Investment Potential in the Cotton Industry

 Tanzania has the potential to produce over 1,000,000 bales of cotton lint worth about 161,135,700,000
shillings (or about US$ 166,980,000.0).
 In the short term there are plans to increase cotton production to 750,000 bales worth about
120,851,775,000 shillings (or about US$ 125,235,000.0) annually.
 Currently Tanzania produces about 243,000 tons of seed cotton that yield an average of 250,000 bales of
lint worth about 40,283,925,000 shillings (or about US$ 41,745,000) annually.
 Cotton is the second most important export crop for Tanzania next to coffee. It contributes about 14% of
export earnings.
 Cotton production in Tanzania started in 1904 during the German rule. It was a small holder crop then
and still is today. About 40% of the economically active population or roughly 5 million people are
engaged in the sector and depend almost entirely on the crop for their livelihoods.
 It is estimated that there are 1,346, 066 hectares under cotton cultivation nationwide. Over 90% of the
cultivated area is found in the Western Cotton Growing Areas (WCGAs) which include the regions of
Shinyanga, Mwanza, Tabora, Mara, Kagera, Singida and Kigoma. Only relatively small areas are under
cotton cultivation in the Eastern Cotton Growing Areas (ECGAs) which include the regions of Morogoro,
Coast, Tang, Kilimajaro, Arusha, Iringa and Mbeya.
 Altogether there are thirteen regions of Mainland Tanzania that produce cotton but the bulk of the crop
is harvested in Shinyanga and Mwanza regions which account for over 80% of national output.

Table 1: Production and Export Trends for Cotton

Year 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Output of 303,984 145,224 123,663 245,914 249,444 207,754 118,000 105,800 123,400 243,000
Seed cotton
(MT)
Area (in 430,000 461,214 328,879 364,000 439,000 440,000 350,000 196,490 213,300 419,960
hectares)
Yields 7,069 3,149 3,760 6,756 5,682 4,722 3,371 5,384 5,785 5,786
(kg/ha)
Lint Exports 72,800 61,200 60,000 70,860 81,890 69,209 22,687 30,004 25,900 36,300
(MT)
Value of 97,600 78,400 105,120 120,150 125,330 103,744 35,771 52,064 12,500 31,309
exports
( 000 US$)

 Due to different climatic conditions, differences in soil fertility, and cotton diseases and pests, two
different cotton varieties are produced in Tanzania one for the WCGAs and another for the ECGAs. The
variety grown in the ECGAs is of superior quality in staple length and in appearance and therefore more
valued in the export market.
 About 80% of the lint produced is exported and only 20% is consumed locally due to low capacity of
domestic textile industries.
 Three key institutions serve the cotton industry. The Ministry of Agriculture and Food Security which
provides overall guidance and leadership and the Tanzania Cotton Lint and Seed Board which regulates
and supervises activities in the industry. The Tanzania Cotton Development Fund established in 1999
support research activities in the sector.

Venture Possibilities
 Purchase of textile factories that are available for sale from the Parastatal Sector Reform Commission.
 Establishing large-scale cotton farms and contracting farmers to produce cotton.
 Establishment of textile factories, spinning mills and garment factories.
 Purchasing seed cotton from farmers and exporting lint as well as installation of ginneries.
 Production of cotton seed and establishing input shops for farmers in the industry.
 Providing credit to small-scale and large-scale cotton growers.
 Training and research services and advisory services in the cotton industry.

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Market Possibilities
 Tanzania’s cotton is of high quality and has a ready market in Malaysia, Indonesia, Pakistan, Uzbekistan,
Taiwan, India, Thailand, Philippines, Portugal, Bangladesh, Italy, United Kingdom, China, Kenya,
Rwanda, Hong Kong, South Korea, Germany, Turkey, Spain, and the Democratic Republic of Congo.
 Tanzania has AGOA eligibility from the United States of America and textile factories in Tanzania stand to
benefit from preferential exports of textiles to the large market in the United States of America.

