Smallholder Agricultural Mechanization: The Role of Service Hiring Market in Developing Countries:A Case Study of Tanzania

1. Smallholder Agricultural Mechanization: The Role of
Service Hiring Market in Developing Countries:
A Case Study of Tanzania
David G. Kahan & Geoffrey C.Mrema
South-South Knowledge Sharing on Agricultural Mechanization
IFPRI, CIMMYT, and the Ethiopian agricultural mechanization forum
Addis Ababa, Ethiopia October 31– November 1, 2017

2. Structure of presentation
• Status of agricultural mechanization in Tanzania
• Drivers of mechanization
• Demand and supply trends and conditions
• Spatial variations
• Tractor hire service business models – results of studies
• Concluding comments

3. Status of Agricultural Mechanization in Tanzania
• Vast land area – 886,000 sq. km; arable land 45 mill. ha (10 mill under
cultivation; largely rural and rapid urbanization.
• Tractors used on only 14% of cultivated land; draught animal power
on 24% ; 62% relying on human muscle power through hand-tool
technologies.
• In some regions land preparation by tractors has reached 48% of
cultivated land [e.g. in Arusha; Manyara; Mbeya; Kilimanjaro], well
above the national average.
• Although there has been a significant increase in imports of new
tractors the national situation is largely the same as in 2005.

4. Agricultural Mechanization in Tanzania 1990 to 2015
• The economic structural adjustment program [ESAP] implemented from
1990 to 2005 opened up the economy to private sector investment.
• Public sector supported THS were privatised with the tractors sold to
private operators. Due to financial austerity no new resources were
allocated for procurement of new machinery. The emphasis was placed on
small farm development through appropriate technologies (incl. DAP)
funded by donor agencies.
• 2005 – to date Tanzania has been implementing the Agricultural Sector
Development Program [ASDP1- 2005-15]. Under the Tanzania Agricultural
Mechanization Strategy [TAMS] which provided a framework to guide
interventions with an increased emphasis on private sector provision of
THS.

5. Import and domestic policies
• Main mechanization policies have included:
• Trade and import policies (tariffs, direct restriction),
• Promotion policies (subsidies)
• Concessional loans
• Licensing
• Policies affecting financial support for machinery purchases and inputs

6. Impact of trade liberalization policy
• Removed restrictions on the types of machines which private businesses
can import. Import tariffs waived by government to increase affordability
to farmers - agricultural machinery and implements are exempt from
import duty as well as VAT.
• Encouraged private sector actors to participate in the supply chain – wider
range of types and brands of tractors imported.
• In the past, a greater proportion of farm machinery imports came from
Europe where quality standards were usually guaranteed. However, the
lower cost imported tractors from China and India have captured a larger
share of the market

7. Government support initiatives: concessional
loans and grants
• Agricultural window in the Tanzania Investment Bank (TIB)
• Subsidization of procurement of 2WTs by farmers under the Agricultural
Sector Development Strategy [ASDS, 2001].
• $40 million concessionary credit from the Indian Government to import
and distribute 1800 units of 4WTs to farmers (2010 and 2011)
• “Kilimo Kwanza” (Agriculture First) for agricultural growth and
transformation: Agriculture Inputs Trust Fund (AGITF): provides credit to
farmers on concessionary terms.
• Private Agricultural Sector Support (PASS) + AGITF + establishment of
Tanzania Agricultural Development Bank eased bottlenecks in credit
availability.

8. Demand for tractors
• Peasant Subsistence Farmers [PSFs] cultivating less than 2ha
• Small-Scale Commercial Farmers [SSCFs] cultivating 2 to 10ha of land
• Medium-Scale Farmers [MSFs]: cultivating more than 10ha and up to 50 ha
• Large-Scale Farmers [LSFs]: cultivating more than 50ha and up to 2000 ha.
It is estimated that the small scale farming sub-sector occupies up to70% of
the cultivated arable land.
Nearly all the mechanically powered agricultural machinery in Tanzania is
owned by the large and medium scale farmers.

9. 0
10
20
30
40
50
60
70
Ghana Kenya Tanzania Zambia
%ofareaowned
Area owned/controlled by small-scale (0 - 5 ha), medium-scale
(5- 100 ha) and large-scale (>100 ha) farm holdings in 2015 [AGRF2016].
Small scale Farms
Medium scale Farms
Large scale Farms
Areas of farm sizes in four countries in 2015

10. Agricultural machinery in use – 4WT
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Tractorsinuse
Year
Tractors (4WT) in use

11. Percentage of Tractor in use per Region (2015) Total
operational 4WT= 13,146
Total % for 6 regions= 63.8% (Source: MoAFS, 2016).
Tractor [4WT] in use in top six
regions in Tanzania in 2015

12. Draft animals in use in different regions (2005)

13. Hire service business models
• Farmer-Tractor Owner Offering Custom Hiring Services: Medium and large
scale farmers who own tractors provide custom hire services to other
farmers in their locality after working on their own farms and sometimes
migrate to other districts and regions.
• Farmer groups/ cooperatives: Isolated cases of groups of farmers or
cooperative/ associations jointly owning agricultural machinery and
providing hiring services to members/ non-members.
• Contract Farming Machinery Operators: Private companies - commercial
farms or agro processors - enter into contracts with smallholder farmers.
• Agricultural machinery dealers: A few agricultural machinery dealers
started providing machinery hire services to targeted customers.

