LOCAL INVESTMENT CLIMATE PROJECT
SUNFLOWER VALUE CHAIN ANALYSIS REPORT FOR DODOMA URBAN, KONGWA AND KASULU DISTRICTS
FINAL DRAFT
CONDUCTED BY MRA Management Associates With contributions from: Charles Ogutu, Sunga Mabeja, Dr. Victor George, Cliff Laizer, James Genga, Alice Muro and Onesmo Kenneth
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential TABLE OF CONTENTS ABBREVIATIONS AND ACRONYMS ...... 4 EXECUTIVE SUMMARY ...... 7 1. INTRODUCTION ...... 9 2. METHODOLOGY ...... 9 3 AN OVERVIEW OF KASULU DISTRICT COUNCIL ...... 10 4. OVERVIEW OF KONGWA DISTRICT COUNCIL ...... 12 5. OVERVIEW OF DODOMA MUNICIPAL COUNCIL ...... 13 6. OVER VIEW -OILSEEDS ...... 15 6.1 World market prices for edible oil CIF Dar es Salaam for the last 5 years ...... 16 6.2 Tanzania Oil Seed production ...... 16 7. SUNFLOWER OVERVIEW ...... 17 7.1 Product Description and Uses ...... 17 7.2 Overview of the World Production of Sunflower Oilseeds ...... 17 7.3 Role of sunflower in Tanzanian economy ...... 19 7.4 Participants of the sunflower oil value chain ...... 19 8. PRODUCTION OF SUNFLOWER IN TANZANIA ...... 20 8.1 Regional Production Trend ...... 20 8.2 National Demand and Supply for edible oil ...... 21 9. THE SUNFLOWER VALUE CHAIN ...... 23 10. MARKETING ISSUES ...... 33 10.1 Refined versus Unrefined Sunflower oil ...... 33 10.2 Segment for Crude and Refined oil ...... 34 10.3 Packaging of Sunflower Seed Oil ...... 35 11. EXPORTS AND IMPORTS OF EDIBLE OIL AND OILSEED PRODUCTS...... 36 11.1 Import trend for edible oils ...... 36 11.2 Price for Edible Oils ...... 37 11.3 Export of Edible oils ...... 37 11.3.1 Exports to Kenya ...... 38 11.3.2 Exports to Burundi ...... 39 11.3.3 Export of Sunflower Seeds ...... 40 12. Sunflower Market system in Dodoma- (Kongwa and Municipal) ...... 41
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 13. Value Chain Supporters and Stakeholders in Dodoma, Kongwa and Kasulu ...... 42 13.1 Current Supporters of the Sunflower Value Chain in Dodoma and Kigoma regions ...... 42 13.2 Processors Associations in Dodoma and Countrywide ...... 44 14. VALUE CHAIN GOVERNANCE ...... 45 15. SERVICE MARKET ...... 47 15.1 Financial Services ...... 47 Requirements ...... 47 Existing institutions ...... 47 15.2 Technology Service Providers ...... 48 15.3 Business Development Services (BDS) ...... 48 16. INVESTMENT REQUIREMENTS TO DEVELOP SUNFLOWER IN THE STUDY AREAS ...... 50 17. GROSS MARGIN ANALYSIS ...... 52
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential ABBREVIATIONS AND ACRONYMS
AMCOS Agricultural Marketing Cooperative Society
ASA Agricultural Seed Agency
BDS Business Development Services
CBOs Community Based Organisations
CEZOSOPA Central Zone Sunflower Processors Association
CPO Crude Palm Oil
DADPS District Agricultural Development Plans
DAICO District Agriculture, Irrigation and cooperatives Officer
DIDF District Irrigation Development Fund
EPZ Export Processing Zone
ESRF Economic and Social Research Foundation
EU European Union
FAO United Nations Food and Agriculture Organisation
FSU Former Soviet Union
FTC Farmer Training Center
GAPs Good Agricultural Practices
GHP Good Hygiene Practices
GMP Good Manufacturing Practice
HA Hectare
KDC Kongwa District Council
KEPHIS Kenya Plant Health Services
Kg Kilograms
KIA Kilimanjaro International Airport
LGA Local Government Authority
LIC Local Investment Climate Project
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential M4P Making Markets for the Poor
MAFSC Ministry of Agriculture Food Security and Cooperatives
MFI Micro Finance Institutions
MRA Management Resource Associates Limited
MT Metric Tonnes
MUVI Muunganisho wa Wajasiriamali Vijijini
MVIWATA National Network for Farmer Groups in Tanzania
NGO Non Governmental Organisation
PHS Plant Health Services
PMO-RALG Prime Minister’s Office, Regional Administration and Local Government
QDS Quality Declared Seeds
RLDC Rural Livelihood Development programme
SACCOS Savings and Credit Cooperative Society
SCF SME Competitiveness Facility
SIDO Small Industries Development Organisation
SME Small and Medium Enterprises
SNV Netherlands Development Organisation
T Tons
TANESCO Tanzania Electric Supply Company
TASUPA Tanzania Sunflower Processors Association
TBS Tanzania Bureau of Standards
TCCIA Tanzania Chamber of Commerce, Industry and Agriculture
TEOSA Tanzania Edible Oil Seeds Association
TFDA Tanzania Food and Drugs Authority
TORs Terms of Reference
TOSCI Tanzania Official Seed Certification Institute
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential TRA Tanzania Revenue Authority
TZS Tanzanian Shillings
UNIDO United Nations Industrial Development Organisation
USAID PCP Processing and Consumption Project of USAID
VC Value Chain
VICOBA Village Community Bank
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential EXECUTIVE SUMMARY The Local Investment Climate (LIC) is a new development project being managed by NIRAS with mandate to contribute to an improved Business Climate in Tanzania. As a result of the foregoing mandate, sunflower value chain study was commissioned by LIC to MRA Management Associates so as to get a clear, up-to-date picture of the sunflower VC in Tanzania. The study focus districts were chosen by LIC to be Kasulu, Kongwa and Dodoma urban. The study findings are expected to provide inputs into the design of interventions that seek to overcome constraints for the growth of local agricultural economies through sunflower value chains in the targeted LGA’s. The Objective of the study was to get a clear picture on production and productivity, demand and supply chain, legal and policy framework as well as supporting institutions. All these are anchored on a purpose to increase the profit among all sunflower VC actors.
The study findings indicate that, sunflower is the 4th largest edible oil that is consumed in the world. Ukraine topped the world production of sunflower at 11 Million metric tones (2013) and contributes 29% of the world production. Tanzania on the other hand is leading African countries in production and was the 10th largest producer of sunflower seeds with a production of 1.08 Million tones and a world share of 2.4%.
Tanzania has witnessed positive trend of production over the last five years (2009-13) from about 300,000 Metric tones per year to over 1 million tones. Of that volume, Dodoma region contributed about 130,000 metric tones while Kigoma contributed 4,900 tones only during the period 2012/2013. The average productivity per hectare in Dodoma and Kongwa councils is estimated at 525 Kilograms (Kg) while that of Kasulu is 700 kgs.
The national estimated demand for edible oil in Tanzania is between 300,000 and 400,000 per year. During the last two years -2012 and 2013 sunflower oil alone has contributed about 280,000 metric tones of edible oil. Most of this oil is produced by the micro, small and medium entrepreneurs using Chinese made oil expellers without any refining or certification by Bureau of Standards (TBS and TFDA). In Dodoma region, only four out of over 100 SME processors have received TBS certification for their raw/virgin oil. At the time of the study, two processors had acquired refining machines but were awaiting installation in Dodoma urban. Currently refining is done by a large processor located in Arusha, and Dar es salaam. The processing facilities in the study area sell Oil and seed cake without any additional value. Cake is sold to traders while oil is sold direct to consumers and to the shops. Organized distribution amongst the processors does not exist, and each processor undertakes own distribution. Only two SME processors in Dodoma urban have dedicated selling outlets for sunflower oil.
The sunflower value chain in the study area consists of the Input suppliers, Agro-dealers, producers, traders and processors, retailers and consumers. There are several constrains at each level of the chain. The most commonly planted sunflower seed variety in Kasulu is Record. In Kongwa and Dodoma urban, Record, Kenya Fedha and Traditional/Jupiter varieties are widely planted. Critical constrain in the chain is access to appropriate financial services and mindset change. There is no existing district based or national producers association at the same time, the good agricultural knowledge of farmers remains low. In terms of consumption, many domestic consumers in the study area use sunflower oil as opposed to palm oil even in Kigoma where Palm Oil is abundant and at a much lower price. However institutions and commercial facilities such as restaurants continue
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential to use other edible oil. In Dodoma urban, supply of the dominant palm oil brand –Korie- shows a continuous decline over the past five years. The produced sunflower oil from Dodoma and Kigoma suffers from poor packaging and branding thus making it difficult to acquire space in the supermarkets. A visit at a Dar es Salaam showed that non of the processors has been able to sell to them.
Despite the increase in local production of sunflower oil alongside other oilseeds, Tanzanian record of imported edible oils over the last five years showed a continued increase of up to 248,000 MT in year 2011 with only a slight drop (to 221,000) over the last two years. There were no official records of exported sunflower oil except an estimated 36 MT per year through Manyovu border in Kasulu. Exports amounting to almost 400 MT of ‘raw’ palm oil via Manyovu and nearby unofficial borders per year have also been noted. Export of seed cakes/meal is mainly to Kenya and dominated by Mount Meru Millers. Records from the Tanzania PHS office and those obtained from Kenya KEPHIS offices at NAMANGA border provide contrasting figures, with Tanzanian records showing lower tonnage of export while Kenya indicates that they received (imported) more from Tanzania. Seeds have risen from 50 MT in 2010 to 777 in 2013.
There are several existing supporters to the sunflower value chain in Dodoma and Kigoma regions. Many of the supporters are in Dodoma region and only few, led by the district council are in Kigoma. In Dodoma, organisations such as RLDC, SCF, USAID PCP, SNV, SIDO, INADES etc have contributed to the growth of the commodity. In Kigoma, Kasulu Consortium, World Vision, MVIWATA, LGA etc have introduced and continue to promote the commodity in Kasulu.
There is no dominant actor in the sunflower value chain, however, the study noted that processors/traders have a pivotal role in terms of farmer price setting especially if the farmer has to sell immediately after harvesting at the farm gate. Besides, there is clear lack of trust amongst and between producers and processors which leads individuals to participate in individual as opposed to collective selling. While CEZOSOPA is expected to represent sunflower processors in Dodoma region, less than 25% of the processors have ever been members and less than 50% of those who have ever been members can be considered active. The sunflower service market is characterized into three segments: a) The financial services market; b) the technology market and c) the business development market.
Gross margin calculations (based on farm gate prices at the start of the season) made for producers, processors, (trading and processing and service only processing) transporters indicate that all the actors make profit with exception of farmers in Kongwa/Dodoma district councils. However, considering that farmers do not consider their labour as a cost, they therefore do not suffer from any actual financial loss. .
Future investments in the sunflower value chain that aim at promoting competitiveness, will need to address issues around Inputs, production, trade bulking, processing technology- related to quality and policy issues that encourage more production rather than importation of edible oils.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 1. INTRODUCTION The Local Investment Climate (LIC) project which has its main office in Dodoma is a new development project being managed by NIRAS and has the mandate to contribute to an improved Business Climate in Tanzania. One of the objectives of LIC is to look into the Sunflower Value Chain, in general and particular in Dodoma and Kigoma Regions and more specially in Dodoma Urban, Kongwa and Kasulu district councils. As a result of the foregoing, the value chain study was commissioned by LIC so as to get a clear up-to-date picture of the sunflower VC. In turn this would provide a way to design interventions that seek to overcome constraints for the growth of local agricultural economies through sunflower value chains in the targeted LGA’s. The Objective of the study is to get a clear picture on production and productivity, demand and supply chain, issues around legal and policy framework as well as supporting institutions. The purpose of the study on the other hand is to increase the profit among all sunflower VC actors.
