Draft Investment Potential for Agricultural Mechanisation

harvesting. Hilly areas can also be ploughed by tractors, butrequires ridging along the contour lines (horizontal ploughing).This to avoid the run-off of rain water and soil erosion fromthe hill downwards in freshly ploughed vertical ridges.

§ Mechanisation is more than tractorization. With additional /auxiliary equipment the tractor can be used for planting,weeding; shelling; harvesting and water pumping. It could evenbe used to distribute fertilizers and spray agro-chemicals). Thiswill assist the efficient use of equipment and facilitate loanrepayment.

§ The government will support farm mechanisation throughpolicies on mechanization of crop production and increasedproductivity.§ The private sector is allowed and encouraged to acquire

machinery and provide hire services to farmers for primary andsecondary agricultural operation importation trends show asteady increase in number of imported mechanical powermachines§ Demand for two axle tractors and implements are 1500 –1800

p.a. and increasingDemand for single axle tractors is 1500 – 2000 p.a. andincreasing

4. CHALLENGES IN AGRICULTURAL MECHANISATION§ Low purchasing power and management skills in operation

and maintenance of most small scale farmers.§ Mechanisation can attack low productivity / low farm income

as farmers in the past used mainly hoe / ox plough for landcultivation.§ Low producer prices due to lack of bargaining power and

market information.§ High cost of agricultural machinery despite the low or no

import charges on agricultural machinery.§ Limited access to agricultural credit.§ Lack of well trained operators and mechanics for farm

machinery.§ Lack of suitable machinery packages for main agricultural

operations.§ Importation of tools, equipment and machinery of poor quality

is costly.§ General poor technical know how among tractor

owners/operators.

1. BACKGROUND.Tanzania has an area of 945.239 sq.km (94 million ha), 44 millionha are classified as suitable for agriculture and about 10.1 millionha or 23% is under cultivation. Agriculture is the leading sector ofthe economy. It accounts for about 26% of GDP. Over 80% of its40 million people are living in the rural areas with agriculture asthe mainstay of the living and smallholder farmers cultivatebetween 0.2 and 2.0 ha the level of mechanization is low with thehand hoe dominating in farming systems. The use of animaltraction is estimate at 24% and the mechanical power is estimateat 13%.. Examples of agricultural mechanization equipment aretractors, power tillers, weeders, maize shellers, sugar cane forkliftand mechanical harvesters. Some tractor models have experienced(frequent) breakdowns and some more feedback is expected fromservices agents & suppliers.

The Role of Agricultural Mechanisation§ Mechanization is a necessary condition for farmers to improve

productivity of labour and land.§ Mechanization of agriculture has the potential to turn idle land

into productive land for national economic growth andincrease of land.

2. PRESENT SITUATION OF AGRICULTURE MECHANISATION

Most farm land is still ploughed with hand hoe and ox plough. Thenumber of tractors is on the increase (see table below). Most farmmechanisation is limited to tractor and plough. There are fewmachine harvesters and very few mechanised dryers and maizeshellers; Many tractor operators/owners have also trailers totransport farm produce from the farm to the house or to the market.In the tea sector, there are now mechanised tea picking machines(Mufindi); In the sugar, there are now forklift trucks and sugarcane cutters (Kilombero). Also water pumps are widely used inthe county. Some are connected to tractor engines, others aredriven by electric power supply or (mobile) diesel engines.

Trends and Statistics on Farm MechanisationThere has been a 300% increase in number of tractor in use. (seetable below). Therefore the amount of arable land per tractor hasreduced from 1196 ha (1995) to 442 ha per tractor (2007) . Alsothere has been an increase in number of tractors per 100 sq.kmfrom 8 (1995) to 24 (2007). The following indicators show thedegree of agricultural mechanization in Tanzania:

3. POTENTIAL FOR INVESTMENT IN AGRICULTURAL MECHANISATIONLarge areas of farm land are still available for mechanisation.Most suitable land for mechanised ploughing has (medium-)deep soils without roots or where roots of trees have beenremoved. Flat perimeters in irrigation areas are also verysuitable for mechanised, ploughing, planting, weeding and

Copyright 2013, PASS Trust

Year 1995 1997 1999 2001 2003 2005 2007Number of Tractors in use 7525 10435 14345 18255 21300 21500 21500Number ha arable land in million 9 8.95 8.85 8.9 9.47 9.5 9Number of ha arable land per tractor 1196 858 617 488 445 442 442No. of tractors /100 sq. km arable land 8 12 16 21 22 23 24

Trends of Mechanisation with Tractors in Tanzania

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Draft Investment Potential for Agricultural Mechanisation

other mechanisation equipment is poor. Frequent break downsalso cause poor loan repayment.

Individual agri-business entrepreneurs / farmer groupsassociations may seek financial assistance for agriculturalmechanisation for :§ Expand the area suitable for mechanised crop production

(especially in irrigation areas with 2 harvest per year).§ Also for bush clearing - to make land available for ranching-

requires the use of mechanised bush clearing equipment(bulldozers).

