Value Chain Solutions (VCS) had the opportunity to visit Tanzania a number of times over the years to conduct various in-country projects for both private sector and NGO clients. Having explored the country quite extensively over a 15-year period and hence developing an in-depth understanding of and gaining insights into the country, we wanted to highlight some impressions obtained.
Geography, Topography and Climate
Tanzania contains a vast mix of microclimates affording the opportunity to produce a wide range of agricultural products within a relatively small radius. In the South, the highlands have fertile soils where products that require a mild to cool climate can be produced. This includes grain crops such as wheat, high-value crops such as potatoes and seed as well as permanent crops such as apples. The central and north-western parts of Tanzania are much warmer and are therefore suited for the production of crops such as sunflower and maize, along with high-value crops such as vegetables and permanent crops. The north, specifically the area around Arusha, also has a temperate climate. The coastal belt of Tanzania, with its tropical climate, is of course suited for the production of tropical crops. Rainfall in Tanzania varies significantly from subregion to subregion. On average, the rainfall is 600 mm per annum. However, one will find areas where rainfall is closer to 1 000 mm per annum on average and other areas where rainfall can be below 400 mm per annum, or even lower.
While it is evident that Tanzania offers significant opportunities from a food and beverage production perspective, there are challenges including infrastructure conditions and availability, market structures and the ability to trade efficiently.
The country has several access points, the main one being Dar es Salaam (port and airport). Given the number of neighbouring countries (Kenya, Uganda, Rwanda, Burundi, DRC, Zambia, Malawi and Mozambique), numerous land access options exist for conducting trade and more importantly, producing and shipping products via deep sea to the Middle and Far East. Road conditions vary significantly from excellent to non-existent and hence logistics in Tanzania can pose a significant challenge. For this reason, many high-potential agricultural production areas are either not developed at all or are developed at a fairly low level and not developing as fast as they can, considering their potential.
The Tanzania consumer market is a dichotomy, with a significant group of consumers based in urban areas such as Dar es Salaam, Mbeya, Mwanza, Lake Victoria and its surroundings and Arusha and its surroundings.
On the other hand, a large percentage of consumers are rural dwellers based in small towns or on farms. Per capita income is generally low, but there are some pockets of higher per capita income in very specific areas. This creates a challenge for any consumer product to be sold in Tanzania. Discretionary type products such as beer are consumed, but brands that do well are brands that would typically be perceived as economy type brands in more developed economies. In terms of value chain development, value chains are generally poorly developed, with poor connectivity between the value chain participants. However, where products that get exported are produced, the value chains are much better developed and more efficient. The scattered nature of consumers and the generally low levels of income suggest that route-to-market strategies and tactics need to be well thought through and tailored towards serving the consumer in a sustainable and profitable manner.
The political economy is highly dependent on a few key private sector players engaging with a government that prefers to strongly influence key economic activities.
This creates a situation whereby Tanzania unfortunately does not attract much-needed foreign direct investment and whereby incumbent private sector players tend to take up a larger percentage of market share and maintain it. The result is that new entrants find it extremely difficult to set up shop and gain traction quickly.
Tanzania remains a country and economy that offers vast potential in terms of the production of food and beverage products for both domestic and export sales. Infrastructure and the political economy of the country, however, hinder the development towards full potential. Route-to-market strategy and tactics need to be well thought through and tailored towards the unique environment found in the country. However, from a production and international export perspective, Tanzania offers high potential opportunities. It is therefore important for companies to keep their eye on developments in Tanzania. Value Chain Solutions is privileged to be involved and has gained good insights into such opportunities.