Warehouse receipt system ‘inefficient’

Morogoro. Government interference in a warehouse receipt system (WHRS) is cited as a major stumbling-block for its effective and efficient implementation. Although farmers have generally accepted the WHRS, the interference is impacting negatively on farmers since their livelihoods depend on agriculture. The introduction of the WRS in Tanzania in 2005 was sought to provide a viable solution to marketing problems such as quality, price stability, bargaining power, tax collection and bulky yields, but there has been a number of challenges demoralising farmers.

A recent report, “Tanzania Warehouse Legal Framework and its Impact on Sesame and Rice”, indicates that political interference in the operations of the WHRS in the country is a major stumbling-block that affects smooth running of the business. This calls for a feasible mechanism to address the problem if the system is to attract the majority of farmers and attain the intended outcome in the country. A study, which was commissioned by BEST-AC and the Tanzania Graduate Farmers Association (TGFA), has highlighted some challenges facing the WHRS in Lindi, Mtwara and Morogoro (in Kilombero District) as far as rice and sesame production is concerned. “Politicking distorts the performance of the WHRS because it allows inclusion of personal interests for personal gains at the expense of farmers,” said Dr Hildelitha Msita from Sokoine University.

She was speaking at an agricultural stakeholders’ meeting in Morogoro recently. The meeting discussed the report and proposed that there was a need for the government, especially politicians to step aside and let the responsible organs in supervising WRS do their work.

Tanzania, compared to other Sub-Saharan African countries, is far ahead by having legislation on warehouse receipts (the Warehouse Receipts Act, 2005, the Warehouse receipts regulations, 2006 and the Tanzania Warehouse Licensing Board (TWLB)), which if well utilised could attract more farmers to the system.

On the other hand, ignorance of how the system works is another challenge facing the WRS in which most farmers and stakeholders in general are still unfamiliar with how the WRS works, a situation stakeholders said needed urgent intervention by conducting public awareness to make it known. Lack of suitable storage infrastructure, a legal and regulatory framework, requisite skills and weak supervisory institutions, create a difficult environment in attracting key stakeholders especially banks.

“It is recommended for TGFA to work with TWLB in awareness campaigns advocating effective WRS in getting the prices right for the benefit of small-scale farmers and other players in various value chains,” according to the report. The report further suggests that TGFA should also advocate sesame and harmonise regulations governing contract farming and the warehouse receipt system and lower transaction costs of primary societies through independent marketing. According to TGFA chairman Stephano Kiganzi Tanzanian farmers still lack education. “Although WRS has been operational since 2007, still smallholders have limited knowledge on how it works. This is the case mostly for marketing cashew nuts,” he said

Mr Kiganzi noted that most farmers in the country were not aware of how the system works. This, according to Mr Kiganzi, has been contributing to the inefficient performance of the WHRS in the country.

Currently, the marketing of cashew nuts in the country is through closed tender bids. This is unlike open auction used in coffee marketing. There are a lot of complaints from stakeholders (traders, producer groups) on how the tender committee works and arrives at awarding successful tender bidders.

“WHRS in itself is not bad, it is the way it is being executed that makes farmers reluctant to adopt it,” Kiganzi told stakeholders, adding that the system was well accepted by farmers, but since there had been a number of bottlenecks associated with it, it has been discouraging famers who were key players in administering the WHRS.

The concerns include the cost of establishing and running warehouses among smallholder farmers in the country. In order to have a warehouse you will need to have licence from the Tanzania Warehouse Licensing Board (TWLB) as well as regular unbearable fumigation costs. Mr Abel Lyimo from the Rural Development Initiative (RUDI) proposed for the introduction of the pre-warehouse system that will help farmers find suitable markets for their produce. “The pre-warehouse system, which has been used by farmers in some parts of Tanzania, has showed some positive results,” said Mr Lyimo, adding: “There is no formalisation of the agricultural system. It is difficult to trace farmers to know what they produce and store for sale.”