1. COTTON IN TANZANIA TRENDS, PERFORMANCE AND FUTURE PROSPECTS Joe C.B. Kabissa, Director General, Tanzania Cotton Board

2. 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;

3. MAP OF TANZANIA Cotton Producing Areas Quarantined Areas Key:

4. 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.

5. 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.

6. Some of the effects of policy reforms on the performance of the cotton industry Sub - sector performancePrior to reformAfter reforms Supply responseweakstronger Payments to farmersdelayedPrompt % of FOB price paid to farmersLess than 40%Above 60% Prices paid to farmersPan territorial and pan seasonal Vary in relation to transport cost and quality of cotton Input procurementInterlocking transactions usedProblematic Private sector participationNone40 private organizations in 2007/08 % Market share of Cooperatives 100%Less than 5% in 2007/08 Role of MNCsNon existentCargill, Paul Reinhart and Olam Competition between buyersNone existentFor volume rather than quality Quality of cottonHigh and with premiumsLow with discounts Use of price risk management tools YesJust a few ginners

7. Challenges emerging after the reforms  Declining seasonal input use;  Declining quality of lint;  Increased coordination problems;  Stagnating local consumption of lint;

8. 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.

9. 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.

10. Cotton production trends between 1992 and 2007

11. 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.

12. 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”;

14. 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?

15. THANKS FOR YOUR KIND ATTENTION