2. METHODOLOGY
Based on the Terms of Reference (TORs), the study employed a participatory multi dimensional approach which helped to diagnose and study the sunflower value chain and necessary support functions. Stage one: this step involved initiation of communication between MRA and LIC. Necessary introduction letters were sought from LIC and the PMO RALG office. These included introductions to major government officials such as RAS of all the regions that we were to undertake the study- spurning from Dodoma, Kigoma, Dar es Salaam, Kilimanjaro to Arusha. Also letters were sought and got to major processors and importers of edible oil. Various Literature review was also undertaken at this stage which included the six documents provided by LIC, the districts and regional profiles amongst the many other value chain reports that we felt were relevant and could positively contribute to the intended outcomes of the study.
Development of the field tools- (checklists) and testing them in Dodoma before departure to the LGAs in Kigoma and Kongwa was also done at this stage. It is at this stage that we also engaged a consultant based in Nairobi to collect export and import data for this study from Kenya side of both Namanga and Holili border posts.
Stage two: At this stage the team were divided into groups working independently under one senior consultant in each region. One senior consultant also visited Dar es salaam to gather the data and the information, while another travelled to the border posts of Namanga, Holili and Tarakea. All the field visits took place with effect from 30th June through to 15th July. Finally data from Dodoma regional office and urban district were then collected after the field visits. In the field, the focal persons for LIC were met, (in Kigoma and Kasulu), DAICOs, agricultural extension officers, farmers, agro-dealers, consumers, retailers, whole sellers, plant health services officers at Namanga, Manyovu, Holili and Tarakea posts, Regional secretariats, TCCIA, SIDO officials, traders, processors, brokers, seed producers amongst others were met. Other stakeholders met and consulted, included TBS, TFDA, TRA amongst others.
Stage three of the assignment comprised synthesis, analysis and draft report writing. Information obtained from the field were compared with the information obtained from the literature review. Triangulation of these information from different sources enabled the team to arrive at a more
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential conclusive state of the sunflower situation in the three district councils that led to the writing of the first draft of the report. Furthermore, the draft report was subjected to a validation workshop where stakeholders from other organisations and agencies attended and discussed the content of the report. The information contained in the report were confirmed and agreed upon by the stakeholders during a validation workshop. Comments from the client were also received and reviewed. A final draft report was then submitted to the client.
3 AN OVERVIEW OF KASULU DISTRICT COUNCIL
Kasulu District Council (KDC) is located between latitudes 30045’ and 30055’ east of the Equator and 29045’ and 30045 longitudes east of prime meridian. It shares borders with Kigoma district on south, Kibondo district on north, Republic of Burundi on west and Tabora region on east. The district covers a total land area of 9,324 sq kms, of which 6,060 sq kms is suitable for agriculture and livestock activities, whereas the rest 2,264 sq km is for residential, forest reserve, rivers and rocks. Only 28 percent of the total arable land is used for agriculture.
The population is about 425,794 (2012 census). Kasulu has the highest average size of household in the region at 7.6 with sex ratio of 95. Per capita income in the district is estimated to be TZS 154,000 .
Topography and Climate
The District has two agro ecological zones namely, the lowlands (miombo woodland) and uplands (grassland) areas. The altitude varies from 900-1350m above sea level for lowlands and from 1400- 1800 meters above sea level for highlands. The three divisions of Makere, Heruchini and Buyonga, with a total of 15 Wards and 42 villages, cover lowland zones. The upland area is covered by four Divisions of Buhoro, Manyovu, Muyama and Heru Juu, which together have 15 wards and 48 Villages.
The District has favourable weather for agriculture. Rainfall is reliable and ranges between 800 to 1800mm per year. The rain season is from October to May. Temperatures vary from 16 to 310c. Warm weather starts from July to October and cold weather starts from November to May. Temperature ranges from 15.5ºC to 26ºC on highlands and 26ºC -31ºC in the lowlands. Normally temperatures are high during July to September.
Vegetation is covered by grasslands and Miombo woodlands occupied by thick and tall grasses in the lowlands, while in highlands it is characterized by short grasslands and bushes. The soils vary from clay loam soils (low lands) to sandy loam soils in highlands which is suitable for growth of different varieties of food crops including maize, beans, cassava, sweet potatoes, paddy, bananas and cash crops namely coffee, Palm Oil, groundnuts, tobacco, cotton and most recently Sunflower. The district has potential watershed whereby major rivers originate. This includes Maragalasi, Luiche, Ruchugi and other small rivers which have extensive wide valleys suitable for irrigation.
Electricity in the district is generated by diesel powered generators operated by TANESCO with 2.5 MW capacities which is not considered to be enough to power large scale industries..There are
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential storage facilities for coffee and cereals located at Muhinda, Mnanila. Also, major mobile phone operators such as and internet VODACOM, TTCL, Airtel, TIGO have services in the district.
Main economic activities
Agriculture is the main economic activity in Kasulu District Council. However, only 28% of the arable land is being used for agriculture. Major highland crops are coffee, maize, beans and banana while in the lowland, major crops are paddy, maize, cassava and sunflower. The council believes that there is also great potential for large scale sugar cane farming along the river and water streams.
Irrigation is practiced in the low land zone and covers a land area of only 565 Ha which is equivalent to 0.02 percent of the low land area which covers 43% of arable land. There are four modern irrigation schemes and major crops cultivated are paddy, horticultural crops and maize during dry season. These schemes were constructed with support of DADPs and District Irrigation Development Fund (DIDF). Table 3.6 below presents the modern irrigation schemes in the district.
Table 1. Irrigation Schemes in Kasulu District
No NAME OF WARD VILLAGE [S] PRESENT Crops POTENTIAL SCHEME IRRIGATE AREA [Ha] D AREA (Ha] 1 Titye Titye Titye, Lalambe, 150 Paddy 500 Nyenge&Migunga and FFV 2 Rungwe Mpya Rungwe Rungwe Mpya, 115 Paddy 300 Mpya Kaguruka, and FFV Nyumbigwa 3 Kabanga Msambara Kabanga, Buhoro, 210 Paddy 400 /Kashenyi Kanazi and FFV 4 Msambara Msambara Masambara, 90 Paddy 120 kidyama and FFV Total 565 1,320 Source: Kasuu District council profile
Sunflower
Sunflower farming was introduced in Kasulu District Council during the last three years i. e 2011/2012. The crop has been identified as the priority product under the district value chain intervention in DADPS. At the time of this study- (July 2014), Sunflower was cultivated in about 3150 Ha and farmers productivity per hectare was estimated at 10 bags. Several groups of farmers have been trained by LGA extension staff, World Vision and Kasulu consortium to produce sunflower seeds in large scale. It has been established that sunflower can grow very well in both agricultural zones. It is expected that in the long run sunflower production will replace tobacco as the main cash crop. There is a huge demand for sunflower oil and seeds locally and in the neighbouring countries.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 4. OVERVIEW OF KONGWA DISTRICT COUNCIL Kongwa District is one of the seven Districts in Dodoma Region others are Bahi, Chamwino, Kondoa, Mpwapwa and Dodoma Municipal .The District lies between latitude 5° 30- 6° South and longitudes 36° 15° – 36 East of Greenwich Meridian. Its altitude stretches between 900 and 1,000 metres above sea level, Kongwa town is the District headquarters and is located about 86 kilometres from Dodoma town. The District borders with Chamwino District in the western front; Kiteto District (Manyara Region) in the North; Kilosa District (Morogoro Region) in the East and Mpwapwa District in the southern front. Climate
The microclimate of Kongwa district council is greatly influenced by its altitude. The mean temperature is about 26.5°C, but sometimes temperature can go down to as much as 11°C. The mean annual rainfall is 700mm. The rain season is normally between December and April. Kongwa District lies on leeward side of Ukaguru Mountains. Most of the time, winds from the ocean are dry and run parallel to the land making moisture uncertain to precipitate.
Kongwa district is characterized by both its location in a high plateau and hills with steep slopes and an escarpment to the east-west. To the south, the escarpment is very steep. The main catchments area and transportation corridor that serves and links Kongwa District council is by road.
The population of Kongwa District was estimated to be 318,995 for the year 2013. Out of these, 156,982 are males and 162,013 are females. This population grows at a growth rate of 2.4% per annum.
Economic activities in Kongwa district council are mainly farming and livestock keeping as well as informal sector activities. The informal sector; which employs few people and predominant in township areas, mainly encompasses trade activities and artisan undertakings. Social services are provided in collaboration with private sectors. Per capita income of people in Kongwa district is estimated to be 450,000 TZS.
Agriculture is the major base for economic activities in Kongwa District to which subsistence farming and livestock keeping (local breeds) are dominant mode of production. A significant number of people in the district still use poor farming methods and implements, such as hand hoes to till the land. Generally agriculture sector is still characterizes by low productivity caused by low and erratic rainfall, high rate of evapo-transpiration and low moisture holding capacity of the soils. This condition is compounded by poor farming methods, poor technology, overstocking and overgrazing which lead to soil degradation and hence poor productivity and earnings. The total arable land for agriculture in the District is 363,691 hectares but only 258,690ha are rotationally put under cultivation. There is a total of 5,811 hectares of land which can be used for irrigation, but only 295 hectares are cyclically cultivated using traditional canal irrigation. There are 685 tractors and 3,755 ploughs in the District, while number of agriculture extension staff is currently 87. The main food and cash crops grown include maize, millet, groundnuts, cassava, sunflower, beans while horticulture crops are grown along streams of Tubugwe and Chamkoroma villages.
During the 2013/14 season sunflower was estimated to be grown on 20,034 Hectares (Kongwa District Council).
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 5. OVERVIEW OF DODOMA MUNICIPAL COUNCIL Location and Size
Dodoma Municipality council is the national capital of The United Republic of Tanzania and the capital of the Dodoma region. It is Located at the south eastern end of the Tanzania Central Plateau at an elevation of 1,200 meters above sea level with coordinates 6°10′23″S 35°44′31″E. The municipality is located at the geographical centre of the country on the vital Central Railway line; and on major crossroad of the National East West trunk road and the famous Great North Road (Cape Town to Cairo), which passes in Tanzania through Mbeya, Iringa, Dodoma, Babati and Arusha. It is 486 kilometres west of Dar es Salaam and 441 kilometres south of Arusha. The Municipality of Dodoma covers the Capital District which is an area earmarked for the Capital Development Area. The area involved includes the area earmarked for urbanization to a population of 1,000,000; future international Airport, underground water catchment area; agriculture and livestock grazing area, a forestation and conservation areas; and other necessary institutional and service facilities. Numerically therefore Dodoma Municipality covers an area of about 276,910 hectares,(equivalent to 2,769 sq km, radiating 30-40 kilometres in each direction from the present centre of the existing town. It is the smallest district in Dodoma region representing 6.3% of the total area .It is a market centre for the surrounding areas that further are sparsely populated.
Population According to the 2012 National Housing and Population Census, the population of Dodoma Municipality was 410,956 consisting of 199,487 males and 211,469 females representing (24%) and (1%) of the Dodoma region and national population respectively. Kizota ward had the largest population size (34,453), followed by Changombe (25,415) and Hombolo (22,457). Uhuru ward had the smallest population size. The 37 wards of the Municipality are grouped into four divisions which are Dodoma Mjini, Hombolo, Kikombo and Zuzu. Statistically; 61.5% of the population in the Municipal council is found in Dodoma Mjini division, 15.8% in Hombolo division, 14.1% in Zuzu division and 8.6% in Kikombo division
Climate The climate of Dodoma is semi-arid, characterized by a marked seasonal rainfall distribution with a long dry and short wet seasons falling through December to April each year. The calculated total annual rainfall ranges between 550-600mm per year. The general trend of average temperature varies from 200C in July to 300C in November each year. The highest temperature is 31.40C while the lowest is 14.50C. Due to the semi-arid nature of Dodoma Municipality dry wind is a common feature with increasing wind speed in July to November. So it can be concluded that wind speed is usually high in dry season compared to wet season.
