Report – Sector aid and structural adjustment: The case of sugar in Tanzania

This study of Netherlands' aid to the sugar sector is part of a wider evaluation study on the impact of Netherlands' development assistance to Tanzania over the past ten years. Netherlands' aid to the sugar sector in Tanzania dates back to the early 1970s. The programme is one of the longest-standing and largest project activities within Netherlands' bilateral aid. It has also been one of the most controversial activities in development cooperation with Tanzania.

This study attempts to assess the impact of Netherlands' aid on the development of the sugar sector. Two phenomena are of particular importance in reviewing the effectiveness of Netherlands' aid. Firstly, in the early 1980s, a shift took place in the type of aid granted to the sugar industry, namely from a project to a sector approach. Moreover, the Netherlands became Tanzania's only major donor in the sugar sector. Secondly, in the mid 1980's, Tanzania accepted a structural adjustment programme intended to restore the basis of a market-oriented economy after a period of strong state domination. The drastic change in Tanzania's development policy had important consequences for the sugar sector. This report can therefore also be regarded as a study of the effects of structural adjustment at the sectoral level.

The report consists of four parts: context; Netherlands' assistance, evaluation findings; and conclusions and recommendations.

Part One provides information about the world sugar situation as a general background to the Tanzanian sugar industry (chapter 1), it gives a historical overview of Tanzania's sugar policy (chapter 2); and it describes the main characteristics and trends in the production of sugar in Tanzania (chapter 3).

Part Two focuses of Netherlands' development assistance to the sugar sector. In chapter 4, Netherlands' policy on the sugar sector is reviewed. A distinction is made between policies in the 1970s and the 1980s and those for the 1990s. The next chapter (5) deals with the implementation of the Netherlands' aid programme to the sector. Three main types of activities are described: investment and rehabilitation projects; management assistance; and commodity import support.

In Part Three, the main evaluation findings are presented. In chapter 6, the overall performance of the sugar sector is reviewed. In this chapter, the following issues are discussed: cane production; utilisation of the processing capacity; and financial and economic performance. In chapter 7, an assessment is made of the efficiency of Netherlands' aid. In this chapter, questions are raised with regard to the choice of technology and the management of aid. In chapter 8, the impact of Netherlands' aid is evaluated. This assessment is based on the following three policy issues: economic self-reliance, poverty alleviation, and sustainability.

In Part Four, the main conclusions of this sector study are summarised on the basis of a number of key questions (chapter 9). Chapter 10 discusses the policy options for Netherlands' aid to the sugar sector in the coming years.