Table 2: Potential Returns to Investments in the Cotton Industry

Item: Returns to primary producers Low tech. Intermediate High tech.
 Production costs (Tshs per hectare) 103,375 176,375 179,375
 Yield per hectare 1,250 1,625 2,000
 Revenue from hectare of cotton 187,500/- 243,750/- 300,000/-
 Gross margins (in Tshs per hectare) 84,125/- 67,375/- 120,625/-
Returns to exporters of cotton lint
 Cost of buying 3 tons of seed cotton (3 tons = 1 ton of lint) 390,000/-
 Cost of processing one ton of lint 185,000/-
 Revenue from export of one ton of lint 980,000/-
 Gross margins to exporter before taxes and levies 405,000/-

Table 3: Potential Areas for Investment in the Cotton Industry

Best Locations Size of Potential
for Investments
Shinyanga and The two regions have over
541,53.5 hectares under
Mwanza
regions cotton cultivation. They
account for about 80% of all
seed cotton produced in the
country. They have the largest
farm population in the country
and vast areas of suitable land
for expansion of cotton
production.
Kagera and These two regions have about
Mara regions 223,564 hectares under cotton
production and produce about
13% of the total cotton output
in the country.
Kigoma, The three regions have about
Tabora and 59,358 hectares under cotton
Singida Regions cultivation and produce about
6% of national output.
There only about 1,437
Morogoro hectares are under cultivation
region in the region. These yield
about 489 metric tons of seed
cotton. There are about
437,000 hectares of prime land
for cotton cultivation.
Kilimanjaro Kilimanjaro region and other
region regions in the ECGAs account
for only 1% of national output
Available Infrastructure
Easy and direct access to the export route at Kasiri at
the Tanzania/Kenya border. There is an established
cargo export system at the Mwanza Airport. There are
direct connections to the Central railway line at Isaka
and Shinyanga town in Shinyanga region and at
Mwanza town for cargo freight. There is easy access
by railway and road networks to export markets in
Kenya, Rwanda and The Democratic Republic of
Congo. Most of the ginneries and oil processing
mills in the country are concentrated in
Shinyanga and Mwanza.
Availability of textiles mills in Mara and Kagera;
easy access to export markets in Kenya and
Rwanda. Access to boat services around Lake
Victoria and railway and air service connections
at Mwanza.
Access to the Central Railway line and proximity
to the export markets in the DRC and Rwanda.
Access to boat services along Lake Tanganyika.
There is ample suitable land for cotton growing.
Access to 4 large-scale ginneries that are
currently under-utilized due to lack of seed
cotton. Access to Central and TAZARA Railway
lines as well as paved road to the export port of
Dar-es-Salaam. Access to a large farm
population that is willing to grow cotton
whenever there is a reliable market.
Access to textile mills in Arusha and within easy
reach to export markets in Kenya and the world
through Kilimanjaro International Airport.

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 Do you know PASS LIMITED?
The following are some of the services that PASS will offer you:
 PASS will provide you with detailed technical and operational information on how to
establish a successful business in the cotton industry;
 PASS will undertake a feasibility study tailored to your size of business and advise you
accordingly;
 PASS will prepare a business plan of international standards for your enterprise that will
show you the potential for profitability and scope of growth of your business;
 PASS will provide credit guarantee that will enable you to access sizable credit from a
reputable financial institution.

Contact PASS at: NMB Building, Uhuru Street, P.O. Box 146, Morogoro.
Telephone: (255-023) 3752
Fax: (255-023) 3768
E-mail: pass@pass.ac.tz and Website: WWW.pass.ac.tz

Also, for more information about incentives and other provisions for your investments,
Contact: The Tanzania Investment Centre, Shaaban Robert Street, P.O. Box 938,
Dar-es-Salaam. Telephone # (255-022) 2116329