Economic activity Dodoma Municipality is not exceptional to the rest of Tanzania. About 80% of the population in the municipality depends on agriculture and livestock keeping for their livelihood notwithstanding of the semi-arid condition of the area.
The Dodoma Municipal Council through its Agriculture department is keen in reducing vulnerability to climate change through following up of activities that are aimed at boosting agricultural production both at household and municipal level. Thus the vision of the agriculture sector in Dodoma Municipality is to have sustainable food security and increased agro-based incomes. The
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential mission is to promote and facilitate agricultural productivity and sustainable management and utilization of natural resources to ensure food security and increased incomes at household level.
Cash Crop Principal cash crops grown in the district include: groundnuts, grapes, simsim, sunflower, tomatoes, water lemon and rosella
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 6. OVER VIEW -OILSEEDS Vegetable oils are derived from a wide variety of plants. Sesame, groundnuts, Soybean, sunflower and palm oil are among the main sources of vegetable oil. While the first four are annual crops, palm oil is a perennial tropical tree crop. Put together, and according to a report by MUVI (2009) the United States and Canada dominate production of oilseed crops, accounting for about 35% of global output. China, the European Union (EU), the Former Soviet Union (FSU) and India are also significant producers. Malaysia, Indonesia and Nigeria are the major producers of crude palm oil. Stemming from high levels of demand from Pakistan and China, palm oil has substantially increased its world market share of vegetable oils
Figure 1: Global consumption of vegetable oils1995/96-2013/24
Source: Statista 2014 website. www.statista.com
Consumption of vegetable oils has been increasing per annum and so as been the production between 2005 and 2013. This trend is mainly determined by population growth, production technologies and changes in taste. Although each vegetable oil has its own characteristics, there is a high degree of substitutability among the different types. The share of sunflower-seed oil within world consumption of vegetable oils has only grown marginally compared to other vegetables yet palm oil has maintained its share. Overall, consumption of vegetable oils has grown faster in developing regions during the last decade. China's demand especially boosts world consumption. The main world consumer of vegetable oils is the EU, whose demand has grown faster than the global average. Asian countries' demand is important, mainly in China, Indonesia, Malaysia, Pakistan, India and Japan. Ukraine, the current world leading producer of sunflower oil, exports over 50% to Asian countries, with India being the single largest importer. In terms of vegetable oil consumption comparison, palm oil takes the lead, followed by Soybean, Canola bean oil while sunflower is the fourth.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Demand: According to market analysts, there is an increasing global demand for edible oils, due to population and income growth worldwide. The income growth in China, India and Pakistan, which account for more than 33% of the total world population, is expected to push the growth in the vegetable oil trade. The growth rate in the near future is expected to be 3- 4%. The palm oil market is expected to absorb the largest share of Consumption growth as the case is currently. Strong growth in oilseed trade relative to meals and seeds is expected to create incentives for increased production in high-oil content oil seed such as sunflower seeds.
6.1 World market prices for edible oil CIF Dar es Salaam for the last 5 years
There had been an increasing trend in CIF price for edible oils imported in Tanzania. Computation of prices from TRA data and triangulation from processors shows that, the CIF price in Dar es Salaam has been varying from year to year and fluctuating from US$ 624 (lowest in 2009) to US$ 1,025 (highest in 2012) per metric ton within the last five years mainly for the crude/semi refined palm oil.
Table 2: Quantity of bulk Imported Edible oils (CPO)
Year 2009 2010 2011 2012 2013 Quantity tons 169,987 156,268 248,479 223,076 221,858
Price in TZS P/ton 824,799 1,118,299 1,607,300 1,622,734 1,215,837
Avg. Exchange rate per US$ 1320 1409 1572 1583 1610
Price in US$ p/ton 624.85 793.68 1,022.46 1,025.10 755.18 Source TRA, 2014 for import data and price in TZS; CIA World fact book for exchange rates
6.2 Tanzania Oil Seed production
Tanzania has been experiencing good and positive growth with its edible oil seeds. The production has been growing well for all the major edible oil seeds. Since the year 2010, sunflower oil seeds has been the most produced oilseed in the country followed by groundnuts, sesame, palm oil and soya. According to the Ministry of Finance and Economic Planning which cited the source of figures as Ministry of Agriculture, by the year 2013, sunflower alone contributed 51% of all the oilseeds in the country, followed by groundnuts contributing 28%, sesame share was 20% while palm oil and soya share was 1% when put together. For this reason, it shows that sunflower is a major edible oil in the country. We however note that there are a number of un-certainties with the production figures presented in the Ripoti ya hali ya uchumi 2013. For instance, according to the National Agriculture Policy (Oct 2013), only 10.8 Million Hectares of land was under crop cultivation. The average yield of sunflower in Tanzania is 600kgs per Hector. At 2.625 Million metric tons of sunflower in 2013, it would imply that 4.4 million hectares (42%) of cultivated agricultural land
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential was planted with sunflower. Equally it would mean that edible oil seeds, if taken in totality were cultivated in more than 70% of all the cultivated land. Because of the foregoing reasons, we have adopted and will use the figures obtained from FAO (2014) in table 4 and 7 below for further calculations.
Table 3. Five year trend on edible oil production in Tanzania
Edible oilseed production in Tanzania (2009-2013) in Metric tons Product 2009 2010 2011 2012 2013 Percent Sunflower 162,019 348,877 786,902 1,125,000 2,625,000* 51% Groundnuts 256,401 320,582 651,397 810,000 1,425,000 28% Sesame 72,932 65,557 357,162 456,000 1,050,000 20% Palm Oil 17,000 17,000 24,880 40,500 .79% Soya 3,900 4,300 2,500 3,490 5,830 .11% Source: Kitabu cha hali ya Uchumi 2013- MFEA, 2014
*the 2013 figures of production are doubtful based on the remarks of farmers and processors.
7. SUNFLOWER OVERVIEW
7.1 Product Description and Uses
Sunflower also known as Helianthus is an oil seed crop. It’s seed contains up to 55% edible oil depending on the variety and climatic conditions. The main use of the sunflower seed is to produce edible oil that is consumed as one of the vegetable oils and considered to be among one of the healthiest vegetable oils with low cholesterol. The process of processing to obtain the oil is carried out through crushing of the seed so as to extract the oil. The by-products are used as raw materials within the soap industry and also in the animal feed industry.
7.2 Overview of the World Production of Sunflower Oilseeds
The world production of Sunflower has been increasing over the years. After several years where Russia was leading, Ukraine-Russian’s eastern neighbour has become the world leader in sunflower production since 2012 and produced 11 million tons. Figure2 and table 3 below shows that the second world producer is Russia with 10.5 million metric tons during the same period of year. The third largest producer is Argentina who is produced only 30%the production of Russia. Tanzania is ranked the 10th largest sunflower producing country in the world by the year 2013. It is the only African country that is producing a large amount of sunflower. Other countries in the top ten include China, France, Romania, Bulgaria, Turkey, and Hungary. Tanzania world share was 2.4% by the year 2013.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Figure 2: Worlds leading sunflower seed producing countries (2013)
Table 4: Details of the world sunflower production and percent share
Rank Country Seed production 2013 World share %
1 Ukraine 11,050,480 29.2%
2 Russia 10,534,000 27.8%
3 Argentina 3,104,420 8.2%
4 China 2,380,000 6.3%
5 Romania 2,196,480 5.8%
6 Bulgaria 1,937,000 5.1%
7 France 1,582,449 4.2%
8 Turkey 1,523,000 4.0%
9 Hungary 1,469,600 3.9%
10 Tanzania 1,083,000 2.9%
Source: FAO, 2014
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 7.3 Role of sunflower in Tanzanian economy Tanzania’s economy is largely dependant on agricultural production and processing of the agricultural products. Many of the country’s population (estimated at 80%) derive their livelihoods from agricultural related products (MAFSC 2013). Over the last seven years, importation of edible oil was indicated to be a major drain on foreign currency -second only to petroleum products (BCS, 2009), however the last three years has seen a major increase resulting into more than 300% production between 2010-2013 in sunflower seed kernel (MAFSC, 2013, FAO, 2014) which has surpassed the amount of edible oil imports in the country during the same period.
Even though Sunflower can be considered a major import substitution for edible oil into Tanzania, its performance (including need for process upgrading) is still underdeveloped. To achieve this, the sub sector need to be well developed and streamlined in a more formal value chain with a clear national developmental strategy encompassing all actors and stakeholders.
7.4 Participants of the sunflower oil value chain
There are generally many individuals and institutions that participate in the sunflower value chain. These participants are either direct or indirect actors, stakeholders or supporters of the sub sector. Several reports and studies give different interpretations for who an actor is or who could be considered a stakeholder or supporter of the sector. For purposes of this study, we have considered actors (see figure 3 below) in line with the M4P approach where actors are those that have direct interest and participate in one way or another from inputs, production, trading, processing, distribution, retailing through to consumption. Stakeholders or supporters have been considered to be all those who are not directly involved in the day to day production or take part in the actual handling of the produce, but their actions can either support or inhibit the commodities.
Figure 3. Locations of actors and stakeholders
S STAKEHOLDER
ACTORS
STAKE
HOLDERS
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 8. PRODUCTION OF SUNFLOWER IN TANZANIA Sunflower can be cultivated in a wide range of ecological zones in the Eastern, Central, Northern and Southern Highlands of Tanzania. Agronomic minimum requirements of the crop are low, and the returns of a more intensive cultivation are significant, thus the crop can be incorporated in extensive low-input agriculture as well as in intensive farming systems. Although sunflower is adaptable to poor soils and drought, it grows best and produces high yields in fertile, moist, well- drained soils with a lot of mulch and is relatively an easy crop to grow.
8.1 Regional Production Trend
Table 5: Sunflower Production Trend in Kigoma Region per Acreage per Tons
Season (HA) ( T)
2011/2012 N/A 904
2012/2013 N/A 4,939
2013/2014 N/A 4,973
Source (Regional Agricultural Office – Kigoma Region)
Table 6: Sunflower Production Trend in Dodoma Region season 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013
Districts (HA) ( T) (HA) ( T) (HA) ( T) (HA) ( T) (HA) ( T)
BAHI - 5,980 - 10,965 - 14,696 14,696 20,593 18,474 29,558
CHAMWINO - 2,973 3,295 6,292 6,484 5,285 3,700 5,856
CHEMBA ------
DODOMA 4,070 11,012 20,700 14,490 19,764 9,882 (M) 7,840
KONDOA 46,459 21,125 40,767 49,722 59,667 34,806 41,767
KONGWA 708 708 4,988 5,986 24,689 29,626 3,484
MPWAPWA 18,758 8,505 9,957 22,059 25,514 34,715 13,886
JUMLA - - 48,346 - 80,435 118,457 132,734 137,732 128,420 69,619
Source (Regional Agricultural Office – Dodoma Region)
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 8.2 National Demand and Supply for edible oil According to FAO, the minimum recommended annual edible oil consumption on a per capita basis is 5 kg. Tanzania is currently estimated to have a population of about 47 Million persons, which then translates to an estimated annual demand of 235,000 metric tons per year. However one has to be conscious that the actual demand is obviously higher than this estimate considering that some households consume more or have a much higher consumption per capita. It is obvious that at national level, demand for edible oil is growing in line with the population growth. In our view, we estimate that the demand for edible oil is between 300-400,000 metric tons. This makes sunflower oil the most important vegetable oil produced in Tanzania.
Over the last five years, the production of sunflower seed kernels have varied but with a positive trend - from about 304,730 MT to 1.125 Million MT between 2009 through to 2013 (FAO). The increase has been reported much higher over the last three years with the highest production achieved in 2012 cropping season. There was a slight drop in production during the year 2013 mainly attributed to erratic weather in the main sunflower producing regions of the central corridor.
