Page 1 of 12
Journal for Studies in Management and Planning
Available at http://internationaljournalofresearch.org/index.php/JSMaP
e-ISSN: 2395-0463
Volume 01 Issue 10
November 2015
Available online: http://internationaljournalofresearch.org/ P a g e | 511
Causality Analysis of Sugar Productions and
Consumption in Tanzania
Damian Sambuo
Abstract
Scarcity of resources has regularly caused
what is produced to be consumed.
Tremendous increase of the rate of sugar
production in Tanzania has led to the raise of
sugar consumption level the in the country.
This study analyze the relationship between
the amount of sugar produced (SGP) and
sugar consumed (SGC) in Tanzania covering
a period of 1977 to 2014. The series data
were collected from economic survey data of
Tanzania (URT 2012) and Sugar Board of
Tanzania (SBT, 2015). The objective of this
study was to analyses the causality demand
for sugar production and consumption in
Tanzania. The focus was to analyze whether
there is direction causality from SGP to SGC,
from SGC to SGP, bilateral causality or they
are independent from each other. Granger
Causality analysis was used and the order of
integration employed in the Vector
Autoregressive (VAR) was estimated by
seemingly unrelated technique (SUR).
The findings indicated that there is a two way
causality of sugar produced and consumed in
Tanzania by 2014. Therefore, in order to
improve the livelihood of farmers rural the
Government should spend large amount of
money expanding local industries and
providing subsidy on farm inputs and
productions facility that could have income
multiplier effect toward local sugarcane
producers. Interventions should be done on
the sugar import tariffs and duties. The
current low importation taxes affect the price
of sugar produced in the country as it is very
high compare to the price of imported sugar.
Moreover more investors should be invited to
invest on sugarcane production because the
demand is still high.
Key words: Sugar Production, Sugar
Consumption, Granger Causality
1.0 Introduction
The prolonged deficit of sugar production in
Tanzania since back 1989 is doubtful. Sugar
production and consumption by the year
2014 in Tanzania was at 320,000 metric tons
and 480,000 metric tons respectively leaving
a deficit of about 160,000 metric tons yearly
demand (SBT, 2015). Sugar productions has
been influenced by several factors including
production costs, policy against import
permit, cheap imported sugar, inflations or
the rise of demand for sugar consumptions in
Tanzania. Meanwhile sugar consumption is
very high due to the smuggling of the sugar
produced from Tanzania caused by high
demand of sugar by other neighboring
Eastern African countries. The price of sugar
produced in Tanzania is lower compare to
other neighboring countries led to sporadic
price increase in the country. While retailers
in Tanzania are directed to sell a kilo of sugar
at not more than 1,700/- per Kg, the current
sub-whole price stands at between 87,000/-
and 11,000/- per 50-kilo bag and the retail
price at between 2,300/- and 2,500/- per kilo.
In Kenya, a kilo of the item fetches Kshs 210,
which at the current exchange rate is 3,570/-.
Page 2 of 12
Journal for Studies in Management and Planning
Available at http://internationaljournalofresearch.org/index.php/JSMaP
e-ISSN: 2395-0463
Volume 01 Issue 10
November 2015
Available online: http://internationaljournalofresearch.org/ P a g e | 512
In Uganda, it is Ugsh. 6,000 (equivalent to
3,400/-) and in Burundi it is Burundi Franc
2000 (about to 3,100/-). (Report from
Ministry of Agriculture).However, since the
privatization of the sugar local industries and
sugar estates plantation in Tanzania, sugar
production has consistently increased
(Rabobank, 2013).
Consequently, the objective of this study is to
analyses the causality relationship between
sugar production and consumption in
Tanzania and its impacts on agricultural
economy.
2.0 Review of Related Literatures
2.1 Sugar Production and Consumption in
Tanzania
Sugar production in Tanzania is facilitated by
four main producers: the Tanganyika
Plantation Company (TPC) located in
Kilimanjaro Region; Kilombero Sugar
Company Ltd and Mtibwa Sugar Estates both
are in Morogoro; and Kagera Sugar Ltd in
Kagera region. In 10 years ,the country’s
sugar production has increased from 112,903
tons in 1995/96 to 263,317 tons in 2005/06.
This represents an increase of 134.91 percent.
