Agro-Allied Industrialization
and Regional Value Chains
Ousmane Badiane, Director for Africa
ECONOMIC GROWTH AND DEMAND OUTLOOK
 Most Countries Will Reach Middle Income Status In 2030
 All Countries Will Reach Middle Income Status By 2050
Source: Sulser T. B. et al. 2015.
ECONOMIC GROWTH AND DEMAND OUTLOOK
Intraregional Trade By 2025
Under Current Trends
Source: Badiane et al. 2014
ECONOMIC GROWTH AND DEMAND OUTLOOK
Regional Trade In Staples: Major Source of Future Income Growth
Potential agribusiness growth and expected income
to farmers
2000
US$ billion
2030
Increase in Demand and Incomes in Billion US$
Expected sector growth to 2030
150
50
3
10
High value
exports
2.9
8
10.5
Commodities
1.6
Urban food
30
Potential Increased
farmer income in
2030
+ $100B = Growth of staple food demand in urban markets in Africa
+ $30B
= Potential income for smallholder farmers
IFPRI/Badiane
ECONOMIC GROWTH AND DEMAND OUTLOOK
THE RISE OF PROCESSED FOODS
Projected Demand Growth 2010 – 2014
(Estimated Purchased Food Budget Share in 2040)
UNPROCESSED
PROCESSED
LOW VALUE
ADDED
PROCESSED
HIGH VALUE
ADDED
NonPerishable
4x
(8%)
5.5x
(17%)
7x
(23%)
Perishable
6.5x
(20%)
8X
(18%)
10X
(15%)
Source: Tschirley, D et al. 2014.
RAPDIDLY TRANSFORMING REGIONAL VALUE CHAINS
1. TRADITIONAL MILLET VALUE IN SENEGAL
RAPDIDLY TRANSFORMING REGIONAL VALUE CHAINS
2. MILLET BASED MEALS
RAPDIDLY TRANSFORMING REGIONAL VALUE CHAINS
3. THE NEW MILLET VALUE CHAIN
HOME
BASED
MILLET
PROCESSING
READY TO COOK
MILLET PRODCUTS
ON THE SHELF
RAPDIDLY TRANSFORMING REGIONAL VALUE CHAINS
3. THE NEW MILLET VALUE CHAIN
HOME
BASED
MILLET
PROCESSING
READY TO COOK
MILLET PRODCUTS
ON THE SHELF
TRADITIONAL MILLET
BASED MEALS
RAPDIDLY TRANSFORMING REGIONAL VALUE CHAINS
3. THE NEW MILLET VALUE CHAIN
HOME
BASED
MILLET
PROCESSING
READY TO COOK
MILLET PRODCUTS
ON THE SHELF
TRADITIONAL MILLET
BASED MEALS
READY TO EAT
MILLET
MEALS ON THE SHELF
EMERGING AGRO-ALLIED INDUSTRIAL SECTOR
Profitability, Growth And Maturation
Current characteristics of regional agro-allied industries
• Rising number of firms producing the same low quality, often imitated goods
#
No. of firms
Time
Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)
EMERGING AGRO-ALLIED INDUSTRIAL SECTOR
Profitability, Growth And Maturation
Current characteristics of regional agro-allied industries
• Rising number of firms producing the same low quality, often imitated goods
• As new entrants copy same products, profitability declines for everyone
• No capacity to invest and innovate; stifling firm growth and maturation
$
#
Profitability
No. of firms
Time
Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)
AGRO-ALLIED INDUSTRIALIZATION STRATEGIES
Two Key Questions
How to bend the profitability curve and escape from low and declining profits?
How to promote enterprise growth through consolidation and specialization?
$
#
Profitability
No. of firms
Time
Dotted (solid) lines denote progression of number of firms and profitability without
Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)
AGRO-ALLIED INDUSTRIALIZATION STRATEGIES
Three Priority Areas for Policy and Investment
A.
B.
C.
$
#
Process and product innovation: Vocational training & Technology acquisition
Market development: Trade & competition policy, quality & standards
Cost of services and Infrastructure access: Power, Telecom, Transport
Profitability
No. of firms
Time
Dotted (solid) lines denote progression of number of firms and profitability without
Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)
AGRO-ALLIED INDUSTRIALIZATION STRATEGIES
Three Priority Areas for Policy and Investment
A.
B.
C.