Table 7. Tanzania’s sunflower seed production trends-2009-2013
Year 2009 2010 2011 2012 2013 Sunflower seed kernelain Mt kernal 304,730 313,110 786,902 1,125,000 1,083,000 Source: MRA field data analysis 2014 and FOA, 2014. http://www.factfish.com/statistic-country/tanzania/sunflower%20seed%2C%20production%20quantity
Using the figures presented in table 7 above, and with an assumption that one metric tons yield about 300 liters of sunflower oil (1 bag of 70kg sunflower seed kernel produces 20 liters of oil: 1,000 kgs equals to 300 liters) it also means that the average oil extraction is only achieved at 30% using the small extraction machines manufactured in china or Tanzania without the use of any chemical extraction. Companies that use chemical extraction from the seed cake report that they can achieve extra 12-15% oil from the cake.
Table 8. Estimated sunflower oil production over 5 year trend
2009 2010 2011 2012 2013
Seed Kernels produced 304,730 313,110 786,902 1,125,000 1,083,000
Export of seed kernels 50 130 146 778
Est. PHL and Recycled 45,710 52,332 118,035 168,750 162,450 15%
Processed kernels 259,020 296,495 668,737 956,104 919,772
Sunflower oil 77,706 88,949 200,621 286,831 275,932
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential
350000
300000
250000
200000
150000 Vol in Tons Vol 100000
50000
0 1 2 3 4 5 Year 2009 2010 2011 2012 2013 Oil Vol 77706 88949 200621 286831 275932
Source: MRA data analysis 2014
The above information and analyzed data need to be considered with other factors in mind. For purposes of this analysis we can safely assume that about 15-20% of the seed kernels are not processed into sunflower oil. These are either used by the farmers as seeds for the next season planting, post harvest losses as well as limited amounts that may be exported out of the country to other parts of the world or to neighbouring countries. As we could not find specific reports indicating post harvest losses in sunflower, we have assumed the findings of grain losses ranging between 10-30% as per study undertaken by RLDC (2011). Furthermore, sunflower has much less post harvest loss due to less infestation hence our estimate of about 10% in table 5 above.
When considerations are made (see above table 8), it shows that sunflower oil produced in the country alone has not been able to cover for our estimated (300-400,000 MT) national demand for the entire edible oil requirements hence the continued importation of the other vegetable oils. Note that sunflower oil is currently the leading oil in terms of production for household consumption in Tanzania.
But based on the figures above, and the actual production of all the edible oils in the country even before including imports, it can be concluded that put together, annual national consumption of vegetable oil is much higher than the FAO minimum consumption. The continued importation of edible oil can only be viably explained if, there are significant informal exports of raw oilseeds and oil to neighbouring countries. Import figures (table 2) for the period between 2011 and 2013, however show a slight decline in import quantities which could imply either saturation in the local market or competition from locally produced edible oil which significantly includes sunflower oil.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential
9. THE SUNFLOWER VALUE CHAIN A SUNFLOWER VALUE CHAIN IN KONGWA, DODOMA AND KASULU
Sunflower value chain within the study districts and regions has a simple chain that mainly entails producers and the processors. A more in-depth analysis of the chain actors depicted a chain that has several issues still to be developed with a view to having a robust sub sector that can be seen to contribute significantly to the economies of the actors and the nation at large. Several factors were constraining the sub sector and therefore inhibiting its ability to effectively contribute to the economy and to exploit its full potential and to enable many rural producers benefit more from their work as well as to create employment and trade.
+Processing technology +Lack of working capital +Oil quality is uncompetitive +Price is the determining +Limited choices on +most have not received quality factor on type of the oil seeds certification;+traders dominate +not aware of the +Seed prices are high quality certification the buying of seeds: No trained compared to other crops food technologists
+staff not trained
Agro Traders Inputs Producers Retailers Consumers dealers processors
+Use of recycled seeds. +Poor agronomy +Supermarkets sell +Limited quality +Low inputs/use of poor branded oil only seeds. seeds +Prices vary with brand +Small scale farming +sourcing is direct from +no use of mechanization: Lack Processor +Oil traded on road side of TRUST amongst and between +Poor packaging farmers and processors
Source: DANIDA- Joint Design mission report, 2012 and MRA field data 2014
As we were tasked with analyzing the Sunflower Value Chain for Kongwa district, Dodoma Urban and Kasulu district, we have taken a more further analysis on these areas. We noted that, Kongwa and Kasulu districts are both production and processing districts for sunflower- with Kongwa having been producing sunflower for a much longer period than Kasulu. In this case, and in these areas, we noted that from a value chain perspective the key aspects involved are:
Supply of inputs Production of sunflower seeds Trading including bulking Processing of sunflower seed kernels
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Whole selling Trading Consumption
Inputs
Inputs include both soft and hard-wares. Hardware inputs refers to farm implements such as draught ploughs, tractors, power tillers etc. ‘Soft’ inputs refers to items such as seeds for sowing, fertilizers and pesticides including herbicides.
In both districts, the major inputs that were sought by the producers were seeds for sowing and oxen draught ploughs. Tractor service was not common amongst the smallholder farmers who are the majority. As for seeds, there are two main existing sources in both districts. As both districts have prioritized sunflower as priority cash crop under the DADPS, some of the farmers accessed the seeds through the production of farmer centered Quality Declared Seeds (QDS) or through the subsidy of certified seeds bought by the councils from registered seed producers and agro dealers. Most of the farmers pay cash to access the seeds. The most predominant way to get the seeds by any farmers especially in Kongwa is through the use of recyled seeds-where farmers keep part of their harvest for next cropping seasons’ sowing. The use of chemical fertilizer in the production of sunflower is considered expensive and therefore not widely used unless given out as s subsidy in the two district councils. In Kongwa, organic farm manure is used by the farmers.
For farmers who purchase inputs, they access these through agro dealers who are located in several parts of the districts. For instance in Kongwa district, there are 7 known and registered agro-dealers: 5 are located in Kibaigwa township, 1 in Mlali and 1 in Kongwa town center. Another 7 agro-dealers are located in Dodoma municipality. In Kasulu the registered agro dealers are 4 who are all located with the Kasulu town council.
Constraining factors
Quality of the inputs- reports of fake inputs is paramount Few suppliers of the inputs Limited access to finance to be able to extend to the producers Limited ability to provide advisory services to the farmers
Production of sunflower seed kernels
Majority of the sunflower seeds are produced by the smallholder farmers who cultivate only small acreage of land ranging from 1-3 acres mainly due to use of hand hoes or oxen draught ploughs. As farmers cultivate small land their earnings are also low and they are unable to get credit to expand their farms
There are three main varieties of sunflower oilseeds that are grown in Kongwa district council; these include Jupiter (traditional variety), Record and Kenya fedha (improved varieties). Jupiter is white in color with big size seeds and has low oil content. Record is black in color with small size seeds and smooth skin but has high oil content. Kenya fedha is stripped with white and black colour and has high production but medium oil content. Of the three, Record is the most common type (50%) variety used, closely followed by Jupiter -traditional variety at about 40% usage while
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Kenya fedha is produced by a handful of farmers (mainly medium scale and commercial farmers) who can afford to pay for the higher costs of the seeds. Overall, the use of improved seed is increasing due to training done by extension officers through farmer field schools (FFS) and the productivity per acre. It was also reported that improved seed are easily accessible to farmers and obtained through farmer's seed production programme that produces and distributes QDS. In Kasulu, there is only one seed variety used by the farmers for production-Record. Being a new district that is only starting to grow sunflower, they have been introduced to this variety so far. In Dodoma urban, seed type is dominated by Record and Jupiter.
Production of sunflower seeds is dominated by smallholder farmers who constitute over 90% of all the farmers of sunflower. These are farmers who cultivate between 1-3 acres of land with sunflower in a given season. Medium scale farmers (cultivating between 5-20 acres) and large commercial farmers (cultivating anything between 20 to 200 acres in a season) are present in Kongwa. In Kasulu district all farmers are smallholder farmers.
Figure 4: Sunflower production trends in Kongwa and Dodoma Urban districts
Dodoma Municipal - Kongwa District - sunflower production sunflower production Trend Trend 25000 35000 20000 30000 25000 15000 20000 10000 15000 10000 5000 5000 0 0
1 2 3 4 5 1 2 3 4 5 Cultivated arealand(H) Cultivated arealand(H) 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Hectares 10114 18354 19404 19764 10944 Hectares 2178 592 2993 24688 20034 MT 2654 11012 13583 9882 9850 MT 708 200 3592 29626 14024
Source: Dodoma Municipal Council and Kongwa District Council, 2014
We found that there are more farmers and land under sunflower cultivation in Kongwa district than in Kasulu. This is because, there are many competing crops in Kasulu and the fact that the crop is still new to the farmers and the market was not well developed at the time of the study and visit to Kasulu.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Table 9: The characteristics of the most commonly used sunflower seed varieties in Kongwa, Kasulu and Dodoma
Variety Days to maturity Potential yields per hectare Record 120- 125 days 2500 Kg Kenya Fedha 130-135 days 2500 Kg Jupiter/Traditional 135-145 days 1500 Kg Source: MRA Field survey 2014
In comparing Tanzania with the world largest producer of sunflower (Ukraine), there was a big contrast in terms of productivity. While the average production of sunflower in Ukraine is 2,170 kg per hectare, in Tanzania it was, 1,330 Kg per hectare. The performance is worse in the three district councils of Tanzania which were the study areas as the production was only 600 Kg per hectare. By implication, Kongwa, Kasulu and Dodoma, are only producing about ¼ of the Ukrainian production, though they may be using different seed varieties.
Constraining factors
Poor and inadequate improved seeds (production technologies) Inadequate extension officers especially those who are sunflower specialist Erratic weather situation which is coupled with the lack of dedicated irrigation schemes for sunflower growing Farm implements-Subsistence cultivation and limited mechanization of the crop Poor agronomic knowledge on sunflower farming including fertilization Labour force-dependency on family labour-subsistence farming instead of commercial Pest and diseases
Trading including bulking
Sunflower purchase in Kongwa and Dodoma is particularly dominated by traders. The traders purchase the produce at farm gate at a price which is generally considered lower than the market price. Their main strategy is to purchase immediately after farmers have harvested. Traders then hire storage facilities where they store the produce for a period between three and six months before they start selling to processors. This study also found that some of the traders pre-finance some farmers and are then paid back using sunflower seed kernels.
Traders in Sunflower commodity exist in the districts, with some buying from one district and transporting to other districts. The traders role was found to be important, in the sense that they are responsible not only for pre financing some farmers, but also in undertaking quality checks for the seeds to ensure that they are properly weaned, packed and bulked for whole selling mainly to processors. For purposes of this study we calculated the margins made by traders using the ‘standard price’ that other buyers would purchase and found that, traders in general make about Tsh: 1900 profit per every bag of seed kernels.
Constraining factors
Lack of binding contract farming arrangements Small productivity per farmer- increasing the cost of collection
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Limited storage facilities Poor road infrastructures
Processing of sunflower seed kernels
Processing of sunflower kernels is a specialized business which we found in all the three councils. Dodoma Municipal with 61 processors (out of which only 33 are members of CEZOSOPA) has the highest number of processors mostly due to good supply of electricity. Kongwa has the second largest number of processors with 29 - who are located in different parts of the district. Kasulu being a new entrant to the sunflower industry has only 4 processors out of which two were operational at the time of the study. Based on the installed machineries, the operational capacities range between 20 and 30%. It is however important to note that, at the time of the survey, many (Over 60%) of the mentioned processors especially in Dodoma urban were not operating on the day of the visit due to various reasons including lack of seed kernels, temporary closure of business to machine breakdown.
Processing in all the three councils can be classified in two segments: i) there are those processors who solely purchase sunflower seed kernels from farmers or traders and then process to sell both oil and cake. In Dodoma municipal there are about 10 only in this category. Ii) the second segment are those processors who apart from purchasing seeds and processing to sell oil and other by products, they also provide oil extraction service to any other clients especially farmers who are opting to sell oil instead of seed kernels. This category is the most predominant activity of the processors. The study team realized that most processors in this second category are those who have limited capital to procure the seeds at the time of harvest and therefore earn most of their income by providing a service especially by procuring the cake from the farmers.
