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Agro-Allied Industrialization
and Regional Value Chains
Ousmane Badiane, Director for Africa
ECONOMIC GROWTH AND DEMAND OUTLOOK
Most Countries Will Reach Middle Income Status In 2030 All Countries Will Reach Middle Income Status By 2050
Source: Sulser T. B. et al. 2015.
Intraregional Trade By 2025 Under Current Trends
Source: Badiane et al. 2014
ECONOMIC GROWTH AND DEMAND OUTLOOK
Potential agribusiness growth and expected income
to farmersUS$ billion
38
50
10 10.5
150
High value
exports
Commodities Urban food
2000
2030
2.9 1.6 30
Potential Increased
farmer income in
2030
Expected sector growth to 2030
Increase in Demand and Incomes in Billion US$
IFPRI/Badiane
Regional Trade In Staples: Major Source of Future Income Growth
+ $100B = Growth of staple food demand in urban markets in Africa
+ $30B = Potential income for smallholder farmers
ECONOMIC GROWTH AND DEMAND OUTLOOK
UNPROCESSED
PROCESSED
LOW VALUE
ADDED
PROCESSED
HIGH VALUE
ADDED
Non-Perishable
4x(8%)
5.5x(17%)
7x(23%)
Perishable 6.5x(20%)
8X(18%)
10X(15%)
ECONOMIC GROWTH AND DEMAND OUTLOOK
THE RISE OF PROCESSED FOODS
Projected Demand Growth 2010 – 2014 (Estimated Purchased Food Budget Share in 2040)
Source: Tschirley, D et al. 2014.
1. TRADITIONAL MILLET VALUE IN SENEGAL
RAPDIDLY TRANSFORMING REGIONAL VALUE CHAINS
2. MILLET BASED MEALS
RAPDIDLY TRANSFORMING REGIONAL VALUE CHAINS
HOME BASEDMILLET PROCESSING
READY TO COOK
MILLET PRODCUTSON THE SHELF
3. THE NEW MILLET VALUE CHAIN
RAPDIDLY TRANSFORMING REGIONAL VALUE CHAINS
TRADITIONAL MILLET BASED MEALS
HOME BASEDMILLET PROCESSING
READY TO COOK
MILLET PRODCUTSON THE SHELF
3. THE NEW MILLET VALUE CHAIN
RAPDIDLY TRANSFORMING REGIONAL VALUE CHAINS
READY TO EAT
MILLET MEALS ON THE SHELF
TRADITIONAL MILLET BASED MEALS
HOME BASEDMILLET PROCESSING
READY TO COOK
MILLET PRODCUTSON THE SHELF
3. THE NEW MILLET VALUE CHAIN
RAPDIDLY TRANSFORMING REGIONAL VALUE CHAINS
No. of firms
Current characteristics of regional agro-allied industries• Rising number of firms producing the same low quality, often imitated goods
#
Time
EMERGING AGRO-ALLIED INDUSTRIAL SECTORProfitability, Growth And Maturation
Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)
Profitability
No. of firms
Current characteristics of regional agro-allied industries• Rising number of firms producing the same low quality, often imitated goods
• As new entrants copy same products, profitability declines for everyone• No capacity to invest and innovate; stifling firm growth and maturation
$#
Time
EMERGING AGRO-ALLIED INDUSTRIAL SECTORProfitability, Growth And Maturation
Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)
Two Key Questions
How to bend the profitability curve and escape from low and declining profits?How to promote enterprise growth through consolidation and specialization?
AGRO-ALLIED INDUSTRIALIZATION STRATEGIES
Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)
Profitability
No. of firms
Dotted (solid) lines denote progression of number of firms and profitability without
$#
Time
Profitability
No. of firms
Dotted (solid) lines denote progression of number of firms and profitability without
Three Priority Areas for Policy and Investment
A. Process and product innovation: Vocational training & Technology acquisitionB. Market development: Trade & competition policy, quality & standards
C. Cost of services and Infrastructure access: Power, Telecom, Transport
$#
Time
AGRO-ALLIED INDUSTRIALIZATION STRATEGIES
Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)
Profitability
No. of firms
Dotted (solid) lines denote progression of number of firms and profitability without
Three Priority Areas for Policy and Investment
A. Process and product innovation: Vocational training & Technology acquisitionB. Market development: Trade & competition policy, quality & standards
C. Cost of services and Infrastructure access: Power, Telecom, Transport
$#
Time
AGRO-ALLIED INDUSTRIALIZATION STRATEGIES
Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)
Page <#>
A. SKILLS DEVELOPMENT FOR TRANSFORMING VALUE CHAINS
① No skill upgrading for existing smallholder farmers
② No skill development for emerging value chain professions
Machine operations and maintenance
Processing technology skills
- Product and process innovations- Management and sales
Packaging and distribution
Food quality and safety
Absence of professional & vocational training opportunities means:
Profitability
No. of firms
Dotted (solid) lines denote progression of number of firms and profitability without
Three Priority Areas for Policy and Investment
A. Process and product innovation: Vocational training & Technology acquisitionB. Market development: Trade & competition policy, quality & standards
C. Cost of services and Infrastructure access: Power, Telecom, Transport
$#
Time
AGRO-ALLIED INDUSTRIALIZATION STRATEGIES
Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)
B. TRADE & COMPETITION POLICIES FOR TRANSFORMING VALUE CHAINS
Source: Badiane et al. 2014
Three policy options for competitive domestic value chains in regional markets
Notes: Notes: * COMESA+Tanzania. Figures on top of bars indicate cumulative increases in regional export supply in 1000 mt.
