Commercial and Inclusive Value Chains Praise for the book ‘An excellent addition to the literature on the integration of the poor into mainstream value chains, illustrating that even vulnerable households can contribute to economic growth and their own development.’ Linda Jones, international consultant, Canada ‘There is a growing recognition that the principles of value chain management apply to all enterprises – not just major global corporations. The authors of this important new work demonstrate how these ideas can be utilized to create truly “inclusive” supply chains resulting in benecial outcomes to all parties.’ Dr Martin Christopher, Emeritus Professor of Marketing and Logistics, Craneld School of Management, Craneld University, UK ‘Importantly, the case studies in this book highlight not only the successes and benets of “inclusive value chains” but also some of the challenges and potential pitfalls. This book will provide a useful reference for individuals and organizations involved in the planning and development of commercially viable, inclusive value chains in developing economies.’ Dr David Taylor, value chain analysis and improvement specialist and advisor, formerly Co-Director of the Food Process Innovation Unit, Cardiff University Business School, UK Commercial and Inclusive Value Chains Doing good and doing well Edited by Malcolm Harper, John Belt and Rajeev Roy Practical Action Publishing Ltd The Schumacher Centre Bourton on Dunsmore, Rugby, Warwickshire CV23 9QZ, UK www.practicalactionpublishing.org © Malcolm Harper, John Belt and Rajeev Roy and the individual contributors, 2015 ISBN 978-1-85339-867-4 Hardback ISBN 978-1-85339-868-1 Paperback ISBN 978-1-78044-867-1 Library Ebook ISBN 978-1-78044-868-8 Ebook All rights reserved. No part of this publication may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without the written permission of the publishers. A catalogue record for this book is available from the British Library. The author has asserted his rights under the Copyright Designs and Patents Act 1988 to be identied as authors of this work. Harper, M., Belt, J., and Roy, R., (eds) (2015) Commercial and Inclusive Value Chains: doing good and doing well, Rugby, UK: Practical Action Publishing <http:// dx.doi.org/10.3362/9781780448671> Since 1974, Practical Action Publishing has published and disseminated books and information in support of international development work throughout the world. Practical Action Publishing is a trading name of Practical Action Publishing Ltd (Company Reg. No. 1159018), the wholly owned publishing company of Practical Action. Practical Action Publishing trades only in support of its parent charity objectives and any prots are covenanted back to Practical Action (Charity Reg. No. 247257, Group VAT Registration No. 880 9924 76). Cover photo: Sacks of rice stored at the Agricultural Business Centre, Kenema, Sierra Leone. These centres are supported by FAO. © FAO/Caroline Thomas Cover design by Mercer Design Indexed by Elizabeth Ball Typeset by Allzone Digital Services Limited Printed by Standartu Spaustive, http://www.stanadrd.lt, Vilnius, Lithuania Contents List of gures, tables and boxes vii About the editors ix Acknowledgements x 1 Introduction – what this book tells us about commercial value chains that include the poor 1 Malcolm Harper, John Belt and Rajeev Roy Part One Non-food value chains 15 2 Khat from Ethiopia to Somaliland – a mild stimulant but a major income earner 17 Abdirazak Warsame 3 Beer from bananas in Tanzania – a good drink and many good jobs 27 Jimmy Ebong and Henri van der Land 4 Seed cotton production in South Rajasthan – preventing child labour 37 Kulranjan Kujur and Vickram Kumar 5 Stove liners in Kenya – less pollution, less charcoal and more income 47 Hugh Allen 6 Granite in Odisha – from Indian quarries to European kitchens, if government allows 59 Malcolm Harper 7 Remittances – from the global diaspora to the poor in Somalia 71 Abdi Abokor Yusuf Part Two Commodity foods 79 8 Nyirefami millet – a traditional Tanzanian crop, marketed in a modern way 81 Jimmy Ebong and Henri van der Land 9 Rice – smallholder farmers in Malawi can be profitably included 89 Rollins Chitika 10 Angkor Rice – 50,000 Cambodian farmers growing for export 97 Rajeev Roy http://dx.doi.org/10.3362/9781780448671.000 vi COMMERCIAL AND INCLUSIVE VALUE CHAINS 11 Moksha Yug – Indian dairy farmers don’t have to be in cooperatives 105 Chandrakanta Sahoo 12 Suguna Poultry – decentralized village production is good business 115 Malcolm Harper, Rajeev Roy and Phanish Kumar Part Three Non-commodity foods 125 13 Green beans – from small farmers in Senegal to gourmets in Europe 127 Miet Maertens 14 Odisha cashew nuts to global markets – value added all the way 143 Kulranjan Kujur 15 Palm oil in Peru – small-scale farmers succeed where plantations failed 151 Rafael Meza 16 Organic turmeric from eastern India – healthy spice and healthy earnings 161 Niraj Kumar 17 Conclusions – what can we learn? 