Investment blueprint for Southern Agricultural Growth Corridor of Tanzania

December 12, 2011

Investment Blueprint
Southern Agricultural Growth
Corridor of Tanzania
This initiative is supported by the World Economic Forum
Kilimo Kwanza Growth Corridors Executive Committee
• Government of Tanzania
• Unilever
• Yara International
• Agricultural Council of Tanzania (ACT)
• Alliance for a Green Revolution in Africa (AGRA)
• Confederation of Tanzanian Industries (CTI)
• Tanzania Sugarcane Growers Association
• United States Agency for International Development
(USAID)
• Irish Embassy –Tanzania
Kilimo Kwanza Growth Corridors (other) partners
• Diageo
• DuPont
• General Mills
• Monsanto
• SAB Miller
• Syngenta
• Standard Bank (Stanbic)
• National Microfinance Bank
• Norfund
• Norwegian Embassy – Tanzania
• Food and Agriculture Organisation (FAO)
• The World Economic Forum
SAGCOT Technical Team
• AgDevCo (co-lead)
• Centre for Sustainable Development Initiatives (CSDI)
• Korongo
• Logistics Consulting Group
• Prorustica (co-lead)
• Tanzania Agricultural Partnership
The Kilimo Kwanza Growth Corridors initiative
Kilimo Kwanza Growth Corridors is an international public-private partnership launched at the World
Economic Forum on Africa in May 2010 in Dar es Salaam, Tanzania. Its mandate is to mobilise private
sector investments and partnership to help achieve the goals of Tanzania’s Kilimo Kwanza strategy.
By catalysing large volumes of responsible private investment, the initiative aims to deliver rapid and
sustainable agricultural growth, with major benefits for food security, poverty reduction and reduced
vulnerability to climate change.
Members of the partnership represent government, global business, the Tanzanian private sector,
farmers, foundations and donor institutions. It is led by an Executive Committee co-chaired by the
Minister of Agriculture of Tanzania; and the Executive Vice President (North and Central Africa) of
Unilever.
The public-private partnership initial focus of the Executive Committee has been to prepare an
Investment Blueprint for development of the Southern Agricultural Growth Corridor (SAGCOT). The
report was compiled by a technical team of African agribusiness specialists jointly led by Prorustica and
AgDevCo. The Tanzania Agricultural Partnership served as secretariat for the initiative and provided
ongoing operational support for the blueprint development. The World Economic Forum provided
indispensable support, including hosting key meetings and promoting the initiative internationally.
The technical team consulted with a broad array of stakeholders in Tanzania and internationally, too
numerous to list here, receiving valuable input. The information presented herein is not exhaustive,
however, and should not be relied upon for making investment decisions. Any inaccuracies are the
responsibility of the technical team.
Investment Blueprint
January 2011
Southern Agricultural Growth
Corridor of Tanzania
Foreword: Kilimo Kwanza in motion 4
Executive summary 7

Why invest in Tanzanian agriculture? 11
Agricultural growth corridor approach 17
What is the Southern Agricultural Growth Corridor? 21
The Southern Agricultural Growth Corridor: current status of agriculture 27
Cluster identification and development path 32
Linking smallholders 37
Making it happen 39
Improving the policy environment 45
Environmental and climate change considerations 46
Investment plan and outputs 49
Social and economic benefits 55
Early wins 57
Vision of success 61
Conclusions and recommendations 63
The Southern Agricultural Growth Corridor covers approximately
one third of mainland Tanzania. It extends north and south of
the central rail, road and power ‘backbone’ that runs from Dar es
Salaam to the northern areas of Zambia and Malawi.
Contents
TANZANIA
Photos: Pages: cover, 1, 6, 10, 20, 26, 31, 47, 48, 52, 62, 64 © Han Derksen, AgDevCo. Pages: 22, 36 © Andrew Tipping, AgDevCo. Page: 56 © AgDevCo
AfDB African Development Bank
AECF Africa Enterprise Challenge Fund
AGRA Alliance for a Green Revolution in Africa
ASDP Agriculture Sector Development Programme
ASDS Agriculture Sector Development Strategy
BADEA Arab Bank for Economic Development in Africa
CAADP Comprehensive Africa Agriculture Development Programme
Catalytic fund Fund to provide start-up finance for agriculture businesses incorporating smallholder farmers,
provided as low-cost or interest-free loans, repayable as soon as the business attracts private finance
CIF Cost, insurance and freight – charges paid by a seller of goods for maritime transport
Clusters Geographic concentrations of interconnected companies, specialised suppliers, service providers,
and associated institutions
CIP Commodity Investment Plans
DADP District Agricultural Development Plan
DANIDA Danish International Development Agency
DRC Democratic Republic of the Congo
EAC East African Community
EU European Union
FSDT Financial Sector Deepening Trust
GDP Gross domestic product
HAACP Hazard analysis and critical control point, a system which identifies, evaluates, and controls hazards that are
significant for food safety
IFAD International Fund for Agricultural Development
JICA Japan International Cooperation Agency
Kilimo Kwanza Policy of the Government of Tanzania, meaning ‘Agriculture First’, which establishes agriculture as a top priority
across all government ministries
Last mile Infrastructure necessary to connect agricultural businesses with backbone infrastructure, e.g. feeder roads,
infrastructure connections to electricity grid
MCC Millennium Challenge Corporation
NMB National Microfinance Bank of Tanzania
NTB Non-tariff barriers to trade
ODA Official development assistance
OFID OPEC Fund for International Development
PASS Private Agricultural Sector Support Limited
Patient capital Long-term, low-cost, subordinated capital provided by donors and invested in the early stages of private sector
agricultural ventures, used to finance the cost of ‘last mile’ infrastructure (e.g. feeder roads and irrigation
connections to the farm gate)
PPP Public-private partnership
SAGCOT Southern Agricultural Growth Corridor of Tanzania; also “southern corridor” or “Tazara Corridor”
SAGCOT A neutral coordinating body and focal point for SAGCOT planning, implementation and
Partnership monitoring; also “the Partnership”
SAGCOT Support unit to the SAGCOT Partnership
Secretariat
SIDA Swedish International Development Cooperation Agency
Social impact Commercial investors who also seek non-commercial, social returns
investors
TANESCO Tanzania Electric Supply Company Limited
TANZAM Paved trunk road system of 1,762km linking Dar es Salaam Port to Kapiri Mposhi (Tanzania-Zambia Highway)
Highway
TAP Tanzania Agricultural Partnership
TAZARA Tanzania-Zambia Railway Authority
Glossary
4 Southern Agricultural Growth Corridor of Tanzania
The Southern Agricultural Growth Corridor of
Tanzania (SAGCOT) initiative was born out of
the deliberations of the World Economic Forum
on Africa held in May, 2010 in Dar es Salaam,
Tanzania. The idea behind the initiative was to
support and bolster efforts being undertaken by the
Government of Tanzania, the people of Tanzania
and other stakeholders aimed at bringing about the
green revolution.
Tanzania is, in essence, an agricultural country
where agriculture means almost everything. Over
80 percent of the people live in the rural areas
and agriculture is their main source of livelihood.
Agriculture accounts for 95 percent of the food
we eat, 25 percent of the GDP and 30 percent
of the foreign exchange earnings. It is a major
source of raw materials for agro-based industries.
Agriculture, therefore, holds a unique position with
respect to the socio-economic wellbeing of Tanzania
and her people. It is a critical factor in efforts to
reduce and, ultimately, eradicate poverty in the
country. We cannot eradicate poverty, promote
balanced socio-economic growth and achieve food
security without transforming our agriculture.
Tanzania has immense opportunities for agricultural
development. There are 44 million hectares of arable
land, only 24 percent of which is being utilised.
Many parts of the country have good rains but there
are, also, other vast water resources in rivers, lakes
and underground, which can be used for irrigation.
There are ample opportunities for building dams to
capture rain water in seasonal rivers and use it for
agriculture. Unfortunately, only 381,000 hectares
are under irrigation. Tanzania’s agriculture is
predominantly small holder, characterized with very
low productivity due to very limited use of modern
technology and techniques of production. As a result,
therefore, the country’s huge agriculture potential
remains unutilized.
Since independence, transforming agriculture has
been the focus of government policies and actions
of all administrations. Several policy initiatives and
programmes have been put in place and implemented,
at different times in the history of Tanzania. Two such
landmark policy initiatives which were made during
the time of the first President, the late Mwalimu
Julius Nyerere, were the Villagisation Policy and the
Iringa Declaration. The latter, famously known as
“Siasa ni Kilimo” meaning Agriculture is Politics,
underscored the use of irrigation besides other aspects
of modernization of agriculture. These two policy
documents shaped agricultural policy measures
through the First, Second, Third and Fourth Phase
Governments.
When we came into office in 2006, we completed
the design of the Agriculture Sector Development
Strategy (ASDS) and the Agriculture Sector
Development Programme (ASDP). The former
was the policy and the latter its action plan for
a green revolution in Tanzania. The objective
was to take bold actions to enable Tanzania to
realize her aspirations of a modernized and highly
productive agriculture. In 2009, a new strategy
called ‘Kilimo Kwanza’, meaning ‘Agriculture
Foreword: Kilimo Kwanza in motion
5 Southern Agricultural Growth Corridor of Tanzania
First’ was designed. The new strategy, properly
anchored the involvement of the private sector
in the development of agriculture. It underscored
the critical importance of the private sector
participating actively in agricultural production,
provision of agricultural inputs, crop marketing and
in the agricultural value chain.
It is in this context that, the Government welcomed
the idea of the SAGCOT initiative. This is a public
private partnership well-placed to achieve the
objectives of Kilimo Kwanza, from Tanzania’s
coastal plains and the valleys of Kilombero and
Ruaha, to the hills and valleys of the Southern
Highlands and the Usangu flats. The Southern
Agricultural Corridor can be the breadbasket of
Tanzania and beyond. Food security will be assured
and wealth creation for the smallholder farmers
would become a reality.
Soon after the Dar es Salaam meeting, a Committee
(The Executive Committee) was set up to develop an
investment blueprint for SAGCOT. The Committee
draws its members from the Government as well
as from the private sector, both domestic and
international. The Committee has successfully
completed its work. The Investment Blueprint it
produced shows what needs to be done to leverage
the agricultural potential of the Southern Corridor.
It sets out a clear roadmap for improving rural
infrastructure, catalyzing private investment and
facilitating better coordination and collaboration
between the private and public sector as well as the
small holder farmers. It recognises the role of the
development partners. It also highlights investment
opportunities that offer good financial returns and
deliver benefits to smallholder farmers as well.
I am proud to say that because of the importance
we attach to the SAGCOT initiative, my
Government was the first to commit funding ahead
of all partners. We, in Government are convinced
that the initiative supports our objectives for a
Tanzanian green revolution. Also, it is in line with
our commitments under the Agricultural Sector
Development Programme and the Comprehensive
Africa Agriculture Development Proramme
(CAADP).
I know there will be challenges, but I am optimistic
that through our cooperative endeavours and
commitment, we will be able to overcome them.
In the end, we will succeed to create a corridor
of highly productive and competitive agriculture
at the local, regional and global market place.
We will also witness significant poverty reduction
among the people who live in the corridor and its
surroundings. Given the commitment and efforts
of the Government coupled with the energy,
experience, expertise as well as the financial and
technological strengths of the private sector, plus
the support of Tanzania’s development partners, we
should be able to deliver on our aspirations.
The SAGCOT Investment Blueprint is a call to
action for all of us. Let us respond accordingly and
make the SAGCOT initiative a reality. “It can be
done, play your part”.
Jakaya Mrisho Kikwete
President, The United Republic of Tanzania,
December 2010

7 Southern Agricultural Growth Corridor of Tanzania
Executive summary
Tanzania’s southern corridor links the port of Dar
es Salaam to Malawi, Zambia and the Democratic
Republic of Congo. It benefits from good
‘backbone’ infrastructure – including road, rail and
power – and passes through some of the richest
farmland in Africa. The area could become a
globally important producer of crops and livestock.
Today, however, its agricultural potential is largely
dormant and the majority of the rural population
remains poor and food insecure.
Building on Tanzania’s Kilimo Kwanza (‘Agriculture
First’ strategy), the SAGCOT Investment Blueprint
describes how $2.1 billion of private investment
will be catalysed over a twenty year period,
alongside public sector grants and loans of $1.3
billion. The result will be a tripling of the area’s
agricultural output. Approximately 350,000
hectares will be brought into profitable production,
much of it farmed by smallholder farmers, and with
a significant area under irrigation.
Commercialising smallholder production
One of SAGCOT’s main objectives is to provide
opportunities for smallholder producers to
engage in profitable agriculture. It will do this
by incentivising stronger linkages between
smallholders and commercial agribusinesses,
including ‘hub and outgrower’ schemes that allow
smallholders in the vicinity of large-scale farms
to access inputs, extension services, value-adding
facilities and markets. SAGCOT will also support
smallholder producer associations, helping them
enter into equitable commercial relationships with
agri-processing and marketing businesses. In many
cases, irrigation will be made available through
professionally-managed farm blocks.
Outcomes by 2030
• 350,000 hectares in profitable production, serving
regional and international markets.
• Tens of thousands of smallholders become
commercial farmers, with access to irrigation and
weather insurance.
• At least 420,000 new employment opportunities
created in the agricultural value chain.
• More than two million people permanently lifted out
of poverty.
• Annual value of farming revenues $1.2 billion.
• Regional food security would be assured.
Build-up of SAGCOT commercial production
2011 – 2030
Other Grains / Pulses Livestock / Beef Rice Sugar
Citrus Banana Other Horticulture
400,000
300,000
200,000
100,000
0
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Total area (ha)
Source: SAGCOT technical team projections
8
Competitiveness through ‘clustering’
Due to economies of scale, farmers and
agribusinesses are most likely to be successful
when they are located in proximity to each
other and related service providers. SAGCOT
focuses on an initial six ‘clusters’ within the
southern corridor where there is the potential,
over time, for profitable groupings of farming
and processing to emerge. Each cluster requires
investment along the full agricultural value chain.
Some of these investments are public goods (e.g.
rural infrastructure) which must come from the
government and its development partners; others
can expect to earn a financial return and will
come from the private sector.
Illustration of an agricultural cluster and a value chain
© AgDevCo
Clusters allow small- medium- and large-scale
farmers to share in the benefits of scale and
access infrastructure
Technology
development
Finance and Infrastructure
Input
production
Extension and
distribution
Processing
and valueaddition
Logistics,
transport and
marketing
Large-scale
production
Smallholder
production
Southern Agricultural Growth Corridor of Tanzania
99
Investment opportunities
As examples of the types of agribusiness that merit
support, the investment blueprint highlights 15 ‘early
win’ investment opportunities where rapid progress
could be made. These include:
• Mbozi seed farm. A 3,000 hectare nucleus seed
estate plus irrigated outgrower scheme for maize,
soya, sunflower, sesame and pulses.
• Ruvu cattle ranch. Redevelopment of a 40,000
hectare government-owned ranch, with the
introduction of fattening and slaughter facilities
for local breeders.
• Smallholder commercialisation and agro-dealer
programme. Providing extension services,
inputs, weather insurance and market access to
large numbers of smallholder farmers.
• Sao Hill agri-centre. Irrigated vegetable
production linked to an agriculture processing
centre (including a biomass plant) with storage
and processing facilities.
Making it happen
An agricultural transformation can be achieved if the
public and private sectors (including development
partners) work together to achieve shared goals.
A SAGCOT partnership organisation will help
coordinate and guide investments, focusing on the
cluster areas. New financing facilities, including ‘social
venture capital’ (for start-up businesses) and ‘patient
capital’ (long-term debt for infrastructure), will help
new farming and processing operations get established
and become internationally competitive.
To ensure fairness and promote responsible investment,
access to the SAGCOT financing facilities will come
with strong conditions attached. Funding will only
be made available to investors who demonstrate a
commitment to building equitable and sustainable
partnerships with smallholder producers. Compliance
will be monitored and investment withdrawn if social
or environmental obligations are not met.
By helping new businesses overcome initially high costs
and risks, SAGCOT will help kick-start a virtuous
cycle of lower production costs, increased productivity,
higher profitability, more investment and rapid growth.
Next steps
In 2011 the SAGCOT Partnership will move
rapidly from the design to the implementation
phase. Two key actions are needed to launch this
process:
• Establish the SAGCOT partnership
organisation1 – supported by an independent
and professional Secretariat – to act as a
neutral coordinating body and focal point for
planning, implementation and monitoring.
• Launch a catalytic fund, initially of $50 million,
with financial backing from the Tanzanian
government and development partners.
The catalytic fund will enable resources to
be channelled into early stage investment
opportunities, including some of the ‘early wins’
identified in the investment blueprint.
SAGCOT is a unique and powerful public-private
partnership capable of delivering sustainable
agricultural growth in the southern corridor.
Demonstrating early results will establish a
replicable model for agricultural development in
the rest of Tanzania and the wider region.
1 The Partnership will be guided by the lessons learned from the Tanzanian
Agricultural Partnership (TAP), set up in 2005 to facilitate and coordinate
public and private stakeholders involved in commercial agricultural
development.
Public investment in infrastructure and the availability of
‘catalytic’ finance will kick-start a virtuous investment cycle
Virtuous agriculture growth cycle
© AgDevCo
Southern Agricultural Growth Corridor of Tanzania

