Horticultural sub-sector in Tanzania has been characterized by sustained growth over the years. But there has been slow growth rate in horticultural exports over the last decade. In this regard, knowledge of the determinants of the industry’s development is very important. Little attempt was made to examine factors influencing the export performance of the sub-sector.
This study was proposed to examine factors that influenced the horticultural exports performance from 1988 – 2018. Secondary data were collected from the Bank of Tanzania, National Bureau of Statistics, and the World Bank. Co-integration technique was employed to examine the long-run relationships among the series. The coefficient values of the long-run relationship among the variables were estimated using Augmented Dickey-Fuller test.
The model results showed that the real exchange rate, agricultural Gross Domestic Products and foreign income had significantly influenced the horticultural export performance in the long-run. Real interest rate was revealed insignificant in the long-run. These significant variables have an important policy implication in improving the horticultural export performance in the country. The model results of the Error Correction Model were revealed as negative and significant, where it confirmed the existence of co-integration among the series. Its coefficient value was 1.0197, which showed 109.7% of the adjustment from short-run to long-run equilibrium per annum. Important policy implications of this study are included: flexibility in the exchange rate movements in line with the fundamentals of the economy; investment in research and agricultural extension as most smallholder farmers have less financial ability to pay for private research; and efficient policies for stabilization of the interest rates should be put in place (e.g., ceiling on lending rates, lowering inflation rate, etc.). These are considered important policy measures to improve the horticultural export performance of Tanzania.