Study on Measures to Enhance Investment into Agricultural ... · PDF fileFY 2010 Study Funded by the Ministry of Agriculture, Forestry and Fisheries of Japan Study on Measures to Enhance

FY 2010 Study Funded by the Ministry of Agriculture, Forestry and Fisheries of Japan

Study on Measures to Enhance Investmentinto Agricultural Sector in Africa

FY 2010 Presentation Summary Report

March 2011

Mitsubishi Research Institute, Inc.

Table of Contents

1. Outline of the Study....................................................................................1

1.1 Background......................................................................................................... 11.2 Aim of the Study................................................................................................. 11.3 Activities............................................................................................................. 11.4 Duration .............................................................................................................. 3

2. Findings on Yam and Cassava Industries in Nigeria and Ghana:Need to Reinforce the Value Chain ............................................................4

2.1 Are Yams and Cassavas in Full Swing? ............................................................. 42.2 Issues in Each Segment of the Value Chain ....................................................... 52.3 Existence of Investnment in the Value Chain ..................................................... 7

3. Approach for Enhancement of Investment intoYam and Cassava Value Chain ..................................................................9

3.1 Basic Concepts ................................................................................................... 93.2 Measure to Stimulate the Downstream............................................................. 103.3 Measure to Develop a Streamlined Value Chain ...............................................113.4 Export Promotion Measure to Encourage the

Globalisation of Yam and Cassava ...................................................................11

4. Conclusion: A Need for Communicative Value Chain ..................................12

Acronyms

1 BOP Base of the Pyramid

2 CSIR-CRI (CRI) Council for Scientific and Industrial ResearchCrop Research Institute of Ghana

3 CSIR-FRI (FRI) Council for Scientific and Industrial ResearchFood Research Institute of Ghana

4 DADTCO Dutch Agricultural Development & Trading Company BV

5 DFID Department for International Development of UnitedKingdom

6 EU European Union

7 FAO Food and Agriculture Organization

8 FDI Foreign Direct Investment

9 FIIRO Federal Institute of Industrial Research, Oshodi, Nigeria

10 FY Fiscal Year

11 HQCF High Quality Cassava Flour

12 IITA International Institute of Tropical Agriculture

13 L/C Letter of Credit

14 LDCs Least Developed Countries

15 MAFF Ministry of Agriculture, Forestry and Fisheries of Japan

16 MOFA Ministry of Food and Agriculture of Japan

17 NGO Non-Governmental Organisation

18 NRCRI National Root Crops Research Institute, Umudike, Nigeria

19 ODA Official Development Assistance

20 PPE Peak Products Enterprises

21 TICAD Tokyo International Conference on African Development

22 USAID United States Agency for International Development

23 SRID Statistics, Research and Information Directorate, Ministryof Food and Agriculture (MOFA) of Ghana

24 VCM Value Chain Management

FY 2010 Presentation Summary ReportStudy on Measures to Enhance Investment into Agricultural Sector in Africa

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1. Outline of the Study

1.1 Background

Japan, in TICAD (Tokyo International Conference on African Development) IV (May2008), has pledged to contribute to the development of Africa, by means of doublingFDI (Foreign Direct Investment) and ODA (Official Development Assistance) into theregion. As one of the considerations, MAFF (Ministry of Agriculture, Forestry andFisheries) has commissioned a study focusing on roots and tubers cultivated inSub-Sahara Africa (with particular emphasis on yams and cassavas). The study focusedon two West African countries: Nigeria and Ghana.

Yam and cassava are widely consumed as staple food in various areas in the regionwhile constrained to low productivity due to situations such as primitive farmingmethod, low fertility of soil, agricultural pests, etc. This study was conducted with anexpectation to identify the issues inhibiting private sector investment into each of thestages of yam and cassava value chain, and to endorse measures to overcome thoseissues and to promote investment into the sector. Details of the recommendations aredocumented in the main report, with the essence explained in this presentation reports.

1.2 Aim of the Study

The study is expected to:(i) Identify issues inhibiting private sector investment into each of the stages of yam

and cassava value chain; and to(ii) Endorse measures to overcome those issues and to promote investment into the

sector.

The overall goal of the study is to:Contribute to ensuring secure and stable food supply to the inhabitants of Sub-SaharaAfrica. Consequently, this is expected to contribute to the global food security.

