Dar es Salaam. Lack of value addition in agro-produce now impacts on farmers negatively, as they are made to pay more in taxes.
Exporters of raw agricultural produce -- cotton included -- are charged higher taxes as the government seeks to discourage exportation of raw materials.
But experts argue that since there are not many textile factories in the country, the huge taxes on cotton exports -- currently estimated at Sh40,000 per tonne -- is shouldered by the poor farmers because exporters recoup the tax through reduced prices.
This, according to experts that met at a forum to review food and agricultural policies in the country last week, is a disincentive to increased production.
“High level of levies and taxes on cotton is mainly caused by lack of value addition in the cotton industry,” said an assistant lecturer at the University of Dodoma, Mr Lutengano Mwinuka. He said there was a need to assess the potential of increasing processing in Tanzania as a way of improving incentives to cotton farmers.
Tanzania Exporters Association executive secretary Mtemi Naluyaga said poor prices offered to cotton farmers was a result of a lack of enough textile factories to process the cotton beyond a ginnery.
“After privatisation we’ve witnessed the killing of textile industries with an upsurge of ginneries that are financed by foreign monopolies to purchase raw cotton for processing outside the country,” said Mr Naluyaga.
He said the government must rethink and come up with viable policy for reviving textile industries in order to export cotton yarn and clothes instead of cotton gin.
For his part, Tanzania Cotton Board acting director general Gabriel Mwalo said contract farming must be improved to enable farmers increase productivity and cotton industry has opportunity for value addition through support from ginners and industrialists.
He said in this marketing season cotton output was expected to drop from 350,000 tonnes to 200,000 tonnes due to suspension of contract farming.
BoT’s monthly Economic Review report shows that as of the end of June this year the value of cotton exports stood at Sh254.4 billion ($159.3) million.