agricultural markets & trade - rldp.org · 2/28/2013 · people permanently lifted out of...

National and Regional

Agricultural Markets & Trade

2/28/2013 The Kilimo Trust: regional solutions to local problems 1

By Team–KT & Team-SAGCOT

What is in this presentation? 1.Why national and regional

markets are important?

2.What mistakes are we continuing to make?

3.What would be the best policies, strategies and programs to achieve sustainable agricultural markets?

4.What is Kilimo Trust Doing on some of these?

5.How is SAGCOT approaching some of the critical challenges?

2/28/2013 The Kilimo Trust: regional solutions to local problems

2

What is Kilimo Trust (KT)?

Vision: Broad-based wealth creation in East

Africa through agriculture and

agribusiness development.

Mission: Catalyze the growth and competitiveness

of strategic agricultural sectors for the

benefit of a large number of people in

East Africa


A private, non-profit & regional organization that implements programs – with a modus operandi similar to UNOPS

Our Largest Asset is the Regional-thinking & acting Team of Experts

from all EAC Partner States, We Have Under One Roof &

Our Focus on Cross-Country Learning

SAGCOT in the Big Picture…

4 SAGCOT is Kilimo Kwanza in Action!

“Mkukuta” CAADP Framework

Agriculture Sector Development Strategy

Agriculture Sector Development Programme

Kilimo Kwanza

Government of Tanzania SAGCOT Centre

Global Alliance for Food Security and Nutrition (G8)

Strategic

Framework

Implementation

Framework

Vision 2025

Public Sector Private Sector

Catalytic Fund

SAGCOT: Unlocking National Assets

SAGCOT Centre Ltd. 5

Mbozi

Farm

Centre

Rungwe

Avocados

Sao Hill Industrial

Park

Soya

Extrusion /

Wheat Mill

Rice Value

Chain

Enhancement

Seed

Production Banana,

Macademia,

Mango, Citrus

Seed

Potatoes

Agro-

dealer /

Extension

Beef

production

and

processing

Beef

production

and

processing

Sugar

Outgrower

Consolidation

Seed

production

and livestock

Abundance of resources and backbone infrastructure

Starting with…

SAGCOT Centre Ltd. 6

350,000

420,000

2,000,000

US$ 1,200,000,000

Hectares in profitable production

New employment opportunities

Commercial SMEs of Producers 100,000

People permanently lifted out of poverty

Annual value of farming revenues

US$ 3,200,000,000 Mobilized in public and private investments

by 2030

Food Security

Green

Growth

Economic impact

Challenges and Mistakes we

Must Deal with…

So far... Agriculture 4 Development HAS: • Focussed too much on smallholder (subsistence) FARMING;

• Neglected labour-saving mechanization even at the farm level

where most programs are focussed;

• Paid inadequate attention to postharvest systems and improved

access to deeper markets (especially with respect to staple foods);

• Made little investment in appropriate data to: (i) monitor and

measure outcomes and impacts, and (ii) learn from Africa; and

thus

• Tended to perpetuate poverty and hunger – with un-innovative

programs designed to do “more-of-the-same”


Example(1) – Too Much Focus

on Farming … Driven by self-

sufficiency strategies; leading to

Keeping too many (85% of pop??) smallholders on the farm; who

Don't specialize as markets are not dependable; leading to

Cycles of glut (e.g 2010) & famine (e.g. 2011) that occur with amazing regularity


Example(2):

Neglecting labour-saving

mechanization


After CIAT, 2012

… For example, the Cell Phone came to the

scene only about 25 years ago

But look ….