§ Improve soil tillage for crop intensification as higher yields canbe achieved by making better use of improved seeds, fertilizer,agro-chemicals, etc.

§ To overcome labour shortcoming in the farm in critical farmingperiods (by mechanised ploughing, weedin, harvesting).

§ To reduce cost of labour by substituting labourers with powertillers and tractors, or go for complete mechanised cropproduction including harvesting, threshing, bagging and bailing.

§ Post-harvest equipment, grading, sorting and packagingequipment and materials.

Source of Funds:§ Own Funds from Savings.§ Bank Loan from Commercial -, Community - and Cooperative

Banks.§ Micro-Finance Institutions (MFI) and Rural Financial

Institutions (RFI).§ Government: Agricultural Input Trust Fund (AGITF); SME

Schemes§ Cooperatives such SACCOSs and AMCOSs;§ Assistance to access loans from sources above with

Possibility of Loan Guarantees: GOT; PASS.

7. HOW PASS CAN HELP DEVELOPMENT OF AGRIC. MECHANISATION ON FARMSPASS TRUST does not lend out money, but can assistfarmers/clients to get bank loans (financial linkage) forpurchasing farm machineries and agro-processingequipment through;§ Making feasibility studies and preparation of business plans for

proposed crop & livestock mechanization and agro processingand submit it to bank for loan.

§ Capacity building of farmers groups and entrepreneurmanagement skills in farm mechanization and agro-processing

, especially in irrigation areas.§ Training on operation, maintenance and service of farm

machineries and post harvest technology and agro processing(for example: for rice and other crops grown in irrigated orupland farming areas).

§ Training in agro-processing: operation, maintenance andservice of agriculture processing equipment, rice & maizemilling, coffee hulling; oil extraction from sunflower and otheredible oil products; and processing of other commodities.§ Assist in market research and market linkages.§ Counselling and assisting in financial management of agri-

businesses in mechanized crop and livestock production andagro-processing.

§ Backing up loan applications by topping up collateral to levelrequired by banks.

§ PASS can provide a lease product for hire-purchase of farmmachineries. This is a new PASS financial products also calledasset based financing.

§ Use of secondary tillage implements is limited (only plough iscommonly used).

§ Limited availability of spare parts and trained technicians foroperation and maintenance

Operation & Maintenance of Agricultural EquipmentTools§ The tractor and its implements play a significant role in

mechanised agriculture. Tokeep them working for a long timeat a minimum cost, they require an adequate and timelymaintenance. The following are equally necessary.

§ Suppliers and Availability of Spare Parts§ Training of Tractor Owners/Operators§ Possibilities of Service Contracts (attractive for bank lending)

5. POTENTIAL FOR IMPROVING AGRICULTURALMECHANISATION

§ Large areas still available for mechanisation ( flat, deep andfertile soil; )

§ Government will/support through policies on mechanization ofcrop production and increased productivity.§ Farmers’ will to use farm machinery§ The private sector is allowed and encouraged to acquire

machinery and provide hire services to farmers for primary andsecondary agricultural operation.

§ Importation trends show a steady increase in number ofimported mechanical power machines.

§ Demand for two axle tractors and implements are 1500 –1800p.a. and increasing

§ Demand for single axle tractors is 1500 – 2000 p.a. and increasingThere is a potential for establishing tractor mechanisation pools forgroups of farmers organised in a cooperative or farmers associationsor a private tractor company, which is eager to rent out farmmechanisation equipment (e.g. a tractor hire service company, likeTFA/TFSC in Arusha).

High Potential Areas for Introduction & Expansion of Agric.Mechanisation§ SAGGOT, this include Coast, Morogoro; Iringa, Mbeya,

Ruvuma, Rukwa.§ Central Zone, this include Dodoma; Shingida;§ Lake Zone, this include Shinyanga, Mwanza; Mara; (only 4

districts in Kagera: Biharamulo/Chato and Karagwe; Missenyi)Manyara Regions: Kiteto; Babati and Hanang esp. Bassuto District§ Arusha & Kilimajaro Regions: all districts, esp. Lower Moshi

Irrigation schemes and similar irrigation schemes in Same etc.§ Coastal Zone, this include Tanga (excl Lushoto), Bagamoyo,

Kibaha, Rufiji Basin, Lindi, Mtwara

6. FINANCING NEEDS FOR AGRICULTURAL MECHANISATION§ Due to the high cost of farm mechanisation, most agri-business

entrepreneurs, commercial farmers or farmers associations (FA),cooperative savings organizations (SACCOS) and the like needexternal financing (loans) to be able to procure new farmequipments and tools.

§ In some cases subsidy schemes for farm mechanisation areavailable from the government through Armed ForcesDevelopment Organisation (JKT); Agricultural Window of theTanzania Investment Bank (TIB); Agriculture Input Trust Fund(AGITF); some donor funded tractor and/or SME schemes.

§ Most tractor & farm mechanisation schemes need the technicalsupport from dealers or technical equipped workshops, becausethe operation, maintenance and repairs of many tractors and Copyright 2013, PASS Trust