Encouraging investment in agro-industries through commercial extension: the case of the Tea Research Institute of Tanzania

Liberalisation policy in the 1980s marks the beginning of the promotion of investment in agro-industries in Tanzania. The Agricultural Sector Development Strategy (2001) proposes that the government work towards creating an enabling environment for medium and large-scale investors to make use of its abundant land resources. The Tanzania Investment Act of 1997, allows non-citizens to own land for the purpose of investment, also through joint ventures with Tanzanians. The recent initiative, which embraces public-private partnerships - Kilimo Kwanza (Agriculture First, 2009) - promotes investment in food crops while “maintaining good practices for investment in traditional cash crops.” Tea is one of only two traditional export crops that have doubled productivity since the 1970s, it has survived recent drops in global commodity prices, and its world market price has risen during the current economic crisis. Together with the Ministry of Agriculture, Cooperatives and Food Security, private sector organizations actively promote investment; including the Tanzania National Business Council (2001), the Tanzania Private Sector Foundation (1998), the National Economic Empowerment Council (2005), and the Agricultural Council of Tanzania (2000). Within the tea sub-sector, private-sector organizations (i.e., Tea Research Institute of Tanzania (TRIT, 1996), Tea Association of Tanzania (1943)) are represented on the Tea Board of Tanzania which is the regulatory body of the government (1997). These actors work together to promote productive investment in the sub-sector. Successful investment has rehabilitated the tea sub-sector. Aspects of the original privatization legislation promoted investment in the industry (e.g., the Tea Act of 1997 requires local processing of green-leaf tea). These commitments have led to a processing sector that produces for international and domestic markets. Starting in 2001, TRIT launched a commercial extension service for the sub-sector. This arrangement, whereby a private company (Wakulima Tea Company) approaches a research institute to provide services at cost, is a unique setup, linking researchers, extension services, farmers, transporters, processors and markets. Subsequently, additional investment is forthcoming in the tea sector. For example, a MOU was signed in 2009 with tea stakeholders and two private-sector donor foundations. Over the next five years US$ 9 million will be invested through a variety of mechanisms including matching grants, loan guarantees, and debt/equity investments. The example of the Tanzanian tea sub-sector illustrates how the strategy of linking commercial extension with public-private funded research has aided investment in the entire industry. The case shows promise for public-private partnerships in promoting productive investment in agro-industries. Challenges remain where some factories limit their investment in catchment areas, which hinders smallholder development.