1.3 Activities

Focusing on yam and cassava, which are produced and consumed as important staplefoods in Sub-Sahara Africa, the consultants have identified issues that may be inhibitingprivate sector investment into the sector. Measures have been recommended withconsideration to the current situations in each stage of the value chain:

- Laboratory research and development;- Production- Storage & transport


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- Processing- Marketing and Consumption- Export

Essence of the recommendations on measures to resolve such issues and to encourageinvestment into the sector is as reported in this document, while their full details aredescribed in the main report.

The case studies have been conducted for two West African countries: Nigeria andGhana. As to raise awareness of necessity to promote private investment into the sector,activities such as policy dialogues, seminars and questionnaire surveys have also beencarried out in these countries.

Furthermore, a study has been carried out on the cases and policies in which a privatebusiness from a third country (which now has been identified as Brazil) is likely toinvest into the sector in Nigeria / Ghana.

The study has analysed the cases (either successful or failure examples) in which thepublic sector collaborated with private sector to promote investment to Nigeria / Ghana.Information has also been collected from private firms and international organisations ina third country, Brazil.

Detailed process of the study is as follows:

1. Preparation of a study programme;

2. Experts’ committee

Formation and convening of an expert committee’s meetings which will considerthe study programme, field survey plan and study outputs (committee will compriseof academics, international development experts and private sector businesspeople) ;

3. Research and analysis of cases:

(a) Production of roots and tubers (production quantity, cultivate area, yields)

(b) Research on current investment climate in roots & tubers industry in Nigeria andGhana.Analysis on each stages of their value chains:- Laboratory research and development;- Production- Storage- Processing- Marketing and distribution- Consumption


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(c) Analysis of issues that are inhibiting investment into roots & tubers industry inSub-Sahara Africa; i.e., investment climate and requisite considerations forinvestment into the industry.

(d) Possibility of investment into the roots & tubers industry in Sub-Sahara Africa(from Japan or any other third country).

e) Possibility of public-private partnershipsExploration into the possibility of private investment to any stages of value chains:- Laboratory research and development;- Production- Storage- Processing- Marketing and distribution- ConsumptionExploration into the possibility of utilisation of public assistance measures as ODA(Official Development Assistance) and / or technical transfer, to encourage privatesector investment.

f) Possibility of BOP (Base of the Pyramid) that will create income opportunities forthe low income tier in LDCs

4. Seminars, policy dialogues, and questionnaire surveys:

Based on the findings from researches and inputs from experts of the committee,seminars, policy dialogues and questionnaire surveys should be carried out. As toraise the awareness of the importance to attract investment, the seminars, policydialogues and questionnaire surveys should target various stakeholders:- Governmental officials in agricultural administration;- Members of agricultural organisations;- Farmers,- NGOs, and;- Private businesses

1.4 Duration

The Study Programme is scheduled to be conducted for three consecutive years. Thefirst phase of the study has been completed in March 2011, prior to the end of the FY(Fiscal Year) 2011.


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2. Findings on Yam and Cassava Industries in Nigeria andGhana: Need to Reinforce the Value Chain

2.1 Are Yams and Cassavas in Full Swing?

Among some of the basic findings on Nigeria and Ghana’s yam and cassava relatedindustries, a common trend was that the potential resources of these roots and tubershave long been under-utilised. In many of the cases, causes for this under-utilisationhave been referred to on issues with production, such as low yield, high cost ofmultiplication of pests and diseases, and improper post harvest processes. Table 1clearly implies that the roots and tubers in Ghana, for example, have much room forimprovement in productivity.

Table 1 Comparison of average yield of roots & tubers in Ghana and elsewhere

Source: SRID, Ministry of Food & Agriculture (MOFA), and FAO

Intensive interviews with farmers showed that they are not capable of improving theirefficiency, not only due to input constraints but also due to uncertainty with the sales ofthe crops. The farmers will be more willing to improve their performance if they hadbetter connections and information exchange with the market demand.

Uncertainty with the sales was found to be relevant to the final consumption of thecrops, which are mostly household consumption as staple food. Figure 1 shows theexample of food crop consumption per capita in Ghana. Consumptions of yam andcassava have been stable and stagnant for the past twenty years. Decrease inconsumption of crops such as millet, sorghum, cocoyam and groundnuts, is assumed tobe substituted by meat as well as wheat (bread and noodles), which is almost entirelydependent on import.