Table 10. Number of sunflower processing machines in Dodoma, Kongwa and Kasulu councils
Number of processing Membership to association machines Kongwa 29- (Pandambili=2, Mlali=8, 3- CEZOSOPA Kibaigwa=12, Mkoka=3, Mbande=3 and Iduo 1) Kasulu 4 None Dodoma Municipal 61 33 CEZOSOPA Source: Field survey data 2014.
Over 90% of the processors in all the councils use the small Chinese oil extraction expellers, such as Y 95, 105, 118, and 130 series. Other processing machines are Rosedown from either India or UK, Roast machine and alpha willball.
Processed quantities: As part of the analysis, we undertook to analyse the amount of sunflower being processed by the processors in Dodoma urban and Kongwa. Discussions with processors led us to an estimated 90 days of processing at the maximum in Dodoma and Kongwa councils for any processor in a year. Using an estimated capacity of the existing machines, we arrived at an average of 20 bags per any given day. Therefore it is possible to estimate that the total amount of sunflower
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential seed kernels being processed in Dodoma Municipal per year is only 7,560 metric tons while that of Kongwa is 3,654 metric tons per year. For Kasulu it is not easy to estimate. These amounts to 2,268 metric tons of oil in Dodoma Municipality and 1,096 metric tons in Kongwa district council.
An important by-product of sunflower seed processing is the sunflower seed cake. The seed cake constitutes the rest of the input materials after the oil has been extracted. It makes therefore about 45 kg in every bag of 70kg of sunflower seeds. As there is no substantial animal feed industry in Tanzania, the seed cake is mainly bought by individual livestock keepers and traders. Export of sunflower seed cake and meal to Kenya fluctuates considerably as can be seen in section 10 of this report.
Refining and Certifications
Two Mini refineries with 1 MT capacity has recently been installed in Dodoma by two processors – Heshima ya Jiko and Nyemo Investments. These units have been recently piloted by UNIDO through CEZOSOPA. Technically, they would not perform a complete refining of the sunflower oil, but has been noted to be a step towards refining. However, we also noted that through the USAID Processing and Consumption Project- commonly known as Tuboreshe Chakula, two medium processors –JACKMA ENTERPRISES and UNCLE MILO won a bid for the installation of a complete edible oil refining unit which have been recently delivered on their sites awaiting installation by a technical team from India. Each refinery machine has a refining capacity of up to 10MT per batch (implying per shift). The two units will improve the standards and quality of the oil in the central corridor. We are not quite certain as to whether the two enterprises will be able to fully utilize the capacities and potentials of the refining given the higher throughput required for refining vis a vis the estimated processed oil per year in Dodoma Urban.
As far as certifications for meeting the quality standards, we noted that, none of the processors in Kongwa and Kasulu has received a TBS certification. Within Dodoma Municipality only four processors (JACKMA ENTERPRISES and NYEMO INVESTMENTS have received the TBS mark of quality and standards compliance. In July 2014, Heshima ya jiko and Kisasa Supplies also received certification from TBS. Considering the high number of processors, it is important to ensure that many of the processors engage in efforts that would improve their systems and compliance to the standards- see table 11 below.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Table 11: Tanzanian specifications for edible sunflower seed oil.
We noted that many of the processors have not complied with the standards hence no certification. This seems to be the result of current weakness in enforcements as well as the market not demanding for quality oil. But additional information which were obtained from TFDA Zonal officials in Dodoma, indicated that, they had provided a three year grace period (2011-2014) for all
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential processors to prepare and comply to the standards, which will come to force by the beginning of year 2015. This means that all processors who shall have not adhered to the standards will have their premises closed for production.
Constraints:
The processing facilities do not meet the Good Manufacturing Practices standards Most Processing facilities are located in residential areas Limited working capital to allow adequate purchase of seeds at time of harvest In adequate storage facilities to store enough produce for a whole season Poor knowledge on brand positioning- uncompetitive brands including packaging Qualified production staff Lack of and access to industrial area- Land
Whole-selling including importation
Out of the sunflower oil processed in Dodoma, Kongwa and Kasulu, there are no dedicated whole sellers. Most processors also undertake whole-selling at the factory for both oil and the other by products such as seed cake. In Dodoma Municipality, Uncle Milo can be considered to be the largest, and sells oil in bulk for clients of the southern highlands.
However, large edible oil importers such as Murzah Oil and Mohamed Enterprises have their own go downs and whole selling facilities including agents in Dodoma urban as well as in Kigoma. These whole sellers do not only sell sunflower oil, but also include other imported edible oils.
Table 12. Whole sale Trend of Cooking Oil in Dodoma (Tons)
2009 2010 2011 2012 2013 Korrie -(Palm 2,367 2,027 1,696 1,386 1,113 Oil) Sundrop 9 10 13 11 12 (Sunflower Oil) Safi (Blended 500 635 800 1100 1008 Palm oil) Total 2,876 2672 2,509 2497 2,133 Source: MRA filed survey data, 2014
Retailing
Retailing of sunflower oil in the three councils is quite mixed. Retailing starts with the processors or at the processing sites. There are also those farmers who process the seed and then sell the oil either along the roadside (with or without any label) especially in Panda mbili area of Kongwa district. Few processors such as Nyemo Investments and Jackma Enterprises have dedicated and special sunflower oil selling outlets in Dodoma Urban (perhaps the only dedicated sunflower oil selling outlets in all the studied areas). Majority of the oil is traded through general merchandise shops and kiosks which are located in both urban and rural areas. At the retail outlets, the locally produced oil compete favourably with other refined oil. The two enterprises reported that they are able to sell all their annual production.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential
During the survey, we were unable to find any of the sunflower oil processed in Dodoma and Kongwa being sold in any large or medium supermarkets in Dar es Salaam. Our analysis found that this is due to poor packaging and brand positioning, unreliable supply but more so that the oil from these processors have not been refined and might not be appealing for certain category of the up- market. With the two refineries set to be installed in Dodoma, we believe that Dodoma brands will start to hit the market. Table: 13 provides for the various prices of oil in the retail outlets of Kigoma and Dar es Salaam.
Table13 : Retail Price Trend of Different Brands in Kigoma per Liter (2010-2014)
District Brand Year 2010 2011 2012 2013 2014 Kigoma Safi-(Palm Oil blend) 1,800 1,900 2,100 2,350 2,400 Korie (Palm Oil 1,900 2,000 2,200 2,400 2,500 Sundrop (Sunflower) 3,100 3,200 3,500 3,700 4,300 Mkwano (sunflower) 3,000 3,150 3,300 3,600 3,900 Sunflower (Local Sources) 2,900 3,100 3,200 3,300 3,600 Palm Oil (Local) 1,280 1,300 1,300 1,350 1,400
Kasulu Safi (Palm Oil blend) 1,800 1,900 2,000 2,300 2,500 Korie (Palm Oil) 1,900 2,100 2,250 2,500 2,600 Sundrop (Sunflower Oil) 3,200 3,300 3,600 3,800 4,300 Mkwano (sunflower) 3,000 3,200 3,500 3,700 3,800 Sunflower (Local Sources) - - 3,500 3,500 3,600 Palm Oil (Local) 1,200 1,300 1,400 1,550 1,600
Dodoma Safi (Pal Oil blend) 1,700 1,800 2,000 2,100 2,300 Korie (Palm Oil) 1,800 1,900 2,100 2,300 2,500 Sundrop (Sunflower Oil) 3,000 3,200 3,400 3,600 4,200 Mkwano ( Oil) - - 3,400 3,600 3,700
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Sunflower (Local Sources) 2,200 2,400 2,600 3,000 3,000
Kongwa Safi (Palm oil blend) 1,800 2,000 2,100 2,200 2,400 Korie (Palm Oil) 1,900 2,100 2,200 2,300 2,500 Sundrop (Sunflower Oil) 3,000 3,200 3,400 3,600 4,200 Mkwano ( sunflower Oil) - - - - - Sunflower (Local Sources) 2,100 2,300 2,600 2,800 3,000 Source: MRA filed survey data, 2014
Table14: Sunflower Oil Prices @ Imalaseko Supermarket In Dar es Salaam. July 2014
Country Price 1 Price 3 Price Brand name of Origin liter liter 5liters Sundrop Tanzania 4,500 15,000 24,000 Corol Abu dhabi 6,500 20,000 Sunola Tanzania 4,500 18,000 25,000 Singida fresh oil mill Tanzania 6,000 18,000 24,000 Felix sunflower cooking oil Tanzania 4,500 22,500 Minara Oman 12,500 20,000 Taibah Oman 14,500 Sungold Kenya 25,000 Source: MRA field survey data, 2014
No doubt that there is a good margin for refined oil than when selling un-refined even if it meets the virgin oil standards set by TBS.
Consumption
According to a study conducted by ESRF and cited by SIDO (2009), it was noted that a good proportion of the Tanzanian consumers prefer local sunflower oil to imported oils. This is noteworthy as local sunflower oil is often not refined and more expensive than imported palm oil- but slightly less expensive than imported oil. We were able to a test this in Kasulu where communities in the area despite having access to palm oil at much cheaper price were slowly converting to use sunflower oil from Singida as well as those produced locally in Kasulu. We assessed the purchasing for consumption patterns of the urban and the rural as well as the middle class and the rural poor. We noted that the urban consumers prefer to purchase five liter sunflower oil and above while those rural and urban poor prefer to purchase half liter. Consumption is mainly by using sunflower oil for cooking at household level. Institutional purchase of sunflower oil is not common in Dodoma and Kigoma regions.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 10. MARKETING ISSUES There is a general awareness in the general population about the health benefits of sunflower oil. Even rural people are aware that most of bulk imported vegetable oils do not compete in quality with sunflower oil. This has created high demand for locally produced sunflower oil; demand which leads to actors selling all that they can process.
Price of sunflower products has been driven by the common principle of supply and demand. The study shows increasing price trend from 2009-2011 then observing a declining trend for the past two years 2012-2013. The explanation for the observed declining trend could be a result of high supply from producers. Besides, we were informed that the year 2011 many processors of sunflower in Dodoma, Kongwa, Babati and Kondoa got working capital credit of TZS: 7.4 Billion from CRDB Bank Plc to purchase seeds-this meant that the processors were competing for the limited supply of seeds that was available in the region. Table…shows the price trend in the surveyed LGAs.
Table 15: Price Trend for Sunflower Product for the Past Five Years in Dodoma (Per bag of 70kg)
2009( 2009(P 2010(H 2010(P 2011(Ha 2011(P 2012(Ha 2012(P 2013(H 2013(P Harves eak arvest eak rvest eak rvest eak arvest eak t Time) Time) Time) Time) Time) Time) Time) Time) Time) Time) Kernel 15000 35000 20000 35000 25000 40000 30000 55000 35000 58000 Cakes 4500 4500 6750 9000 9000 11250 11250 11250 13500 13500 Oil 40000 44000 40000 48000 48000 52000 50000 60000 60000 60000 Price Trend 2009-2013 70000
60000
50000
40000 Kernel
30000 Cakes
20000 Oil TanzaniaShillings
10000
0 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013
Source: CEZOSOPA 2014, Field survey 2014
10.1 Refined versus Unrefined Sunflower oil Refining1 (curing) of sunflower oil normally involve de-gumming, neutralization, bleaching as well as solvent extraction. Refining can make sunflower oil more stable and suitable for high-
1 Additional information can be accessed from: http://www.cookingforengineers.com/article/50/Smoke-Points-of-Various-Fats,
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential temperature cooking in addition to prolonging the shelf life of the oil. However it is noted that by so doing it also removes some of the oil's nutrients; flavor; colour (resulting in a pale-yellow); free fatty acids; phospholipids; polyphenols; and, phytosterols. However,by any standards, the refining losses are low and the oil has good keeping qualities with light tendency for flavor reversion. Besides, refining allows for fortification of the oil with Vitamin A, a requirement which has recently been approved by the Tanzanian Government, and will become mandatory with effect from year 2015 (that all processed cooking oil and grains must be fortified with Vitamin A, plus other nutritional requirements). Naturally the oil contains appreciable quantities of vitamin E, sterols, squalene, and other aliphatic hydrocarbons, terpene and methyl ketones (chiefly methyl nonyl ketone). Smoke point for refined sunflower oil is at 232 degrees celcius.
