Economic Viability of Jatropha Curcas in Northern Tanzania


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Economic Viability of Jatropha Curcas in Northern Tanzania

  1. 1. Economic viability of Jatropha curcas L. plantations in Northern Tanzania Assessing farmers’ prospects via cost-benefit analysisNepomuk Wahl, Ramni Jamnadass, Henning Baur, Cristel Munster and Miyuki Iiyama
  2. 2. The World Agroforestry Centre, an autonomous, non-profit research organization, aims to bring about a ruraltransformation in the developing world by encouraging and enabling smallholders to increase their use of trees inagricultural landscapes. This will help to improve food security, nutrition, income and health; provide shelter andenergy; and lead to greater environmental sustainability.We are one of the 15 centres of the Consultative Group on International Agricultural Research (CGIAR).Headquartered in Nairobi, Kenya, we operate six regional offices located in Brazil, Cameroon, India, Indonesia,Kenya, and Malawi, and conduct research in eighteen other countries around the developing world.We receive our funding from over 50 different investors. Our current top ten investors are Canada, the EuropeanUnion, Finland, Ireland, the Netherlands, Norway, Denmark, the United Kingdom, the United States of Americaand the World Bank.
  3. 3. Economic viability of Jatropha curcas L. plantations in Northern Tanzania Assessing farmers’ prospects via cost-benefit analysisNepomuk Wahl, Ramni Jamnadass, Henning Baur, Cristel Munster and Miyuki Iiyama
  4. 4. Correct citation:Wahl N, Jamnadass R, Baur H, Munster C and Iiyama M. 2009. Economic viability of Jatropha curcasL. plantations in Northern Tanzania – Assessing farmers‟ prospects via cost-benefit analysis. ICRAFWorking Paper no. 97. Nairobi. World Agroforestry Centre.Titles in the Working Paper Series aim to disseminate interim results on agroforestry research andpractices and stimulate feedback from the scientific community. Other publication series from the WorldAgroforestry Centre include: Technical Manuals and Occasional Papers.Published by the World Agroforestry CentreUnited Nations AvenuePO Box 30677, GPO 00100Nairobi, KenyaTel: +254(0)20 7224000, via USA +1 650 833 6645Fax: +254(0)20 7224001, via USA +1 650 833 6646Email: icraf@cgiar.orgInternet:© World Agroforestry Centre 2009Working Paper no. 97The views expressed in this publication are those of the authors and not necessarily those of the WorldAgroforestry Centre.Articles appearing in this publication may be quoted or reproduced without charge, provided the sourceis acknowledged.All images remain the sole property of their source and may not be used for any purpose without writtenpermission of the source. II
  5. 5. About the authorsNepomuk Wahl Nepomuk Wahl holds a Bachelor‟s degree in Agricultural Sciences from the Humboldt-Universität zu Berlin. He is currently doing a Master‟s in Agribusiness at the University of Hohenheim, Germany.Ramni Jamnadass Dr. Ramni Jamnadass is a specialist in tree genetic resources as well as in biochemistry and molecular genetics. From 2004 to 2007 she headed the World Agroforestry Centre (ICRAF) Genetic Resource Unit, which holds the largest collection of tropical agroforestry species in Africa. Currently, Ramni leads the ICRAF Global Research Project 1 (GRP1) focusing on Tree Genetic Resources and Domestication.Henning Baur Dr. Henning Baur was ICRAF‟s Regional Coordinator for Eastern Africa until March 2009 and now works as a principal advisor on food security in Yemen.Cristel Munster Cristel works as a post-doc scientist at The World Agroforestry Centre. Her work is dedicated to biofuels with a special focus on Jatropha curcas L., looking at agronomical and domestication related issues. She holds a PhD in plant physiology and molecular biology in poinsettia flower abscission from the Norwegian University of Life Sciences.Miyuki Iiyama Miyuki Iiyama is a post-doc scientist at ICRAF. She holds a PhD in economics from the University of Tokyo. She is assigned to do research on the evaluation of economic viability of biofuel provision within agroforestry systems in eastern Africa including the assessment of socio-economic and environmental impacts of biofuel feedstock production. She also has been engaged in policy research on biofuel development and economic assessment of natural resource management. III
  6. 6. AbstractThe oil-containing seeds of Jatropha curcas L., a shrub prevalent in many African countries,were recently rediscovered as a possible feedstock for biodiesel production. This studyexamines the economic viability of jatropha seed production in three northern regions ofTanzania where a jatropha-based bioenergy value chain is about to emerge. Interviews withseveral farmers growing jatropha in the regions were conducted to create primary data on costsand benefits. Along with data from literature and assumptions made, a cost-benefit analysisreveals future prospects of jatropha cultivation. The net present value of a five-year investmentwas found to be negative (USD -65 ha-1) when yielding 2000 kg of seeds per hectare and onlyslightly positive (USD 9 ha-1) when yielding 3000 kg ha-1. On rather fertile soils jatropha is notable to compete with alternative sunflower cultivation. For the specific case of NorthernTanzania, the authors therefore advise not to sacrifice scarce fertile land to a rather riskyinvestment because of insecure prospects. On the contrary, jatropha hedges, that are low inopportunity costs, are a proven additional source of income and seem more appropriate undercurrent conditions.KeywordsJatropha curcas L., Tanzania, bioenergy, biodiesel, cost-benefit analysisIV
  7. 7. AcknowledgementsThis study was made possible through a GTZ-ICRAF collaboration. I am grateful to bothorganizations and the people who work there for giving me the wonderful opportunity andsupport to undertake this research in Tanzania. On behalf of GTZ this is Marlene Diekmann andWolfgang Kasten, at ICRAF it is Claire Momoh and Hellen Ochieng who took care of me. Iexpress my gratitude to Meshack Nyabenge, GIS Unit Manager, for the GIS support heprovided me.I am especially grateful to my former lecturer at Humboldt-Universität zu Berlin, Barbara Wickfor pointing out the GTZ-CGIAR cooperation.Special thanks go to all the people who supported my research in Tanzania and helped me to getin touch with the farmers. This is Lilian Maliva, Albert Mshanga and Magdalena from JPTL,Janske van Eijck, Enil Kiwia and Allen Taeku from Diligent Tanzania and SNV Arusha with itstwo interns Lauren Parker and Lode Messemaker.Last but not least I would like to thank all the farmers who contributed much of their valuabletime to provide input for the questionnaires and showed me around to see and evaluate theirjatropha plots. This paper is dedicated to them hoping it will contribute to proper futureinvestment. V
  8. 8. “In the beginning we thought it is a bush plant and can tolerate even no good management. But we realized that jatropha requires a full management as for any other cash crop, like coffee, etc.” Ismael Manang, Manager of a 32-ha plantation near Arusha, TanzaniaVI
  9. 9. Table of Contents1 Introduction ................................................................................................................. 22 Overview of bioenergy policies in Africa, jatropha, and the study area..................... 4 2.1 Recent policy developments in Africa towards biofuel production..................... 4 2.2 Bioenergy policy in Tanzania .............................................................................. 5 2.3 Introduction into Jatropha curcas L. ................................................................... 5 2.4 Study country: Tanzania ...................................................................................... 8 2.5 Study area: Arusha, Manyara and Kilimanjaro region ...................................... 113 Method and data ........................................................................................................ 16 3.1 Method ............................................................................................................... 16 3.2 Data .................................................................................................................... 18 3.3 Limitations ......................................................................................................... 194 Assessment of factors influencing jatropha cultivation and marketing .................... 20 4.1 Production economics ........................................................................................ 20 4.2 Agronomic factors affecting costs and yields .................................................... 21 4.3 Output markets in Northern Tanzania................................................................ 25 4.4 Stakeholders involved ........................................................................................ 285 Analysis & Results .................................................................................................... 32 5.1 Characteristics of the planting sites visited ........................................................ 32 5.2 Detailed analysis of single cost factors .............................................................. 35 5.3 Necessary adaptations ........................................................................................ 37 5.4 Scenario I ........................................................................................................... 41 5.5 Scenario II .......................................................................................................... 41 5.6 Scenario III......................................................................................................... 426 Conclusions & Recommendations ............................................................................ 43 Appendix .................................................................................................................. 49 References ................................................................................................................ 54Currency exchange rateUSD 1 = TZS 1160 1
