The Role of Road Infrastructure in Agricultural Production E. Fungo, S. Krygsman and H. Nel Southern African Transport Conference 10 – 13 July 2017 Pretoria - South Africa

Introduction Improved road infrastructure is expected to lower transportation costs and prices Better roads leads to lower vehicle operating costs Lower vehicle operating costs lead to lower charges for transporting passengers and goods In turn leads to lower prices for goods and services : lower production costs to open up new markets for goods and services to support economic growth and poverty reduction

Introduction cont… Investment in infrastructure (transport, power and communication) is still low in African countries Accounts for only 2 – 3% of GDP (Kandiero, 2009), compare to 7.78% in China (Davis, 2008) Only 30% of rural population have access to all-weather roads (Kandiero, 2009), Transport price are estimated twice as high as those of southeast Asia (Kandiero, 2009): Makes Africa uncompetitive

Introduction cont… Rural transport provision is important factor for the successful agricultural sector Facilitates the supply of agricultural inputs and access to agricultural extension services Facilitate the delivery of farm outputs to the market and improve market access

Problem statement Rural roads and transport services in Tanzania are generally characterised by poor infrastructure: (poor quality of roads) high transport costs and prices: (due poor road) low quality services : (poor roads lead to fewer service providers)

Problem statement cont… Among the policy strategy adopted to stimulate agricultural development is provision of proper and adequate transport e.g. Tanzania National Transport Policy However, the extent of agricultural sector development following these initiatives has not been properly quantified

Objective To investigate and empirically quantify the impact of improved accessibility (i.e. roads) on the agricultural production of Tanzania small holder farmers More specific the paper: Establish the relationship between transport price of agricultural products and agricultural production Establish the potential crop production increase that can be realised following the reduction of transport price after road improvement

Data The 2012/13 National Panel Survey (NPS) for Tanzania Collected by Tanzania National Bureau of Statistics (NBS) Obtained from Word Bank database as part of Living Standards Measurement Study-Integrated Surveys on Agriculture (LSMS-ISA)

Descriptive statistics Crop selling and transportation Only 38% of cultivated crops were sold Some 30.6% of sold crops transported to the market Only 37.2% (of the 30.6%) pay for transport services (N=261) N=261 is equivalent to 4.3% of total number of harvested crops (N = 6 070)

Descriptive statistics cont… Farm size, crop production, distance variables Those who sold crops, on average, had statistically significant Bigger farm size: (2.5 vs 1.5 acres) Higher quantity harvested: (906 vs 310 kg) Farms further away from the road: (3.0 vs 2.0 km) Farms further away from the local market: (12.5 vs 10.2 km)

Descriptive statistics cont… Transported vs non-transported crops Farmers who transported crops for selling, on average, had statistically significant Higher crop price: (819 vs 696 Tsh/kg) Low crop yield: (462 vs 592 kg/acre) The data set did not reveal on how the products of the farmers who reported not transporting their crops reach the market, not much can be said in the context of road infrastructure and transport price

Descriptive statistics cont… Farmers pay vs not pay for transport services Farmers who paid for transport services, on average: Transport crops for selling at more distant market: (22.5 vs 6.9 km) Had statistically significant higher Crop yield: (578 vs 393 kg/acre) Crop price: (909 vs 767 Tsh/kg) Quantity sold: (820 vs 414 kg)

Agriculture production and transport service Regression analysis (OLS) was used establish the empirical relationship between agricultural production, road infrastructure and transport service Farmers included in the analysis Transport crops for selling Pay for transport services N = 261

Agriculture production and transport service Dependent variable: Crop yield, i.e. crop produced per unit area of land cultivation (kg/acre) Independent variables: Agricultural inputs e.g. fertilisers (kg/acre) Crop market price (Tsh/kg) Distance from the farm to the road (km) Distance from the farm to the local market (km) Distance crops transported to the market for selling (km) Transport price (Tsh/ ton-trip)

Agriculture production and transport service Empirical model:

Agriculture production and transport service Regression model results Dependant variable: ln(Crop Yield )  Coefficients P-values Significant F Adj R square (Constant) 7.559 .000 .435 ln(Transport Price) -.291 Ln (Crop Price) .056 .462 ln(Agriculture Input) .080 .008 ln(Dist Farm to Road) -.014 .684 ln(Dist Farm to Local Market) .058 .235 ln(Dist to the Market for Selling) .161 .002

Agriculture production and transport service Interpretation of model results 1% reduction of transport price is associated with 0.291% increase in crop yield This is not very elastic. 1% change lead to <1 % This is supported by the literature, Hine and Ellis (2001) found similar results

Agriculture production and transport service 1% increase in distance that crop is transported to the market for selling is associated with 0.161% increase in crop yield Surprising results, one would expect negative relationship i.e. sell at nearby market have less market access problems and low transport price, and thus higher crop yield

Agriculture production and transport service Possible reasons Sell at a distant market (relatively larger), high chance of access goods and services not available at local market Selling at a distant market is associated with lower unit transport price (Tsh/ton-km) (Fungo & Krygsman, 2017) and higher crop price Relatively, those who sell at more distant markets are better off in terms of transport price and crop price: facilitate an increase in crop yield

Agriculture production and transport service Agricultural inputs shows positive relationship with crop yield, as expected 1% increase in the quantity of input used per acre is associated with 0.08% increase in crop yield

Agriculture production and transport service Distance from the farm to road show no statistically significant relationship with crop yield, not expected Possible reasons Most tertiary roads near the farm are in poor condition Do not provide sufficient transport service to lower transport price

Agriculture production and transport service Distance from the farm to the local market show no statistically significant relationship with crop yield Possible reason Local market alone is not providing sufficient goods and services required to facilitate increase in crop yield

Conclusion The figure summarise the finding of the paper

Conclusion cont… Reduction of transport price have positive impact on crop yield Access to the bigger market (distant market) facilitates the increase in crop yield Improved road infrastructure and transport service are necessary but not the only factor for agricultural development (Chakwizira et al., 2010)

Recommendation The established empirical relationship i.e. transport price and crop yield Can be used during the rural road appraisal process to estimate agricultural production increase following the reduction of transport costs and prices

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References Chakwizira, J., Nhemachena, C. & Mashiri, M. 2010. Connecting transport, agriculture and rural development: Experiences from Mhlontlo local municipality integrated infrastructure atlas. In Proceedings of the 29th Southern African Transport Conference (SATC). 209–223 Davis, A.H. (ed). 2008. Infrastructure Finance: Trends and Techniques. London: Euromoney Institutional Investor Plc Fungo, E. & Krygsman, S. 2017. Impact of Rural Road Condition on Transport Price of Agricultural Products. In Washington DC 96th Transportation Research Board Annual Meeting Hine, J.L. & Ellis, S.D. 2001. Agricultural marketing and access to transport services. Rural transport knowledge base. [Online], Available: http://www.transport-links.org/rtkb/English/Module 4/4_3a Agricultural Marketing.pdf. Kandiero, T. 2009. Infrastructure Investment in Africa: Developement Research Brief Number 10. African Development Bank (AFDB)