11 Southern Agricultural Growth Corridor of Tanzania
Agriculture is the basis of Tanzania’s economy. It
is the major source of employment, a significant
export earner and an important component of
the national GDP. Approximately 85 per cent of
the country’s poor live in rural areas and rely on
agriculture2 as their primary source of income.
But yields are low, for example averaging 1.5
tonnes per hectare for maize. Restricted access to
profitable markets traps the majority of farmers
in subsistence-level activities, where many earn
less than US$1 a day. Excluding a few specialised
crops such as tea and sugar, there is no critical
mass of profitable agriculture businesses.
With improved access to finance, infrastructure,
modern farming inputs and know-how,
Tanzania’s smallholder farmers could achieve
much higher yields, allowing them to sell into
regional and international markets. At present,
however, they are isolated and vulnerable to
drought, floods and other risks. Population
pressure, competition for land and water in some
areas, and the impact of climate change will only
make the situation worse, if nothing changes.
The future could be a lot brighter. Tanzania
has vast natural resources that provide a base
from which significant agricultural growth in
crops, livestock and fisheries is possible. There
are opportunities for major improvements
in productivity on farm land, working in
partnership with smallholder farmers and local
communities. In the longer-term, there are large
areas of land away from existing infrastructure,
where population density is much lower, that
could be opened up for productive agriculture.
2 In this report the terms ‘agriculture’ and ‘farmer’ refer to both crop and
livestock production

Why invest in Tanzanian agriculture?
As in the wider East Africa region, Tanzania’s population is
expected to double by 2050, exceeding 100 million.
Background on Tanzania’s agriculture
• Although Tanzania’s economy achieved 7.4 per
cent overall growth in 2008, this is highly skewed,
primarily representing a few urban centres and
the mineral sector.
• An estimated 85 per cent of the country’s poor
live in rural areas and rely on agriculture for their
livelihood and their primary source of income.
• Ninety-eight per cent of rural women who are
economically active are engaged in agriculture.
• Tanzania uses an average of 9kg of fertiliser per
hectare, compared with 27kg in Malawi, 53kg in
South Africa and 279kg in China.
• More than 90 per cent of the 2.5 million cattle,
14 million goats and four million sheep are lowyielding
unimproved breeds.
• Tanzania has approximately 2,300m3 of
‘internal fresh water’ per person. This is 1.4
times greater than that of Uganda and 3.6 times
greater than Kenya.
• Although one of the largest herds in Africa,
Tanzania’s livestock sector accounts for only one
per cent of national exports.
Figure 1.1 East Africa Community Population
350
300
250
200
150
100
50
0
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
EAC Tanzania
Source: UN World Population Prospects
Millions
12 Southern Agricultural Growth Corridor of Tanzania
Tanzanian agriculture has a combination of
factors that make it attractive for commercial
investment, including:
• shared borders with eight countries in the East
Africa region, providing a large and growing
regional market,
• a coastal location with an international port
providing potentially low-cost access to rapidly
expanding markets in the Middle East and
Asia, and
• significant natural resources including good
soils, under-developed land, and water
resources suitable for agriculture, which could
be opened up with more public investment in
infrastructure.
“The agricultural potential of the
southern corridor is enormous, but
remains largely dormant or highly
underexploited. Serious market
opportunities for agricultural
produce abound. It is time for
the Agricultural Sleeping Giant
[Tanzania] to awake.”
Salum Shamte, Chairman,
Agricultural Council of Tanzania
Box 1: Investment in African agriculture
African agriculture is attracting increased interest from the private sector. With a rapidly rising global population,
the world’s grain output must rise by around 70 per cent and meat output will have to double by 2050. With the
right type of investment and political support, Africa could switch from being a net importer to a major exporter
of agricultural products, in particular to markets in the Middle East and Asia. However, for this to happen
countries like Tanzania will have to become more competitive. There are other land-rich parts of the world – such
as Brazil and Eastern Europe – which are already attracting the majority of private capital flows.
There is a risk is that Africa attracts the wrong type of investment. For example, the debate about ‘land grabbing’
highlights the dangers of industrial-scale farms that exclude local communities and smallholder farmers. For
SAGCOT and similar initiatives the challenge is to attract private investment in a way that maximises social gains
and allows smallholder farmers to become profitable producers and entrepreneurs with access to regional and
international markets.
Source: World Bank
Figure 1.2 International yields comparison
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Kilogrammes per hectare
European Monetary Union
United States
South Asia
Sub-Saharan Africa
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
80
70
60
50
40
30
20
10
0
2000
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
World population (millions) Per capita consumption meat (kg)
Source: UN World Population Prospects and FarmEcon
World population (million)
Per capita consumption (kg)
Figure 1.3 Global consumption and population growth
13 Southern Agricultural Growth Corridor of Tanzania
To illustrate the market opportunity, the diagram
below compares Tanzania’s current competitiveness
against imported soya beans from Brazil. Although
production costs are higher than Brazil’s, the
international freight and other shipment costs to
East Africa far outweigh this disadvantage (Figure
1.4). It should therefore be possible for Tanzania to
compete effectively with foreign imports. A similar
picture emerges for crops such as wheat and rice.
Today, the Tanzanian domestic market is relatively
small. However, regional markets are larger and
growing, and provide an important stepping stone
for the expansion of agricultural exports. Over
time, by developing new markets, it should be
possible for Tanzania to achieve economies of scale,
drive down production costs, and achieve lower
freight costs to the Middle East, Asia and other
markets. By 2030 Tanzania should be aiming to be
competitive on price with international competitors
in Europe, Asia and South America (Figure 1.5).
Countries such as Brazil and Vietnam that
successfully transformed their agricultural economies
over a 20-year period show what can be achieved,
if public and private sector resources are channelled
into agriculture. But Tanzania is going to have to
move rapidly to catch up because international
competitors continue to innovate. International
agricultural markets that are characterised by
highly efficient, sophisticated value chains (e.g. the
Figure 1.4 Import substitution in short-term (CIF
and landing charges, cost at Dar es Salaam)
700
600
500
400
300
200
100
0
Tanzania Brazil
Other costs (inc tariffs) International freight
Inland freight Farm cost
Soya beans (US$/MT)
Figure 1.5 Export competition in long-term
(CIF cost China) by 2030
700
600
500
400
300
200
100
0
Tanzania Brazil
International freight Inland freight
Farm cost
demanding product specifications and timeliness of
delivery required by expanding supermarkets) remain
beyond the reach of smallholders without specialised
knowledge and market linkages that only the private
sector can provide.
Over the past 30 years, Tanzanian agriculture
has lagged behind other sectors of the economy.
Agricultural exports have remained flat for the past 20
years, resulting in an overall decline in the agriculture
sector’s contribution to the GDP. Over the same period
there has been no significant reduction in rural poverty.
Soya beans (US$/MT)
Figure 1.6 Size of market opportunity
for soya beans

2,500,000
250,000
<50,000
Tanzanian Regional Global
market market market
Current local demand=
<50,000MT
China market =
55,000,000 MT
Source: SAGCOT technical team
Source: SAGCOT technical team estimates
Source: SAGCOT technical team estimates
Soya beans (MT)
14 Southern Agricultural Growth Corridor of Tanzania
There are multiple reasons for this poor
performance. In the past, agriculture has not
been seen as a priority sector. Land tenure
policy and its application remains complex and
bureaucratic. Skilled management capacity and
practical experience in commercial agriculture
are limited. Also, poor rural infrastructure and
limited access to long-term finance make it very
difficult to establish an agriculture business and
reach an efficient scale of operation. Section 4
(page 27) explores these and other constraints in
more detail.
The government has recognised the opportunities
and challenges facing the agriculture sector and is
doing something about them. For example:
• Initially developed by the Tanzanian private
sector, and then taken up by the government,
the Kilimo Kwanza initiative establishes
agriculture as a top priority across all
government ministries. Kilimo Kwanza calls
for action by all stakeholders on a set of
10 priority areas (the ‘Pillars’) to develop
opportunities and reduce constraints to rapid
future agricultural growth: Tanzania’s Green
Revolution. Kilimo Kwanza builds on the
country’s Agricultural Sector Development
Programme (ASDP), which coordinates public
investments by the Agricultural Sector Lead
Ministries, supported by some of the donor
agencies.
• Tanzania is a recent signatory of the
Comprehensive Africa Agricultural
Development Programme (CAADP), which
commits the government to allocating 10
per cent of budgetary expenditure to the
agriculture sector and establishes a target of a
minimum of six per cent per annum agriculture
growth. SAGCOT can play an important role
in helping implement Pillar II of CAADP,
which calls for increased private investment in
infrastructure and value chains.
• The Prime Minister’s Office has prepared a
roadmap for the improvement of the
investment climate.
Source: Bank of Tanzania & FAO STAT
2500
2000
1500
1000
500
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Figure 1.7 Exports of major crops and non-agricultural merchandise from Tanzania
Total non-agricultural merchandise Major crops
USD (millions)
15 Southern Agricultural Growth Corridor of Tanzania
Tanzania Development Vision 2025 and Agriculture Sector Development Strategy (ASDS)
Both Tanzania’s Development Vision 2025 and ASDS establish clear priorities for the transformation process towards a
modern commercial Tanzania to be private sector-led.
CAADP
The CAADP has four pillars covering the key elements in future agricultural growth: (i) land and water resources
management, (ii) infrastructure and market access, (iii) food security and nutrition, and (iv) science, technology and human
resource development. As SAGCOT develops, it will become one part of the CAADP compact for Tanzania.
Linking to SAGCOT
SAGCOT will operate within the dual, complementary frameworks of Kilimo Kwanza and ASDP. Cooperation
between SAGCOT and ASDP will include support to smallholder irrigation and improving land-use planning.
Also, local Commodity Investment Plans (CIP) will establish district-level partnerships, mobilising ASDP support
through the local government’s District Agricultural Development Plans (DADP). SAGCOT will help Kilimo Kwanza
move from concept to reality. It provides a replicable model showing how private investment can promote socially
responsible and ecologically sustainable commercial agriculture.
Kilimo Kwanza
This home-grown, private sector-led initiative focuses
on Tanzania’s agriculture. Coordinated by the Tanzania
National Business Council it will stimulate a private
sector-led Tanzanian Green Revolution. The ‘Ten Pillars’
of Kilimo Kwanza propose activities to reinvigorate
market-driven agricultural growth. The initiative, which
proposes a radical shift in the approach to agriculture,
has the support of both the government and private
sector apex organisations such as the Agricultural
Council of Tanzania. SAGCOT will be the first major
initiative to be launched under Kilimo Kwanza, and
will establish a model for future agricultural growth
partnerships that can be replicated throughout the
country. By looking at global market opportunities
as well as local markets and the necessary producer
incentives, SAGCOT will bring an additional element to
the Kilimo Kwanza range of activities.
ASDP
ASDP is designed to implement the ASDS. It is
implemented by the five Agricultural Sector Lead Ministries
and 132 local government authorities under the overall
coordination of the Ministry of Agriculture, Food Security
and Cooperatives. The objectives are (i) to enable farmers
to have better agricultural knowledge, technologies,
markets and infrastructure, and (ii) to increase private
sector investment in agriculture. The overall budget is
US$1,780 million over eight years of which 75 per cent is
earmarked for irrigation development. Market and private
sector development accounts for about two per cent.
ASDP has helped increase crop and livestock production
and growth in agricultural exports due to the adoption of
new technologies, better extension services, increased use
of irrigation, and greater access to mechanisation. However,
involvement of the private sector in ASDP is “still weak”3.
This is an area where SAGCOT will be able to provide
significant support and complementarity.
3
3 The 5th Joint Implementation Review – Agricultural Sector Lead
Ministries, October, 2010
16 Southern Agricultural Growth Corridor of Tanzania
Figure 1.8 SAGCOT within Tanzania’s developmental and agricultural strategic framework
National Strategy for Growth and
Reduction of Poverty (“Mkukuta”)
Strategic
Framework
Institutional
Framework
Public sector-led investments Private sector-led investments
CAADP Framework
Agriculture Sector
Development Strategy
Agriculture Sector
Development Programme
Kilimo Kwanza
Ministry of
Agriculture
LGA funds
Kilimo Kwanza
Growth Trust
Kilimo Kwanza
Financing facilities SAGCOT Secretariat
ASDP is already backed up by significant
resources (about US$150 million per year over
eight years) and there is potential access to
additional funding through CAADP. However,
questions remain about whether it will be
possible to catalyse significant amounts of
private investment alongside government and
development partner commitments. SAGCOT is
an attempt to address this challenge. Starting in
a few high-potential areas and working with a
wide range of partners, SAGCOT will promote
sustainable agricultural growth by attracting
socially and environmentally responsible private
investment from domestic and international
sources. The following sections describe how this
will be done.
17 Southern Agricultural Growth Corridor of Tanzania
In countries where commercial agriculture has been
successful there are four common features. Firstly,
there is ample suitable land available for commercial
development, with benign climatic conditions
and a reliable supply of water for irrigation and
other uses. Secondly, there is adequate access to
agriculture-supporting infrastructure, in the form
of low-cost transport links to markets and, in drier
climates, irrigation powered by reliable, affordable
grid electricity. Thirdly, there are ‘clusters’ of
farming, processing and service firms concentrated
in specific geographical areas. By creating economies
of scale, these clusters increase efficiencies and
drive down production and marketing costs in
the value chain. Fourthly, in each case, the private
sector takes the lead in developing the sector, but
with strong, complementary support from the
government (e.g. through business-friendly policies
and publicly-funded research and development
and infrastructure). When these four elements are
combined, the result is a profitable agricultural sector
able to compete in global markets.
The agricultural growth corridor model is a way
of focusing public and private sector resources on
areas with high potential for agriculture where
there is existing backbone infrastructure. The
model recognises the importance of incorporating
smallholder farmers within commercial agriculture
businesses, which has happened successfully
in some countries (e.g. Vietnam, Malaysia and