  10. 10. 1 Introduction“The worldwide recognition of limits in the availability of major fossil energy sources and therelated rapidly rising energy prices (…) have introduced a massive search for new energysources for world economic development (FAO 1981).” This quote from a FAO expertconsultation entitled “Energy cropping versus food production”, held 28 years ago in Romeraises the two main issues we still discuss today: How can energy from sustainably producedbiomass be provided in large quantities and at competitive prices without compromising foodproduction? While the search for the panacea is still under way energy prices continue to soarand African smallholders‟ agricultural production is threatened more than ever by continuedlow inputs into degraded soils, climate change and high energy prices. High population growthrates, especially in developing countries, put additional pressure on the agricultural sector andthe individual farmer alike. Compared with 1980 an additional 1.5 billion people need to be fedtoday (UN Population Division 2008).Bioenergy use today – Biomass is already the main energy source for Tanzania and many otherAfrican countries (WRI 2003). However, the problem is the unsustainable and inefficient use ofbiomass, e.g. fuelwood. Furthermore, traditional energy sources such as fuelwood and charcoalcannot provide the energy sources needed for modern energy systems. Liquid fuels of differentkinds are the main energy source for transportation, lighting and processing. Bioenergypromises to reduce foreign currency spending while reducing greenhouse gas emissions at thesame time.Jatropha – the bioenergy feedstock – One widely discussed new source of bioenergy is thephysic nut tree, Jatropha curcas L. Its oil-containing seeds constitute a good feedstock forbiofuel production. First trials by GTZ in Mali in the 80‟s and early 90‟s to make jatropha oil adiesel substitute failed because of relatively high feedstock costs compared with rather lowprices for fossil diesel at those times (Wiesenhütter 2003). But with real energy prices in 2007soaring to even higher levels than during the second oil crisis in 1979 (McMahon 2008) andgeneral perception of a steady increase in the long term, prospects for jatropha biodieselproduction seem better than ever. This may explain why many companies, private investors,NGO, farmers, national as well as local governments from developed and developing countriesare embarking on jatropha ventures although viability of jatropha seed production has not been 2
  11. 11. thoroughly assessed yet (Jongschaap et al. 2007). With unknown real production costs forjatropha many uncertainties remain to profitability of investments into biodieselmanufacturing.However, the numerous potential benefits from the “multi-purpose tree” sound promising:reduction of costly fuel imports, energy security, new employment opportunities for farmersand skilled engineers, a new export commodity, reduction of greenhouse gases and prospectsfor the marketing of carbon credits while combating erosion and desertification at the sametime.Viability unclear – Tomomatsu and Swallow (2007) examined the market feasibility of ajatropha-based biodiesel production chain and its profitability for smallholder farmers inKenya, and concluded that jatropha is not a viable cash crop under current economicconditions. Other authors in turn, like Philip (2007), see jatropha as a high-potential bioenergytree and recommend massive and immediate cultivation. None of these analyses though relieson actual data from existing jatropha plantations in Eastern Africa because such data is stillrare. Available figures on inputs and yields are mainly assumptions (Tewari 2007) or incorrectextrapolations (Achten et al. 2008), often taken from plantations outside of Africa. Reliabledata for the East African region will only be available in a few years time after evaluating themany plantations being set up today.Urgent need for reliable data – Despite missing facts on the actual performance of jatrophacultivation more than 10,000 small-scale farmers are currently establishing jatropha plantationsin Tanzania (Loos 2008) and many more all over East Africa. There is an urgent need to providea reliable ex-ante analysis that incorporates already available facts from existing plantationswhile filling the gaps with conservative assumptions to arrive at figures that small-scalefarmers, investors, development agencies and the government can rely on for further decisionmaking.Study objective – This study examines profitability and competitiveness of jatropha seedproduction in Northern Tanzania where a jatropha based biofuel value chain is about to emerge.The tool applied is cost-benefit analysis that examines expenditures and revenues over a certainperiod of time which will lead to economic indicators that allow simple judgement on viability. 3
  12. 12. Structuring of the paper – Chapter two gives an overview on recent developments in bioenergypolicy in Africa, the jatropha plant itself and the study area. Chapter three describes theresearch method applied and the kind of data obtained. Chapter four discusses factors found toinfluence jatropha cultivation and marketing while chapter five presents the results of theanalysis and different scenarios. Chapter six then sums up the findings and concludes the paperwith recommended action.2 Overview of bioenergy policies in Africa,jatropha, and the study areaThe following chapter gives a brief overview on the development of biofuels promotion on theAfrican political agenda, on jatropha as a traditional hedge plant and a modern energy shrub aswell as an introduction into the study country and the study regions.2.1 Recent policy developments in Africa towards biofuelproductionBioenergy and liquid biofuels in particular have been on the political agenda of many Africancountries already since 2004. A large group of African ministers signed the Statement onRenewables in Africa in Nairobi in 2004, which calls for, inter alia, promoting the sustainableproduction of biomass and its efficient use in all sectors and enhancing the development ofrenewables. Then in 2007, the first “High-level Biofuels Seminar in Africa” was held in AddisAbaba, Ethiopia. The seminar concluded with the adoption of the “Addis Ababa Declaration onSustainable Biofuels Development in Africa” and an Action Plan (Conliffe and Kulovesi 2008).The Plan encompasses the development of ethanol, biodiesel, biogas, biomass gasification, andcogeneration as priority sectors, and contains a number of cross-cutting programme areas,including policy and institutional frameworks, financing mechanisms, resource assessments,capacity building and strengthening technical expertise. Both conferences represent officialstatements confirming that a large number of African countries are willing to promotebioenergy in general and liquid biofuels in particular. Despite political willingness, biofuelproduction in Africa is still at an infant stage.4
  13. 13. To foster activities towards biofuel production the Kenyan Ministry of Agriculture incollaboration with GTZ (German Agency for Technical Cooperation) recently published aRoadmap for Biofuels in Kenya (MoA/GTZ 2008). The roadmap identified jatropha as a majorfuture biodiesel feedstock.2.2 Bioenergy policy in TanzaniaIn 2005, Tanzania established the Rural Energy Agency (REA). According to its own missionstatement, the purpose is to promote development of modern energy services in rural areas byfacilitating administrative processes and project implementation and also by working on thepolicy level. Facilitating activities of key stakeholders includes providing grants and subsidiesto developers of such projects. This is done through the Rural Energy Fund (REF). In additionto the REA, which does not exclusively focus on bioenergy and biofuels, the Tanzaniangovernment established the National Biofuels Task Force (NBFT) in March 2006. Differentministries and the private sector are involved in it. Stated activities of NBTF are to deal withpolicies, set up a regulatory framework, and legislation issues.However, Philips (2007) notes that despite the political will to promote biofuels, economicfeasibility is still unclear and lacks detailed analyses. Because of that and because a clear policyframework is still missing, e.g. taxation of biofuels is still a matter of discussion, biofuelproduction and use are still at an infant stage.2.3 Introduction into Jatropha curcas L.Jatropha curcas L.1, commonly known as jatropha or physic nut2, is a succulent shrub or smalltree, which belongs to the large Euphorbiaceae family. It originated from Central America buthas been naturalised in most tropical and subtropical countries from South-America to Africaand Asia (Heller 1996). Its tolerance of various soil and climatic conditions allows a vastdistribution within the so called “jatropha belt” stretching between 30° N and 35° S(Jongschaap et al. 2007).Traditional use – People in many of these countries use it as a live fence to protect their crops,for demarcation of properties or to fence livestock. At the coastal region of Madagascar,1 In the following referred to as “jatropha” 5
  14. 14. jatropha is used as a support plant for vanilla trees. Due to its toxicity the plant also possessesmedicinal properties to induce diarrhoea and regurgitation. Traditional doctors mention woundsealing properties of its sap (latex). Medicinal research on jatropha„s toxicity started more thanhundred years ago when in 1893 Siegel published his examination of the toxicity of jatrophaseeds and oil. The oil-containing seeds nonetheless were never of much interest to the farmersas the oil is non-edible and only suitable for soap making3 but not for cooking nor is theprotein-rich press-cake suitable for animal feeding. From 1987 to 1997, the Special EnergyProgramme carried out by GTZ in Mali used jatropha oil as a feedstock for soap production andas a diesel substitute. The latter practice was not found to be price competitive in Mali or inZambia at those times because of relatively high feedstock and processing costs (Benge 2006).Renewed interest in jatropha as biodiesel crop – However, as the new millennium began,soaring oil prices and concerns about the environmental impact of fossil fuel combustion led toa search for new sustainable biodiesel feedstocks. Jatropha suddenly became very popular andis touted since then as one of the most promising future major oil crops by developed anddeveloping countries alike. Companies from developed countries recognize jatropha as a newexport crop for developing countries to supply western economies with “green fuel” whiledeveloping and newly industrialising countries like India see mainly their potential to reducedependency from costly oil imports (New-Dehli - Planning Commission 2003).Claimed properties of jatropha – The alleged advantage of jatropha lies in its greater toleranceof environmental conditions. This is supposed to make jatropha an alternative oil crop to palmoil there where the latter is not profitable or even impossible to cultivate. Especially arid andsemi-arid regions as well as marginal soils are in the focus for extensive jatropha plantations.Much of Tanzania„s land has been identified suitable for jatropha cultivation4.Unrealistic expectations – Many characteristics such as being high yielding, low in water use,drought-resistant, low in nutrient requirement, not susceptible to pests nor diseases were andare still attributed to jatropha. These properties are not necessarily incorrect but not alwaysachievable in combination, e.g. low nutrient and water requirement with high yields (Jongshaap2 Botanically Jatropha curcas L. does not produce nuts but fruits3 Some West African countries, the Cape Verde Islands and Madagascar exported Jatropha seeds during the 20th century for soap production to Marseille (Heller 1996).4 Meshack N. 2008. ICRAF GIS Unit 6
