The Development of Smallholder Tea Production in Tanzania: an Economic Analysis of Factors Influencing Green Leaf Tea Output
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University of Tennessee, Knoxville TRACE: Tennessee Research and Creative Exchange Doctoral Dissertations Graduate School 6-1986 The Development of Smallholder Tea Production in Tanzania: An Economic Analysis of Factors Influencing Green Leaf Tea Output Joseph Tarmo Nagu University of Tennessee, Knoxville Follow this and additional works at: https://trace.tennessee.edu/utk_graddiss Part of the Agricultural Economics Commons Recommended Citation Nagu, Joseph Tarmo, "The Development of Smallholder Tea Production in Tanzania: An Economic Analysis of Factors Influencing Green Leaf Tea Output. " PhD diss., University of Tennessee, 1986. https://trace.tennessee.edu/utk_graddiss/4219 This Dissertation is brought to you for free and open access by the Graduate School at TRACE: Tennessee Research and Creative Exchange. It has been accepted for inclusion in Doctoral Dissertations by an authorized administrator of TRACE: Tennessee Research and Creative Exchange. For more information, please contact [email protected]. To the Graduate Council: I am submitting herewith a dissertation written by Joseph Tarmo Nagu entitled "The Development of Smallholder Tea Production in Tanzania: An Economic Analysis of Factors Influencing Green Leaf Tea Output." I have examined the final electronic copy of this dissertation for form and content and recommend that it be accepted in partial fulfillment of the requirements for the degree of Doctor of Philosophy, with a major in Agricultural Economics. Steven D. Mundy, Major Professor We have read this dissertation and recommend its acceptance: Luther H. Keller, John R. Brooker, William E. Cole Accepted for the Council: Carolyn R. Hodges Vice Provost and Dean of the Graduate School (Original signatures are on file with official studentecor r ds.) To the Graduate Council: I am submitting herewith a dissertation written by Joseph Tarmo Nagu entitled 11 The Development of Smallholder Tea Production in Tanzania:. An Economic Analysis of Factors Influencing Green Leaf Tea Output." I have examined the final copy of this disserta tion for fonn and content and recommend that it be accepted in partial fulfillment of the requirements for the degree of Doctor of Philosophy, with a major in Agricultural Economics. Steven D. Mundy, We have read this dissertation and recommend its acceptance: ��l ld&v � ;£ �'\ - � Accepted for the Council: --L,v:,,,t,.�A<�--- v1ciTrovost and Dean of the Graduate School THE DEVELOPMENT OF SMALLHOLDER TEA PRODUCTION IN TANZANIA: AN ECONOMIC ANALYSIS OF FACTORS INFLUENCING GREEN LEAF TEA OUTPUT A Dissertation Presented for the Doctor of Philosophy Degree The University of Tennessee, Knoxville Joseph Tarmo Nagu June 1986 ACKNOWLEDGEMENTS The author wishes to express his gratitude to all the individuals and institutions who have facilitated this study. The author is especially grateful to Dr. S. Darrell Mundy, Chairman of his Advisory Committee, for his guidance, patience and constructive criticism throughout the preparation of this study. Appreciation is also extended to Dr. William E. Cole, Dr. John R. Brooker, and Dr. Luther H. Keller for their help in reviewing this manuscript. Gratitude is extended to the Institute of International Education for the financial resources in helping to make this study possible. The author is grateful to Anne Norwood for typing the rough draft. The helpfulness of Pearl Geddings in making the copies is also much appreciated. Appreciation is extended to Georgia Bunn who typed the final draft. Without reservation, the deepest appreviation and LOVE is extended to the author's wife, Mary, and his children, Tumarini and Neema, for their love, sacrifice, perseverance, and understand ing during the four and one-half years of this study. ii ABSTRACT This study focused on smallholder tea production as one strategy for Tanzanian·economic development. The central research question was the economic evaluation of the potential of this strategy for increasing peasant farmer income streams in an economy comprised of mostly subsistence farming. Two objectives were: (1) the assessment of the extent to which selected production factors explain the variability in the annual output of green tea leaf (output) and (2) the estimation of the physical resource productivities and the computation of marginal value products (MVP's) of selected resources for a sample 150 small holder tea farms in Njombe, Tanzania to detennine economic efficiency and the potential for enhanced utilization of selected r�sources. A conceptualized production function was specified in a single equation model in which the annual output, the dependent variable, was a function of labor actually used, land area