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Strategic intervention price, key to pro-poor growth and industrialisation in Tanzania (II)
2006-09-15 09:28:21
By Damian M. Gabagambi
Tanzania seems to acknowledge the key role played by agriculture in the development process.
Of late the government has come up with a chain of strategy papers and policy initiatives embedded in the Tanzania Development Vision 2025 and National Strategy for Growth and Reduction of Poverty (NSGRP), colloquially known as MKUKUTA.
With regard to the agricultural sector some of the relevant policies and strategies include Agriculture and Livestock Policy (1997), Rural Financial Services Program (RFSP), Agriculture Sector Development Strategy (ASDS) 2001, Poverty Reduction Strategy Paper (PRSP), Cooperative Development Policy (2002), Rural Development Strategy (RDS). National Food Security Policy (2004) and Agricultural Marketing Policy (2005).
Under this framework, the country has witnessed mushrooming projects/programs such as Agriculture Sector Development Programme (ASDP), Participatory Agricultural Development and Empowerment Project (PADEP), Agricultural Marketing Systems Development Program (AMSDP), National Irrigation Master Plan (NIMP) and District Agricultural Sector Investment Project (DASIP) just to mention a few.
All these projects and programs are being implemented in the realms of reforms engineered by the Bretonwood institutions (World Bank and IMF) that insist in non-government intervention in market to give way to the private sector to become an engine of economic development. While it is true that the reforms have worked fairly well in many sectors, critical observers have started to realise that it has terribly failed in the agricultural sector.
This is because agricultural production and marketing processes are unique - numerous small scale farmers producing with no freedom to sell their produces, time lag due to biological nature of plants and animals, cost-price squeeze and free rider problems inherent in agriculture all over the world.
As a result when small scale farmers are indiscriminately hooked to the market forces they become exposed to all sorts of local and international crooks who exploit them mercilessly.
These unscrupulous traders form syndicates that buy crops at very low prices at harvesting time when prices have dropped below production costs, and sell them at prices two or three times higher later during lean seasons.
This phenomenon goes on year after year. In a situation whereby the poor are constantly exploited fighting poverty remains a day dream. Some kind of protection is eminent.
I concur with people who believe that a grand panacea to this problem is collective actions by producers (cooperatives and farmers associations) in order to increase bargaining power of the farmers.
This is well explained in the concept of ownership and value adding along the value chain model, which is being architected by Mr. Herment A. Mrema, Senior Business Manager of National Union of Coffee Agribusiness and Farm Enterprises (NUCAFE).
I also appreciate the role played by infrastructure, farmers’ awareness campaigns and warehouse receipt systems in increasing farmer’s share on a consumer’s shilling and thus reducing income poverty.
But, in my opinion, to assume that the strategies outlined above would work for every district and for every crop is erroneous.
In some cases especially traditional cash crops such as coffee, cashwenuts, cotton, etc warehouse receipt system and the concept of ownership and value adding model would suffice, in some areas infrastructure and awareness would be adequate.
But in food crops especially grains (maize and rice) which have a direct bearing on food security and have potential of becoming cash crops, a more robust strategy such as minimum price scheme could be necessary to turn the widely preached potentials in agriculture into opportunities for pro-poor growth and poverty reduction. Without it the development process of this country will take hundreds of years.
It should be remembered that the approach of subjecting agriculture to the market forces as a strategy for development had never been used successfully anywhere in the world; why should we believe that it will work in Tanzania?
If improved infrastructure, level of awareness among producers and collective actions were a solution, why developed countries such as America, Germany, Japan, Canada, the United Kingdom etc with excellent communication networks (in terms of roads and railways, phone), farmers cooperatives, education system, etc have never left their farmers to compete in a free market economy?
That’s why I am proposing in confidence that minimum price scheme should be adopted for strategic crops. Such kind of intervention would ensure that efficient farmers recovered production costs plus a small margin of profit, say, 15 - 20%.
This would increase incentive to farmers and make them produce more through expansion of farms (specialisation) and use of modern inputs (intensification) sourced at market prices.
More often than not policy-makers assume that farmers do not increase output because of lack of credit, efficient advisory services, use of rudimentary technology, etc.
The key issue is that inputs are derived demand of output. If there is no market (good price) for output no matter how much credit, fertiliser, extension services and technology pushed to the farmers will ever bear intended fruits.
At the moment the government doesn’t know whether prices paid to farmers cover production cost or not simply because the World Bank and IMF instructed that the approach for the government should be “hand off, eyes on”.
As long as production costs are not recovered the farming sector will never advance and poverty will never go away.
The multibillion program (3.2 trillions shillings) recently announced by the government to transform agriculture in seven years will hardly deliver intended results if not accompanied by intervention price system.
The minimum price scheme would attract many people including youngsters to get involved in farming and thus provide solution to the unemployment problem facing the country.
The positive multiplier effects of intervention price in agriculture outweigh the shortcomings of the scheme by a large margin.
I am sure this discussion has raised a number of questions in the mind of the readers.
They might be asking themselves; where would the government get money to buy all such crops?
How would inherent inefficiency in government be overcome?
How would the stock be disposed off? Wouldn’t this suffocate middlemen in the system?
For how long should the price be supported? Are there success stories of countries that have successfully used this strategy? What are the advantages of intervention price approach over the current approach? These and other related questions are genuine.
I have interesting answers for them to share with you. In a near future I will create time to discuss them one after another so that we could be standing on the same platform when discussing the economic future of this blessed country of ours.
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