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2012-12-30 | Discussion Paper

The Supply of Inorganic Fertilizers to Smallholder Farmers in Tanzania, Evidence for Fertilizer Policy Development

Kirama, Stephen, Onesmo Selejio and Todd Benson. 2012. “The Supply of Inorganic Fertilizers to Smallholder Farmers in Tanzania, Evidence for Fertilizer Policy Development” IFPRI Discussion Paper 01230
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Inorganic fertilizer is one of a handful of agricultural technologies that have immense potential for raising the productivity of poor smallholders, enabling them to increase income, accumulate assets, and set themselves economically on a pathway out of poverty. This paper presents the results of a broad study of fertilizer supply to smallholder farmers in Tanzania that was done to assess whether the taxes (explicit or implicit) that are applied at various points along the fertilizer importation and marketing chain or the absence of key public goods and services reduces the access that smallholder farmers have to fertilizer. The study involved a review of the literature of fertilizer supply, demand, and use; interviews with key participants in fertilizer importation and marketing in Tanzania; and two surveys—one with farmers and the other with input suppliers—in three farming areas where more fertilizer is used than is the norm for the country as a whole

The broad finding is that the government of Tanzania has taken some action that has been conducive to improving farmer access to fertilizer. Although the pool of importers and wholesalers of fertilizer in Tanzania remains quite small, a competitive market exists. Efforts are being made to strengthen the retailing sector of agricultural inputs by building the commercial skills of private traders. Although Tanzania provides an expensive fertilizer subsidy for several million smallholder farmers, the design of the subsidy program, when compared to such programs in other African countries, generally does not work against the interests of private fertilizer firms. Although a few direct taxes and fees on fertilizer supply activities remain that seem difficult to justify, in general fertilizer importation and marketing activities in Tanzania are relatively unencumbered in this regard.
But there are areas where government inaction is having an adverse effect on efforts to increase use of fertilizer. The most important of these missing public goods is not specific to fertilizer but is implicated in broad efforts for increased economic growth in Tanzania—extending the transportation infrastructure; upgrading Dar es Salaam port; and enhancing access to credit for small enterprises, including farmers; among others. However, there are several fertilizer-specific initiatives that the government of Tanzania should undertake to enhance farmer uptake:
 • Overcoming information constraints that smallholder farmers who might use fertilizer face. This includes information both about the proper agronomic use of fertilizer on specific crops under specific agroecological conditions and about the proper economic use of fertilizer under changing input and output market conditions so that farmers can derive reliable profits from their use of the technology.
• Regulatory reform. A considerably lighter regulatory regime than what is now under consideration would allow more fertilizer into Tanzania, resulting in lower costs for farmers. We argue that efforts to ensure the quality of fertilizers in open and competitive markets are best achieved through self-regulation processes tied to sufficient information about product quality for farmers and ample choice in suppliers, rather than through heavy regulation and costly enforcement.
• Addressing agricultural development policy inconsistencies. It is illogical that the government of Tanzania spends a substantial portion of its budget on fertilizer subsidies at the same time as it restricts the market for the maize and rice produced using that fertilizer by closing its borders to trade in staple foods in the interest of national food security. Strengthening agricultural output markets for Tanzanian farmers, both domestically and regionally, is as important to sustainably increasing uptake of fertilizer by farmers as undertaking any fertilizer-specific initiatives. The government of Tanzania must seek other mechanisms to ensure national food security than restricting output markets for its farmers.