  15. 15. et al. 2007). Expectations that jatropha will yield up to 12 t ha-1 of dry seeds result fromillegitimate extrapolation from individual plants (Achten et al. 2008). Also, being adapted andsuitable for unfavourable conditions should not be confused with being viable from aneconomic point of view. Harsh climatic conditions and marginal soils will not allow high yieldsunless intensive inputs are applied which in turn will affect profits negatively.Theoretical oil yield potential – The theoretical annual oil production potential of jatropha liesbetween 539 - 2720 kg ha-1 under the assumption that all incoming radiation is intercepted and50% of the dry matter is accumulated in fruits (Openshaw 2000). The variation is due to thediffering Net Primary Production (NPP5) depending on the longitude and the appliedsimulation model (Jongshaap et al. 2007). The northern part of Tanzania (Arusha, Kilimanjaro)is located very close to the equator (2 - 4° S) and allows a very high NPP of about 1000 gC m-2yr-1. Compared to the oil yield that is achieved from oil palm plantations (3240 t ha-1 yr-1 6) themaximum possible yield from jatropha is still significantly lower but an alternative worthconsidering, given the annual oil yields of crops such as sunflower (315 L ha -1 7), or castor(270 L ha -1 8). This comparison of the potential oil yield with actual yields from grown crops isimproper but nevertheless points out the potential that is there.Critical issues for investors and farmers – Apart from agro-ecological conditions, viability ofjatropha seed production also depends highly on good genetic material as well as on actual fieldconditions, adjusted management, and input practice. Among the problems that need to beurgently addressed are: Unavailability of genetically improved or selected seeds Knowledge on best fertilisation practices: What kind of fertilisers need to be applied in what quantity and frequency on what soil type to:  achieve highest yields  maximise profit5 NPP is the net production of all types of plant biomass6 Average Yield achieved by smallholder producers (National Agricultural Census of Agriculture 2002 / 2003)7 Assuming an average yield of 0.9 t ha-1 and an oil content of 35%8 Assuming an average yield of 0.6 t ha-1 and an oil content of 45% 7
  16. 16.  achieve high yields in relation to low input as an adapted strategy for poor farmers Water requirements Best spacing for different agro-climatic conditions Threshold level of damage through pests, diseases, and fungi that requires phytosanitary measuresUnder such suboptimal conditions farmers embark on jatropha cultivation in Tanzania.2.4 Study country: TanzaniaThe United Republic of Tanzania, located in East Africa at the Indian Ocean, lies just south ofthe Equator. The boundaries stretch between 1° to 12° S latitude and 21° to 40° W longitudecovering a total surface of 945,000 sq km. Tanzania borders with Africa„s deepest lake, LakeTanganyika in the south-west and Lake Victoria, Africa„s largest lake in the north-west (Fig. 1).40 million people live in Tanzania today. The population growth rate is about 2% annually(CIA 2008) and therefore the population is expected to reach 60 million people by 2025 (WRI2003). The population consists of about 130 tribes united by one common language ofcommunication, Swahili.EquatorFig. 1 Location of Tanzania on the African continent. Source: Wikipedia User:Vardion 2006, modified.Agro-ecological zones – Tanzania„s coastline is flat but quickly ascends towards the centretableland, which remains constant between 1000 and 1500 m. Mountains dominate the countryin the southwest and especially in the northeast where high mountains up to 5895 m8
  17. 17. (Kilimanjaro) can be found. As a result, Tanzania„s mainland consists of diverse ecological andclimatic zones. The country can be divided in four major agro-ecological zones that receivedifferent rainfall levels. Precipitation levels range from less than 500 mm to above 1500 mm.The narrow coastal region is consistently hot and humid with an annual mean temperature of25°C and 1142 mm of rain (Dodoma), while in the lowland central regions a temperatesavannah climate prevails. Average annual rainfall shows great variation depending on thelocation. Highest precipitation is found towards the southeast and a small area close to LakeVictoria reaching up 2500 mm and least on the central plain receiving only 500 mm (FAO2008).2.4.1 State of small-scale agriculture on Tanzanian mainland12 million ha of farmland are allotted to smallholders from which 80% (9.5 million ha) are usedfor annual crops (7.2 million ha), permanent crops including trees (1.3 million ha) andpermanent-annual mixed stands (1.0 million ha) (NBS 2006). Only a very small percentage ofall crops are cultivated on irrigated land (184,000 ha) (CIA 2008). Agriculture is practisedthroughout the entire country but characterised by low density of arable land and permanentcrops per unit of area (FAO 2008). The two prevailing farming systems are the maize mixedfarming system in the central plains and the root crop farming system in the south andnorthwest (Dixon, Gulliver and Gibbon 2001). Maasai people are traditionally pastoralists butnowadays engage often into farming activities in addition to extensive livestock keeping.Tanzania„s small-scale farmers are mainly subsistence farmers. Available land area is a majorlimiting factor to agricultural production. The average area utilized by smallholder farmers islittle more than 2 ha per household. 46% of agricultural households reported having insufficientland. Due to scarcity of land and other limiting factors farmers are mainly producing for ownconsumption. Maize, cassava, beans and rice constitute the staple food for all Tanzanians andtherefore occupy large areas of the arable land. Cash crops play a minor role but still significantquantities of export commodities are produced such as cotton (180,000 t), coffee (60,000 t),and tobacco (50,000 t). Important oils crops grown by smallholders are groundnuts, oil palms,and sunflower (NBS 2006).Productivity of all crops is generally low and even dropped dramatically with the beginning ofthe new millennium. While in the 1980s average maize yield reached almost 2 t ha-1 it is less 9
  18. 18. than 1 t ha-1 today. Production increase of a million tons in two decades was only possible dueto a triplication of the area under maize cultivation (FAO 2008, NBS 2006).Concerning the current status of small-scale agriculture in Tanzania, the National SampleCensus of Agriculture concludes the following (NBS 2006): The average planted area of 1.61 hectares per household for annual crops is low to support an average size smallholder household and is insufficient to allow smallholders to move beyond subsistence existence. The most fertile areas have even less available land for cultivation per household. In regions like Kilimanjaro the average land area per household is only one hectare. The percentage of utilised land compared to available land is high and in some regions all available land is utilised. With the exception of seeds, there is virtually no investment in crop production. More than 90% of the households use only farmyard manure and compost for fertilisation and virtually no pesticides, insecticides, etc. There are practically no credit facilities and most households purchase implements through the sale of crop products. A large amount of support is required to transform these subsistence farms into profit making entities.2.4.2 Economy and energyTanzania ranks among the poorest countries of the world being a so-called Least DevelopedCountry (UN-OHRLLS 2008). The annual GDP per capita is low, only US$ 1100. TheTanzanian economy depends heavily on agriculture, which contributes more than 40% to GDP,provides 85% of exports, and employs 80% of the labour force (CIA 2008). Especially in therural areas, agriculture is of great importance since almost all rural labour force is occupied byagricultural activities. These figures clearly show that economic development of Tanzania isnot possible without the development of the agricultural sector. Because small-scale agricultureforms the basis for the livelihood of millions of Tanzanian farmers, agricultural developmentneeds to tackle their problem and to assess their needs. However, development is not possiblewithout energy. Provision of sustainable and locally produced energy is therefore crucial for thewhole country.10
  19. 19. Energy consumption – Today the agricultural sector consumes only 3% of the total energywhereas the biggest share, almost 80%, is residential energy consumption9. The main energysources are by far renewables – mainly primary solid biomass (fuelwood) – providing 94% oftotal energy consumed. Fossil fuels play a minor role in total energy provision10 but are crucialfor traffic and electricity generation where there is no hydropower available11.High expenditures on oil imports – Tanzania is among the countries with no known oil reserves(CIA 2008). Therefore, the entire industrial and transport sector depends heavily on foreign oilimports which value accounted in 2007 for 1.5 billion US$ an increase of over 30% comparedto 2006 (Bank of Tanzania 2008). The 2007 spending on oil imports was equal to 40% of thecountry„s total export earnings. This share is likely to increase in 2008 due to continuous hikesof world oil prices. The ever-aggravating situation made the Tanzanian government think aboutthe possibility of displacing fossil fuels with liquid biofuels (Philip 2007).2.4.4 Biodiesel production todayOnly recently has Tanzania started production and marketing of straight vegetable jatropha oilfor use in adapted car engines, and for this reason the output is still negligible. Nationallyproduced biodiesel is so far not available at competitive prices. At least two ambitious investorsare currently active in jatropha propagation and processing: Diligent Tanzania Ltd. in Arushaand PROKON Renewable Energy Ltd. Prokon is a German company that provided jatrophaseeds and cultivation knowledge to more than 10 000 small-scale farmers in Mpanda, Rukwaregion (Loos 2008). For more details on Diligent please refer to chapter Study area: Arusha, Manyara and Kilimanjaro regionThe study on the economic viability of jatropha seed production was conducted in three regionsbordering each other in Northern Tanzania. They are Arusha region, the northern part ofManyara region and the northern part of Kilimanjaro region. Arusha and Kilimanjaro borderKenya in the north while Manyara is found south of these two and stretches towards the centreof Tanzania. The three regions are mainly known for their extensive national parks and game9 1999: 10 697 tmtoe (tmtoe: thousand metric tons of oil equivalent) (WRI 2003)10 1999: 762 tmtoe (WRI 2003) 11
