Tanzania imports large quantities of basic food staples such as palm oil, rice, sugar, and wheat and occasionally has large imports of maize. While imports are needed to meet local demand, they often disrupt domestic markets when quantities imported exceed market requirements or when large imports are authorized by the Government but not anticipated by the private sector. This can lead to price volatility and increased risks for producers, traders, and stockholders. A more transparent and predictable staple foods import policy could encourage increased development of the staple food crops sectors, provide additional tariff revenue to Government, and reduce market uncertainty. It would also reduce the need for ad hoc policy decisions that can lead to regional trade disputes, and provide a more stable market environment for the commodity exchange that is currently being developed.
One of the challenges of implementing an effective staple foods import policy is the difficulty of controlling illegal imports that enter Tanzania from neighbouring countries and through major Tanzanian sea ports. They are illegal in the sense that they don’t have import permits as required, and they don’t pay the import tariff. The magnitude of these illegal imports is unknown, but they can be estimated by comparing the reported exports to Tanzania from other countries to the imports reported by Tanzania. For example, exports of rice to Tanzania reported by all exporting countries were two to three times as large as imports reported by Tanzania during 2011-2015. That suggests that large imports were unrecorded, but even that may underestimate actual imports because some exports going to neighbouring countries actually get diverted to Tanzania. A similar situation existed for sugar, with exports to Tanzania being reported as about twice as large as imports reported by Tanzania (Table 1). Other staple food crops showed less divergence between reported exports and reported imports.
Controlling illegal imports is difficult because Tanzania has long and porous land borders with neighbouring countries and a long coast which allows easy access for small quantities of food staples. Illegal imports also enter the mainland Tanzanian market through other channels, including transit goods that remain in country and improperly labelled imports that are not detected by customs. However, large quantities of illegal imports are also reported to enter through Tanzania’s major sea ports. The loss in tariff revenue from illegal imports is substantial and could provide funding for upgrading customs as well as general budget support. The loss of tariff revenue from rice was approximately 60 million USD per year during 2011-2015 based on the difference between reported exports and reported imports, and the loss of tariff revenue on sugar was approximately 62 million USD per year over the same period. If only one-half of this tariff revenue could be collected in the future, it would be a substantial contribution to the Tanzanian budget.
Tanzania has higher import tariffs on food staples than many of its neighbouring countries and that creates incentives to import staple food crops into neighbouring countries and sell them in the Tanzanian market without paying the tariff. Kenya, for example, has a 35 percent tariff on rice imported from Pakistan while Tanzania has an import tariff of 75 percent. That provides incentives for Kenyan traders to import at the lower tariff and sell in Tanzania. Zanzibar also has a lower import tariff of 12.5% on rice compared to the mainland and that encourages traders to import more than is required for Zanzibar’s consumption and sell the surplus on the mainland. The approximate magnitude of these surplus imports in Zanzibar can be estimated and have been as much as 30,000 tons of rice per year beyond the quantities required to meet domestic demand in Zanzibar.
With such large tariff differentials and the relative ease with which illegal imports can enter by land and sea, it is very difficult to control illegal imports from neighbouring countries. In response to this situation, the Government of the United Republic of Tanzania (GoT) has often relied on quantitative controls and occasional bans on imports of rice and sugar (The Citizen, March 15, 2016) in an effort to control illegal imports. Quantitative controls are implemented by restricting the issuing of import permits; however, Tanzania has not been very effective in monitoring and controlling illegal imports. In some cases, import permits were issued for a specified quantity but actual imports exceeded the quantities authorized. This occurred in 2013 when duty-free rice imports were authorized, but the actual imports were much larger than the quantities authorized and the imports disrupted the domestic market causing prices to fall sharply. There are also reports of import permits being issued for larger quantities than required to balance the market (The Daily News, February 19, 2016) which also disrupts local markets. The longer term consequences of such disruptions are to cause greater price volatility and greater uncertainty for producers and other stakeholders and, therefore, less investment.
A staple food import policy that relies on established tariffs would be less disruptive to domestic markets, generate greater tariff revenue to Government, and would operate automatically under normal market conditions. It would also be more compatible with policies of the East Africa Community and less likely to create regional trade disputes. However, in order for such a policy to operate effectively, it would be necessary to control illegal imports. Some illegal imports would continue, but more effective monitoring and enforcement of staple foods import policies and tariffs could reduce illegal imports especially through major sea ports.