Study on Measures to Enhance Investment into Agricultural Sector in Africa. FY 2010 Presentation Summary Report

Transcription

1 FY 2010 Study Funded by the Ministry of Agriculture, Forestry and Fisheries of Japan Study on Measures to Enhance Investment into Agricultural Sector in Africa FY 2010 Presentation Summary Report March 2011 Mitsubishi Research Institute, Inc.

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3 Table of Contents 1. Outline of the Study Background Aim of the Study Activities Duration Findings on Yam and Cassava Industries in Nigeria and Ghana: Need to Reinforce the Value Chain Are Yams and Cassavas in Full Swing? Issues in Each Segment of the Value Chain Existence of Investnment in the Value Chain Approach for Enhancement of Investment into Yam and Cassava Value Chain Basic Concepts Measure to Stimulate the Downstream Measure to Develop a Streamlined Value Chain Export Promotion Measure to Encourage the Globalisation of Yam and Cassava Conclusion: A Need for Communicative Value Chain...12

4 Acronyms 1 BOP Base of the Pyramid 2 CSIR-CRI (CRI) Council for Scientific and Industrial Research Crop Research Institute of Ghana 3 CSIR-FRI (FRI) Council for Scientific and Industrial Research Food Research Institute of Ghana 4 DADTCO Dutch Agricultural Development & Trading Company BV 5 DFID Department for International Development of United Kingdom 6 EU European Union 7 FAO Food and Agriculture Organization 8 FDI Foreign Direct Investment 9 FIIRO Federal Institute of Industrial Research, Oshodi, Nigeria 10 FY Fiscal Year 11 HQCF High Quality Cassava Flour 12 IITA International Institute of Tropical Agriculture 13 L/C Letter of Credit 14 LDCs Least Developed Countries 15 MAFF Ministry of Agriculture, Forestry and Fisheries of Japan 16 MOFA Ministry of Food and Agriculture of Japan 17 NGO Non-Governmental Organisation 18 NRCRI National Root Crops Research Institute, Umudike, Nigeria 19 ODA Official Development Assistance 20 PPE Peak Products Enterprises 21 TICAD Tokyo International Conference on African Development 22 USAID United States Agency for International Development 23 SRID Statistics, Research and Information Directorate, Ministry of Food and Agriculture (MOFA) of Ghana 24 VCM Value Chain Management

5 1. Outline of the Study 1.1 Background Japan, in TICAD (Tokyo International Conference on African Development) IV (May 2008), has pledged to contribute to the development of Africa, by means of doubling FDI (Foreign Direct Investment) and ODA (Official Development Assistance) into the region. As one of the considerations, MAFF (Ministry of Agriculture, Forestry and Fisheries) has commissioned a study focusing on roots and tubers cultivated in Sub-Sahara Africa (with particular emphasis on yams and cassavas). The study focused on two West African countries: Nigeria and Ghana. Yam and cassava are widely consumed as staple food in various areas in the region while constrained to low productivity due to situations such as primitive farming method, low fertility of soil, agricultural pests, etc. This study was conducted with an expectation to identify the issues inhibiting private sector investment into each of the stages of yam and cassava value chain, and to endorse measures to overcome those issues and to promote investment into the sector. Details of the recommendations are documented in the main report, with the essence explained in this presentation reports. 1.2 Aim of the Study The study is expected to: (i) Identify issues inhibiting private sector investment into each of the stages of yam and cassava value chain; and to (ii) Endorse measures to overcome those issues and to promote investment into the sector. The overall goal of the study is to: Contribute to ensuring secure and stable food supply to the inhabitants of Sub-Sahara Africa. Consequently, this is expected to contribute to the global food security. 1.3 Activities Focusing on yam and cassava, which are produced and consumed as important staple foods in Sub-Sahara Africa, the consultants have identified issues that may be inhibiting private sector investment into the sector. Measures have been recommended with consideration to the current situations in each stage of the value chain: - Laboratory research and development; - Production - Storage & transport 1

