Growing Africa: Unlocking the Potential of Agribusiness
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Unlocking the Potential of Agribusiness Africa Growing Public Disclosure Authorized Authorized Disclosure Disclosure Public Public Public Disclosure Authorized Authorized Disclosure Disclosure Public Public Public Disclosure Authorized Authorized Disclosure Disclosure Public Public Public Disclosure Authorized Authorized Disclosure Disclosure Public Public GROWING AFRICA: UNLOCKING THE POTENTIAL OF AGRIBUSINESS i Growing Africa Unlocking the Potential of Agribusiness March 2013 Financial and Private Sector Development Department Agriculture, Irrigation and Rural Development Unit, Sustainable Development Department Africa Region Photos on the front cover and pages xiii, 1, 13, 23, 107, courtesy of the World Bank Photo Library; photos on pages 7 and 33 courtesy of William Crosse. iii Contents Foreword..........................................................................vii Acknowledgements................................................................. ix Acronyms and Abbreviations .........................................................x Executive Summary ...............................................................xiii Introduction........................................................................1 Why a report on agribusiness? .....................................................2 Analytical framework and data sources for this report ................................3 Overview of the report ...........................................................5 Agribusiness in Africa—A large sector .................................................7 The size of the agricultural and agribusiness sector ...................................8 Structure of agribusiness..........................................................9 Bright prospects for agribusiness .....................................................13 Strong market demand ..........................................................14 Positive factors on the supply side, too .............................................16 A better policy environment and strong private sector interest . 18 Potentially large development impacts from inclusive growth .........................19 Overall performance has lagged ......................................................23 Growth........................................................................24 Trade .........................................................................24 Productivity ...................................................................28 Constraints to agribusiness identified through specific value chains .......................33 Rice: Lack of seed, irrigation, and mechanization ....................................34 Maize in Zambia: Distortionary policy interventions.................................42 Cocoa in Ghana: The need for better-organized and more skilled smallholders ..........46 Dairy in Kenya: Upgrading informal value chains ...................................50 Green beans in Kenya: Meeting ever more stringent export standards ..................52 Summary of value chain constraints ...............................................56 Overcoming constraints: An agenda for getting agribusiness moving ......................59 Improving market performance and meeting new demands...........................60 Facilitating access to inputs and technology ........................................72 Enhancing access to land and tenure security for both smallholders and investors........82 Financing agribusiness ..........................................................87 Upgrading infrastructure, using public-private partnerships where possible .............94 Building skills and entrepreneurship...............................................98 Making agribusiness inclusive ...................................................100 iv Growing Africa: Unlocking the Potential of Agribusiness Getting the job done: Implementing the agenda........................................107 Putting agriculture and agribusiness at the top of the agenda.........................108 Taking a proactive stance: Lessons from success in other regions .....................108 Learning from failures in Africa..................................................112 Getting started by focusing on a few carefully selected priorities .....................113 Engaging strategic “good practice” investors .......................................115 Strengthening safeguards: Screening investments for sustainable growth...............115 Getting the Job done through an agribusiness transformation team . .118 References........................................................................121 List of Tables Table A: Summary of major constraints by value chain............................... xxi Table 2.1: Importance of selected determinants of competitiveness in four types of value chains..................................................................10 Table 3.1: Current yield relative to estimated potential yield . 17 Table 4.1: Decomposition of agricultural growth in Sub-Saharan Africa (not including South Africa) ..............................................31 Table 5.1: Overview of production, consumption, and trade of case study commodities.....35 Table 5.2: Rice in Ghana and Senegal ................................................37 Table 5.3: Examples of existing standards for green bean producers in Kenya..............54 Table 5.4: Costs and returns to green bean farmers in Kenya, 2006.......................55 Table 5.5: Summary of major constraints identified by snapshot reviews of value chains ....57 Table 6.1: Recent policy interventions in grain markets in Eastern and Southern Africa.....62 Table 6.2: Summary of major ICT services to agriculture and agribusiness, Kenya .........65 Table 6.3: Number of new varieties and hybrids registered with national seed authorities (2005–08) ..............................................................75 Table 6.4: Comparison of research systems in Sub-Saharan Africa, India, and the United States around 2000 . .81 Table 7.1: Indicators of sector growth, case studies of competitiveness...................111 List of Figures Figure A: Dual but interlinked value chains for livestock ..............................xv Figure B: Projected value of the food markets in Sub-Saharan Africa .................. xvi Figure C: Exploitable yield gaps are high for maize in Africa.......................... xvi Figure D: Shares of world agricultural exports (1960–2008) ..........................xvii Figure E: Ratio of cash crop yields in Africa compared to Asia and Latin America .......xvii Figure F: Comparison of fertilizer value chain costs, Africa and Thailand (2006) ....... xxiv Figure G: Adoption of Bt cotton in Burkina Faso through a partnership with Monsanto . xxiv Figure 2.1: The ratio of food processing to agricultural value added rises with incomes ......9 Figure 2.2: Agro-industry as share of total manufacturing value added, mid-2000s..........9 v Figure 2.3: Share of total output value, West and Central Africa ..........................9 Figure 2.4: Dual but interlinked value chains for livestock ..............................11 Figure 3.1: Percent change in real commodity prices of key African agricultural exports, imports, and inputs, 2000–10 .............................................14 Figure 3.2: Exploitable yield gaps are high for maize in Africa...........................17 Figure 4.1: Trends in agricultural GDP and per capita agricultural GDP in Sub-Saharan Africa .....................................................24 Figure 4.2: Value of agricultural exports and imports, Sub-Saharan Africa (1970–2009).....25 Figure 4.3: Net agricultural exports as a share of agricultural GDP.......................25 Figure 4.4: Shares of world agricultural exports (1960–2009) ...........................26 Figure 4.5: Global share of agricultural exports by country (1991–93 and 2007–09) ........26 Figure 4.6: Composition of Sub-Saharan Africa–s exports by commodity, share of total value (2007–09) ............................................27 Figure 4.7: Sub-Saharan Africa’s share of world exports by commodity (raw and processed) (1991–93 and 2006–08)..................................................27 Figure 4.8: Africa’s shares of global imports for top 11 imports (raw and processed) (1991–93 and 2006–08) .................................................28 Figure 4.9: Composition of Africa’s imports by commodity group (total: US$ 24 billion) (2006–08) .............................................................28 Figure 4.10: Index of food crop yields in Africa relative to the rest of the developing world (=100) (2008–10) .......................................................29 Figure 4.11: Ratio of cash crop yields in Africa vs. Asia and Latin America .................29 Figure 4.12: Sub-Saharan Africa maize yields relative to non-African countries with rainfed maize production (1961–2010) ...........................................30 Figure 4.13: Change in livestock productivity, meat (1980–2005) .........................30 Figure 4.14: Change in livestock productivity, milk (1980–2005) .........................30 Figure 4.15: TFP growth in Africa lags other regions....................................30 Figure 5.1: Rice production and imports, Sub-Saharan Africa ...........................36 Figure 5.2: Production costs for rice in Ghana and Senegal benchmarked to Thailand ......39 Figure 5.3: Value build-up in the rice markets of Senegal and Ghana.....................40 Figure 5.4: Change in