Today we speak to Tamahi Kato, a researcher at the Institute of Development Studies in the United Kingdom, about agricultural input subsidies and their effect on poverty reduction and farmers’ livelihoods in the United Republic of Tanzania.

DD: What in your view is the root cause of poverty in the United Republic of Tanzania? Who is most affected?

TK: After independence, Julius Nyerere announced that the country would follow the African socialist political system. In response to the foreign-owned plantations, which funnelled profits to their home countries, he put emphasis on rural development and equality among people, and announced that ujamaa (a Swahili term for familyhood, where people live and work and share profits together) would be a guiding principle of his policies. This was later followed by the “villagization” of production, in which people moved to so-called “development villages”, where they were provided with capital for agriculture and social services. The state controlled the marketing and prices of crops and agricultural inputs (pesticides, seeds, fertilizer and feed) and introduced cooperatives and district development corporations for the promotion of agricultural production and marketing.

However, agricultural production was not high, and industry was held back owing to its control by the government. After the international economic downturn in the 1970s, the country turned to economic liberalization in the mid-1980s.

Since the 2000s, the United Republic of Tanzania has achieved stable economic growth, which averaged 6.4% annually from 2002 to 2008. Since 2007, mainland Tanzania has showed considerable reduction of poverty: from 33.2% in 2007 to 28.2% in 2011/2012—rural areas, however, still have a high incidence of poverty (37.6% in 2007 and 33.3% in 2011/2012). However, my experience as an aid worker from 2002 to 2005 and during my fieldwork for research in 2012–2013 gives me the impression that the standard of living in rural areas has not changed much in the past decade or so. The rural areas remained poor because of low agricultural productivity and a lack of transport infrastructure, access to markets, inputs and capital, credit, social services, information, etc.

DD: What created the gap between people in rural areas and the cities?

TK: In rural areas, the majority of people are engaged in agriculture and are predominantly small-scale farmers with about two hectares of land; crop productivity has remained low. Urban areas have attracted more investment and achieved growth.

DD: Have agricultural subsidies helped farmers?

TK: Following a successful model in Malawi, “market smart” agricultural input subsidies have been widely adopted in sub-Saharan African countries since the late 2000s as a way of improving crop yields. These subsidies promote private sector development by using vouchers and involving agro-dealers and rural finance institutions. Studies suggest that input subsidy programmes have been effective in raising fertilizer use, average yields and agricultural production, but their success is affected by other factors (mainly rain) and is largely dependent on their design and implementation.

Evidence from Malawi suggests that its Farm Input Subsidy Programme was effective in increasing production/yield and in increasing net crop income, food consumption and the household income of maize producers, although the latter impacts were limited. However, other studies in Malawi and Zambia suggest that subsidy programmes are inefficient for wealthier households that purchased inputs at commercial prices—previously purchased inputs were displaced by subsidized inputs.

Several studies have been conducted on the implementation and impacts of the United Republic of Tanzania’s recent agricultural input subsidy programme. These suggest that about 60% of the vouchers were obtained by village leaders—the beneficiaries were better off and were better connected to village leaders than the non-beneficiaries. The beneficiaries experienced maize/rice yield gains compared to non-recipients; however, the profitability of input use for average farmers without subsidy was low, and depended on the input use efficiency and agricultural output prices. The programme made a positive effect on farmers’ knowledge about agricultural inputs, and a significant number of programme graduates continued to buy the commercial inputs.

DD: What has your research revealed?

TK: I am using a mixed-method approach in the United Republic of Tanzania, which gives me detailed findings on whether the programme was effective in improving yields and reducing poverty, and on how it was implemented. The preliminary findings from my research in the Ruvuma region include that the vouchers had neither a significant impact on maize yield nor on poverty, while had mixed impacts on household assets.

The implementation of voucher management has challenges, especially in targeting, owing to collusion and fraud. Fraud and unethical behaviour have also been found in other countries. However, the programme seemed to increase mono-cropping, and to increase input use by non-recipients, which may be due to an educational effect for the non-recipients. My detailed study on the country could provide insight and suggestions on how programmes should be designed and implemented, not only in the United Republic of Tanzania but also in other sub-Saharan African countries.