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Enhancing value chain governance and competitiveness across ACP regions

Project overview

The value chain refers to the full range of activities required to take a product to market, from conceptualisation through design, product development, production, processing, marketing, distribution and consumption. The importance of smallholders in agriculture and the need for value chains to become “inclusive”, whereby those smallholders with necessary assets, skills and access to infrastructure would be able to take advantage of profitable international, regional and domestic markets, was a particular issue addressed by all. The importance of all of these issues to the development of profitable value chains that could have a positive impact on both rural and urban incomes has been stressed on several occasions.

Critical elements of this Master Project are: increasing access to information and knowledge on changing consumer requirements/demands and on markets, value addition, value chain finance, supporting development of enabling policies, effective implementation of those policies, adequate resources, and the necessary institutions. CTA will mobilise its ACP and international partnerships and resources to assist in the effort to develop viable value chains in the ACP regions.

The project will try, as much as possible, to leverage other funding from donors and the private sector, and will be carried out through three interrelated components, as follows:  

Promoting smallholder-inclusive value chains for priority commodities in ACP countries

Value chain development suffers from a limited knowledge of value chain development techniques leading to a lack of understanding of effective ways of including smallholders in commercially viable activities for priority products such as grains, horticultural products and livestock in Africa, roots and tubers and livestock in the Caribbean and roots and tubers, coconuts and cocoa in the Pacific. This is constraining the level of investment in inclusive chain development. There is a lack of research/evidence to inform both policy decisions and private-sector development in areas such as the difficulties faced by the private sector in working with small farmers, the reasons why some farmers enter modern value chains and others don’t, the role of producer marketing organisations, the impact of standards and certification schemes, and the constraints facing development of chains to supply growing urban markets.  

The project will place considerable emphasis on both using the results of CTA-funded research as input into the other two components of the master project as well as into other related CTA projects and ensuring maximum dissemination, where possible in partnership with other organisations. The on-going Agritrade service will be continued.

Value chain and agribusiness capacity building and upgrading

The development of agricultural value chains requires a large number of people, particularly youth, who are able to take on a variety of roles within a commercial market-oriented context. At present ACP countries lack sufficient trained staff in various key value chain areas including both technical (e.g. ICTs, post-harvest handling and product quality) and managerial (business management, logistics, accessing finance, communications, collaboration and networking) skills. Most universities are not in a position to provide the trained graduates needed by modern agribusiness nor to upgrade the skills of those already in agribusiness. Creating an understanding of the issues among policymakers and potential policymakers (e.g. parliamentarians) is also important.  

Maximum impact will be achieved if there is an active sharing of experiences and collaboration between the different ongoing initiatives to address this problem, with emphasis being placed on developing training support related to the development of priority products. A partnership approach, which is at the heart of CTA’s Strategic Plan 2016-2020, will be a key operating mode for the activities. One problem however, is that farmer organisations participation in multi stakeholder settings are often relatively weak, a constraint which needs to be addressed. Partners will further include universities and business schools in all three ACP regions.

Improving access to finance for the value chain

Sustainable and equitable growth is only possible when rural areas are made to prosper, which in turn requires family farms to emerge as market-oriented, profitable enterprises. But to be able to engage with markets, farmers need, alongside other conditions, access to finance – finance to invest in their farms, to buy the inputs they need, and to market their produce when they feel the time is best rather than when they are pressed for cash. But banks as well as donor agencies have found that it is hard to lend to farmers. Agriculture is rife with risk that can hurt farmers’ capacity to reimburse their loans, and even if farmers can reimburse, government policies have not always encouraged them to do so. In value chain finance, financiers use the interconnections within the value chain to reduce their risks in providing credit to the chain participants. This permits farmers who otherwise would be un-bankable (most of which are women and youth, for various reasons) to get access to credit, both pre- and post-harvest. For example, farmers with guaranteed contracts are in a stronger position to obtain loans from banks, or can obtain loans directly from the contracting company. However, this is not yet a mainstream instrument for banks in ACP regions, partly due to the fact that success stories have not been widely disseminated. There is also a scarcity of support institutions to help banks structure and manage value chain loans and the policy environment can also be a hindrance.  

CTA, with its strong links with both banks and farmer organisations in ACP regions, is particularly well placed to support development of effective value chain finance. The massive response to its Fin4Ag Conference in July 2014 in Nairobi (with more than 800 participants it was the largest agricultural finance conference ever organised) indicated that CTA is indeed well-placed to catalyse a revival of agricultural finance. Farmers’ organizations showed that they are viable partners for processors, buyers and banks, and government officials (including central bankers) recognized that there were viable public-private partnership models which boost access to finance by smallholder farmers in a sustainable manner.