6 - Processing - Marketing and Consumption - Export Essence of the recommendations on measures to resolve such issues and to encourage investment into the sector is as reported in this document, while their full details are described in the main report. The case studies have been conducted for two West African countries: Nigeria and Ghana. As to raise awareness of necessity to promote private investment into the sector, activities such as policy dialogues, seminars and questionnaire surveys have also been carried out in these countries. Furthermore, a study has been carried out on the cases and policies in which a private business from a third country (which now has been identified as Brazil) is likely to invest into the sector in Nigeria / Ghana. The study has analysed the cases (either successful or failure examples) in which the public sector collaborated with private sector to promote investment to Nigeria / Ghana. Information has also been collected from private firms and international organisations in a third country, Brazil. Detailed process of the study is as follows: 1. Preparation of a study programme; 2. Experts committee Formation and convening of an expert committee s meetings which will consider the study programme, field survey plan and study outputs (committee will comprise of academics, international development experts and private sector business people) ; 3. Research and analysis of cases: (a) Production of roots and tubers (production quantity, cultivate area, yields) (b) Research on current investment climate in roots & tubers industry in Nigeria and Ghana. Analysis on each stages of their value chains: - Laboratory research and development; - Production - Storage - Processing - Marketing and distribution - Consumption 2

7 (c) Analysis of issues that are inhibiting investment into roots & tubers industry in Sub-Sahara Africa; i.e., investment climate and requisite considerations for investment into the industry. (d) Possibility of investment into the roots & tubers industry in Sub-Sahara Africa (from Japan or any other third country). e) Possibility of public-private partnerships Exploration into the possibility of private investment to any stages of value chains: - Laboratory research and development; - Production - Storage - Processing - Marketing and distribution - Consumption Exploration into the possibility of utilisation of public assistance measures as ODA (Official Development Assistance) and / or technical transfer, to encourage private sector investment. f) Possibility of BOP (Base of the Pyramid) that will create income opportunities for the low income tier in LDCs 4. Seminars, policy dialogues, and questionnaire surveys: Based on the findings from researches and inputs from experts of the committee, seminars, policy dialogues and questionnaire surveys should be carried out. As to raise the awareness of the importance to attract investment, the seminars, policy dialogues and questionnaire surveys should target various stakeholders: - Governmental officials in agricultural administration; - Members of agricultural organisations; - Farmers, - NGOs, and; - Private businesses 1.4 Duration The Study Programme is scheduled to be conducted for three consecutive years. The first phase of the study has been completed in March 2011, prior to the end of the FY (Fiscal Year)

8 2. Findings on Yam and Cassava Industries in Nigeria and Ghana: Need to Reinforce the Value Chain 2.1 Are Yams and Cassavas in Full Swing? Among some of the basic findings on Nigeria and Ghana s yam and cassava related industries, a common trend was that the potential resources of these roots and tubers have long been under-utilised. In many of the cases, causes for this under-utilisation have been referred to on issues with production, such as low yield, high cost of multiplication of pests and diseases, and improper post harvest processes. Table 1 clearly implies that the roots and tubers in Ghana, for example, have much room for improvement in productivity. Table 1 Comparison of average yield of roots & tubers in Ghana and elsewhere Average yield of yam in Ghana: 15.3 ton/ha (2009) Average yield of cassava in Ghana: 13.8 ton/ha (2009) Average yield of yam in Japan: 23.8 ton/ha (2009) Average yield of cassava in Thailand: 22.7 ton/ha (2009) Source: SRID, Ministry of Food & Agriculture (MOFA), and FAO Intensive interviews with farmers showed that they are not capable of improving their efficiency, not only due to input constraints but also due to uncertainty with the sales of the crops. The farmers will be more willing to improve their performance if they had better connections and information exchange with the market demand. Uncertainty with the sales was found to be relevant to the final consumption of the crops, which are mostly household consumption as staple food. Figure 1 shows the example of food crop consumption per capita in Ghana. Consumptions of yam and cassava have been stable and stagnant for the past twenty years. Decrease in consumption of crops such as millet, sorghum, cocoyam and groundnuts, is assumed to be substituted by meat as well as wheat (bread and noodles), which is almost entirely dependent on import. Yam and cassava production can be further encouraged by reinforcing the value chain, 4

