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Challenges of commodity value chain development towards improving the competitiveness of agricultural commodity in Africa
Background Paper Prepared for the
2nd Conference of the STC on Agriculture, Rural Development, Water and Environment
2-6 October 2017 Addis Ababa, Ethiopia.
AFRICA UNION
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1.0: Introduction
The Arusha 2005 declaration on African commodities posits strongly that the development of the
commodity sector is a prerequisite for achieving development goals. The declaration emphasized the
significant roles that commodity production and trade play in income and employment generation,
wealth creation as well as their direct contribution to export earnings. Against the backdrop that
most African countries have commodity-dependent economy, it is therefore, impossible to fast track
improved livelihoods and economic development, eliminate poverty and hunger, and achieve
sustainable development without commodity value chain development.
African economy is largely agrarian. This comparative advantage presents a huge opportunity to
boost African competitive advantage in agricultural commodity production and trade. The Malabo
2014 commitments; which defined the immediate future of African economies around agriculture,
also, orchestrate the key roles of agricultural commodity value chains development as instrument for
tripling intra-African trade.
Emerging evidences reveal that poorly developed commodity value chains coupled with a host of
infrastructural and policy related constraints are hampering the abilities of African countries to boost
commodity’ competitiveness. Commodity value chains development, which is the product of value
chain analysis, helps to situate the commodity market system in terms of their improved
competitiveness, efficiency and reliability. The analysis involves identifying actors and activities that
increases transaction costs along the chains and limits efficiency. As part of her support action in the
promotion of strategic agricultural commodities value chains in the semi-arid zone, AU-SAFGRAD
commissioned two studies; IGAD region (2014) and the Sahelo-Saharan zone (2015) to identify the
challenges of agricultural commodities value chains development towards improving their
competiveness. While the IGAD study targeted sesame and sorghum value chains using
administrative data, the Sahelo-Saharan zone study investigated maize and sorghum value chains
using field survey data elicited from primary actors in the commodity value chain.
Assessment of the activities of primary stakeholders using the SWOT analysis reveals the country-
specific outcomes, that are key to initiating value chain development through reducing transaction
costs and producing competitive products. The production, marketing (wholesaling and retailing)
and processing activities were analyzed with reference to their competiveness and efficiencies
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2.0: Key findings
A. General:
The study finds close similarities in the structure, conduct and performance of chain
activities for the commodities in countries and across zones. Specifically:
1. The chain actors includes, input suppliers, farmers, collectors, wholesalers, exporters,
processors (millers) and retailers.
2. Production of the cereals was mainly in rain fed farms, cultivated holdings are small (<
2ha/households) and dispersed with little or no use of purchased inputs. Sorghum and
Sesame was found to be largely produced to meet family food needs (67% and 74% of total
production consumed at household in the IGAD and Sahelo-Saharan zones respectively).
3. Low per hectare yield levels for Sorghum and Sesame and close to the SSA average (720kg).
However, yield levels of maize in Burkina Faso (1.79tons) and Mali (1.9tons) were higher
than the SSA average (1.14tons)
