COTTON IN TANZANIA

TRENDS, PERFORMANCE AND FUTURE PROSPECTS

Joe C.B. Kabissa,Director General, Tanzania Cotton Board

COTTON IN TANZANIA The leading cash crop in terms of the number of

producers estimated at half a million farming households;

40% of the population depend on it; Cultivated area: 300,000 - 500,000 ha; Smallholder based and completely rain-fed; Farmers generally practice low input - low output

approaches to production; Output fluctuates in relation to rain and market price; Offers great potential for increased GDP; exports;

farmer incomes and employment via textile manufacturing;

MAP OF TANZANIA

Cotton Producing Areas

Quarantined Areas

Key:

COTTON CULTIVATION HISTORY

Cotton was introduced into Tanzania in 1904 by the Germans;

Initial attempts to grow it as a plantation crop failed;

Between 1954 and 1994, marketing institutions were in a state of continuous change aimed at enhancing production, processing and marketing of cotton;

Reforms are still ongoing; Present and future performance of the cotton

industry in Tanzania will most likely depend on the impact of these reforms.

MAJOR REFORMS IMPLEMENTED BY 1994

Poor performance of an agriculture – led economy up till the 1980s compelled the Government of Tanzania to undertake:-

Price and trade liberalization; Privatization of production, marketing and

processing of agricultural commodities; Enterprise restructuring; and Macroeconomic stabilization.These reforms sought to improve price

incentives for farmers in order to boost agricultural production.

Some of the effects of policy reforms on the performance of the cotton

industry

Sub - sector performance Prior to reform After reforms

Supply response weak stronger

Payments to farmers delayed Prompt

% of FOB price paid to farmers Less than 40% Above 60%

Prices paid to farmers Pan territorial and pan seasonal

Vary in relation to transport cost and quality of cotton

Input procurement Interlocking transactions used Problematic

Private sector participation None 40 private organizations in 2007/08

% Market share of Cooperatives

100% Less than 5% in 2007/08

Role of MNCs Non existent Cargill, Paul Reinhart and Olam

Competition between buyers None existent For volume rather than quality

Quality of cotton High and with premiums Low with discounts

Use of price risk management tools

Yes Just a few ginners

Challenges emerging after the reforms

Declining seasonal input use; Declining quality of lint; Increased coordination

problems; Stagnating local

consumption of lint;

A note on the textile industry

Some 20 mills convert lint into textiles; Relatively low quality printed fabrics such as

khanga, kitenge and bed linen are produced for the local market;

High quality fabric is imported for the export – oriented garment industry;

Age of technology and the integrated nature of most mills limit production level, quality of products and hence quantity of lint used; and

Rules of origin limit sales into the EU in spite of the EBA facility.

Tanzania’s Coping Strategies

A Development Strategy was adopted; Institutionalization of Stakeholders’

Meetings; Formation of the Cotton Development

Fund (CDF); Adoption of one zone – one variety

strategy; Roles the Tanzania Cotton Board

redefined; and Formulation of a Corporate Strategy.

Cotton production trends between 1992 and 2007

Seed cotton production

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,00019

91/9

2

1992

/93

1993

/94

1994

/95

1995

/96

1996

/97

1997

/98

1998

/99

1999

/00

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

Seasons

Pro

duct

ion

(tons

)

Total WCGA

Total ECGA

Grand Total

THE GLOBAL TRADE REGIME

Pursuit for an agriculture-led growth and development strategy is being undermined by a global trade regime characterized by:-

Commodity price instability, Declining commodity prices; and Deteriorating terms of trade.

Under these circumstances agricultural profitability and poverty reduction cannot be achieved.

Future Prospects

To produce 1.5 million bales by 2010; To increase the proportion of cotton

processed domestically by new investments in spinning, weaving and processing; for production of continuity products such as bed sheets, toweling and undifferentiated garments such as t-shirts and knitted underwear initially and fashion garments later; and

To restore Tanzania’s reputation as an exporter of “WHITE GOLD”;

A moral question!Can these farmers ride the wave of

globalization or be swept by it? To date, 80% of total world cotton output is

produced by smallholders. Yet in spite of their comparative advantage, they have little hope of achieving higher and stable prices because of policies in some EOCD

countries. Our farmers are being perceived as being on their way out - a price of

progress! On what moral right?

THANKS FOR YOUR KIND ATTENTION