About three out of four households report to have agriculture as their main activity. Even urban households are still involved in crop production.

Indeed, agriculture is an important sector for Tanzania contributing up to 26% of GDP. Typically, farmers produce to feed their families but they also expect to gain revenues by selling their output. When farmers make more income from the sale of their produce this leads to more development in the rural areas, which ultimately impacts positively on the overall economy. This is what has been surmised from the success stories of predominantly agricultural countries, such as Malaysia and Vietnam.

In Tanzania, this kind of impact has not yet been felt – at least not on a tangible scale. Agricultural commercialisation remains marginal in the country as shown by the following statistics from 2011:

• 26% of all farmers did not sell any of their crop production and so were not connected to markets.
• Only 25% of farmers sold more than half of their production.
• More than two thirds of maize farmers did not sell any of their harvest and only 25% of total maize production is marketed.
• Uganda and Kenya have similar statistics. On the other hand, Vietnam moved from 48% of crop production being marketed in 1993 to 87% in 2008.

The livestock sector is even less commercialised than the crop sector. As many as 52% of livestock owners did not get any cash income out of their animals in 2011. Less than 10% of the overall country livestock value is marketed.

The low rate of commercialisation may be explained by many factors such as remoteness, low production, low farm-gate prices, high marketing margins, lack of information, or simply farmers’ unwillingness to participate in the market. Indeed, less than a third of Tanzanian villages have a daily or weekly market where farmers get to sell their produce. For the typical farmer, the closest market is 18 kilometres away from the village centre and more often than not there is seldom any road and/or public transportation service to reach that market. Farm-gate prices received by farmers are a small share of the wholesale price of crops which averages around 60% and 45% for maize and paddy respectively in 2011.

The lack in agricultural commercialisation raises the following questions:

• Should the government invest more in infrastructure such as roads, village markets, etc., to improve farmers’ connectivity?
• Should there be price controls to ensure farmers receive a minimum price from their produce?
• Should taxes on agricultural produce be reduced or abolished altogether?
• Can farmers be directly linked to supermarkets, agribusiness firms and processors bypassing marketing middlemen?
• Should the emergence and development of contract farming with large farms be encouraged?
• Will the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) initiative help smallholder farmers increase production and get more cash income out of their produce?
• How can the mobile revolution help improve agricultural commercialisation?

Note: The statistics above are computed using the 2010/11 Tanzania National Panel Survey, and the crop wholesale prices from the Ministry of Industry Trade and Marketing.

Jacques Morisset is a World Bank Lead Economist based in Dar es Salaam, responsible for Tanzania, Uganda and Burundi.