Agricultural growth corridor approach
Thailand), but less so in others (e.g. Brazil). By
promoting the development of profitable ‘clusters’
of farming and other related agribusinesses along
the corridor, the approach can help countries like
Tanzania catch up with international competitors.
This is achieved through:
• taking a long-term approach to agricultural
development, recognising that transformation
occurs over a 10 or 20-year period,
• commissioning robust analysis of the
constraints on commercial agriculture and
showing how these can be addressed,
• establishing an independent public-private
partnership organisation, which helps
to coordinate and target agricultural
development programmes and investments,
and
• using government and development
partner resources to catalyse socially
and environmentally responsible private
investment.
SAGCOT aims to facilitate the development
of clusters of profitable agricultural businesses
within the southern corridor. Building on
existing operations and planned investments, the
clusters are likely to bring together agricultural
research stations, nucleus larger farms and
ranches with outgrower schemes, irrigated block
farming operations, processing and storage
facilities, transport and logistics hubs, and
improved ‘last mile’ infrastructure to farms
and local communities. When taking place in
the same geographical area, these investments
result in strong synergies across the agricultural
value chain, helping create the conditions for a
competitive and low-cost industry.
SAGCOT aims to facilitate
the development of clusters of
profitable agricultural businesses
within the southern corridor.
18 Southern Agricultural Growth Corridor of Tanzania
Box 3: Cluster development
‘Clusters’ are defined as geographic concentrations of interconnected companies, specialised suppliers,
service providers, and associated institutions. For SAGCOT, this includes suppliers of farm inputs, machinery,
and agriculture support services (extension agents, financial services), commercial farmers (large and small),
processors and providers of infrastructure such as irrigation and rural roads. Clusters also include governmental
and other institutions, such as universities, vocational training providers, and trade associations, which provide
specialised training, education, information, research, and technical support. The proximity of companies and
institutions in one location, and the repeated exchanges among them, fosters better coordination and trust. It
also drives increased competitiveness. A cluster allows each member to benefit as if it had greater scale. Poor
countries typically lack well-developed clusters; they compete in the world market with cheap labour and natural
resources. To move beyond this stage, and to add value and share benefits with producers, the development of
well-functioning clusters is essential.
Great
Rufiji
Kilombero
100 i
LAKE TANGANYIKA
LAKE RUKWA
MTERA
RESERVOIR
LAKE NYASA
Dar es Salaam
Tanga
Mkuranga
Dodoma
Kilosa
Zombo
Morogoro
Kinonko
Mlandizi
Kibaha
Mbeya
Tunduma
at Ruaha
Rufifiji
Kilom K ero bero
E NYNYASA NYAYASASA
beya
unduma
Iringa
Figure 2.1 Agricultural growth corridor clusters
© AgDevCo
19 Southern Agricultural Growth Corridor of Tanzania
Successful development of the clusters will benefit
the Tanzanian economy on a number of levels:
• Smallholder farmers will have the opportunity to
become profitable producers linked to markets,
with affordable access to irrigation and other
agricultural support services.
• Local entrepreneurs will have the opportunity to
set up new businesses in the agriculture services
sector, e.g. agro-dealers, logistics services, storage,
processing, and marketing.
• Rural communities will benefit from improved
access to infrastructure (e.g. feeder roads,
electricity and potable water), while also gaining
employment opportunities with agricultural firms
throughout the value chain.
• The East and Central African region will benefit
from improved food security, and the Tanzanian
economy will benefit from increased tax revenues
and an improved balance of payments.
• Large numbers of smallholder farmers continuing
to operate under rain-fed conditions will have
improved access to inputs, value-adding services
and markets.
As development within each cluster reaches a
critical mass, Tanzania will experience a virtuous
agricultural growth cycle, with increased investment
leading to more production, generating a supply
chain response and economies of scale that
further increase competitiveness, encourage more
investment and results in accelerated growth. The
challenge is how to ‘kick-start’ private investment
in the clusters, in a situation where there is limited
commercial agricultural activity today, to get
the growth cycle moving. Later sections in this
report show how new institutional and financing
mechanisms can help achieve this goal.
Figure 2.2 The virtuous agriculture growth cycle
© AgDevCo
Box 4: What is ‘commercial agriculture’?
In the context of SAGCOT, the term ‘commercial agriculture’ includes farming, ranching, processing and
agribusiness activities and investments that use modern planning, production, processing and marketing
techniques. Commercial farms – large, medium or small – operate as financially sustainable businesses with the
primary objective of selling crops and livestock products into the market. In terms of turnover and in the context
of Tanzanian agriculture, smallholder farms can be defined as those with a turnover of less than US$5,000 per
year, emergent farmers with a turnover of between US$5,000 and US$500,000, and large farms with a turnover
of more than US$500,000. Although a farm of any size can be commercial, economies of scale generally mean
that there is a minimum efficient size of commercial enterprise for a given product that may either come through
a single or collective farm or by a combined aggregated approach of individual farmers farming collectively to
reach appropriate levels of scale. For commodities such as grains, the area is likely to be upwards of 200 hectares
(although this might be sub-divided into smaller plots, e.g. in an irrigated block-farming development or as part of
a producer association), but five hectares of well-managed irrigated flowers or vegetables would provide a viable
business. A viable ranch in a semi-arid area would require a lot more land – more than 10,000 hectares. Other
players in the commercial agriculture value chain include input suppliers, logistics companies, financial services
providers and marketing agents.

21 Southern Agricultural Growth Corridor of Tanzania
The Southern Agricultural Growth Corridor (also
known as the ‘Tazara Corridor’) is formed along
the traditional trade route linking Tanzania to
landlocked countries in south-eastern Africa. Within
Tanzania it covers an area of about 287,000km²
and incorporates a population of nine million.
Regionally, the corridor reaches mining industries
in the Northern and Central Provinces of Zambia,
Malawi and the Katanga Province in the Democratic
Republic of Congo (DRC). Although currently
operating well below its potential capacity, the Port
of Dar es Salaam has a pivotal role in regional trade.