On the other hand, the expressed/crude oil (unrefined oil) is of light amber color with a mild and pleasant flavor. The unrefined sunflower oil is less heat-stable (and therefore well-suited to dishes that are either raw or cooked at low temperatures); but it retains more of its original nutrient content, flavor, and its light-amber colour. Smoke point of unrefined oil is at 107 degrees celcius.
The palatability of either refined or unrefined oil to a large extent depends on the taste of the consumer. However as part of value addition and in order to enable the oil to be stable and can used in making other products especially snacks with longer shelf life as witnessed in several developed countries, there is the need to encourage refining of the oil. In fact, given the technical specifications listed above, the losses on the composition of the oil is lower than the benefits which includes allowing for the oil to be ready for fortification as well as being used in frying at high temperatures.
10.2 Segment for Crude and Refined oil In Tanzania, the demand and usage of ‘crude’ and refined sunflower oil is not clearly marked. This implies the consumers are not driven by the level of value addition of a particular product. The study found that in Dodoma, Singida, Babati, Iringa, and Mbeya where the increasing number of cold pressed (crude/expressed) sunflower oil by the micro and small processors, all the processed oil is generally sold and consumed despite the distribution of refined sunflower oil such as Sungold, Mkwano and Sunola. In kigoma, the crude palm oil exists alongside imported refined oil such as Korie and Safi.
Interesting enough is the high number of ‘well educated’ persons- mainly middle to upper class who travel along the main Mwanza, Singida, Dodoma, Morogoro highway that we found stopping to purchase the ‘crude’ sunflower oil from the roadside points of sale with most of them taking these products to Dar es Salaam where they could purchase better quality refined sunflower oil including imported products from Europe or middle east.
However discussions with consumers, and further analysis found that many middle income Tanzanians are however increasingly turning away from the use of palm oil due to its high saturated fat content and instead use sunflower oil as it is promoted to be low in cholesterol content. We noted also that, the preference for the ‘crude’ sunflower oil is not only due to its slightly lower price when compared to refined, but also the knowledge that the use of ‘crude’ sunflower oil is healthy and acceptable so long as it is kept under an appropriate temperature of below 30 degrees, out of sun light and in an appropriate package and consumed within 180 days from the date of
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential production. In-fact, some of the ‘crude’ sunflower oil is marketed as organic sunflower oil which in turn attracts organic product conscious persons.
10.3 Packaging of Sunflower Seed Oil Tanzanian’s packaging industry is not well developed compared to countries such as Kenya and Uganda. By default this has impacted on the packaging of the sunflower oil produced by majority of the sunflower processors- both large and small including those selling refined or un refined. A study conducted by SCF (2011), indicated that Tanzanian sunflower oil products were found to be oily thus making most of them to be un-attractive to purchasers especially those who are conscious of the effects. One negative interpretation of an oily product is that it is not well sealed thus allowing air and other particles to enter the product. Besides, supermarkets prefer better packages that are attractive and lure buyers to purchase the product.
But Packaging materials currently used by the processors in Tanzania are so generic that they do not provide room for brand positioning. Even though there has been some efforts by some SME processors in Dar es Salaam to introduce their own mold and brand, the design still needs improvement in order to favourably compete with imported products and to allow the sunflower products from Tanzania to also cross the borders (note that, according to production statistics of 2013, the edible oil production was higher than the national estimated demand).
One however need to appreciate efforts that has been taken by the processors- especially the small scale- by introducing labels for their products, unlike five years ago when sunflower oil was sold in used jericans without any label, thus being synonymous to diesel. In itself, one would consider this as a positive effect on value addition.
Oil packed by a Dodoma urban processor
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 11. EXPORTS AND IMPORTS OF EDIBLE OIL AND OILSEED PRODUCTS
11.1 Import trend for edible oils Importation of edible oil in Tanzania has been showing a mixed trend. Table…shows quantities of edible oils imported since 2009. The maximum amount has been observed in 2011 (248,479.33 tons) while the minimum amount has been observed on 2010.
Table 16: Five Years Trend of edible oil imports into Tanzania
Year 2009 2010 2011 2012 2013 Quantity tons 169,987 156,268 248,479 223,076 221,858
Price in US$ P/ton 625 794 1,022 1,025 755
Edible Oil Import Vol in Tons 300000
250000
200000
150000 Import Vol 100000
50000
0 2008 2009 2010 2011 2012 2013 2014
Source: TRA, 2014
Despite physical visits, submission of letters and reminders, the importation data from the big processing companies in Tanzania were not possible to get except for one company who showed cooperation in providing the data. Figure 5 shows quantities imported by BIDCO since 2009. The data shows declining trend due to stiff competition with local edible oil industries and also tax imposed on oils.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Figure 5. Trend of Edible oil imports by BIDCO into Tanzania
30000 27000 25000 25000
20000 18000 15000 13000 10000 Quantity(Tons) 9800
5000
0 2008 2009 2010 2011 2012 2013 2014 Year
Source: MRA field survey data, 2014
11.2 Price for Edible Oils Price for edible oils were also determined at industrial level. It was noted that processor groups edible oils in two main categories that is liquid oil and fat oil. The study observed dynamic price change of liquid oil as compared to fat oil. For the past three years price of liquid oil has been changing from TZS 1900-2355/= while that of fat oil remain unchanged for the past three years as seen in table 13 below
Table 17: Whole Sale Price for Edible oils
Oil category 2014 2013 2012 Price per liter (Liquid Oils)(TShs) 2355 2345 1900 Price per liter (Fat Oils) (TShs) 3300 3300 3300 Source (Field Survey Data, 2014)
11.3 Export of Edible oils It was expected that export information on edible oil would come from processing plants, TBS, TRA and TFDA. Field survey had different results. Whereas major processers were reluctant to cooperate during the survey interview with TBS and TRA officials also shows that, export data were difficult to get since there were different channels of exportations that were not captured by the two. Equally it was not possible to get these data from TFDA despite several efforts. The study team, however remain confident that as long as major oil refining companies are based on or registered by the Export Processing Zones (EPZ) such as Mount Meru Millers, they export a good quantity (80%) of their annual produce. Why these records were not availed by the main authorities mandated to track these numbers leaves a lot to be desired.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 11.3.1 Exports to Kenya Sunflower by-products cross-border trade between Tanzania and Kenya has been prevailing for quite some time driven mainly by the booming dairy industry in Kenya whose animal feed products is reliant on the sunflower seed cake/meal as part of the forward linkage into the value of sunflower into livestock industry. The big business exists in seed meal/cakes as compared to oil or kernels. The main exporter of seed cakes to Kenya is Mount Meru Millers. Until 2010, not only were cakes/meals being exported via Namanga, but also sunflower seed kernels. However, the study (figure 7) noted declining trend on the business as per official records obtained from the Tanzanian PHS offices at Namanga of sunflower cakes and even seeds business.
When we did a comparison of the figures obtained from the PHS office in Namanga and those obtained from the Kenya Plant Health Services (KEPHIS) at Namanga, there are obvious discrepancies which we conclude to imply a high amount of seed cake crossing the border without declaration or enter the Kenyan side through informal/illegal routes. For instance while the Tanzania reports show a major decline in seed cakes and meals, (though there is a decline), but the Kenya record figures are very different (see table 14). During the year, 2011, Tanzania reported exporting 20,100 tons of cake, Kenya on the other hand recorded that they received during the same period some 124,891 metric tons of seed cake/meal.
The ‘official’ information given as a probable reason for such decline has been attributed to the fee imposed by Tanzanian government on exported cakes (The government charges TShs, 10,000/= per ton of seed cakes)
Figure 6: Trend of seed cake/meal exports to Kenya via Namanga Border
25,000 20,100 18,844 20,000 14,494 15,000 13,042 10,873 10,000
5,000 Quantity(Tons)
0 2008.5 2009 2009.5 2010 2010.5 2011 2011.5 2012 2012.5 2013 2013.5 -5,000 Year
Sunflower seed meal/Cake
Variety 2010 2011 2012 2013 2014 Sunflower seed meal/Cake (Tons) 14,494 18,844 20,100 13,042 *10,873
Source: PHS 2014
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Figure 7. Comparison of border reports at Namanga (Tanzania and Kenya)
140000
120000
100000
80000 Kenya Import Records 60000 Tanzania Export record
40000
20000
0 2011 2012 2013 2014
Table 18: Comparison of export/import records for sunflower seed cake/meal via Namanga border
Year 2011 2012 2013 2014 Kenya Import Records (MT) 124,891 32,893 46,217 *18,387 Tanzania Export record (MT) 18,844 20,100 13,042 *10,873
Difference=Informal/Illegal trade (MT) 106,047 12,793 33,175 *7,514 *the 2014 figures are for the period between January-June only.. Source: PHS and KEPHIS 2014
11.3.2 Exports to Burundi Records from Manyovu border post showed that the monitoring of edible oil and other related products have only been covered over the last two years. As sunflower has been a new crop for Kasulu over the last three seasons, the production and processing has not been well organized to necessitate major exports to Burundi. However, we noted from the TRA officials that an estimated 100 liters of sunflower oil carried in 5-10 liters jericans pass through the border every day and is not recorded due to its value ( less than US$500) assumed as an agricultural produce for home consumption. This figure implies that there might be some 3 MT of sunflower oil being exported into Burundi every month or 36 MT every year. The official records however indicate export of palm oil through Manyovu as seen below. The exported palm oil are those that are locally processed and can be considered as raw material. They are sold in the districts of Mabanda, Lumange and Makamba in Burundi.
The team were further informally informed that there are some other unofficial border posts where palm oil is sold during weekly community shifting markets (gulios). In these posts, the estimated amount of palm oil exported were 7 MT per week, which implies about 30 MT per month and 360 MT per year.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential
Table 19: exported palm oil to Burundi obtained from PHS Manyovu office.
Year Quantity (tons)
2011/2012 25 2012/2013 30 2014 (January-June) 25 source: PHS office Manyovu, MRA Field data 2014
11.3.3 Export of Sunflower Seeds Records from Namanga have not shown any exports since 2010. Holili and Manyovu borders did not show any exports of sunflower seeds too. However records from the zonal PHS office located in Tengeru Arusha showed that, seed kernels were exported to Holland and France via Kilimanjaro International Airport (KIA) since year 2012-implying they were airlifted. It was shown that the main exporters were Multi flower and Maua Companies based in Arusha region. Additional information from informal sources indicated that all the seeds that were exported via KIA were high oleic seeds destined for a major laboratory located in Switzerland. Overall, the trend for exportation for the past three years has been reflected in Figure 8 and shows a sharp increase of sunflower seeds to European countries.
Figure 8:: Export of Sunflower Seed Kernels
Sunflower Seed Export Vol in Tons 900
800 777 700 600 500 400 Export Vol 300 200 145 100 130 50 0 2009 2010 2011 2012 2013 2014
Source: MRA field data survey, 2014
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 12. Sunflower Market system in Dodoma- (Kongwa and Municipal)
Export market- National consumption of oil Animal feed EU, EAC (seeds, Market/ Industry -Local Oil+ cake Consumptio n
Shops/kiosks Institutions Retail
certification services Quality control and Milling and Medium whole selling SME Millers Millers
Bulking and Traders Trade
Extension Services Production Smallholder / medium Large scale
farmers 95% farmers 5%
Input Seeds Pesticides Fertilizers Supply
The market system for sunflower in Dodoma and Kongwa (kasulu not included due to its very immature nature with unclear system) councils illustrates the flow of several products right from inputs to the final consumption/market. The final market includes those for sunflower oil, cake/meal as well as seeds for both local consumption as well as export markets. Non of the oil produced from the two councils is qualified by TBS standards as refined oil. This implies that, the two processors with mini refineries are not considered in any way as refined oil. It is more complicated as TBS does not have any standards for mini- refinery.