Yam and cassava production can be further encouraged by reinforcing the “value chain”,

Average yield of yam in Ghana:15.3 ton/ha (2009)

Average yield of cassava in Ghana:13.8 ton/ha (2009)

Average yield of yam in Japan:23.8 ton/ha (2009)

Average yield of cassava in Thailand:22.7 ton/ha (2009)


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which starts from production and links storage, transport, processing marketing &consumption and / or export (research and development can also be included as tocomprise the value chain). If the producers are given more information and commitmentfrom the wholesalers, processors and marketers, if the wholesalers, processors andmarketers are better informed about the market and consumers, and if the consumers areprovided with more choice from the marketers, the whole value chain will react tostimulate all of the activities of the stakeholders.

Figure 1 Consumption of major food crops in Ghana

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

500.0

1990 1995 2000 2002 2004 2005 2006 2007 2008 2009

kg/capita

Cowpea

Groundnuts

Plantain

Cocoyam

Sorghum

Millet

Rice(Milled)

Maize

Cassava

Yam

Source: SRID, Ministry of Food & Agriculture (MOFA)

2.2 Issues in Each Segment of the Value Chain

Stakeholders in each segment of the value chain all expressed their concerns in doingtheir businesses. Some of the issues were to do with their own segment while manyothers were related to other segments of the value chain. For example, processors’concern over unstable supply of raw materials is directly related to production segment.Concern was expressed by the exporters on lack of overseas market information. This isdue to the missing link beyond exporters.

The value chain of yam and cassava, both in Nigeria and Ghana can be said to be in“under-utilisation equilibrium”, due to weak links among each of the segment. Suchlack of links results in the stakeholders becoming reluctant to change the way of doingbusiness. The whole value chain therefore remains as it is, unless a strongdisequilibrium condition occurs in any of the segment.


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Figure 2 Issues in each segment of the value chain

Segment:Production Storage

TransportDistribution

Processing(factory)(cooperatives)

Consumption(home)(industrial)

Export(raw tubers)(processed)

Yam

Cassava

Major issues:- Fertility degradation- Disease and

pestilence- High input cost

- Limited seasonalshift

- Unstable, unsecuresupply

- Not distributedwidely

- Niche marketproducts

- Competition withwheat flour,corn starch

- Limited recipe- Time consuming to

cook- Not served in urban

environment

- Limited informationon overseas market

- High risk intransaction

Measures to tackle some of the issues are already under way in various forms. As anexample, research and development activities on breeding and variety improvementhave been funded by international donor community. NGOs are actively involved indeveloping capacity of the producers and processors. Nevertheless, many of the issuesare remaining, being abandoned after many good trials. A few more push in many of theexisting measures may drastically change the under-utilised equilibrium of the industry.Major issues and corresponding causes and consequences, as well as measures, in fivesegments can be summarised as follows:

(1) Productioni) Fertility degradation- Fertiliser is not available (Nigeria);- Use of fertilisers is not preferred (Ghana).- Proper use of fertiliser is being encouraged (IITA / Japan)ii) Disease and pestilence- Use of pesticide is not preferred;- Variety with higher resistance is being developed (IITA, NRCRI).iii) High cost of input?- Multiplication methods of seed yam being developed (IITA).


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(2) Storage - Transporti) Difficulty in storage- Off-season harvest, longer shelf life yams are being developed (IITA, CRI);- Farmers will get better deal by introducing a Warehouse Receipt Scheme (whichis a scheme that enables the farmers to borrow money based on the receipt fordepositing the crops, and receive further amount when the crops are sold at betterprice).ii) Unstable unsecure supply- Post harvest loss of crops may be significant- There are not contracts between producers and wholesalersiii) Not distributed widely- Only the local merchants are distributing to neighbouring countries;- Scarcity has not been pronounced by traders.

(3) Processingi) Processed yams are only for niche market- Yam was once considered to be served in restaurants;ii) HQCF and starch compete with low-cost imported alternative products such aswheat flour and corn starch- A national campaign to promote substitution of the imported products.

