Southern Highlands Food Systems Project.
Tanzania.
URT 132 & 133 – Tanzania, Southern
Highlands Food Systems
An analysis of the Edible Oils Value Chain
Draft Final Report
November 2012
1
Table of Contents
Contents
Table of Contents ............................................................................................................................... 2
Executive Summary ........................................................................................................................... 4
Acronyms ............................................................................................................................................ 6
List of Acronyms ................................................................................................................................. 6
1. Introduction ...................................................................................................................................... 8
1.1 Background of the Study & Objectives ..................................................................................... 8
1.2 Methodology .............................................................................................................................. 9
1.3 Brief Overview of the Sunflower Value Chain. ......................................................................... 9
1.4 Other Oil Seed Crops ............................................................................................................... 10
2. End-markets ................................................................................................................................... 12
2.1 Total world production and main producers of oilseeds. ............................................. 12
2.2 National Market for the Sunflower Oilseeds .......................................................................... 13
2.3 Export and Import of Sunflower Oilseed Products .................................................................. 14
2.4 Price Patterns in Urban Markets .............................................................................................. 15
2.5 Sunflower cake (Mashudu). ..................................................................................................... 16
3. The Sunflower Value Chain ........................................................................................................... 16
3.1 The Value Chain Map .............................................................................................................. 16
3.2 Value Chain Governance....................................................................................................... 20
3.3 Technology Generation ............................................................................................................ 21
3.4 Input Supply & Demand .......................................................................................................... 22
3.5 Production ................................................................................................................................ 25
3.6 Processing ................................................................................................................................ 28
3.7 Wholesale & Retail Distribution .............................................................................................. 29
4. Systemic Constraints and Upgrading Opportunities ...................................................................... 29
4.1 Constraints Related to Business Enabling Environment.......................................................... 29
4.2 SWOT Analyses of the Value Chain. ...................................................................................... 30
5. Vision and Strategy for Improved Competitiveness and Growth .................................................. 31
5.1 Vision ....................................................................................................................................... 31
5.2 Strategic Issues Synthesis ........................................................................................................ 31
5.3 Value Chain Competitiveness Strategy.................................................................................... 35
5.4 Proposed Strategy Components ............................................................................................... 35
2
List of Tables.
Table 1: Regional background for soya.
Table 2: Sunflower seed production (thousand tons)
Table 3: Sunflower seed oil global production (thousand tons)
Table 4 Edible oil imports 2001 to 2006
Table 5 Summary of Trade Statistics of Sunflower Oilseed Products (2001 - 2006)
Table 6 Tanzania Sunflower imports and exports 2009
Table 7 Summary of Companies Dealing with Sunflower Products
Table 8: Functions and Actors in the sunflower value chain in the Southern Highlands.
Table 9 Banks operating in the Southern Highlands.
Table 10 Domestic Sunflower oil production in Tons.
Table 11. Sunflower Area ('000'ha) and Production ('000'tons) by Region by District and Year.
Table 12 Some Characteristics that favour competitiveness of small firms.
List of figures.
Figure 1: Simplified Sunflower Oilseed Value Chain
Figure 2 Characteristics of the Sunflower value chain
Annexes
Annex A: Sunflower Value Chain Map
Annex B: Persons met
Annex C: Economic calculations
C1: Indicative Added Values.
C2: Sunflower Crop Gross Margins.
C3. Processor Performance
Annex D: Stakeholder Analysis
E:Suggested Public Private P Commitments
Annex F: References
Annex G: Maps
3
Executive Summary
The assignment was undertaken in the context of two projects being implemented by FAO under
the umbrella of the Southern Highlands Food Systems (SHFS) Development Program. The SHFS
Development Program is comprised of two projects which were twinned together in 2010 for
improved implementation purposes: URT 132 “Food Systems Development in Tanzania” and URT
133 Advisory Services Capacity Development in Support of Food Security in the United Republic
of Tanzania
According to 2008 estimates, the production of oilseeds in Tanzania is mainly from ground nuts
(40%), sunflower (36%), sesame (15%), cotton (8%), and palm oil (1%). However, there is virtually
no oil produced commercially from sesame and groundnut1. Furthermore, oilseed production in the
Southern Highlands is predominantly sunflower and is increasing annually. As a result the report
focuses on the sunflower value chain. Sunflower is the fastest growing crop in Tanzania which
produces both edible oil and a high protein cake, as a residue from the extraction, which is used in
animal feed. Oil content varies according to variety and extraction process but is generally reckoned
to be about 35% with 65% cake.
The company CP Foods of Thailand has entered into a contract to establish an industrial scale
poultry production unit that will require up to 600 tons per month of high protein soya bean meal
plus 1200 tons of maize. This will provide a significant opportunity for farmers and processors to
engage in an alternative cash crop that will ideally fit into a crop rotation of maize and sunflower
under conservation agriculture practices. Given the above there is scope to support soya production
in the SH by undertaking a feasibility study.
The demand for edible oils in Tanzania is estimated to be about 350,000 tons a year and growing in
line with population growth of 2.9% and increasing standards of living. Sixty per cent of demand, is
met from imported Crude Palm Oil (CPO), that is free of import duty and is in competition with
local production of sunflower oil. Importation is dominated by a few large industrial scale
processors who are producing fully refined oils in compliance with required TBS standards2. The
40% balance of demand is met from local production of unrefined crude sunflower oil most of
which is produced in the Central Corridor This is dominated by small producers and processors who
lack the technical and financial capability to run it efficiently and profitably resulting in weak
horizontal and vertical linkages in the value chain. Nevertheless, there is considerable scope for
import substitution.
Major bottlenecks in the chain are the low yields and overall production of crushing seed causing a
shortage for crushing by commercial processors, large numbers of unregistered processors
producing crude oil of dubious quality and, lack of refining capacity. Processors are a pivotal link in
the chain as all seed must pass through them to extract the oil and cake yet they are operating at a
fraction of capacity and with a low level of technology.
The local edible oil industry is still in an immature stage and needs to develop stronger horizontal
linkages of farmers and vertical linkages between farmers and processors. With assistance from
development agencies farmers are gradually forming producer groups to enhance their bargaining
power and to access credit. Processors are forming local associations and a national organisation,
1
Care should be taken not to confuse oilseed production with edible oil production as many oilseeds are consumed
whole rather than being used to produce oil.
2
Much of the imported CPO is refined and exported as finished products within the region although reliable data on this
is not forthcoming.
4
TEOSA, has been formed to represent all registered processors. This association has the potential to
fulfil a need to coordinate the whole value chain going forward by providing a platform for all
stakeholders..
The low farmer yields are largely due to the use of recycled seed that is genetically degenerate. This
is being alleviated to some extent with the production of Quality Declared Seed, QDS, of improved
varieties that are grown under the supervision of District Councils which are distributed through
agro dealer networks. The fact that oilseeds are classified as minor crops in Tanzania has resulted in
less support and attention being given to them compared to other food crops. This needs to be
rectified as soon as possible.
Support services, especially from the public sector are weak due to very low operational capacity as
a result of budget constraints and staff shortages. This is especially true of R&D, extension services
and of the application and regulation of quality standards but provides a potential opportunity for
private sector actors to undertake these on contract to government which may require external
support. The provision of reliable and up-to-date statistics is a major weakness that requires
addressing. Likewise, in order to attract investment, the business environment requires considerable
improvement as identified by the World Bank that ranks Tanzania 127 out of 182 countries.
However, the edible oil industry is continuing to develop despite the shortcomings of government.
To provide the consumer with a product of the required standard will require further investment in
refining facilities. Available evidence indicates that processors are operating at below break-even
level for oil at both price and volume levels. This in turn, implies the need for processors to
cooperate in order to obtain the economies of scale necessary for profitable refining operations that
will qualify for investment finance.
At farm level the critical factor will be the formation of registered farmer producer groups as viable
business entities. These could eventually transform into limited companies that would form the
basis for the commercialisation of agriculture in line with government policy. For sustainability of
production within a farming system it will be necessary to promote the practice of Conservation
Agriculture, CA, and also the possibility of additional income generating activities such as
apiculture and the introduction of soya into the crop rotation which would enhance fertility as well
as diversifying risk. This latter would also provide processors with additional supplies of oilseed for
extraction.
In addition to those mentioned above other important constraints include; confusion over land rights
and tenure which lead to conflict between graziers and farmers, land degradation, poor rural road
maintenance, duty free import of Crude Palm Oil, lack of a policy for oilseeds, corruption,
protracted bureaucracy, low business skills, and poor inter-ministry coordination.
Continued assistance will be required to enhance the business skills of farmers and producer groups
through training and mentoring.