What is the Southern Agricultural Growth Corridor?
The majority of goods through the port originate
from, or are destined for Tanzania. Trade with the
mineral-rich areas of Zambia and the DRC accounts
for about a third of all shipments.
The corridor has a diverse range of climates, from
the wet coastal plains through semi-arid savannah
and tropical lower-mountain valleys, into extensive
temperate highlands. This variety in climate and
altitude, as well as the diverse nature of the soils,
allow for the cultivation of a large range of crops
and different types of livestock.
Box 5: Crop and livestock value chain potential in the southern corridor
The natural potential of the southern corridor offers commercial farmers, large, medium and small, a broad spectrum of
crops to grow, both for local consumption and export. The major crop opportunities include cereals (wheat, barley, maize,
sorghum, rice), horticulture, sugar, citrus, soya beans, coffee, tea, potatoes, bananas, beans, vegetables and sunflower. In
terms of livestock, beef, goats, poultry, sheep, pigs and dairy operations all have great potential.
Maize: The majority of the maize in Tanzania is produced by smallholder farmers from retained seeds. Average yields
are generally below a tonne per hectare for subsistence farmers and five tonnes per hectare in the commercial sector.
The introduction of better seeds and access to inputs could increase yields significantly. A national surplus would provide
Tanzania with the opportunity to export to neighbouring countries, and could encourage agencies such as the World
Food Programme Purchase for Progress (P4P) to secure their maize requirements for the region from Tanzania. They are
already actively doing this in Zambia, which recently boasted an annual surplus of maize.
Wheat: Tanzania only produces five per cent of its wheat requirements and imports in excess of 500,000 tonnes of wheat
annually at a cost of US$175 million per year. There is significant potential for import substitution
Rice: In areas such as Kilombero, there is huge potential for increasing rice production. With the introduction of better
varieties, improved water regulation and commercial management, Tanzania could supply a large portion of Sub-Saharan
Africa’s requirement of five million tonnes, including much of East Africa’s current annual imports of 740,000 tonnes.
Horticulture crops: The temperate climate of many parts of the corridor is ideal for horticulture crops, such as fine beans
and other high value legumes. Tanzania produces approximately 250,000 tonnes of dry beans at yields well below 500
kilogrammes per hectare. Dry beans, with the correct production methods and screening of varieties to ensure the required
purity and uniformity for exports, could offer the Tanzanian farmer yet another cash crop option in their grain rotation.
22 Southern Agricultural Growth Corridor of Tanzania
There is also large demand for Irish potatoes in Tanzania, which fetch very good prices.
Bananas: Tanzania has the potential to export about 255,000 tonnes of bananas each year to established export
channels in regional and international markets. Based on average yields of 50 tonnes per hectare, this requires
approximately 4,000 to 5,000 hectares. Banana plantations reach commercial maturity quicker than other fruits such as
mangoes and lychees, and therefore start to generate positive annual income flows earlier.
Livestock: With Africa’s third largest livestock herd, extensive rangelands and significant feed resources, Tanzania could
have a highly productive and profitable livestock industry. However, the livestock industry remains undeveloped and
unproductive. There are about 2.5 million cattle in the corridor and recently almost 900,000 hectares of land has been
allocated by village governments to livestock development. The potential can be achieved by improving the quality and
management of the animals, through improved animal health and by developing modern animal production and marketing
systems. For example, 80 per cent of Tanzania’s hides are exported (mainly to Kenya) unprocessed. There are tremendous
opportunities for local added value, using immediately available resources.
Fisheries: Tanzania has one of the largest fisheries sectors in Africa, ranking in the top 10 countries in terms of total
captured fisheries production. The country has an average annual fish landing of more than 300,000 tonnes and an
estimated production potential of 730,000 tonnes. Tanzania has extensive freshwater fisheries, some of which, such as
those on Lake Victoria, have been developed for export. There is potential for further development, particularly in the
southern corridor, e.g. aquaculture in small dam sites.
Tanzania has the second largest volume of inland
fresh water resources in Africa and it is estimated
that only one per cent of total irrigable land is
currently developed. A recent study by Japan
International Cooperation Agency (JICA) for
the Ministry of Agriculture suggested there is
approximately three million hectares of mediumto
high-potential land suitable for irrigation in
the corridor. However, with inefficient technology
and poor controls, in some areas water resources
are already being over used (see Section 9 and
Appendix VII). All moves to develop future
irrigation will require careful assessment of the
hydrological and environmental impact.
23 Southern Agricultural Growth Corridor of Tanzania
Figure 3.1 Agricultural potential and backbone infrastructure
SAGCOT’s backbone infrastructure provides a
reasonable but incomplete platform upon which
to develop commercial agriculture in the southern
corridor. The majority of infrastructure was built after
Tanzanian independence as an alternative to the South
African and Mozambican transport links to Zambia,
and includes:
• the Port of Dar es Salaam, which currently handles
approximately eight million tonnes per year,
• the Tanzania-Zambia Railway Authority (TAZARA)
network of 1,870km of rail, commissioned in 1976
to link Dar es Salaam Port to Kapiri Mposhi and
then to the Zambian Railways (and the DRC and
Southern African rail networks),
• The Tanzania-Zambia (TANZAM) Highway, a
paved trunk road system of 1,762km linking Dar es
Salaam Port to Kapiri Mposhi,
• the TANESCO electricity grid servicing major towns
along the corridor within Tanzania, and
• total renewable water resources amounting to
93km3 per year, of which 84km3 per year is
produced internally.
If this backbone infrastructure is going to provide
the services that are needed for agricultural
growth, several important improvements are
needed. Firstly, Dar es Salaam Port’s capacity
needs to be expanded and customs procedures
accelerated. Secondly, the road system requires
rehabilitation and maintenance. Thirdly, even
though rail transport is less expensive than
road haulage, it is currently slow, unsecure
and unreliable. Interchange facilities must be
improved and railway wagon and locomotive
stock upgraded to make it more competitive.
Fourthly, the power grid will need upgrading
in places and national shortages in generating
capacity will need to be met.
Investments in some of these improvements
are already taking place (see Figure 3.4
Anchor investment map). The government and
development partners, with cooperation from the
private sector, must be committed to see proposed
infrastructure investments completed, including
cooperation from state-owned enterprises.
Source: JICA, SAGCOT technical team estimates
24 Southern Agricultural Growth Corridor of Tanzania
Box 6: The Brazilian success story
There are similarities between the southern corridor and the Cerrado region of Brazil as it was in the early 1970s, before
it became a major global agriculture producer. Climatic and soil conditions are broadly comparable and many of the same
crops can be grown (e.g. maize, soya, rice, sugarcane). SAGCOT has an advantage over the Cerrado in having direct
access to the Port of Dar es Salaam and relative proximity to Asian markets.
In the Cerrado, soya bean production
increased fivefold from 9.9 million tonnes
in 1975 to 51.4 million tonnes in 2005.
The success of the Cerrado is
commonly attributed to a combination of:
• public sector support for research, infrastructure
and low-cost finance for farmers, supported by
minimum price guarantees, and
• significant private investment, which created
economies of scale and scope for all players in
the agriculture value chain.
The Cerrado experience shows that, where the natural conditions are suitable, investment in commercial agriculture can
result in rapid growth of profitable production and farm incomes. However, rapid development and agricultural growth
of the sort achieved in Brazil is accompanied by risks. For example, in the Tanzanian context rapid modernisation of the
farming sector could disrupt traditional livelihoods, exclude smallholder farmers and have unintended environmental
impacts. For this reason SAGCOT promotes a form of agricultural development that directly benefits smallholder farmers
and rural communities (see Section 6). It is also why SAGCOT will undertake careful environmental impact assessments
(see Section 9).
During the 1990s, Brazilian net exports of soybeans,
soybean meal, and soybean oil increased 444, 65, and
288 per cent, respectively, giving Brazil a 30 to 40 per
cent share of world trade in these commodities.4 Over
the same period, Brazil switched from being a net
importer of maize to being a net exporter, providing
7.7 million tonnes of global maize traded in 2003.
Similarly, Brazil is currently the second largest net
exporter of beef and broiler meat and the third largest
exporter of pork. Strong performance has continued
through the 2000s, with major gains in efficiency as
well as land expansion of five million hectares.
Brazil’s success shows what can be achieved in a
relatively short period of time if there is properly
coordinated public and private investment in
commercial agriculture. But it also poses a challenge for
4 Matthey, Fabiosa and Fuller, 2004, “Brazil: The Future of Modern
Agriculture?”, MATRIC Briefing Paper 04-MBP 6
Tanzania and other countries yet to realise the potential
of their agriculture sectors: competition in international
markets is intense. To compete successfully in those
markets Tanzania will have to catch up with the likes of
Brazil and match their levels of efficiency and scale.
160
140
120
100
80
60
40
20
0
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Production all grains (1000/tonnes) Area (million/ha)
Source: Conab
Figure 3.3 Brazil efficiency improvements
Figure 3.2 The Brazilian success story
TANZANIA
Infrastructure
Railway:
The Peoples Republic of China, the original sponsors of
the railway construction, has provided a USD$39m interest
free loan for the rehabilitation of the Tanzania-Zambia
Railway Authority (Tazara) Railway. The Chinese Civil
Engineering and Construction Company (CCECC) has
secured a US$5m contract to build 90 wagons for Tazara.
Roads:
AfDB has committed US$230m and JICA has committed
US$87.7m for the upgrade of 450km of trunk roads
including the Dodoma–Iringa road. The Millennium
Challenge Corporation (MCC) has committed US$373m
to transport, including the upgrade of the Tunduma–
Sumbawanga road and DANIDA has committed
US$84.8m for the repair and upgrading of the Tanzam
highway for 149km between Iyovi-Iringa.
Power:
The EU is investing US$4.7m on the construction of the
Mwenga 3 MW hydro power project, in Mufindi district of
Iringa, and the AfDB is currently constructing a 667km
400kV full AC transmission line split into three individual
construction lots, including an Iringa–Dodoma 225km
400 kV AC line. The MCC has committed US$206m to
the energy sector in Tanzania, including the Distribution
Systems Rehabilitation and Extension Projects in
Morogoro, Iringa, Dodoma and Mbeya regions. Sida is
investing US$70m to install a Makambako-Songea 132 kV
transmission line and the electrification of Songea district
in Ruvuma and Iringa. Under the Kilimo Kwanza initiative,
the Rural Energy Fund plans the electrification of irrigation
schemes in the Southern Highlands and Eastern Zones,
with a budget of US$6.8m.
Ports:
Port of Dar es Salaam:
The Tanzania Ports Authority has invested US$18m in
modern handling equipment, the construction of additional
paved storage yards, and the relocation of container
scanning facilities, all of which hope to rationalise traffic
flow, assist the port to handle greater throughput volumes
and reduce container import dwell time. They are also
building a new liquid bulk terminal for an estimated
US$80m and are at the feasibility stage for another five
major expansion projects.
Fertiliser terminal:
Yara intends to invest US$20m to build a dedicated
fertiliser terminal at the Dar es Salaam Port, increasing
handling rates at the ship to shore interface, allowing
greater throughput. DSM Corridor Group has begun
the US$4m construction of a bulk/ fertiliser terminal
that will be linked to the port by a bulk conveyor system,
increasing ship handling rates, reducing berth occupancy,
and cutting port costs.
Dry port Mbeya:
DSM Corridor Group and East Africa Trade House
Company are planning a dry dock in 2013 with a
proposed budget of US$10m.
Figure 3.4 Anchor investment map
Agriculture:
The World Bank ($155m), AfDB ($56m), IFAD ($92m), JICA ($6.86m) and Irish Aid ($5.75) are
supporting the Agriculture Sector Development Programme (ASDP) to assist farmers’ access to
agricultural knowledge, technologies, marketing and infrastructure. The World Bank is providing
US$45m on export development and competitiveness, and US$170m on the Seventh Poverty
Reduction Support Credit Programme that includes agriculture. The AfDB, IFAD and AGRA
will provide approximately US$155m for the development of a Marketing Infrastructure, Value
Addition and Rural Finance Support Programme. The EU is providing US$26m budget support
and US$15m to non-state actors as Food Facility Grants for the provision of agricultural inputs,
rehabilitation of seeds farms, and promotion of agricultural mechanisation, rural based agroprocessing,
agricultural marketing and household food storage.
National Microfinance Bank (NMB), FSDT and AGRA are providing US$6.3m for an agricultural
loan programme for outgrower input finance. NMB, in partnership with Tanzania Breweries
Limited is also supporting a Barley Input Purchase Loans scheme. Yara and Syngenta are
currently developing three Climate Change Mitigation projects with a focus on increased
farm productivity driven by improved land use and optimal use of proper agricultural inputs.
Additional projects include the 470 hectare irrigated Mkula rice cooperative and mill and the
1,600 hectare Mtanga commercial farm for wheat, barley and maize. The Tanzania Agricultural
Partnership (TAP) is working with private sector partners on the development of two grain
partnership projects (rice and maize) and is also rolling out a Commodity Investment Programme
that links ASDP funding to agribusiness development in the districts.
Julius Nyerere
International Airport (JNIA):
JNIA, also known as Dar es Salaam
International Airport, is the main gateway
to Tanzania, and a link to countries inside
and outside the region. The Government is
planning the rehabilitation and expansion of
JNIA in order to improve airport security and
to handle a greater volume of traffic. This
five-year project is expected to commence
in 2011 and is estimated to cost US$300
million. Funds have not yet been secured
but would potentially be obtained through
multilateral financing, bi-lateral financing
and/or a PPP.
Songwe International
Airport:
Construction is currently underway at
Songwe (Mbeya Region) for a new
international airport that will enable capacity
for Boeing 737 aircraft. In addition to
providing convenient links with regions in the
southern parts of Tanzania, it will also link
Tanzania to Malawi, Mozambique and Zambia.
The project is expected to be completed by
May 2011. BADEA/OFID and the Tanzanian
Government are co-financing the project.
The implementing authority for both airports
is Tanzania Airports Authority (TAA).
Airports:
26 Southern Agricultural Growth Corridor of Tanzania
Box 7: Decline in official development assistance (ODA) flows to agriculture
Aid to the agriculture sector has been in decline for 30 years. At the Aquila summit in Italy in 2009, global leaders
committed to providing an extra US$20 billion of official development assistance (ODA) to agriculture. This led to the
establishment of the Global Agriculture and Food Security Programme (GAFSP), managed by the World Bank. Initial
resources are beginning to flow, but so far committed funds are far short of promises made. SAGCOT illustrates the
potential development gains that can be achieved from coordinated public and private investment in agriculture. For
too long it has been assumed that the private sector can solve the problems facing the agriculture sector on its own. It
cannot and will not while major barriers to profitable entry remain, such as poor rural infrastructure, an uncertain policy
climate, and the lack of an experienced workforce. Governments and the international community need to find ways
of leveraging private finance into agriculture by helping kick-start private investment, in particular by providing ‘patient
capital’ with conditions attached to ensure social and environmental responsibility.
Source: OECD International Development Statistics – Creditor Reporting System
20%
15%
10%
5%
0%
1980 1985 1990 1995 2000 2005
US$ million
(commitments
constant 2004)
% of total ODA
Figure 3.5 Official development assistance (ODA) to agriculture, 1980-2005
10,000
8,000
6,000
4,000
2,000
0
27 Southern Agricultural Growth Corridor of Tanzania
Despite its huge potential, there is currently
very limited large-scale farming in the southern
corridor. Of the 7.5 million hectares of arable
land, less than two per cent is farmed under
irrigation; mainly public irrigation schemes for
smallholder rice production. Excluding two large
sugar and tea estates, the total area under yearround
irrigation for food and horticulture crops
is below 2,000 hectares.
Of the 2.1 million hectares that are under
production, 95 per cent are farmed by
smallholders using traditional methods, primarily
for subsistence. The principal smallholder crops,
apart from rice, are maize, cassava and pulses.
In addition to field crops, farmers keep large
numbers of livestock, including cattle (2.5 million
head), goats (0.8 million), and poultry (3.4
million). Yields are low, with grain and pulse
crops averaging less than one and a half tonnes
per hectare. In the rice sector, where reliable
irrigation is still available, yields are higher but
still well below potential because of a lack of
suitable varieties and water storage.
The Southern Agricultural Growth Corridor:
current status of agriculture
Box 8: The impact of irrigation investment in Vietnam
In many places of the Mekong Delta, paddy yield increased from 4.5 tonnes per hectare in 1975 to 9.5 tonnes per hectare
in 1990 and 10 to 12 tonnes per hectare in 1999 thanks to stable irrigation and drainage. Because of the increase in
yields, production and crops, average per capita food consumption increased from 328kg per year (in 1980) to 400 to
500kg in 2000 despite a fast growing population. Agriculture has become an export sector. Agricultural GDP in 2000
increased 5.3 times compared with that of 1990.
Source: Nguyen Xuan Tiep, Water Resources with Food Security in Vietnam, 2002.
Figure 4.1 Curent use of land
7,500,000 ha
Arable land
2,090,000 ha
Smallholder farming
110,000 ha
Commercial farming
20,000 ha
Commercial farming under modern irrigation
less than 2,000 ha
Commercial farming under modern irrigation (excluding
sugar and tea plantations)
Source: SAGCOT technical team estimates
28 Southern Agricultural Growth Corridor of Tanzania
There is currently limited use of specialist
knowledge and modern farming methods in
the corridor. Chemical and mineral fertiliser
applications are some of the lowest in the world.
The hoe remains the main tool of production and
very little improved seed is used. Due to low yields
and uncompetitive markets, a high proportion of
food crop production is consumed on-farm and
almost the entire rural population remains poor.
Large-scale commercial farming in the corridor
is restricted to sugar and tea, except for a few
medium-sized farms that produce a mix of dairy,
red meat, sisal cereals, flowers and high-value
horticulture crops. New private sector investments
are underway in irrigated rice and sugar (e.g. in the
Kilombero Valley) and teak, but these are currently
in the early stages of development. Others are
planned but as yet not operational, for example the
South Korea Rural Community Corp (KRC) has
signed a memorandum of understanding with the
Rufiji Basin Development Authority (RUBADA)
to develop 15,000 hectares of irrigated food crops
in the lower Rufiji Valley. The environmental
impact of some of these investments will need to be
carefully assessed.
The tea and sugar estates have outgrower
arrangements with about 10,000 smallholder
farmers, providing modern inputs and access to
markets. By introducing opportunities to earn
reliable cash incomes, these schemes have delivered
important development benefits to the surrounding
areas, and yet smallholder farmers receive low
incomes (e.g. an average of less than US$250
annual income per farmer for tea). The benefits
could be larger if smallholder farmers were able
to have a greater share in the value addition that
comes from processing, as they do in Kenya for
example, rather than simply providing the raw
product, usually immediately after harvest for a low
price, to contract buyers.
Annual smallholder
production (2009)
Hectares (ha) Volumes (mt) Value (US$’000)
Maize 1,000,000 1,835,000 195,000
Cassava 200,000 385,000 12,000
Paddy rice 100,000 280,000 84,000
Pulses 300,000 260,000 27,000
Beef n.a. 5,000 25,000
Tea 8,000 8,000 10,000
Sources: Regional DADPs, Ministry of Agriculture Food Security and Cooperatives, and SAGCOT technical team estimates
Annual commercial
production (2009)
Hectares (ha) Volumes (mt) Value (US$’000)
Sugar 10,000 300,000 6,000
Tea 8,000 18,000 22,500
Rice 12,500 45,000 15,000
Sources: Regional DADPs, Ministry of Agriculture Food Security and Cooperatives, and SAGCOT technical team estimates
29 Southern Agricultural Growth Corridor of Tanzania
For other crops, smallholder and large-scale
farmers tend to operate independently. Existing
large-scale farmers who are willing to work with
smallholder farmers are sometimes deterred from
doing so because of the high costs of setting up and
managing outgrower schemes.
All famers in the southern corridor face enormous
challenges in realising a profit from their
investment. Because the practice of modern farming
remains an ‘infant industry’ there are high barriers
to entry5, inadequate supporting infrastructure, few
economies of scale, and low levels of clustering.
Furthermore, areas of uncertainty in the policy
environment, such as periodic export bans, mean
that farmers are reluctant to make long-term
investments, for example in improving land fertility
through proper application of lime or investing in
improved breeds of livestock. Those farmers who
are prepared to take a longer-term perspective are
generally unable to access long-term finance on
affordable terms.
The combination of these factors pushes up
production costs, making the agriculture
sector uncompetitive with international rivals.
International and domestic investors tend to favour
other sectors in Tanzania such as the property,
entertainment and leisure, tourism and mining
sectors where financial returns are easier to obtain.
The fundamental issue for SAGCOT is therefore
reducing costs and risks in the early stages to
stimulate growth of production, resulting in lower
unit costs and improving competitiveness in the
medium term.
Despite its enormous natural promise, the agricultural
potential of the southern corridor remains unrealised
– one of Africa’s Sleeping Giants.
5 For example, working with local authorities to identify suitable land and
acquiring leasehold rights can take a long time, even for investors who are
willing to share the benefits with local smallholder farmers.
0.10
0.09
0.08
0.07
0.06
0.05
0.04
0.03
0.02
0.01
0.00
600.00
500.00
400.00
300.00.
200.00
100.00
0.00
18%
16%
14%
12%
10%
8%
6%
4%
2%
0
Figure 4.2 Transport costs
Figure 4.4 Finance costs
Figure 4.3 Fertiliser costs at farm gate
Tanzania Kenya Brazil Vietnam
Tanzania Kenya Brazil Vietnam
Tanzania Kenya Brazil Vietnam
% charged on 1-year bank loan (local) US$/tonne/KM US$/tonne
Source: SAGCOT technical team estimates
Source: SAGCOT technical team estimates
30 Southern Agricultural Growth Corridor of Tanzania
Box 9: Constraints on productive agriculture
Poor infrastructure
• The port, local roads and the lack of use of the railroad all lead to transport obstacles that significantly increase the
cost of bringing local production to market.
• Large-scale dams, irrigation and electrification systems are generally not available and are beyond the capability of
individual farmers to finance and install. Farmers have to use expensive diesel-powered electricity.
• The rural feeder road network away from the main Dar es Salaam to Mbeya road is poor. There are no temperate or
cold storage facilities or reefer/container facilities readily available to agriculture along the corridor.
• The majority of farmers lack processing services in their area. Without the stimulation of concentrated production
areas, installation of efficient processing services will be hard to justify economically.
Inadequate access to affordable long-term finance
• Only a few banks are lending to agriculture in any significant way. According to the Tanzania National Business
Council, in 2008 the total domestic lending to agriculture was TZS540 billion (approximately US$360 million), of
which 92 per cent went to agricultural trading.
• When banks do lend, it is usually on a short-term basis to fund working capital and at rates of interest that are often
too high to be commercially affordable.
Difficulties securing land
• No comprehensive land survey of the area is available. Consequently, investors have difficulty accessing information
on land availability and quality. This discourages new investment in agriculture because locating suitable land is
expensive and time consuming.
• Only limited land in Tanzania is currently secured under ‘Right of Occupancy’ title and available for purchase or longterm
lease. Lack of security over land deters long-term investments in land clearing, soil upgrades, irrigation and fixed
assets such as pack houses and storage facilities.
• Soils are generally deficient in nutrients, likely to be the result of years of poor husbandry without proper
replenishment. However, soil structure is very good and conducive to intensive farming.
Limited market access and economies of scale
• Low production volumes and poor information flows prohibit direct access to markets, resulting in reliance by the
majority of smallholders on local traders (sometimes as many as seven intermediaries) and inefficient processors prior
to product reaching final markets.
• The dispersion of smallholder farmers, their significant distance to markets, and the low volumes they are producing
make it difficult to install infrastructure (roads and electricity) that would improve their access to markets.
Taxes and export barriers
• In addition to the high cost of transport, periodic export bans prohibit access to larger and often closer regional
markets. Such bans reduce incentives for farmers to invest in increasing production volumes, potentially exacerbating
crop shortages in future seasons. As a result of these ad hoc bans, local financial organisations such as PASS have
stopped lending to some maize producers, citing the lack of a reliable market as its primary concern.
Poor perception of agriculture
• Agriculture has a poor image amongst Tanzanians, particularly the younger generation. They have been discouraged
from entering in to commercial agriculture because of its poor performance, limited profitability and long hours. As a
result, agriculture fails to attract bright, creative entrepreneurs, who prefer to seek their future in other sectors. It is
estimated that only 30 per cent of Sokoine University of Agriculture graduates take up careers related to agriculture.
31 Southern Agricultural Growth Corridor of Tanzania
Box 10: Trade facilitation
The East African Community (EAC) Custom’s Union Protocol commits partner states to the immediate elimination of all
existing Non-Tariff Barriers to trade (NTBs) on intra-EAC trade, and to refrain from introducing new ones. However, trade
between EAC countries remains greatly hampered by NTBs. A recent study on the impact of NTBs on formal maize and
beef trade in the EAC found that both commodities face similar barriers in the form of local taxation, licensing, road blocks,
customs barriers and corruption, and all countries would benefit from eliminating the NTBs.
The Investment Climate Facility (ICF) aims to help African governments identify and remove constraints to trade across
Africa. Similarly, the Trade Mark East Africa (TMEA) Tanzania programme will support a range of interventions to reduce
cross-border transport costs. This includes work with the Tanzanian Port Authority to improve the operational efficiency of
the Port of Dar es Salaam and funding for new One Stop Border Posts at Tunduma and Kabanga.
32 Southern Agricultural Growth Corridor of Tanzania
Over the next 20 years, SAGCOT will facilitate the
development of agriculture clusters in the southern
corridor. They will be centred on areas of high
agricultural potential with shared infrastructure
where economies of scale can rapidly develop. Cluster
development will be driven by the private sector
based on the needs and opportunity of each area.
The clusters identified in this report have been
selected because they are representative of the
different opportunities and constraints facing
smallholder and large-scale farmers throughout
the corridor. It is important to note, however, that
the six clusters in the report are not the exclusive
focus of SAGCOT. Investment in productive and
socially responsible agriculture will be encouraged
throughout the corridor, as Section 12 on the ‘early
win’ opportunities shows. Additional clusters will
be added as SAGCOT moves forward.
There are three types of cluster. The ‘Type 1’
cluster areas are those where some modern
farming that is already developing scale, public
irrigation schemes are operational and there is
relatively good backbone infrastructure. With
the right type of financial support it should be
possible to make rapid progress. ‘Type 2’ and
‘Type 3’ require further investment in backbone
infrastructure and careful assessment of social and
environmental impacts.
To provide a rapid start to SAGCOT
implementation, a series of individual ‘early
win’ opportunities with immediate development
potential has been identified. These offer a chance
to test and develop SAGCOT investments as soon
as appropriate funding is available. Section 12 lists
the ‘early win’ opportunities and further detail is
provided in Appendix X.
Cluster identification and development path
Figure 5.1 SAGCOT cluster areas
Figure 5.2 Indicative cluster development
16 mixed farms (42,400 ha
commercial + smallholder)
4 banana plantations
(600 ha commercial