0 10 20 30 40 50 60 70 80 90 100

Cell Phone

Ox Plow

Any AWM

Tractor

Access/Utilization by Ag Producers (%) in the EAC – case of Tanzania

Aft

er G

CF

& F

SDT

Agr

ifin

Stu

dy

Example(3):

Promotion of Mediocre Technologies


0 0.5 1 1.5 2 2.5 3

Buckets, watering cans (MB)

Treadle pumps (TP)

Motorized pumps (MP)

Time spent irrigating (hrs/ha/year))

Thousands Aft

er t

he I

WM

I/

BM

GF A

gW

ate

r S

olu

tio

ns P

ro

ject

…The only exception to low levels of

mechanization, is Grain Milling


Although the Medium Scale is “Missing”

Example(4): Inadequate Attention to:

Postharvest Systems and/or Access to Regional Markets


- 1.0 2.0 3.0 4.0

Bananas

Sweet Potatoes

Beef

Cassava

Irish Potatoes

Dairy

Beans

Maize

Rice

EAC formal Cross-border Trade as % of Production by Value

52

51

43

77

70

37

23

50

54

0 20 40 60 80 100

Sweet potatoes

Rice

Maize

Irish potato

Dairy

Cassava

Beef

Beans

Banana

Percentage of produce sold by the

producers

Extent (%) to which Farming HHs Sell what they Produce – EAC Average for Key Staple Foods

But WHY are National and

Regional Food Markets so thin?… There are four mutually reinforcing causes:

Small holders as “subsistence” producers;

Small holders as “low income” consumers;

Inadequate safety-nets to deal with pockets of food shortages; and

Limited business proposition for investment in effective trade and distribution networks


14

Which Means focusing on…

Deepening markets for SMEs (of

producers and other VC operators) in

the food sub-sector;

BUT this is less about market

access; and

More about market creation

and/or development.


Lessons from SME Tea

Sector in Kenya… • According to KTDA – in

2009/2010, Kenyan

smallholders were among the

highest paid smallholder tea

farmers in the world;

• Average farmers’ income is 10

times that of other smallholder

tea growers in the EAC; and

• The key is productivity +

smallholders’

participation in value

addition


After: www.proudlyafrican.info

0

500

1000

1500

2000

2500

1963 2006Yie

ld o

f m

ad

e T

ea

in

Kg

/Ha

Smallholders Large scale

Another Illustration …

2/28/2013 Kilimo Trust: regional solutions to local problems 17

Epuripur Sorghum – a result of Public Research in Tanzania & Uganda

Beer being brewed from the sorghum in Uganda

The beer is marketed and consumed in the EAC + South Sudan

For Food Commodities, the focus should be on national and regional

markets - because …


0

10

20

30

40

50

60

70

80

90

100

FRANCE UK USA GERMANY

Fo

od

Im

po

rts

as a

Pro

po

rti

on

of

To

tal C

on

su

mp

tio

n

(%

)

CEREALS

PULSES

MEAT

Global markets for food are actually very thin

BUT – at the moment we are often

NOT COMPETITIVE

in the Regional Markets


-

100

200

300

400

500

600

700

800

900

Val

ue

chai

n c

ost

bre

akd

ow

n ($

/MT)

Case of RICE - Tanzanian vs. Pakistani Imports to Nairobi

competitiveness gap

Aft

er –

KT-G

CF E

AC

Ric

e P

ro

gram

MORE SERIOUSLY –we are

NOT EVEN COMPETITIVE

in Our Own National Markets


Case of RICE - Mbeya vs. Pakistani Imports to Dar es Salaam

-

200

400

600

800

1,000

1,200

1,400

Re

tail

co

st b

rea

kd

ow

n (

$ /

MT

)

VAT and tariff

protection gap

competitiveness gap

Aft

er –

KT-G

CF E

AC

Ric

e P

ro

gram

And – the value Chains We Develop are Loaded Against SMEs


OK…

2/28/2013

The Kilimo Trust: regional solutions to local problems

22

FIRST… 1.Discard the misconception that farming has

a limitless capacity to:

• Lift a high proportion of the poor out of poverty, or

• Be the employment provider of last resort;

2.Shift away from misplaced strategies focused on

food self sufficiency within single countries;

3.Expand local, national and regional trade in food – by increasing purchasing power of a critical mass of local consumers; and

4.Transform (deliberately) a proportion of smallholders from direct producers of food commodities, to enterprise operators in value addition processing or Non-agricultural rural enterprises – or at least get out of the way!!!

