BMI View: We continue to favour the Tanzanian sugar and coffee industries over the medium term owing to their potential for growth on the back of strong investment in capacity. The grain industry in Tanzania 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.
Dominated By Grains
Tanzania - BMI Market Value By Commodity (% of total)
- Sugar production growth to 2016/17: 35.1% to 398,000 tonnes. This will come from increased investment in the sector as well as booming demand for local consumption on the back of growing confectionary and soft drinks demand in the country.
- Corn consumption growth to 2017: 31.2% to 5.4mn 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: 125.8% to 1.2mn 60kg bags. Although this eye-catching growth can partly be attributed to base effects, the sector is benefiting from investment in disease-resistant trees, and from incentives to small producers.
- 2014 real GDP growth: 7.3% year-on-year (y-o-y), up from 7.2% in 2013; forecast to average 7.5% over 2012-2017.
- Consumer price inflation: 5.4% average in 2014 (down from 7.7% average in 2013).
- BMI universe agribusiness market value: 16.7% y-o-y decrease to US$1.6bn in 2014, forecast to decrease by an annual average of 1.0% between 2011/12 and 2016/17.
We maintain our 2013/14 forecast for Tanzanian corn production to 4.2mn tonnes as the latest official estimates show a smaller decrease in output than previously anticipated. This is because corn prices during plantings held up better than expected, encouraging production. Also, the impact of the recent black caterpillar outbreak was less than expected on plantings for the 2013/14 corn harvest. The USDA forecasts area harvested at 3.1mn hectares in 2013/14, which is in line with the five-year average, while yields are forecast at 1.4tonnes/ha, compared with 1.3tonnes/ha on average over the past five years. Growth in output in the past decade has come mainly from a steady increase in area planted, while yields have actually declined over the period, especially towards the end.
Tanzania unveiled five new varieties of drought-resistant rice in November 2013 with different levels of traces suitable for dry areas. Local industry sources have indicated that research to obtain these seeds has been conducted since 2009. The new seed varieties are NERICA 1,2,4,7, WAB-12-2, WAB450, BL1 and DV4 are suitable for dry areas of agriculture both in central and northern areas of the country including Shinyanga, Musoma, Ifakara, Dodoma, among others. These new varieties are not only drought resistant but they also help boosting yields, which will support our view for strong growth in rice production out to 2016/17.
Tanzania's carbonated soft drinks sector has grown strongly over the past few years, driven by consumers' rising incomes and increasing investment into the segment. Also contributing to growth is the fact that soft drinks appeal to lower-income consumers, as carbonates are often cheaper than bottled water, and prices of core carbonates rarely rise at the rate of inflation. Tracking forecast pan-regional disposable income appreciation, demand for low-cost carbonated soft drinks and bottled water is expected to grow considerably over the coming years.