5
Acronyms
List of Acronyms
(R)MSE(s)
AIDS
AMCOS
AMSDP
ARI
BCS
BEE
BEST-AC
CC
Cm
CRDB
CSDI
DADP
DAIPESA
DALDO
DASP
DED
EAC
EU
ESRF
FAO
FAOSTAT
FFS
FGD
GDP
GMA
GOT
FSU
HIV
IFAD
Kg
LGA
MAFC
METL
MITM
MKUKUTA
Mt
MUVI
MVIWATA
NADO
NBS
NGO
NJODECO
NMB
NSGRP
PASS
(Rural) Micro and Small Enterprises(s)
Acquired Immune Deficiency Syndrome
Agricultural Marketing Cooperative Society
Agricultural Marketing Systems Development Programme
Ilonga Agricultural Training Institute
Business Care Services
Business Enabling Environment
Business Environmental Strengthening – Advocacy
Central Corridor
Centimetre
Cooperative Rural Development Bank
Centre for Sustainable Development Initiatives
District Agriculture Development Plan
Development Alternatives, Inc. Private Enterprise Support Activities
District Agriculture and Livestock Officer
District Agricultural Support Programme
District Executive Director
East Africa Commission
European Union
Economic and Social Research Foundation
Food and Agriculture Organization
Food and Agriculture Organization Statistics
Field Farmer School
Focus Group Discussion
Gross Domestic Product
Gross Margin Analysis
Government of Tanzania
Former Soviet Union
Human Immunity Virus
International Fund for Agriculture Development
Kilogram
Local Government Authority
Ministry of Agriculture, Food Security and Cooperatives
Mohamed Enterprise Tanzania Limited
Ministry of Industry, Trade and Marketing
Mkakati wa Kukuza Uchumi na Kupunguza Umaskini Tanzania
Metric tonne
Muunganisho wa Ujasiriamali Vijijini
Mtandao wa Vikundi vya Wakulima Tanzania
Njombe Agricultural Development Organization
National Bureau of Statistics
Non-Government Organisation
Njombe Development Cooperation
National Microfinance Bank
National Economic Growth and Reduction of Poverty
Private Agricultural Sector Support
6
PMD
QDS
RAS
RBSS
REA
RFSP
RLDC
RMA
SACCOS
SADC
SH
SIDO
SMART
SME
SMS
SNV
SWOT
TAFOPA
TBS
TCCIA
TDC
TEMDO
TEOSA
TFC
TFDA
TIRDO
TIC
TOSCI
TPRI
TRA
TZS
UMGT
USA
US/ADF
USAID
VAT
VC
VCA
VCD
VCIP
VCO
VCS
VICOBA
Powdery Mildew
Quality Declared Seed
Regional Administrative Secretary
Rural Business Support Services
Rural Energy Agency
Rural Financial Services Programme
Rural Livelihood Development Company
Preliminary (Rapid) Market Assessment
Savings and Credit Cooperative Society(ies)
Southern Africa Development Cooperation
Southern Highlands
Small Industry Development Organization
Specific, Measurable, Achievable, Realistic and Time bound
Small and Medium Enterprises
Subject Matter Specialist
Netherland Development Agency
Strengths, Weaknesses, Opportunities and Threats
Tanzania Food Processors Association
Tanzania Bureau of Standards
Tanzania Chamber of Commerce, Industry and Agriculture
Technology Development Centre
Tanzania Engineering and Manufacturing and Design Organization
Tanzania Edible Oil Sector Association.
Tanzania Fertilizer Company
Tanzania Food and Drug Authority
Tanzania Industrial Research and Development Organization
Tanzania Investment Centre
Tanzania Official Seeds Certification Institute
Tanzania Pest Research Institute
Tanzania Revenue Authority
Tanzanian Shilling
Uncle Millo General Traders
United States of America
United States/African Development Foundation
United States Agency for International Development
Value Added Tax
Value Chain
Value Chain Analysis
Value Chain Development
Value Chain Implementing Partner
Value Chain Operators
Value Chain Supporters
Village Community Bank
Exchange rate used: US$= TZS 1575
7
1. Introduction
1.1 Background of the Study & Objectives
The objective of the study is to formulate a strategy for the development of the sunflower industry
on the Southern Highlands Corridor based on an analysis of the value chain.
The assignment was undertaken in the context of two projects being implemented by FAO under
the umbrella of the Southern Highlands Food Systems (SHFS) Development Program. The analysis
of the value chains relates to the outputs identified in both these projects as shown below.
The SHFS Development Program is comprised of two projects which were twinned together in
2010 for improved implementation purposes: URT 132 “Food Systems Development in Tanzania”
and URT 133 Advisory Services Capacity Development in Support of Food Security in the United
Republic of Tanzania”. Both projects are closely aligned with the Government of Tanzania’s
Agricultural Sector Development Strategy (ASDS) which aims to make the policy environment
more favourable for private investment in agriculture and put in place sector-specific policies that
have a bearing on agricultural productivity and profitability.
The overall project outcome for Project URT 132 is defined as “Public and private organisations
and food chain actors have improved capacity to coordinate, plan and support food chain and
business development in the rice, maize, edible oil and red meat sub-sectors of the Southern
Highlands. In order to achieve this outcome the project has five major outputs:
Output 1:
Output 2:
Output 3:
Output 4:
Output 5:
Sub-sector specific strategies and priorities identified.
Public-private sector coordination and capacity strengthened.
Best practises for new market mechanisms promoted.
Food-chain innovation capacity strengthened.
Strategies to improve capacity utilization of agro-processing facilities identified
In respect of project URT 133 the outcome envisaged is enhanced capacity of advisory service
providers and farmers in farm management and marketing to enable them to respond to better to
market opportunities. In addition the project is expected to contribute to the government
restructuring efforts by focusing on market oriented extension. These interventions are expected to
enhance farm profitability and competitiveness and the income derived from farming operations.
Output 1.
Output 2 .
Output 3.
Output 4.
Awareness of policy makers and programme managers to market oriented
agricultural extension and knowledge of ‘good practices’ heightened and realized.
Capacity of advisory service providers in farm management and marketing at central,
district, and ward levels, developed
Capacity of smallholder farmers and farmer groups developed
Linkages between producer groups, private agricultural service providers and
financial institutions and market outlets established.
From the above it can be seen that analysis of value chains cuts across both projects and their
outputs.
8
1.2 Methodology
The mission to Tanzania took place between 05 August and 01 September 2012 during which a 5
day field trip was undertaken to Morogoro, Iringa and Mbeya regions of the Southern highlands
during which limited primary information was obtained. In Dar es Salaam meetings and interviews
were undertaken with a wide range of actors. The FAO guidelines for agri-food chain performance
were used as a basis for the study3
The report is based on a review of available documentation as well as interviews undertaken with a
wide range of actors and stakeholders in the field as well as in Dar es Salaam as identified in Annex
B4.
Although much documentation is available, (see Annex E), it is noticeable that there is a
considerable disparity in available statistical data which raises doubts as to its reliability and
usefulness, even though from apparently reliable sources, and it was beyond the scope of the
mission to verify all the data sources and statements. Furthermore, as the sub-sector is developing
rapidly, data on sunflower production soon becomes outdated. Given the above it is advisable to
regard the data presented in the report as indicative rather than definitive.
According to 2008 estimates, the production of oilseeds in Tanzania is mainly from ground nuts
(40%), sunflower (36%), sesame (15%), cotton (8%), and palm oil (1%).. However, according to
available information, there is virtually no oil produced from groundnut and sesame, most of which
is exported as seed, and given that sunflower dominates oilseed production in the Southern
Highlands the report focuses on the sunflower value chain.
1.3 Brief Overview of the Sunflower Value Chain.
The demand for edible oils in Tanzania is estimated to be about 350,000 tons a year and growing in
line with population growth of 2.9% and increasing standards of living. Sixty per cent of demand is
met from imported Crude Palm Oil (CPO), that is free of import duty and is in competition with
local production of sunflower oil. Importation is dominated by a few large industrial scale
processors who are producing fully refined oils in compliance with required TBS standards. The
40% balance of demand is met from local production of crude sunflower oil. This is dominated by
small farmers and processors who lack the technical and financial capability to run it efficiently and
profitably. Consequently the horizontal and vertical linkages of the value chain are weak and
uncompetitive, and require support to strengthen them. Given the above there, is in effect, two value
chains running concurrently, one based on imports, the other on local production.
Sunflower is the fastest growing crop in Tanzania where production has more than doubled since
2005 especially in the Central Corridor. The Ministry of Agriculture estimates that Tanzania has 1.6
million sunflower seed producers who have the capacity to satisfy the national cooking oil demand
if fully supported. Sunflower produces two products, oil for human consumption and industrial use,
and cake for high protein animal feed.
“Guidelines for rapid appraisals of agrifood chain performance in developing countries”
It was originally required that the report should not exceed 25 pages. However, it has been necessary to exceed this in
order to accommodate the required information according to the prescribed table of contents. Detailed technical
information in support of the report is contained in the annexes.
3
4
9
In the Southern Highlands most sunflower is grown as an intercrop with maize but is beginning to
expand as a cash crop to offset low prices realised from maize. However, yields are very low
resulting in shortages of crushing material for the processors who are running at a fraction of
capacity.
Due to the absence of refining capacity outside of the large operators, micro and SME processors
are only able to produce crude, filtered oil which does not meet the TFDA required standard and has
a limited shelf life as it deteriorates rapidly. This implies that there is opportunity for investment in
refining capacity to provide a product to the required standards.
As sunflower is classified as a minor crop by MAFSC it receives very little by way of government
support in comparison to food crops. Thus R&D has come to a standstill and the provision of a
pipeline of improved varieties is minimal. Likewise extension services are weak as are most of the
other services due to the lack of operational funding. Nevertheless, it is apparent that the local
oilseed industry is increasing despite institutional weaknesses which is possibly its main strength
going forward.
There are many opportunities for enhancing this value chain from the producer to the consumer and
already efforts are being made by some development agencies in this regard. In particular SNV and
RLDC are active in the Central Corridor and have developed models that can be replicated in the
Southern Highlands. The sub-sector is also being addressed by the MUVI project, funded by IFAD
and implemented by SIDO in the Southern Highlands and elsewhere. The industry has also
spontaneously formed a number of associations and an umbrella Tanzania Edible Oil Sector
Association that has the potential to coordinate the value chain.