  20. 20. reserves covering a total area of 10 720 sq km and for, Mount Kilimanjaro (5895 m) and MountMeru (4566 m), the highest and fourth highest in Africa respectively (Fig. 2).Fig. 2 Map of Tanzania with the three regions indicated where the study took place: Arusha, Kilimanjaroand Manyara. Source: CIA 2008, modified.Geography – The agro-ecological conditions of the study area depend much on their specificgeography. The Rift Valley cuts through the middle of Arusha region in the north-southdirection, resulting in significant differences in altitude and creating diverse microclimateswithin the region. The western plain towards Ngorongoro Crater is dry and hot, allowing fewcrops to grow viably without irrigation. In this area, only the Maasai people live, practicinglivestock rearing for their livelihood. In contrast, most mountainous sections of the highlands inthe western Arusha and Kilimanjaro regions are humid unless not situated in the rain shadow ofa mountain. All kinds of agricultural activities, including a variety of food and cash crops,livestock keeping, dairy production are potentially viable there.11 Electricity production by source: fossil fuel 18.9%, hydropower: 81.1%. Electricity production: 1.88 billion kWh (2005) (CIA 2008) 12
  21. 21. Temperatures – The average annual temperature is 21°C in the highlands and 24°C in the lowlands (The Regional Commissioner‟s Office 2009). Highest temperatures occur during therainy seasons from October to April where the average ranges from 23 to 25°C. From May toSeptember temperatures are a little lower with monthly means ranging from 20 to 22°C( 2009).Rainfall – Agricultural activities in most districts are influenced by a bimodal rainfall regime –a short rainy season from November to December and the long and heavy rainy season fromMarch to June (Fig. 3). Total precipitation in the three regions varies between <1000 and>2000 mm y-1 (Fig. 4).Fig. 3 Average monthly precipitation in four different locations. Source: Hoare 2008. 13
  22. 22. Fig. 4 Average annual precipitation in four different locations. Source: Hoare 2008.Soils – Arusha and northern Kilimanjaro region have neogene soils characterized by typicalalkaline volcanic rock material like olivine basalt, alkali basalt and others. In Manyara regionwe find mainly granite and crystalline limestone series as parent material.Major enterprise forms – Because of good climatic and soil conditions, west Arusha andKilimanjaro attract both small- and big-scale farmers. Huge flower, sugar, aloe vera and (oftenabandoned) sisal farms can be found around the cities Arusha and Moshi.2.5.1 Smallholder household characteristicsPopulation density differs a lot between the three regions but also within each region dependingon the agro-ecological conditions. On average only 23 and 35 people sq km-1 live in Manyaraand Arusha respectively while density is high in Kilimanjaro region with 104 people sq km-1(NBS 2005). All rural agriculture households of the three regions together account for 11.1% ofall rural agriculture population of Tanzania. The average household size is between 5.2 and 5.6persons.The majority of agriculture households cultivate crops and rear livestock. In Manyara about onethird is cultivating crops only. In Manyara and Kilimanjaro region there are virtually nopastoralists relying on livestock keeping only. In Arusha, many Maasai still practice theirtraditional way of livestock rearing but this represents only 10% of all households that dolivestock.14
  23. 23. Two thirds of the households use their livelihood income mainly for subsistence purposes. Only≤9% use more than the half of their livelihoods for non-subsistence purposes. As for allTanzanians maize constitutes the staple food for people in Arusha, Manyara, and Kilimanjaroregion too. The average yield per hectare of small-scale farmers in these regions varies between0.8 and 1.1 t ha-1. The average area planted with maize per maize growing household is highestin Manyara (1.3 t ha-1) and rather low in Arusha and Kilimanjaro (0.7 and 0.5 t ha-1respectively). Almost all farmers practice intercropping. Typically maize gets intercroppedwith beans or cabbage because beans are the usual side dish for ugali12 or rice.Land ownership is characterised by prevalence of customary law (>70%). Only a rather smallpercentage of smallholder farmers hold an ownership certificate. Land availability forsmallholders is a critical issue in all of the three regions. 76 to 86% of the households use alltheir available land for agricultural production. Only 23% (Arusha) to 41% (Manyara) of thehouseholds consider having sufficient land. Food insecurity is an issue in all three regions butdiffers highly; in Kilimanjaro less than 50% never face problems in satisfying the householdfood requirements compare to Arusha and Manyara where the figure is much higher.In all three regions farmers have relatively good access to roads compared to other regions(≥70% of the first fields are within one kilometre to the nearest road).Almost no small-scale farmer is making use of credits (<2%). Most of them even do not knowhow to get credit or state that credit is not available.2.5.2 Traditional role of jatropha in agro-ecosystems of Northern TanzaniaIt is difficult or even impossible to determine when physic nut was first introduced intoTanzania. The only record confirming early jatropha cultivation in Africa was found on theCape Verde islands reporting extensive plantations that were established at the beginning of the19th century (Freitas 1906 and Serra 1950 in Heller 1996). In Tanzania no such records areknown of till date. Nonetheless jatropha has been around for many generations as the elderpeople who visited villages remember seeing jatropha trees when they were young.Appearance of jatropha within the agricultural systems differs remarkably from one village toanother. In some jatropha is not cultivated at all either because people have never been heard of12 Ugali is made from maize flour and water. It is the staple starch component of most Tanzanians. 15
  24. 24. it or those that have may not possess the planting material or the custom to grow it. In a fewcommunities jatropha is perceived as a graveyard plant and therefore only planted aroundtombs. The willingness of those villagers to grow jatropha in a different context is very lowbecause they believe this will bring them bad luck. In many other places jatropha can be foundabundantly. Jatropha trees, shrubs and hedges are exclusively located in rural areas there wheremen dwell and work – in villages, near plots and beside roads. This is because the plant hardlyspreads by itself. The notion that jatropha is a weed that invades existent ecosystems andspreads uncontrollably can be rejected for the area surveyed. A very high percentage of today‟sexisting trees and bushes were planted by humans in a specific place to fulfil a specificfunction. This function in most cases is to act as a “living fence”. A survey of 125 households inthe year 2002 by Mshanga showed that 95% grew jatropha as a hedge on their compound and5% as a graveyard plant. None of the interviewed households cropped a jatropha plot forcommercial purposes.The bushes achieve heights of two meters or more unless they are pruned. The hedges fulfilmultiple purposes along roads, around houses and plots, as crop protection, propertydemarcation, fencing of livestock and erosion control. The seeds were never of much interest tothe farmers except for medicinal purposes13.3 Method and dataThe method applied to evaluate economic viability, the various data sources used and thelimitations encountered will be described in this chapter.3.1 MethodIn order to determine the economic viability of jatropha seed production we first need to definethe term “viability”. We look at viability in two ways:13 A traditional healer in the Maasai village of Engaruka, western Arusha, is aware of the purgative and diarrheic properties of the seeds due to their toxicity. Also he observed that application of sap stops minor cuts from bleeding and that a very small quantity of oil administered orally cures from stomach worms. Furthermore to stop toothache teeth should be brushed with the cut off end of a jatropha branch, he says. 16
  25. 25.  Is jatropha cultivation profitable? Will the farmer be able to earn enough from oil or seed sale to cover his input and labour costs and gain a net profit >0. Is jatropha cultivation competitive? Here we look at whether the farmer can earn more by cultivating jatropha than when he would allocate his land, labour and capital to alternative crops.The tool applied to evaluate the current situation is cost-benefit analysis (CBA). Data wascollected on the cost factors for the cultivation and on the profits from selling the seeds. Thisdata was entered into a MS Excel-sheet to sum up the discounted costs and benefits for everysingle year up to the fifth year. This data then built the foundation for the calculation of foureconomic indicators: The net benefit (NB) is calculated as the remaining profit after subtracting all costs that incurred within one period from the value of all products produced within the same period. The discounted net benefit (DNB) discounts the values of future earnings and losses to provide their today„s values. An appropriate discount rate needs to be chosen. The net present value (NPV) presents today„s value of the whole investment summing up discounted future earning and losses based on a given discount rate and. The internal rate of return (IRR) is an indicator of the efficiency of an investment. It is the annualized effective compounded return rate which can be earned on the invested capital.A discount rate has to be set for the calculation of DNB, NPV and IRR. We decided on arealistic discount rate of 12%, similar to the one used by Wiskerke (2008) (11.8%). This rate isbased on the latest available lending rate (16.6%, March 2007) for long-term loans (3-5 years)(Bank of Tanzania 2009) minus an inflation rate of 4.6%. Thus the discount rate applied doesnot include a risk premium which reflects the various uncertainties involved in jatrophacultivation.The analysis is divided in three different scenarios: The first scenario does a CBA to calculatethe NPV and IRR14 with and without intercropping. To demonstrate viability of jatrophacultivation itself intercropping is left out at first. Then intercropping of jatropha with food cropsis included because it is common practice and improves revenue per unit of land. The second14 IRR is only given when applicable 17