smallholder)
2 regional markets
(4,000 m2)
2 research stations
2 cold storage units
3 warehouses
4 mills/processing facilities
400+ km upgrade main
roads
90+ km power transmission
6 substations
$14 m bulk
$4 m bulk water
(outgrower)
$0.4 m bulk water
(local community)
5 mixed farms (13,250 ha
commercial + smallholder)
7 rice schemes (14,000
ha upgrading of current
schemes)
2 sugar estates (20,500 ha
expansion and new)
5 citrus farms (3,000 ha)
7 banana plantations
(1,050 ha)
2 regional markets
(4,000m2)
4 cold storage units
6 large warehouses
3 mills/processing-
Facilities
1 sugar mill
320 km upgrade –
main roads
5 km rail spur
60+ km powertransmission
4 substations
$ 90 m bulk water
(commercial)
$ 8.5 m bulk water
(outgrower)
$ 1 m bulk water
(local community)
Key
Mixed farms
Rice schemes
Sugar estates
Citrus/banana farms
Dams
Markets
Research stations
Cold storage/warehouses
Mills/processing facilities
Ihemi Cluster
Kilombero Cluster
Illustrative investment needs
and opportunities over a 20-
year period in the Ihemi and
Kilombero clusters
Refer to Appendix XI for details
on the development of other
cluster areas
Development of each cluster will depend on
coordinated action by a range of public and private
sector organisations, drawing on various forms
of public and commercial funding. Figure 5.2
illustrates the type of investments and programmes
required in the Ihemi and Kilombero clusters, with
examples of the roles of different actors (note that
the location of specific investments on the maps are
illustrative). There is a need for proper coordination
and focus of all of these activities in order to
attract private investment into the sector and to
ensure that it is done in a socially acceptable and
environmentally sensitive way.
Establishing momentum will be critical to
SAGCOT’s long-term success. For example, in the
Ihemi and Kilombero clusters there is potential
to establish more than a dozen new or expanded
nucleus farms in the first five years – in livestock
(especially beef and dairy), rice, sugar, cereals,
and high-value horticulture – all with associated
outgrower/serviced block schemes to extend the
benefits to smallholder farmers in the vicinity. Both
dry-land and irrigated farming will be developed, as
well as livestock operations.
The total additional area irrigated in this fiveyear
period could reach 12,550 hectares, of which
5,550 hectares is provided to emergent farmers,
with a further 7,000 hectares of rain-fed land
being used by smallholder farmers. Much of the
irrigated area in the first five years is assumed to
come from existing (brownfield) schemes where
SAGCOT will work with partners to upgrade
infrastructure, improve technology and increase
production and marketing. The table on the
following page provides an indicative sequencing of
events, coordinated and monitored by the SAGCOT
secretariat, to make this happen.
Appendix V provides full details of the indicative
investment plans for the Type 1 clusters, including
the sequencing of actions and investments required
in the first five years.
Development of each cluster will
depend on coordinated action by a
range of public and private sector
organisations.
Source: SAGCOT technical team projections
34 Southern Agricultural Growth Corridor of Tanzania
Partner Year 1-2 Year 3-5
Central
Government
Road/rail rehabilitation and upgrades
New procedures to accelerate seed and planting
material import and commercial release
Establish Commodity Investment Plans as part of
ASDP implementation at district level to bring in private
sector
Clarification of available and accessible agricultural
land within Kilombero, Ihemi (and Mbarali Clusters)
Carry out business environment assessment within
clusters (with TNBC)
Reduce number of police road blocks on
road hampering movement of agricultural
inputs and produce
Improve national land use planning to link
with district- and village-level land use
planning
Local
government
Update regional land banks
Integrate TAP and Commodity Investment Planning
into DADP process
Leverage ASDP funds to complement specific Kilimo
Kwanza Catalytic Fund and private investment
Pilot district land use planning within
clusters
SAGCOT
financing
facilities
Provide start-up and expansion funding to at least 3
agribusinesses in Ihemi and Kilombero
Provide further finance to another five
agribusiness
Private investors Pilot rice and grain partnerships (building on ongoing
TAP activities)
Provide matching funding for investments promoted by
the catalytic fund, and expansion finance for existing
commercial businesses in the clusters
Roll out grains partnership to include
outgrower/contract farming model with
local/international grain trader(s)
Development
partners
Engage development partners involved in rice
development schemes to develop rice PPPs with
private sector SAGCOT partners
SAGCOT to engage with district plans on specific
opportunities to align activities towards cluster and
farm development, e.g. in areas of research and
development, extension service, farmer association
capacity building, agro-dealer support, etc.
Roll out specific joint funding plans and
activities to support smallholder linkages
with large-scale farming (small-scale
infrastructure, association strengthening,
information systems, etc.)
Service providers Pilot microinsurance and information services
programmes (corridor-wide)
Engage banks to develop short- and mediumterm
warehouse receipts development plan
Kilombero and Ihemi outcomes after five years Kilombero Ihemi
Annual gross revenue US$34,822,250 US$21,395,250
Smallholder outgrowers (irrigated) 630 910
Smallholder outgrowers (rain-fed) 1,000 6,000
Direct farm production employment 620 740
Processing employment 2,070 3,590
Wider agricultural value chain employment 2,690 4,330
Indirect beneficiaries 31,545 70,065
Total beneficiaries 38,555 85,635
Source: SAGCOT technical team projections
Kilombero and Ihemi investments in first five years
35 Southern Agricultural Growth Corridor of Tanzania
Kilombero Mbarali
Districts covered: Kilombero and part of Kilosa
Total area (ha): 1,044,260
Total arable land (ha): 312,127
Total cultivated area (ha): 80,272
Population: 286,193
Population density (per km2): 30
Population growth rate: 2.6%
Land under existing or planned irrigation schemes (ha):
76,230
Major commodities: paddy, sugarcane, maize, banana,
poultry, citrus
Annual rainfall: bimodal, 1,200-1,600mm, seasonal flooding
Temperature range: 26-32°c
Altitude: 200-1,200m
Environmental issues: Selous Game Reserve, wetlands
Districts covered: Mbarali
Total area (ha): 1,164,240
Total arable land (ha): 137,200
Total cultivated area (ha): 96,320
Population: 192,230
Population density (per km2): 17
Population growth rate: 2.4%
Land under existing or planned irrigation schemes (ha):
54,422
Major commodities: paddy, maize, beans, sorghum, poultry,
cattle
Annual rainfall: monomodal, 500-800mm
Temperature range: 9-30°c
Altitude: 750-1,400m
Environmental issues: Ruaha National Park, wetlands
Ihemi Ludewa
Districts covered: Iringa Rural, Kilolo and Mufindi
Total area (ha): 1,321,390
Total arable land (ha): 617,730
Total cultivated area (ha): 279,200
Population: 501,204
Population density (per km2): 38
Population growth rate: 1.5%
Land under existing or planned irrigation schemes (ha):
17,932
Major commodities: maize, paddy, pulses, sunflower,
banana, potato, wheat, cattle, pigs, poultry
Annual rainfall: monomodal, 600-1,200mm
Temperature range: 13-22°c
Altitude: 1,300-2,200m
Environmental issues: deforestation, illegal river water
extraction, soil erosion
Districts covered: Ludewa, and Mbinga
Total area (ha): 1,439,700
Total arable land (ha): 715,000
Total cultivated area (ha): 401,444
Population: 145,507
Population density (per km2): 16
Population growth rate: 1.6%
Land under existing or planned irrigation schemes (ha):
17,600
Major commodities: maize, paddy, pulses, banana, cattle,
horticulture, citrus, poultry
Annual rainfall: monomodal, 1,000-1,500mm
Temperature range: 10-30°c
Altitude: 500-2,300m
Environmental issues: Mount Livingstone Forests
Sumbawanga Rufiji
Districts covered: Sumbawanga and Nkasi Districts
Total area (ha): 1,738,460
Total arable land (ha): 972,020
Total cultivated area (ha): 460,046
Population: 536,528
Population density (per km2): 31
Population growth rate: 4.0%
Land under existing or planned irrigation schemes (ha):
56,300
Major commodities: maize, sunflower, pulses, horticulture,
paddy, citrus, banana, cattle, goats, pigs, poultry
Annual rainfall: monomodal, 600-1,200mm
Temperature range: 10-29°c
Altitude: 800-2,300m
Environmental issues: Uwanda Game Reserve,
deforestation, soil erosion
Districts covered: Rufiji District
Total area (ha): 666,950
Total arable land (ha): 241,215
Total cultivated area (ha): n.a.
Population: 117,853
Population density (per km2): 18
Population growth rate: 1.9%
Land under existing or planned irrigation schemes (ha):
41,350
Major commodities: maize, paddy, sugar, citrus, cashew,
legumes
Annual rainfall: bimodal 800-1,200mm, seasonal flooding
Temperature range: 18-35°c
Altitude: <500m
Environmental issues: Selous Game Reserve, wetlands,
seasonal flooding, deforestation
Sources: Regional DADPs, Ministry of Agriculture Food Security and Cooperatives, SAGCOT technical team estimates

37 Southern Agricultural Growth Corridor of Tanzania
Figure 6.1 Outgrower irrigated farm blocks connected to water and power supply

