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Unlocking pulses sector potential amid Covid-19

PULSES sector is a vibrant industry in the country with production around two million tons per year.

According to Tanzania Investment Centre (TIC)’s 2016 statistics, the sector has employed more than three million farmers all over the country. The sector is valued at 200 million US dollars, which is by far higher than the whole of Tanzanite gems exports.

However, since the outbreak of novel coronavirus, the industry is facing a number of challenges from measures that were imposed to flatten the pandemic curve. These responses to contain the impact are divided into two categories; one aimed at containing spread of the disease and another targeting rescuing businesses from collapsing.

Health measures

Some of the steps taken to mitigate the disease include imposed control measures at the ports of entry by installing thermal scanners and deploying health workers to prevent importation of coronavirus; Banning all international flights; and closure of all hotels in Zanzibar. Others are using the media.

The government embarked on sensitisation of prevention measures to the public, like; Hand washing, masks wearing and social distancing. The government closed universities and schools effectively on 17 March 2020. This went in line with discouraging public gatherings within the country to contain the spread of the virus.

However, currently, with an exception to personal prevention measures like, hand washing, masks wearing and social distancing, the rest of the measures have been eased and the situation is nearly back to normal. Economic measures Although the measures applied helped to contain the spread of disease, they posed some negative impacts to the economy.

Measures like banning of international flights reduced tourists which meant losing foreign currency and shrinking domestic consumption.

Also, countries all over the world responded to the pandemic by restricting transportation of both passengers and goods ship. These and other reasons prompted the government to enact measures which sought to bring relief to the situation.

The Bank of Tanzania (BoT)’s Monetary Policy Committee (MPC) which met early May approved various policy measures to cushion the economy from adverse effects of Covid–19, aiming at safeguarding the financial sector stability and continue facilitating the financial intermediation process.

The following are the approved policy measures; lowering of the Statutory Minimum Reserves (MSR) requirement from 7.0 percent to 6.0 per cent with effect from June 8 envisioning to provide additional liquidity to banks; Reducing the discount rate from 7.0 percent to 5.0 percent with effect from May 12 intending to provide additional space for banks to borrow from the central bank at lower cost, expecting to lower banks’ lending rates.

Others were reducing haircuts on government securities, from 10 per cent to 5.0 percent for Treasury bills, and from 40 percent to 20 per cent for Treasury bonds, with effect from May 12.

This will increase ability of banks to borrow from the central bank with less collateral than before Also implored commercial banks to assess financial difficulties experienced b borrowers caused by Covid–19 in respect of loan repayment and agree on the possibility of restructuring of the loans and allowed mobile money operators to increase daily transaction limit to customers from 3.0m/-to 5.0m/-and daily balance from 5.0m/- to 10m/-.

This will encourage customers to use digital payment platforms for transactions, thereby reducing congestion in banking premises. Covid–19 Impact in the Pulses Trade Absence of lockdown has served so well with pulses sector, most especially when compared to our neighbouring countries.

Country’s relaxed position ensured smooth transport of products from upcountry to different ports ready for export, thanks to inexistent travel restrictions between regions. Testimonies by most exporters reveal that they didn’t get any difficulties in accessing port services at the Dar es Salaam port.

This helped Tanzania to export pulses amounting to around 70 million US dollars. The bold move taken by the government to refuse imposing lockdown, an approach taken by many countries in the world–leading to crippling of their economies, has given us an added advantage.

In Kenya for instance, travel restrictions (which included cargo planes operations) have affected exports of agricultural products.

One small rural farmer was reported to have lost unpicked ripe beans estimated to be more than 4,000 US dolars, because he could not be allowed to export thanks to lockdown and travel restrictions within the country. And this is only one farmer. Similar impacts were observed in other neighbouring countries.

Generally, there was minimal impact of the disease especially to local pulses traders who used to supply beans to public schools and colleges. Also, there has been hesitation by financial institutions to lend money to export companies for fear of reduced demand in the overseas markets.

State of Production and Market this Season

Above normal rainfall stands to disrupt this year as many pulses will get destroyed. Also last year’s price has acted as a pull-back factor by discouraging farmers from increasing their planting area. The reduction of production will also be caused by unidentified disease harmful to pulses in Manyara Region.

It is expected that beans production will decline to 1.0 million tons or less from last year’s output that stood at 1.3 million tons. Dry beans harvest has already started in many areas in Tanzania and its shortage is starting to be felt.

In some areas like Iringa, the price stands between 1,700/-and 2,000/-a kilo, up from a range of 1,300/- and 1,500/- a kilo in the corresponding period last year, thanks to scarcity that has befell this season. Other types of pulses are unlikely to be affected because rainfall started when plants were in advanced stages.

Besides, international market signals to be better this season because Market Intelligence shows that there will be huge shortage of chickpeas in India this season due to low production. Therefore, this may create huge market for chickpeas produced in the country, as India’s demand will kick-start around September and October.