  26. 26. and the third scenario constitute a sensivity analysis. The second scenario assumes higher seedyields of jatropha. Better management practice and improved germplasm are likely to increaseproductivity in future. In the third scenario higher food prices are assumed to check whetherjatropha is a viable alternative when food prices increase.From various possible intercrops we decided to use sunflower exemplarily. Like jatrophasunflower is an oil crop that could be used as a biodiesel feedstock. Sunflower oil is animportant cooking oil and used in almost every household. Sunflower is grown by a total of34,200 households in Arusha, Kilimanjaro and Manyara region. Because of much better yieldsin Manyara (1.48 t ha-1) and Kilimanjaro (1.73 t ha-1) in contrast to Arusha (0.99 t ha-1)sunflower is cultivated mainly in the two first regions. In total sunflower covers an area of 6348ha in the relevant regions.3.2 DataThe applied data was derived from three different sources: Firstly primary data collected viainterviews and survey of the region, secondly secondary data from local institutions andliterature and thirdly ex ante estimates. Objective was to obtain as much primary data aspossible from the interviews and to use secondary data and ex ante estimates only to fillinevitable gaps. The final figures therefore incorporate a mix of newly generated data from ownfield survey plus available data from literature and local institutions plus ex ante estimatesbased on conservative assumptions rather than actual results.The data collection took place in April and May 2008 up to 100 km around Arusha town inthree northern regions of Tanzania, namely Arusha, Kilimanjaro and Manyara. Thesemi-structured questionnaires consisted of two parts. The first one was to get detailedinformation about the jatropha plot especially on the amount of inputs and labour invested butalso if possible on seed yields. The second part were open questions to gain a betterunderstanding of the farmers„ motivation and concerns (for questionnaire see Appendix A). Intotal ten small-scale farmers, two commercial farmers and two households that gather fromhedges were interviewed. Additionally interviews were also done with NGO and privateenterprises promoting jatropha cultivation and buyers of seeds and oil.To incorporate sunflower production as an intercrop into jatropha cultivation the following datais utilized (Table 1):18
  27. 27. Table 1 Sunflower gross margin for one hectare Market price (USD kg-1) 0.1552 -1 Sunflower yield (kg ha ) 1809 Total revenue (USD ha-1) 281 -1 Total production cost (USD ha ) 150 Annual profit (USD ha-1) 131Source: Faida MaLi (2007)Other required input data is jatropha yield and the market price for the seeds. Unfortunatelyonly one full yielding jatropha plantation was found in all three regions. The yield achieved onthis farm is rather discouraging though: 875 kg ha-1 y-1 in the sixth year. Ouwens et al. (2007)compiled yield data from all over the world ranging from 250 to 5000 kg ha-1 y-1. The low yieldmight have been caused by wrong management, disadvantageous environmental conditions orpoor quality. Because this yield is not necessarily representative for the whole region andliterature approves that higher yields are possible a seed yield of 2000 kg ha-1 in the fifth year isassumed for the following calculations. The market price for one kg of jatropha seeds variesgreatly between USD 0.09 (TZS 100) and 4.31 (TZS 5000) (Messemaker 2008). However,Diligent – the biggest buyer in all three regions – pays mostly USD 0.13 kg-1 (TZS 150). In thefollowing calculations this is considered to be the market price. Considering the tight marketconditions buyers of jatropha seeds operate in a much higher price does not seem feasibleanyway (see chapter 4.3).3.3 LimitationsThe quantity of interviews conducted (14) is far too small for a quantitative evaluation of thedata obtained. That is why from a statistical point of view the study is not representative andresults are not given in per cent but in absolute figures, e.g. 5 from 14. Also the average valuefor cost factors or yields are not representative but we still believe that the data obtained doesreflect the actual situation of jatropha farmers in a sufficient way. Sufficient enough to allowfurther calculations that give the desired economic indicators.The reason why so little interviews were possible is typical for an ex ante analysis: Until nownot many jatropha plantations exist and most of the existing plantations are still at an infantstage. Jatropha is a perennial with a long gestation period until it develops its full yieldpotential. These circumstances made it difficult to collect sufficient data especially on the 19
  28. 28. output/revenue side – still a major problems in all jatropha calculations. Additionally to theproblem that not many plots are available for evaluation small-scale farmers neither keep exactrecord of their actual inputs and labour invested nor have they exact records of their yields.Also, jatropha is almost always intercropped with other annual or perennial crops. The time andinputs allocated exclusively to jatropha often can not be distinguished completely from theintercrops. Thus, the data and results presented in this study should be understood as anindication rather than be taken as exact figures.The cost-benefit-analysis does not take into account any possible non-market goods nor anyexternalities. This is because external effects and non-market goods are difficult to monetariseand the calculation of these would be beyond the means of this study.4 Assessment of factors influencing jatrophacultivation and marketingJatropha is recognized as a multi-purpose tree and its products too. Especially the oil and theseedcake can be used for different purposes. Despite a few exceptions though, farmers marketthe harvested seeds to buyers and do not process them themselves any further. However, in bothcases – direct selling of seeds or further processing – production economics are of greatimportance for possible profits. How production and the demand side influence economicviability of jatropha seed production will be looked at in the following sub-chapters.4.1 Production economicsThe profit obtained depends on the quantity produced, the obtained price per unit andproduction costs. Some production costs are fixed, i.e. not varying with the quantity producedothers are variable, i.e. increasing with an increasing output. Progress in technology can alsoplay an important role to either increase production or decrease production costs. For thecalculations the following simple equation is used:Profit = Revenue – Total CostsProfit = (Units produced x Price per unit) – (Units of inputs x Costs per unit) 20
  29. 29. Profit is defined as the difference between total revenue and total costs. Assuming that farmerscan neither influence the price of their product nor the price for the inputs applied it is clear thatthe only ways they can optimise their profit is through reducing the amount of inputs and/or byincreasing the output quantity. Input prices and the market price for his product depend on themarket situation, namely supply and demand, in case of a free market (Mankiw 2003).Seeds are the only output considered. Other possible external effects such as erosion control,CO2 sequestration etc. are not taken into account. Several input factors such as labour,(opportunity) cost for land, and agricultural inputs are included in the calculation.4.2 Agronomic factors affecting costs and yieldsSeed yield – “Yields can not yet be predicted at any degree of accuracy.” This statement from anexpert committee that discussed small and large scale jatropha project development inWageningen, the Netherlands, in 2007 (Ouwens et al. 2007), reveals the biggest challenge forjatropha investment be it a small-scale farmer or a multi-national company. A somewhatprecise prediction of the seed quantity a farmer will harvest from his specific spot with specificclimate and soil conditions is absolutely crucial for his decision on investment. Reportedfigures on yields exhibit a very wide range though, varying from 0.4 to 12 t ha-1 yr-1 (Openshaw2000). Many different reports on yields under various different conditions from all over theworld are more confusing than clarifying. Affirmations of high yielding mature trees should behandled with caution because systematic yield monitoring just started recently (Achten et al.2008). Because jatropha performs very different under different agro-ecological conditionsyield figures need to be looked at in relation to the prevailing environmental conditions andapplied management practices.Mature plantations in sufficient numbers do not yet exist in Tanzania to allow proper evaluationof yields. Nonetheless viability of jatropha seed production in Tanzania has already beenexamined by several authors (Mshanga 2002, Philipp 2007, van der Land 2007, Wiskerke2008). The authors use different yields projections, which represent expectations and estimatesrather than actual findings. The assumptions range from 2 t ha-1 yr-1 for semi-arid Shinyanga(Wiskerke 2008) to 9.9 t ha-1 yr-1 (no specification of conditions) (van der Land 2007).For hedges literature data on yields is even scarcer. Henning (2003) reports an average yield of0.8 kg m-1 seeds in Mali. Older not pruned hedges yielded 2 kg m-1. 21
  30. 30. Harvesting, drying and shelling – In jatropha cultivation labour costs play an important rolebecause none of the works can be done mechanically except initial ploughing. Especially in thecase of small-scale farmers field work is often done by family members. Harvesting, drying andshelling constitute a main cost factor because they are labour intensive. Wiskerke (2008)calculated that harvesting – including shelling of the fruits – consumes 80% of total time forseed production (Fig. 5). Other labour cost factors were weeding (12%) and manuring (4%).Wiskerke also estimated the total production cost for 1 kg of seeds to be USD 0.10. Hiscalculations revealed a negative NPV of USD -229 ha-1.Fig. 5 Breakdown of total production costsSource: Wiskerke 2008, modified Gestation period – Depending on the environmental conditions the gestation period varies tremendously. First flowering can occur even within the first year but not in four years under harsh conditions. Age – The age of a plantation and the seed yield are positively correlated. This can be seen from a survey of plantations in Paraguay and Nicaragua: The older the trees are the higher the seed yield is. For Nicaragua even until the eighth year an increase was monitored (Achten et al. 2008). Water demand – As for every other plant water availability is substantial for the functioning of all bio-chemical processes of jatropha. The more water is available the better is the growth rate. Because jatropha belongs to the succulent Euphorbiaceae family it can survive well in tropical low precipitation areas (< 600 mm y-1) (Jongschaap et al. 2007) but seed production is likely to be minimal and therefore cultivation is economically not viable. Higher water availability due to higher precipitation or irrigation does not automatically increase seed yield but is a prerequisite to it. Achten et al. (2008) analysed the relation of22
