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FINANCIAL WATCH: Hints on strategy for revamping neglected vineyards
2005-09-28 06:48:52
By Mireny John
Last week, two contrasting scenarios occurred worthy of discussion. One, the outgoing President Benjamin William Mkapa paid an official visit to South Africa’s Western Cape.
While at the Elsenburg College of Agriculture, His Excellency was introduced on the factory floor to the wine making process and was reportedly impressed.
At the end of his tour, he was overwhelmed by the way South Africa’s farming sector was benefiting the majority of the poor populace by creating jobs across its many sub sectors.
The President expressed his wish that Tanzania could emulate South Africa’s agricultural successes.
Back home in his own backyard, owing to lack of wine processing factories, Kenyan businessmen were reportedly aggressively buying hundreds of tonnes of grapes in Dodoma during the September-October main harvest season.
The grapes are bought at Tshs.500 per bunch from peasants in rural parts of Dodoma region. These middlemen sell the same amount for Tshs.5,000.
One would not be surprised to find out that wine produced from these grapes is processed in Nairobi and exported to the enlarged East African Community market, competing with South African wines in our supermarkets.
So, this is just a simple illustration, depicting how much we are losing from our agricultural sector.
The first is a scenario where farmers are grossly underpaid at farm-gate price level. Low prices are more than enough to discourage farmers from expanding their areas under cultivation.
The second situation takes into account the economic losses we suffer by having failed to establish grape processing factories for wines, grape juice, raisins, brandy, vinegar, and other grape products.
We simply seem to lack the manufacturing, packaging, managing and export marketing skills relevant for wineries.
The third circumstance refers to the economic losses we incur by failing to build a brand, and, by extension, goodwill.
Commercial cultivation of grapes in Dodoma started way back in 1966, while current production is estimated at 535 metric tonnes per year, farmed on 1,421 hectares.
So what is next? We cannot improve agriculture and its related sub-sectors outside the market mechanism. And, the trauma facing Tanzania’s agriculture arises from the fact that although it contributes close to 50 percent of GDP, much of its own output isn’t retained within the sector to ensure accelerated growth and expand productivity.
Modern farm technology and related skills are all available on the marketplace. The daunting challenge is how to manoeuvre the same market framework and obtain the desired results from farming efforts.
One of the strategies is to sub-categorise agriculture, and, through a bottom-up participatory involvement of all stakeholders, design fiscal and marketing incentives for that particular farm sub-sector.
At fault is the way we think about agriculture in its holistic nature, and miss out on the important linkages necessary for the sector to be made sustainable.
In the case of the grapes, for instance, since the closure of the state-owned Dodoma Wine Co. (DOWICO) in 1982, both small and medium vineyards have been declining in acreage, primarily because the factory that used to absorb 70 percent of the region’s grape harvest no longer exists.
Right now, available statistics show that an average peasant owns about 0.5 of a hectare, and that hardly any new land is being planted to grapes .
It would seem that a strategic failure prevents us from attracting private initiatives in setting up new wine and packaging factories to invigorate grape cultivation.
One missed strategy is to zero-rate tariffs on imported factory equipment.
Some religious organizations are running small-scale wine factories in Dodoma. Similar incentives could be extended to them with a view to encouraging them to expand their operations.
Tariffs on imported wines have been upped, partly with the aim of protecting the local, so called infant wine industry.
Which are those industries that deserve protection in the first place?
One needs to have an industry in place first, with proven potential for growth and job creation and then decide on the best strategy of protection.
Overprotection isn’t an optimum intervention strategy for it can so easily lead to inefficiency and by extension, inability to penetrate global markets or at worst compete with similar imports.
All these are set to happen in the presence of a strong foundation of political will. Even without recourse to purely private sector initiatives, the relevant ministry could encourage farmers to establish their own Savings and Credit Cooperative Societies (SACCOS).
As their financial and managerial capabilities grow over time, such SACCOS will certainly qualify to borrow from financial institutions for the purpose of financing medium-scale wine factories, and or, distilleries.
Over the last ten years or so, massive investments were directed to modernizing infrastructure.
The long-term benefits of such efforts will be hard to come by if our roads don’t move finished products and semi-processed raw materials to domestic and international markets.
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