1. Introduction
Tanzania, after a long-standing dependency on imports for major food commodities, such as sugar and edible oils, intends to transform its agriculture sector to a level that meets local demand for food commodities through domestic production [
1]. The agriculture transformation is seen as a crucial strategy for poverty reduction in Tanzania, considering that about 65% of the population is engaged in this sector [
1,
2]. Moreover, in Tanzania, the agricultural sector provides raw materials for the industrial sector [
1,
2,
3]. Therefore, any transformation strategy that results in an increase in agricultural output is vital for feeding its growing population and meeting demand from the industrial sector. Additionally, it is expected that the increase in agricultural output will have wide multiplier effects on other economic sectors in the country.
Among the Tanzanian government initiatives aimed at revitalizing the agriculture sector is the perpetuation of the phased-out Agriculture Sector Development Program I (ASPD I) through the newly launched Agriculture Sector Development Program II (ASDP II), established in 2018. The main goal of both the former ASDP I and the current ASDP II is to revitalize the agriculture sector such that it increases both output and its contribution to the Tanzanian economy (United Republic of Tanzania (URT) [
4]). This initiative is based on the economic policy theory of import substitution industrialization that advocates promoting domestic production such that it replaces imports, thus reducing foreign dependency and creating self-sufficient economies in the long-run [
5,
6,
7,
8,
9,
10]. To achieve the intended goal, many areas of intervention have been identified, including the improvement of production techniques, development of market infrastructure, training farmers to identify markets and value addition at the farm level, and supporting financial deepening among agricultural sector stakeholders [
1,
4]. All of these areas are poorly or under-developed, resulting in poor agricultural production and growth in the country [
4].
Along with the identified areas of interventions and within the agricultural crops sub-sector, several strategic crops have been identified, including edible oilseeds. The choice of edible oilseed crops is supported by the fact that Tanzania’s large national demand for edible oil requires imports to meet about 60% of demand [
1,
11]. The demand for imported edible oils is increasing, resulting in about US
$294 billion of foreign currency reserves being spent annually [
1,
11,
12]. Further, Tanzania has diverse agroecological zones that are suitable for producing edible oilseed crops. The edible oilseed crops that can be grown in these agroecological zones include cotton, sunflower, palm, groundnuts, soya bean, and sesame. Consequently, the United Republic of Tanzania [
1] determined that the edible oil sub-sector is a priority sub-sector. It invites both local and foreign investors to create not only jobs but also increase domestic edible oil production and processing, ultimately reducing dependency on imports.
Although the edible oil sub-sector, especially regarding sunflower oil, shows promise both in terms of seed production and processing, it still faces daunting challenges in realizing its full potential. These challenges include the availability of improved seeds, limited financial support, land-competition with maize, and stiff competition for the domestically produced edible oils from imports. For instance, farmers complain that the available hybrid seeds are sold at high prices because they are imported, while if such seeds were produced domestically, it could lower seed prices. Lowering prices and increasing the availability of hybrid seeds could result in lower-cost production and increased yield [
13,
14,
15,
16]. Thus, when production cost is minimized and yield is increased, then domestically produced edible oils become competitive with imports [
12,
13,
17].
Studies on the use of improved seeds and agronomic practices for edible oilseed production show a tremendous increase in yields using minimum inputs [
18,
19,
20,
21]. For instance, a study by [
20] reports that the use of fertilizer micro-dosing and tied-ridge technologies in the semi-arid environments in Tanzania show a yield increase of up to 400 percent per hectare for edible oil crops. According to [
22], farmers producing sunflower using traditional varieties obtained 485 to 815 kg per hectare, while those using improved varieties obtained from 1950 to 2435 kg per hectare. This indicates that using improved seeds increases output 4 to 5 times more than that of traditional seeds.
In addition, to ensure the sustainability of the edible oil sub-sector, the use of improved seeds, inputs, and appropriate agronomic practices should be coupled with assured markets for the edible oil products. For instance, [
23,
24] argue that contract farming increases production for farmers producing both cotton and sunflower due to the assurance of markets for their products. However, these interventions cannot be achieved by farmers alone, and indeed deliberate government interventions are needed to facilitate the process [
18,
24]. The government has been imposing a tariff on imported edible oils at increasing rates, going from 10% in 2016 to 35% in 2018, which is considered an import substitution strategy aiming to protect and foster domestic production of edible oils [
13]. Conversely, findings from studies by [
9,
13,
17] indicate that tariff interventions did not yield the intended outcomes, as instead of promoting domestic production, they caused price escalation of edible oils in domestic markets. The previous studies highlighted above concentrated on the effects of various interventions on improving edible oil sub-sector production. There is a paucity of evidence on the multiplier effects of improving edible oil production on other sectors of the economy, an information gap that this study addresses.