  31. 31. annual rainfall and dry seed yield from several plantations all over the world. Seed yield in high precipitation areas (> 1000 mm) varies tremendously between 337 and 5000 kg ha-1 yr-1. For plantations though receiving less than 1000 mm of water per year seed yield seldom exceeds 2000 kg ha-1 yr-1. Although jatropha does respond well to better water availability it does not support water-logging conditions which occur typically in clayish soils (Ouwens et al.) and therefore prefers well drained soils with good aeration (Heller 1996). Nutrients – Jatropha does grow on marginal soils but however responds well to fertilizer application. To assure continuous seed production on a high level the soil needs to be replenished with at least the amount of nutrients that are exported through harvesting. When jatropha cultivation is supposed to be in conjunction with a CDM project nitrogenous mineral fertilizers need to be applied moderately or omitted completely15. Doing without any mineral fertilizers though can have a great impact on the yield potential: Results from Patolia et al. (2007) show that “the seed yield of jatropha was significantly influenced by application of nitrogenous and phosphate fertilizers”. Propagation method – Three different propagation methods are commonly used. All three have advantages and disadvantages, from an agronomical and an economical point of view. To discuss these in detail is not subject of this study and therefore will only be mentioned briefly:  Direct seeding is the easiest and cheapest way to establish a plantation and requires good soil and weather conditions for the initial growth phase.  Seedlings get raised in a nursery where they receive optimal treatment. On the one hand keeping the seedlings in the nursery becomes more expensive every day, on the other hand the longer they stay the more hardy they get. High transport costs need to be taken into account especially for seedling older than three months.  Cuttings are easy to establish and yields can be achieved earlier than from plants propagated generatively. To obtain cuttings, elder jatropha shrubs and trees need to be available. Cuttings do not develop a tap root which makes it impossible for them to tap water from deeper soil layers.15 The global warming potential of N2O is 296 times greater than CO2 (IPCC 2007). When only a small percentage (2–5%) is released from the soil the assumed GHG emission gains can be reduced significantly (The Royal Society 2008) or completely out-balanced. 23
  32. 32.  Pests, diseases and fungi – Contrary to common believe jatropha is susceptible to a broad variety of pests, diseases and fungi (Dadang, Suastika and Dewi 2007). Plant health can be affected at every part of the plant – at the roots, the stem and the leaves. Infection and insect attacks will result in reduced nutrient and water uptake, lower photosynthesis, slower biomass increment and decreased fruit production and should therefore be prevented or cured when a certain threshold is reached.The case of hedges – Hedges are planted in line with a very short distance to one another of 5 to50 cm. Typically people use distal, thick branches as cuttings because they fruit quicker andhave a higher survival rate than thinner ones. Not much labour needs to be invested into the setup of a “live fence”. Hedges generally receive neither inputs nor maintenance except forpruning and are therefore low in maintenance and labour costs. Hedges are claimed to have apositive influence on nearby annual crops through protection from animals and as a wind brake.Competition for water, nutrients and radiation is likely to reduce growth of crops next to thejatropha fence (Felske 1991).Because hedges are planted on land that is not under cultivation there is neither landcompetition with food crops nor are there any opportunity costs.The case of plantations – To grow jatropha on a plot, each of the three propagation methods canbe used. Clearing of land can be labour intensive depending on former vegetation. Plantingdistance depends on the environmental conditions – mainly water availability and nutrients. Onmarginal soils with low precipitation a wider distance is recommended to reduce intra-specificcompetition. Generally 1111 to 2500 shrubs are planted per hectare. This refers to a spacing of2 x 2 m and 3 x 3 m respectively. If irrigation and nutrient inputs are applied 10 000 trees ha-1are possible during the first one or two years, afterwards thinning might be necessary. Highdensity assures maximum utilisation of land and reduces weeds due to soil covering.Intercropping with annuals is often done during the first years when the jatropha trees are stillsmall and do not cover the whole plot. This is very important to maintain the productivity of theland until jatropha reaches maturity and starts to produce itself. Unless jatropha is not grown onformer scrublands opportunity costs need to be taken into account to compensate for thereplaced crops. 24
  33. 33. Jatropha cultivation is very labour intensive because the work cannot be mechanised so far.Theoretically site preparation could be done with a tractor but this is an unlikely option forsmall-scale farmers in Tanzania. Labour is required for clearing the site, ploughing, pitting,planting, weeding, irrigate, spraying of crop protection chemicals, fertilization and pruning.Because labour costs amount for a high percentage of total costs, scale effects are unlikelywhen establishing a jatropha plantation on a bigger scale. The labour requirement will increasealmost linear with the increment of the area. Transportation costs could be lowered whentransporting inputs or seeds at a larger scale but this is a rather small portion of the total costs.4.3 Output markets in Northern TanzaniaFarmers sell seeds to buyers or process seeds themselves. The latter option is less common.However, in any case the seed price that farmers obtain is very important for profitability oftheir activities. The seed price depends, of course, on the market situation namely on supply anddemand. In the case of Engaruka village in the western part of Arusha region, the seed price ofone kilogram tripled due to increased demand from USD 0.09 (TZS 100) in 2005 to 0.26 (TZS300) in 2008 (Messemaker 2008). Generally a big variation in farm gate prices for seeds isobserved. While high seed prices benefit the farmers and gatherers of seeds it has adverseeffects on buyers and processors; high seed prices threaten their profits.To better understand the demand side the three major uses of jatropha oil shall be explained:Soap production – Soap production on a jatropha oil basis is possible with only two additionalingredients: lye and carbonate. The soap is said to have medicinal properties. Due to relativehigh production costs jatropha herbal soap is not competitive with conventional soap. Onlywith a price six times higher gross margins of 7 to 24% were possible, depending on the seedprice (Messemaker 2008).Domestic energy use for lighting & cooking – The oil can also be used for lighting purposes. Afloater with a wick in the middle is put in the oil and lighted up. Two cooking stoves forvegetable oil were tested in Arusha region. The so-called “Kakute stove” does not function atall. The “protos” developed by the Bosch and Siemens Home Appliances Group (BSH) doeswork but didn„t prove to be a competitive alternative to existing systems (GTZ 2007). Thedevelopment of an affordable, easy-to-use plant oil stove holds the potential to reduce CO2 25
  34. 34. emissions by a far greater amount than substituting all diesel consumed with biodiesel inTanzania. Because almost all Tanzanians rely on firewood and charcoal for cooking analternative cooking system would have a major impact on the Tanzanian ecosystem and CO2emissions from biomass.Fuel – The calorific value of 38 – 42 MJ kg-1 (Achten et al. 2008) makes straight jatropha oil(SJO) a possible fuel substitute. SJO though can only be used in modified diesel engines. Onlya few, mainly stationary diesel engines run on straight vegetable oil without any modificationsat all. Oil extraction can be done either mechanically or chemically. The latter one is onlyrecommended for large-scale biodiesel production facilities > 50 t biodiesel per day (Adriaans2006). Because such high volumes are still not a reality for Tanzania mechanical expellers arethe appropriate option. Different sizes of expellers from a manually operated ram-press to hugeelectricity powered machines are available. Mechanical extraction offers a valuable by-productin form of a press cake. This press cake is rich in nutrients and has a high energy content whichmakes it a good feedstock for biogas plants and a good organic fertilizer, both creatingadditional profit. The toxicity prohibits the use of the press cake for animal feeding.An Arushan biofuel company pays approximately USD 0.93 for seeds, transport and oilextraction per litre of jatropha oil assuming a seed price of USD 0.16 kg-1 (TZS 180). To besomehow competitive with fossil diesel the price of SJO (straight jatropha oil) cannot be higherthan for conventional diesel. The current pump price for diesel in Arusha is about USD 1.72(TZS 1995) per L16. Table 2 reveals that biofuel companies have to spend much capital on thefeedstock itself and only a small contribution margin is left to cover overhead and investmentcosts. Such costs include expenditures inter alia for office rent, staff, cars, fuel, and oilexpellers.16 Price from June 18th, 2008 26
  35. 35. Table 2 Gross margin for SJO. Difference in energy content between the units kilogram and litre isneglected to keep calculation simple. All costs in USD. Medium seed price variant High seed price variant -1 Seeds (kg ) (TZS 180) 0.16 (TZS 300) 0.26 17 4 kg seeds 4 x 0.16 = 0.64 4 x 0.26 = 1.04 Transportation 4 x 0.03 = 0.12 4 x 0.03 = 0.12 -1 Oil extraction (kg ) 0.17 0.17 Total (kg-1) (TZS 974) 0.93 (TZS 1438) 1.33 -1 Diesel price at pump (L ) (TZS 1995) 1.72 (TZS 1995) 1.72 18 Gross margin 0.79 0.39Source: Mitchell 2008Straight jatropha oil is also a possible feedstock for biodiesel production. Via transesterificationthe vegetable oil‟s viscosity gets increased to be adapted to modern diesel engines. Dependingon the engine type the biodiesel can be used either pure (100%, B100) or in a blend up to acertain value (e.g. 20%, B20). This additional step in processing requires a specialtransesterification plant, a chemical reactant and a chemical catalyst. While man powered oilextraction is still in reach for small-scale farmer associations, biodiesel production is ratherunlikely because it requires relative high capital investment which small-scale farmers usuallylack. Under current conditions competitive biodiesel production is ruled out because not eventhe feedstock for it, SJO, is produced competitively19.Use of SJO to power a Multi Functional Platform – The Multi Functional Platform (MFP) is aplatform that consists of different smaller machines that can be combined as needed. The corecomponent is an engine that runs on either diesel or straight vegetable oil to producemechanical power. This power can then be used to run different devices such as an oil expeller,an electricity generator, a mill machine or a water pump. The MFP can be used to extract oilfrom jatropha seeds and then use this oil to power the other devices (Sawe 2008,Brew-Hammond and Crole-Rees 2004). Two pilot MFPs are currently installed in NorthernTanzania in the villages of Engaruka and Leguruki. A feasibility study from Wijgerse (2007)shows that a platform with some extra income from other services next to the electricity supplycan run viable on jatropha oil. TaTEDO (Tanzania Traditional Energy Development and17 About 4 kg of seeds are necessary to extract 1 kg of oil when using a mechanical press.18 For reasons of simplicity we neglect here that 1 kg of SJO does not have the exact same energy content as 1 L of diesel.19 June 2008 27
