Title: MSE Development Programme
1Value Chain Analysis in the Food Construction
Sectors
- Micro Small Enterprise Development Programme
2Value Chain Analysis in the Food Construction
Sectors
- Rationale
- ECBP orients on Value-Chain Approach
- MSE dominate many steps in the value chain
- Objectives
- Identify analyse prospective value chains
- Draft strategies for value chain development
- Identify possible contributions of MSE Project to
value chain development
3Value Chain Analysis Approach
- Mission 1 (June 1 July 6, 2005)
- Value chain identification analysis
- Data Document Review
- Discussion with key actors
- gt50 company visits (Addis, Debre Zeit Adama)
- Mission 2 (September 2005)
- Strategy development
- Focus Activities to be discussed !
4Value Chain Analysis Presentation Overview
- Analysis of Selected Value Chains
- Cereal Processing
- Building Construction
- Furniture Metalworks
- Key Issues
- Policy Business Environment
- Company Reengineering
- Standards Certification
- HRD / TVET
- Outlook
5Cereal Processing Value ChainRelevance
- Dominating Processing Sector
- 53 of all Micro Enterprises
- 87 of all Small Enterprises
- 23 of all Medium Large Enterprises
- 53 of total manufacturing employment
- Base for national food security
- Population growth
- Urbanisation -gt Changing eating habits
- Driver of rural growth
- Regional export potential (medium-term)
6Cereal Processing Value ChainStructure
Consumers
7Cereal Processing Value ChainDemand Trends ...
- Driving Forces
- Population growth -gt overall demand increase
- Urbanisation -gt Changing eating habits
- (Urban) income growth
- Urbanisation
- More cereal products less unmilled cereals
wheat flour - Caterers (Army, Universities) switch from Injera
to Wheat bread - Urban medium upper class trends
- Home-produced Injera
- Wheat bread pasta replace traditional bread
- Factory beer replaces traditional beer
- More food drinks consumed outside from home
8Cereal Processing Value ChainDemand implications
- Bakeries
- 3-5 annual output growth (Addis 8-10)
- 600 Bakeries in Addis, room for new market
entrants - 320.000 t wheat flour demand p.a., growing
- Breweries
- Strong growth (20-25 p.a.)
- Major capacity expansion projects under way
- Local malt supply insufficient 40-50 of malt
imported - Pasta Cookies
- Market growth, new domestic entrants, but imports
still dominate -gt additional market assessment
required - Flour Mills
- Stagnating household market, several new entrants
- 30 overcapacity, heavy competition, low margins
- Significant staff reductions, plant closures
imminent - -gtReorient on industrial customers expand into
baking/ pasta!
9Cereal Processing Value ChainUrban Demand
Trends (1)
Teff milled
Injera
- Trend to home-prepared Injera
10Cereal Processing Value ChainUrban Demand
Trends (2)
Wheat Bread
Traditional Bread
Pasta
- Wheat bread Pasta replace traditional bread
11Cereal Processing Value ChainUrban Demand
Trends (3)
Traditional Beer
Drinks away from home
Factory Beer
- More outgoing, factory beer slowly replaces
traditional beer
12Cereal Processing Value ChainFarming Issues
- Production short of industrial demand
- Undersupply of hard cereals (for baking, Pasta)
- Insufficient supply of cereals for malting (?)
- Input trade
- Develop introduce high-productivity seed
varieties (e.g. Triticale) - Provide effective yet harmless agro-chemicals
- Farmers
- Ensure compliance with processors standards
- gt Cooperation across the whole value chain
(Input RD -gt Processors) required
13Cereal Processing Value ChainCereal Trade
Structure
- Absence of generally accepted, certified
standards grades (Cereals, Flour)
- Farmers
- Unable to incorporate margins for cleaning
grading (except large state farms) - Collectors / Wholesalers
- High costs for multiple sacking inspection
- Additional transport cost (10-12 impurities)
- Insecurity inhibits inter-regional trade
- Millers
- Additional cleaning costs (unreliable equipment)
- Unable to guarantee flour quality
- Bakers / Pasta makers
- Flour-related quality problems (additional costs)
- General
- Lack of base for market information systems,
warehouse receipts and cereal commodity exchange
14Building Construction Value ChainStructure
Private/ Public Construction
15Building Construction Value ChainMarket Overview
- Growing demand
- Population growth -gt Public private housing
projects - Public construction Universities, schools,
hospitals etc. - Industrial warehousing investment, office
construction - New infrastructure Dams, roads, bridges,
waterelectricity
- Supply issues
- Construction is slow, costly, and of varying
quality - Limited availability of skilled manpower
specialised contractors - Shortage of domestic inputs (cement, sand,
gravel, marble etc.) - Most finishing materials are imported
- World market price pressure (Steel, oil-gtbitumen,
cement, transport)
- Wholesale trade weakly developed
- Limited product range, mostly lowest standard
- Low market transparency
- No pulling of local suppliers
16Building Construction Value ChainSector
Environment
- Public projects
- 20 of projects obtained through corruption
(Contractors association estimate) - Partly run under youth employment creation
objectives - gt Quality not always adequately supervised
- Standards
- Lack of standards control for fittings
finishing (electricals, sanitary ware, windows,
furniture etc.) - Substantial entry risk for domestic investors
- Discretionary decision power of consultants on
non-standardised components -gt risk of corruption
misappropriation - Public security risks high maintenance costs
thrugh inferior components
- Investment
- Equipment supplier credit not allowed by Nat.