in tea, bush popu lation, expenses for farm tools and expenses for fertilizer and insec ticide. The model also included zero-one variables: two levels of education of the household head, no education and primary or more; and two farmer perceptions about tea processing plant capacity, ade quate and inadequate. This was the main model called Model II. Three other models were specified. Two of the three were subproduc tion functions, referred to as Model I (output as a function .. of bush population categories) and Model III (output as a function of labor iii iv categories). The fourth model was a modification of Model II with. discrete zero-one fann organization variables added. The functional fonn for Models II and IV was specified as a modified Cobb-Douglas (except for discrete variables). The functional form for Models I and III was linear statistical analysis and was performed using ordinary Least Squares. The results of Model II indicated that the coefficients for total labor, land area, bush population and fanner perception of inadequate processing plant capacity were statistically significant at the 5 percent level. The coefficient for household head education level of primary or more was statistically significant at 10 percent.· Except for expenses on farm tools, all signs were as expected. The results of Model II suggested constant returns to scale. Labor was the most important factor, followed by land and bush popu lation, in explaining variation in output per farm. The potential for enhanced utilization of labor, land and �ush population was evi dent with each respective MVP being greater than its MFC. TABLE OF CONTENTS CHAPTER PAGE I. INTRODUCTION . 1 Economic Structure of the United Republic of Tanzania . 1 The Central Importance of Agriculture ......... 2 Importance of the Non-Market Sector..... 4 Importance of Agricultural Exports •.•...... 8 Post Independence and Government Strategies for Agricultural Export Crop Development .... 9 The estates and African socialism ....... 14 1960 World Bank Report ............. 16 Incorporating peasants into tea production .. 16 Economic justification for promoting smallholder cash crop production ........... 19 Problems of traditional agriculture in the transfonnation process ........ .... 22 Two Competing Theoretical Explanations: Non-Economic vs. Economic Behavior of the African Peasant 26 The Economic Problem . ... 34 Research Problem . ... 37 Objectives ... 39 Justification... 40 General Hypothesis .. 41 II. TEA CONSUMPTION AND PRODUCTION . 43 Introduction . 43 Tea as a Low-Cost Beverage . 44 Geographical Origin of Tea . 45 Small Scale Production: Historical Perspective. 45 Tea Drinking . • . ... 47 Types of Tea in Commercial Use . .... 47 Botanical Characteristics. 49 Tea Cultivation. 52 Planting ..... 53 Planting material .......• ...... 53 Pruning. ..... 54 Plucking ......... 54 Plucking rounds and transportation ..... 55 V vi CHAPTER PAGE II. (Continued) Global Output and Growth Trends During the Post-War Period. 56 Regi ona 1 changes in output. 60 Regional changes in land area planted 62 III. TANZANIAN TEA PRODUCTION: SOME PHYSICAL AND STRUCTURAL FACTORS IN THE DEVELOPMENT OF THE TEA INDUSTRY .. 64 Introduction •.................. 64 The Effect of the International Tea Regulation Scheme--1933-1955 ... 65 The Tanzania Tea Authority ... 67 Tea Growing Areas in Tanzania 68 Rai nfa 11. 70 Temperature ...... 72 Soi 1 s . 73 Production. • . 73 Tea Estates ...... 74 Post-War Colonial Period. 75 Post-Independence Period .... 79 Decline in Estate Expansion 1970-80 ..... 80 Smallholder Expansion 1970-80 ... 80 IV. THE SMALLHOLDER TEA PRODUCTION FUNCTION: CONCEPTUAL AND METHODOLOGICAL ISSUES . ... 83 Introduction .. ... ........ 83 Conceptual Issues ........• ........ 84 The Concept of Smallholder Agriculture.. ... 85 Technological Production Possibility {Frontier) 90 Existence of the Production Function ........ 94 Economic Specification of the Production Function . 103 The problem of logic ...... 103 Choice of variables ..... •.. 106 Measurement of economic variables .. 107 Output. • . 107 La bar . .... 108 Standardizing labor input: man-equivalent ...... 109 Land. 112 Bush population •...· ...• 115 Tools and equipment expenses. 115 vii CHAPTER PAGE IV. (Continued) Capital services. 116 Education .... 118 Local Processing Plant Capacity .. 119 Algebraic Fann... ............. 120 Use and Limitations of Production Function Ana 1 ys is. 123 V. VILLAGE AND AREA DESCRIPTION, SAMPLING, AND DATA COLLECTION PRODEDURES AND FORMAL MODEL STATEMENTS . 127 The Village--A Basic Economic and Spatial Unit. 127 Description of the Study Area . 128 Sampling and Data Collection Procedures . 133 Selection of villages .... 133 Selection of household farms .. 135 Determination of sample size. 135 Degree of precision .... 137 Data collection method ... 138 Description