1.4 Other Oil Seed Crops
Statistics available for oilseed crops are widely disparate depending on source and need to be taken
with a high degree of circumspection and that they are not all produced as pure stands but in mixed
cropping systems making areas and yields difficult to estimate. Available data serves to confuse
rather than enlighten.
Sesame
Although grown in the Southern Highlands the main production areas are in Lindi, Mtwara and
Dodoma Regions but amounts are grown in Mbeya, Morogoro and Rukwa in the Southern
Highlands. Apart from un-quantified domestic consumption all production is exported as crude
seed. Sesame production is semi-regulated by Regional Governments in that it is all marketed
through the Primary and Cooperatives who on-sell the raw seed to exporters either by auction or by
tender. Furthermore the crop is subject to substantial levies by district and regional governments
who depend on it for a substantial proportion of their income.5 According to SNV 20106 the value
chain is in confusion and disarray due to:
 Poor marketing and pricing practices,
 Political interference
 Lack of business skills of cooperatives
 Lack of professionalism
 Weak farmer bargaining power.
5
Bennett 2008 Adapting to new marketing realities: value chain analysis of
sesame in Tanzania
6
UNLOCKING SESAME FARMERS’ POTENTIAL FOR FAIR TRADE IN SOUTHERN TANZANIA
10
There is one embryonic processor for sesame oil in Lindi, Frasal Intertrade, with a capacity of 10
tons per day, that is being supported by a programme implemented by SNV. It is vertically
integrated with its suppliers and employs 4 extension staff for the purpose.
Estimates of sesame exports in 2009 are 50,000 tons at an average world market price of $1500 per
ton which is about 70% of a national production estimate of 70,000 tons.
Soya.
In general soybeans can be grown in areas where either beans or maize can be cultivated.
Currently, soybeans are cultivated in Ruvuma region (Songea), Morogoro (Kilosa, Mvomero and
Morogoro Rural districts), Kagera region, some parts of Iringa and Mbeya, Rukwa, Arusha, and
Lindi regions (Nachingwea districts).
Current national production is about 3,500 tons, most of which is produced in the Southern
Highlands. According to SAGCOT there is considerable potential for increased production in the
Southern highlands shown in the table 1 below.
Table 1: Regional background for soya7
Production
areas
Mbeya
Rukwa
Ruvuma
Iringa
Morogoro
Current production (mt)
2005: 533 mt
2005: 11 mt
2005: 499 mt / 2010: 800 mt
(expected)
2005:
105 mt / 2010: 120 mt
Mentioned by farmers and
researchers
Area
(ha)
200,000
150,000
150,000
130,000
Potential (mt)
300,000
225,000
225,000
200,000
120,000
However, according to new information the company CP Foods of Thailand has entered into a
contract to establish an industrial scale poultry production unit that will require up to 600 tons per
month of high protein soya bean meal plus 1200 tons of maize. This will provide a significant
opportunity for farmers and processors to engage in an alternative cash crop that will ideally fit into
a crop rotation of maize and sunflower under conservation agriculture practices. Given the above
there is scope to support soya production in the SH by undertaking a feasibility study.
Groundnut
Apart from acreage and tonnage, statistics on groundnut consumption and processing are sparse.
Groundnut is widely grown throughout the country as a food crop rather than for oils extraction. A
problem associated with the crop is the infection with the aflatoxin fungus which can cause severe
sickness or death.
Cotton
Cotton is grown in the cotton zones in the NE and NW of Tanzania and is marketed through the
Tanzania Cotton Board, TCB. Production of seed cotton varies according to year, 369 K tons in
2009 dropping to 267 K tons in 20118. At a ratio of 1 lint to 1.6 seed the latter equates to 1612 tons
of seed. Of this some is kept for planting whilst the rest goes to millers in Arusha for processing
into oil and cake. Statistics for oil production are not readily available. It is an internationally
traded commodity and is susceptible to world market prices. The TCB receives subsidies from the
government to support farmgate prices and for pesticides.
A negligible amount of cotton is grown in Morogoro in the Southern Highlands.
7
8
SAGCOT Value Chain and Market Analysis.
Tanzania Cotton Board, Annual Report, 2010.
11
2. End-markets
2.1 Total world production and main producers of oilseeds.
The world’s average per capita consumption of edible oils is estimated as 17.8 Kg per year, based
on a population of 6.773 billion in 2009, with global demand averaging 120 million tons per year.
Given an annual population increase of 1.125%, there is likely to be a growing demand especially in
developing countries where studies show that edible oil consumption rises with increased incomes.
Out of the total global production of oilseeds (404 million tons in 2008/2009), sunflower seed
represents only 8%. The greatest seed production is of soybean (55%), followed by rapeseed (14%) and
cottonseed (10%)
The Russian Federation, Ukraine and Argentina are the main world producers of sunflower seed and
sunflower by-products, as well as suppliers to the global market. These three countries produce
over the half of the sunflower seed in the world, which is why these countries are often referred to as
the “sunflower triangle”. The change in the market situation of one country has a great influence on
the market situation in the other two countries, and affects the world market of sunflower seeds and
sunflower by-products.
In 2008/2009, about 33 million tons of sunflower seeds were harvested around the world (+23%
against 2007/2008).
Table 2: Sunflower seed production (thousand tons)
Country/Region
Russian Federation
EU-27
Ukraine
Argentina
Turkey
Other
World total
Marketing Year
(Sep.–Aug.)
(Oct.–Sep.)
(Sep.–Aug.)
(Mar.–Feb.)
(Sep.–Aug.)
2006/7
6,750
6,502
5,300
3,500
850
6,910
29,812
Sunflower Seed
2007/8
5,650
4,771
4,200
4,650
700
7,225
27,196
2008/9
7,400
6,950
6,300
3,630
850
8,291
33,421
Source: FAO data
N.B. In Tanzania a production level of 350,000 tons of seed equates to just 1% of global
production.
Table 3: Sunflower seed oil global production (thousand tons)
Country/Region
Marketing Year
2006/7
Sunflower Seed
2007/8
2008/9
Russian Federation
(Sep.–Aug.)
2,465
2,130
2,520
Ukraine
(Sep.–Aug.)
2,050
1,726
2,285
EU-27
(Oct.–Sep.)
2,200
1,773
2,270
Argentina
(Mar.–Feb.)
1,202
1,800
1,785
Turkey
(Sep.–Aug.)
525
523
544
Other
2,172
1,958
2,270
World total
10,614
9,910
11,674
Source: FAO internal data
12
Sunflower is a high quality vegetable product. It produces oil used for cooking as well as in salad
oils and dressings, shortenings and margarines. It also has several industrial uses such as a drying
agent used in paints, resins and plastics. In addition the residue from oil extraction is a high protein
animal feed.
2.2 National Market for the Sunflower Oilseeds
Sunflower National Demand and Supply
Mount Meru Oil Mills estimates that the market demand is rising by 6% per year. However,
available data on national demand and supply is often inconsistent and invariably covers different
time frames. Thus it is presented with a degree of circumspection. FAO recommends a minimum
annual per capita consumption of 5 kg of vegetable oil. National demand for edible oil is huge
compared to national supply, which has forced the country to largely rely on imported palm oils.
This has an impact on country foreign exchange reserves as well as the suppression of local
production of oilseeds like sunflower. Domestic demand for edible oils in 2010 has been estimated
to be 350,000 tons per year and rising in line with population growth of 2.9% to about 450,000 tons
in 2015, but only 40% of demand is being met from domestic production. The annual import of
edible oil into Tanzania is estimated at over 200,000 tons, much of which is converted into nonedible products and for export within the region whilst the rest is consumed mainly in urban centres
which have yet to be significantly penetrated by locally produced sunflower oil. While there is a
large production of oilseeds such as groundnuts and sesame, there has been no substantial oil
production from these seeds.
Thus Sunflower is the most important oilseed crop in Tanzania and is the country’s main source of
vegetable oil.
Demand may be further enhanced by the spread between GDP of 7%, and population growth of
2.9%, indicating an annual increase in standard of living of 4.1%, even though the basis of the GDP
is from mining. In addition the population of Tanzania is expected to increase by 15% in the next
five years to 52 million, from the 2010 estimate of 45 million, and to 75.5 million by the year 2030,
which will give a commensurate increase in the demand for and consumption of edible oils. This
provides a market opportunity for the domestic sunflower oil producers.
The Ministry of Agriculture Food Security and Cooperatives MAFC estimates that Tanzania has 1.6
million sunflower seed producers who have the capacity to satisfy the national cooking oil demand
if fully supported.
Demand is supplied by:
Three large importers and refiners producing refined oils and other products mainly for urban
markets.
Large numbers of smallholder farmers producing sunflower seed for crushing.
Large numbers of small and micro-scale traders and processors producing crude, filtered oil.
The market for sunflower oil within the southern corridor is well established and absorbs more than
75% of the sunflower oil produced in the SH regions. Therefore only a relatively small percentage
is traded outside the region. Local consumers are able to purchase crude sunflower oil in the
following ways:



from farmers who have paid for the processing of their crop,
from local traders who have purchased from farmers and paid for the processing,
from processors who have bought either the seed or oil from the farmers,
13


from retailers who have bought the oil from processors or traders, or
from farmer/community groups who own processing equipment.