Bank - Difficult access to land for expansion / mining
sites - No VAT refund on imported equipment for
construction materials
17Metalworks Furniture Value ChainStructure
18Metalworks Furniture Value ChainMarket
Overview
- Increasing demand
- Population increase and urbanisation
- Public investment in schools, universities and
hospitals - Increasing private investment (office furniture,
restaurant furniture, etc.) - Low-cost housing requires different furniture
design
- Supply issues
- Decreasing availability of local wood
- Local chip wood manufacturing has reached
capacity limit - Worldwide increase of steel price -gtWorking
capital shortage of metal processing - Paints and lacquer well developed
- All fittings imported
19Metalworks Furniture Value Chain Challenges
Way Ahead
- Challenges
- Strong import competition for office and
household furniture - Imported metal hardware competes on lower quality
and price
- Way ahead
- Replace wood by laminated chip wood, metal and
bamboo - Introduce monitor minimum standards for metal
hardware - Enhance market research and design capabilities
- Strengthen efficiency of local metal processors
20Policy Business EnvironmentKey Issues
- Review VAT System
- Integrate MSE into VAT system (not TOT)
- Expedite VAT refunding
- Simplify VAT invoices
- Check for inconsistencies (e.g. flour VATable,
whereas bread VAT-exempt)
- Liberalize foreign trade
- Remove obligatory shipping with Ethiopian
Shipping Lines - Allow for international supplier credit
- Allow for customs refund on imported products
- Enhance investment and access to finance
- Re-vitalise privatisation efforts to supply
additional investment capital - Create infrastructure for share exchange market
- Review exclusion of foreign banks from Ethiopian
market - Conduct investment fairs to bring together
business ideas and capital
21Business Re-engineering Support Needs
- Marketing Strategies
- Adapt to changing demand (e.g. Milling, dry food,
injera, bakeries, furniture) - Increasing production efficiency
- Workflow management, maintenance, quality
management (e.g. metal industry processing,
construction inputs) - New technology
- Using Triticale wheat in cereal processing
- Laminated chip board in furniture making
- Operating automated (computerised) machinery
- Waste management and treatment
- Financial Management and Planning
- Investment planning
- Working capital management (increased input
prices of cereals, steel, wood, gravel, cement
etc.) - Others, e.g.
- Change management and creativity
- Team building and multitasking,
- IT-based business management solutions
22Business Re-engineering Proposed Approach
International Consultancy Facility
Large Enter-prises
Twinning
Commercial BDS Provision
Medium Enterprises
Linkage
MSEs
BDS Facilitation
23Standards CertificationKey Issues
- Lacking (enforcement of) standards
- Cereal grades quality, flour, bread
- Construction finishing components (electrical,
fittings, sanitary wares, etc.) - Furniture (minimum weight/load bearing, etc.)
- Two functions of standards certification
- Consumer protection (e.g. bread, furniture)gt
Cooperation with consumer associations in
standard setting supervision ? - Enhance market transparency efficiency lower
investment risk,gt Integrate industries in
standard development, promote industry standards,
orient on international standards
24HRD TVETKey Observations
- TVET/HRD needs named by discussion partners
- Project managers, claims contract handling
(contractor) - Furniture designers
- Food quality control / laboratory staff
- Equipment maintenance
- Automated equipment operators
- Millers, bakers, brewers
- Wood processing
- Metal casting -gt fittings, spare parts
- Heat treatment, galvanising, electroplating
- Innovation
- No RD/Training/Information Centre for cereal
processing and for furniture making - Sector associations weak how can they be
strengthened? - Chambers and EMIA as alternative platforms for
innovation generation exchange?
- Training by Suppliers
- Petram Baking with imported yeast
- Kadisco Wall painting training, adhesive
application in shoe making - Kaleb (Claas) Maintenance of agricultural
machinery - gt How can such practices be supported???
25HRD TVETIntegrate TVET Innovation
Dissemination
- TVET alone may not result in effective change
- Decision makers need to be informed about new
techniques as well !
Building Construction Example
26Value Chain Analysis Outlook
- Mission 2 (September 2005)
- Completing research
- Review MSE Pro experience
- Additional value chain research (e.g. bamboo,
logging sawing, linseed linnen) ? - Field research in other regions ?
- Analysis of potential implementation partners
(e.g. sector associations) ? - Assess activities of other donors related
ministries ?
- Strategy development
- Drafting implementation mechanisms structures
- Defining performance indicators ?
- Validation workshop with main stakeholders
- Report preparation