BMI View: We still favour the Tanzanian sugar and coffee industries for their growth potential over the medium term thanks to strong investment in capacity. The grain industry will remain less competitive than other countries in the region, particularly South Africa and Zambia, and we see little potential for the country to become a major grain exporter.
- Rice production growth to 2016/17: 30.6% to 1.5mn tonnes. The rice sector will benefit from increased investment from foreign companies, which plan to cultivate rice as a food security crop. New varieties also could boost yields in the medium term.
- Corn consumption growth to 2017: 32.1% to 4.8mn tonnes. A combination of enhanced yields (contributing to lower prices) and rising living standards is expected to drive corn consumption growth.
- Coffee production growth to 2016/17: 145.3% to 1.3mn 60kg bags. Although this eye-catching growth can partly be attributed to base effects, the sector is benefiting from investment in improved diseaseresistant trees, and from incentives to small producers.
- 2013 real GDP growth: 7.1% year-on-year (y-o-y), up from 7.0% in 2012; forecast to average 7.2% over 2012-2017.
- Consumer price inflation: 7.7% y-o-y average in 2013 (down from 16.1% in 2012).
- BMI universe agribusiness market value: 4.6% y-o-y increase to US$3.9bn in 2012/13, forecast to increase by an annual average of 4.5% between 2011/12 and 2016/17.
Local industry sources believe Tanzania has potential to increase production above Madagascar's levels by 2018 thanks to the introduction of new varieties resistant to drought and diseases. Tanzania currently produces more than 1mn tonnes of rice, which makes it the second largest rice producer in Africa after Madagascar, which produces about 2.5mn tonnes. However, local authorities see growth potential for the country mainly as a result of land expansion. Madagascar being an island, it has only limited possibility to expand beyond current potential. Also, the introduction of two new varieties of rice seeds known as 'komboka,' and 'tai' will reduce risks of damage from weather and disease.
Tanzania is expected to experience strong coffee output growth over the long term, and could eventually surpass Kenya on a permanent basis. Our forecast envisages coffee production expanding by 145.3% in the five years to 2016/17 to reach 1.3mn 60kg bags, although it should be noted that this rate of growth is largely due to base effects. Indeed, the 2016/17 figure is greatly exaggerated in comparison with the poor 2011/12 crop; 2008/2009, for instance, saw production of almost 1.2mn 60kg bags. Nevertheless, we maintain an optimistic view about the longer-term prospects of Tanzania's coffee sector. Coffee is an important export crop for the country and is expected to become more so over the next few years.