$
#
Process and product innovation: Vocational training & Technology acquisition
Market development: Trade & competition policy, quality & standards
Cost of services and Infrastructure access: Power, Telecom, Transport
Profitability
No. of firms
Time
Dotted (solid) lines denote progression of number of firms and profitability without
Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)
A. SKILLS DEVELOPMENT FOR TRANSFORMING VALUE CHAINS
Absence of professional & vocational training opportunities means:
① No skill upgrading for existing smallholder farmers
② No skill development for emerging value chain professions
 Machine operations and maintenance
 Processing technology skills
-
Product and process innovations
Management and sales
 Packaging and distribution
 Food quality and safety
Page <#>
AGRO-ALLIED INDUSTRIALIZATION STRATEGIES
Three Priority Areas for Policy and Investment
A. Process and product innovation: Vocational training & Technology acquisition
B. Market development: Trade & competition policy, quality & standards
C. Cost of services and Infrastructure access: Power, Telecom, Transport
$
#
Profitability
No. of firms
Time
Dotted (solid) lines denote progression of number of firms and profitability without
Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)
B. TRADE & COMPETITION POLICIES FOR TRANSFORMING VALUE CHAINS
Three policy options for
competitive domestic value
chains in regional markets
Notes: Notes: * COMESA+Tanzania. Figures on top of bars indicate cumulative increases in regional export supply in 1000 mt.
Source: Badiane et al. 2014
AGRO-ALLIED INDUSTRIALIZATION STRATEGIES
Three Priority Areas for Policy and Investment
A. Process and product innovation: Vocational training & Technology acquisition
B. Market development: Trade & competition policy, quality & standards
C. Cost of services and Infrastructure access: Power, Telecom, Transport
$
#
Profitability
No. of firms
Time
Dotted (solid) lines denote progression of number of firms and profitability without
Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)
C. INFRASTRUCDTURE CHALLENGES AND OPPORTUNITIES
Harness ICT for Quick Gains
 Africa’s infrastructure gap is lowest
in the Telecom Sector
 While investing in power and
transport infrastructure
 Tap into Modern ICT to leapfrog
Torero, M. (2014)
USING ICT TO INNOVATE, CUT COST AND GO TO SCALE
How ICT can be leveraged for smallholder agriculture
① Lower cost of overcoming physical and institutional obstacles
 Bridge the distance to millions of dispersed smallholders
 Extend the reach of limited technical staff
① Lower cost of access to technology and services
 Tap into global knowledge networks
 Enable self-learning and peer-to-peer learning
① Link smallholders to other value chain operators
 Traders, exporters, processors
 Financial services providers
 Technology services providers
Page <#>
THE CHALLENGE: TAKING ICT SOLUTIONS TO SCALE
Current ICT tools target….
…. an isolated
business problem
They provide solutions
that are not replicable
nor scalable.
for a separate
segment
of a given
value chain
often in specific
geographies
Needed are integrated solutions that digitize all major interfaces
between smallholders and other value chain actors.
References
1.
2.
3.
4.
5.
6.
7.
8.
Badiane, O. and T. Makombe. 2016. Beyond a Middle Income Africa: Transforming African Economies for
Sustained Growth with Rising Employment and Incomes. ReSAKSS Annual Trends and Outlook Report.
Badiane, O. and M. McMillan. 2016. Economic Transformation in Africa: Patterns, Drivers and Implications
for Future Growth Strategies. In Badiane, O. and T. Makombe (Eds.). Beyond a Middle Income Africa:
Transforming African Economies for Sustained Growth with Rising Employment and Incomes. ReSAKSS
Annual Trends and Outlook Report.
Badiane, O., S. Odjo and S. Jemaneh. 2014. More resilient Domestic Food Markets through Regional Trade.
In Badiane, O., T. Makombe, and G. Bahiigwa (Eds.): Promoting Agricultural Trade to Enhancing Resilience
in Africa. Annual Trends and Outlook Report. Regional Strategic Analysis and Knowledge Support Systems.
Washington DC. PP: 38-53.
Badiane, O., T. Makombe, and G. Bahiigwa. 2014. Promoting Agricultural Trade to Enhancing Resilience in
Africa. Annual Trends and Outlook Report. Regional Strategic Analysis and Knowledge Support Systems.
Washington DC.
Otsuka, K. and T. Sonobe. 2011. A Cluster-based Industrial Development Policy for Low-income Countries.
Policy Research Working Paper No. 5073. World Bank. Washington DC.
Sulser, T. B.; D. Mason-D’Croz; S. Islam; S. Robinson; K. Wiebe and M. Rosegrant. 2016. Africa in the Global
Agricultural Economy in 2030 and 2050. In Badiane, O. and T. Makombe (Eds.). Beyond a Middle Income
Africa: Transforming African Economies for Sustained Growth with Rising Employment and Incomes.
ReSAKSS Annual Trends and Outlook Report.
Torero, M. 2014. Infrastructure Challenges and Opportunities for Africa South of the Sahara. In Badiane, O.
and T. Makombe (Eds.). Beyond a Middle Income Africa: Transforming African Economies for Sustained
Growth with Rising Employment and Incomes. ReSAKSS Annual Trends and Outlook Report.
Tschirley, D; T. Reardon; M. Dolislager and J. Snyder. 2014. Presentation at CAADP Annual Trends Outlook
Report Methodology Workshop: Towards a Middle Income Africa: Long Term Growth Outlook and
Strategies. IFPRI Washington DC. December 12.
Thank you!