Assessing market distortions affecting poverty reduction efforts on smallholder tobacco production in Tanzania

Tobacco is one of Tanzania’s most important agricultural export crops as well as being an important source of employment and income in rural areas. However, this study finds that gross inefficiencies in the production-marketing system are distorting markets and reducing the profitability of tobacco production for smallholder farmers. Key findings include:there is a need to review the tax system. Currently a range of government levies, taxes and fees on the tobacco industry result in high costs along the entire marketing chain, lowering prices paid to smallholder tobacco producersthe tobacco board should investigate the practical and financial implications of introducing an auction system into tobacco marketing arrangements, as this system promotes maximum buyer competition and is responsive to quality and presentation. It should be noted, however, that unpredictability of prices can produce grower uncertaintybetter credit arrangements are required to finance seasonal inputs. To develop these, farmers must be encouraged to establish their own local organisations such as savings and credit co-operative societies or a tobacco development funddue to a lack of penalties for defaulting on loan repayments, strategic default has become a culture among smallholder farmers. There is a need to professionalise grassroots organisations involved in lending so as to bring about accountability and responsibility particularly in enforcing loan repaymentto ensure that produce classification is fair to all parties involved, there should be representatives of all stakeholders in the team of classifiers who grade tobacco. Farmers and society representatives should be well trainedimproved transport infrastructure is needed to reduce the costs of tobacco marketing and productionan increase in yield per hectare can still be achieved through improved growing techniques, while improved quality and presentation of tobacco leaves can be achieved through better handling, curing, grading and advanced marketing techniques. Further research and provision of adequate and quality extension services is vital to achieve thisat present, a few insiders generally dominate Primary Cooperative Societies, with little accountability, technical capacity and credit worthiness. Very few are trusted sufficiently by traders to fulfil an effective intermediary role. To address this problem, the government should encourage the establishment and continuous operation of member-owned and member-controlled cooperatives which are economically strong and capable of operating as viable independent business entities. Small farmer associations should be recognised and supportedthe HIV/AIDS pandemic is having a major impact on crop production in rural societies of Tanzania. This is a critical area for further research.