Oct. 9, 2012
FORMAL cross-border trade in commodities could be one of the biggest economic activities in East Africa, which has a combined population of more than 150 million people, who need to eat hundreds of tonnes of food daily.
With the highest comparative advantage for the production of various food crops, Tanzania has been benefiting little from the aggro-business potential boon because much of the trade has so far been informal. For example, statistics show that between October and December last year about 50,000 tonnes of cereals, like maize, rice, wheat, and sorghum or 39 per cent of total food commodities traded in the region originated in Tanzania, pointing to massive potential for income generation and fighting poverty.
Generally, the Namanga border market between Kenya and Tanzania recorded the highest volume of cross border trade, which was at least formal. But the amount of food trade through border posts remains uncertain thus putting the nation at great risk of losing massive revenue. To avert the situation, authorities in Kilimanjaro Region decided to make cross border trade formal at a market centre located at Himo Township, Moshi rural district.
The Kilimanjaro Regional Commissioner, Mr Leonidas Gama, revealed last week in an interview that the move has helped the Tanzania Revenue Authority (TR A) to collect more taxes, which formerly was impossible because the business was informal. “This is just the beginning of the long term programme to make the centre, which is a few kilometres to the border with Kenya an international market to end incidences of smuggling,” he said.
Official figures recorded from October to December last year show that maize continued to be the most traded commodity with 27,019 tonnes crossing the borders. Other commodities with their tonnage in brackets were beans (22,636), sesame (21,310), rice (10,245) and wheat (6,768). About 80 per cent of the maize traded originated from Tanzania and went through Namanga to Kenya, where drought has ravaged farms and wreaked havoc on food supply.
But other reports showed that there were large undocumented consignments also crossing the border. The Holili market centre is also an important business point with Kenya with plenty of revenue opportunities for the country, he added. He said construction of an international market facility was blessed by President Jakaya Kikwete who promised to inject 2bn/- in the project.
He said the decision to formalise the trade was also welcomed by the business community, due to the disturbances while trying to avoid Customs officials thus sometimes plunging them into heavy losses. At times, they faced heavy penalties when they fell in the hands of Customs officials.
Before the decision to formalise the businesses was reached, Mr Gama said customs officials used to ambush traders at border points, an exercise that was not only costly and dangerous but also the revenue collected was small. Apart from revenue collection from the business transactions at the market, also trucks from neighbouring countries will be paying road toll.
“The project will be a successful story if all parties particularly the TR A play their role efficiently,” he added. Tanzania enjoys comparative advantage in producing food crops like maize and other legumes with high demand in the neighbouring countries, Kenya included.
Although the common market protocol has already been ratified by the five East African countries, the business community has continued to complain over the cumbersome clearance procedures and the still existing informal exits, famous as ‘panya’ or rat routes. Complementing the initiatives already in place, the five East African countries, Tanzania, Uganda, Kenya, Burundi and Rwanda have decided to increase regional food trade by 20 per cent more in the next five years.
The projection is contained in the new East Africa Food Security Plan, where trading among each other would grow among Tanzania, Kenya, Uganda, Rwanda and Burundi from the current 10 per cent to 30 per cent. To realise the plan, the Secretary General of East African Community (EAC), Dr Richard Sezibera, said last week that harmonisation of the policies is the first challenge to be addressed in order to reach the desired goal.
He cited the construction of the 20 million US dollars storage facility by Yara International at the Dar es Salaam port as one of the strategies to boost intra regional food trade. Tanzania is technically the gateway for a number of landlocked countries, most of which do not have enough fertilizer supplies to be able to increase their food production.
Yara International presently supplies 120,000 tonnes of fertilizer annually to Tanzania and neighbouring countries, but the installation of this facility would increase the quantities to meet the growing demand. The multi-national fertiliser company started building a warehouse at the Dar es Salaam port this year after the government approved the over 20 million US dollars (about 30bn/-) project to to serve the local and regional fertilizer markets.
The new terminal will have a revolving storage capacity of 45,000 tonnes of fertilizer, which will be sufficient for the medium term requirements. The project is a result of President Kikwete’s visit to Yara’s Headquarters in Norway in 2007, where he invited the group to invest in Tanzania.