2.3 Export and Import of Sunflower Oilseed Products
Although there has been a significant increase in edible oil production in recent years, until 2006
this has never exceeded 100,000 tons which in turn has forced the country to import vegetable oil in
order to meet its domestic demand. The import is mainly palm oil from Malaysia and Indonesia.
These imports are in the form of crude, semi-refined, and refined oils the cost of which to the
national budget is second only to imported petroleum products 9. However, there is confusion as to
whether Crude Palm Oil (CPO) or Palm Olein is being imported as this is not being tested on arrival
by the authorities.
Table 4 Edible oil imports 2001 to 2006
Year
2001
2002
2003
2004
2005
2006
Source MA-POTS, 2007
Edible oil imports
187,000
157,000
185,000
160,000
258,000
282,000
Palm oil imports
177,000
147,000
167,000
155,000
250,000
268,000
Table 4 below summarises export and import of sunflower oilseed products in Tanzania between
year 2001 and 2006 as compiled from FAO Statistics Division 2009 (FAOSTAT).
Table 5 Summary of Trade Statistics of Sunflower Oilseed Products (2001 - 2006)
Year
2006
2005
2004
2003
2002
2001
Sunflower Oil
Export
Quantity ( Value
tonnes)
(1000$)
575
466
2,762
1,804
20
4
11
3
114
79
114
56
Import
Quantity
(tonnes)
6,789
185
1,089
2,380
250
227
Value
(1000$)
4,630
101
764
1,407
148
185
Sunflower Cake
Export
Quantity
Value
(tonnes)
(1000$)
405
34
1,091
53
8,107
333
4,076
248
5,047
254
8,017
397
Import
Quantity
(tonnes)
4
-
Value
(1000$)
1
-
Source: FAO Statistics Division 2009
Based on the data above, in 2006 Tanzania imported about 90% of edible sunflower oil and
exported only 10%. This implies that there is a need for increasing investment in this sector through
supporting the enterprises in the value chain as one of the key import substitution strategies.
Table 5 shows that in 2009 almost 50% of imported sunflower oil is re-exported at a higher price
per ton indicating the export of locally refined and finished products.
9
Disaggregated data on these imports was requested from TBC but not made available.
14
Table 6 Tanzania Sunflower imports and exports 2009
Sunflower Oil Imports 2009
Tons Value 000$
4495
3659
$814
Total Import
Av cost per tonne
Sunflower oil Exports 2009
Tons Value 000$
2182
3025
$1386
2313
634
Total Export
Avge price per tonne
Trade Deficit
Source FAOSTAT
2.4 Price Patterns in Urban Markets
Major traded products of sunflower oilseeds is edible oil and sunflower seed cake which is mainly
used as a key ingredient of animal feeds. Below is the summary of sunflower oil brands and the
respective prices collected from various supermarkets in Dar es Salaam.
Table 7 Summary of Companies Dealing with Sunflower Products
Product
Sundrop sunflower TZA
Sunola sunflower TZA
Veg oil from UK
Palm Oil (Emirates)
Korore (Abu Dhabi) Corn Oil
Korie Palm Oil
Kimbo Palm Oil
Afia Sunflower
Lieseur sunflower
Bidco red palm oil
OK Cotton Seed oil (Mwanza)
Mazola (Saudi)
Hyat Palm Oil
EV Olive Oil
Elianto corn oil(Kenya)
From market Shop
Korie Palm Oil
Korie Palm Oil
Korie Palm Oil
Sunola sunflower
Sunola sunflower
Sundrop
Sundrop
Kimbo Palm Oil
OKAY Cottonseed Oil
Company
Muzah Oils
Bidco
Elianto
litres
1
1
2
1.8
1.8
1
1
1.8
2
5
5
1.8
1.8
1
3
Price
4000
4500
20,100
11,900
23,700
3,200
3,900
24,300
15,000
17,000
18,900
24,200
11,900
24,300
19,400
Price/litre
4,000
4,500
10,050
6,611
13,167
3,200
3,900
13,500
7,500
3,400
3,780
13,444
6,611
24,300
6,467
Muzah Oils
Muzah Oils
Muzah Oils
Bidco
Bidco
Muzah Oils
Muzah Oils
Kimbo
OKAY
1
3
5
3
5
1
5
5
5
3,500
8,500
15,000
12,500
19,000
4,000
19,000
18,000
18,000
3,500
2,833
3,000
4,167
3,800
4,000
3,800
3,600
3,600
Korore
Muzah Oils
Kimbo
Alfa
Lieseur
Bidco
OKAY
Mazola
Hyat
15
in US$
2.54
2.86
6.38
4.20
8.36
2.03
2.48
8.57
4.76
2.16
2.40
8.54
4.20
15.43
4.11
0.00
2.22
1.80
1.90
2.65
2.41
2.54
2.41
2.29
2.29
FAMA Sunflower (ex Belgium)
FAMA
3
19,000
6,333
4.02
2.5 Sunflower cake (Mashudu).
As well as producing oil the other important product from the extraction process is un-decorticated
sunflower cake that is a high protein animal feed.10 Much of this is used locally by livestock farmers
but much is exported to Asia and regionally. According to FAOSTAT this has risen from 10,000
tons in year 2000 to 28,000 tons in 2008. Depending on price, which fluctuates considerably, cake
accounts for a considerable proportion of the overall returns to processors.
3. The Sunflower Value Chain
The value chain in sunflower from input usage, through production and processing to marketing is
compounded by a series of technical and institutional impediments that is due to the fact that the
sector is dominated by small producers and processors who lack technical and financial capability
to run it efficiently and profitable.
In Tanzania the SME edible oil industry is at a very immature stage. Apart from the large
processors the sunflower value chain in Tanzania can be characterised as fragmented, unorganised,
unregulated and uncoordinated. It is dominated by large numbers of smallholder farmers who
produce seed for crushing, an unknown number of middlemen operating between every link, and
over 400 small and micro-processors producing crude sunflower oil. Consequently the horizontal
and vertical linkages of the value chain are weak and uncompetitive, and require support to
strengthen them.
Conversely, the large oil millers such as Muzah and Mount Meru are modern vertically integrated
industries relying mostly on imported oils which they refine into products for the market. These
include not only cooking oils but also margarines, soaps and detergents. Many of these products are
exported within the region. They are also active in purchasing crushing material locally for oil
extraction and refining whilst cake is exported. Products from these companies are registered and
regulated fully refined oils that are branded and labelled with the TBS approval logo. According to
one of these companies about 10% of their production is exported within the East Africa region.
3.1 The Value Chain Map
A look at a simplified version of the value chain, Figure 1, shows that the whole chain is suspended
from the consumer whose link to the rest of the chain, if broken, would result in its collapse. This is
true to a greater or lesser extent for all the other linkages in the chain. Each ascending link uses the
product from the lower link, processes that into an output which is used by the link above, and so
on. At each stage the value of the product increases until it reaches the final consumer. A pivotal
role is that of the processor through which all seed must pass and from which both oils and cake are
produced.
However, many of the actors occupy more than one role. For instance some farmers are processors
and retailers, some processors are also retailers and traders of crushing seeds and many traders have
their seed crushed for oil which they then retail whilst the processor keeps the cake as payment or
else takes cash. Thus a farmer may sell seeds to either a trader or a processor or both. A trader may
sell seed to a processor or may have the seed processed into oil for on-selling as retail or wholesale,
10
Un-decorticate cake has an analysis of up to 20% fibre and 30% protein whereas decorticated cake has 12% fibre and
up to 45% protein.
16
or both. A processor may buy seed directly from farmers or from traders and sell the oil either as
retail or wholesale to traders as well as selling cake.
Each link in the chain relies on goods and services in order to enable it to undertake its processing
and handling of the product. At different stages these include seeds, fertiliser, transport, energy,
finance, land , labour, storage and knowledge. It also requires clearly defined standards and a
regulatory framework applied by law. Unfortunately many of these requirements are weak or nonexistent in Tanzania.
The main areas of value chain weakness are between farmers and processors whereby processors
are short of crushing material, and between processors and the consumer, as only crude unrefined
oils are produced at micro and SME level. A detailed Sunflower Value Chain Map is shown in
Annex A.
17
Figure 1: Simplified Sunflower Oilseed Value Chain
Consumer
Retailers &
Wholesalers
Processors
Traders
Farmers
Goods and
services
(For every link)
A comprehensive Value Chain Map with description is shown in Annex A
18
Table 8: Functions and Actors in Sunflower Chain – Southern Highlands.
Actors
Research
Functions
Predominantly the Agricultural Research Institutes (ARIs) breeds crop
seeds. ARI Ilonga, in Morogoro Region, is designated as the lead station
for oilseeds but work is also undertaken at Uyole located in Mbeya
region, INGERI is a branch in Njombe. Unfortunately these stations are
barely functional. Ilonga only produces basic seed for multiplication
whilst Uyole has ceased all work on oilseeds.
Seed
ASA is the government agency for multiplying seeds through its
producers
“commercialized” farms. Dabaga farm is located to southern highlands.
Produces basic sunflower basic seeds. Outgrowers are contracted to
produce Certified Seed whilst local governments have authority to
produce and distribute QDS.
Seed
Tanzania Official Seed Certification Institute (TOSCI) is for control and
Certification certification of produced improved seeds to be supplied to agro-dealers.