Linking smallholders
Smallholder support programmes in Tanzania
have had limited sustainable impact. While there
are examples of successful crop-specific projects,
they are usually limited in scope and often prove
to be unsustainable when initial funding runs out.
As recognised in Kilimo Kwanza, new models for
agricultural growth are required, where farming is
seen as a business and smallholders are provided
with opportunities to sell profitably into regional
and international markets. One of the best ways
of achieving this transformation – an essential
part of Tanzania’s Green Revolution – is to forge
greater linkages between modern agribusinesses and
smallholder farmers and their communities. Too often
in the past the ‘large-scale’ and ‘smallholder’ farming
sectors have been viewed independently of each other
– this must change.
There are proven models for integrating large-scale
and smallholder farmers with mutual benefits.
These models could be promoted within agricultural
growth clusters along the southern corridor. For
example, the nucleus farm hub and outgrower model
allows smallholder and emergent farmers (including
through farmer associations) to benefit from access to
infrastructure, including irrigation, lower cost inputs,
processing and storage facilities, finance and markets.
Adjacent villages can be linked to water and power
supply at low marginal cost. In cases where nucleus
farm and outgrower schemes incorporate communityowned
land on a leasehold basis, local residents can
be given an equity share in the farming business
as well as access to low-cost irrigation. Likewise,
farmer producer associations could be integrated
into commercial value chains through outgrower or
contract farming models.
For an example of a joint venture
between a nucleus farming
business and local residents, see
the Chiansi Smallholder Irrigation
Project in Zambia, developed by
InfraCo (www.infraco.com).
Typical capital cost for medium-sized
farm (per hectare):
• Off-farm infrastructure: US$4–6,000
• Off-farm irrigation: US$3–4,000
• Off-farm costs: US$4–6,000
© AgDevCo
There are proven models for integrating
large-scale and smallholder farmers with
mutual benefits.
38 Southern Agricultural Growth Corridor of Tanzania
SAGCOT will create opportunities for emergent
and smallholder farmers in multiple ways, with
major social and economic benefits:
• Firstly, by catalysing private investment
for nucleus farms with irrigated outgrower
schemes, over 22,000 emergent farmers on
plots of five hectares or more will be able
to achieve full commercial yields. They will
also have access through the nucleus farm to
modern farming inputs on credit, low-cost
irrigation, value-adding services and a reliable
market.
• Secondly, 75,000 smallholder farmers operating
under rain-fed conditions in a wide area around
the nucleus farms as independent farmers,
or through aggregated producer association
models, will gain improved access to finance,
insurance, inputs and markets. Yields will not
be as high as emergent farmers with access
to irrigation which makes double cropping
possible, but improvements from better seeds
and fertiliser will nonetheless be significant.
• Thirdly, investment in agriculture-supporting
infrastructure such as storage and processing
facilities, agri-services centres and logistics hubs
will allow those emergent and smallholder
farmers who are not linked to a nucleus farm to
add value to their crops and reduce the costs of
reaching end-markets.
• Fourthly, by providing focal points for
improved livestock production through better
access to improved breeds through artificial
insemination and stud services, better feed and
feeding systems, improved range management
techniques, professional veterinary services and
markets.
• Finally, by stimulating national commercial
agricultural growth, SAGCOT will contribute
to the overall economy. This will feed into
economic benefits for the whole population, and
to some extent to poverty reduction.
Box 11: Wider benefits for surrounding farmers
As well as offering irrigation to adjacent
farmers, the nucleus farm can act as a hub
for providing services and market access
for smallholder farmers in a wide radius,
typically 25 kilometres. This may be a
classic outgrower contract where the hub
provides inputs on credit and acts as a
guaranteed buyer of smallholder production
for an agreed price. More innovative
services include micro credit and weather
insurance (or together – ‘microinsurance’).
Microinsurance is a service that
incorporates a range of insurance products
to mitigate the risk exposure of smallholder
farmers. It is designed specifically
for smallholder farmers in its pricing,
contracting, distribution and benchmarking.
By reducing their exposure to these risks,
smallholder farmers increase the security of their own livelihoods, but also decrease their risk profile to providers of
finance, therefore increasing their ability to finance profitable investment opportunities. Access to affordable finance
has enabled smallholders to purchase drought-resistant seed and fertilisers. In pilots in India and Malawi, this has
produced dramatic increases in yield, often well over 300 per cent, and enabled farmers to bring additional land
under cultivation, invest in irrigation schemes and diversify away from food staples into cash crops.
Figure 6.2 Nucleus farm hub and benefits for
surrounding community
© AgDevCo
39 Southern Agricultural Growth Corridor of Tanzania
Realising the vision of a profitable, sociallyresponsible
and environmentally-sensitive agriculture
sector in the southern corridor will require bold
new approaches and sustained commitment from
all involved. The government and its development
partners will need to invest heavily in rural
infrastructure and improve the policy environment.
The private sector will need to engage more effectively
with public authorities and farmers’ associations if it
wants to access new sources of finance. On both sides
there must be improved trust and a more positive
approach in working together towards a shared goal.
Words will need to be backed up by concrete actions
and substantial resource commitments.
This section describes what SAGCOT will do
differently to achieve that vision. Firstly, it
will seek a tripartite agreement between the
government, the private sector and development
partners on a coordinated programme of
investment and policy reform to accelerate
development of commercial agriculture (small-,
medium- and large-scale) in SAGCOT. Secondly
it will establish a non-aligned and private sector
led organisation – the SAGCOT Partnership
– to represent farmers, improve coordination,
monitor progress and report on successes and
problems implementing the agreement. Thirdly,
it will establish new government and donorfunded
innovative financing mechanisms aimed
at catalysing additional private investment in
SAGCOT in ways that ensure that major benefits
accrue to smallholder farmers and are consistent
with the agreement referred to above.
Tripartite agreement
A tripartite agreement would involve a written
declaration by all public and private sector partners,
including local authorities and state-owned
enterprises, to the following principles6:
6 The wording of the tripartite agreement to be agreed by SAGCOT partners.
Making it happen
i) Agreement to work together to promote
commercial (small-, medium- and large-scale)
agriculture in the southern corridor, with
the ambition of establishing Tanzania as an
internationally competitive agricultural producer.
ii) Agreement to address key policy and
infrastructure constraints which hinder
commercial agriculture development, including
improved land use and tenure arrangements, and
wider consultation with the private sector on
policies which restrict trade (e.g. export bans).
iii) Agreement to mobilise financial resources,
including from within existing budgetary
allocations (such as ASDP and existing
development partner budgets) and from future
sources (e.g. CAADP) to support SAGCOT’s
implementation.
SAGCOT Partnership
The SAGCOT Partnership, whose purpose is to
promote a successful and vibrant commercial
agriculture sector, will monitor progress and publish
annual performance reviews. Other activities to be
undertaken by the Partnership would include:
• Facilitating improved communication and trust
between the private sector, the government and
other stakeholders. For example, expansion of
the Commodity Investment Planning system to
access ASDP funds through the DADPs, and
improving collaboration between the public and
private sectors in the implementation of irrigation
improvement plans under ASDP.
• Encouraging improved coordination of
government and donor programmes in the
agriculture sector. The Partnership will focus
on priority areas and needs, for example the
Words will need to be backed up
by concrete actions and substantial
resource commitments.
40 Southern Agricultural Growth Corridor of Tanzania
order for it to conduct its own affairs independently
and in particular be able to source and receive funds
from the public and private sector to support its
work in developing SAGCOT. Appendix I describes
the current status of the TAGT and Secretariat and
sets out a timeline for their establishment.
Innovative financing facilities
Achieving SAGCOT’s aims will require heavy
investment by the private sector. As described in
earlier sections, private investment has been low in the
past because of the high costs and risks of investing in
commercial agriculture at its ‘infant industry’ stage.
The high costs of connecting agricultural land to
the backbone infrastructure cannot in most cases
be absorbed by a medium-sized farming business,
let alone by smallholder farmers. For example,
installing an electricity line in Tanzania can cost
over US$20,000 per kilometre. These ‘last mile’
infrastructure costs put Tanzanian farmers at a
disadvantage to international competitors, in countries
where there has often been significant public sector
investment and subsidy for rural infrastructure.
Similarly, the establishment costs of an outgrower
programme, especially involving the provision
of infrastructure services to smallholder farmer
organisations, can be prohibitive without access to
concessional funding. The result is that very few of
the nucleus farm and outgrower models described in
Section 6 get off the ground.
If the early-stage costs and risks of investing in
agriculture can be reduced, agriculture in the
southern corridor can be internationally competitive
and profitable. As the rural infrastructure platform
strengthens, farmers and workers gain experience
in commercial agriculture, and the benefits of scale
economies start to drive down costs. The returns on
investment start to become more attractive to private
investors. The challenge for the government and the
international community is how to get the process
started. What is the best way to deploy public and
donor resources in ways that will be catalytic and
induce much higher levels of private investment from
local and international sources, leading to rapid
agricultural growth?
provision of finance to high potential agriculture
areas. The Partnership will help mobilise a range of
funds either specifically targeted at SAGCOT and/
or for broader use across Tanzania. It will also lobby
for additional resources for commercial agriculture.
• Commissioning targeted applied research in
priority areas identified by its members – for
example on the impact of export bans, market
perceptions of the role of the new crops board,
or the need for a detailed land mapping survey or
improved land-use planning – and lobbying the
government and development partners to make
appropriate changes.
• Making available information on investment
opportunities and support programmes, including
innovative finance, to potential domestic and
international investors. Providing links for
value chain development ‘from field to plate’ by
maintaining contacts and networks throughout
the agricultural sector, and with public and private
sector organisations.
• Monitoring the business environment in each of the
regions where SAGCOT is operating.
• Monitoring the social and economic impacts of
SAGCOT and sharing findings.
Development partners have indicated a willingness
to provide funding to support the establishment of
the SAGCOT Secretariat and its operation during
the first three years. Beyond that time period the
level of donor support is likely to reduce as the
Partnership increases collection of membership
fees. The Secretariat will provide a professional
and institutionally-neutral platform for SAGCOT
planning, coordination and facilitation. The
SAGCOT Secretariat will become one part of a
newly established Tanzania Agricultural Growth
Trust (TAGT). The Trust will have legal status in
Private investment has been low
in the past because of the high
costs and risks of investing in
commercial agriculture at its
‘infant industry’ stage.
41 Southern Agricultural Growth Corridor of Tanzania
There are three types of innovative finance which
can help catalyse private investment into socially
responsible agriculture projects:
• Firstly, a catalytic fund will provide start-up
finance for agriculture businesses incorporating
smallholder farmers. Finance will be provided
as low-cost or interest-free loans, repayable as
soon as the business attracts private finance.
To ensure the businesses are professionally
managed and properly structured, the fund
manager will take an active role during the
start-up phase, working alongside entrepreneurs
on the ground and participating in all decision
making. The fund manager will also assist
businesses in accessing longer-term finance.
Separately, business development grants would
be available to smallholder farmers and farmer
associations to ensure a level playing field when
submitting funding applications to the fund.
7 Informa Agra, in the Wall Street Journal (October 2010)
Box 12: Availability of commercial finance
There are multiple market failures, not least poor infrastructure and economies of scale, that prevent
early-stage agriculture business from being able to attract finance on affordable terms. Commercial
finance for Tanzanian agribusiness is mainly restricted to large operators with established track records
who typically already have equity from international sponsors. Apart from exceptional cases, start-ups
and early-stage agriculture businesses operating above the microfinance level (i.e. those requiring more
than US$500,000 of finance) can rarely find debt and equity finance in the local capital markets. In all
cases working capital and trade finance is only available at high rates of interest (20 to 25 per cent)
on short tenors and with onerous collateral requirements, often more than 100 per cent of the local
value. Due to high perceived and actual risks, commercial banks in Tanzania require some form of loan
guarantee (e.g. through the PASS programme) in almost all situations where they lend to the agriculture
sector, regardless of the strength of the project.
There has been a lot of interest in the media about large sums being raised for investment in African
agriculture by ‘social impact’ investors. It is true that the volumes of funding are large – more than US$2 billion
according to a recent study7. Some of this funding will undoubtedly find its way into Tanzanian projects. Indeed
there are already investments by social impact investors (Capricorn and Norfund) in the southern corridor, e.g.
Kilombero Plantations. But in general, it appears unlikely that these investors will be willing to invest in startup
and early-stage businesses involving primary production because of the risks and costs described above.
In fact many of the private equity funds targeting African agriculture explicitly rule out investment in primary
production of food crops because it is perceived to be low return and high risk.
“Currently, there is a yawning gap in the financial system in that there does not exist a credit institution lending to
farmers who are establishing new ventures or those farmers who require long-term finance in order to expand their
acreage or to install machinery or equipment of a permanent or durable nature.” (Tanzania National Business Council)
• Secondly, patient capital is long-term, low-cost,
subordinated capital provided by donors and
invested in the early stages of private sector
agricultural ventures. It is used to finance the
cost of ‘last mile’ infrastructure (e.g. feeder roads
and irrigation connections to the farm gate)
required by African agricultural businesses and
smallholder farmer organisations. By reducing
the costs and risks of commercial farming,
patient capital has the effect of catalysing
additional commercial finance into businesses
which otherwise would not have been able
to obtain capital. For each US$10 dollars of
patient capital invested in the early stages of an
agricultural business, it should be possible to
attract US$100 dollars of commercial finance.
• Thirdly, an increase in the availability of loan
guarantees and currency risk instruments would
help to leverage capital from the domestic
banking sector into agriculture businesses.
42 Southern Agricultural Growth Corridor of Tanzania
Access by private businesses to innovative
finance must come with strong conditions. The
most important requirement is that smallholder
farmer and local community benefits are built
into the project from the outset. For example,
in the nucleus farm hub and outgrower model,
the charges for access to irrigation services for
smallholders should be set at much lower levels
than for the nucleus large-scale farm. Local
communities should gain access to infrastructure
services at low cost (e.g. for water and electricity)
or free of charge (e.g. feeder roads). There should
also be benefits for smallholder farmers in terms
of lower prices for inputs (e.g. seeds and fertiliser)
resulting from economies of scale, improved
opportunities for value addition (e.g. storage and
processing), and reliable access to markets (e.g. offtake
agreements).
Together the three innovative financing facilities
will catalyse large volumes of commercial debt
and equity into agriculture. As an illustration,
Figure 7.1 shows the sequencing of finance for a
typical medium-sized farming enterprise of 1,000
hectares including irrigated outgrower schemes and
requiring US$10 million of investment.
• In the project development (or start-up)
phase, catalytic funding is required for
activities such as developing a full business
plan, negotiating agreements with local
communities, obtaining appropriate land
rights, conducting social and environmental
surveys, and soil testing and land
preparation.
• At the end of the project development phase,
it should be possible to raise commercial
debt and equity finance for the construction
and operation phase. In many cases it will
be necessary to have access to patient capital
to fund the ‘last mile’ infrastructure to the
farm gate. Initial equity providers are likely
to be development finance institutions and
other ‘social impact’ investors. It is also likely
that commercial bank debt will need to be
supported by loan guarantees.
• Over time, once the business develops a
track record of success, patient capital and
local guarantees can be phased out. The
business should be able to refinance and
obtain capital for expansion through the
commercial markets.
Box 13: Innovative financing facilities:
governance arrangements
How can patient capital best be deployed? The best
approach is to create a public-private equity fund
in which donors (and private sector foundations
and social impact investors) fund a tranche of
patient capital and private investors fund a tranche
of private equity expected to generate commercial
returns. The low cost of the patient capital would
lever up private equity returns and the subordination
would reduce the risks. The fund would invest both
patient capital and private equity into a portfolio of
early-stage agriculture ventures. It will be essential
to get the governance arrangements right to
ensure that patient capital resources are applied
appropriately and professionally in ways that achieve
the objectives of funders.
Access by private businesses to
innovative finance must come
with strong conditions. The most
important requirement is that
smallholder farmer and local
community benefits are built into
the project.
43 Southern Agricultural Growth Corridor of Tanzania
Figure 7.1 Innovative finance (example of a medium-sized agribusiness)
© AgDevCo
1 5 10 15 20
Years
1
5
10
15
Investment (US$m)
1.
3.
4.
5.
6.
2.
Catalytic funds – for project development of early-stage agribusinesses
Patient capital – for “off-farm” infrastructure (e.g. feeder roads, small dams and electrification)
“Social impact” equity – for early-stage businesses
Commercial debt finance supported by guarantees – mainly for working capital
Commercial equity – for mature businesses
Commercial debt without guarantees – for mature businesses
Project cycle
Project
development Construction Operation
“There is still a big gap in attracting private sector
investment in agriculture… The government will
commit resources to the [SAGCOT] catalytic fund
and we are asking development partners to build it
into their plans.”
Prime Minister Mizengo Pinda
44 Southern Agricultural Growth Corridor of Tanzania
The tripartite agreement, the SAGCOT Partnership
and the innovative financing facilities described
above are essential to kick-start the agricultural
growth cycle and achieve the vision of a productive
and socially responsible agriculture sector in the
southern corridor. They should be implemented as
soon as possible.
Box 14: Links with other funding facilities
By helping entrepreneurs design and structure ‘bankable’ agriculture businesses, the catalytic fund will provide a pipeline
of investment opportunities to local and international investors. It will also complement existing government and donorbacked
financing initiatives in the agriculture sector.
The ASDP programme is successfully disbursing finance into public irrigation and infrastructure schemes at the district
level. It has so far failed to leverage significant private capital. The catalytic fund can help generate socially responsible
projects incorporating smallholder farmers which could leverage private finance alongside ASDP resources.
The US$25 million Danida-backed PASS facility provides local currency finance to early-stage agriculture businesses
with a sound business plan and competent management. The catalytic fund will help structure many more businesses that
could be eligible for local bank funding.
AGRA/Standard Banks’ and AGRA/NMB’s $25 million guarantee facility is intended to support established and
commercially viable agriculture businesses which incorporate smallholder farmers. The catalytic fund will help create a
pipeline of opportunities for Standard Bank and other international banks seeking to lend to the agriculture sector.
The US$5 million Africa Enterprise Challenge Fund (AECF) window for Tanzanian agribusiness is made available to
established agriculture businesses which are looking to expand their operations and incorporate smallholder farmers, and are
able to provide matching funding. The catalytic fund will help create more agriculture businesses that meet AECF’s criteria.
‘Traditional’ development partner and non-governmental organisation support programmes can help build smallholder
farmers’ capacity to participate in modern supply chains, for example through training and extension services, certification,
and institutional strengthening.
45 Southern Agricultural Growth Corridor of Tanzania
Fundamental to SAGCOT’s future success is a
policy and business environment which is supportive
of private investment in commercial agriculture.
As recognised in Kilimo Kwanza, progress needs
to be made in a number of areas, including land
legislation, agricultural tariffs and taxes, import
and export restrictions and access to utility services.
Tackling these constraints, and ensuring that reforms
are properly implemented on the ground, will
require strong political leadership with support from
agriculture sector lead ministries, local government
authorities and state-owned enterprises.
Priority actions to facilitate SAGCOT’s
implementation include:
• Firstly, improving national land use planning
and tenure arrangements by identifying land
belonging to government institutions that could
be used for agricultural production, streamlining
arrangements for granting secure land rights
to investors, and reforming the process which
enables local communities to use their land
as equity in joint ventures with investors.
• Secondly, increasing the long-term predictability
of government policy towards the private
8 Towards a Tanzanian Green Revolution: Policy Measures and Strategies,
Summary of the Reports of the TNBC Working Group, TNBC (2009)
Improving the policy environment
sector by maintaining open communication and
consulting widely on major policy decisions
which impact directly on commercial agriculture,
in particular trade restrictions, and the role of
the proposed national crops board.
• Thirdly, catalysing increased private sector
investment into agriculture by making
government and development partner resources
more accessible, for example through opening
up ASDP at the local authority level, and by
making a government contribution to the
catalytic fund (e.g. using CAADP resources).
• Fourthly, undertaking a comprehensive review
of agricultural taxation, which is considered by
the Tanzanian National Business Council to be
the most taxed sector in the country.
• Fifthly, improving access to utility services
including electricity connections.
It is promising that some of these issues – along
with others on improving processes for business
registration and permits, simplifying labour laws,
facilitating access to credit and enforcing contracts
– have already been identified in the government’s
Roadmap to Improve the Business Climate (2010).
The challenge now is for implementation.
Box 15: Recommendations on agricultural taxation reform from TNBC8
• The current 5 per cent produce cess be removed completely or should be equivalent to rates paid by
investors in other sectors,
• farmers should be granted a full tax exemption on the fuel used in the direct production of agricultural
products in order to provide the energy to power the transformation of the agricultural sector,
• VAT paid by smallholders such on cashew, cotton, coffee, etc, should be removed completely,
• grant a corporate tax holiday of five to ten years to all investment in the agricultural sector, including
agro-processing,
• exempt agriculture from payment of withholding tax on interest, dividends, management and
professional fees for five to ten years,
• exempt agriculture from stamp duties and pre-shipment inspection fees,
• remove the multiple levies charged by local governments in the fisheries sub-sector, and
• reduce the development levy in the agricultural sector from six per cent to one per cent, and social
security (NSSF) to five per cent.
46 Southern Agricultural Growth Corridor of Tanzania
Wise use of the environment is an essential part
of successful agriculture. Long-term benefits
from agricultural growth will be undermined if
the ecosystem and natural resources are not well
managed. SAGCOT will ensure that environmental
and social concerns are central to planning and
implementation. There are five main areas of
environmental focus important for SAGCOT
development: (i) competition for land use and
water, (ii) protected areas, (iii) improved soil and
water management, (iv) climate change, and (v)
environmental assessment.
Competition for land and water: Recent increases
in crop production in Tanzania have come more
from deforestation than from improved crop
yields. Similarly, livestock numbers have increased,
though there has been no broad-based increase in
productivity. Rangelands are becoming overgrazed
and access to dry-season water points increasingly
difficult for many livestock owners. Competition
for resources is already leading to conflict,
sometimes fatal, between farmers and livestock
owners. It is also leading to encroachment into
critical protected areas and fragile ecosystems.
Tanzania’s population is set to grow to over
100 million by 2050. This will put ever-greater
pressure on all natural resources, especially water
and land. It must be planned for and effectively
managed. Under increasing competition,
heightened risks of conflict and expanding
dangers of damage to crucial habitats and
ecosystems, there is an urgent need for scientific,
knowledge-based planning and effective control.
Environmental and climate change considerations
With population growth and extensive, lowyield
agricultural practices there is increasing
stress on ecologically sensitive areas. This is
particularly evident in the floodplain, in the
Kilombero cluster, and in the Usangu Flats, in
the Mbarali cluster. It is therefore critical that
future agricultural growth, especially irrigation
in wetland areas, is carefully planned and
implemented in an open and disciplined manner.
Protected Areas: There are several national
parks and game reserves, many forest reserves
and a Ramsar site (in Kilombero) within and
near to the clusters. SAGCOT will cooperate
with the different public and non-governmental
organisations involved in the management
and protection of the areas, including local
government authorities.
Improved soil and water management: SAGCOT
can help improve land use and soil and water
management practices in the clusters, for
example by promoting agro-forestry, soil
fertility management, water harvesting, moisture
conservation and low-tillage farming. Done
properly, this will have environmental benefits,
helping to reduce the current pressure on land
expansion, especially if linked to improved land
use planning and land administration.
Climate change: The impact of climate change in
Tanzania is uncertain. However, it is expected that
droughts and floods will occur more frequently.
Improved soil and water management and effective
organisation of local groups will help communities
respond and adapt. At the same time, strategies
are being developed to encourage a low-carbon
development path. This includes reduced deforestation
and carbon capture in soils, with potential for
communities to benefit from access to carbon credits.
There are several new initiatives working in this
Long-term benefits from agricultural
growth will be undermined if the
ecosystem and natural resources are
not well managed.
47 Southern Agricultural Growth Corridor of Tanzania
direction, including the World Economic Forum’s
‘Financing Sustainable Land Use Project’.
SAGCOT’s environmental responses: SAGCOT
investments will respect the provisions of the
Environmental Management Act of 2004 as
well as international guidelines. All investments
supported by SAGCOT will be required to
undertake thorough social and environmental
impact studies, as well as taking appropriate
actions to mitigate risks.
By promoting increased use of irrigation,
conservation farming techniques, improved seed
varieties and weather-index insurance, SAGCOT
will help farmers adapt to climate change.
Box 16: Environmental concerns
• Better public awareness of the issues
• Improved national and district land use planning
• Cultivation and land management techniques to
reduce runoff
• Identification of protected areas, forests, woodland
and important biodiversity areas
• Environmentally friendly infrastructure development
• Safe handling of agro-chemicals
• Sustainable use of water through realistic planning,
control and disciplined management
• Comprehensive human settlement planning
Box 17: Climate Change concerns
• Improved understanding of the possible changes and
impact
• Development of resilience to change – economic
diversity, stronger local organisations, improved
knowledge of options
• Development of adaptation strategies – drought
tolerant crops and livestock types, water harvesting
techniques, soil moisture retention, minimal tillage etc.
• Increased use of irrigation and drought insurance
• Lock into low-carbon emission production systems

49 Southern Agricultural Growth Corridor of Tanzania
The majority of the financial resources needed
to raise productivity along the southern corridor
will come from local and international investors.
However, private investment will not come in
sufficient volumes unless there is targeted and
coordinated public investment in agriculturesupporting
infrastructure. This section describes
the amounts and types of investment required to
transform agriculture in the southern corridor
into an internationally competitive sector with
major benefits for local communities and the
wider economy.
The investment cost for the six clusters presented
in this report is about US$3.4 billion – an average
of US$175 million or 1 per cent of Tanzania’s GDP
per year over 20 years9. Over three quarters of
this investment would be able to earn a financial
return, meaning that only US$650 million of grant
funding is required. The increased tax revenue from
commercial agriculture over the period would more
than off-set this initial public investment.
The result would be over 350,000 hectares under
commercial production by 2030, the majority of
which farmed by smallholder and emergent farmers.
Included within the total figure would be 215,000
hectares of irrigated farming, allowing year-round
production, of which more than half (111,000
hectares) would be farmed by emergent farmers,
while the remainder would be nucleus farms and
larger estates.
By 2030, the region would be producing an
additional 680,000 tonnes of field crops (maize,
soya and wheat), 630,000 tonnes of rice, 4.4
million tonnes of sugar cane, 3,500 tonnes of red
meat, and 32,000 tonnes of high value fruit and
9 Other costs associated with stimulating a productive agriculture sector
are not covered here – for example research and development or the cost
of extension programmes to reach smallholder farmers.