By applying a computable general equilibrium model (CGE) as an ex ante evaluation approach, the light will be shed on the multiplier effects of the intervention on the edible oil sub-sector. By disaggregating the edible oil sub-sector from the agricultural sector and other sectors, it is possible to evaluate its multiplier effects on Tanzania’s economy following production increases. The study considers the hypothesis that an increase in edible oil production could improve domestically produced edible oils and reduce imports. The research questions are as follows. To what extent does an increase in production promote supply of domestic edible oil and other sectors commodities? What are the effects of increasing edible oil production to the Tanzania’s economy? Hence, to address this question, macroeconomic-specific indicator effects, such as the change in the gross domestic product (GDP), imports, exports, and commodity prices, are compared among the disaggregated sectors in response to the increase in edible oil sub-sector production.
4. Conclusions and Policy Implications
Tanzania seeks to reduce its dependence on edible oil imports by supporting various interventions intended to promote and stimulate the domestic production of edible oilseeds. This paper evaluates the effects of a decision by the Tanzanian government to support technological progress for the edible oilseed crop sector in order to increase its production. A computable general equilibrium model is applied in order to discern the multiplier effects of the intervention in accelerating economic growth and improving peoples’ welfare. Findings show that increasing the production of the edible oilseeds indeed stimulates the domestic production of edible oils, other agricultural and related industries, and service sector commodities. Moreover, an increase in production is predicted for other commodities. Specifically, the model predicts that the intervention triggers an increase in the supply of edible oilseeds in the domestic market, which subsequently decreases prices. This decrease in prices creates a welfare gain in term of consumers surplus. Thus, from the model prediction, we conclude that the production enhancement intervention has the following outcomes: first, it incentivizes domestic producers to supply more due to the availability of improved inputs and technologies, ultimately increasing domestic production in order to meet domestic demand. This indicates that production improvement interventions in the agricultural sector could reduce dependence on edible oil imports, thus improving Tanzanian food security. Agricultural production improvements increase domestic outputs and enable the processing industries of these commodities to achieve economies of scale due to the availability of adequate raw materials from the agricultural sector. Secondly, the model predicts an increase in income for all domestic agents—rural households, urban households, and the government. This indicates that production improvement interventions motivate farmers to expand and employ more factors of production, such as labor and capital, to meet the demand for domestically produced commodities. This expansion, in turn, leads to increases in household income. For the government, the increase in production expands the tax base, which leads to an increase in government revenue. Therefore, the welfare gains resulting from the increase in incomes for the various household groups manifest both inclusive income growth and a reduction in food insecurity among citizens. Results of this model suggest that improving the production of the edible oilseeds sub-sector will cause an increase in the supply of domestically produced edible oils, which subsequently reduces imports. Indeed, such an intervention can be advocated as it could reduce the dependence of the country on imports, thus improving food security. In addition, the intervention creates a welfare gain for both consumers and producers by increasing domestic production in a sector that is increasingly efficient in terms of productivity. Based on the model results, we recommend that the government of Tanzania invests in technological progress and interventions that target the increase of production in sectors where it has a comparative advantage, such as agriculture. Interventions that increase production for smallholder farmers, such as the use of improved seed and other modern technologies that reduce costs of production, are critical and could reduce dependency on food imports. It is important to note that the model results do not establish the costs for implementing the highlighted technologies, rather provide insights into the impact of implementing technological progress interventions. Further studies are needed that could quantify the cost required by the government to implement interventions to attain the required level of production that reduces food insecurity and dependence on imports. In addition, the government needs to collaborate with other development partners through projects that are geared toward production improvement, particularly in the rural areas. Thus, to achieve competitiveness, increased support is needed, especially for farmers and processors, in terms of capital and the creation of a favorable business environment. This will help farmers and other stakeholders achieve the national vision of becoming food self-sufficient.