TOSCI is located in Njombe
Input
There are two types of input suppliers in sunflower value chain. Hard
suppliers
inputs including seed, fertilizer, agro-chemical and farm implements e.g.
hand hoes, power tillers and tractors. Soft inputs including Extension
services, financial services.
Hard inputs are supplied by private companies. There about 500 listed
agro-dealers in the SH. Tractor suppliers are not included in the list.
Auto Sokoni Company is the major supplier of power-tillers.
Soft inputs particularly extension services are provided mainly by the
government through LGA. Financial services are limited to few actors
e.g. medium processors and registered farmer groups but not individual
farmers. Other Business Development services (BDS) are also provided
by SIDO through ODOP Program, NGO e.g. Njombe Agricultural
Development Organization (NADO)
Farmers
Sunflower seeds are grown by small scale farmers (1-5 acres). The
records indicated that there about 37, 496 households who are involved
in production of sunflower. About 20,170 ha (2006) were under
production
Traders
Three types of traders were identified trading in the sunflower seed
including primary buyer, primary brokers, secondary buyer/ agents. All
the buying is done at farm gate. No collection Centres.
Processors
Two types of processors. Service provider oriented processors, these are
both small and medium scale firms. They account for about 70% of the
processing business. Example are NJODECO in Njombe. Large/ medium
scale owners factory who also are buyers of sunflower seeds and
processors. About 30% of the processing business is done by them.
Another example is Shadeco located in Iringa Municipal.
Wholesalers
Wholesaling is done at factory gate.
Retailers
Retailing is undertaken by small-scale distributors including kiosks,
vendors, road-side stalls in towns within the region. A limited proportion
is found in supermarkets in Dar es Salaam.
Source: SIDO 2012.
19
3.2 Value Chain Governance
Sunflower value chain in the Southern Highlands is governed by market forces in respect of prices
of sunflower seeds, oils and cake. Governance issues include:
Lack of Governance: The governance mechanism in the sunflower value chain is underdeveloped.
Value chain actors operate in an uncoordinated and unorganized way. Few rules exist among value
chain actors.
Inadequate of regulation and quality control: TBS and TFDA do not have the capacity to
monitor and regulate the supply which results in the supply of only crude oil with limited shelf life
but may also allow unscrupulous traders to adulterate their oil with cheaper ingredients.
Presence of many small actors and transactions: The value chain is characterized by too many
small actors with small businesses that increase transaction and transportation costs and a cause
unfair competitiveness of products in the market.
Uncoordinated Market: There is no lead organisation that coordinates the chain in relation to
markets, technology and other important information sharing among actors. Consequently actors,
particularly farmers and processors, receive no incentives for up-grading in terms of their product
and the value chain process as a whole to promote sustainable income earning opportunities. This
results in a lack of transparency and trust between actors which is essential for a value chain to
flourish.
20
Figure 2 Characteristics of the Sunflower value chain
Source, SAGCOT.
An indicative analysis in Annex C 1 shows the values added at each major stage of the value chain
indicates a win-win situation for all actors. It also shows that the farmer is receiving about 13% of
the retail price.
3.3 Technology Generation
Research and development
For any industry to prosper requires stream of new technologies and innovations. However, given
the winding down of the ARI stations there is little, if any, source of new technologies based on
adaptive research, available to extension services or farmers. On the other hand, much information
is available on the internet but this is probably not available to most small farmers and is not
exploited to any extent by the extension services.
In Tanzania responsibility for Sunflower Research is with the research stations of Ilonga (Morogoro
Region), Uyole (Mbeya Region), and Naliendele (Mtwara Region). Of these, Uyole has stopped all
work on sunflower whilst Ilonga only produces Basic Seed of Rekord which it supplies to the
Agricultural Seed Agency (ASA), the government seed production agency, for multiplication. Both
Ilonga and Uyole stations are severely underfunded and understaffed due to a recruitment freeze
and retirements. The consequence is the loss of institutional memory and the inability to operate.
21
Field trials and demonstration are being undertaken by Yara on their range of NPK fertilisers but
they have not yet published any results.
3.4 Input Supply & Demand
All actors in the value chain require goods and services in order to operate.
At farm level there is a requirement for improved seeds, fertiliser, machinery services, transport,
credit and information. Seeds and fertiliser are available through a network of Agro-Dealers, many
of whom have agents at village level. Some of these even supply goods on credit to trusted clients.
However, farmers prefer to apply fertiliser to food crops such as maize rather than to sunflower.
Credit to individual small farmers is virtually non-existent but NMB and CRDB banks do have
facilities to finance registered Producer Groups. Transport to get inputs in and outputs out can be
problematic especially for more remote locations. This factor, together with the degraded rural road
infrastructure, is an extra cost and has the effect of reducing farmgate prices.
At registered processor level the needs are for sufficient crushing seed, machinery, energy,
packaging, storage and credit. Processors visited complained of a shortage of seed for crushing
together with high prices of TS5-600 per Kg in August 2012. Other expressed problems included
the need for storage capacity in order for them to acquire stock to see them through the year, credit
to enable them to purchase stocks and exemption on the duty on imported crushing machinery
which they want classified as agricultural equipment that is duty free. The need to refine oil for the
retail market is becoming increasingly recognised by the registered, commercial processors.
At consumer level there appears to be a lack of awareness as to the difference between crude and
refined sunflower oil and to the keeping qualities of each.
Seed Supplies.
The commonest source of seed is that recycled by farmers from year to year and is genetically
degenerate. However, adoption of improved varieties is taking place in the Central Corridor and is
also taking hold in the SH..
Production of Rekord, an OPV, the most popular improved variety, is by the ASA which produces
Certified Seed. District Agricultural Officers are allowed to produce Quality Declared Seed (QDS)
from Certified Seed through contracts with farmers and farmer groups. The Highland Seed
Company in Mbeya is also producing Certified Seed from Basic seed it obtains from ASA and
intends to produce 50 to 100 tons per year depending on demand. Tanseed International of
Morogoro has been producing Certified Rekord seed for 8 years. Kenya Fedha, another OPV is
produced by Kibo Seeds under licence from the Kenya Seed Company whilst some hybrids are
imported, mainly from South Africa and Zambia by Pannar Seed Company with its PAN varieties.
Farmers obtain seed from agro-dealer retailers of which there are many, (e.g. 25 in Mbeya), but also
through processors where contract farming is taking place. Reportedly there is a major problem
with the supply of counterfeit seed in Tanzania covering all classes.
The Tanzania Official Seed Certification Institute (TOSCI). TOSCI is responsible for seed
certification though there is no direct relationship with farmers. However TOSCI has problems with
regard to its operational capacity and budget.
Pesticides and other inputs are approved by TPRI, to mitigate the risk of supply of poor quality
agro-chemicals.
22
Fertiliser.
The average use of fertiliser in Tanzania is 4Kg per hectare. This has been mainly in the form of
DAP and Urea which, when used as recommended, exacerbates soil acidity. However, farmers
routinely apply any fertiliser that they can obtain or afford to food crops rather than cash crops as a
risk reduction measure. Yara Company is a main supplier of fertiliser that is now recommending the
use of NPK blends and compounds to suit different soil types.. Premium Agrochemicals and Export
Trading Group are also suppliers of fertiliser and agrochemicals. Products are available to farmers
through agro dealers. Reportedly there is a problem with counterfeit or diluted fertiliser and
chemicals which has made farmers distrustful and unwilling to purchase in some instances. Prices
of agri inputs are listed in annex C1.
Credit and finance.
The National Microfinance Bank and CRDB Bank are the biggest providers of credit to agriculture
in Tanzania and have branches in most districts. NMB has a range of products which include loans
for farmer groups and also SME loans applicable to processors. However, collateral requirements
are strict sometimes requiring double the amount of the loan. Interest rates are based on Treasury
Bills plus 1 or 2 % and range from 19% for SMEs to 24% for micro and small enterprises. . Both
these banks provide funds to SACCOS. Other banks operating in the SH are shown in Table 7. The
Government is in the process of establishing an Agricultural Bank as proposed in the Kilimo Kwanza
initiative. To start with, it has opened a special window for agricultural lending in the Tanzania
Investment Bank, while preparations are being finalized to establish a fully dedicated Agricultural Bank.
Table 9 Banks operating in the Southern Highlands
Bank
NMB Ltd
CRDB Ltd
TPB
NBC LTD
EXIM BANK
Range of loan 300-500
300-500
Average 1.1 5
–
250 500
million
amount (Tshs)
million
per million
per million
per million
per per
MFI/SACCOS MFI/SACCOS MFI/SACCOS MFI/SACCOS MFI/SACCOS
ii) Types of Provides whole range of financial products to individual clients: these include
Products:
savings, loans, money transfer, payment services etc. Wholesale loans are
extended to SACCOS and MFIs.
iii) Profile of NMB, NBC, EXIM and CRDB bank are primarily indirect providers to rural areas
clients
through their links with MFIs and SACCOS. TPB has a greater tendency to
provide direct services to individual rural clients.
iv)
CRDB volume of loans to the agriculture (rural) comprises about 25% of total
Characteristics lending. NMB has extended significant lending in agriculture whereas TPB, NBC
of the portfolio and EXIM have continued to lend to individual farmers as demand arises.
v)
Financing SACCOS & other MFI’s are able to generate funds from the banks, NGOs and
sources
and own members.
capital structure
Source: SIDO 2009
Extension Services and Training: Agricultural extension services in the country are provided by
the government through the Ministry of Agriculture, Food Security and Cooperatives (MAFC). In
general, the whole training and technology delivery system has not performed as well as expected.
