Improvement of Regional Value

Chains

AgriBusiness ForumJohannesburg

Henri A. MINNAAR18 October 2011

www.thenbf.co.za

Value Addition in Agriculture - Agenda

1. Introduction2. NBF-Agricultural Program3. Development Corridor Methodology4. Constraints: Trade & Agriculture5. Upgrading Value Chains – Why & How?6. Lessons & Recommendations: Policy Frameworks7. Conclusions: Industrial Policy for upgrading

• NEPAD’s expected outcomes:– Economic growth, development & increased employment – Reduction in poverty & inequalities – Diversification of productive activities & increased exports– Enhanced competitiveness in international market & improved terms of trade– Increased African integration

• NBF: Chamber of Business for Development supporting NEPAD ideal• Agricultural Program:

– Main focus: Linking small farmers & local SMEs to commercial value & supply chains - national, regional & international markets

– Private sector & Market-driven: Alongside multi-national corridors– Identify & Address: Trade & other barriers to agricultural development

NBF & the Agricultural Program

• Improve Investment Climate to support PSD– Contracting Arrangements for inclusive & equitable development– Identification & mapping of constraints – Southern Africa Agricultural Development Platform– Trade Facilitation Study

• Capacity Development– Empowerment of Rural Women in Agriculture – Supply Chain Entrepreneurship Development

• Development Projects– Fresh Produce Hubs & Agro-Processing Centres– Renewable Energy for Last-Mile Power Solutions– Promotion of Applied & Value Addition Technologies

NBF-Agri Program: A Cross-Cutting Approach

Value Chains & Development Corridors

Why?• Target areas with inherent economic potential: Natural resources (minerals,

agriculture, eco-tourism & forestry)• Extractive industries (a wasting resource) attracts large investments – opens up

opportunities via trunk infrastructure for sustainable development (agriculture)• Promote PPPs where feasible (possible trunk infrastructure-not ancillary)• Fiscus & ODA to provide feeder roads & other ancillary infrastructureHow?• Densification: Facilitation of development at the local economy • Linking local commercial partners & develop value/ supply chains• Configure investments to ensure infrastructure viability via sustainable revenue

streams• Crowd-in private sector investment• Secure political commitment & provide requisite conducive environment

Beira Corridor

Tanzania

MozambiqueMalawi

Zambia

Zimbabwe

South Africa

0 100km

Lusaka Tete Blantyre

Nacala

Harare

Beira

Bulawayo

Beira Agricultural Growth CorridorPrima landHigh potentialRail and road linkPrimary roadCity or major town

Chimoio

Lilongwe

• Weaknesses in macroeconomic environment & trade regimes• Deficiencies of trade-related infrastructure (Hard & Soft)• Unstable market opportunities related to production variability• Relatively small markets and no economics of scale• Agricultural domestic support & export subsidies• Product standards & technical regulations• High and escalating tariffs & Restrictive rules of origin• Dependence on limited export commodities • Inadequate transport, storage and marketing infrastructure • Poor market development (Domestic, Regional & International)

Constraints on Value Chain Activities

• New urban markets: Higher quality products• Infrastructure & mining firms: Demand local quality

produce• Entry of supermarkets: Local fresh supplies• Farmers and processors: Participate in local value chains• Global value chains: New opportunities & offer handsome

profits• Stimulate Private Sector: New Agri-Businesses & Jobs

Value Chains: How do they work & Why are they important?

• Product upgrading: Move to more sophistication (e.g. semi-processed)

• Process upgrading: Improve Standards & Environmental & Social impacts

• Functional upgrading: Primary processing – on-farm• Inter-sectoral/chain upgrading: Competencies from

one to another • Other: Strict logistics, lead times, homogeneity, large

volumes, etc.

Upgrading Value Chains – How?

• Steep upgrading trajectories are possible in Africa:– Global & regional value chains

• ‘Best’ upgrading trajectories: – Not necessarily these that wants to obtain highest value

added

• Optimal outcomes – mix of strategies: – Increase higher value products & – Maintain lower value added high volume products

Lessons & Recommendations?

• Standards provide a good starting point• PPPs: Industry associations & regulation are crucial• First-Mover advantage is important• High risk & Vulnerability in global value chains• Mixing upgrading & downgrading strategies • Value Chain Restructuring & ‘Regrading’• Different tools needed for upgrading in local value

chains

Lessons:Agribusiness Policy Frameworks

• There are no fixed sets of features: Improved processing, branding, labelling, geographic areas, etc

• Threats: Global buyers/producers; Incoherent national policies; Resistance in local consumer preferences

• Policies: Value chain specific, end-market specific & time-bound

• Policy Fit: One size does not fit all• Ongoing Process: Existence Overall Industrial Policy &

Value Chain Fora – examining & support initiatives

Conclusions: Industrial Policy for upgrading

Thank You

Henri MinnaarManager: NBF-Agri Programme

henri.minnaar@thenbf.co.zawww.thenbf.co.za