Understanding Institutional Arrangements: Fresh Fruit and Vegetable Value Chains in East Africa
Abstract: This paper analyses institutional arrangements for marketing of fresh fruits and vegetables in Tanzania: spot market transactions, marketing by producers’ organisations, contract farming with individual farmers and with producers’ organisations. Marketing of vegetables in Tanzania is undertaken primarily in spot market-type transactions. There is some limited movement towards farmers’ engaging collectively in contract farming through producers’ organisations for higher value products. Contracting with individual farmers would entail excessive transaction costs, reflecting structural difficulties in achieving economies of scale at the level of primary production. Transaction costs associated with establishing a producers’ organisation for marketing purposes appear to be too high, suggesting an important agenda for research and capacity strengthening. On the other hand, spot market transactions are quite diverse in terms of their market context and there appear to be opportunities for reducing transaction costs. With respect to the institutional environment in the region, government policies in East Africa have more often than not restricted the emergence of successful institutional arrangements through extensive interventions that left little room for market actors to shape suitable institutional arrangements. Combined with rent-seeking behaviour of government officials, this has also restricted the emergence of a successful fresh fruit and vegetable sector.
