Tobacco production is done through contract farming. Contract farming has bee practiced in tobacco industry for many years. Tobacco in Tanzania is mostly produced on contractual arrangements through contract farming involving two parties namely the tobacco buyer and the farmers. Initially this involved buyer’s supply of tobacco farming inputs followed by tobacco marketing. The buyer buys the tobacco from the farmer. As at present, contract is mainly based on agreements for the buyer to purchase the produced tobacco (field Green leaf purchase contracts).
The current crop reforms have brought significant changes on contract farming as practices in tobacco industry. Previous contract farming arrangements involved tobacco buyers and farmers. Other stakeholders were not involved. As part of the crop reforms, there has been amendments in the Tobacco Industry Act to widen the scope and the practice of contract farming in the tobacco industry of include financial institutions, inputs suppliers, investors, processors and any person interested in supporting the tobacco farmer for an agreed consideration.
Under the current reforms therefore, contract farming reforms recognizes the role of all tobacco stakeholders in facilitating tobacco production. It also creates sound and protected commercial relationship between the tobacco farmer and other stakeholders particularly tobacco buyers, bankers, inputs suppliers and other investors involved in promoting sustainable growth of the crop.
The current contract farming as practiced in tobacco industry will help to protect mutual interest of tobacco farmers and investors as important mechanism of tobacco stakeholders. It will basically protect the interest of the tobacco stakeholder as a whole in furthering the objectives of ASDP and creating conducive business and investment for sustainable growth of the tobacco crop in Tanzania.
Further under the reformed contract farming, the principle of freedom of contract has been widely addressed as now contractual farming involves negotiations between independent parties and the contractual period is for a given growing season of a year subject of being extended through renewal by both parties. There also ongoing efforts on the part of the Ministry of Agriculture to include specific part on the contract farming in the forthcoming Agricultural Resources Management Bill.