A significant quantity of Tanzania’s maize is produced by smallholder farmers. Around 65
percent of Tanzania’s households grow maize; these include a large proportion of Tanzania’s
poorest households, making maize one of the key markets for poverty reduction efforts. The
maize market reforms increased competition among buyers and made maize more attractive
for production. Market prices went up and the area of maize harvested increased. Yet despite
the gains accrued through the reform effort, the maize market suffers from high transaction
costs, especially due to poor rural roads, hurting many poor producers and consumers.
Marketing costs are largely determined by transport costs. Other important costs are loading
and unloading of trucks at various stages of the supply chain. These costs arise from the need
to have several layers of traders and markets before the loads are consolidated for
transportation by trucks. These costs are also inflated by weak enforcement of contractual
agreements, weak standard/grade compliance, and thus, a lack of trust between sellers and
buyers, as well as unloading required for taxation purposes. While these costs are high, public
interventions are unlikely to succeed, as it reflects the thin market structure, small-scale
farming, and poor rural roads. At the same time, non-tariff barriers such as costs at
weighbridges and roadblocks and export ban could and should be addressed to reduce
marketing costs.
Improving the quality of local roads (district and rural), reducing the costs of fuel, and
promoting load consolidation will be critical for increasing market efficiency and prices for
maize producers. Public investment in transport infrastructure should be prioritizing toward
connecting rural areas that offer a combination of rich natural and economic potential and
high population densities to major deficit markets, both domestic and across the borders. It
goes mainly about district and rural (local) roads that connect primary and secondary markets
with national roads. Investments in wholesale markets and promotion of private storage are
also desirable to increase loads and improve transparency of price formation.
In addition, non-tariff barriers need to be reduced, including the export ban. The latter should
be lifted as soon as the food security situation permits. The export ban reduces prices for
producers, especially in southern Highlands, and is unsustainable in the long term. Its use
also makes it unprofitable to invest in private storage for temporal arbitrage and risk
management tools.
The recently-introduced inputs subsidy programme is an important program to induce supply
response in the short run but its impact would not last without reduction in marketing costs.
This makes it urgent to allocate more public expenditure for local roads and address nontariff
measures to preserve the benefits being generated by the input voucher scheme and
other productivity-enhancing programs in the agriculture sector.