Agricultural Supply Chains, Growth and Poverty in Sub-Saharan Africa: Market Structure, Farm Constraints and Grass-root Institutions

Lead Research Organisation: African Ctr for Economic Transformation
Department Name: Economic Research & Advisory

Abstract

This research proposal relates to the "Agriculture and Growth" theme of the DFID-ESRC Growth Programme.
In Africa, rural poverty is a widespread phenomenon. The countries that historically managed to pull out of poverty are those that have been successful in diversifying their economies away from agriculture and other natural resource based activities. However, in Africa, the agriculture sector has so far failed to become an engine of growth and economic transformation for most countries in the continent. In Africa, international market conditions combine with domestic market configurations in shaping agriculture growth and poverty reduction. In Sub-Saharan Africa the levels of productivity in agriculture are of the order of one third of those enjoyed by small-holders in Asia. Part of the problem lies in the market structures and in the poor institutions, policies, and infrastructure serving the agriculture sector. Often, the commercialization of the agriculture output is produced along a value chain where intermediaries, exporters, and downstream producers interact with farmers. While in Africa the farming sector is composed mostly of atomistic smallholders, the lower-layers of the value chains are usually dominated by a small number of firms. Farmers may suffer from the non-competitive behavior of other agents along the chain, or be constrained from selling output in markets because transport and other services are not available or are too costly.
Our research will investigate if and how agricultural market structures and farm constraints affect the development of dynamic food and cash crop sectors and whether these sectors can contribute to a process of economic transformation and poverty reduction in Sub Saharan Africa. To do that we plan to study the interplay between agriculture supply chains, farm constraints and poverty in a number of crops and countries. We will do a mapping of the existing supply chains characterizing the existing market structures and domestic competition policies (privatization, regulation, entry, merger, etc). At the farm level we will study the constraints faced by small holders to increase productivity and break a vicious cycle where low productivity exacerbates vulnerability to poverty. In a series of case studies, we will explore how grass-root institutions may help overcome those constraints. We will study how the market configurations, farm constraints, and the action of grass-root institutions interact to create useful instruments of poverty eradication. We will also study the differential effect on female-headed households vis-à-vis male-headed households. As women and poor households often confront greater barriers to participation in agricultural value chains and in nonmarket institutions, it is important to highlight such differential constraints and their impacts in our analysis.
Our analysis builds around several case studies covering much of Sub-Saharan Africa and many of the major food and cash crops produced in the continent. Each case study has three building blocks, supply chains, farm constraints and grass-root institutions, and poverty impacts. In turn, the analysis in each building block is based on a sound theoretical framework and on a comprehensive quantitative assessment.

Planned Impact

One of the key missions of the African Center for Economic Transformation is to enable increased ownership and accountability in the development process among African governments by improving the capacities of African governments to formulate and implement informed and sustainable economic policies. This project will generate a series of outcomes that will benefit policy makers currently seeking improved capabilities to deal with effective competition policy to promote increases in agriculture productivity, solve food security issues, promote agribusiness diversifying exports and increasing trade and competitiveness, and remove some of the constraints faced by poor farmers. This will be achieved through the following mechanisms:

i) Mapping current institutional and domestic markets configurations for food and cash crops in Sub Sahara Africa;

ii) Increased emphasis on more effective competition policies as an instrument to reduce major behind the border barriers to trade, exports, food security, and poverty alleviation;

iii) Development of new analytical tools to assess the poverty effects of value chains;

iv) Compilation of data and summary of methods to measure competition at different layers of a supply chain;

v) Assessment of the role of various rural development policies (e.g., provision of infrastructure) in more efficient value chains and price transmission;

vi) Greater awareness of the need for regulatory policies to support agricultural production and exports; and

Better understanding of the constrained faced in commercial agriculture by female-headed and poor households and how grass-root institutions could work to ease those constraints.
The African Center for Economic Transformation is particularly interested in the policy impact of this project and therefore will implement a knowledge dissemination strategy and a capacity building methodology to ensure the main stakeholders can benefit from this research.
 
