Tanzania: Developing a good nose for wine

A 2012 report by David Mgwassa, managing director at TDL, says that as a result of the link between TDL and Distell, a threefold increase in yield per acre was experienced from three tonnes per acre to 10. A significant rise was also experienced in the amount of wine bought by TDL for brandy use, which increased from 211,890 litres in 2008 to 586,930 litres in 2011.

The Tanzanian-South African collaboration in the wine market was not new, however; in 1993 SABMiller invested $22.5m in Tanzania Breweries, giving them a 50% ownership over the company and allowing it to introduce its Castle Lager and Milk Stout brands into the local market.

Local investments
Tanzania’s agriculture sector accounts for more than a quarter of GDP, and provides 85% of its exports. Of this 85%, the greatest earners are its cash crops: coffee, cotton, sisal, tobacco and pyrethrum.

Some attempts have been made to classify grapes as a cash crop but thus far the country’s wine market has not been exploited. In 2013, however, the sector began to receive renewed attention after Chamwino District embraced the country’s green revolution initiative Kilimo Kwanza (Agriculture First), and began to promote the cash crop value of grapes among farmers.

In May this year, Tanzania’s Deputy Minister for Food, Agriculture and Cooperatives, Godfrey Zambi, announced plans to set up a processing factory in Chamwino, which would counter the challenges farmers face due to the perishability of the crop.

The total cost of constructing the factory is estimated at TSh1bn ($580,000), and will be funded by the Tanzania Investment Bank, with whom Chamwino District Council has signed a memorandum of understanding.

The Chamwino factory will be Dodoma’s third; it will consolidate it as the country’s wine-processing hub and help revive a processing industry that collapsed in the 1990s.

The initiative is in keeping with the objectives of a national agriculture policy that advocates a move towards agro-processing industries in order to add value to crops and increase the price they attract in the international market.

Tanzania is slowly realising the economic benefits that a strong wine sector can offer. Its national brewer, Tanzania Breweries, was perhaps the first to acknowledge this when it highlighted in its 2011 annual report that it had experienced a 20% increase in sales, partly due to the exceptional performance of its wines business, which helped it achieve a corresponding operating profit of TSh184bn ($109 million).

Tanzania’s 2014–15 national budget suggests the government is following suit, since it marginally reduced the excise duty on wine that is produced using more than 75% local grapes from TShs176 ($0.10) to TShs160 ($0.09) per litre.

But as local wine production rebounds, South Africa stands to lose the most. In 2011, Tanzania was the fourth-largest destination of South African wine on the continent. It imported TShs42m ($25,000) worth, with an earlier industry report suggesting that 85% of Tanzania’s wine imports were South African.

But a 2011 report by VinIntell suggests that volumes of trade between the two may actually intensify as cooperation on technological, marketing and agriculture management, market access and agro-processing joint ventures increases.

Going by May’s South Africa-Tanzania Business Seminar, partnerships between the two countries are set to increase, particularly in Tanzania’s cash crop sector.