The effects of state intervention in public parastatals: the case of Tanzania dairy farming company limited Tanzania

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Sokoine University of Agriculture


The study aimed at analyzing the effects of state intervention on the performance of public parastatals in Tanzania with special reference to the Tanzania Dairy Farming Company Limited (DAFCO). The specific objectives of the study were to: (a) Describe the milk production trends, marketing and pricing arrangements; (b) Analyze the effects of government intervention policy on the performance of marketing and pricing of milk; (c) Determine alternative Marketing and pricing arrangements of milk and other dairy products (heifers and bulls) from DAFCO farms; (d) Develop a dairy subsector policy in marketing and pricing; Both primary and secondary data were collected and analyzed by employing both qualitative and quantitative methods. The results on trends of milk production in DAFCO farms, revealed two phases of production i.e. an increasing phase between 1976 and 1982 and decreasing one between 1982 and 1991. Milk production increased from 1 220.2 thousand litres in 1976 to 4 570 thousand litres in 1982 and decreased to 2 371 thousand litres in 1991. The study showed that production performance of DAFCO has deteriorated greatly compared to the original design and objectives, (milk production decreased from highest of 4 571 to 2 371 thousand litres (-48%) , milk yield per cow per day decreased from highest of 7.7 to 6.8 litres (-12%), total herd decreased from highest of 5 592 to 3 633 heads (-35%) and milking cows decreased from highest of 1 686 to 930 heads (-45%). It was also found that the company has been making financial losses in all fiscal years except for 1977 when it reported a net profit of Tshs 23.8 million. The study also revealed that through Government intervention policy DAFCO was directed to sell all its milk to TDL as its sole marketing channel and milk prices were determined and fixed by the government, this policy was found to be detrimental to DAFCO. Results of regression analysis model indicated that price of milk is negatively related to quantity of milk produced which is contrary to economic theory. This indicated how firms which are protected through state intervention are not sensitive to market signals. Other variables i.e. price of feed, the minimum wage rate and trend variable were found to have the right relationship to quantity of milk produced as implied by economic theory i.e. increase in feed price will result into decreased milk production, increase in wage rate will lead to increased milk output and that for trend variable, improvement in dairy technology will result into increased milk production. All these variables were found to be significant at 0.05 significance level in determining milk production in DAFCO. farms with the explanatory power of 87.6% which shows that they are all important factors to be considered for decisions involving milk production. Policy recommendations include: (a) DAFCO to be given sole autonomy in decision making on its own policies, objectives and strategies and planning process; (b) The company should take the open market as the only marketing channel for its products. The prices of milk and other dairy products should also be determined by open market forces of supply and demand; (c) DAFCO should seek for funds from internal and external as well as from its own sources. It should also look for both internal and external joint ventures; (d) Husbandry aspects i.e. disease control and feeding procedures should be improved to reduce cattle's high mortality rates; (e) Technological improvement is required to increase production; (f) Managerial skills should be improved through recruitment of qualified and experienced staff and offering further training; (g) All farms need to be well equipped with adequate farm machinery and equipments for their development




Public parastatals-dairy farming, Tanzania, Dairy farming, Dairy products-marketing and pricing, Milk