Crop banks: a saviour for farmers

16 April 2010, Tanzania Daily News
URL: http://allafrica.com/stories/201004141117.html

Dar Es Salaam:  Members of the Japan Agriculture Co-operative Society (YASATO) in the city of Ibaraka, most of whom are small-scale farmers and livestock keepers, never bother about crop markets or prices of farm produce. It is their society, YASATO, that bothers about it. The marketing director of YASATO, Mr Kioshi Suzuki, told Prime Minister Mizengo Pinda, who visited YASATO recently that the society collects crops from all members, processes it to add value and looks for markets mainly in Japan.

Mr Suzuki also told Mr Pinda, who was accompanied by the Minister for Agriculture, Food Security and Co-operatives, Mr Stephen Wasira on the trip, that farmers and animal breeders are also offered insurance cover as a hedge against crop or animal losses. "We also offer them insurance for life, health and other types of properties, Mr Suzuki said.

Mr Pinda found the Japanese approach to crop banking rather similar to the envisaged Tanzanian version - but the Japanese had made remarkable headway. Minister Wasira said that co-operative societies were the best answer for the crop marketing problems that beset small-scale farmers in Tanzania.

"Successful co-operative societies are actually a saviour for farmers," he said. "The societies evade the onslaught of unscrupulous middlemen and other high-profile crop thieves and go for reliable crop markets," he said.

In Tanzania a lot of grain is wasted in the fields and much of the harvested crop is sold at throw-away prices to middlemen. Mr Wasira said that the Japanese co-operatives' approach to crop banking was similar to the system used in yesteryears by their Tanzanian counterparts. However, most Tanzanian co-operative societies are now defunct. Many failed to manage their capital and collapsed. Mr Suzuki said that YASATO looks for buyers of crops such as rice, cabbages, carrots, sweet potatoes, bananas, apples, cucumber, onions and others - many of which are difficult to store in the farmers' granaries.

The farmers are paid for their crops upon delivery at the storage facilities or one month after the society has sold their produce. Mr Suzuki also said that the society procures fertilizers and other farm inputs and distributes them to farmers on loan or cash basis. This approach saves the farmers from going through the tiresome rigmarole of applying for loans from financial institutions.

Mr Suzuki said that buyers of YASATO crops are mostly small-scale consumers, whole-sellers, schools, hospitals and supermarkets. Establishment of crop banks in Tanzania is in line with the Warehouse Receipts Act of 2005. The Warehouse Receipts Bill 2005 appeared to be a controversial, unconstructive effort that ran into stiff opposition at a seminar for Members of Parliament in July of that year.

Some legislators thought it would graduate into "a very bad law." "A crop bank? What do you mean?" some MPs asked cynically. The Bill had required farmers to shunt their crops into warehouses (or crop banks) and return home with delivery receipts - not money. The farmers would use these receipts as collateral to obtain monetary loans from financial institutions; it was explained in the Bill.

But some MPs contended that there was no point in storing farmers' produce in warehouses. They reasoned that farmers needed to sell their produce in cash and spend the money on essentials such as fertilizers, food, school fees, blankets and better shoes. The MPs said that farmers had immovable assets in the form of plots of arable land or even farms. "These immovable properties could swiftly be used as collateral in banks to obtain loans, they pointed out. Traditional table banging greeted this view, as the Bill appeared headed for a flop.

One MP suspected that the Ministry of Co-operatives and Marketing must have borrowed the "crude" idea from South Africa, where farmers were wealthy individuals who engaged in big-time mechanical agriculture and the harvests there were invariably bumper.

The legislator said that the idea could be a brilliant one in the South African situation; but it, certainly, could not suit the condition in rural Tanzania, where most of the producers are small-scale subsistence farmers. He said he did not expect the Bill to help a small-time farmer who tills the land with a hand hoe. Another legislator wondered where each farmer would get the money to pay for transportation of produce to the warehouses.

"Who will pay for transportation of crops to warehouses?" he queried.  The legislator said farmers incur a lot of expenses preparing their farms and that they need to recoup their expenses during the harvest season and start preparing for the following farming season.  "So, what farmers need is hard cash for their produce, not receipts!" he insisted. As fate would have it, the Bill finally saw the light of day. It was endorsed and has graduated into "a good law."