Factory-wise, Kilombero’s has increased
production by 227.91%, TPC by 80.04% and
Mtibwa by 53.13%. Kagera Sugar Ltd which
stopped production in 1999/2000 resumed
production in October 2004 producing
16,703 tons by end of March
2006.Tanzania’s sugar demand was more
than 330,000 tons, in year 2010 while its
production stood at 250,000 tonnes, creating
a deficit of nearly 80,000 tons. The retail cost
of sugar has risen to 2,500/= from 1,700/- per
kilo in retail outlets.With current projected
demand of 501,865 tons, it outstrips current
production by about 48%. The country also
depends on sugar imports to satisfy domestic
requirement (SBT, 2012).
Production theory postulates that, with the
availability of input factors may results to
output factors. The sugar production industry
in Tanzania has some causal factors on the
quality and quantity of the sugar product
including granting duty free for those
importing sugar, high demand comparing to
production capacity, and presence of cartels
for profit margins and lack of clear irrigation
system in the country. Other factors are
related to few hours of sunshine which has
impact on the availability of sucrose, climatic
changes that disturbs the availability of
rainfall to estates that do not use irrigation
and poor block farming system (SBT, 2012;
Sugaronline; 2013 and Rabobank, 2013).
Sugar consumption is very high in Tanzania.
Following the demands, it also needs to be
transported, though not at enough quantity, to
satisfy final consumers. Transport cost
influence its prices to the final consumer,
moreover there is no fixed prices which is set
unless intervened by government officials at
local level (SBT, 2013), otherwise producers
can set their own price. Import tariffs and
duties fixed by the government affects the
prices and thus indirectly the effects are
transferred to consumers. Population increase
at a rate of 3% and annual population grow
by 6% which also leads to the increase of per
capital consumptions (SBT, 2012 and
Rabobank 2013).
Unsecure sugar local market dominated by
greedily middleman has been affecting sugar
consumption in Tanzania to the extent that
they create inadequate availability of sugar in
Page 3 of 12
Journal for Studies in Management and Planning
Available at http://internationaljournalofresearch.org/index.php/JSMaP
e-ISSN: 2395-0463
Volume 01 Issue 10
November 2015
Available online: http://internationaljournalofresearch.org/ P a g e | 513
the country. Moreover, sometimes poor
timings in importation of sugar has caused
sugar to be overloaded in warehouses. This
has affected sugar production for large scale
producers. As the result, due to
inconveniences, the government licensed
unsold sugar to be sold at European Union,
Uganda and South Sudan. This is an
indication that more sugar can be produced
by the firms within the country and the
markets are available at local and
international level for (SBT, 2013).
Despite the reports issued by SBT, the
strategic plans of country’s sugar industry
expects to largely target export markets by
2016. The SBT expects to implement nine
projects see the country tripling its annual
sugar production from the current estimate of
300,000 metric tons to 910,000 metric tons
by the year 2016.
Several studies have been conducted on the
direction of the causal link between
economic variables such as FDI and
Economic Growth (Kholdy, S. 1995, Ngowi
H.P, 2001, Frimpong J.M and Oteng-Abuyie
E.F, 2008). According these studies, the
characteristics and conditions of a particular
country may affect the causal relationship
between economic variables of our
expectation.
This study developed to find out the causal
relationship between sugar production and
sugar consumption. The aim of this study is
to determine whether the amount of sugar
produced within a country is determined by
the amount of sugar consumed or sugar
consumed in and some exported is
determined by sugar produced in Tanzania
perspective, and if there is a causal
relationship in both direction
2.0 Data
The study used time series data on
domestically sugar produced and consumed
in Tanzania between 1977 and 2008which
which were collected from Tanzania Sugar
Board for.
3.0 METHODOLOGY
3.1 Granger Causality Test
Basing on the axioms that the past and the
present may cause the future but the future
cannot cause the past, and all causal
relationship remain invariant over the period
of analysis then the Granger Causality Test
was used to test these two variables as they
were measured on the yearly basis.
The inquiry was directed toward the
possibility that time series Y(t) causes another
x(t), and the direction of causality is
determined by Granger Causality Test. The
series assumed to have the same time interval
and measured at same units. Granger (1969)
argues that within a bivariate context, the
Granger-type test states that, ‘if a variable x
Granger causes variable y, the Mean Square
Error (MSE) of a forecast y, based on the past
values of both variables is lower than that of
a forecast that uses only past values of y.
Granger test was implemented by running the
following regression:
∆y = α + ∑ βi∆
p
i=1 Yt−1 + ∑ γi∆
p
i=1 Xt−1 + μt....................................(1)