  36. 36. Environment Organisation) is responsible for the design, installation and co-management of theMFP. The rural electrification project is intended to be scaled up to 50 MFP countrywide(Messemaker 2008).In all cases – soap production, fuel for domestic cooking and fuel for engines – producersstruggle with relative high feedstock costs what makes their products too expensive orsignificantly reduces the profit margin: Jatropha herbal soap is not competitive on the regionalmarket, a competitive plant oil stove for domestic use of SJO is not available and biofuelcompanies can only offer SJO as fuel at a competitive price but no biodiesel20. And even forSJO the contribution margin is rather low what makes it difficult for biofuel companies to covertheir overhead costs and assure profits.Among the many options to make jatropha products profitable or increase the profit margin isto lower the seed price because the feedstock price is one of the biggest cost factors. Producersof seeds benefit from high seed prices but will loose their market when jatropha-basedbusinesses become unviable.4.4 Stakeholders involvedSeveral stakeholders are involved into the market of jatropha seed production and processing.Because the seed price farmers receive is inter alia influenced by the demand the study alsolooks at the different stakeholder parties involved in the value chain. Figure 6 gives anoverview of the manifold stakeholders involved and their relation to one another. TaTEDO,KAKUTE and JPTL are NGOs promoting jatropha cultivation, GGWG is a producercooperative, Faida MaLI is meant to give business support, SARI and CAMARTEC provide oilextraction technology, KAMA and Diligent are buyers of seeds and processors and MEM,NBTF, REA and REF are political institutions supporting renewable energies. For detaileddescription of all stakeholders see Messemaker‟s value chain analysis (2008).20 For straight plant oil to become biodiesel further costly processing (transesterification) is necessary. 28
  37. 37. Fig. 6 Actor constellation for Northern Tanzania with regional and national integration (Messemaker2008)The main stakeholders in Arusha, especially in view of seed marketing options for the farmers,are described below. They can be distinguished into five different groups: 1. Seed supply Gatherers of seeds from “public” and private hedges Small-scale farmers Large-scale commercial farms 2. Oil extraction Women groups using manual ram-presses Medium-scale enterprise using mechanised oil-extraction technique, capability of biodiesel production 3. Soap production Small-scale soap producers (women groups) Commercial soap factory (KAMA) 4. Provision of training NGOs promoting jatropha to small-scale farmers and setting up and knowledge Multi Functional Platforms Private companies, providers of knowledge, training and other jatropha related services 5. Regional government Does not play a major role. 29
  38. 38. 1st group: seed supply – Seed gatherers from “public21” and private hedges still provide thebulk quantity of all seeds traded. Several hundred small-scale farmers recently started tocultivate jatropha on plots. Only very few are already producing seeds because most of themdid not reach maturity yet. Two commercial large-scale farms can be found in the three regions.These are Kikuletwa Farm (8 ha) and Agriflora Ltd. (32 ha). Figures on how many seeds areharvested from hedges and how many are already obtained from plots do not exist. The authorsestimate this to be more than 90%. This is about to change within a few years time when all theplots currently established will start yielding.2nd group: oil extraction and trading – Small-scale oil extraction is done by a few womengroups that were provided with a manual ram-press. The press fabricated by CAMARTEC(Centre for Agricultural Mechanisation and Rural Technology) costs approximately USD 200.Diligent Tanzania Ltd. is a branch of Diligent Energy Systems BV, a Dutch enterprise. DiligentTanzania is based in Arusha town where it runs four mechanical oil expellers and a smallbiodiesel refinery plant. Annual production is about 1500 T of straight Jatropha oil per year.The seed cake is used as feedstock for the nearby biogas plant which supplies a kitchen withcooking gas for the 400 workers of a nearby flower farm. Diligent„s main objective is toproduce SJO or even biodiesel for the export market in Europe. Currently Diligent producesonly medium quantities of SJO which is sold for TZS 2000 L-1. As fossil fuel is still slightlycheaper than Diligent„s SJO (May 2008) the company can only supply a niche market of safaricompanies in Arusha that are willing to pay a higher price in order to offer “green” safari tours.Usage of SJO in cars requires engine modifications. Biodiesel production is economically notviable under the current situation. Methanol, a required catalyst for the transesterificationprocess, is not available in Tanzania. Also, the biodiesel would not be competitive because theSJO is already more expensive than diesel at the pump.Diligent buys mainly from 150 middlemen who set up their collection points at central spotslike market places or administrative buildings. Contracted and not contracted farmers can comethere to sell their seeds for about USD 0.13 kg-1 (TZS 150). Diligent will buy the seeds for aboutUSD 0.16 kg-1 (TZS 180) from the owners of a collection point. Diligent offers a minimum seedprice to its contacted farmers of USD 0.09 kg-1 (TZS 100). Seed prices of USD 0.26 kg-1 (TZS21 With the term “public” the authors refer to the many hedges that are not grown on private but on public ground.30
  39. 39. 300) such as in the village of Engaruka are not viable in the long-term for an enterprise likeDiligent that has to compete with actual fuel prices (see 3.3).Diligent‟s high demand of jatropha seeds might have caused this tremendous increase in pricesbecause the demand can not be met by the current supply that consists mainly of seeds gatheredfrom hedges. To further increase the production, Diligent actively encouraged farmers to plantnew jatropha plantations and is supporting their contracted farmers with extension officers.A big problem for Diligent is that the Tanzanian government did not decide yet whetherbiofuels will be taxed or not. So far taxes are included in the fuel price of TZS 2000 L-1.Diligent is the biggest buyer of seeds in the region. A very high percentage of the purchasedseeds originate from the innumerable hedges all around Arusha town. To further increase seedproduction and ensure future supply, Diligent works together with several hundred small-scaleoutgrowers in Arusha, Kilimanjaro and Manyara region.3rd group: soap production – A few women groups trained by Kakute and JPTL produce smallquantities of soaps. Because of the high price for a bar of soap (90 gr) of USD 0.43 there is nomarket in the smaller villages. Bigger soap bars are available for a fifth of the price (USD 0.09).The only marketing options on a regional level for jatropha soap exist in bigger towns such asArusha which higher income earners.KAMA Herbal Products Ltd. is a private company run by several shareholders. It emerged fromKakute Ltd. as a result of an workshop on Value Chain Development (VCD) organised byMatch Maker Associates Ltd. (MMA) that is one of the shareholders. KAMA„s objective is todeliver herbal soaps based on jatropha oil for the national or even international market. BecauseKAMA evolved from a VCD-workshop, one if its key interest is the creation of value in localvillages by small-scale farmers. To achieve this, to reduce transportation costs and to simplifythe production, KAMA prefers to buy jatropha oil from local farmers instead of seeds. KAMAis just started up its business and is therefore not a buyer of large quantities yet.4th group: provision of training and knowledge – Kakute Ltd. was founded in 1995. Already in1998 Kakute started jatropha activities in Arusha region and became a pioneer for the wholecounty. The long existence of jatropha in many parts of Arusha region simplified theintroduction of a jatropha based value chain. Farmers owning jatropha hedges were and are stillexited to learn that the seeds they considered to be without any value actually can be sold. 31
  40. 40. Together with CAMARTEC (Centre for Agricultural Mechanization and Rural Technology,Arusha) Kakute developed and introduced the manual ram-press to jatropha growers for oilextraction. The training activities and soap production were handed over to JPTL and KAMAin 2007. Today, Kakute provides training, workshops and knowledge transfer.JPTL (Jatropha Products Tanzania Ltd.) is a private company but acts like a NGO. JPTLemerged from Kakute in 2007. JPTL„s clear focus is on training smallholder households andspecific women groups in the technical aspects of jatropha cultivation and soap production andto inform them about various other possibilities. This does not include thorough evaluation ofmarket potentials and economic viability studies. JPTL„s objective is to teach 2000 householdsuntil 2010. Instead of creating market access for the trained soap producing groups JPTL buysthe jatropha oil from them to supply its own soap production.5th group: regional government – The regional government of none of the three regions ismuch involved in jatropha activities. Some district governments purchased manual ram-pressesto distribute them to farmer groups and upon request village governments linked thejatropha-promoting NGO JPTL to existing farmer groups (Messemaker 2008).5 Analysis & ResultsThis chapter describes the results obtained through the analysis of both qualitative andquantitative data. In addition to the scenario that is based on the actual situation (scenario I) asensivity analysis is carried out. The results of this analysis are presented in scenario II and III.5.1 Characteristics of the planting sites visited Location: The plots visited are located between the 2° and 3° S latitude and 35° to 37° W longitude. Elevation: The altitude in the area surveyed differs considerably between 835 and 1382 m, a difference of 547 m. Age: The average plot age of jatropha is 3 years. Plots surveyed where between one year to over 5 years. Land tenure: Mainly all land used for jatropha is owned by the farmers themselves. 32