9 which starts from production and links storage, transport, processing marketing & consumption and / or export (research and development can also be included as to comprise the value chain). If the producers are given more information and commitment from the wholesalers, processors and marketers, if the wholesalers, processors and marketers are better informed about the market and consumers, and if the consumers are provided with more choice from the marketers, the whole value chain will react to stimulate all of the activities of the stakeholders. Figure 1 Consumption of major food crops in Ghana kg/capita Cowpea Groundnuts Plantain Cocoyam Sorghum Millet Rice(Milled) Maize Cassava Yam Source: SRID, Ministry of Food & Agriculture (MOFA) 2.2 Issues in Each Segment of the Value Chain Stakeholders in each segment of the value chain all expressed their concerns in doing their businesses. Some of the issues were to do with their own segment while many others were related to other segments of the value chain. For example, processors concern over unstable supply of raw materials is directly related to production segment. Concern was expressed by the exporters on lack of overseas market information. This is due to the missing link beyond exporters. The value chain of yam and cassava, both in Nigeria and Ghana can be said to be in under-utilisation equilibrium, due to weak links among each of the segment. Such lack of links results in the stakeholders becoming reluctant to change the way of doing business. The whole value chain therefore remains as it is, unless a strong disequilibrium condition occurs in any of the segment. 5

10 Segment: Production Yam Figure 2 Issues in each segment of the value chain Storage Transport Distribution Processing (factory) (cooperatives) Consumption (home) (industrial) Export (raw tubers) (processed) Cassava Major issues: - Fertility degradation - Disease and pestilence - High input cost - Limited seasonal shift - Unstable, unsecure supply - Not distributed widely - Niche market products - Competition with wheat flour, corn starch - Limited recipe - Time consuming to cook - Not served in urban environment - Limited information on overseas market - High risk in transaction Measures to tackle some of the issues are already under way in various forms. As an example, research and development activities on breeding and variety improvement have been funded by international donor community. NGOs are actively involved in developing capacity of the producers and processors. Nevertheless, many of the issues are remaining, being abandoned after many good trials. A few more push in many of the existing measures may drastically change the under-utilised equilibrium of the industry. Major issues and corresponding causes and consequences, as well as measures, in five segments can be summarised as follows: (1) Production i) Fertility degradation - Fertiliser is not available (Nigeria); - Use of fertilisers is not preferred (Ghana). - Proper use of fertiliser is being encouraged (IITA / Japan) ii) Disease and pestilence - Use of pesticide is not preferred; - Variety with higher resistance is being developed (IITA, NRCRI). iii) High cost of input? - Multiplication methods of seed yam being developed (IITA). 6

11 (2) Storage - Transport i) Difficulty in storage - Off-season harvest, longer shelf life yams are being developed (IITA, CRI); - Farmers will get better deal by introducing a Warehouse Receipt Scheme (which is a scheme that enables the farmers to borrow money based on the receipt for depositing the crops, and receive further amount when the crops are sold at better price). ii) Unstable unsecure supply - Post harvest loss of crops may be significant - There are not contracts between producers and wholesalers iii) Not distributed widely - Only the local merchants are distributing to neighbouring countries; - Scarcity has not been pronounced by traders. (3) Processing i) Processed yams are only for niche market - Yam was once considered to be served in restaurants; ii) HQCF and starch compete with low-cost imported alternative products such as wheat flour and corn starch - A national campaign to promote substitution of the imported products. (4) Consumption i) Cooking recipes with yam & cassava are limited - IITA, with support from USAID, developed yam & cassava recipe booklet; ii) Preparing yams require time and labour. - Alternatives (rice, wheat, maize, potatoes) are becoming more popular - Easy to cook yam products are being developed (CSIR-FRI). (5) Export i) Exporters have limited information on overseas market - Government can support disseminating overseas market information; ii) Exporters are risking uncollectible sales - Exporters have united to form associations; - Use of L/C (Letter of Credit) and insurance can be promoted. 2.3 Existence of Investment in the Value Chain Investment, both local and foreign could be found only among the processing segment of the value chain. Some of the relatively strong medium-sized yam and cassava processors were found to own the farms by themselves, in industrial scale. On the contrary, bigger-sized cassava processors (for HQCF and cassava starch) do not own their farms, as primary processing of cassava will have to be done at dispersed farm levels. 7

