WITH fiscal 2021/2022 budget day across the corner, the expert and business people, viewing forthcoming submission contrast previous budgets, the budget to be read, will at least give a focus on key issues to help enhance the competitiveness of Tanzanian products in both for the domestic and international markets.
In my opinion, it is not adequate to think that revising the existing tax rate, or studying of regulatory framework or more importantly investing in technology alone would be sufficient to boost the competitiveness of locally produced products. What is necessary based on evolving market dynamics is value addition and value creation that continue to entice buyers.
In line with what is expected to crop out of the big budget for 2021/2022, of late, the Deputy Minister for Industry and Trade, Exaud Kihage, when inaugurating an exhibition which was structured by small industries development organisation aka SIDO, resonated on the need for small and medium enterprises to continue producing quality products that would permit them not only to fight competition in the local market but enter foreign markets competitively.
Much as quality products would make small and medium enterprises and agro-processors at whatever level survive in the markets, without vigorous strategy designed to uplift these processors to add value and create value, Tanzania products will not easily be able to infiltrate competitive markets.
Observations resonated by the trade and industry permanent secretary at the Tanzanian National business council (TNBC), sounds great but addressing to remove hurdles plaguing Tanzania’s business environment is one thing but conforming to invisible hands that run competitive markets is most important mainly on markets served by imports from various sources that Tanzania may desire to enter.
For instance, the term value-added especially on agriculture- related products gets pitched around a lot, but then what does it mean? What follows might elicit heated debate, but through my assessment, many of our agronomists in Tanzania want to increase productivity and adding value to raw agricultural products to reap good returns of their investment.
To realize this, on the other hand, agronomists, in my opinion, need to think in new and different ways and break away from centring all of their efforts on production, which has remained to be a noise from those who think to know more but narrow-minded. But what could be the best options to add value or specifically capture value or creating value for our agronomists?
Available studies confirm that capturing value relates to capturing some of the value that is added to a product beyond production by handling or marketing. Unquestionably, to date studies on these issues shows that the agronomist’s share of every shilling that end-user i.e. consumers pay for food, for example, has been decreasing over the years.
Please, note agriculture is just an example in point, but this trend also happens to other products. To place my run-in perspective, in the African context, reliable in book form data and its analysis illustrate that returns on farmers especially small ones feeding most of us in urban areas continue to drop over years. In the 1970s, for instance, according to data was about USD 0.33 per USD 1 invested and in recent years, this return to farmers has dropped to about less than USD 0.16 per USD 1 worth spent.
The agronomist in Tanzania and other raw producing nation similar to Tanzania, as a whole continues to get less and the rest profits go to processors, distributors and marketing agents. Local manufacturers and processors cannot compete competitively to enjoy what the export market offers.
Such fact alone amongst others sounds disheartening but illustrates the potential opportunity to attain more value to help boost processors and in this case, farmers are needed. But the question is how can this be achieved? One very successful option that could help can be through creating alliances in cooperatives or limited-liability businesses that can chain resources to achieve common goals.
Equally, direct marketing could also serve as means to capture the value and this can be done in a variety of ways on both a small or large scale. In addition to value addition, creating value is another strategy that could also help by involving developing products that are differentiated in some way.
The key to success, in my view, is to align how products are valued to make consumer feels there is added value to the product(s). Thus why from a humble balanced economic viewpoint when two products or services have similar core features, or can be sourced from more than one area and above all can be produced by different firms, competition results.
And if our products aren’t in line with evolving trends, it will be next to impossible to penetrate the export market competitively or prosper well in emerging markets. A competition-based pricing strategy involves setting product prices based on competitors’ prices and production costs rather than on their costs and profit goals.
If there is a close gap between costs and the actual selling price then there is going to be even greater competition on price in addition to quality. And failure to have a product(s) in a way it can appeal to buyers, no matter how much can be available domestically; such products cannot competitively and easily sail in the markets, especially markets beyond county’s borders.
Thus why in a perfect world there would always be a larger margin between costs and selling price to comfortably increase profits. But in real terms, there is no perfect world that could permit a country such as Tanzania sale its products without a designed strategy in place to penetrate such a market.
Thus why, the expected reading from the finance and planning minister, to be tabled this week, need to go beyond business as a usual statement.
Reading 176 pages document presented in the parliament for fiscal budget for 2021/2022 ministry of agriculture, for example, one easily can’t miss anxiety from the legislators call for measures that would help to raise the contribution of the agriculture sector to GDP at more than 26.9% recorded in 2019.
But the key question remains how do we as a country achieve a higher contribution to GDP if there isn’t a robust strategic plan that in my view isn’t anywhere in the Ministers budget speech (agriculture) read in the house during the 2021/22 fiscal budget presentation?
I might be mistaken but to the best of my knowledge is the low and untimely application of science, technology and innovation in agriculture in Tanzania responsible for the inability of the nation’s agricultural products to compete globally when compared to our neighbours within the region.
Where are we getting approach wrong? When are we going to stop with stories arts of reviewing this or revising that on issues that only in my opinion just need less than 20% of effort and resources and instead centre on 80% on setting that would strictly land Tanzanian processors and producers to enter export market competitive?
It is well known across many circles that Africa’s economy is profoundly reliant on agriculture, and going to published data the sector accounts for about 35% of the continent’s Gross Domestic Products (GDP), 40% of its exports and 70% of employment in the content. Based on these facts, Tanzania is well placed strategically as a nation with substantive arable land for various crops.
In my opinion, many challenges confronting the nation as far as export is a concern would be solved if there is in place an approach that would lead to a point of supporting technology advancement in favour of the nation’s industrial economy policy to increase local innovation.
The element of science and technology in modern agricultural practice, for example, is more than 90% if we consider the whole agricultural value chain. It is low at the ease of science and technology in agricultural practice in Africa that has stemmed in low productivity, low harvest and tied with deficiency of value creation, inability to compete internationally happens.
Despite these constraints, I am persuaded that Tanzania goods from an agricultural point of view to industrialbased products have incredible potential to earn enormous revenue both local and forex. What is important is to ensure that within government corridors is to do away with conflict of interest within government institutions.
Revisiting some supervisory issues to make sure they are brought into line with the mission to stimulate domestic production base is essential but more important is how to add value, how to create value and align decisions support Tanzanian based processors to meet market standards that are more and more becoming competitive locally and internationally.