Experts call for out-grower irrigation schemes to boost Tanzanian tea sector
05 July 2011
In Tanzania, Africa’s fourth-largest tea producer, a call has been made for increased investment in irrigation for out-growers, who produce 50% of the national tea crop. Such investment, it is argued, could stabilise and expand production which is periodically affected by drought conditions. Currently a 9% decline in overall tea production is foreseen as a result of the drought, with smallholder tea producers being most severely affected. Production is expected to fall from 35,000 tonnes to 32,000 tonnes. In 2009/10 exports of black tea from Tanzania earned $57m, with a total of 28,064 tonnes exported.
This represents an average price of 203 US cents/kg earned on Tanzanian tea exports, while the average 2010 Mombasa auction price for tea was 316.7c/kg. In this context it should be noted that ‘a majority of Tanzanian tea is sold outside of the auction through private contracts’. This being noted, quality is of course a critical determinant of tea prices rather than simply the route to market adopted.
Tea, Mombasa, Kenya: auction price (US cents per kg: monthly average 2010)
| Jan | Feb | March | April | May | June | July | August | Sept | Oct | Nov | Dec |
| 338.67 | 332.35 | 332.61 | 332.61 | 313.59 | 286.14 | 259.18 | 315.09 | 337.18 | 339.86 | 331.68 | 352.13 |
Currently there are three different organisational relationships in the Tanzania tea sector: ‘full ownership of growing and processing by a single company’; ‘full ownership of processing by a single investor company and contracted growing by smallholders’; and ‘shared ownership between a single investor company and smallholder cooperatives of processing, and contracted smallholder production.
According to press reports, four-fifths of the tea production is sold to foreign buyers, with about half channelled through the Mombasa auction floor. Smallholder tea farmers’ associations have been strengthened in recent years, with resulting in improvements in tea quality.
Editorial comment
With private companies heavily involved in the Tanzanian tea sector, the question arises of the basis on which investment in irrigation projects for smallholder tea producers would be financed. Should finance come from the commercial companies involved? Should financing be mobilised by the smallholder growers themselves? Should government or aid-for-trade funds be used? Or should some form of public–private sector partnership be established, organised through the Tea Board of Tanzania? This is an important issue, since it relates to the distribution of the benefits derived from expanded production, and particularly important in view of the discrepancy between the price per kg received for Tanzanian tea exports and the Mombasa auction price.
More fundamentally, with decreasing water levels already impacting on power generation in Tanzania, water is likely to be a growing constraint on agricultural production in the country. This raises the issue of competition for water from producers of export-oriented crops such as tea and food production for the domestic market. There is also the important question of the commercial impact of new investments in tea-sector irrigation. Irrigation investments could well increase average unit production costs in a region with highly competitive tea production (e.g. neighbouring Kenya). Clear marketing strategies would need to be in place to ensure that costs of investing in irrigated tea production are more than matched by improved revenue flows to those responsible for financing such investments.