173 Malcolm Harper, John Belt and Rajeev Roy List of figures, tables and boxes Figures 3.1 BIL’s main sources of banana and its main end markets 29 3.2 Value chain map for BIL 34 4.1 Average sales price at different levels in the cotton seed value chain 40 5.1 The Kenya Ceramic Jiko 48 5.2 Jiko liner value chain map 54 5.3 Water filter value chain map 55 6.1 Main features of the granite value chain, per tonne in Indian rupees 63 7.1 Overview of a Dahabshiil money transfer process 73 8.1 Map of Tanzania showing Nyirefami’s main sources of millet and end markets of millet flour 86 9.1 MHL and the rice value chain 91 10.1 The Angkor Rice value chain 100 11.1 Moksha Yug Access value chain 110 12.1 Business model of Suguna Poultry 117 13.1 Value of fresh fruit and vegetable exports from Senegal, 1995–2011 (US$ billion) 128 13.2 Bean export region in Senegal and studied communities 129 13.3 Diagram of the bean export supply chain from Senegal (situation in 2005) 131 13.4 Participation of local households as contracted suppliers and agro-industrial employees in the bean export chain, 1996–2005 135 13.5 Comparison of average farming household income from different sources 138 14.1 Cashew value chain in South Odisha 144 14.2 Selling price of cashew at different levels of the chain 147 15.1 Organization of the palm oil value chain its main participants 154 16.1 Operational value chain 166 16.2 The economics of the turmeric value chain 167 16.3 The price build-up in the turmeric value chain 170 Tables 3.1 Banana beer value chain 33 4.1 Cash surplus from a typical farmer’s tenth of a hectare of cotton seed production (figures in US$) 41 viii COMMERCIAL AND INCLUSIVE VALUE CHAINS 5.1 Estimated income of Chujio Ceramics 53 5.2 Impact of Chuijo Jiko on household incomes 56 5.3 Impact of Chuijo Jiko on the environment 56 7.1 Value added along the chain for $100 remittance to Somaliland 73 8.1 Millet value chain: costs, revenues and margins at different levels in the chain 85 10.1 Results from the survey of smallholders contracted to Angkor Rice 101 10.2 Economics of a household producing Neang Malis for Angkor Rice 101 11.1 Development of milk production in India 106 11.2 Prot and loss account for a dairy cow 108 12.1 Value addition in the Suguna Poultry value chain 118 12.2 Economics of a 2500 chick poultry farm supplying to Suguna 121 12.3 PPI score before joining Suguna Poultry and at current levels 122 12.4 Characteristics of poultry farm employees 123 13.1 Comparison of household characteristics 137 14.1 Average cost of processing 100 kilos of cashew in a processing unit in Parlekhamundi 148 15.1 Production costs for 1 tonne of crude palm oil 156 17.1 The case study value chains in summary 174 17.2 Small poor players in value chains: ‘SWOT’ analysis from the point of view of value chain leaders 178 Boxes 3.1 Testimonies of two banana producers 35 8.1 Testimony of trader with Nyirefami Millet 87 10.1 Stories from two rice producers selling to Angkor Rice 103 11.1 Three dairy farmers supplying milk to MYA 111 12.1 Poultry farmer case study 123 16.1 Mr Naresh’s story of turmeric and ginger cultivation 169 About the editors Malcolm Harper is Emeritus Professor of Cranfield University in England, and has taught at the University of Nairobi and Cranfield University; he has worked since 1970 in enterprise development, microfinance and other approaches to poverty alleviation, mainly in India. John Belt works for the Royal Tropical Institute (KIT) in Amsterdam. He is an agricultural economist with more than 20 years’ field experience in agricultural development. Rajeev Roy was an entrepreneur and currently teaches entrepreneurship. He has been engaged in several entrepreneurship development initiatives across the world. He is mentoring several start-ups in India. Acknowledgements This book is a collection of case studies that have been written by many different people, and each of the studies involved conversations with far larger numbers, including company managers and staff at all levels, and, most important, the small-scale producers and other members of the value chains on whose experiences the cases are based. We are grateful to all of them, and in particular to the poorer people who are benetting from inclusion in the value chains but who are nevertheless still much poorer, and perhaps much busier, than any of those who will read the book.