By Makuna Chirimi
KILIMO Kwanza is an economic program that aims at revolutionizing Tanzania’s agriculture as part of the national resolve to eliminate poverty and improve the livelihoods of majority of people.
Implementation of the agrarian revolution hinges on the adoption and implementation of the Ten Pillars of Kilimo Kwanza, a matrix which details the specifics tasks, activities, implementing partners, timeframes and budgets for the success of Kilimo Kwanza.
The first pillar of Kilimo Kwanza is adopting the vision of the green revolution by instilling political will at all levels of leadership and garnering commitment of all Tanzanians to the resolution. The government of Tanzania claims 100% commitment to modernizing and commercializing agriculture for peasant, small, medium and large scale producers. A review of actual implementation of the pillars however faults the government of not walking the talk.
Financing for Kilimo Kwanza is the second pillar and central to achieving the goals of poverty alleviation and economic growth envisaged in the
Kilimo plans. The specific aspects of financing include increasing the government budget allocation to Kilimo Kwanza, establishing and
mobilizing resources for the proposed Tanzania Agricultural Development Bank (TADB), establishing a special fund for Kilimo kwanza,
supporting farmers cooperatives and SACCOS and instituting policies that support commercialization of agriculture. The proposed implementation timelines for financing indicate that most of these activities were to start in August of 2009. As such, most of these activities
should be entering their second and third phases but checks reveal that at best, most are still in infancy.
Poor access to funding for agricultural activities is a major bottleneck to commercialization of agriculture in the country. The authorities have
either reneged on earlier commitments made at the launch of the Kilimo plans or at best, failed to implement proposed activities within the
A case in hand was the government’s commitment to up the 2010/11 budget allocation to agriculture from 6.4 % during the 2008/09 financial year to 10% in 2009/2010, and progressively increase it thereafter. However current allocation is 7.9%.
Commenting on this, the Tanzania National Business Council (TNBC) is on record saying, “The government is commended for its efforts of raising budgetary allocation to the agricultural sector from 6.4% of the national budget during the 2008/09 financial year to 7.9% for 2009/10. However the amount is still low.”
Apparently, this is not the first time that the government has failed to meet commitments. The TNBC, who are the originators of Kilimo Kwanza, noted that as early as 2003 the country signed the Maputo Declaration in which the Southern African Development Community (SADC) countries benchmarked budgetary allocation of “not less than10%” to the agricultural sector by year 2008/2009. This increase is yet to materialize. It is now two years past the deadline and this increase has yet to materialize.
The institutions responsible for implementing the financial plans for Kilimo Kwanza are the Ministry of Finance and Economic Affairs (MoFEA) in collaboration with all government ministries, departments and agencies (MDA’s). The Prime Minister’s Office (PMO) in collaboration with the finance ministry, MDA’s and Local Government Authorities (LGA’s) were also tasked to make sure budgets of all other ministries are streamlined and oriented to supporting Kilimo Kwanza. The finance ministry in collaboration with the MDA’s should also continuously elicit the support of development partners. However civil society organizations have time and again faulted the government for achieving relatively little with the large sums of money it receives from donors. Speaking at a recent workshop on the impact of aid on the country’s development, the Executive Secretary of the Agricultural and Non-State Actors Forum (ANSAF) Audax Rukange said that the sector has in the past received a lot of money with little tangible results. They called for the inclusion of rural people in discussions on how best to apply development aid for long term results other than applying top-down development models that fail to achieve anything.
Another task is assigned to the Ministry of Water and Irrigation (MWI) in collaboration with the Ministry of Finance, development partners and the Ministry of Agriculture, Food and Cooperatives (MAFC’s) is to increase budgetary allocation to irrigate over 7 million hectares of land by 2015.Tanzania’s agriculture is heavily dependent on unreliable rainfall. Currently just over 200,000 hectares (or less than 1%) of available land suitable for agriculture is irrigated, yet it has been proven that irrigation alone can triple output and increase food security by increasing crop seasons and crop variety. Given the importance of irrigation, budgetary increases should rapidly be allocated to this sub sector.
Tanzania, in which an estimated 85% of the populace directly depends on agriculture for their livelihood, lacks even a single financial institution dedicated to the needs of farmers and agriculture in general. Furthermore existing financTh ial institutions have very negative attitudes towards lending for agriculture. The proposed Tanzania Agricultural Development Bank (TADB) was supposed to be unveiled by December 2009 to fill this yawning gap in the financial system. However it was only in late 2010 that the President launched a lending window at the Tanzania Investment Bank (TIB),
By late last year the bank had disbursed some TSH 9bn to farmers, out of the TSH 22bn that had been allotted to it by that period. However the challenge is to increase the amount allocated and to increase awareness on the agriculture concessionary window. Lending by TIB in this window is long term, concessionary at between 4-8% rates of interest with varying grace periods. TIB is not expected to make profits from the operations of this window because it is not taking any risk. Margins are expected to be enough to cover operational costs only, according to TNBC.
