to get increasingly involved in informal cross-border trade.

Thirdly, consumers may benefit from generally lower market prices in the short run, because of domestic food availability. In the long run, supply-side constraints may arise from reduced food availability that, in turn, may lead to higher market prices.

In comparison with Tanzania, Zambia distributes so-called Food Security Packs (FSP-PAM) which are meant to support small farmers in securing their livelihoods.

Farmers who receive the maize seeds and fertilisers given out with the packs do benefit but the support is not guaranteed since the allocation comes with strings attached that cannot be met by all farmers. Another measure consists of regular subsidies for milling companies to lower mealie meal prices temporarily for consumers. This Government intervention sidelines the private sector as it cannot compete with these comparably low prices.

Agricultural Trade Policy

Both Tanzania and Zambia pursue a liberalised agricultural trade policy and seek to create a competitive export sector. Tanzania’s policy is based on the recently published Kilimo Kwanza (2009) that aims to transform the agricultural sector

64 Assessment of the Field Survey Results towards a green revolution. The Government plans to commercialize and modernize the agricultural sector to create a diversified and competitive export sector based on agricultural growth. In Zambia, the objective of the recently reviewed Commercial, Trade and Industrial Policy (2009), which is based on the Fifth National Development Plan (2006), is to create an export-driven and competitive middle-income economy by 2015. Because both agricultural trade policies in Tanzania and Zambia have just been defined, concrete measures have not been implemented and entailed effects on farmers, traders, or consumers could not be observed so far.

National Food Reserve Agencies

The Tanzanian and the Zambian Food Reserve Agencies pursue similar policies with effects that vary to a certain extent. Both agencies have to facilitate national food security by stocking up food domestically and balance seasonal market price fluctuations. They mainly differ concerning the mandate on redistributing and importing food during times of maize shortages. In both cases, the Food Reserve Agencies continue to depend strongly on government funds while their interventions create market distortion and distrust between Government and the private sector.

On behalf of the Tanzanian Government, NFRA purchases maize in areas where farmers have no access to markets and no means of transport. The interventionist policy of NFRA has different effects. First of all, only farmers with the capacity to sell their produce directly to NFRA’s buying centres may benefit from the Agency’s floor price. Furthermore, unpredictable Government funds and annually changing locations of buying centres create an unreliable situation for those farmers who want to sell their harvest regularly to NFRA. Only very few farmers have the capacity to bring their produce to the buying centres. Most of the farmers instead sell to middlemen who, in turn, sell to the Agency. Those farmers do not benefit from NFRA’s higher floor price and depend on middlemen as their only buyer. Secondly, traders face difficulties in competing with the high floor price. This creates disincentives for traders to participate in the market or squeezes out of the market traders without the capacity to compete with the floor price. This in turn may harm farmers in the long run because their dependency on NFRA purchases would increase. Thirdly, NFRA redistributes food to deficit areas mainly in Central and Northern Tanzania where consumers generally benefit from falling prices or free supply.

The Zambian FRA has the mandate to stabilise both, the national food security situation and the market prices of designated crops. FRA purchases maize from farmers based in remote areas who are supposed to benefit directly from this intervention. In the past, FRA had announced plans to buy more maize than its public funds allowed. Consequently, a number of farmers could not sell their produce. This

Assessment of the Field Survey Results 65 signifies that farmers cannot rely on the Agency’s purchases due to the Agency’s non-economical and inefficient management (e.g. insufficient funds, inadequate storage facilities). By fixing a floor price lying above the market price and by supplying the maize to millers, the Zambian Government creates disincentives for traders to participate in the market. In general, the private sector has limited capacities to compete with such government subsidies. In contrast with Tanzania where the Food Reserve Agency has no mandate to import during times of shortage, in Zambia, maize is imported mainly by either FRA or the private sector, depending on the actual tender.