Coffee Diversion, a Strategy for Development: the Case of Tanzania

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University of Dar es Salaam
Coffee is the number one agricultural commodity in international trade, surpassing cotton and wheat in terms of monetary value. In relation to all internationally traded commodities coffee ranks second to petroleum which is number one in value. The importance of coffee is further enhanced by the great number of countries in the Third World which depend on the crop for the development of their economies and for earning foreign exchange. In the consuming or importing countries coffee forms a substantial part of their agro business. The importance of coffee in the Tanzanian economy cannot be overemphasized. The crop contributes about 5% of GDP, accounts for about 20% of total agricultural exports, occupies over 230,000 acres (or 360 square miles) of the best land in the country, employs 215,000 to 300, 000 people in production and coffee related services and commands over Shs. 100 million in processing, curing and roasting plants. Inspite of the dominance and importance of the crop in international trade and in the economies of coffee producing countries in the world, the crop has experienced problems in recent years. The most acute problems include; first, wide fluctuations in price and foreign exchange earnings, associated with annual variations in production typical of tree crops. Second, these annual variations or fluctuations are superimposed on some prolonged cyclical movements in the world coffee economy extending as far as twenty years each, Third, the world coffee market is circumscribed in part by high tariffs in the consuming countries, high export taxes in the exporting countries and quantitative restrictions in accordance with the International Coffee Agreement. Fourth, the commodity is prone to react not only to the laws of supply and demand of its own, and its close substitutes (tea, cocoa, etc,) but to the general economic conditions of the developed countries. In addition to these general problems of the coffee industry, Tanzania’s coffee industry has its own problems; first the major coffee producing areas relies almost on the crop for their farm (cash) incomes. Second, a fall in price of the crop stagnates any economic and social activities in those districts and regions that produce the crop, Furth more the nation as a whole is then deprived of a substantial part of its foreign exchange earnings. The significance of the coffee industry and its problems gave impetus to this study. The study is attempting to: a) detail and analyze problems facing the coffee industry internationally and nationally; b) to trace the development of the crop quantitatively and geographically; c) to look at production and marketing policies used by the early coffee producing countries., so as to gain insight to the problems as they pertain to the Tanzania situation; d) to examine the socio—economic situation in the major coffee producing areas in Tanzania; e) to analyze the economies of peasant coffee production using farm budgeting and production function techniques; and f) present and suggest policy actions an implementations strategies with special emphasis on diversification and marketing. The problem, scope, objectives and the methodology of the study are discussed in Chapter I. Chapter II, traces the historical and institutional setting of the coffee industry internationally and nationally. The theoretical framework of the peasant economy ends the hypothesis of the study are presented in Chapter III. Chapter IV examines the socio— economic conditions in the five major coffee producing districts of Kilimanjaro, Arusha, Bukoba, Rungwe and Mbinga. The economic analysis of peasant coffee production is discussed in Chapter V 9 which include the use of farm budgeting techniques, the Cobb—Doughlas .as production function approach and the presentation of the empirical results. Chapter VI reviews production, marketing and institutional changes pertaining to coffee in Tanzania and briefly suggests policies, recommendations that might improve the development of the coffee industry in Tanzania. Findings that may be of rea1 use and interest for policy makers are those contained in Chapter IV, which detail in descriptive statistics the factors of production of the crop by peasant farmers. The resources there is a chance that they will choose crop mixes or enterprise combinations that will maximize farm incomes. The empirical results of the Cobb—Doughlas production function, with all its limitations, show •that there 901.10 factors of production that can be intensified in use so as to realize better yields and higher quality of the crop. It was found out that, the use of labor could be intensified in all the study areas. The response to modern inputs like chemical fertilizer, sprays and insecticides yielded varying results in the various districts, some negative while others positive. Experience in the field show that there are good positive responses for the use of these inputs. The negativity (or non— response) in our model is due mainly to poor data used. Land had a positive response to production but hag limited possibilities of expanding its use due to overpopulation in practically all the districts excepting Mbinga, The hypothetical case of possibilities for trade between the upper and lower belts in Kilimanjaro reveal that there is something to gain for both populations by adopting limited specialization in their economic activities. In order to spread out the gains accrued from such specialization, ujamaa village approach to modes or units of production would be the most useful strategy. The study has attempted to throw light on the major issues concerning coffee. It remains for the policy makers and implementors to develop projects that are viable and will benefit the peasants and the nation as a whole.
Available in print form, East Africana Collection, Dr.Wilbert Chagula Library, class mark (THS EAF HD9199.T3 M2)
Coffee, Economic aspects, Agriculture, Agriculture and state, Tanzania
Mbilinyi, Simon Michael Mhelema (1974) Coffee Diversion, a Strategy for Development: the Case of Tanzania, Doctoral dissertation , University of Dar es Salaam