European investors in dialoge with Minister of Agriculture

Since the installation of the new government, this was the first time such event took place. The Tanzania government is keen to attract foreign investment in the agriculture value chain and secure raw materials that will support the industrialization agenda. However, at the moment business climate is not attractive for foreign investment. This also is reflected in the doing business index by the World Bank where Tanzania is ranked 141 out of 190 globally. For this reason, the Tanzania government is actively reaching out to the business community with an intention of improving the business environment in Tanzania.

During his opening remarks, H.E Ambassador Jeroen Verheul emphasized on strengthening agriculture sector reforms to expand more access to market opportunities in the EU region. Looking at the figures, from 2017-2020, the agri-food exports for Tanzania to the EU showed a decline. Specific in 2019, a negative balance of 5.2% was recorded.

High cost of compliance coupled with unpredictability of business environment, policy and judiciary systems limits sustainable investment particularly in the agriculture sector. The ambassador encouraged the Government of Tanzania to continue putting more efforts in creating better business environment to re-gain investors’ confidence. The ambassador commended on the initiative taken by the government of Tanzania reaching out to the private sector. He emphasized, for a strong, robust and a sustainable agriculture sector, cooperation between public and private partnerships is key.

Agriculture productivity is also directly linked with other sectors of the economy. From the Household Budget Survey (HBS) data, the blue-collar workers spend more than half of their earnings on food, which affect their wage. As wage is an important factor in the industrial development bringing prices of food down while increase farmers income through productivity will increase the real wage for the industrial workers.

Part of reasons to low productivity is little investment in multiple areas along the agriculture value chains. This is why, the Ministry of Agriculture has prioritized investment in research, seed development, improving extension services, increase size of land for irrigation, strengthening markets for agricultural crops and improving access to inexpensive loans to address productivity. The Ministry of Agriculture is however yet to find the right recipe for sustainable synergy between the public and the private sector. The government focus on public driven investment approach, especially in the areas where the private sector has a comparative advantage, continues to constrict longer-term growth projections of the sector.

The experience shared by the investors during the dialogue sends out a loud and clear message that engagement of the private sector in the agriculture sector is essential for the development agenda. However, the strategy to promote the private sector has been undermined by the government's erratic regulatory changes and abrupt increases in business taxes.

The EUBG chairperson recommended area of improvement to promote private sector investment in agriculture. The areas include removal of trade restrictions and improving the regulatory environment for agricultural input markets. In addition, addressing issues related to access to land for investors through establishing the land banks. Notably, the land banks should not only focus on the size and location that government wants to promote, but also take into account criteria investors are looking for including proximity to power, road network, availability of labor, quality of soils, rainfall pattern and terrain. Ability to renew land lease is also crucial in realizing and attracting new investors. For instance, the investors will not invest in a farm if there is only 5-10 year remaining on Certificate of Occupancy without assurance that the Certificate will be renewed or extended.

This event was a good start to set a stage for open and candid discussion on business environment between the EU Investors and the Ministry of Agriculture. It was clear for the private sector to flourish the facilitative role from the government should be effective and efficiently placed and balanced while implementing the legal regulatory functions. Remarkably, despite the challenges, investors still gave commitment to continue with investment while the government is following up on improving the business environment. The future seems to be bright!