12 Representative invested establishments in Nigeria were DADTCO (Dutch owned HQCF manufacturer), Peak Products Enterprises (local HQCF and cassava starch manufacturer), and many pounded yam flour (Iyan) manufacturers such as Ayoola, Ola-Ola, etc. Investment in Ghana were all local investments, such as: Caltech Ventures (industrial cassava producer and HQCF, starch and ethanol manufacturer), Josma Agro industries (local cassava producer and manufacturer), with many other small scale cassava producers and manufacturers. Production Figure 3 Investors in yam and cassava value chain Storage Transport Yam Processing Consumption Export Farmers Traders Consumers Cassava Yam / Cassava Yam Exporters Processors (farm owner) Farmers Yam Cassava Investment: Yam / Cassava processing for easy-to-cook products Processors (factories) Pounded yam powder Fufu powder Pounded yam powder Fufu powder Consumers Exporters Farmers Cassava Cooperatives Flour, (Garri) Consumers Investment: Cassava processing for industrial (and some for home) use Traders / Processors Cassava starch HQCF 11 Flour,(Garri) Manufacturers (factories) Consumers Investment: Yam / Cassava processing for easy-to-cook products Nigeria Ayoola Ola-Ola 3SC Olu-Olu Oluiyan Ghana Leehouse (Leemex) Neat Table 2 Two types of investors in Nigeria and Ghana Investment: Cassava processing for industrial (and some for home) use Nigeria PPE (Peak Products Enterprises) DADTCO Ghana Caltech Ventures Josma Agro Industries Ayensu Starch (Nationalised) 8

13 3. Approach for Enhancement of Investment into Yam and Cassava Value Chain 3.1 Basic Concepts Overall approach to promote investment into Nigeria and Ghana s yam and cassava value chain will be to reinforce the value chain, itself. An environment in which an investor can take advantage of the value chain, i.e. to have stable input in upstream, and secure and growing market in downstream, will be the requisite condition for an investment to be coming in. The approach should also make the most of existing, ongoing industrial promotional measures. By introducing new measures that will function as a platform to link up the existing measures, a system composed of various measures can interact among each other, to promote the whole value chain. Figure 4 Basic concepts of new measures functioning as a platform Production Storage Transport Distribution Processing (factory & cooperatives) Consumption (home & industrial) Export (raw & processed) Existing measures: - Cultivar improvement - Empowering and associating farmers - Development of autonomous processing groups, etc. - Product development - Trade facilitation New measures: - New processed product development with producers / processors / local marketers & exporters - National Campaign to promote substitution of imported products such as wheat flour and corn starch - Investment promotion campaigns - More profit for the producers As the consequence of the introduction of new measures, the value chain is expected to be linked up among the segments, especially pivoting the manufacturers and the marketers. This is because manufacturers and marketers will be more inclined to invest in business only when they are in a position to influence the whole value chain, under their value chain management strategy. 9

