Government Subsidized Fertilizer in Tanzania

Introduction

Tanzania, an agricultural powerhouse in East Africa ¹, has a long history of government intervention in the fertilizer sector. Recognizing the crucial role of fertilizers in boosting agricultural productivity and ensuring food security, the Tanzanian government has implemented various subsidy programs over the years. This report delves into the intricacies of government subsidized fertilizer in Tanzania, examining its costs, accessibility, associated regulations, benefits, and challenges.

Cost of Government Subsidized Fertilizer in Tanzania

The cost of government subsidized fertilizer in Tanzania has fluctuated over time, influenced by factors such as global market prices, government expenditure, and the specific subsidy program in place. In recent years, the government has made significant investments in the fertilizer subsidy scheme. In 2023, the government allocated over Sh250 billion (approximately US$\$107 million) to the program ². This substantial investment underscores the government’s commitment to supporting farmers and reducing the cost of food crop production. Under President Hassan’s tenure, the government has revitalised the Tanzania Fertiliser Company Limited (TFC) by injecting Sh116 billion in capital, enabling the firm to operate efficiently ².

Despite these efforts, the price of fertilizer remains a concern for many farmers. The global rise in fertilizer prices has significantly impacted Tanzania’s import bill, which surged by 155 percent between the 2020/21 and 2022/23 fiscal years ³. This price increase has affected both the supply and demand for fertilizers, making it more challenging for farmers to access this essential input.

Regional Context and the African Development Fund Grant

To put Tanzania’s fertilizer subsidy program into perspective, it’s helpful to examine the approaches taken by other countries in the region. In Malawi, for example, the government plans to spend about MK 142 billion (approx. USD 137.6 million) in 2022 under the Agricultural Input Program (AIP) to procure 250,000 metric tons of fertilizer ⁴. This program aims to reach the same number of farmers as in 2021.

Furthermore, the African Development Fund has approved a $\$20.2 million grant to raise food production in Malawi, with a portion of this funding allocated to procuring 70,000 tons of fertilizer to reach 300,000 farmers ⁴. These initiatives highlight the regional efforts to address fertilizer affordability and accessibility.

Key Insight: Balancing Investment and Affordability

The Tanzanian government’s substantial investment in fertilizer subsidies demonstrates its commitment to supporting farmers. However, the rising global fertilizer prices pose a challenge to the long-term sustainability of the subsidy program. The government needs to carefully balance its investment in subsidies with the need to ensure that fertilizer remains affordable for farmers in the face of these price pressures. This might involve exploring strategies to improve efficiency in fertilizer procurement and distribution, as well as promoting the use of alternative fertilizers or soil health management practices to reduce reliance on synthetic fertilizers.

Accessing Government Subsidized Fertilizer in Tanzania

To ensure that subsidized fertilizers reach the intended beneficiaries, the Tanzanian government has implemented various distribution mechanisms. One notable approach is the National Agricultural Input Voucher Scheme (NAIVS) ⁵. Under this scheme, eligible farmers register with local authorities to receive vouchers that can be redeemed for subsidized fertilizer at designated agro-dealers.

The NAIVS Registration Process

The registration process for the NAIVS typically involves the following steps:

1. Farmer Registration: Farmers register with ward and village executive officers, providing information about their farm size and the crops they cultivate ⁶.
2. Unique Number Generation: Once registered, the system generates a unique number for each farmer and sends it to their mobile phone via SMS ⁷.
3. Fertilizer Allocation: Based on the information provided during registration, farmers are allocated a specific number of subsidized fertilizer bags ⁷.
4. Redemption at Agro-dealers: Farmers can then use their unique number and identity card to claim subsidized fertilizer from nearby contracted and registered agro-dealers ⁷.
5. SMS Confirmation: The system sends an SMS notification to the farmer for each bag of fertilizer sold, confirming the transaction and preventing the use of others’ contact details to claim the subsidy ⁷.

While the NAIVS has been instrumental in improving access to subsidized fertilizer, challenges remain. Some farmers, particularly those in remote areas, may face difficulties in registering or accessing agro-dealers ⁵. Additionally, the effectiveness of the scheme has been hampered by issues such as elite capture, where influential individuals or groups disproportionately benefit from the subsidies ⁸.

The Role of Governments in Fertilizer Markets

It’s important to understand the broader context of government involvement in fertilizer markets. Governments often play a crucial role in ensuring fertilizer accessibility, especially for smallholder farmers who may face challenges in accessing or affording fertilizers at market prices ⁹. This involvement can take various forms, including direct subsidies, public procurement, and support for fertilizer distribution networks.

Policy Options for Fertilizer Access

The FAO’s policy report on fertilizer access in Tanzania provides valuable insights into policy options for ensuring affordable fertilizer access, even without subsidies ¹⁰. These options include measures to improve efficiency in the fertilizer supply chain, promote the use of alternative fertilizers, and strengthen soil health management practices.