Description Our research investigates if and how agricultural market structures and farm constraints affect the development of dynamic food and cash crop sectors and whether these sectors can contribute to economic transformation and poverty reduction in Africa. We map the current cash and food crops supply chains in six African countries, characterizing their market structures and domestic competition policies. At the farm level, we study the constraints faced by small holders to increase productivity and break out of a vicious cycle in which low productivity exacerbates vulnerability to poverty. In a series of micro case studies, the project explores how cooperatives and institutions may help overcome these constraints.
We find that the effect of more competition on farm gate prices depends on the initial level of competition in each crop. For many crops, in particular food crops, there is already a lot of competition and further changes in the level of competition will not affect farm gate prices much. In some other specific cases, in particular in cash crops, the initial level of competition is low and more competition is likely to have larger impact on producer prices. In terms of the effect of complementary policy and other factors affecting the allocation decision of farmers, the largest impacts often come from an increase of the international price. The response of prices to this shock and others in the model is cushioned to a very large extent by the market structure.
Our research should appeal to scholars and policy makers seeking instruments to promote increased agriculture productivity, resolve food security issues, and promote agribusiness by diversifying exports and increasing trade and competitiveness.
Exploitation Route The research provides:
- Essential knowledge for policy makers currently seeking improved capabilities to deal with effective competition policy to promote increases in agriculture productivity, solve food security issues, promote agribusiness diversifying exports and increasing trade and competitiveness, and remove some of the constraints faced by poor farmers
- Mapping of current institutional and domestic markets configurations for food and cash crops in Sub Sahara Africa
- Development of new analytical tools to assess the poverty effects of value chains
- Better understanding of the constrained faced in commercial agriculture by poor households and how grass-root institutions could work to ease those constraints

Following this research ACET has decided to the dedicate its next flagship report the African Transormation Report to Agriculture. The ATR 2017 has three objectives. First, the report aims to focus agricultural policy in Africa on transformation in this sector by putting together and presenting analysis and results that would inform policies on agricultural transformation and through ACET's advisory and advocacy activities. Second, the report will provide an index, the African Agricultural Transformation Index (AATI), which would identify metrics to be used by policymakers, researchers, and other stakeholders to analyze and monitor agricultural transformation in African countries. Third, the report aims to contribute new insights to the important work on the current state and the future of African agriculture, and in particular the investigations of 'how to improve livelihoods of smallholder farmers' that have been undertaken by the Comprehensive Africa Agriculture Development Programme (CAADP) and Bill & Melinda Gates Foundation, and contribute to the post-2015 agenda and the growing body of research on South-South cooperation.
Sectors Agriculture, Food and Drink