Chonde Village in Dodoma Region has one of the best crop banks. Cashew nut growers in Mtwara Region have a number of highly successful crop banks. However, the plan is tailored to promote national economy and cut back on poverty, which is still mindboggling in many parts of Tanzania.

Japanese farmers have the best crop banks in Asia, Mr Dawaka Suzuki, a successful rice farmer and crop bank association member, says. Farmers in Japan banded together to ease the burden of individual crop marketing. In Tanzania, it is the weaknesses in the free market economy that have prompted adoption of the plan.

Crop banks have numerous benefits for farmers, apart from enabling them to borrow money from financial institutions. The banks reduce after-harvest crop losses and boost food security both for farmers and the nation.

The crops are also to be stored safely, ensuring quality control. There is also the added benefit that warehouses act as a hedge against price falls. Farmers would decide to sell their crops at the opportune moment without suffering losses even after a long spell of time. The arrangement would also help to check and maintain the quality of crops.

In Japan it is the association that looks for buyers. In the Tanzanian situation the arrangement makes farmers credit-worthy. All a farmer would need to do would be to take his or her Warehouse Receipt to a financial institution and walk out moments later with borrowed money in his or her pocket.

He would proceed to buy fertilizers, clothes and settle school fees for his children. So, when the objecting parliamentarians finally saw sense in the crop bank arrangement, they called for storage of all sorts of grains -- maize, sorghum, finger millet and so on. Some even thought sun-dried vegetables could be stored as well.

Others said dried fish such as sardines could be stored for years without spoiling. They said that crop banks should start sprouting in each of the 12,000 Tanzanian villages. Since the latter half of the 1980s, efforts in economic reforms have been made and market-oriented policies implemented.

Tanzanian economy has been dependent on agriculture sector which accounts for about 40 per cent of GDP and 80 per cent of labour forces. In recent years the growth of tourism and mining sectors came forward outstandingly and the growth rate of the GDP over the last five years surpassed 7.1 per cent.

The inflation rate was held firmly at below five per cent especially between 2002 and 2006. Unfortunately, food prices became unstable driving inflation rates to 7.3 per cent in 2006 and to 7.0 per cent in 2007. In 2008, the global financial crisis sent food and oil prices galloping taking the inflation rate to 10.3 per cent.

Tanzania remains among the poorest countries in the world with a per capital income of US$400 (2007), despite substantial improvement of macro-economic indicators such as foreign exchange reserves. Poverty reduction is still a challenge in the country.

The first Poverty Reduction Strategy (PRS1) was launched in October 2000, focusing on seven high priority sectors: Education, Health, Agriculture, Water, Road, HIV/AIDS and the Judicial System. The National Strategy for Growth and Reduction of Poverty (NSGRP), which is the PRS2, was launched in July 2005 and was directed at "Growth and Reduction of Income Poverty." "Improvement of the Quality of Life and Welfare" and "Governance and Accountability."

Japan has placed Tanzania as an important targeted country for its official development assistance in Africa, based on the fact that Tanzania has enjoyed political stability and maintained good relationships with Japan since its independence.

The nation has also provided political leadership in East Africa. It is vital to continuously provide support to this country, in order to sustain its economic development and poverty reduction in view of its remarkable achievement of economic growth in recent years.

Japan's Country Assistance Programme (CAP) for Tanzania, which was revised in June 2008, prioritizes the areas of its co-operation in agriculture, infrastructure (transport, energy, water) and governance. Its co-operation is also provided in the health and education sectors. In accordance with Japan's CAP, Japan provides assistance in line with NSGRP or MKUKUTA.

Agriculture is of vital importance for the economic growth of Tanzania given that about 30 per cent of the GDP, 30 per cent of the total exports and about 80 per cent of labour forces are all from this sector. However, significant improvement in agricultural productivity has not been observed due to the rain-fed and extensive agriculture.

Japan has been providing technical support for irrigated rice production through technical co-operation in supporting service delivery systems of irrigated agriculture and in addition, capacity development for irrigation-related technology at the level of local government.

*  By Sosthenes Mwita