(4) Consumptioni) Cooking recipes with yam & cassava are limited- IITA, with support from USAID, developed yam & cassava recipe booklet;ii) Preparing yams require time and labour.- Alternatives (rice, wheat, maize, potatoes) are becoming more popular- Easy to cook yam products are being developed (CSIR-FRI).

(5) Exporti) Exporters have limited information on overseas market- Government can support disseminating overseas market information;ii) Exporters are risking uncollectible sales- Exporters have united to form associations;- Use of L/C (Letter of Credit) and insurance can be promoted.

2.3 Existence of Investment in the Value Chain

Investment, both local and foreign could be found only among the processing segmentof the value chain. Some of the relatively strong medium-sized yam and cassavaprocessors were found to own the farms by themselves, in industrial scale. On thecontrary, bigger-sized cassava processors (for HQCF and cassava starch) do not owntheir farms, as primary processing of cassava will have to be done at dispersed farmlevels.


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Representative invested establishments in Nigeria were DADTCO (Dutch owned HQCFmanufacturer), Peak Products Enterprises (local HQCF and cassava starchmanufacturer), and many pounded yam flour (Iyan) manufacturers such as Ayoola,Ola-Ola, etc.

Investment in Ghana were all local investments, such as: Caltech Ventures (industrialcassava producer and HQCF, starch and ethanol manufacturer), Josma Agro industries(local cassava producer and manufacturer), with many other small scale cassavaproducers and manufacturers.

Figure 3 Investors in yam and cassava value chain

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Production StorageTransport

Processing Consumption Export

Farmers Traders Consumers

Cooperatives

Processors(factories)

Exporters

Processors(farm owner)

Farmers

Consumers

Exporters

FarmersCassava

Pounded yam powder

Fufu powder

Yam / CassavaYam

CassavaYam

Yam

Cassava

Pounded yam powder

Fufu powder

ConsumersFlour, (Garri)

ConsumersFlour, (Garri)

Traders /Processors

Manufacturers(factories)HQCF

Cassavastarch

Investment: Yam /Cassava processing foreasy-to-cookproducts

Investment: Cassava processing forindustrial (and some forhome)use

Table 2 Two types of investors in Nigeria and GhanaInvestment:Yam / Cassava processing foreasy-to-cook products

Investment:Cassava processing for industrial(and some for home) use

NigeriaAyoolaOla-Ola3SCOlu-OluOluiyan

GhanaLeehouse (Leemex)Neat

NigeriaPPE (Peak Products Enterprises)DADTCO

GhanaCaltech VenturesJosma Agro IndustriesAyensu Starch (Nationalised)


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3. Approach for Enhancement of Investment into Yam andCassava Value Chain

3.1 Basic Concepts

Overall approach to promote investment into Nigeria and Ghana’s yam and cassavavalue chain will be to reinforce the value chain, itself. An environment in which aninvestor can take advantage of the value chain, i.e. to have stable input in upstream, andsecure and growing market in downstream, will be the requisite condition for aninvestment to be coming in.

The approach should also make the most of existing, ongoing industrial promotionalmeasures. By introducing new measures that will function as a platform to link up theexisting measures, a system composed of various measures can interact among eachother, to promote the whole value chain.

Figure 4 Basic concepts of new measures functioning as a platform

Production StorageTransportDistribution

Processing(factory &cooperatives)

Consumption(home &industrial)

Export(raw &processed)

Existing measures:

- Cultivar improvement- Empowering and associating farmers- Development of autonomous processing groups, etc.

- Productdevelopment

- Tradefacilitation

New measures:

- New processed product development with producers / processors / local marketers &exporters

- National Campaign to promote substitution of imported products such as wheat flourand corn starch

- Investment promotion campaigns - More profit for the producers

As the consequence of the introduction of new measures, the value chain is expected tobe linked up among the segments, especially pivoting the manufacturers and themarketers. This is because manufacturers and marketers will be more inclined to investin business only when they are in a position to influence the whole value chain, undertheir value chain management strategy.


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Figure 5 Basic concepts of new measures linking up the value chain

Production StorageTransportDistribution

Processing(factory &cooperatives)

Consumption(home &industrial)

Export(raw &processed)

Processor’s VCM links

Marketer’s VCM linksVCM: Value Chain Management

3.2 Measure to Stimulate the Downstream

At the same time as strengthening the links within the value chain, a measure tostimulate the downstream segment, i.e. consumption will be one of the primarymeasures to promote investment. Currently, yam and cassava are limited to homeconsumption, not for eating out in urban life. With rapid urbanisation taking place inmany countries in Sub-Sahara Africa, yam and cassava can even be left behind, withincreasing in wheat and rice consumption, which will result in increasing importdependency of food.

