STATEMENT BY AMBASSADOR OMBENI SEFUE, CHIEF SECRETARY OF THE GOVERNMENT OF THE UNITED REPUBLIC OF TANZANIA, AT THE PARTNERSHIP TO CUT HUNGER AND POVERTY IN AFRICA FORUM ON EMPOWERING AFRICAS FUTURE: BUILDING INFRASTRUCTURE AND AGRIBUSINESS THROUGH PUBLIC-PRIVATE PARTNERSHIPS WASHINGTON, D.C.,OCTOBER 6-7, 2014


Goals of the Country

The development aspirations of Tanzania are encapsulated in the Development Vision 2025, which with regard to agriculture anticipates that by that year, “The economy will have been transformed from a low productivity agricultural economy to a semi-industrialized one led by modernized and highly productive agricultural activities which are effectively integrated and buttressed by supportive industrial and service activities in the rural and urban sectors.”

 

In other words, agriculture needs to be transformed from a low productivity and inefficient subsistence activity to a more productive and efficient business undertaking.

 

In Tanzania this renewed focus on transforming agriculture is encapsulated in the Kilimo Kwanza (Agriculture First) initiative, within the broader Comprehensive African Agricultural Development Program.

 

Where Does Infrastructure fit in

 

This transformation cannot happen without an efficient transport infrastructure upon which market forces rely to get inputs to farmers and produce to markets efficiently; it cannot happen without irrigation infrastructure to solve the climate change induced unpredictability of rain; it cannot happen without investment in a network of warehouse infrastructure to reduce post-harvest losses and price volatility; and it cannot happen without electricity infrastructure to support agro-processing and value addition; etc.

 

In other words, in Tanzania and elsewhere in Africa, it is impossible to transform agriculture without heavy investments in infrastructure that would link the rural, urban and export sectors and generally create a more enabling investment climate for rural agriculture, and market efficiencies.

 

The only problem is that infrastructure is very expensive to build and maintain, especially for a country the size of Tanzania, with about 365,000 square miles, a population density of only 52 people per square kilometer and a road network of 91,049 km.

 

Recognizing that poor infrastructure was a critical barrier to accelerating growth and poverty reduction, the Commission for Africa (Blair Commission) in its 2005 report decried the fact that despite the clear benefits of investing in infrastructure, African governments and development partners sharply reduced, over the 1990s, the share of resources allocated to infrastructure and the hope that the private sector would take up the slack never materialized.

 

Hence, the Commission determined and recommended that Africa needed an additional US $ 20 billion a year investment in infrastructure, including investments that support the growth of agriculture and related agribusiness, such as rural feeder roads and irrigation, as well as electric power, ports and regional infrastructure.

 

Since then a number of African governments, including Tanzania, have deployed more of their own domestic revenues to building, upgrading and maintaining infrastructure, including rural roads and rural electrification. International and regional financial institutions such as the World Bank and the African Development Bank, European Investment Bank and several bilateral partners, in our case the United States, Japan, Korea, and China have stepped up support to infrastructure, specifically targeting to unlock growth in the agricultural sector.

 

Yet, the needs for investment in infrastructure, including agriculture related infrastructure, far outweigh what the African governments in partnership with development partners and ADB have managed to mobilize, hence the need to invite private sector participation through more innovative ways.

 

Tanzania is one of the four countries included in President Obama’s initiative to accelerate and sustain broad-based economic growth through the Partnership for Growth. In 2011, the two countries formed a joint team to do a Growth Diagnostic (also known as Constraints Analysis). The analysis, among other things, determined that “…the poor quality of rural roads connecting high production agricultural areas to markets poses a binding constraint to growth.” The following three benchmarked road indicators from the report, comparing Tanzania with average low-income countries (LIC), illustrate the magnitude of the problem:

 

Indicator

Unit

LIC

Tanzania

Paved Road Density

Km/1000 km2 of arable land

86.6

47.1

Unpaved Road Density

Km/1000 km2 of arable land

504.7

482.6

Rural Accessibility

% of rural population within 2 kmof all-season road

21.7

24

 

The report concludes that, “The primary challenge for Tanzania has been in extending the reliable road networks to rural areas.”

 

Tanzania therefore has an ambitious program to pave all of the country’s main trunk roads by 2018, as well as increase the reliability of most secondary road networks. And it is highly unlikely that any of them can be “white elephants.” Tanzania has among the highest road traffic among low-income countries. The constraints analysis showed that average annual daily traffic in Tanzania’s paved roads is 1,797 against an LIC average of 1,049.6 and 99.8 average annual daily traffic on unpaved roads against an LIC average of only 62.6. And our experience is that every time a road is built, traffic increased significantly and economic activities in the relevant areas picked up rapidly.

 

Another important statistic is that only 10 percent of roads managed by the central government are in poor condition compared to 47 per cent for the roads under local government.  Less than one percent of the country’s 75,871 km of rural roads are currently paved or treated for all weather access. Yet, it is the rural roads under local governments that provide market access to the agricultural sector.

 

The large geographic size of Tanzania, and the fact that some of the most productive agricultural areas are in remote parts of the country imposes a huge marketing cost.  A World Bank study from 2009 showed that transportation costs in Tanzania account for 83 percent of total marketing costs for maize, and are higher than in Kenya or Uganda because maize in Tanzania must travel 461 kilometers to reach a wholesale market compared to 373 km in Kenya and 133 km in Uganda.

 

What has been done to improve PPP for Agricultural Infrastructure?

 

Realizing that the magnitude of the financing needed to address the infrastructural challenges that hold back agricultural development is beyond the capacity of government and development partners, the government has put in place policies and legislation, as well as regulations, to provide space for private sector participation thought Public Private Partnerships. We are now working to create a PPP facilitation fund, as well as establish a PPP Center under the Prime Minister’s Office to promote and facilitate PPP projects. Among the first PPP projects will be large infrastructure projects, including the Dar es Salaam – Chalinze expressway, as well as electricitygeneration and transmission.

 

One of the most promising PPP projects in the agricultural sector is the Southern Agricultural Growth Corridor of Tanzania (SAGCOT). You will hear more about it this afternoon when the SAGCOT CEO will make a presentation on it. Suffice to say here that one of the most important aspects of SAGCOT is that it brings together the Tanzania government, several development partners and international financial institutions, including the World Bank, as well as the private sector, to unlock the agricultural potential of one of the most rich agricultural lands in Tanzania.

 

This model involves having a few private large-scale nucleusfarms with contractual relationships with small out growers,extending tothem needed infrastructural, technical and extension services. We have begun negotiations with the US government on a program that could see reliable roads built to link this very productive region to markets. One of the most successful projects within the SAGCOT is the Kilombero Plantations Ltd where the large scale farmer has helped the small scale rice out growers to increase their yield from 1-2 tons per hectare to 6-7 tons, a yield exceeding even that of the large scale nucleus farm.

 

Challenges

 

We nonetheless have a lot of challenges to deal with. Rural roads and rural electrification do not always appear attractive to the private sector. Even the successful KPL project was made possible only through a significant grant element. So once the model has been tested and validated it is important to have significant escalation of development partner support to minimize risk and address some of the most pressing obstacles. It is therefore important that the private sector receive early support from governments and multilateral financial institutions, by proving guarantees, instilling confidence and supplying technical assistance and analytical services. This helps to reduce capital costs as well as the risk element in such PPP projects in the rural sector.