Crop yields and productivity are low compared to the potential demonstrated by agricultural
research. Low performance is attributed to:
 Non-use of the package approach which emphasizes combining of the dissemination of
extension messages and the use agro-inputs;
 National extension field work is not well linked to the private sector distributing agro-inputs;
 Weak research – extension –farmer linkage;
23





Technical recommendations are not frequently used in combination with indigenous
technologies;
Top-down extension or non-use of the participatory extension approach;
Non-use of participatory research; Deficient supervision, monitoring, and evaluation of
extension work;
Village extension workers are generalists and not well backstopped by a team of subject matter
specialists;
Extension messages and agricultural technology are not modified to fit farmers’ production
systems;
Technology
Many processors are running very old expellers and would like to purchase new equipment from
Indian or China but are awaiting the removal of import duty on equipment. The request is that oil
milling equipment is classified as agricultural which is free of duty. Major actors in sunflower
processing technology and input supplies in the region include SIDO - TDC, CAMARTEC,
TEMDO INTERMECH and TIRDO. There are also major importers namely AUTO SOKON and
some dealers from Dar es Salaam. Enterprise Works Worldwide (formerly Appropriate Technology
International) has an office in Iringa and has a wealth of knowledge in support of appropriate
technology required in sunflower sub-sector. The Small Industries Development Organisation
(SIDO), manufactures a range of agricultural equipment for farmers as well as oil refining units.
The majority of farmers are using only traditional low input, low output farming methods and are
mainly focussed on food production. This is a reflection on the extension services which are
underfunded to the point that they are barely operational. However, in some areas farmers are
switching to sunflower as a cash crop to offset poor rainfall and low prices realised for maize.
Across the border in Zambia farmers are obtaining considerable benefits from adopting
Conservation Agriculture, CA, practices yet there seems to be little promotion of this in the SH
region, even though the regional centre for CA is based in Arusha.
Business Development Services
The Southern Corridor has a significant number of business development service providers at LGA
level which include CSDI, RUDI, MVIWATA, Techno Serve and BCS. These companies provide
a number of services ranging from farmer groups organization and mobilization, business
leadership and management training, financial and accounting training, design of business and
investment plans, credit management, market research, market and credit linkages.
Edible oil quality standards.
According to the standardization of Tanzania sunflower oil, the Tanzania Bureau of
Standards (TBS) specifies that:
Raw sunflower oil is obtained by a process of mechanical expression and/or solvent extraction. The
oil should be pure and not contain any particles, sediments, foreign matter or contamination.
Refined sunflower oil is obtained by expression and/or extraction and, in addition, it is neutralized
with alkali, washed with water, dried, bleached with bleaching earth or activated carbon, and
deodorized with steam. No other chemical agent is allowed in this process except citric acid.
Sunflower oil for edible purposes shall contain antioxidants and antioxidant synergists in specified
levels.
TBS with TFDA aspires to align its standards with ISO 67.200 Edible Oils and Fats, Oilseeds;
which is very detailed and comprehensive and is outside the scope of this report to address
According to the Tanzania Food and Drugs Authority (TFDA), sunflower oil for human
consumption should be double refined.
24
The mission visited a number of registered sunflower processors and found them to be extremely
filthy and with practices that could best be described as primitive. Clearly the Authority is not
applying the regulations in respect to these as it is short of operational funds that reduce its capacity
to undertake its statutory duties..
Standards require that all edible oils for sale to the public must be refined. This is clearly not being
applied as, other than products from the very large processors such as Mount Meru, BIDCO and
Muzah Oil, all locally processed sunflower oil is sold unrefined. Unrefined oil has a short shelf life
and begins to deteriorate after about a month. Yet at least one processor is labelling his product with
a sell by date 12 months from the date of labelling.
3.5 Production
According to RLDC report (2008), the production of oilseeds in Tanzania mainly focuses on ground
nuts (40%), sunflower (36%), sesame (15%), cotton (8%), and palm oil (1%). However, there is
virtually no oil produced from sesame and groundnut.
Sunflower oilseeds dominate about 36% of the total oilseeds production in Tanzania and over 50%
of these oilseeds are planted in four regions namely Dodoma, Kilimanjaro, Arusha and Singida. The
oilseed sub-sector is predominantly liquid products (75-80%), typically from imported palm oil.
The current total demand stands at 18,000 tons per month. However, according to SIDO 2010 a
significant growing interest for sunflower oilseed products among Tanzanians may reflect increased
standards of living. There are also companies buying sunflower oil and seed cake from domestic
suppliers for export either regionally or overseas.
While the production of sunflower oilseeds for crushing varied between 75,000 and 100,000 tons
from year 2001 to 2005, it increased dramatically to between 300 to 350 thousand tons from 2006
(source MAFSC). The corresponding sunflower oil production increased to almost 90,000 tons of
oil per year (source MAFSC).
Table 10 Domestic Sunflower oil production in Tons.
Year Sunflower oil (tons)
1999 / 2000
11,560
2000 / 2001
19,409
2001 / 2002
25,056
2002 / 2003
26,986
2003 / 2004
25,515
2004 / 2005
21,325
2005 / 2006
89,614
2006 / 2007
88,753
2010 Estimate
125,000
Source MA-POTS, 2007
The following table shows that there has been an increase of 65% in area planted to sunflower in the
Southern Highlands between 2006 and 2010 and an overall increase of 135%. However, most of
this increase has been through increased area planted rather than increased yields. A production
figure of 500,000 tons of seed equates to 150,000 tons of oil which may be an overestimate.
25
Table 11. Sunflower Area ('000'ha) and Production ('000'tons) by Region by District and Year
Region
2005/2006
2006/2007
2007/2008
2008/2009
2009/2010
+ or
-%
Central Corridor (CC)
Dodoma Area ( '000' ha)
Dodoma Production ( '000'
tons)
18.83
73.50
83.38
91.57
77.06
309
23.62
110.73
56.07
36.87
32.51
38
Singida Area ( '000' ha)
Singida Production ( '000'
tons)
40.15
74.22
99.36
93.43
129.50
223
90.93
78.75
68.30
97.41
82.48
-9
Manyara Area ( '000' ha)
Manyara Production ( '000'
tons)
10.44
19.19
39.07
32.34
20.22
94
24.67
30.10
29.24
17.42
14.70
-40
Sub Total area CC
69.43
166.91
221.82
217.34
226.77
227
Subtotal production CC
139.22
219.58
153.61
151.71
129.69
-7
Ruvuma Area ( '000' ha)
Ruvuma Production ( '000'
tons)
12.08
0.66
4.37
1.63
4.68
-61
4.61
1.26
2.84
1.26
3.62
-21
Rukwa Area ( '000' ha)
Rukwa Production ( '000'
tons)
39.22
39.67
36.77
47.68
53.91
37
132.55
62.07
27.43
66.47
46.29
-65
8.47
0.06
5.26
8.26
0.00
-3
19.01
0.06
3.10
2.10
0.00
-89
4.65
7.56
14.96
12.49
16.99
265
7.06
9.66
10.13
5.72
15.43
118
Iringa Area ( '000' ha)
23.27
42.88
32.27
60.68
68.70
195
Iringa Production ( '000' tons)
Total Area SH
35.27
52.93
21.16
41.41
57.43
63
93.63
130.73
144.28
65
Southern Highlands (SH)
*Morogoro Area ( '000' ha)
*Morogoro Production ( '000'
tons)
Mbeya Area ( '000' ha)
Mbeya Production ( '000'
tons)
87.70
90.83
Total Production SH
198.51
125.99
64.66
116.96
122.77
-38
Total Area
157.12
257.74
315.45
348.07
371.05
136
Total production
296.34
477.32
469.06
499.78
500.74
69
Source: Statistics Unit-Ministry of Agriculture, Food Security and Cooperatives
The production System
Sunflower is a crop which, compared to other crops like maize and sorghum, performs well under
low rainfall conditions. This crop grows very well in drier areas of the country like Dodoma and
Singida, due to their favourable climatic conditions11. Sunflower adapts relatively well to a wide
variety of soil types. It can be planted over a period of at least three months and is usually cultivated
in rotation with maize or sorghum.
Sunflower is produced in both pure stand and intercropping systems depending on the scale of
production. Smallholder farmers commonly intercrop sunflower with other crops such as maize,
cowpeas, sorghum etc. while larger scale farmers grow sunflower on pure stand.
26
In the areas visited the majority of farmers typically produce sunflower intercropped with maize,
(six rows of maize to one of sunflower), cowpea and sorghum. But larger scale farmers produce as a
pure stand.
The most widely grown sunflower is a traditional variety that has been recycled over many years
and is genetically degenerate resulting in average yields of 250 Kg per acre (600Kg/Ha) with a low
oil content. This compares unfavourably with potential yields of more than 1,370 Kg/Ha (FAO
2005), a gap of some 56%. However, two improved varieties are available namely Rekord and
Kenya Fedha both of which are open pollinated varieties, (OPVs), but small farmers are resistant to
purchasing these due to the perceived high price.
Crop Husbandry
Farm Technology: Poor technology adoption by farmers is among the factors that limits
improvement in a sunflower and other agricultural commodity production and productivity as
shown in the situation analysis, below, of farm technology applied for sunflower seed production in
Iringa region.
