Spatial Price Dispersion and Transactions Costs in Agricultural Commodities in Tanzania

Tanzania’s current efforts to modernize and commercialize its large agricultural sector is unlikely to reach full potential if it does not, at the same time, tackle inefficiencies in the supply chain linking producers in rural areas to consumers in urban areas. The objective of this research was to document and estimate the transaction costs involved in the supply chain, in other words in getting agricultural commodities from the farm gate to the consumer.

Tanzania covers a vast area with relatively low population density and scattered villages, where the majority of the poor reside. Together with the low density of the often poor road network, connecting producers with consumers in the growing urban centres is a challenge. This analysis concludes that while market information on quality and standards appears to be relatively good, the estimated transaction costs are substantial.