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Last week Sunday’s post stated ‘The next post will discuss what the report suggests as ways of overcoming these constraints… Here it goes….

OVERCOMING CONSTRAINTS:

  • Improving market performance and meeting new standards: To create space for private markets to operate, governments need a predictable, well-defined strategy to complete an orderly transition to market based food systems. Private participation in markets is high in countries such as Uganda and Mozambique that have a ‘hands-off’ policy on the operations of grain markets. Reforms of parastatal must be sequenced with care to ensure that services such as extension, credit, risk management and the like are replaced by market based mechanisms. Promotion of regional trade is one of the most effective quick wins for improving market efficiency and reducing food price volatility. ICT has tremendous potential to improve market performance and should be driven by private initiative and capital,  but public-private partnerships are generally needed, especially to finance some of the startup costs. Parts of the value chain needs to be upgraded such as processing, packaging, quality and branding. 80% of the value in the global food industry is in value added components.
  • Facilitating access to input and technology: Agricultural inputs represent a large agribusiness market. The production and distribution of agricultural inputs are primary opportunities for agribusinesses to grow.  The potential maize seed market in Africa is around 430,000 tons, with a value of at least US$500 million.  Only 100,000 tons are currently produced. Also Africa cannot meet its agricultural growth targets without increasing fertiliser consumption from its current 1.5 million nutrient tons annually to at least 4.5 million tons by 2015. That market is estimated to be worth over US$5 billion. However there are significant challenges in operating these businesses.  National varietal registration laws need to be reformed to speed up the release of new varieties.Level the playing field for access to public germ plasm and release of varieties to all companies on a nonexclusive basis. Rigorous and unrealistic seed quality regulations such as testing all seeds needs to be relaxed. Policies on intellectual property rights and biosafety in countries with emerging seed markets need to be completed. Transport and logistic cost should be reduced through targeted infrastructure development.
  • Providing access to land and tenure security: Rights to land and natural resources need to be recognised, clearly defined, identifiable on the ground, and enforceable at low cost. This systematic approach ensures that local people benefit from investments and investors enjoy secure tenure, which encourages long-term investments such as irrigation infrastructure.
  • Facilitating access to finance: The peculiarities of agriculture, such as its high seasonality and risks (related to weather and policy); lack of secure property rights; heterogeneity across commodities, farmers, and regions; and bankers’ inexperience in the sector severely limit formal lending in the sector. Interventions that partner domestic and foreign investors should be promoted and financed if Africa is to exploit the potential and achieve sustainable development in the agribusiness sector.  Efforts to improve the technical capacity of financial institutions should be accompanied by financial literacy campaign.
  • Investing in infrastructure, using public-private partnership where possible: Investment in agriculture is a high priority to jumpstart agribusiness throughout Africa. It will require sharply increased public investment in partnership with the private sector to the extent possible. Best bets for infrastructure investment are irrigation, roads and markets. Predictable access to water is key to increasing productivity in the agricultural sector.  Donor and government investment in infrastructure have reduced transportation times significantly along major roads in Africa in recent years, but truck freight rates can still be two times higher than Latin America and Asia because of high fuel costs, uneconomic and one-way payloads, limited competition in trucking, logistical delays and road blocks. Public investments to set up more advanced and strategically located wholesale markets can stimulate the growth of regional and urban wholesale markets and make it easier to improve quality and safety standards, especially for burgeoning fresh produce markets.
  • Building skills and entrepreneurship: A range of training is needed at various level. New Picture (2)
    Agribusiness often seek very specialised skills that can be provided through highly focused short-term training. Building the future generation of entrepreneurs requires innovative training and support services.  Organisations such as Market Matters Inc, Songhai Center and Technoserve are providing agribusiness focused training. A major gap in the commercialisation of agriculture is the absence of continuing information and advisory services for farmers and small businesses. The demise of public extension systems Sub-Saharan Africa since the 1990s has opened opportunities to experiment with more market driven advisory services.
  • Making agribusiness inclusive: Agribusiness development programs need to pay particular attention to inclusive growth that integrates market oriented small holders and rural communities into dynamic value chains through contract farming and the generation of jobs. Government and donors can reduce startup risk to investors by co-financing initial cost of investment for small holders. Government can also implement actions to strengthen famers’ bargaining power e.g providing timely information, avenues to settle dispute in a cost-effective manner etc.

Please share your thoughts on the above, what needs to be included or excluded from the list, who or what group of people need to be driving this etc…

Thanks for taking time out to read this post!

 

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4 thoughts on “Agribusiness – Part 2

  1. I think the main factor is building up the skills and confidence. If people are determined to do something, know how to do it and have self confidence in their ability to succeed, then they will accomplish their goals.

    Also I am not a fan of this phrase: “if Africa is to exploit the potential”. The use of the word exploit makes it seem we are determined to ruin the land for benefit. I would rephrase it:
    “if Africa is to realise its potential”

    Regards and thanks for the read, it was very educational.

    Cheweyyy

    • For sure the right skill sets and confidence is fundamental. However there are many other variables that come into play when we have to deal with the complexities of agribusiness. From government policy to infrastructure to market links, all of which are fundamental in determining the success of your agribusiness. But you are right at the very heart of the matter the individual that wants to succedd in this sector must be knowledgable and confident in their ability.

      I actually prefer the phrase ‘if Africa is to realise its potential’. Definitely sounds more positive.

      Thanks for your kind words, I’m glad you found it useful.

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