Investment blueprint for Southern Agricultural Growth Corridor of Tanzania

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

  1. Why invest in Tanzanian agriculture? 11
  2. Agricultural growth corridor approach 17
  3. What is the Southern Agricultural Growth Corridor? 21
  4. The Southern Agricultural Growth Corridor: current status of agriculture 27
  5. Cluster identification and development path 32
  6. Linking smallholders 37
  7. Making it happen 39
  8. Improving the policy environment 45
  9. Environmental and climate change considerations 46
  10. Investment plan and outputs 49
  11. Social and economic benefits 55
  12. Early wins 57
  13. Vision of success 61
  14. 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

  1. 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

  1. 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.

  1. 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.
  2. 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.
  3. 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

  1. 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.
  2. 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.
  3. Catalytic funds – for project development of early-stage agribusinesses
  4. Patient capital – for “off-farm” infrastructure (e.g. feeder roads, small dams and electrification)
  5. “Social impact” equity – for early-stage businesses
  6. Commercial debt finance supported by guarantees – mainly for working capital
  7. Commercial equity – for mature businesses
  8. 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)
  9. 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.
  10. 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.

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.
  8. 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.

  1. 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