Both traders and millers from the region exports mainly seed cake and not the oil. Reports of some oil from Dodoma going into Malawi via Mbeya could not be confirmed by this study.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 13. Value Chain Supporters and Stakeholders in Dodoma, Kongwa and Kasulu As in any value chain, there are bound to be several supporters and stakeholders who participate in developing the commodity in question. Our assessment of the support and supporters revealed the following.
• Central Government: Supports subsidy through voucher, training and setting, enforcing and monitoring of standsts through its agencies such as TBS and TFDA. TOSCI, SIDO GOVT • Local Government Authority: Tasks with improvement of the local infastructure and extension services
• International/Local and CBOs. • Supports farmer groups/AMCOS stregnthening trainings, market linkage, advocacy, provides some extension, Value chain development, NGO agronomic knowledge, linkage for financial access grant provision etc
• Undertakes research on new breeds, soil analysis and certification of new sunflower breeds Research
13.1 Current Supporters of the Sunflower Value Chain in Dodoma and Kigoma regions Discussions held with the DAICO offices, processors, farmers and the regional secretariats during the field visits did not show that there is over crowding of supporters engaged on the sunflower value chain in both regions. Table 11 below provides information on the supporters and their core support area.
Table 20. Names and areas of interventions of maize value chain supporters
SN Name Core Support area Region -DODOMA Rural Livelihood Development RLDC uses a M4P approach to interact with Value Programme (RLDC) Chain actors. Support is through the processors as pulling agents along the value chain.
Their supports areas covers, improvement on technologies such as better inputs including
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential improved seeds, processing technologies to adhere to quality standards, policy issues and general knowledge management for all the actors. All these are done through a grant approach covering the whole of central corridor of Tanzania Netherlands Development SNV support includes and focuses more on Organisation (SNV) capacity building for the associations and processors. Their support though classified as an inclusive value chain approach, it is mainly delivered through a software approach without any grants and by using service providers. USAID- Tuboreshe Chakula Grant and technical support is directed towards processors to improve processing and introduction of fortifications of the sunflower oil. Covers Dodoma urban, Kongwa, Morogoro and Babati districts though no fortification has started. United Nations Industrial Works with the processors association in Dodoma Development Organisation to improve the quality of sunflower oil in the (UNIDO) country/Dodoma through a cluster approach. They have recently introduced a mini refinery that has been made by VETA in Dodoma. Government-LGA Supports the value chain through promotion and supervision of production of QDS, extension services and establishment of extension services. Research on appropriate seeds, disease control and release of new breeds. Also policy formulation for the sub sector. INADES Support to producer group formation and market linkage SIDO Technology support, training, credit facilitation and linkage to trade promotion especially with the zonal annual saba-saba trade fair. REGION- KIGOMA Kasulu Consortium Sensitization and mobilisation of sunflower farmers. Group formation and strengthening and training on GAPs for sunflower World Vision Provision of inputs, group formation and strengthening. Support to exchange program LGA Extension services, provision and support on processing by providing processing machines through DADP grants. At least two villages have been provided with expellers together with filters. MVIWATA Support to existing producer groups, advocacy and KIKANGONET Sensitization and formation of farmer groups Tumbi Agricultural Research Research and on farm trials Institute MATI Mubondo Training of the agricultural officers
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Government-LGA Support through the DADPS, includes training, purchase and supply of oil extracting machine for the producer groups, provision of improved seeds and fertilizer.
Regarding the actors associations, this study and analysis did not find any known existing primary producers associations for sunflower both in Dodoma and Kigoma regions. In kigoma too, we did not find (perhaps due to its infancy in the sub-sector and with only four processors), any existing regional or district based processors association. On the contrary, there exists a vibrant processors association (CEZOSOPA) that covers the whole of Dodoma region and is very active on advocacy. At the national level, even though Tanzania Sunflower Processors Association (TASUPA) as a national coverage, at the time of this survey, it did not have a presence or a representative in Kigoma, but was well known in Dodoma. Below is a list of some of the key edible associations within Dodoma and nationally.
13.2 Processors Associations in Dodoma and Countrywide Tanzania Edible Oil and Seeds Association (TEOSA) An APEX Nationwide association dealing with edible oil and seeds, Contacts: Att: Chairman. Mr. Rashid Mamu its members are all stakeholders in the edible oil sectors including Tel: 0754 488866 email: [email protected] farmer, traders, processors, associations, and central and local government. Tanzania Sunflower Processors Association (TASUPA) An APEX National wide association dealing with sunflower sector, its Contacts: Att: Chairman. Mr. Ringo Iringo members are regional sunflower processors associations and Tel: +255 782 014906 email: [email protected] individual processors. This association is headquartered in Dodoma urban. Central Zone Sunflower Oil Processors Association An association dealing with (CEZOSOPA) sunflower sector, its members are processors in Dodoma region. Contacts: Att: Chairman. Mr. Ringo Iringo Current membership is 33 but represents even non members. Tel: +255 782 014906 email: –[email protected] Recently established a mini laboratory to for voluntary testing of the sunflower oil in Dodoma in collaborations with SIDO.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 14. VALUE CHAIN GOVERNANCE In value chains, governance refers to the relationships among the buyers, sellers, service providers and regulatory institutions that operate within or influence the range of activities required to bring a product or service from inception to its end use. Governance is about power and the ability to exercise control along the chain at any point in the chain and some firms set and or enforces parameters under which others in the chain operate. Key parameters (issues) includes product design and specification, definition of the production processes, which can include elements such as the technology to be used, quality systems, labor standards and environmental standards. Production scheduling and logistics are also included.
The chain governance exists when some actors work for the parameters set by other powerful actors in the chain. The actor that sets the parameters with which other actors in the chain must comply are referred to as the lead actor in the chain. The relationships that lead actors have with their suppliers, can either be helpful with respect to improving the competitiveness of the industry, based on a commitment to long-term, mutually beneficial relationships with suppliers, or they can be merely focused on realizing quick profit in the short-term.
Types of Value Chain Governance
The connections between chains activities within a chain can be described along a continuum (range) extending from market, characterized by lengthy relationships, to hierarchical value chains illustrated through direct ownership of the production processes. Between these two extremes, are three network-style modes of governance: modular, relational and captive:
Governance of Sunflower Oilseeds Value Chain
Following the brief explanation of what governance in commodity value chain means, it is prudent to examine actor's relationships in sunflower value chain in Dodoma region with an intension of evaluating the chain to asses which kind of governance modular it fits. According to the field survey findings, Sunflower value chain is Dodoma region is governed by the market forces. -In this respect prices of (Sunflower seeds, oils and seed cake) are determined by market forces. The main characteristic underlining the chain include;
Dis-organized actors vertically and horizontally such that there is no lead firm; Prices are more influenced by few actors mainly buyers at farm level and processors at factory gates; Relationships among actors involve transactions that are relatively simple; Information on products specifications is easily transmitted, Producers can make products with no inputs from buyers.
These evaluation findings illustrates that apparently, the sunflower chain can be categorized as follows:
Lack of Governance: The governance mechanism in the sunflower value chain is underdeveloped. Value chain actors operate in an un-coordinated fun-organized way. Few rules exist among value chain actors. We learnt that even when buyers/processors have entered into farming contracts
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential with farmers the later hardly respects the agreement and the buyer cannot impose any legal mechanism to recover the perceived and real losses.
Presence of many small actors and transactions: The value chain is characterized by too many small actors with small businesses that increase transaction and transportation costs and a lower competitiveness of products in the market. The transactions that occurs between farmers and ultimate consumers include; local trader, harvesting, loading, unloading, transport, urban trader, loading and unloading, transport, market levy, broker, retailer, loading, unloading and transport.
Market Un-Coordination: even though CEZOSOPA may be seen as a lead organisation that coordinates the processors in Dodoma, not all the processors are members of the association. Infact, out of the almost 90 processors in Dodoma Urban and Kongwa, only one third are members of CEZOSOPA. Besides there is no lead firm that coordinates the chain in relation to markets, technology apart from occasional information sharing among actors. On the other hand, as mentioned before, there are no existing farmer organisations apart from the weak local producer group associations which are further not restricted to only sunflower farmers. Consequently actors particularly farmers and processors receive no incentives for up-grading in terms of their product and the chain process as a whole to promote sustainable income earning opportunities.
Product Up-Grading; focuses on the introduction and delivery of improved or new products within the value chain. In sunflower value chain what is needed is the improvement in product crop husbandry; improve oil packaging, quality certification by TBS and TFDA, to ensure the safety of consumers and to be complaint to the new TBS guidelines for edible oil standards.
Product upgrading could also consider introduce of new products that are organic such organic sunflower; the use of by-products to produce animal feeds, introduction of medium scale soap industries using the other products of sunflower etc.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 15. SERVICE MARKET
This market constitutes the following key services: Financial services, Technology services, and Business development services.
15.1 Financial Services In Tanzania, Financial services are provided by six categories of institution namely:
Non-bank financial institutions: Member based organizations and associations such as SACCOS and AMCOS Non-governmental organizations providing financial services (NGO-MFls) such as PRIDE, FINCA, BRAC etc Informal sources such as (VICOBAs) and Government and Public Sector institutions such as SIDO and SELF.
Requirements
The need for appropriate and timely financial services cuts across all actors along the sunflower value chain in Dodoma, Kongwa and Kasulu district councils with exception of improved seed growers. For some farmers, the decision not to use improved seeds, plough by tractor and even apply appropriate amount of fertilizer is attributed to lack of money and more so credit facility that would enable them procure these services and inputs at a time when they need them. On the other hand, traders and millers/processors are unable to purchase a good stock of produce during harvest, but also to procure milling machines with higher milling capacity due to either higher interest rates charged and stringent conditions set by the financial institutions including commercial banks or the quantity of sum being offered by the financial institution not being enough to meet the required amounts..
Existing institutions
There are a good number of financial institutions ranging from SACCOS to fully fledged commercial banks located within the reach of potential value chain actors who require loan. A quick scan revealed that in Kongwa and Dodoma Municipal there are a number of banks, SACCOS and even AMCOS. In Kasulu district council there are two banks and few SACCOS as can be seen from the below table.
Table 21: Distribution of Financial Service Institution/intermediaries in Dodoma, Kongwa and Kasulu
Available Banks Available Available SACCOS AMCOS Dodoma CRDB- 4 Branches: NBC-2 Branches: NMB- 4 25 4 Municipal Branches: DTB-1 branch: Postal Bank-1 Branch: ACB-I Branch: Azania Bancorp-1 branch: Barclays- 1 branch
8 Banks with 15 bank Branches
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Kongwa District NMB=2 Branches: CRDB Mobile 1 18 6 Council Kasulu District NMB 1 Branch and CRDB Mobile 10 10* Council *AMCOS are all for Tobaco growers only. Source: Field data survey 2014
Specific Financial Services to actors in the Value Chain
Assessment of financial institutions attitudes towards financing agro-based value chain activities is mixed. Both CRDB and NMB do have specific financial package to SMEs and particularly SACCOS. The two like other commercial banks work with agribusinesses based on financial viability of their projects. Both prefer to work with farmers through their SACCOS. Also it was noted that traders may be financing agricultural commodity trade through bank loans given that there is more request and trade during harvesting seasons of crops including sunflower.
NMB has introduced warehouse receipt financing package that allows farmers or associations have immediate access to cash when they deliver their goods to registered and managed warehouse. The newly introduced MIVARF program under the office of the Prime Minister is mandated to help ensure that access to rural finance is enhanced building from the RFSP experience.
