Cotton is Tanzania's largest export crop after coffee. Most cotton is exported, contributing $90 million to export earnings. Labor is the major input: cotton provides employment to 500,000 rural households. Use of other inputs is limited. (World Bank Report - 2002)

Before 1990 most cotton marketing and trade were handled by cooperative unions and the Tanzanian Cotton Board. Reform began slowly in 1990, with the biggest step coming in 1994 when the government eliminated the monopoly held by the board and unions and allowed competition in marketing and ginning. The reforms increased the producer's share of export prices, but official statistics show no evidence of a supply response. Ginning capacity and marketing efficiency increased considerably while the quality of cotton may have declined marginally.

Several issues still need to be addressed. The tax code could be simplified, and taxes substantially reduced. Taxes could also be consolidated and rationalized, making taxation of export crops and merchandise exports more uniform. Better data are needed, along with better dissemination of information. More investment in railroad service, Mwanza's road network, and multiplication of the new seed variety would also help the sector.

source: http://www.worldbank.org/afr/wps/wp42.htm