Key Insight: Ensuring Equitable Distribution

While the NAIVS has improved fertilizer access, challenges like elite capture and limited access for remote farmers need to be addressed to ensure equitable distribution. Potential solutions include strengthening monitoring mechanisms to prevent fraud, increasing the number of agro-dealers in remote areas, and providing targeted support to vulnerable farmers.

Selling Government Subsidized Fertilizer in Tanzania

The sale of government subsidized fertilizer in Tanzania is primarily facilitated through a network of contracted agro-dealers ⁷. These agro-dealers play a crucial role in ensuring that fertilizers reach farmers in different regions. The government selects and registers importers and manufacturers who then work with agro-dealers to distribute and sell subsidized fertilizer at half the market price ⁷.

The government compensates the importers and manufacturers for the remaining cost, effectively subsidizing the fertilizer for farmers. This system aims to make fertilizer more affordable and accessible to smallholder farmers who often struggle to afford market prices.

Fiscal Burdens of Fertilizer Subsidies

It’s crucial to consider the fiscal implications of fertilizer subsidy programs. While these programs can provide significant benefits, they also place a burden on government budgets. A study examining fertilizer subsidy programs in various countries found that these subsidies can account for a substantial proportion of total government expenditure ¹¹. For example, in Bangladesh and Malawi, fertilizer subsidies accounted for a very large proportion of total government spending in 2011.

Historical Context of Fertilizer Subsidies in Tanzania

Tanzania has a long history of fertilizer subsidy programs, with varying approaches and levels of success. Previous programs, such as the universal fertilizer subsidy and the fertilizer transport subsidy, faced challenges such as elite capture, malpractices by agro-dealers, and limited capacity for timely fertilizer delivery ⁸. These experiences have informed the design and implementation of the current subsidy program.

Key Insight: The Role of Agro-dealers and Addressing Malpractices

Agro-dealers are essential for the success of the fertilizer subsidy program. However, malpractices such as selling subsidized fertilizer at full market price or diverting it for illegal export can undermine the program’s effectiveness. Measures to strengthen oversight and accountability in the agro-dealer network, such as regular inspections and stricter penalties for violations, are crucial to ensure that subsidized fertilizer reaches the intended beneficiaries.

Restrictions on the Sale of Government Subsidized Fertilizer in Tanzania

The sale of government subsidized fertilizer in Tanzania is subject to various regulations and restrictions. The Fertilizers Act of 2009 provides a framework for regulating the fertilizer sector, including importation, distribution, storage, and marketing ¹². This Act aims to ensure that farmers receive fertilizers of the required quality and prevent the sale of counterfeit products.

Under this Act, all fertilizers sold in Tanzania must be registered, packed, and labeled according to specific standards ¹². For example, labels must include information about the fertilizer’s nutrient content, manufacturer, and date of manufacture. Dealers in fertilizers must also be registered and possess a minimum level of knowledge about the products they sell. These measures help maintain quality control and protect farmers from substandard or counterfeit fertilizers.

Historical Perspective on Fertilizer Regulations

Historically, Tanzania’s approach to fertilizer regulation has evolved over time. Like many African countries after independence, Tanzania initially implemented a centrally controlled importation and distribution system with subsidized fertilizer prices ¹³. However, this system faced challenges such as poor quality control, delays, and shortages. Economic reforms in the late 1980s led to liberalization of the fertilizer market, with a greater role for the private sector.

Key Insight: Strengthening Regulatory Oversight

The Tanzania Fertilizer Regulatory Authority (TFRA) plays a crucial role in enforcing fertilizer regulations. However, the TFRA faces challenges in its capacity to conduct inspections and monitor the sale of fertilizers across the country ¹⁴. Increasing the TFRA’s capacity, through increased funding, staffing, and training, is essential to ensure compliance with regulations and prevent the sale of counterfeit products.

Benefits of Using Government Subsidized Fertilizer in Tanzania

The use of government subsidized fertilizer in Tanzania offers several potential benefits for farmers and the agricultural sector as a whole. One of the primary benefits is increased crop productivity ¹⁵. By making fertilizer more affordable, subsidies enable farmers to apply the necessary nutrients to their crops, leading to higher yields and improved harvests.

This increased productivity can contribute to enhanced food security by boosting the production of staple crops such as maize and rice ⁸. It can also lead to higher incomes for farmers, improving their livelihoods and contributing to poverty reduction.

Furthermore, fertilizer subsidies can encourage farmers to adopt improved farming practices and invest in their agricultural activities ¹⁶. This can lead to a more productive and sustainable agricultural sector, supporting economic growth and development.

Targeting Subsidies for Maximum Impact

To maximize the benefits of fertilizer subsidies, it’s crucial to target them effectively. Research suggests that subsidies deliver greater returns when directed to farmers who would not otherwise buy fertilizer ¹⁷. This approach helps to reduce the impact on commercial sales and ensures that subsidies reach those who need them most.