Farm implements: Most of land clearing is done by hand hoe and axes, land cultivation is done by
oxen (60%) of farming households while 30% use hand hoes and (10%) tractors. Simple farm
implements are used in performing other activities such as weeding. Farming practices show that
sunflower cultivation can be suitably handled using a plough as primary tillage tool.
Fertilizer application: The use of fertilizers on sunflower in the region is relatively low compared
to maize. It was reported that farmers normally use Urea, SA and CAN. The reasons given are that
fertilizer is normally not available or fertilizer is expensive. It was also observed that maize is
usually be considered the primary crop and due attention given to it instead of other crops.
Compared to grain crops, sunflower12 utilizes soil nutrients exceptionally well. The main reason for
this is the finely branched and extensive root system. The roots come into contact with nutrients
which cannot be utilized by other crops.
Agro-chemicals: Little or no chemical inputs such as pesticides are used for the sunflower. The
extension officers who were interviewed confirmed that there is insignificant application of
herbicides, fungicides or pesticides applied to sunflowers farms in the region.
Labour Force: Labour utilisation is either in the form of household family labour, or, in a few
instances hired in labour. In the case of family labour, this is generally not given a monetary value.
Farmers rely mainly on family labour for production of sunflower oilseeds.
Pests: Include Birds, (esp. Quelea), Cutworm, Rodents, Sucking insects, Fungus rots.
Indicative Crop Gross Margin Analyses in Annex C 2, show that even without inputs and using
recycled seed there is a positive gross margin. However, by following recommended practices there
is an indicated incremental benefit of 244% over the traditional methods. In conjunction with an
FAO Agribusiness Specialist, a break-even analysis spreadsheet has been developed for
distribution.
12
Sunflower normally reacts well to nitrogen and phosphorus fertilization where there is a shortage of these elements in the soil. It is
therefore essential that any fertilization program for sunflower should be based on the soil analyses .
27
3.6 Processing
Small processors extract oil from seeds using the cold pressing method. At micro and farm level
this is mostly done using a simple ram press, but much processing is now carried out using
expellers which are mostly used at a fraction of their capacity. These are often located in premises
that leave a lot to be desired by way of cleanliness and hygiene. Expressed oil is filtered prior to
sale. There is no refining or solvent extraction facilities outside of the major processors.
The major sunflower oilseed buyers and processors in Tanzania include Mount Meru Millers
(Arusha), Oils Mills (Singida), Mohamed Enterprises (Dar es Salaam), and Murzah Oil Mills (Dar
es Salaam). These are producing refined edible oils for markets in the major towns and cities and
regionally, whereas in the rural and peri-urban areas much of the oil is supplied by micro and SME
processors. Of these there is a minority that are registered whilst the informal majority are
unregistered and unlicensed. This puts the registered processors at a disadvantage in that the
unregistered processors pay no dues or taxes and are thus able to operate at lower margins. Taxes,
duties and fees payable by registered processors are shown in Annex C3.
IVORI, a large food processing company in Iringa, stopped processing sunflower in 2011 because it
claimed that small distributors were buying its oil, adulterating it with palm oil and selling it as
sunflower oil at cheaper prices. It also quoted problems with the complicated taxation system and
the opportunity cost of capital which could be put to better use.
Analyses of processors undertaken by FAO in the SH in 2011, illustrated in Annex C3, indicate that
they are operating at above break-even level for both price and volume for oil and cake.
Nevertheless variable cost are considered to be exceptionally high as a proportion of total costs due
mainly to the cost of crushing seed. Obviously variations in costs and prices will affect this but the
price of seed in August 2012 was reported to be between TSH500 – 600 per Kg which is a 50%
increase over 2011. Clearly demand exceeds supply which may force some inefficient producers to
close but will also encourage farmers to produce more until such time as prices stabilise within a
range. Perversely, however, the situation reinforces the need for processors to pursue economies of
scale and to form closer relations with farmer producers. A break even analysis spreadsheet has
been developed and circulated to selected processors for comment
Apart from the large industrialised companies there is no refining capacity available to SME
producers thus their product is only filtered crude oil. This is subject to rapid deterioration with a
consequent short shelf life, or use-by period. With such a large number of processors the quality and
content of the oil is questionable and of unknown provenance. Refined oil, on the other hand, has
the gum and wax removed and the acidity neutralised which prolongs the shelf life considerably.
Thus, there is a need for investment in local refining capacity so that oil can be produced to the
required standard. This implies additional investment which is outside the scope of most SME
processors and of questionable viability so long as unregulated crude oil continues to be freely
available at cheap prices. On the other hand, investment in refining capacity requires greater
economies of scale which do not at present exist in the SH but which could be realised by more
horizontal integration of processors to invest collectively in refining capacity.. Indicative
investment costs of installing a basic refinery, as manufactured by SIDO, are in the region of $50,
000, but operational costs for this equipment are as yet unavailable. In turn this implies the need for
upgrading the business skills of producers in forming companies and joint ventures.
It is the responsibility of the Tanzania Bureau of Standards to set standards and the Tanzania Food
and Drugs Authority to apply approved standards and regulate production through the analysis and
registration of products and the licensing and inspection of premises. However, these institutions
28
have severe budget and staffing restrictions and are unable to undertake their statutory duties in the
field to the required level. Explanation of the roles of TFDA and TBS are shown in Annex D1.
3.7 Wholesale & Retail Distribution
The large producers supply double refined oil to both a wholesalers and retailers in the cities but
some crude oil is also finding its way onto the supermarket shelves in Dar es Salaam. These
products are labelled and dated but the expiry date is 12 months after packing which is not in
keeping with the short shelf life of crude oil as it starts to deteriorate and decompose towards
rancidity after one month.
Crude oil is wholesaled from the factory where a significant proportion is sold loose by processors
to customers who bring their own containers. More often than not these have been re-used several
times which only advances the onset of rancidity.
Retail marketing arrangements are almost entirely informal and fragmented. Much crude oil is
found for sale in bazaars and along the main roads although at least one processor in Morogoro,
after training from FAO, is selling his labelled product through his own retail outlets. Although it
was reported that registered retailers may only sell refined oils many are obviously ignoring this.
There is very little, if any, relationship between the urban supermarkets and the producers of crude
oil except to a minimal degree.
4. Systemic Constraints and Upgrading Opportunities
4.1 Constraints Related to Business Enabling Environment
Issue: According to the World Bank, Doing Business 2012, Tanzania ranks 127 out of 183 countries
with the regional average being 137. Concurrently the World Economic Forum, World
Competitiveness Report 2011-2012 ranks Tanzania 120 out of 142 citing the major reasons in order
of priority as; Access to financing, Corruption, Tax rates, Inadequate infrastructure, Inflation and
Inefficient government bureaucracy. This does not bode well for encouraging inward investment,
nor internal investment in new, or the expansion of existing, businesses. Nevertheless it appears
that, so far, in the oilseed sub-sector, business is expanding despite the endemic constraints. It
remains to be seen if the necessary investment becomes available to take it to the next level.
29
4.2 SWOT Analyses of the Value Chain.
Strengths






Weaknesses


A large number of primary producers
ensuring continuity of supply and also
sharing in the benefits
Entrepreneurial processors looking for
opportunities to enhance the value chain.
Apparent ready market for sunflower oil
and for cake.
A few large producers with the potential to
stimulate local production.
Increasing number of farmer Producer
Groups to enhance bargaining power and to
engage in contract farming.
Win-Win at every level of value chain.









Opportunities










Uncoordinated value chain.
Poor yields of primary producers resulting in
shortages of crushing material.
Little or no R&D for oilseeds that are
classified as minor crops. No new varieties
in the pipeline.
Cheap imports of palm oil without import
tariff.
Poor business environment that discourages
investment.
Too many processors operating at minimal
capacity.
Minimal regulation and control of the
quality of locally produced edible oil.
Lack of direction and policy for edible oils.
The inability of government agencies to
perform their statutory duties without
operational funding.
Poor support services especially research
and extension.
Degraded rural infrastructure
Threats

TEOSA to coordinate the whole value chain.
Considerable opportunities for import
substitution.
Re-impose duty on imported edible oils.
Potential for investment in refining capacity.
Potential for regional exports of oils, cake
and finished products.
Continued formation of registered farmer
Producer Groups leading to the
commercialisation of agriculture.
Encouragement of the adoption of
Conservation Agriculture for all farming
systems.
Introduction of soya as a complementary
oilseed cash crop.
Potential for outsourcing the functions of
some government agencies to the private
sector.
Former civil servants to establish companies


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Climate change with the potential for crop
failures.
Bans on the export of food crops and
products.
The uncontrolled supply of counterfeit
seeds and chemicals.


to tender for government service contracts.
Consolidation of processors into larger units
to take advantage of economies of scale.
Establishment of a stability fund to mitigate
the effects of climate change.
5. Vision and Strategy for Improved Competitiveness and Growth
5.1 Vision
Draft policy statement.
To achieve national self-sufficiency in edible oils with an exportable surplus that results in
increased rural incomes and an improvement in the trade balance of payments through the reduction
in the importation of edible oils.
5.2 Strategic Issues Synthesis
Critical Issues Affecting the Sunflower Value Chain
There is a seemingly endless list of issues, and issues within issues, mitigating against oilseeds
production but the more important ones have been identified for consideration below.
At Farmer level
Issue: Very low yields of seed production leading to shortage of supply to processors.