14 Figure 5 Basic concepts of new measures linking up the value chain Processor s VCM links Production Storage Transport Distribution Processing (factory & cooperatives) Consumption (home & industrial) Export (raw & processed) VCM: Value Chain Management Marketer s VCM links 3.2 Measure to Stimulate the Downstream At the same time as strengthening the links within the value chain, a measure to stimulate the downstream segment, i.e. consumption will be one of the primary measures to promote investment. Currently, yam and cassava are limited to home consumption, not for eating out in urban life. With rapid urbanisation taking place in many countries in Sub-Sahara Africa, yam and cassava can even be left behind, with increasing in wheat and rice consumption, which will result in increasing import dependency of food. Various experimental projects have been conducted, for example, by IITA, FIIRO, NRCRI, CSIR-FRI and some other institutions to develop processed yam and cassava food which will be accepted into an urban lifestyle of eating. The results from most of these projects are, however, left preserved in laboratories, not being launched commercially. An example of Pão de queijo, a popular Brazilian cassava snack proves that commercialisation of yam and cassava will be able to change urban eating habits, when a right recipe is taken up by the outlet such as restaurants, fast food stalls, hotels, super markets, etc. Figure 6 Involving more stakeholders to promote processed yam foods Food packaging companies Processed food manufacturers Exporting trader Hotels Supermarkets Research institutes for food processing technologies Development of processed yam products for urban consumers Fast food restaurants & stalls Yam traders Processed food distributors 10

15 A measure to create a forum in which not only the scientist but also business people can join to discuss on how to develop and commercialise yam and cassava products will become a good platform to utilise the accumulated knowledge better, as well as to launch the developed products into the real economy. 3.3 Measure to Develop a Streamlined Value Chain A pilot project to develop a model case of streamlined value chain can be another measure to strengthen the yam and cassava value chain. There are some examples in Brazil in which farmers cooperatives have joined their forces with the supermarket, processors and traders to create more markets and to empower the farmers. Farmers cooperatives started by negotiating with the supermarkets to have their best crops sold on the shelves. After the success of marketing of fresh and high quality crops, the relation between the farmers and the supermarkets evolved by shifting onto development of new processed products which contributed to enhance the supermarket s product line ups at the same time as benefitting the farmers with higher value. Ghana s Konkomba Yam producers and marketers association is a group of farmers who are interested in linking up production with other segments of the value chain. Such association can become a good candidate for the pilot project, together with supermarkets and probably, some potential processing businesses. Figure 7 Streamlining the Value Chain Producers + Traders + Processors + Supermarkets(Collaboration) Production Product development Processing Marketing Distributing 3.4 Export Promotion Measure to Encourage the Globalisation of Yam and Cassava The third measure that can lead to creating a better environment for investment is a support for export of yams. Currently, around 10,000 tons of raw yam tubers are being exported from Ghana, mostly to North America and Europe. The target of this export is the Diasporas from West Africa and the Caribbean countries. Exporters lack in information of the market. They also suffer from high risk of export transactions. Therefore, a measure to allow more North American and European market information to be passed onto the Ghanaian exporters will motivate the exporters to become more competitive. It will also relieve the risk of failure to collect sales money from their customers. The measure can be said to be a trial to link the West African yam and cassava value chain with the global market. It will connect the yam and cassava 11

16 stakeholders to the global economy. This measure, to link yam and cassava value chain to the world, may be more effectively implemented if it is conducted in collaboration with the market side authority. Collaboration with USAID and DFID may be an option to be considered. Figure 8 Yam export from Tema of Ghana to London 4. Conclusion: A Need for Communicative Value Chain A factor which may enhance investment into Nigeria and Ghana s yam and cassava value chain is to strengthen the links within the value chain. The way to strengthen the links is to encourage more communications within the stakeholders. Communications can be in forms of information exchange through forums, collaborative works, business contracts, and creation of information platform. It is the communicative value chain that will have to be created through proposed measures. When the stakeholders get better visibility in the value chain, there will be more incentives for mutual collaboration among the different segments of the value chain. Further, better visibility of the value chain from outside, is more likely to offer potential investors an open and welcoming environment for business activities. END OF DOCUMENT 12