Managing markets: lessons and emerging issues

1
Managing markets lessons and emerging issues
Consultative Regional Workshop Shea product
quality and product certification system
design 6-8 October 2004 Palais des Congrès Bamako
Mali

• Diane Russell
• Trees Markets
• World Agroforestry Centre

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Market forces in Africa

• West Africa as ancient hub of trade
• The effects of colonialism
• Nationalization and import substitution
• Market boards
• Structural adjustment
• Continued challenges in world markets

Between the 11th and 15th centuries West Africa
exported goods across the Sahara Desert to Europe
and beyond
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In cases where domestic markets have been
liberalized, the private sector has responded
with rapid increases in the number of traders,
greater competition, and, in many cases, reduced
marketing margins. At the same time, most private
traders operate on a small scale with minimal
investment. Marketing costs remain high because
of poor transport infrastructure and uncertainty.
Similarly, export marketing has generally become
more efficient, allowing farmers to keep a larger
share of the export price. Liberalized export
markets may be vulnerable, however, to collusion
by the small number of exporters, particularly
when political connections are necessary to enter
the market. Another problem is that, in a
competitive market, agricultural traders are
reluctant to offer farmers inputs on credit
because the farmers can sell to a competitor and
avoid repayment. In cases where producer prices
have increased, farmers have responded by
expanding output, although the supply response is
greater for export crops than for food crops.
Furthermore, farmers have generally increased
supply by reallocating land from one crop to
another or expanding overall cropped area rather
than by increasing yields. The overall
agricultural supply response is limited by
structural factors including poor infrastructure
and limited use of purchased inputs.
REFORMING AGRICULTURAL MARKETS IN AFRICA
Mylène Kherallah, Christopher Delgado, Eleni
Gabre-Madhin, Nicholas Minot, and Michael Johnson
2002
4
What have we learned?

• Balanced roles for government, external
  investors, private sector and civil society
• No simple equation for value addition
• Link NRM to market incentives (e.g., forest
  policies)
• Tree crops part of overarching rural development
  strategy

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Success stories?

• Vanilla in Uganda
• Cut flowers in Kenya
• Cassava starch in Nigeria
• Groundnuts in Senegal
• Tobacco in Malawi
• Cocoa in Ivory Coast

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Proliferation of certification standards

• Industry standards
• Consumer demands
• National standards emerging
• Who bears the costs?

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EUREPGAP Major Musts
D. Gibson
Must conduct a risk assessment to determine
impacts of new ag lands on adjacent crops and
areas Must adopt cultivation techniques that
minimize soil erosion Must enhance environmental
biodiversity on farm through conservation
management plan Must equip, train, certify and
protect pesticide handlers and applicators Must
rinse, pierce, keep secure, and never reuse
pesticide containers Must provide access to clean
toilets, washing facilities and first aid
boxes Must comply with applicable labor and
health requirements
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Appellation
L.Guillerme
Protected Denomination of Origin

• Results from successful negotiations among
  producers, companies and government

• Entails relationship between the product and its
  origin, marked by many specifically established
  natural and human factors. The product cannot be
  reproduced outside its area of origin
• All production phases carried out in the same
  geographical area in which the natural and human
  factors are located.

• Domains are collective and public property of
  interprofessionnal or stakeholder association

• The recognition procedure allows a debate about
  product specificity and quality
• Controls help to maintain collective discipline
  and global uniquness of the product

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What we can do

• Target capacity building and prepare appropriate
  materials

Compare certification approaches (costs
benefits)
ICRAF-Unilever partnership on Allanblackia
Support to RD? private sector find ways to work
with smallholders (ex of allanblackia partnership)

• Work with donors on tree crops (e.g., World Bank
  initiative)

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Hope for the future?Government, private sector
NGOs

• Peter Anyang' Nyong'o MP, Minister of Planning
  and National Development of Kenya, spoke of the
  stifling red tape and bureaucracy the business
  community had to endure under the previous
  "predatory" regime. This had been reduced, and
  the business community now spoke with one voice
  through the Private Sector Alliance. Property
  rights, even for hawkers, are an important issue,
  and so is access to credit for small enterprises.
  He stressed the importance of having strong
  financial institutions and the need to lower
  costs of production if Africa is to be
  competitive.

United We Stand The Role of Organized Business
in Development 04.06.2004 Africa Economic Summit
11
Market informationmodes increasing

• KENYA AGRICULTURAL COMMODITY EXCHANGE (KACE)
• A Guide to Accessing Daily Market Price
  Information Through Your Safaricom Mobile Phone
• For more information or assistance,
• please phone Mr. Wycliffe Ochieng or
• Ms. Susan Shitambanga at KACE
• Mobile [phone]-220551
• 4441829/30.

Tropical Commodities and their Markets A Guide
and Directory by Peter Robbins Published by TWIN
1995ISBN 0 7494 1672 0 PART ONE1.1 Markets for
Tropical Products1.2 Exporting tropical
products1.3 Trading Commodities on Future
Markets1.4 Volatile Oils 1.5 Natural Fibres
1.6 Fruit and Vegetables1.7 Spices PART
TWODIRECTORY OF COMMODITIES PART THREEUSEFUL
ADDRESSES
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Business services expand
Honeycare

• Fair trade assistance (Phytotrade, Honeycare)
• Business development services (SanProta, Pride
  Africa, CPWild, CECI, Technoserve,
  EnterpriseWorks, IDE)
• Need more support to and integration of small
  traders, merchants

Jan Beniest
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NGOs and enterprisesgetting professional

• The study shows that, despite the inefficiencies
  associated with nonprofit organizations that
  emanate from opportunism and lack of incentives
  for their managers to be efficient, the
  organizational characteristics in the South
  African nonprofit sector show benefits that can
  counterweigh some of the above inefficiencies.
  Through incentive structures designed to minimize
  agency costs, allowing all stakeholders to
  participate in the project implementation, use of
  volunteers, project locations, and the nature of
  goods and services in which they specialize,
  nonprofit organizations in South Africa reveal a
  potential to minimize transaction costs. The
  competitive edge through transaction cost
  minimization, however, can only be realized if
  the sector can control a range of organizational
  inefficiencies associated with lack of ownership
  and opportunism.

Nonprofits as Economic Organizations Transaction
Costs and the South African Nonprofit
SectorbyMartin KaggwaUniversity of
Witwatersrand - South Africa
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Attack structural constraints to competitiveness
in Africa

• Investing infrastructure
• Promoting literacy, numeracy
• Strengthening African nations in world economic
  fora (e.g., IMF)
• Encouraging public-private partnerships for RD
• Strong, flexible and transparent subsector
  bargaining bodies
• Promoting intermediary organizations and building
  skills of market actors
• THE BOTTOM LINE Higher quality products

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Integrated rural development approach

• Invest in rural industries that use products
• Integrate traders, merchants, processors into RD
  agendas
• Monitor resource sustainability and tree
  management with producers? cost effective
  domestication and silviculture
• Carry out macro and micro policy analyses and
  improve policy environment

Thriving markets
Community (agro) forestry
Science in Africa 2002
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Un très grand merci á
Dave Gibson, Chemonics International Laure
Guillerme, INAO Hubert Omont, CIRAD Fabrice
Pinard, ICRAF-CIRAD Eliot Masters, ICRAF Steve
Franzel, ICRAF Cori Ham, CPWild/Stellenbosch Agrof
orestree database (Baxter Lovett photos)