29 November 2012

Africa: Agro-Industry - Bringing the Value Into Value Chains

analysis

"It is wise for countries to make informed choices of strategic commodities to promote in specific zones"

The economic development prospects of African countries are bright. The International Monetary Fund projects that growth is expected to average 6 percent in 2012, with strong indications that the continent is poised to experience a boost in economic growth between now and 2020.

Africa's population will reach 1.4bn by 2020, by which point four out of every ten citizens will be residing in urban areas, with a sizable middle class of about 30 percent. These developments, if properly harnessed will bring along greater opportunities for the continent.

The growing number of consumers, with relatively higher incomes than today, will require more and higher quality value-added foods and products. The increasing demand for processed agricultural products will require adding value to farmers' outputs.

New markets for value-added products will evolve, thus positioning value addition, or agro-processing, as the cornerstone for food security and the path to unlocking prosperity in Africa.

This is an opportunity to create sustainable jobs and inclusive growth, particularly for the smallholder farmers who are responsible for 75 percent of domestic trade in Africa, and most of whom are women.

Unfortunately, Africa is presently a net importer of value-added food; an example of how the continent has failed to transform its 'inherited natural wealth' into 'created wealth'.

Africa, despite vast arable land, good agro-ecological conditions, water for irrigation, has not used its resources to create value and prosperity. Value-addition to commodities is the path Africa must take to address the persistent food insecurity and poverty.

That food insecurity has, in several African countries, been traced to low agricultural productivity, high post-harvest losses (40 percent for certain commodities) and the lack of appropriate agro-processing or value-addition technologies. Several factors are responsible for the high post-harvest losses.

These include the disorganised and fragmented small land holdings, poor infrastructure and institutions to support commercial agriculture, poor organisation of producers and linkages to market via agro-processing and limited road networks and access to rural electrification.

To alleviate this problem, African countries must promote agribusiness strategies that integrate rural infrastructure and support services for targeted commodity value chains based on specialisation and market demand.

For this to have broad-based impact, structural transformation involving a shift from subsistence-oriented production and food-processing towards a modern integrated agribusiness value chain economy based on specialisation is a must. How can this be done to maximise impact?

African countries should take targeted actions within regional or sub-regional frameworks for synergies and economies of scale. At the sub-regional or country level, an agribusiness-led growth strategy with a strong productivity growth and value addition along the entire agribusiness value chain is required.

An important aspect of the strategy is the provision of necessary incentives for bolstering private sector investments and competitiveness. The strategy should also integrate the benefits of science, innovation and modern technology, and attract the increasing number of educated young men and women to be agro-entrepreneurs.

Given the infrastructure and budgetary constraints and the urgency to transform agriculture to enhance food security, jobs and wealth creation in Africa, it is wise for countries to make informed choices of strategic commodities to promote in specific zones.

This calls for prioritisation of commodities and promotion zones, thus the concept of Value Chain Promotion Zones (VCPZs) should be followed. The VCPZs facilitate the clustering of producers and processors.

In these zones adequate infrastructure (roads, irrigation, electricity, etc.) are provided through public-private sector investments and support from development partners.

The VCPZs facilitates backward and forward linkages, thereby enhancing more remunerative employment in emerging sectors outside farming, such as trading centres, ICT centres. Through this agro-industry is integrated thereby bringing value into value chains and prosperity for Africa.

Patrick Kormawa of UNIDO discusses how African countries can promote structural transformation, turning themselves into integrated agribusiness economies

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