Global Value Chains and Local Economic Development: Evidence from Tobacco Farmers under Contract Farming in Urambo, Tanzania

Publikation: Bog/antologi/afhandling/rapportPh.d.-afhandlingForskning

  • Edward Bahati Makoye
The main objective of this study was to analyse how the global tobacco value chain is associated with local economic development dynamics among tobacco farming communities in Urambo District. In order to achieve this, the following were done. 1) I took a point of departure in the global value chain (GVC) approach with the four analytical dimensions namely input-output structures. These include territoriality, governance structures and institutions, and 2) I focused on strategic coupling and the role of institutions and value sequence (representing a broader understanding of upgrading and more nuanced understanding of local economic development) as advocated by the Global Production Network framework (GPN). The research design employed is case study in which 11 Primary Cooperative Societies were randomly selected and analysed. Two phases of data collection were carried out. In the first phase, data were collected through a survey of 228 household heads obtained through a multistage stratified random sampling technique. In the second phase, qualitative data were collected through in-depth structured interviews from three tobacco processing-companies, primary cooperative society leaders, and six focus group discussions.

Quantitative data were analysed by using t-tests, Chi-Square test and a multinomial probit model. In order to analyse local economic development, investments were used as a proxy. Explanation building techniques were used to analyse qualitative data. Findings indicate that global branded cigarette manufacturers’ (lead firms) requirements are categorized into industry and transaction-specific requirements. Lead firms have not only integrated these requirements into their own corporate business strategies but also have influenced tobacco processing-companies to do so. Moreover, Primary Cooperative Societies, as local institutions, play an important role in mediating relationships between farmers and tobacco processing-companies by ensuring overall implementation of production contracts as well as value creation, capture and distribution among farmers.

Farmers are constrained by less formal education, insufficient financial means and use of poor farming technology. Despite these challenges, they have managed to invest and acquire some assets that facilitate their livelihoods. From the quantitative analysis, the main determinants for investment trends were net cash tobacco incomes and age of the household head. As evidence of successful strategic coupling processes between local assets and lead firm requirements, farmers, PCSs, villages and the District Council have become important points for value creation, value capture and distribution through investments, CSR projects and crop-cess revenues, which in turn are used to improve living standards among farmers. In general, terms, local economic development in the tobacco-growing communities occurs in three ways namely investments made at the household level, collective investments made at the PCS level and CSR programs offered by tobacco processing-companies.

However, contract-farming system has also created social tensions and conflicts among farmers. These are value chain struggles within the contract farming arrangement. For example, some farmers are excluded from the system because of their inability to meet minimum criteria for admission while loyal farmers within farmer groups are overburdened with huge debts from unfaithful group members – something that has made many (68%) farmers dissatisfied with the arrangement.

The findings have several policy implications. First, the mediation role performed by PCSs calls for capacity building initiatives to PCS leaders in terms of increasing their managerial skills. Second, there is need to review the PCS registration criteria in order to include female and the youth. Third, there is need to review the inputs supply system as well as improving extension services for increased productivity. Fourth, there is a need for introduction and enhancement of regular PCS audits in order to safeguard farmers’ interests against unscrupulous leaders. Finally, since the district government plays an important role in value distribution among farmers, policies need to articulate an equitable distribution mechanism of tobacco revenues among producing villages
ForlagDepartment of Geosciences and Natural Resource Management, Faculty of Science, University of Copenhagen
StatusUdgivet - 2019

ID: 234275371