  41. 41.  Plot size: The average size of a smallholder jatropha plot it 0.4 ha, which is about one acre. There are two commercial farms with plantations sizes of 8 and 32 ha respectively. Planting density: The average planting density is 1940 shrubs ha-1. That is equal to 2.3 m x 2.3 m spacing. A big variation in spacing was observed ranging from 1 m x 3 m (3333 shrubs ha-1) to 3 m x 4 m (833 shrubs ha-1). Planting material: The planting material is either derived from existing hedges (seeds and cuttings) or given by promoting organisations (Kakute/JPTL, Diligent). Seedlings are used rarely because of higher investment costs. Dead shrubs: Farmers take care of dead shrubs and replace them in most cases in order to maintain future productivity of the plantation. First yield: First harvest takes place on average during the second year. A big variation occurs here too: Some farmers were able to collect a small amount of fruits already in the first year, whereas others waited up to four years for their first harvest. Quantities of this first harvest are mainly negligible. Small quantities on each tree makes harvesting uneconomic because the time needed is not compensated by the small profit earned. By-product: The seedcake is not used as fertilizer because farmers sell the seeds and the buyer keeps the seed cake for its own purposes. Diligent uses the seed cake to feed its own 60 m3 biogas plant. Arable land: The soil jatropha is planted on land ranging from rather fertile to very fertile. None of the farmers planted jatropha on marginal dry land not suitable for food crops. In Engaruka one farmer intends to plant jatropha on dry rain-fed land because he has been told that jatropha is well adapted to such conditions. Competition with food crops: Farmers tend to replace food crops with jatropha. Nine out of twelve farmers planted jatropha on a plot where they grew exclusively food crops before. During the first years the impact is low and mainly not noticeable because the jatropha plant is still small and does not cover much of the arable land. One Maasai farmer explained his wife was complaining about fewer potatoes from a field where he decided to grow jatropha as well. Intercropping: Intercropping is very common. Farmers integrate jatropha in their existing intercropping system by either adding jatropha as an additional crop or replacing another one with it. Jatropha was found to be often intercropped with maize, beans and elephant grass (Pennisetum purpureum) but also with lablab beans, cassava, pumpkin, and potatoes. 33
  42. 42.  Fertilization: Only 3 out of 12 farmers applied farm yard manure. A single commercial farm applied inorganic fertilizer. Small-scale farmers do not use mineral fertilizer at all.  Plant health: On 8 out of 12 plots insects were observed. The two main insects that where found almost everywhere are a scutellarid bug (Scutellera nobilis Fabr.) and a flea beetle. The effect was negligible up to medium. A borer (Pempelia morosalis) and powdery mildew did occur as well.  Source of capital: To finance the investment farmers never made use of credit.  Market access: Market access is good where a collection point is already set up by Diligent. These collection points are always situated at strategic points, e.g. market places. Market access is difficult for villages that are not provided a collection point and where there is no local demand from a soap producing women group. Theoretically even small quantities can be sold directly to Diligent in Arusha town but this is a rather unlikely option for poor small-scale farmers living in remote areas.  Imposition: Trading of seeds does not get taxed so far.34
  43. 43. The results from the quantitative part of the questionnaires are displayed in Table 322.Table 3 Primary input data for cost-benefit analysis Cost type Cost factor Average costs23 (USD ha-1) Observed range 1. Investment costs Total 98 25–431 Site clearing, preparation, 47 4–36 planting Planting material 51 0–138 Average costs (USD ha-1 y -1) Observed range 2. Annual costs Total 74 16–330 Land 3 0–32 Fertilizer (organic) 0.36 0–4 Fertilizer (inorganic) 0.48 0–6 Transport of fertiliser 0 0 Irrigation 15 0–117 Weeding 41 0–213 Crop protection chemicals 6 0–48 Application of chemicals 0.82 0–8 Sprayer 4 0–21 Pruning 5 0–27 Average costs (USD kg-1) 3. Harvest and post Total 0.3924 harvest processing Harvesting 0.19 n/a Drying and shelling 0.20 n/a5.2 Detailed analysis of single cost factorsThe following observations refer to the average costs displayed in Table 3. Farmers invest on average USD 98 ha-1 in the setting up of a plantation. Expenses differ heavily between USD 25 and 431 ha-1. Site clearing was not necessary in most cases because arable land was chosen for cultivation. Hence ploughing and planting contributed the most to this cost factor.22 Due to rounding small deviations in numbers may occur. The calculations however are based on precise numbers to provide accurate results.23 The average calculated is the arithmetic mean based on the summed up values obtained from the interviews divided by the number of interviews.24 Based on a very few not transferable figures! 35
  44. 44.  Costs for planting material depend heavily on the chosen propagation method. Seeds for direct seeding and cuttings are available for free – only family labour costs need to be taken into account. Seedlings in contrary cost USD 0,09 per piece. Considering an average number of 1940 seedlings per hectare USD 167 need to be invested. This significant cost factor forces farmers to use mainly seeds or less favoured cuttings. Annual costs account to 75 ha-1 y-1 on average. The annual maintenance costs differ between USD 16 and 330 ha-1. In the initial year, investment costs for planting etc. need to be added to the annual costs. The biggest maintenance cost factor for the farmers interviewed is weeding. On average farmers spend USD 17 on weeding per hectare per year. Second biggest cost factor is irrigation which counts for USD 7 per year. Irrigation, although widely practised during the dry season, does not contribute much to the total costs because farmers use their irrigation system in place. The irrigation method applied is surface flooding once every one or two months depending on water availability during the dry season. Because the water is diverted from nearby streams onto the field in already existing channels farmers do not have to pay for the water itself; the only costs are labour costs. Other maintenance is hardly undertaken: Neither mineral nor organic fertilizers are applied much. Plant protection chemicals were only applied on the two commercial farms. Pruning was found to be necessary by only four farmers with plantations older than two years. Only two farmers are paying for land tenancy. All the others own the land cultivated and therefore do not need to pay any rent for it. The recorded figures for harvesting, drying and shelling were derived from a single plantation. We had the impression that the harvesting and post harvest processing was done very inefficiently so that the figures given here are not representative. Still this should not be neglected as it shows how much training could still be necessary. To account for the opportunity costs that arise from family labour the usual wage for a field worker was applied to integrate the costs into the calculation. The average wage for one man-day is set to be USD 1.72 (TZS 2000). The actual wages paid vary between USD 1.03 and 2.15 depending on the location and season. 36
  45. 45. 5.3 Necessary adaptationsThe above listed average costs are the basis for further calculations of economic indicators. Inthe first year investment costs plus annual costs incur. It is assumed that the maintenance costsremain the same every year with the exception of costs for weeding. Because of increasedshading by jatropha trees appearance of weeds will be reduced to zero. Thus some adaptationsfor weeding and some other factors have to be made to further calculations: We assume that the costs for weeding will decrease from 100% to 0% over a period of five years because the canopies will close resulting in complete shading of the ground. Opportunity costs for the land need to be included into the total costs to account for the loss of profit when rented out instead of using it for jatropha cultivation. The monetary renting price is assumed to be the opportunity cost of land. The renting price for arable land is about USD 32 per hectare and year for fertile land. Rather dry and less fertile land is available for USD 21 ha-1 y-1. Because most jatropha plantations are established on fertile arable land we use the first value. This value is coherent with figures from Wiskerke (2008) for arable land in Shinyanga region where the average renting cost of land is about USD 34 ha-1 y-1. Adapt costs for pruning. The pruning costs displayed in table 3 were retrieved from four farmers only. The average pruning costs of four farmers are calculated (USD 13.84 ha-1 y-1) and then divided by four so we get an annual value because we assume that pruning will be done every four years. The value now used is USD 3.46 ha-1 y-1. Get more reliable data for harvesting and shelling costs from literature. Because the only values obtained from a single farm seem unnecessarily high, different data should be used for further calculation. Unfortunately such data is scarce. Henning (2004) reports that in Mali 3 kg of seeds were picked in one hour. Applying an average wage of USD 1.72 d-1 we obtain harvesting costs of USD 0.0716 kg-1 of seeds25. Van Eijck (2007) estimates the harvesting efficiency to be 2-10 kg h-1 what leads to harvesting costs of USD 0.1075 to 0.0215 kg-1. Because no figures on drying and shelling were found we simply use a rather high value for picking (USD 0.0716 kg-1 equal to 3 kg h-1) and assume that those costs are included.25 Average daily wage divided by 8 working hours per day divided by 3 kg of seeds harvested per hour. 37
  46. 46. When now recalculating the costs considering the necessary changes the total sums are asfollows (table 4):Table 4 Aggregated main cost factors for a jatropha plantation of one hectare Cost type Total average costs (USD ha-1) 1. Investment costs 98 Total average costs (USD ha-1 y -1) 2. Annual costs Year 1 234 Year 5 202 Total average costs (USD kg-1) 3. Harvest and post harvest processing 0.07The amount of annual costs is reduced significantly by more than USD 30 per hectare per yearwithin five years. This is because of less labour needed for weeding. Figure 7 displays the fourmain cost groups of the annual costs. Weeding is by far the biggest cost factor but is assumed toturn to zero within a few years because the jatropha canopy will cover all soil and makeweeding unnecessary. Because weeding and irrigation is mainly done by family members thecosts consist mainly of opportunity costs for family labour. This is the same case for the secondbiggest factor, land.Fig. 7 Breakdown of main cost groups within the annual costs.Table 5 demonstrates how important high yields are to cover the fixed costs in order to achievea positive gross margin. Table 5 also reveals that with a yield ≤ 1000 kg ha-1 y-1 jatropha seed 38