Investment plan and outputs
vegetables. This would achieve food security for
Tanzania and the wider region and allow up to
US$0.8 billion of crops to be exported annually to
global markets. The benefits would reach over 2.3
million people, as described in more detail in the
next section.
By 2030, the region would be
producing an additional 680,000
tonnes of field crops (maize, soya and
wheat), 630,000 tonnes of rice, 4.4
million tonnes of sugar cane, 3,500
tonnes of red meat, and 32,000 tonnes
of high value fruit and vegetables.
Figure 10.1 SAGCOT clusters development profile
400,000
300,000
200,000
100,000
0
400,000
300,000
200,000
100,000
0
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Kilombero Mbarali Ihemi
Ludewa Sumbawanga Rufiji
Large-scale irrigated Large-scale rain-fed
Smallholder irrigated Smallholder rain-fed
Total area (ha) Total area (ha)
Source: SAGCOT technical team projections
50 Southern Agricultural Growth Corridor of Tanzania
There are four main types of investment needed
to make the SAGCOT vision a reality. Illustrative
investment requirements over a twenty-year period
are provided on the following page. Of course this
is a hypothetical scenario since the key investment
decisions will be taken by the private sector.
While the backbone infrastructure in the
corridor is largely adequate to support an
increase in commercial agriculture, it will
require further significant investment including
the Port of Dar es Salaam, to enable it to
support the volume of increased activity
proposed for the next twenty years. US$650
million is needed to improve and extend the
main roads, electricity transmission lines and
the Tazara railway. These are public goods
which deliver wide benefits including beyond
the agriculture sector and justify public sector
investment. Funding could come through the
government budget and from international
agencies such as the World Bank and African
Development Bank, as well as development
partners in Asia.
Under current conditions in Tanzania,
much of the immediate upfront expenditure
required for new farming projects and
farm improvement lies in the ‘last mile’
infrastructure connections. This includes
the costs of bringing power, water and road
access to the farm gate. These are costs that
farmers in many parts of the world do not
have to incur because of more developed
and extensive public infrastructure systems.
Water-related investments include small dams
to hold water during the dry season, pump
systems and pipes. US$570 million will be
required to finance ‘last mile’ infrastructure.
With access to patient capital, the private
sector can manage the implementation of these
investments, which should provide a financial
return over the long-term.
Providing improved opportunities for valueaddition
and access to markets will require
investment in processing/milling facilities,
warehouses and cold storage, and both mediumsized
(10,000m2) and smaller (2,000m2) wholesale
markets. US$108 million will be needed for
marketing, storage and processing infrastructure.
In some cases this type of infrastructure will be
funded commercially. But in the early years there
is likely to be a need for patient capital to help the
private sector achieve economies of scale and to
ensure strong linkages to smallholder farmers.
A total of US$2.1 billion in ‘on-farm’ investment
can be made by the private sector. This will
include improved on-farm infrastructure such
as fences, water supplies and roads, and where
necessary, levelling and drainage for irrigation. All
farm investments require significant investment
in farming equipment, on-site storage/processing
and working capital. Depending on the type of
enterprise and technology, average costs for onfarm
irrigation can be US$2,500 to US$5,000 per
hectare. Of course improved ranching and rainfed
agricultural systems are less expensive.
The cumulative build-up of investment is shown in
Figure 10.2, which assumes that all of the ‘last mile’
infrastructure and agricultural infrastructure are
Figure 10.3 Total investment by source over
20 year period
Private investment
Patient capital
Public investment
$650
$677 $2,059
Figure 10.2 Total investment required
4,000
3,000
2,000
1,000
0,00
Investment ($million)
2015 2020 2025 2030
On-Farm Last Mile
Marketing, Storage and Processing Backbone Infrastructure
Source: SAGCOT technical team projections Source: SAGCOT technical team projections
51 Southern Agricultural Growth Corridor of Tanzania
funded by patient capital. This is a prudent assumption
because in reality it should be possible to finance some
of these types of infrastructure with fully commercial
capital. This level of investment would translate
into increased infrastructure, agriculture-supporting
infrastructure and new commercial production as
shown in the table above.
The projected increase in irrigated production is
ambitious, averaging 11,000 hectares installed
per year, from a very low base. Successful
implementation will require careful planning and
professional management, especially in terms
of hydrology, social factors and environmental
impact. A significant proportion of the development
could take place on areas currently identified as
suitable for irrigation under ASDP, including the
rehabilitation of existing public schemes.
As international comparators, Brazil increased its
irrigated land area from 800,000 hectares in 1970
to 3,500,000 hectares today – a rate of 67,500
hectares per year – although over a significantly
large land area. Vietnam showed a similar rate of
increase of irrigation during the 1990s and 2000s.
If Tanzania is to make rapid progress on irrigation
it will need to import skills and expertise from
countries such as Brazil and Vietnam, at the same
time as training local irrigation engineers.
Achieving these results will only be possible if the
government, local authorities and state-owned
enterprises commit to funding and delivering
the required infrastructure improvements, and
innovative finance can be made available in
sufficient quantities to the private sector to help
overcome barriers to entry in areas with poor
existing infrastructure and limited commercial
farming activity.
Irrigation potential
(cumulative)
2015 2020 2025 2030
Kilombero 6,150 22,900 36,900 44,300
Mbarali 6,800 16,850 24,250 34,300
Ihemi 7,650 12,800 16,550 20,600
Ludewa 1,850 8,050 22,900 37,450
Sumbawanga 1,250 9,400 27,950 47,700
Rufiji 4,000 18,150 24,150 39,650
Total 27,700 88,150 152,700 224,000
Source: SAGCOT technical team projections
Cluster
Backbone Last mile Marketing, storage and
processing
On-farm
Main
roads
(km)
Rail
spur
(km)
Power
transmission
(km)
Electricity
lines (km)
Roads
to farm
gates
(km)
Traders’
markets
(units)
Bulk
storage
(units)
Processing
mills (units)
Irrigated
production
(‘000 ha)
Other
production
(‘000 ha)
Kilombero 140 5 60 579 350 2 10 4 44.3 51.8
Mbarali 120 5 60 602 380 2 6 4 34.3 46.9
Ihemi 120 – 90 340 200 4 5 4 20.6 43.0
Ludewa 225 – 100 749 450 3 8 4 37.5 84.1
Sumbawanga 315 – 150 1,004 600 5 8 5 47.7 99.9
Rufiji 120 – 70 498 300 2 4 3 39.7 44.3
Total 1,040 10 530 3,772 2,280 18 41 24 224.0 370.0
Source: SAGCOT technical team projections
If Tanzania is to make rapid progress
on irrigation it will need to import
skills and expertise from countries
such as Brazil and Vietnam.
52 Southern Agricultural Growth Corridor of Tanzania
Box 18: SAGCOT investment – the first five years
Within the first five years of SAGCOT, public investment of US$445 million is required, mainly to improve the rural road
network. This funding, which will need to come through the national budget, will have to be disbursed promptly to help
bring down transport costs for commercial producers and allow smallholder farmers better access to markets.
In addition, almost US$100 million of patient capital is needed to kick-start commercial investment in nucleus farms and
outgrower schemes, and to support investment in storage, processing and marketing facilities. The proposed catalytic fund
can act as a temporary arrangement until permanent structures for a patient capital fund are put in place.
The specific funding requirements for each of the six clusters are presented in Appendix XI. Section 5 has indicative
investment requirements for Kilombero and Ihemi.
53 Southern Agricultural Growth Corridor of Tanzania
Kilombero
Ihemi
Sumbawanga
SAGCOT clusters
Ludewa
Rufiji
SAGCOT clusters
Mbarali
Figure 10.4 Cluster and corridor development profiles
100,000
80,000
60,000
40,000
20,000
0
100,000
80,000
60,000
40,000
20,000
0
100,000
80,000
60,000
40,000
20,000
0
400,000
300,000
200,000
100,000
0
100,000
80,000
60,000
40,000
20,000
0
100,000
80,000
60,000
40,000
20,000
0
400,000
300,000
200,000
100,000
0
100,000
80,000
60,000
40,000
20,000
0
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
Mixed farms Livestock ranches Rice farms
Sugar estates Citrus farms Banana plantations
Mixed farms Livestock ranches Rice farms
Sugar estates Citrus farms Banana plantations
Mixed farms Livestock ranches Rice farms
Sugar estates Citrus farms Banana plantations
Kilombero Mbarali Ihemi
Ludewa Sumbawanga Rufiji
Mixed farms Livestock ranches Rice farms
Sugar estates Citrus farms Banana plantations
Mixed farms Livestock ranches Rice farms
Sugar estates Citrus farms Banana plantations
Large-scale irrigated Large-scale rain-fed
Smallholder irrigated Smallholder rain-fed
Mixed farms Livestock ranches Rice farms
Sugar estates Citrus farms Banana plantations
Total area (ha) Total area (ha) Total area (ha)
Total area (ha)
Total area (ha) Total area (ha) Total area (ha) Total area (ha)
Source: SAGCOT technical team projections
54 Southern Agricultural Growth Corridor of Tanzania
Box 19: SAGCOT production and investment model
The projections presented in this report have been derived from an investment model for the six SAGCOT cluster regions.
It is supported by detailed baseline analyses of the cluster regions. The model considers six types of farming units, and
then estimates the number of units, and the rate at which these units can be developed, for each cluster. Figure 10.4
shows the build-up of the farming units within each cluster over the next 20 years. Estimates are then made of the
infrastructure (backbone, last mile, on-farm, and marketing, storage and processing) required to support the farming
projects, with costs associated per unit or per kilometre.
Consistent unit costs are applied to all investments, as are consistent operating profiles for each of the six farming units,
being developed using realistic benchmarks for yields, capital and operating costs, and selling prices. Each unit is forecast
to generate a commercial return on investment (IRR) of 15 to 25 per cent.
In reality, there will of course be a wide range of commercial farming and processing investments, with decisions made
by the private sector. The units used as ‘building blocks’ in the model are purely illustrative, while being grounded in
commercial reality and intend to reflect what typical investments might look like.
Farming unit Description Investment required
per unit ($ million)
Mixed farm – crops and
livestock
1,250 hectares of irrigated land, growing 100 hectares of
high value horticulture (excluding citrus and banana), with
1,150 hectares growing grains and pulses (excluding paddy),
of which 750 hectares is irrigated smallholder outgrowers. An
additional 400 hectares for 135 head of livestock, and capacity
for a further 1,000 hectares of rain-fed smallholder outgrowers
supplying the commercial farm hub.
$3.5
Livestock ranch 10,000 hectares of land for 3,000-3,500 head of livestock,
with 300 hectares of irrigated land growing animal feed (nonpaddy
grains and pulses), of which 100 hectares is smallholder
outgrowers.
$2.5
Rice farm 2,000 hectares of irrigated land growing paddy, of which 1,000
hectares is smallholder outgrowers.
$15.0
Sugar estate 10,000 hectares of irrigated land growing sugarcane, of which
2,750 hectares is smallholder outgrowers, and an additional
250 hectares of irrigated commercial land growing grains and
pulses (excluding paddy).
$20.0
Citrus farm 600 hectares of irrigated land growing citrus, of which 300
hectares is smallholder outgrowers.
$5.0
Banana plantation 150 hectares of irrigated land growing bananas, of which 50
hectares is smallholder outgrowers.
$0.5
More detail on the model and its outputs is available in Appendix IX.
55 Southern Agricultural Growth Corridor of Tanzania
The powerful potential for agriculture to reduce
poverty in rural areas is well known. Research
by the World Bank shows that economic growth
originating in the agricultural sector can increase
incomes for the poorest 40 per cent of the
population by a multiple of three times growth
originating in the rest of the economy10.
Growth of agricultural production will stimulate,
and be supported by, simultaneous growth of
agribusinesses along the whole value chain, in
transport services, input supply, development of
value-added processing, wholesale markets and
10 Ethan Ligon and Elisabeth Sadoulet, 2007, “Estimating the effects
of aggregate agricultural growth on the distribution of expenditures.”
Background paper for the 2008 World Development Review.
marketing services, agricultural credit and other
financial services. There is major potential to
generate significant off-farm employment and
incomes within the value chains as agricultural
production grows over time.
Social and economic benefits
Economic growth originating in
the agricultural sector can increase
incomes for the poorest 40 per cent
of the population by a multiple of
three times growth originating in the
rest of the economy.
Figure 11.2 Development benefits
140,000 on-farm employment opportunities
(including smallholder farmers)
120,000 employment opportunities in
agricultural processing
160,000 employment opportunities in the
wider agricultural value chain
1,900,000 additional beneficiaries from
employment in a household
2.3 million people impacted through employment
opportunities as direct or indirect beneficaries
Source: SAGCOT technical team projections
Figure 11.1 Expenditure gains induced by 1% GDP
growth in agriculture and non-agriculture (%)
Source: Ligon and Sadoulet 2007
Agriculture
8
6
4
2
0
-2
Lowest 2 3 4 5 6 7 8 9 Highest
Expenditure deciles
Nonagriculture
% expenditure gain
56 Southern Agricultural Growth Corridor of Tanzania
Box 20: Zambia case study
Through the 1990s, Zambia was a net importer of agricultural food crops, and there was very little growth in agricultural
production. Those large-scale farming businesses which were producing food and cash crops had great difficulty
accessing finance on commercial terms, as the risk involved in investment decisions was influenced heavily by uncertainty
over crop markets, brought about by government policies which held significant influence over input and output markets,
and over the import and export of food crops. As a result of the low incentives to produce, Zambia was importing maize
and protein meals from Zimbabwe, and wheat for bread from as far away as North and South America. With such low
production levels, there was little demand for additional services in the rest of the agricultural value chain.
In the early 2000s, Zambia benefitted from a strong increase in farming capability that migrated from Zimbabwe, bringing
with it expertise in both food and cash crop production, and an increased capacity to manage the inherent risks of
commercial agriculture. At the same time, the government encouraged its domestic financial sector to support agriculture,
and banks began to offer finance to farmers on more favourable commercial terms. The benefits of increased capability
in the agricultural sector and the more supportive approach towards agricultural finance filtered through to smallholder
farmers, who seized the increased opportunities to operate as both suppliers to the larger farms, and as emergent farmers
with direct access to markets. As production increased, particularly of cash crops, the ability to finance irrigation schemes
increased, allowing farmers to mitigate the risk of drought and guarantee improved yields under a double cropping regime.
Uncertainty within crop markets was reduced primarily through the establishment of the Zambian Commodity Exchange,
which allowed farmers and financiers to assess risk in crop markets more accurately, thus decreasing the risk in returns to
investment.
Zambia’s agriculture sector has grown significantly and gained momentum, and is now able not only to supply its own food
needs, but also to export to its neighbours. As finance has improved, it has found itself more able to produce to export
parity prices, rather than simply matching import parity prices. Export crops such as maize, cotton and tobacco are being
produced significantly by the burgeoning smallholder farmer sector, while exports of wheat, soya, horticulture, potatoes,
beef, dairy and poultry are produced primarily by the commercial sector. Across the value chain, service sectors have
grown to support the increased production, creating thousands of employment opportunities.
The benefits of SAGCOT will be shared
widely, reaching a large number of the rural
poulation in the southern corridor. US$3.4
billion of investment could generate annual
farming revenues of US$1.3 billion by 2030,
create employment opportunities for 420,000
people and lift 2.3 million people in rural areas
permanently out of poverty.
57 Southern Agricultural Growth Corridor of Tanzania
A number of investment opportunities have been
identified, each of which could be initiated in
the next few years (see Appendix X for details).
Most are within the proposed cluster areas. Some
are elsewhere in the corridor, where existing
infrastructure connections are reasonably good.
They range from livestock ranches to medium-size
mixed crop/livestock farms, to smallholder farmer
extension and marketing programmes. What is
common to all the opportunities is that they can be
delivered on a commercially sustainable basis and
involve significant benefits for smallholder farmers
and local communities. However, all must overcome
specific constraints before they can proceed.
The map below shows the location of these investment
opportunities and the table provides brief descriptions
of the projects, investments required and actions
needed. A number of these opportunities only require
access to catalytic funding and affordable working
capital. They show fully commercial returns but have
sponsors with limited track records and balance sheets.
Other opportunities require patient capital, access to
agriculture-supporting infrastructure as well as finance.
Early wins
Figure 12.1 SAGCOT ‘early win’ investment opportunities
Beef ranching and processing on 40,000ha. Improve beef and
dairy herds for emergent and smallholder farmers with use of
cross-breeding and introduction of specific breeds.
A seed potato growing and distribution operation on 200ha
nucleus farm to provide improved seed to 60,000 smallholder
farmers.
Improve 3,000ha central farm and storage to serve as nucleus
to surrounding area offering access to inputs, extension, crop
storage and marketing.
Avocado plantations and outgrower scheme. Could include
mangoes and macadamia.
Mixed vegetables and pulses production on 95ha for sale to
Sao Hill. Processing of crops, including dehydrated vegetables.
Anchoring soya production and extrusion in protein meals
and oils for both humans and livestock. Developing wheat
production and flour processing for commercial and
smallholder farmers.
Kwamsisi Estate farm hub on 7,300ha for grain storage,
marketing, seed production and processing, along with poultry
and beef production. Development and management of
community irrigated farming blocks.
Strengthen existing partner programmes aimed at agrodealers,
and input credit programmes with extension and
demonstration plots. Commercialising smallholder production
through conservation farming.
Improve management and reduce logistical costs, which will
improve yields and returns to smallholder outgrowers.
58 Southern Agricultural Growth Corridor of Tanzania
SAGCOT investment opportunities: summary
Project Type of project/ description Initial
Investment
required
Actions needed
Ruvu Beef Ranch
Coast
Beef ranching and processing programme
Redevelopment of 40,000 hectare government ranch
Cross-breeding and introduction of specific breeds to improve beef
herds for emergent and smallholder farmers
US$6.3m Need for finance/
rehabilitate infrastructure/
restock existing ranches/
Seed Potato
Mtanga Farm
Iringa
Seed potato growing and distribution operation on up to 100 hectare
nucleus farm and through outgrower programme to provide improved
seed to a market of over 100,000 smallholder farmers
Potential to develop farming blocks for emergent potato farmers
US$1.0m Need for finance/ technical
assistance/ research / build
infrastructure/ storage
Mbozi Farm
Centre
Mbeya
Large-scale farming with outgrowers
Improve 3,000 hectare farm and storage to serve as nucleus to
surrounding area, offering access to inputs, extension, crop storage,
processing and marketing
1,200 hectare commercial grain including seed maize and 600 hectare
of soya and seed legumes
Smallholder crops include maize, soya, sunflower, sesame and pulses
Benefits include increased yields, better varieties, technical advice and
extension, conservation farming, access to inputs, credit facilities, access
to market, better prices
Farm
equipment
(US$1.5m),
working
capital crops
(US$1.7m)
Need for finance/ mechanical
soya extrusion plant/ maize
mill/ smallholder inputs, access
to training and local market
Rungwe Avocado,
phase two
Mbeya
Avocado plantations and outgrower scheme
60 hectare nucleus avocado plantation supported by 140 hectare of
smallholder production under irrigation and a further 400 hectare of
smallholder outgrowers – benefits would include improved incomes
and reduced risks (through crop diversification) for large numbers of
smallholder farmers
Could include mango and macadamia, the latter ideal for smallholder
outgrowers, and longer-term establish a fully modernised pack house,
to export 4.2 million kg of avocados by year 10 of the plantation, graft
Hass avocado seedlings onto existing smallholder trees, and establish
extension services
Start up costs
US$4.2m
The cost of
establishing
avocado
plantations is
estimated at
US$612/ha.
Need for finance/ port
rehabilitation, roads,
electrification
Sao Hill Agro-
Industrial Park
Iringa
Smallholder vegetable production and processing
100 hectare mixed vegetables and pulses for sale to Sao Hill
Potential for a vegetable drying and storage facility, to be marketed in the
wet months (out of season), increasing revenues by 2.5 times
US$1.4m
capex plus
working capital
for 100 ha
vegetable farm
processing
facilities TBD
Need for finance/ unit utilising
steam and electricity for
vegetable hydration
Soya extrusion
and wheat mill
Iringa
Processing, storage and handling facilities
Soya production and extrusion in protein meals and oils both for human
and livestock use
Wheat production and flour processing broiler and pig production on
back of soya extrusion and establishment of stock-feed facilities
US$TBD Need for finance/ patient
capital to build processing
facility and allow for production
to be established/ experienced
management and ability to
work with outgrowers and
large-scale farms
Sasumua Seed
Kwamsisi Estate
Tanga
Seed production and livestock nucleus farm hub
7,295 hectares for grain storage, marketing, seed production and
processing along with poultry and beef
Development and management of community irrigated farming blocks,
sustainable water management strategy, controlling access to the value
chain to allow for better pricing and cash flow, expertise in modern
farming techniques, seed, inputs and equipment selection, demonstration
projects and seed multiplication
US$5.0m
equity and/or
medium term
debt
Need for finance/ outgrower
programme/ agro-processing
facilities/ storage and
distribution
59
Agro-dealer
extension
programme
Mbeya
Agro-dealer programme to support family sector commercialisation
Strengthen existing partner programmes aimed at agro-dealers and input
credit programmes with extension and demonstration plots, aligning with
AGRA’s agro-dealer development programme
Recruit and train local farmers to become agro-dealers servicing their
community – brings the benefit of utilising a person known in the local
community who can gradually build up an agro-dealership
US$0.6 million
start-up and
US$1 million
for input credit
finance
Need for input credit finance/
demonstration plots/extension
workers/transport equipment
Sugar outgrower
consolidation
Morogoro
Develop professional and organised smallholder outgrower programme
Improve management and reduce logistical costs, which will improve
yields and returns to outgrowers and form the basis for mill expansion
US$13.6m plus
working capital
to establish
1,000 ha of
outgrower
sugar
plantation
Need for finance/ farmer
to start outgrower nucleus/
extension services to organise
small farmers in economical
blocks
Project opportunities in unspecified locations
Banana plantation
Kilombero area
Large banana plantation with outgrowers
Developing 1,500 hectares of banana production, utilising existing largescale
farmers capable of developing and operating their own banana
plantations in association with packaging and processing centres and
which can provide technical and logistical support to linked large-scale
and smallholder outgrower estates
US$1.6m
for 200
hectares
Need for finance/electricity
and irrigation/ identify site
Citrus plantation
Kilombero area
Elevations 500–
700m
Citrus plantation capable of servicing export markets with outgrowers
Developing a 600 hectare citrus plantation and including at least 4 local
large-scale farmers as outgrowers on 50-100 hectares
The programme can be further enlarged by adding small farmer
outgrower programmes
US$5.7m plus
working capital
of US$5.2m
Need for finance/seedling
production/ identify site
Mango plantation
Kilombero area
Mango plantation under irrigation
Developing a 200 hectare mango plantation in well drained land, close to
a reliable water source
Should access to the Middle Eastern market be established, the 30,000
tonnes demand can absorb production from as much as 2,245 hectares
of land
US$2.3m Need for finance/irrigation and
electricity/ fruit fly monitoring
programme/ in depth market
study Middle Eastern, Pacific
Rim and European markets/
identify site
Rice value chain
enhancement
Kilombero and
Mbarali areas
Develop several 1,000 hectare nucleus estates capable of annual double
cropping, plus potential legumes
Significant potential to increase existing rice production particularly
focusing on those systems which currently benefit from irrigation. Upon
successful implementation, a viable rice industry can support an efficient
and economical infrastructure platform which in turn can support the
profitable cultivation of other crops
US$13.6m
(includes
US$3.5m for
dam)
Need for finance/land survey/
infrastructure support and
access to processing centre/
development of marketing
chain/ indentify site
Family sector
commercialisation
Farmer association support programme
Utilisation of dedicated field staff each focusing on small groups of
pre-selected farmers who are willing to assume joint responsibility for
input credit and who show interest in and aptitude for adoption of higher
yielding/multi-crop-based farming
Work with 4,800 farmers and deliver a US$180 premium for farmers
US$0.5m Need for finance/ supply of
willing farmers/ technical
staff/ indentify site
Allanblackia
farms
Develop a long-term sustainable and profitable allanblackia farming and
processing business, incorporating smallholder farmers.
Allanblackia is an African tree that bears fruits containing seeds rich in
oil. The oil can be used in a number of commercial food and non-food
applications. Potential market demand is >100,000 tonnes of oil. To fulfill
these requirements 8,000,000 trees need to be planted
Planting programmes are being set up to generate knowledge on yields,
profitability and environmental impact
TBD Need for land and
infrastructure (nurseries, tools,
etc) to set up demonstration
plots/ mobilise and train
farmers/ indentify site
Southern Agricultural Growth Corridor of Tanzania
60 Southern Agricultural Growth Corridor of Tanzania
For full details on all the investment opportunities
see Appendix X.
All of the opportunities highlighted here have
the potential to be commercially viable and to
deliver significant benefits for local communities.
Collectively these projects could form the basis of
new clusters of productive farming activity along
the southern corridor. But most of these investments
will not happen unless support is made available in
the form of catalytic funding, patient capital and
improved access to affordable working capital.
Box 21: Sasumua Holdings, irrigated food crop production
Sasumua Holdings is a Tanzanian-registered company which is engaged in agricultural development, with a mission
to become one of the region’s primary producers and processors of critical food crops. Kwamisisi is the first of
several large-scale commercial agriculture projects that Sasumua intends to develop. It is an existing farm with
secure title near Kwamsisi Village in Tanzania’s Tanga Region, approximately 125km north of Dar es Salaam, and
40km inland on the Mkata/Mkwaja Road.
Planned crops will include maize, sorghum, soya, sunflower and chickpeas, on 2,600 hectares with a minimum 400
hectares under irrigation. Trial planting has already commenced on 220 hectares with good yields. The site is also suitable
for livestock management of both cattle and poultry. The project will be structured as a commercial hub/outgrower model.
The aim will be to develop a fully productive mixed large-scale farm and incorporate smallholder farmers in production
and value creation through an outgrower scheme. The project will design, fund and implement the outgrower programme
for smallholders, constructing agro-processing facilities to add value to the commodities, and constructing a storage and
distribution centre in Mkata. There is potential to replicate the model elsewhere in the southern corridor.
The direct benefits for local villagers of Sasumua’s expansion programme will be the creation of approximately
550 on-farm jobs per year, 1,100 off-farm processing jobs, 1,650 jobs in the wider value chain, and 18,150 indirect
beneficiaries, offering services as an intermediary in the supply of inputs to the outgrower farmers, leveraging buying
power through large pre-contracted input volumes, offering competitive pricing, provision of a facility at Mkata to
provide fuel storage and distribution, banking facilities, bulk storage and distribution for both grains and processed
products, and wholesale storage and distribution for frozen farm products.
Box 22: Ruvu Beef Ranch
Ruvu ranch covers 44,000 ha and is located between Morogoro and Dar es Salaam. The government farm lacks
fencing and operates on a maintenance basis only. Income essentially covers basic operating costs. The ranch is understocked
with approximately 3,600 head and it is very low in breeding cows. The ranch purchases cattle form small
livestock farmers for fattening and slaughter. However, the slaughter weights are low indicating that either feedlots
operations are too expensive or the operation cannot support fattening. The ranch faces additional obstacles such
as outdated buildings, dilapidated fencing, no cold chain, reported disease, low HAACP awareness, lack of access to
finance, extensive use of the ranch by neighbouring cattle, and outdated slaughter methods.
The project intends to rehabilitate the infrastructure and restock the existing ranch to maximise its production potential.
Using cross-breeding and the introduction of specific breeds the project will improve the beef and dairy herds. By year
10 the ranch will have 13,000 head of livestock and the gross margin over gross sales will increase to over US$300
per head. Annually, the ranch will create approximately 2,200 on-farm jobs and 500 meat processing jobs. Initially the
project will require investment of US$6.3 million. Assuming professional management and with projected potential
growth in the beef markets, the development of demand for quality cuts in Tanzania and access to export markets, the
project shows a commercial rate of return.
61 Southern Agricultural Growth Corridor of Tanzania
By 2030, SAGCOT aims to have developed
agriculture and improved rural life in the southern
corridor. There will be a critical mass of efficient,
modern small-, medium- and large-scale farms and
ranches producing commodities at competitive
prices for local and international markets.
Natural resources will be used in a sustainable
manner and rural employment opportunities
will have increased. Farmers will be benefiting
from reasonably-priced inputs and effective
technical support through improved research and
development. There will be well-informed market
choices available to farmers, and affordable credit.
Rural infrastructure, especially all-weather roads,
electricity and water supplies, will be upgraded.
There will be a well-developed agro-industrial base,
and processing of commoditites to add value to
local production.
The rural economy will be based on an open,
knowledgeable, information-based agricultural
system, with access to the best possible technical
support and global markets. This will result in
local economic growth, the greater empowerment
and expansion of farmers’ associations (mobilising
significant numbers of smallholders), sustainable
management of the environment, increased rural
employment and reduced poverty.
Vision of success
MTERA
RESERVOIR
MTERA
RESERVOIR
Backbone infrastructure
$650 million investment in roads,
rail and electricity
Last mile infrastructure
$570 million in water, power and road
connections to the farm gate
Agriculture
infrastructure
$108 million in
marketing, storage
and processing
infrastructure
Employment
345,000 employment
opportunities generated for
farmers and in supply chain
Emergent farmers
22,200 farmers have access to modern
irrigation and inputs on plot sizes >5 ha
Smallholder farmers
75,000 rain-fed
outgrowers (on plots of
c. 1 ha) linked to markets
Private investment
$2.1 billion investment in
commercial farming and
processing units
Nucleus farms
188 nucleus farms with outgrower
schemes plus four livestock ranches
and four sugar estates
Exports
$0.8 billion per year by 2030
Figure 13.1 Vision of success