2/28/2013

The Kilimo Trust: regional solutions to local problems 23

SECOND… “Graduate”

the entrepreneurial smallholders into strong and

thriving SMEs of producers and other actors

along regional VCs – because (together)

smallholders currently constitute the

LARGEST private sector in agriculture and

agribusiness;

Build institutions for private-private partnerships;

Enhance market -supporting infrastructure; and

Improve financing and risk mitigation


…Access to Finance is “the” Priority of SAGCOT

25 Indicative Timeline of investment (10 years)

Projects

Smallholders

Policy

Public infrastructure

SAGCOT Centre acts as coordin

ator (inform

ation flows)

Challenge Funds (e.g. AECF)

Social Impact Investors (e.g. Transfarm)

Development Finance inst. (e.g. Norfund)

Commercial investors (e.g. equity funds)

NGO Programmes (e.g.Grants)

World Food Programme (Purchase for Progress)

African Policy Programmes(e.g. through AGRA, CAADP) Investment

Climate Facility window

Research institutions’ programmes

Government Programmes (e.g. ASDP)

Last mile infrastructure (e.g. Patient Capital

Commercial lenders

Removing trade barriers programmes (e.g. Trade Mark East Africa)

Catalytic Fund

THIRD …

Build extension and advisory services on

post-harvest handling and value-addition

processing;

Support the mainstreaming of new

products, innovative technologies and

superior processes; and

Build vocational and business skills at all

levels of the value chains.


FOURTH…

Expand Agro-processing ----------------------------------------

Recall the Chinese proverb:

“Give a man a fish and you feed him for a day”

“Teach a man to fish and you feed him for a lifetime”

... and add

Support the man and/or woman to preserve and process his fish and ....


27

For Sustainability SAGCOT is Promoting Clusters’ Approach

28 Large, medium and small farmers will be facilitated

With Entrepreneurial Producers Organizing into Mini Estates and Processing Enterprises (MEPE)


Production is anchored around a processing plant; The plant is owned by producers – as shareholders – but professionally managed at arm’s-length; Production is supported by high quality postharvest handling (including collection centres, warehouses or cold

storage) – with most being professionally managed at arm’s-length; and Solid contractual arrangements with the buyers of finished products from the processing plant.

WHY – is Processing So

Important in Food Trade?


0.3 days

14 days

90 days

180 days

365 days

730 days

0 200 400 600 800

Raw

Pasteurised

Cheese (Cheddar)

UHT

Condensed

Powedered

Length of Stable Shelf Life (Days)

Case of Milk

Source: Costa Bylund (1995). Dairy processing hand book: Tetra Pak Processing Systems, AB S -22186 Lund, Sweden

FIFTH

Invest in robust, long-term and

representative diagnostics and

analysis; to

Produce business briefs for the

SMEs and other agribusinesses.


31

KT is working with… The private sector in key food sector

value chains in the EAC Region;

The EAC Secretariat and Legislative Assembly;

Governments of partner states of the EAC –

Burundi, Kenya, Rwanda, Tanzania and Uganda

UNDP and FAO; and

International Private Philanthropies that are

investing in agriculture 4 development in the

EAC Region


In Getting Regional Trade Plan

into Practice, KT … IS leading in analysis and diagnostics of

Staples with EAC as the unit of analysis; with the

purpose to;

Provides the evidence for selecting the most

strategic commodities for trade-based &

comparative-advantage–based food and nutrition

security in the region – using three main criteria: Potential for competitive and profitable markets,

Likelihood of benefiting large numbers of people, and

Effective utilization of comparative potential of the different agro-ecologies

of the region.


…and KT has Initiated Four Major

Regional M4P Programs

Development of Inclusive Markets in Agriculture

and Trade (DIMAT) – (with UNDP);

Bean Enterprises and Structured Trade in the

EAC – (BEST-EAC);

East Africa Rice Development Program (EARDP)

– (with BMGF & GCF); and

East Africa Agro-industries and Agri-enterprises

Development Program (E3ADP) (with EAC

Secretariat and FAO)


Learning from the Past 50 Years of Agriculture

in the EAC


35

Thank U…


36

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