Causality analysis of sugar productions and consumption in Tanzania

Abstract

Scarcity of resources has regularly caused what is produced to be consumed. Tremendous increase of the rate of sugar production in Tanzania has led to the raise of sugar consumption level the in the country. This study analyzes the relationship between the amount of sugar produced (SGP) and sugar consumed (SGC) in Tanzania covering a period of 1977 to 2014. The series data were collected from economic survey data of Tanzania (URT 2012) and Sugar Board of Tanzania (SBT, 2015). The objective of this study was to analyses the causality demand for sugar production and consumption in Tanzania. The focus was to analyze whether there is direction causality from SGP to SGC, from SGC to SGP, bilateral causality or they are independent from each other. Granger Causality analysis was used and the order of integration employed in the Vector Autoregressive (VAR) was estimated by seemingly unrelated technique (SUR). The findings indicated that there is a two-way causality of sugar produced and consumed in Tanzania by 2014. Therefore, in order to improve the livelihood of farmers rural the Government should spend large amount of money expanding local industries and providing subsidy on farm inputs and productions facility that could have income multiplier effect toward local sugarcane producers. Interventions should be done on the sugar import tariffs and duties. The current low importation taxes affect the price of sugar produced in the country as it is very high compare to the price of imported sugar. Moreover, more investors should be invited to invest on sugarcane production because the demand is still high.