The Palm Oil Value Chain in Tanzania Diagnostics, Investment Models and Action Plan for Development and Innovation
Total Page:16
File Type:pdf, Size:1020Kb
3ADI+ Making Partnerships work for the Sustainable Development Goals (SDGs) The palm oil value chain in Tanzania Diagnostics, investment models and action plan for development and innovation Draft Report, February 2019 3ADI+ Making Partnerships work for the Sustainable Development Goals (SDGs) Executive Summary In the poorest region of Tanzania, Kigoma – there are over 30,000 smallholder subsistence palm oil farmers. Meanwhile, the country imports over 500,000 MT of palm oil per annum. Thus, palm oil value chain development offers great potential for both import substitution and poverty alleviation. At the same time, other goals such as environmental conservation, improved nutrition, and gender equality and women’s empowerment may be achieved through sustainable palm oil value chain development. 3ADI+ proposes a comprehensive, sustainable food value chain development approach, which requires the action of various stakeholders working at all levels, across the value chain, in support services and the enabling environment. Without the coordination of actors working in unison to achieve common goals in input provision, production, processing, knowledge provision and an enabling business environment, palm oil sector development will not be successful in Tanzania. 3ADI+ proposes a three-pronged approach to develop businesses along the value chains, which are inclusive of at least 10,000 of the palm oil producers located in Kigoma. On the level of production three business models – village clusters, village estates and an industrial plantation, are necessary for an economically feasible yet smallholder inclusive palm oil value chain. The strategy is underpinned by the necessity to expand the use of imported improved tenera variety trees in place of unproductive dura variety. Most importantly, it is necessary to implement a biodiverse agroforestry production system as opposed to the traditional, unsustainable monocrop palm oil plantations. In processing, gradual upgrades from the current technology (i.e. Burundi and SIDO expellers), will not be technically and economically viable. Instead, large-scale private sector investment is foreseen in a mill and refinery, which will serve as the anchor to the entire palm oil sector development. This investor will serve as the off-taker for fresh fruit bunches from smallholder plantations and play an important advisory role in ensuring quality and quantity. In addition, knowledge and further support will be provided by a proposed Kigoma Agricultural Training Centre (KATIC), which will serve as a one-stop shop for all knowledge on palm oil plantations, including production and harvest. Moreover, good governance is of the utmost importance, and an umbrella cooperative with subchapters will organize smallholder farmers into productive units. The Umbrella Cooperative will provide contractual negotiations and training oversight, as well as critical functions of storage, value addition and marketing for subchapters. The Government of Tanzania, including local government authorities and relevant agencies, must play a facilitating role the ease of doing business. This will include investment promotion, the provision of land titles, a public health campaign, amongst others. Finally, it is essential that 3ADI+ partners, including the Food and Agricultural Organization, the United Nations Industrial Development Organization, and Trade Mark East Africa will continue to play a coordinating role in the strategy development and implementation, in partnership with the Ministry of Agricultural and Ministry of Industry Trade and Investment. 3ADI+ Making Partnerships work for the Sustainable Development Goals (SDGs) Contents Executive Summary ............................................................................................................... iii List of Tables ............................................................................................................................ v List of Figures ........................................................................................................................ vii Acronyms ................................................................................................................................. ix Introduction .............................................................................................................................. 1 Chapter 1: Analysis of Current Situation .............................................................................. 3 1.1 Overview of the national palm oil value chain ................................................................................. 3 1.2 Map of the palm oil value chain ....................................................................................................... 4 1.3 Market analysis ................................................................................................................................. 6 1.4 Core value chain .............................................................................................................................. 21 1.6 Extended value chain ...................................................................................................................... 28 1.8 Natural Environment....................................................................................................................... 45 Chapter 2: Strategic analysis ................................................................................................ 49 2.1 Economic sustainability................................................................................................................... 49 2.2 Social sustainability ......................................................................................................................... 50 2.3 Environmental sustainability .......................................................................................................... 51 2.4 SWOT analysis ................................................................................................................................. 52 Chapter 3. Development and innovation opportunities ..................................................... 55 3.1 Primary production ......................................................................................................................... 55 3.2 Processing (palm oil milling & refining) .......................................................................................... 65 3.3 Sector support functions ................................................................................................................. 67 3.4 Cooperative development .............................................................................................................. 69 3.5 Cross cutting issues ......................................................................................................................... 73 Chapter 4: An Action Plan for Palm Oil Development in Kigoma ................................... 77 4.1 Palm oil industry development strategy ......................................................................................... 77 4.2 Proposed actions ............................................................................................................................. 79 4.3 Roles and responsibilities ................................................................................................................ 83 4.4 Tentative (rough) Budget ................................................................................................................ 87 4.5 Preparation Phase ........................................................................................................................... 87 4.6 Next steps ....................................................................................................................................... 91 Conclusion .............................................................................................................................. 93 References ............................................................................................................................. 101 Annex 1: Kigoma palm oil production estimations Annex 2: Farm profit margin analysis Annex 3: Processes for certification 3ADI+ Making Partnerships work for the Sustainable Development Goals (SDGs) List of Figures and Tables Table 1: Palm Oil Value Chain Map ............................................................................................ 5 Table 2: Global trade trends in export values for selected edible oils ...................................... 6 Table 3: Global trends in unit values for selected edible oils .................................................... 7 Table 4: Global exports of selected edible oils (export values, quantities and unit values) ..... 7 Table 5: Top global importers of aggregate refined and crude palm oil ................................... 8 Table 6: Top global importers of palm kernel oil (world import values, 2005-2016) ............... 9 Table 7: Top global exporters of palm oil (world export values, 2010-2015) ........................... 9 Table 8: Top global exporters of sunflower oil (world export values, 2010-2015) ................. 11 Table 9: Values, market shares and CAGR of edible oil imports to the EAC (2005-2016) ....... 11 Table 10: Edible oils export trends from the EAC .................................................................... 12 Table 11: Trade balances for selected edible oils in the EAC (2005-2016)