The launch of the TIB financing window marked a first step towards the formation of the farmer’s bank. The TADB is expected to provide farmers with loans whose conditions include grace periods of two to four years, single digit interest rates and favorable repayment periods of 10 to 15 yearsThe Bank of Tanzania was assigned the lead responsibility in fast tracking the establishment of TADB with initial capitalization of USD 500 million. The Ministry of Finance and Economic Affairs is the key collaborator in this. However according to the finance minister, Hon Mustafa Mkullo, only 100bn/- has been allocated to the proposed bank. “We cannot allocate the whole amount to avoid misuse of the funds. That’s why we will be adding more money every year,” he said.
Commenting on the progress of mobilizing loans and grants arrangements for TADB from multilateral and bilateral sources, Hon Mkullo is on record noting that the response for mobilizing the resources is positive and that this ministry has gotten confirmation from so many places. “We got a lot of commitment from many sources. We are not allowed to disclose the details,” he claimed.
Mobilizing resources for TADB was scheduled to take off in August 2009 and the responsible institutions were the Ministry of Finance in collaboration with the Ministry of Foreign Affairs and development partners. The BoT was assigned the lead responsibility of undertaking consultations with Commercial Banks and other stakeholders towards holding of TADB bonds. Mkullo said the bonds are not issued yet but will be issued later. “For now we have reached a certain stage,” Mkullo said promising to give more details after the whole process is completed.
However even as this back room dealing continues, lack of credit for agriculture from financial institutions is crippling the purchase of key agricultural inputs like tractors. For example millions of farmers are bent over their hand hoes as they engage in cultivation as hundreds of tractors remain idly parked at the National Service (JKT) yard in Dar es Salaam because would be buyers are unable to acquire credit from their banks. The TNBC has therefore requested that the government expedite formation of the bank during the current financial year. They also propose that the bank extends credit to agricultural production at concessionary terms and conditions using the existing credit delivery mechanisms like commercial banks, cooperative unions and Savings and Credit Cooperative Societies (SACCOS). The establishment of community banks
The government still has to legislate for commercial banks to lend a percentage of their deposits on concessionary terms to agricultural production. There is a, urgent need to complete negotiations with commercial banks and other stakeholders on concessionary lending for agricultural production and to review prudential regulations to encourage lending to agricultural production. This may help to encourage and support banks to be innovative in agricultural value chain financing.
Establishing of a special fund for Kilimo Kwanza to address land survey costs, investment, capacity building and guarantees to complement the requirements of the green revolution still hangs in the balance, alongside plans to establish special units in financial institutions for mobilizing and disbursing agricultural credit.
The establishment of commodity exchanges and facilitation of floatation of agricultural companies at the Dar es Salaam Stock (DSE) exchange will also go a long way in commercializing agriculture. At the moment only Tanzania Tea Packers (TATEPA) is listed at the DSE and this limits the ability of agriculture to fully benefit from capitalization available at the stock exchange.
There is a further need to mobilize farmers’ cooperatives and SACCOs to manage and channel funds for agricultural production to their members. The government is yet to develop national strategy for financial literacy and to implement financial education programs to strengthen farmer’s cooperatives and SACCOs’ capacity to effectively manage resources for Kilimo.
Finally there is a dire need to fast track the establishment of social security, pension fund lending and insurance arrangements for farmers. This could take the form of establishing a specific social security fund or facilitating existing institutions to adopt schemes that cover farmers and mobilizing farmers to join social security schemes. At the moment farmers are unable to access social security and insurance which puts them and their investments at risk. Plans to institute policy instruments that facilitate insurance companies to extend cover and lending to agriculture should be actualized so that insurance companies can provide cover for agricultural production. Agriculture is a business like any other business that carries risks that under the right environment can be properly assessed and covered. The government through the Prime Minister’s Office-Regional Administration and Local Government was to start this process in August 2009, but reports indicate that nothing has happened so far.
Commercialization of agriculture for poverty eradication is impossible without proper funding instruments. The government should put more serious focus in revamping the financial sector to support agriculture in order to achieve the erstwhile goals of Kilimo Kwanza.