On the other hand, organisations such as PASS Trust provides bank guarantee schemes to the SMEs involved in agricultural value chains. In addition they also support SME by developing feasibility and business plans before recommending to the banks for credit (credit is provided on the banks terms and not that of PASS)
15.2 Technology Service Providers Major actors in sunflower processing technology and input supplies in the region include SIDO – and other dealers based in Dar Salaam who supply new oil extraction machines and related equipments. Whereas each provider has significant contribution in the value chain, further exploration will be required to be able to document how best each technology can be accommodated in the value chain.
15.3 Business Development Services (BDS)
Business development services are important aspect of any value chain. It facilitates improvement and performance of the chain at all levels. This study identified services offered by different organization to enable actors meet the required standards at their level. The service includes capacity building and training, Financial services, Extension Services, Marketing services and Standard and regulation compliancy. See Table 22
Table 22: Service Provided to Sunflower Actors Type of Support Offered Actor Support/Service Provider 1 Capacity Building and Training Producers and SIDO, CEZOSOPA, RLDC, processors TUBORESHE
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 2 Financial Services Processors NMB and CRDB 3 Extension Services Producers LGAs 4 Marketing Services Producers and RLDC, SCF andUSAID processors/traders 5 Standard and regulation compliancy processors/traders SIDO, CEZOSOPA
From the above table, we could further disaggregate the Business Development Services accessibility and availability by level of sunflower value chain actor
Producers’ accessibility to BDS The study indicates that, producers are able to access capacity building and training from different organizations. For example, producers in Dodoma region acknowledged receiving capacity building training from RLDC on production of QDS. Extension services were also noted to be among necessary service that was offered to sunflower producers. These services were mainly offered by Local Government Authorities (LGAs) through extension officers stationed at ward levels.
Processors accessibility to BDS Among all actors, it was noted that processors had access to many services as compared to other actors. For example many processors had access to the following services
Capacity building: Organizations such as USAID PCP (Tuboreshe Chakula), SIDO, RLDC and CEZESOPA are providing training on value addition and processing of the sunflower. The services enhance capacity of processors to improve quality and their level of competence in the edible oil industry
Financial Services All actors in the value chain needs financial support at one point. However, the study noted that processors/traders were easily getting financial support in terms of loans from Banks such NMB and CRDB. This is because traders have securities that act as collateral to fulfill banks mandatory requirement. On the other hand other processors in Dodoma region admitted getting financial support from RLDC that were used for different purposes such as facilitating contract farming and improving processing.
Marketing Services Markets save for all actors in the value chain. It is actually the link between all other actors in the chain. Producers have acknowledged receiving some marketing services from RLDC and SCF. It was noted that RLDC were providing grants that enabled processors to facilitate contract farming with producers thus creating sustainable markets for both actors. These Organizations has been much working on Dodoma region compared to Kigoma where sunflower has just emerged as potential cash crop.
Standard and regulation compliancy
In Tanzania TBS and TFDA set standards and regulations that have to be reached by processors of edible oils before going to markets for consumption. SIDO and CEZOSOPA have been noted to be working with processors especially in central corridor to strengthen ability of processors to comply with standards and regulations set for edible oils and cakes.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 16. INVESTMENT REQUIREMENTS TO DEVELOP SUNFLOWER IN THE STUDY AREAS In both regions, there will be several investments that are required to improve the sunflower value chain. It must be noted that the study team have strategically listed only those investments that will have some systemic effect on the value chain. Table 23 below provides summary of the investments along the chain. Estimated costs however will vary greatly but we have utilized the information from the stakeholders to arrive at them.
Table 23. List of potential required systemic investments to improve Sunflower Value Chain
Investment at which area of Type of Investment the Value Chain? Inputs Increase the supply of improved seeds before crop season. Focus on use of certified seeds.
Introduce a loan guarantee scheme for farm implements that are affordable to SHF Production Development of and support for sunflower block farms
Invest in farmers training on GAP
Expand irrigation schemes that can be used by sunflower farmers- should be in major potential areas
Establish a sunflower growers association. Trading and Bulking Construction of storage facilities to accommodate -to be managed by Associations or private sector
Improvement on feeder roads Processing Introduction of specific flexible credit guarantee scheme for processors targeting processing technology/equipments.
Training of processors on GMP/GHP and business management skills
Construction and installation of packaging processing facility
Increase training of food production technologist at both certificate and diploma level Marketing Development of competitive brands
Establishment of cost effective distribution system Policy Strengthen the actors association especially on policy advocacy matters Others Introduce an annual award to best farmers and processors to increase own initiatives.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Support to establishment of viable clusters
Support the establishment of farmer training centers (FTC) for sunflower.
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential 17. GROSS MARGIN ANALYSIS Underlying Assumptions
Calculations of the gross margins for purposes of this analysis refer to revenue minus direct or variable costs. Overheads, Capital investment, or cost of borrowed capital have not been taken into account. Such costs are mainly incurred by the processors, traders and even the producers, but the terms and types differ greatly, thus making it impossible to have an ideal figure to base calculations especially over a wide group of actors operating. Where labour has been indicated, it has been based on a modest calculation that has taken into consideration the local wages for similar tasks.
It must be understood that the calculations are to a large extent based on the costs and prices that were prevailing at the time of the study visits and in the markets visited. Therefore these margins can change if situations and prices also change overtime. However, we have made effort to ensure that the calculations would provide even a future basis for such calculations. In additions, the production averages takes into account the best and poor yielding farms-some farmers did get up to 8 bags per acre while others got 1 bag in acre.
According to study results, sunflower has very low gross margin once sold as seeds. Low gross margin is mainly due to low productivity and not necessarily on the price offered for sunflower seeds. Data summarized in the table below shows average yields of 3 bags per acre in Kongwa and Dodoma and sold at 35,000 per bag of average 70kg, while in Kasulu production average is 4 bags per acre and sold at 40,000 per bag of 70kg. With these averages, the farmers, in Kongwa are making ‘economic losses’ while those in Kasulu make about TZS: 40,000 on every acre mainly caused by higher prices and a much better yield when compared with Kongwa and Dodoma. One needs to note that in real monetary terms, farmers in both districts make ‘profits’ as they do not consider their labour as a cost.
With an average of 2-3 acres owned by households as revealed by the farmers, extension officers and in FGD and even the regional and respective council averages the incomes.
Table 24: Sunflower Producers Cost and Margin (Per acre) by Districts – Selling at Farm Gate
Item Kasulu Kongwa Inputs 15,000 8,000 Land Preparation 35,000 35,000 Labour 45,000 65,000 Packaging 4,000 3,000 Total Costs 99,000 111,000 Revenue 160,000 105,000 Margin 61,000 (6,000) %Margin 62 (5)
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Table 25. Producers Cost and Margin (Per acre) by Districts – Selling Oil and Cakes
Item Kasulu Kongwa Inputs 15,000 8,000 Land Preparation 35,000 35,000 Labor 45,000 65,000 Packaging 12,000 9,000 Transport 8,000 9,000 Levy 0 3,000 Storage 1,200 1,500 Processing 48,160 24,000 Total Costs 164,360 154,500 Revenue 302,400 220,500 Margin 138,040 66,000 %Margin 84 43
Table 26. PROCESSORS COST MARGIN - PROCESSING AND TRADING (Per bag of 70Kg)
Kongwa or Dodoma Urban
Cost Item/Activity Units Quantity Amount
Processing Cost
Raw materials bag 1 35000
Transport trip 1 4000
Levy bag 1 2000
Labor bag 1 1000
Packaging 20lit 1 6500
Periodic maintenance/servicing bag 1 1000
Electricity bag 3.5 1300
Other costs _ bag 1 2500
Total Costs 53300
Revenue
Edible oil Lts 20 55000.00
Cakes Kgs 45 13500.00
Total Revenue 68500.00 Gross margins 152000
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Figure 9. Processors Cost Margin - Providing Services Only
Cost Percentages
Periodic Salary maintanance/servici 27% ng 36% License 0% Rent 5% Tax 1% Communication Electricity 3% 28%
Traders Margin and Cost
Quantification and valuation of trader’s cost and margin in this study based on one bag of sunflower weighing 70kg. Traders employ a broker at the farm to collect and do all the buying arrangements for them.
Table 27. Traders Costs and Margins (per 70 Kg)
Item Amount Raw materials (per 70 kg) 35,000.00 Transport 3,000.00 Levy 1,000.00 Labor 1,000.00 Packaging 800.00 Communication 0.35 Storage 300.00 Tax 0.00 Rent 0.79 License 0.06 Salary 0.43 Total Costs 41,101.63 Revenue 43,000.00 Gross margins 1898.37
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Table 28. Transporters Cost and Margin (Per bag of 70Kg)
Item Amount 980 Fuel 200 Periodic maintenance/servicing 167 Labor 65 Insurance 39 Communication 28 Tax 46 License 259 Salary 100 Fine 1,883 Total Costs 3,000 Revenue 1,117 Gross margins
Distribution Cost and Income between chain actors
Contribution to total cost and share of profit generated along the sunflower value chain
The percentage share of profit each actor gets along the value chain is indicated in Figure
Figure 10. Distribution of share profit along the value chain
Margin percentages share in Margin Percentage Share in Transpor Kasulu Kongwa and Dodoma ters Farmers 21% Farmers -5% Traders 22% 4% Traders Processo 2% Transport ers rs Processor 50% 55% s 41%
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Annexes
List of Agro dealers in Dodoma Urban
List of Producer groups in Kasulu
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential LIST OF SUNFLOWER SEED TRADERS IN DODOMA URBAN- AGRO-DEALERS
SEED VARIETY SELLER/AGRODEALER SOURCE
NAME CONTACT
RECORD M.A Agrotech farmers wing 0715 436 569 Highland seed
EL Agricultural inputs and consultation 0753 448 473 Growers LTD-
Helb Agribusiness 0762 152 836 MBEYA, ASA
MOSHY pembejeo za kilimo 0784 439 574
NGAO Agricultural inputs 0769 904 803
H&A pembejeo za kilimo 0713 465 869
ZEBRA M.A Agrotech farmers wing 0715 436 569 Highland seed
Kilimo kwanza agrovet 0755 170 860 Growers LTD-
M&F Agriconsultant services - MBEYA
MOSHY pembejeo za kilimo 0784 439 574
Blessing pembejeo za kilimo 0754 673 508
KENYA FEDHA M.S Agrotech farmers wing 0715 436 569
Helb Agribusiness 0762 152 836 KIBO SEEDS
NGAO Agricultural input 0769 904803
H&A pembejeo za kilimo 0713 465 869
LOCAL SEEDS MOSHY pembejeo za kilimo 0784 439 574
(KIENYEJI) H&A pembejeo za kilimo 0713 465 869
Kilimo kwanza agrovet 0755 170 860
EL Agricultural inputs and consultation 0753 448 473
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential Sunflower Producers Group in Kasulu
Village Producer group name NYACHENDA 1.Twikome ASANTE NYERERE 1. Muungano 2.Jenga Uwezo 3.Amajambele 4.Ntilampebha 5.Kakindu KIGONDO 1.Walezi 2.Tumaini 3.Tuendelee 4.Tuinuane 5.Tuamke KALELA 1. Jipe Moyo 2.Juhudi 3.Hekima 4.Amahoro 5.Umoja KANAZI 1.Jikongoje 2.Ubhumwe 3.Tupatane 4.Upendo 5.Juhudi RUHITA 1.Mshikamano 2.Mkombozi 3.Upendo 4.Tumaini 5.Umoja RUSESA 1.Matarajio 2.Tumaini 3.Umaki 4.Umoja 5.Upendo KASANGEZI 1.Tujikomboe 2.Upendo KIGEMBE 1.Uvumilivu 2.Mshikamano MALALO 1.Nyakasanda
Final Draft Sunflower Value Chain Analysis submitted to LIC-Confidential