Woodfuel Markets in Developing Countries: A case study of Tanzania

MUCH HAS BEEN written about the central importance of woodfuel in low-income nations. However, there are still glaring gaps in our understanding of the factors affecting procurement and use of wood and other fuels. This book tackles one of the most significant of these gaps, namely, the system of supply of woodfuel from rural producers to urban consumers. It reports on a detailed case study carried out in 1990-1991 in Tanzania. The study and the book are designed specifically to inform government policy. As one of the first major studies to address the question of rural-urban supply chains for woodfuel, the book provides useful methodological guidance for anyone planning to undertake similar work.

Chapter One introduces the rationale of the book, as described above, and briefly describes the links between woodfuel collection, deforestation, rural resource tenure, urban markets and previous policy interventions in Tanzania. Chapter Two provides a more detailed description of the structure and functioning of woodfuel markets. Two core problems with woodfuel markets in low-income countries are identified as being the hidden inefficiencies in the supply network, which raise prices for end-users, and the absence of environmental externalities in the end price. This study focuses on the first of these problems. The remainder of Chapter Two discusses some of the methods used previously to examine market inefficiencies and derives an appropriate approach for the Tanzanian study.

Chapter Three describes the process of data collection. The study used a technique of “backwards-linkage survey methodology” in which supply chains were traced back from the end-users to the producers. Each group – users, transporters, traders and producers – was surveyed in turn. The advantages, disadvantages and methodological challenges of this approach are discussed in some detail.

Chapters Four through Seven report the results of the study. The three cities in which the surveys were carried out – Dar es Salaam, Mbeya and Shinyanga – differ substantially in proportions of firewood and charcoal used, number and remoteness of supply areas, and employment history and practice of traders. More detailed analysis of market conduct shows that prices for charcoal in Shinyanga and for firewood in Mbeya are set by collusion among sellers rather than by competition. A close look at productive efficiency at all stages of the process, from harvesting and charcoal kilns to transport and storage, reveals enormous variation and suggests that most of the observed inefficiencies are due to a lack of financial capital. Prices for woodfuel rose through 1990-1991, and seasonally, but profit margins differed among the three cities. Apparently collusion among traders does not influence the spatial and temporal variation in prices.

The concluding chapter, Chapter Eight, brings together the broad set of results and recommends the types of policy approaches that could most benefit urban end-users of woodfuel in Tanzania. The results of the study show that, with some local exceptions, the Tanzanian woodfuel market is much more efficient and competitive than might be expected, and certainly functions better than the more regulated markets for other fuels such as electricity or kerosene. The author thus suggests that the government should avoid broad intervention in woodfuel markets but, instead, should address local problems. Two of the main policy recommendations are to encourage larger-scale transport of woodfuel in back-hauling lorries and to set appropriate local stumpage fees.