Recommendation: Use of improved seed would have the biggest single effect on yield with or
without fertiliser. This requires demonstration and assistance from processors in providing seed.
Registered farmer groups to be encouraged to produce QDS under District supervision.
Issue: Low bargaining power of farmers.
Recommendation: In order to take advantages of economies of scale smallholder farmers need to
integrate horizontally into registered producer groups to enhance their bargaining power which as
individuals is very weak. This would also enable them to enter into contract farming arrangements
with processors to their mutual benefit. The IFAD funded MUVI project is supporting the formation
of producer groups in the Southern Highlands but successful models are also emerging in the
Central Corridor supported by SNV and RLDC with CEZOSPA. Further development of these
groups into Limited Companies would lay the foundation for the commercialisation of agriculture.
Issue: Low level of farming practices and technology.
Recommendation: Provision of improved extension services. This could be provided by some of
the bigger processors as well as provision of contracts for Pay for service Providers specialising in
sunflower as part of the farming system.
Issue: Land degradation and reduced fertility levels.
Recommendation: Adoption of Conservation Agriculture across all farming systems and crops will
enhance soil fertility as well as reducing the need for cultivations and fertiliser application resulting
in a reduction in costs and increases in yields. Consideration should be given to the introduction of
soya production into the farming system as a complementary cash crop to sunflower. Being
31
leguminous soya would enhance soil fertility and at the same time increase the availability of edible
oil. This to be integral to any extension provision.
Issue: Limited opportunities for alternative income generation.
Recommendation: Introduce apiculture as part of the sunflower recommendations. This will
improve pollination and yields as well as providing additional income.
Issue: Counterfeit seeds, chemicals and diluted fertilisers.
Recommendation: Districts need to enhance their inspection services and relationship with TFDA,
TPRI, and TOSCI, to undertake spot checks for analysis. Offenders to be prosecuted according to
law.
Issue: Unregulated weights and measures lead to cheating of sellers of seed at farm level.
Recommendation: MIT to mobilise its weights and measures department to sensitise rural
population to standard weights and measures.
At Processor level
Issue: Shortage of availability of crushing seed.
Recommendation: Processors to form much closer relations with registered Producer Groups for
their mutual benefit. Producers could assist farmers with advice and inputs on credit and farmers
would produce on contract to the processor. This would serve to cut out the middle men thus
reducing costs and increase farmgate price.
Issue: Inadequate storage facilities in rural areas, in most cases leads to products being sold directly
from the field. During harvest seasons this practice tends to depress producer prices, leading to a
reduction of farmers’ income. In addition, inadequate post-harvest storage facilities causes
deterioration in the quality of agricultural products. It is estimated that in Tanzania, post-harvest
losses range between 25-35 per cent of yields.
Recommendation: Further attempts need to be made to establish a warehouse receipting system.
The provision of which would provide collateral for processors to obtain working capital to build up
stocks of crushing seed. The same would be applicable to registered producer groups. However, the
Warehouse Licensing Board is short of staff and operational budget so is unable to perform its
statutory duties. Alternatively storage needs to be either rented from the private sector or purpose
built with a mortgage facility.
Issue: Shortage of working capital to purchase stocks of seed.
Recommendation: Banks are making seasonal loans for this purpose to some registered processors
who are well established and who have a good track record. It may be that the banks need to employ
agriculturalists to technically appraise applications for credit.
Issue: Lack of adequate business skills.
Recommendation. Further training of processors and farmer group leaders in basic business
management is required. However, this needs to be followed up with on the job mentoring to assist
the trainees to put their theory into practice.
Issue: Lack of refining facilities to produce oil to required quality standards.
Recommendation: There is potential for some horizontal integration between processors to invest
collectively in a refining facility. This would probably be in the form of a limited company or
partnership that would provide a refining service to producers of crude oil that could then be
registered, branded and labelled with the TBS logo.
32
Issue: Large numbers of micro unregistered processors undercutting registered processors.
Recommendation: District councils to register all processors. Some exemptions may be made for
those operating only a ram press.
At Market Level.
Issue: Consumers unaware of quality differences of edible oils across all market levels.
Recommendation: TBS to seek sponsorship from the industry to undertake a public awareness
campaign to inform consumers of the qualities of different oils and of the benefits of refined oil.
Issue: Supermarkets stocking unregistered, untested crude filtered oils with 12 month use by dates.
Recommendation: TBS to inspect stores for compliance with health standards.
Institutional and Governance level.
Issue: Corruption, euphemistically known as Rent Seeking, that is endemic throughout the country
and is an additional cost to commerce at all levels of the value chain and another disincentive to
investment.
Recommendation: Application of the rule of law.
Issue: The inability of government to deliver on its policies and programmes resulting in poor and
unregulated sectoral performance. All government ministries and agencies visited were
underperforming due to shortages of staff and operational budgets.
Recommendation: If the government cannot undertake its statutory duties then consideration could
be given to streamlining the civil service and contracting these out to accredited private sector
companies. Many government agencies have highly qualified and skilled staff who are sitting idle
due to the above reasons. These staff could be encouraged to form companies to provide required
services to government on contract. Inter alia, this could apply to agricultural research, food and
drug standards and inspection agencies.
Issue: Ministries of Agriculture and Trade do not coordinate enough resulting in confusion and
duplication of effort.
Recommendation: Cabinet Office to form a joint working group between ministries as appropriate.
Issue: There is no policy for oilseeds which results in uncertainty for investors.
Recommendation: MAFSC to formulate a policy for oilseeds to include tariffs on imported oils for
refining to provide a level playing field for local producers and processors.
Issue: Oilseeds are classified as minor crops by MAFC and thus do not receive priority
consideration. Local Government Authority planning and budgeting overlooks edible oilseeds
development.
Recommendation: Reclassify oilseeds as major crops equal to food crops such as maize and rice
and provide the necessary support.
Issue: Importation of cheap crude oils is distorting the local market and undermining investment in
local production. For example the East Africa Community Customs Compliance in 2009/10, 10%
tariff on imported crude palm oil was reduced to zero. There is also uncertainty as to the quality of
these imported oils.
Recommendation: Reinstate the 10% import duty on imported oils and undertake inspection and
analysis of oils on arrival at the port.
Issue: Multiple taxation systems set by the local government authorities.
Recommendation: Review and simplify the taxation system.
33
Issue: Protracted government bureaucracy e.g. the issuing of business licences or export permits,
limits enterprises incentive to engage in processing as a business.
Recommendation: None offered.
Cross Cutting Issues.
Issue: Weak vertical linkages affecting the whole chain. Actors and enterprises are not
coordinating, which limits their capacity to influence domestic policy and to collectively access
inputs.
Recommendation: Coordination is required for the whole value chain encompassing all actors to
generate communication and trust at national, regional and district levels. The role of TEOSA
should be expanded to undertake this. SNV have experience of this in Uganda and the model could
be adapted to Tanzania.
Issue: Poor condition of rural roads causing increased transport costs.
Recommendation: This is the responsibility of government at various levels. Farmer and Processor
Associations to pressure Regional and District Councils to undertake their statutory duties. TEOSA
to make representation to Central Government.
Issue: Confusion regarding land rights, tenancy and ownership leading to disputes over usufruct
and a disincentive to invest in land based industries.
Recommendation: This will require a long-term solution but which needs addressing with
immediate effect. The implication is for the undertaking of a cadastre followed by a system of land
title either freehold or leasehold. These provisions could be made at district level on an interim
basis by issuing Temporary Occupation Certificates of limited duration until such time as surveys
are carried out.
Issue: Absence of reliable statistics available for analysis and planning purposes.
Recommendation: Introduction of statistically based planning process into MAFSC and strengthen
the statistics department. Provide support for the preparation of a Farm Management Handbook
perhaps in conjunction with a University.
34
5.3 Value Chain Competitiveness Strategy
Table 12 Some Characteristics that favour competitiveness of small firms as compared with
the sunflower value chain.
Characteristic
Seasonal in nature
Yes
Presence in sunflower value chain
Low capital requirements
Varies according to actor but relatively low.
Relatively labour intensive
Yes at farm and processor levels.
Non-repetitive production process
No, the process is repetitive
Small production volumes.
Yes at farmer level but economies of scale
needed by processors..
Vertical linkages
Very weak or non-existent in some instances
Horizontal linkages
Very weak.
Win-win relationships
Seemingly present at all levels.
Access to new skills and technology
Very weak. No R&D.
Good business enabling environment
Poor and needs to improve.
Transparency
Required at all levels. Especially at decision
making levels.
Vertical and horizontal cooperation is essential to move a product from the primary producer to the
market.
Horizontal integration usually leads vertical integration.
5.4 Proposed Strategy Components
Any proposed strategy should be considered within the context of a Public-Private Partnership,
PPP, whereby the public sector provides the economic environment in which businesses can
flourish whilst the private sector provides the necessary investment. A suggested list of
commitments for a PPP for sunflower is presented in Annex D2.
Strategic components would include:



Improvement of the business environment.
Implementation of policy and statutory duties to provide confidence and security for VC investors
and consumers.
R&D requirements for crop production and farming systems.
35





Enhanced support to primary producers through re-organisation (or use of private sector providers)
of extension services.
Enhanced access to business advisory services with the inclusion of mentoring.
Consolidation of processors into viable entities.
Application of quality standards.
A well-coordinated and fully commercialised edible oil value chain producing a high quality product
for national consumption and export.
Annexes
36