 
Description The objective of this research was to study whether and how agricultural market structure and farm constraints affect the development of dynamic food and cash crop sectors, and whether these sectors can contribute to the process of economic transformation and poverty reduction in SSA. The research emphasize that deregulation of agricultural markets and the emphasis on competition policy would have only limited effects on farmers wellbeing given the many constraints affecting the productivity and the marketing of agricultural products in Africa. As a result, it was important to emphasize the role played by complementary policies for the sector. The project emphasize the spill over effects between food and cash crops. Besides external capacity building, the project greatly contributed to the development of in house expertise on agricultural issues. This grant was the first project on agriculture economics undertaken in house by ACET. As a result, ACET increased its capabilities on agricultural issues, reshaped its vision of the role of the sector in the transformation agenda, and got in touch with different stakeholders. While the original project was limited in scope and the research budget was modest, the research team had the opportunity to meet several times with key stakeholders. During engagements with policy makers, they signalled the need for deep dives studies on key crops and livestock but they emphasised that the research need to go beyond a report that provides policy recommendations identifying value capture opportunities with investment plans and even identify potential investors. The ESRC/DFID project signalled that there was the need to do further work and to do that ACET applied to Gates Foundation for a larger and more ambitious project. During that project we have much closer contact with policy makers and other stakeholders and we could see an impact at least in the way agriculture is mainstreamed in the transformation agenda of different African countries. Because of the of DFID/ESRC and Gates projects, ACET decided to dedicate its next African Transformation Report to Agricultural Transformation. The key objectives of the follow up studies and related advocacy work are to improve government policies and to attract investments in the sector, both public and private investments. As ACET deepens its work in agriculture/agro-processing, this project will be the basis for policy advisory work. While the initial DFID/ESRC project did not have any direct policy short term policy impact, in the follow up projects ACET and in country partners institutions have created a continuous dialogue with policy makers and agricultural supply chains stakeholders in five countries, and ACET findings are been used to inform national agricultural transformation agendas and the establishment of advocacy platforms to spur governments into action. Moreover, contacts with journalists and publication of interviews and blogs who helped to put agriculture at the centre of the transformation agenda. The main challenge for the project was the relative small size of ACET in house team and the budget that only allowed for limited engagements with stakeholders and field work. However, ACET leveraged on the DFID/ESRC project to obtain new funding to produce deep dives studies. The project was scaled up with grants from Gates Foundation (finalized) and USAID BASIS (ongoing) and would lead to an African Transformation Report focusing on Agriculture Transformation (ongoing). These allowed visiting partners and stakeholders in person. In the second stage of the projects, our partnerships with country institutions gave us the credibility and capacity for the studies. The in- country institutions that we partnered with brought insights that very much contributed to the quality of research and the credibility with government officials. ACET is using these studies as a key building block for a continent wide Agricultural Transformation Report (ATR 2016). The main objective of ATR is to help advance Africa's quest for agricultural transformation by: (a) providing analysis and recommendations to help address the challenges and take advantage of the opportunities in African agriculture; and (b) to raise the awareness of policymakers, farmers, investors, and the African development community to the solutions and opportunities in African agriculture. The report will look at the development of agriculture through the lens of national economic transformation. It aims to assemble and synthesize existing knowledge, and to supplement it with commissioned case studies in order to highlight the central role of agricultural transformation to national economic transformation, and to present practical examples and lessons on how to promote agricultural transformation. Eventually it would be important to use the knowledge generated in the original and subsequent projects not only to advice governments but also to link with private sector investors. Finally the methodology developed in the project was used in other projects, including West Africa value chain studies of the World Bank, DFID Tanzania (poverty impact of improvements in Dar es Salaam port) and a trade and poverty course prepared by the PI and Co-PI with UNCTAD's Virtual Institute. The course has been delivered twice online with hundreds of participants and in several workshops organized by UNCTAD in LDCs targeting local policy makers.
First Year Of Impact 2014
Sector Agriculture, Food and Drink,Education
Impact Types Policy & public services

 
Description Agriculture Development Program
Amount $1,445,817 (USD)
Organisation Bill and Melinda Gates Foundation 
Sector Charity/Non Profit
Country United States
Start 11/2012 
End 10/2014
 
Description International Growth Centre Grant
Amount £25,750 (GBP)
Funding ID 1-VCC-VETH-VXXXX-32203 
Organisation International Growth Centre (IGC) 
Sector Charity/Non Profit
Country United Kingdom
Start 01/2015 
End 06/2016
 