14. Survey findings
• Most common business model - farmer tractor owner custom hire
service - medium and large scale farmers with 4WTs (farmer to farmer
model)
• 92% of tractor owners in selected districts provide tractor hire services
but the larger the farm more time is spent on their own farms - less
time available to provide hire services.
• Individual owners and group owners provide 4WT hire services to
other farmers within their vicinity after their own farm work is
completed
• Owners move to other regions of the country when the farming season
is over in their own region. About 58% of the tractors move to areas
less than 100 km while about 42% move to distances more than 100
km away.
• Combine harvesters move up to 600 km away.

15. Survey findings (Contd.)
• Data from several studies (albeit limited) show that the profitability
and sustainability of Tractor Hire Services is very much dependent
on:
generating off-farm work especially during the off season
work in other parts of the crop production value chain
work in other districts where the land preparation season is in
different months of the year.
• It is unlikely that THS based on 4WT which concentrate on land
preparation activities and are located in one district throughout the
year are going to achieve utilization rates of more than 400 hrs.
• Post-harvest sector - grain milling has been almost completely
mechanized through small hammer and disc attrition mills. SMEs
offering grain milling hire services
• Positive impact on women who previously milled the grain

16. Efficient machinery utilization rates
• An important element of mechanization is the need to achieve:
efficient utilization rates of agricultural machinery and
timeliness of performing field operations.
• Delayed planting can lead to reduction in yields of up to 100kg/ha for each day
planting is delayed beyond the optimum date in rain fed cereals systems in the
semi-arid areas of SSA [Kosura, 1981].
• The number of days available for field operations in such semi-arid areas is
limited to about 30 days and hence timeliness is critical in most farming
systems in SSA.[Simalenga,1994]
• This limits the effective annual utilization rates, of say tractors [4WT], to 300 to
400 hours as opposed to the recommended 800 to 1200 hours.
• This will remain a major challenge to the viability and profitability of
mechanization investments in Tanzania.

17. Percentage of 2WT in use per Region (2014)

18. Survey findings (2WT and small mech)
• 85% of the hire service providers offer a diverse package of services which include ploughing,
shelling and transportation.
• The demand for post-production operations that include maize shelling and legume threshing is
increasing leading to some service providers (SPs) investing in shellers and threshers.
• In some irrigated areas water pumps used for water lifting and irrigation.
• Typical clientele - small farmers on land holdings of between 0.1-2 hectares.
• Higher profits from shelling, followed by transportation and ploughing operation.
• Higher levels of profitability in maize based systems that include market oriented farm
enterprises.
• Costs of 2WT machinery and equipment could be greatly reduced by extending its use over a
large number of hours annually.
• Viability of the 2WTs is enhanced when farmers purchase the 2WT and implements as a
combined package for multi-purpose use.
• Most common and practical approach for increasing utilization rates was through the use of
tractors for transport and other non-agricultural tasks. But could only occur on a limited basis in
the upland areas given weak feeder road accessibility.

19. Conclusions
• Effective Demand: Factors leading to small holder demand for machinery hire services are very much
linked to the availability of markets for the output of the farming enterprise e.g. areas and regions near
major population centers with good last mile infrastructure.
• Dynamic & Static situation: A lot of changes appear to have occurred since 1985; very dynamic process
in ownership of farms but there is a paucity of data. There is also the change from socialist to capitalist
economy but without corresponding changes in some institutions e.g. land tenure policy.
• Hand Tool Technology (HTT), DAP and Tractors: Too much attention has been paid to the whole question
of tractors – especially the evolution from HTT to DAP to Tractors.
• Modality of introduction of 4WT and 2WT and other equipment: Mechanization in Tanzania is likely to
occur through different modalities.
• Mobility: THS providers who are offering services across regions likely to increase. This is likely to focus
on 4WT which can be driven to different locations. New technologies in ICT – will improve management
of tractor fleets when away from the base farm and facilitate owner keeping track of the tractors across
the country;

20. Conclusions
• Sequencing: Introduction of machinery for land preparation and
harvesting will likely occur simultaneously especially in areas where there
are many medium scale farmers.
• Spatial patterns: Regions where there is effective demand of the outputs
of farming – regions near international grain markets or near trunk roads
will be the ones where mechanization will take place first.
• Capacity building: Training is needed amongst THS - technical skills, and
development of business and managerial skills.
• Economic/ financial analysis: Little effort made to determine the
profitability and sustainability of the private sector run THS even though
there seems to be a consensus that this is the solution to the
mechanization problem in Tanzania and SSA in general.
• ERGONOMICS is as critical as ECONOMICS in SSA when considering
mechanization of primary tillage by hand-hoe (reducing drudgery and
attracting youth)

21. Thank you!