The State of Trade Environment in Pulses Sector Last year, we championed the amendment of the Value Added Tax Act to enable exporters of raw products to recover input tax and enhance competitiveness of the products in the international markets as well as abide to the VAT destination principle.

We presented this to the Ministry of Finance and Parliamentary Committee on Budget and Finance in 2019. As expected, the Ministry in question, positively responded by scrapping the VAT, and this was confirmed by Dr Philip Mpango in his 2019/2020 and 2020/2021 budget speeches.

At this juncture, we want to thank the government for being cooperative with the private sector. This grand decision by the government it was not in vain as it contributed to increase in our exports from $72.1 million in 2018 to $147.1 million in 2019.

Prior to that, as TPN, we worked closer with government to lift a ban on using Methyl Bromide fumigant in 2016.

This meant we could lose a lucrative Indian market which placed this fumigant usage a mandatory standard for any exporter intending to access it market. The Government decision to lift the ban helped us salvage around 150 million US dollars that was latter exported to India.

Tanzania Mercantile Exchange (TMX)

Since liberalisation of economy in 1980s, trading environment has been unfair to farmers, as it left a lacuna that gave way for middlemen and crook traders to take advantage of asymmetric information at the expense of small holder farmers.

To work on the problem, Government established a Tanzania Mercantile Exchange– a commodity exchange providing a platform where buyers and sellers meet. TMX started its operations in 2018 by beginning with Sesame. This year, an exchange incorporated green mung as one of the crops to be procured through the platform.

Significance of TMX it helps farmers to get the best price available in the market, it acts as an aggregator of crops and so simplifies job for a trader, it saves traders from theft of unfaithful agents Nonetheless, since starting operating in the pulses sector, a number of issues have emerged, from both buyers and sellers, which requires quick responses.

But there are farmers concerns on TMX which are conflict between cooperatives. The rule requires all primary cooperative to send crops to Main coops, as they are the only ones mandated to sell. Main coop has a full authority to decide on the price even if it is against farmers wishes.

This eventually brings conflicts with primary coops. Also there is a lack of transparency. it is lamented by farmers that they are not involved in deciding on the price set by the buyer during an auction. They are usually placed in the receiving position. There is no farmer representation in approving the price.

On other hand, there are also traders’ concerns on TMX that include increased expenses. There are added cost that amounts to 192/-per kg. Since international markets price are static, traders are compelled to lower the buying price which cause costs farmers receive very little as much of them ends up in the system.

Low quality of produce—the quality of pulses is usually low compared to international markets’ requirements. Besides, there are no mechanisms to help an exporter inspect consignment before bidding.

Even inspection after bidding has been ineffective because money or product refunding has never been practical despite of the present refund policy that requires doing so when a buyer rejects the consignment.

Others being cheating on quantity, exporters have been receiving little quantity than which is being paid for, which has been adversely affecting exporters in their profitability and so reducing their trust on TMX and fear of abandonment--pulses have very small margin compared to cashew and sesame making it less attractive to trade through the exchange.

There are worries that TMX may be abandoned the same way Ethiopia Commodity exchange has been ditched the moment they included pulses.

Recommendations

There are number of alternatives provided by players in the value chain, farmers and traders alike, which includes; Transparency. Farmers and traders alike need to be involved in the whole bidding process of TMX. This will create trust among the stakeholders.

Quality improvement and honesty on quantity; international standards are the ones which needs to operate in this whole process. TMX needs to coordinate well with WRB I ensuring better quality as well as proper quantity as sold in the auction. In addition, TMX needs not to pay farmers in 24 hours as policy states.

Instead, money should be paid only when the quality matches with the paid price. Also reviving MoU talks with India on pulses. India’s production of pulses is relatively higher now compared three years ago which has prompted it to impose quantitative restrictions.

Mozambique is the only African country with a MoU with India which was signed in 2016. A MoU is expected to end in 2021. This poses an opportunity for Government to revive talks on entering a MoU between these countries.

Others are clarity on ministry’s directives Last directive required regions without facilities to sell pulses crops in a freehold way while restricting others with facilities to sell through auctions. The Ministry needs to tell specifically which regions they mean.

This will help both farmers and traders to be aware of the regulations’ requirements. Also establishment of spot markets (Open markets) for pulses is recommended. At least every district or region which produces pulses should establish farmers’ spot (open) markets for pulses.

This will give farmers more freedom to decide which route to take as these markets allow farmers to hold their commodities and renegotiate for better prices at one place. This will reduce asymmetry information and help farmer to use their unity to decide on the better price.

While this will remove middlemen from the value chain, it will do away with bureaucracy and help a trader to quickly get commodities of their choice. Same model is used by India, while Nigeria has fully embraced spot markets system for pulses products.

● Mr Andrew is a National Co-ordinator at Tanzania Pulses Network

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