Title Network Analysis in Rural Areas in Northern Ghana 
Description We present new dataset of social and economic networks collected in nine rural communities in the Tolon-Kumbungu districts of Northern Ghana between August and September 2013. A mix of qualitative and quantitative information is used. Based on a GRI strength index done thanks to a database containing information on: (1) whether the GRI has a bank account, (2) if the GRI is registered in the Department of Cooperatives, Registrar General's Department or in the Ministry of Food and Agriculture (MOFA), (3) the level of their production (mt), their acreage (ha) and yields, (4) the source of their existence and (5) their main activity [Crop Production, Processing Enterprise, Marketing Enterprise, Livestock Production, Aquaculture], the district was chosen. Based on a list of GRI registered with the Ministry of Food and Agriculture, we have randomly selected 10 GRIs from 9 communities. A household survey was conducted (15% of the total HH of these communities). Additionally, a survey of the secretaries/chairmen of the GRI was carried out in order to capture potential institutional interactions. In total 150 households were interviewed (of which 75 are members of a GRI and 75 are not). Non-GRI members were selected for being neighbors of the GRI members - with a rule of the fifth closest neighbor. The data used in our empirical analysis was collected in September 2013 in nine communities of the Tolon-Kumbungu district of Northern Ghana. 
Type Of Material Database/Collection of data 
Provided To Others? No  
Impact Paper on network analysis and the role of grass root institutions in Northern Ghana. Trainning of local researchers on survey methods. 
 
Description African stakeholder group meetings and launch conference 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact To maximize the impact of the project the team sought to involve different stakeholders in the early stages of the research programme. We have been talking to businesses, cooperatives and NGOs working in the agriculture sector in Sub Saharan Africa. We invited some of them to the initial workshop that took place in Nairobi (conference organized jointly with DFID-ESRC project ES/J009601/1). Some members of AECT's network of African Think Tanks conducting work on agricultural supply chains were also invited to participate in the conference.
We have started a dialogue and consultation with local stakeholders in five of the countries in the project, including SNV-EA, Food Research Institute, Technoserve, World Cocoa Foundation, ASARECA, PanACC, IGAD, AGRA, IITA, Government Officials, Union National des Producteurs de Coton (Burkina Faso), INERA, Ghana Rice Interprofessional Body.
Some of the stakeholders have expressed interest in an MOU between them and ACET to collaborate on advocacy process:
- SNV regional office of East Africa is keen to share in knowledge development and also support any advocacy platform developed in the dairy sector on which it has a number of projects in the region.
- PanACC which is a Pan Africa agro-processing advocacy platform with chapters in the 36 Africa countries, is keen on an MOU to advocate the agro-processing agenda.
- The Association for Strengthening Agricultural Research in Eastern and Central Africa (ASARECA) has also expressed interest in sharing knowledge and advocacy platform .
- Hon Bernard Mulegani, Member of East Africa Parliament, has agreed to arrange for us to make a presentation to the agriculture committee of the East Africa Parliament.
The meetings provided important inputs for the project and the PI decided to go deeper in the analysis and policy advocacy work of 5 countries rather than covering the initial twelve countries of the proposal. The countries for which deep dives will not be conducted will be part of the academic paper instead of the book. The selection of the five countries was based on the following criteria:
i. There was an interest of local stakeholders and partners in the project
ii. ACET and DFID target country
iii. The possibility to leverage the project with policy work that was been conducted by ACET on agriculture supply chains
We have also made contacts with developing agencies interested in the topic, including the World Bank, UNCTAD, UNDP, the International Trade Center, and ICTSD.
In the process of producing the mapping of grass root institutions in a dozen African countries, ACET's agricultural economist has been reaching on daily basis businesses and grass root institutions working in food and cash crops to request information and useful feedback for the current research project. Based on those conversations a field study was conducted in Northern Ghana and other two are planned in Ethiopia and Zambia.
The research team has reached out to other researchers to collaborate as co-authors in the three field studies.

Following the initial consultation, ACET has been working with national based think tanks in five African countries to advocate for an agenda on agricultural transformation with governments.
Leveraging on this grant, ACET succesfully applied to a Gates Foundation grant to do deep dives studies of twenty agricultural supply chains in five African countries. Those studies and funds allow an ACET team to meet periodically with stakeholders and receive their feedback. As a result of those meetings it was agreed that agricultural transformation will be the key subject area of the next ACET's research cycle that will lead to the publication of the second African Transformation Report focusing on agriculture. We expect to continue a constructive dialogue throughout the project with main stakeholders.
Year(s) Of Engagement Activity 2013,2014
URL http://acetforafrica.org/whats-new/post/the-quest-for-economic-transformation-in-africa/