Various experimental projects have been conducted, for example, by IITA, FIIRO,NRCRI, CSIR-FRI and some other institutions to develop processed yam and cassavafood which will be accepted into an urban lifestyle of eating. The results from most ofthese projects are, however, left preserved in laboratories, not being launchedcommercially.

An example of “Pão de queijo”, a popular Brazilian cassava snack proves thatcommercialisation of yam and cassava will be able to change urban eating habits, whena right recipe is taken up by the outlet such as restaurants, fast food stalls, hotels, supermarkets, etc.

Figure 6 Involving more stakeholders to promote processed yam foods

Development ofprocessed yam products

for urban consumers

Research institutes for foodprocessing technologies Processed food distributors

Yam traders

Processed food manufacturers

Fast foodrestaurants & stalls

Supermarkets

Food packaging companies

Exporting trader

Hotels


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A measure to create a forum in which not only the scientist but also business people canjoin to discuss on how to develop and commercialise yam and cassava products willbecome a good platform to utilise the accumulated knowledge better, as well as tolaunch the developed products into the real economy.

3.3 Measure to Develop a Streamlined Value Chain

A pilot project to develop a model case of streamlined value chain can be anothermeasure to strengthen the yam and cassava value chain. There are some examples inBrazil in which farmers’ cooperatives have joined their forces with the supermarket,processors and traders to create more markets and to empower the farmers. Farmers’cooperatives started by negotiating with the supermarkets to have their best crops soldon the shelves. After the success of marketing of fresh and high quality crops, therelation between the farmers and the supermarkets evolved by shifting ontodevelopment of new processed products which contributed to enhance the supermarket’sproduct line ups at the same time as benefitting the farmers with higher value.

Ghana’s Konkomba Yam producers and marketers’ association is a group of farmerswho are interested in linking up production with other segments of the value chain.Such association can become a good candidate for the pilot project, together withsupermarkets and probably, some potential processing businesses.

Figure 7 Streamlining the Value Chain

Producers + Traders + Processors+ Supermarkets (Collaboration)

Production Product development Processing Marketing Distributing

3.4 Export Promotion Measure to Encourage the Globalisation ofYam and Cassava

The third measure that can lead to creating a better environment for investment is asupport for export of yams. Currently, around 10,000 tons of raw yam tubers are beingexported from Ghana, mostly to North America and Europe. The target of this export isthe Diasporas from West Africa and the Caribbean countries.

Exporters lack in information of the market. They also suffer from high risk of exporttransactions. Therefore, a measure to allow more North American and European marketinformation to be passed onto the Ghanaian exporters will motivate the exporters tobecome more competitive. It will also relieve the risk of failure to collect sales moneyfrom their customers. The measure can be said to be a trial to link the West African yamand cassava value chain with the global market. It will connect the yam and cassava


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stakeholders to the global economy.

This measure, to link yam and cassava value chain to the world, may be moreeffectively implemented if it is conducted in collaboration with the market side authority.Collaboration with USAID and DFID may be an option to be considered.

Figure 8 Yam export from Tema of Ghana to London

4. Conclusion: A Need for Communicative Value Chain

A factor which may enhance investment into Nigeria and Ghana’s yam and cassavavalue chain is to strengthen the links within the value chain. The way to strengthen thelinks is to encourage more communications within the stakeholders. Communicationscan be in forms of information exchange through forums, collaborative works, businesscontracts, and creation of information platform.

It is the communicative value chain that will have to be created through proposedmeasures. When the stakeholders get better visibility in the value chain, there will bemore incentives for mutual collaboration among the different segments of the valuechain. Further, better visibility of the value chain from outside, is more likely to offerpotential investors an open and welcoming environment for business activities.

END OF DOCUMENT

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Study on Measures to Enhance Investment into Agricultural ... · PDF fileFY 2010 Study Funded by the Ministry of Agriculture, Forestry and Fisheries of Japan Study on Measures to Enhance