Profitability
No. of firms
Dotted (solid) lines denote progression of number of firms and profitability without
Three Priority Areas for Policy and Investment
A. Process and product innovation: Vocational training & Technology acquisitionB. Market development: Trade & competition policy, quality & standards
C. Cost of services and Infrastructure access: Power, Telecom, Transport
$#
Time
AGRO-ALLIED INDUSTRIALIZATION STRATEGIES
Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)
C. INFRASTRUCDTURE CHALLENGES AND OPPORTUNITIES
Africa’s infrastructure gap is lowest in the Telecom Sector
While investing in power and transport infrastructure
Tap into Modern ICT to leapfrog
Torero, M. (2014)
Harness ICT for Quick Gains
Page <#>
USING ICT TO INNOVATE, CUT COST AND GO TO SCALE
① Lower cost of overcoming physical and institutional obstacles
Bridge the distance to millions of dispersed smallholders
Extend the reach of limited technical staff
① Lower cost of access to technology and services
Tap into global knowledge networks
Enable self-learning and peer-to-peer learning
① Link smallholders to other value chain operators
Traders, exporters, processors
Financial services providers
Technology services providers
How ICT can be leveraged for smallholder agriculture
…. an isolated business problem
for a separate segment
of a given value chain
often in specific geographies
Current ICT tools target….
They provide solutionsthat are not replicable nor scalable.
Needed are integrated solutions that digitize all major interfaces between smallholders and other value chain actors.
THE CHALLENGE: TAKING ICT SOLUTIONS TO SCALE
References
1. Badiane, O. and T. Makombe. 2016. Beyond a Middle Income Africa: Transforming African Economies for Sustained Growth with Rising Employment and Incomes. ReSAKSS Annual Trends and Outlook Report.
2. Badiane, O. and M. McMillan. 2016. Economic Transformation in Africa: Patterns, Drivers and Implications for Future Growth Strategies. In Badiane, O. and T. Makombe (Eds.). Beyond a Middle Income Africa: Transforming African Economies for Sustained Growth with Rising Employment and Incomes. ReSAKSS Annual Trends and Outlook Report.
3. Badiane, O., S. Odjo and S. Jemaneh. 2014. More resilient Domestic Food Markets through Regional Trade. In Badiane, O., T. Makombe, and G. Bahiigwa (Eds.): Promoting Agricultural Trade to Enhancing Resilience in Africa. Annual Trends and Outlook Report. Regional Strategic Analysis and Knowledge Support Systems. Washington DC. PP: 38-53.
4. Badiane, O., T. Makombe, and G. Bahiigwa. 2014. Promoting Agricultural Trade to Enhancing Resilience in Africa. Annual Trends and Outlook Report. Regional Strategic Analysis and Knowledge Support Systems. Washington DC.
5. Otsuka, K. and T. Sonobe. 2011. A Cluster-based Industrial Development Policy for Low-income Countries. Policy Research Working Paper No. 5073. World Bank. Washington DC.
6. Sulser, T. B.; D. Mason-D’Croz; S. Islam; S. Robinson; K. Wiebe and M. Rosegrant. 2016. Africa in the Global Agricultural Economy in 2030 and 2050. In Badiane, O. and T. Makombe (Eds.). Beyond a Middle Income Africa: Transforming African Economies for Sustained Growth with Rising Employment and Incomes. ReSAKSS Annual Trends and Outlook Report.
7. Torero, M. 2014. Infrastructure Challenges and Opportunities for Africa South of the Sahara. In Badiane, O. and T. Makombe (Eds.). Beyond a Middle Income Africa: Transforming African Economies for Sustained Growth with Rising Employment and Incomes. ReSAKSS Annual Trends and Outlook Report.
8. Tschirley, D; T. Reardon; M. Dolislager and J. Snyder. 2014. Presentation at CAADP Annual Trends Outlook Report Methodology Workshop: Towards a Middle Income Africa: Long Term Growth Outlook and Strategies. IFPRI Washington DC. December 12.
Thank you!