Fertilizer Distribution Systems in Tanzania

Over the years, Tanzania has employed various fertilizer distribution systems, each with its own characteristics and challenges. These include:

Distribution System	Time Period	Description	Key Features
Pan-territorial pricing	1970s	Subsidized fertilizer prices with transport cost subsidies for remote areas	Aimed to encourage production in remote areas and reduce regional income disparities
National Agricultural Input Voucher Scheme (NAIVS)	2009-present	Voucher-based system where farmers receive vouchers to redeem for subsidized fertilizer	Targets specific crops and regions, aims to improve efficiency and transparency
Credit system	2014/15	Distribution of inputs through farmer groups and cooperatives	Aimed to improve access to credit and inputs for farmers
Contract with companies	2016-2018	Government contracts with companies to sell subsidized fertilizer	Aimed to leverage private sector efficiency in fertilizer distribution

¹⁸

Key Insight: Promoting Sustainable Agricultural Intensification

Fertilizer subsidies can be a valuable tool for promoting sustainable agricultural intensification. By increasing fertilizer use, subsidies can encourage farmers to adopt improved farming practices, leading to higher yields and improved livelihoods. However, it’s essential to ensure that fertilizer use is balanced and does not lead to environmental damage.

Challenges Associated with the Use of Government Subsidized Fertilizer in Tanzania

While government subsidized fertilizer offers potential benefits, it also presents several challenges. One major concern is the fiscal cost of these programs ¹⁹. Subsidies can strain government budgets, potentially diverting resources from other essential sectors such as education and healthcare.

Another challenge is the risk of fertilizer overuse ¹⁹. When fertilizer is heavily subsidized, farmers may apply it excessively, leading to environmental problems such as soil degradation and water pollution. This can have long-term negative impacts on agricultural productivity and sustainability.

Furthermore, subsidy programs can be susceptible to inefficiencies and corruption ¹⁸. Leakages, where subsidized fertilizer is diverted from its intended beneficiaries, can occur, reducing the effectiveness of the program and undermining its goals.

Funding Source for Research on Fertilizer Subsidies

It’s important to acknowledge the funding source for research on the impact of fertilizer subsidies. The research cited in this report on the challenges associated with fertilizer subsidies in Tanzania was funded by the Ministry for Foreign Affairs of Finland ²⁰. This transparency helps to ensure the credibility and objectivity of the research findings.

Key Insight: Balancing Benefits and Environmental Impact

While fertilizer subsidies can boost agricultural productivity, it’s crucial to consider their potential environmental impact. Excessive fertilizer use can harm soil and water resources, undermining the long-term sustainability of agriculture. Strategies to promote balanced fertilizer use, such as soil testing, integrated nutrient management, and farmer education, are essential to mitigate these risks.

Government subsidized fertilizer has played a significant role in supporting agricultural development in Tanzania. By making fertilizer more affordable, these programs have the potential to increase crop productivity, enhance food security, and improve farmers’ livelihoods. However, challenges remain in ensuring the efficient and equitable distribution of subsidized fertilizer, managing the fiscal costs of these programs, and mitigating the risks of overuse and environmental damage.

Addressing these challenges requires a comprehensive approach that involves strengthening regulatory frameworks, improving transparency and accountability in subsidy programs, and promoting sustainable fertilizer use practices. By effectively managing these challenges, the Tanzanian government can maximize the benefits of fertilizer subsidies and ensure the long-term sustainability of its agricultural sector.

The Future of Fertilizer Subsidies in Tanzania

Looking ahead, the future of government subsidized fertilizer in Tanzania requires careful consideration. The challenges of fiscal sustainability, environmental concerns, and the need for balanced fertilizer use need to be addressed. The government should explore alternative approaches to support farmers and promote sustainable agriculture, such as investments in soil health, improved agricultural extension services, and the promotion of alternative fertilizers. Learning from the experiences of other countries in managing fertilizer subsidy programs can also provide valuable insights for Tanzania.

Ultimately, a sustainable approach to fertilizer use in Tanzania requires a balance between supporting farmers’ needs, ensuring economic viability, and protecting the environment. By carefully considering these factors, the Tanzanian government can develop policies and programs that promote a thriving and sustainable agricultural sector.

Works cited

1. SAGCOT – Africa’s success story [Tanzania] | CGIAR GENDER Impact Platform, accessed December 12, 2024, https://gender.cgiar.org/publications/sagcot-africas-success-story-tanzania

2. Government targets Sh1 trillion in fertiliser subsidy by 2025 – The Citizen Tanzania, accessed December 12, 2024, https://www.thecitizen.co.tz/tanzania/news/national/government-targets-sh1-trillion-in-fertiliser-subsidy-by-2025-4561378

3. Tanzania’s fertilizer import bill soars 155% amid global price rise | Milling Middle East & Africa Magazine, accessed December 12, 2024, https://www.millingmea.com/tanzanias-fertilizer-import-bill-soars-155-amid-global-price-rise/

4. agra – price & policy, accessed December 12, 2024, https://agra.org/wp-content/uploads/2022/08/Price-and-Policy-Monitor-July-edition-4.pdf

5. Political economy of agricultural input subsidies in Tanzania: Who benefitted from the National Input Voucher Scheme?, accessed December 12, 2024,