By modernising agriculture and ensuring the
benefits are widely shared, Tanzania can feed its
people and eliminate poverty. Within a generation,
it can become a major agricultural producer
selling surplus cereals, horticulture, livestock and
specialised cash crops to the rest of the world.
Building on Tanzanian strategies, SAGCOT is a
long-term initiative which can help achieve the
vast agricultural potential of the southern corridor
region. As lessons are learnt, the approach can be
replicated elsewhere in the country and extended
into other countries in the region.
The impacts of SAGCOT will be major increased
opportunities for smallholder farmers and
entrepreneurs in the supply chain to make reliable
incomes from agriculture, which could lift at least
two million people permanently out of poverty.
The constraints on commercial agriculture are
well-known. What SAGCOT offers is a new way
of bring together public and private sector actors
to achieve real and lasting change. The investment
blueprint makes concrete recommendations
on what needs to be done. The test now is the
commitment from all partners to see it through.
As next steps, two key actions are required in early
2011 to launch SAGCOT’s implementation:
• Firstly, establish the SAGCOT Partnership
organisation, supported by an independent and
professional Secretariat, to act as a neutral,
non-aligned coordinating body and focal point
for SAGCOT planning, implementation and
monitoring. The Partnership will be based on a
tripartite agreement between government, the
private sector and development partners setting
out roles and responsibilities.
• Secondly, launch the catalytic fund with financial
backing from the government and development
partners. As the first of the innovative financing
facilities, the catalytic fund will enable resources
to be channelled into early-stage investment
opportunities, including some of the ‘early wins’
identified in this report.
These actions will ensure that the momentum
behind SAGCOT continues to build into 2011 and
beyond, delivering a sustainable transformation of
the agricultural sector.

Conclusions and recommendations
63 Southern Agricultural Growth Corridor of Tanzania

The development of the SAGCOT Investment Blueprint was led by AgDevCo and
Prorustica, reporting to the Kilimo Kwanza Executive Committee.
About AgDevCo
AgDevCo believes that profitable agriculture with strong links to markets is the best route
out of poverty for the majority of Africa’s rural poor. AgDevCo is an agricultural project
development company operating in Sub-Saharan Africa. Acting as principal, it invests
‘social venture capital’ to create commercially viable agribusiness investment opportunities,
bringing them to the point where they can attract private investment from domestic and
overseas investors. AgDevCo exists by sale of its interest in projects when they reach
sufficient maturity, typically after three to five years. As a not-for-profit-distribution company,
all proceeds from sales are reinvested in new early-stage agricultural ventures in Africa.
Contact
Chris Isaac, Director Business Development
Tel: +44 20 7841 2822
cisaac@agdevco.com
About Prorustica
Prorustica is at the forefront of developing Public Private Partnerships (PPPs) in
agriculture. It works with leading agribusiness companies, governments and donors
who recognise that investment in agriculture requires new and innovative approaches.
Prorustica operates at the interface between public and private institutions providing
strategic guidance to the development of business and social development initiatives. As
a neutral ‘partnership broker’ it focuses on tested methods of value chain assessment,
to promote collaboration and coordination of public and private resources including
finance. The aim is to share risks, achieve more efficient uses of funds and fulfil shared
commercial and social objectives.
Contact
Patrick Guyver, Managing Director, Prorustica Ltd
Tel: +44 7796336595
info@prorustica.com
For more information: info@africacorridors.com

Kilimo Kwanza

Investment blueprint for Southern Agricultural Growth Corridor of Tanzania

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