B. Commodity value chains growth advantages:
1. Favorable climatic condition,
2. High opportunities for increased yield through intensification of production; availability of
technological and institutional support
3. massive pool of farm families involved in production and value addition
4. Opportunities for value addition considering the broad spectrum of utilization and use
varieties
5. Huge market opportunity (household and industrial demand) in the region.
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Source: FAOSTAT raw data (2013)
1
10
100
1000
10000
100000
1000000
10000000
Somalia Eritrea Ethiopia Sudan Kenya Uganda
Pro
du
ctio
n (
ton
ne
s)
Fig.1: Production of sorghum in selected countries in IGAD region (2013)
Sorghum
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
200000
Somalia Ethiopia Sudan Kenya Uganda
Pro
du
ctio
n (
ton
nes
)
Fig. 2: Production of sesame in selected countries in IGAD region (2013)
Sesame
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1709000
390000
1502717
1798
1300
2346
0
500
1000
1500
2000
2500
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
Burkina faso Chad Mali
Mai
ze y
ield
()k
g/h
a)
Mai
ze P
rod
uct
ion
(kg
)
Fig3: Production and Yield of Maize in the selected countries in the zone.Maize production (kg) Maize yield (kg/ha)
1940000
745000 819606
1287000
4524000
957
876 874
415
634
0
200
400
600
800
1000
1200
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
4500000
5000000
Burkina faso Chad Mali Niger Sudan
Sorg
hu
m Y
ield
(kg
/ha)
Sorg
hu
m P
rod
uct
ion
(K
g)
Fig4: Production and Yield of Sorghum in the selected countries
Sorghum production (kg) Sorghum yield (kg/ha)
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C. Sources of inefficiencies in Commodity value chains:
National
1. lack of standardization,
2. poor quality of harvest,
3. Lack of market support services,
4. bad roads infrastructure as well as
5. the sharp practices of public marketing boards officials
Inter-country level
6. Non-tariff barriers occasioned by excessive documentation and
7. Delays resulting from excesses of land border agents (phytosanitary and certification), and
8. High transportation costs.
D. Priority areas for intervention for chain development
The study identifies key priority areas for intervention to accelerate chain development in
the countries. The priority areas suggest the specific node(s) that will accelerate value chains
development in the country and regional levels. Figs 5 and 6 show the most important
country specific intervention areas (farm production, marketing and processing). The height
of each column signifies their relative importance in accelerating chain development in the
respective countries. For example, apart from encouraging processing activities, the
development of market infrastructure and other measures to reduce marketing costs will go
a long way in reducing transaction costs in sorghum and producing competitive products.
E. Summarized development Challenges from chain actors’ activities
Table 1 is a summary of key value-chains development challenges identified from the study.
At the farm level, recurring constraints are lack of access to improved seeds and chemical
fertilizers. At the collection and wholesaling level, high transportation costs, and lack of
access to good storage facilities (resulting in high quality and quantity losses) as well as price
volatility were significant causes of high transaction cost. Processing activities especially at
the industrial level were, to a large extent, affected by high processing cost, price instability
resulting from irregular supply of grains and stiff competition with imported finished and
cheaper products
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0
10
20
30
40
50
60
Burkina faso Chad Mali Niger Sudan
Pe
rce
nta
ge
Fig 5: Intervention priority areas for Sorghum value chain development
farm production marketing Processing
0
5
10
15
20
25
30
35
40
45
50
Burkina faso Chad Mali
Pe
rce
nta
ge
Fig 6: Intervention priority areas for Maize value chain development
farm production marketing Processing
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Table 1: Summarized development Challenges from chain actors’ activities
Chain Activity Challenges
Production Lack of access (availability and affordability) to improved seeds, fertilizers and erratic
rainfall
Collection Lack of standard measure, poor quality of produces, absence of storage facilities and
credit access, high transportation cost
Wholesale Storage facilities and credit access, Lack of standard measure, poor quality of
produces, absence of storage facilities and credit access
Processing High variability in supplied quality and price, high energy cost, high cost of
replacement and maintenance of plants, availability of imported cheap products
Retailing High quality and price variability and credit access
Source: AU-SAFGRAD Survey (2016)
3.0: Recommendations
The following recommendations are proffered based on the findings of the studies:
Member States (MS) should:
1. Promote anti-dumping policies to encourage and protect investments along the value chain
2. Incentivized business schemes to attract investors
3. Open up and develop feeder roads and market infrastructure
4. Facilitate access to affordable inputs and equipment, and
5. Promote the development of structured and functional markets information
Regional and Continental level
6. RECs to facilitate the regularization of trade standards,
7. RECs to prioritize strategic regional commodities upon which they should concentrate value
chains development efforts to improve regional competitive advantage
8. RECs in Collaboration with AUC to harmonize border post certifications, documentations and
permits to facilitate intra-African trade in the commodities, and
9. RECs in Collaboration with AUC to inaugurate regional strategic commodity committees
(RSCC). The Committee will chart the road map for developing the value chains which are
considered key for ensuring food security and boosting intra-African trade