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Promoting structured grain trade in Africa

CTA director Michael Hailu: Speech for the 6th African Grain Trade Summit

October 1, 2015

The 6th African Grain Trade Summit (AGTS) opened today in Kigali, Rwanda. The three-day event is a biennial high-level multi-stakeholder forum organised by the Eastern Africa Grain Council (EAGC). Read the speech delivered by CTA's director, Michael Hailu at the official opening ceremony.

"I am very grateful to the East African Grain Council for giving me this opportunity to talk to you today.

We cannot exaggerate the importance of agriculture to Africa. It generates 32% of the GDP and employs over two-thirds of the labour force. Smallholder farms play an especially important role, growing some 80% of the continent's food. Yet many farming families remain trapped in poverty.
Improving their livelihoods and achieving food security for the growing population is one of the most pressing challenges facing the continent.

We will only succeed in meeting the challenge if we transform agriculture into a profitable business and integrate Africa's 33 million small farms into the market. The private sector, which is well represented at the Summit this week, has a critical role to play in meeting this challenge.

The opportunities for African agriculture are immense. At present, the continent imports $40 billion of food every year. Blessed with abundant land, water and cheap labour, there is no reason why Africa shouldn't be a net exporter, rather than a net importer of food.

By 2050 the number of people living in urban centres in Africa is projected to rise from 440 million to over 1.3 billion. At the same time, the burgeoning middle classes will demand different types of food – more meat and chicken, vegetable oils, processed foods and branded products. Satisfying these needs will require a dramatic increase in domestic food production and value addition. This provides a tremendous opportunity for African producers, traders and processors.

Two key questions: What do we need to do to improve national and regional trade and reduce dependence on imports from other parts of the world? How can we make agriculture a real engine for inclusive growth?

The Summit this week will address these important questions and I hope it will come up with concrete action points for the various stakeholders.

If we are going to connect tens of millions of smallholder producers to local, regional and national markets, it's vitally important that we address the various constraints along the value chain.

Many of problems which are hindering agricultural transformation begin at the farm. Up to 40% of the crops harvested in Africa are either lost in the field, in poor storage or during transportation. Desperate for cash, farmers are often forced to sell their crops during a time of market glut, when prices are at their lowest.

For traders, procuring small supplies of grain from many different farmers can be an expensive business. If they don't have suitable warehouse facilities for storage, they will have to sell to larger buyers, and – like many farmers – they will be obliged to sell when prices are low.

Lack of organisation, poor communications and poor infrastructure are further factors which hinder the efficient working of agricultural markets.

EAGC's goal of promoting structured grain trading in vitally important in overcoming some of these challenges.

As many of you know structured trade is all about making the business more organised and more efficient. Farmers gain access to a market and better prices, and also gain access to finance through warehouse receipt systems. Traders obtain a reliable supply of grain of the right quality that they can sell to clients. Processors are guaranteed a continuous and reliable supply of raw materials that meet their quality requirements.

Governments play a key role by providing leadership, establishing the legal framework to ensure the effective implementation of contracts and allowing the financial institutions to get involved. Governments also play an important role in supporting training for farmers, warehouse managers, traders and bankers.

CTA has been working closely with EAGC and other organisations to promote structured trade, not just in East Africa, but in other parts of the continent through capacity building, information sharing, facilitating cross learning and encouraging new innovations.

One of our projects is supporting the East African Grain Institute, which is based at the EAGC in Nairobi. The Institute holds frequent training events for bankers and other actors in the value chain. One of our aims is to ensure its commercial sustainability by developing a proper business plan.

We are also working closely with EAGC to develop ICTs and strengthen market intelligence systems which help to support the grain trade. EAGC will soon launch a fee-based Web 2 and social media training course using CTA's methodology and training resources. The Council already hosts the Regional Agricultural Trade Intelligence Network, known as RATIN, a web-based system which provides market intelligence from 35 markets in the region and seven border points. This has proved particularly useful for policymakers. During the coming years, efforts will be made to ensure that it serves a wider base of interests.

The EAGC was mandated by the East African Community to harmonise 22 grain and cereal standards. This is a significant achievement, yet very few people in the business, and especially farmers on the ground, understand the standards or are even aware of their existence. CTA would like to see women – who represent some 70% of the traders – and young people become more engaged in the adoption and use of the regional grain standards. To this end, we are supporting the development of information materials and a comprehensive communications strategy.

We believe that other regional grain sector associations can learn from EAGC's experience. CTA is assisting the West African Grain Network to develop a grain information system and we are supporting cross-learning activities with the EAGC on setting up regional grain standards.

We are also working closely with the South African Confederation of Agricultural Unions (SACAU), whose main focus to date has been the development of more inclusive multi-stakeholder commodity platforms at the regional level. In particular, we are providing support to SACAU to help the Grains Network of Southern African Stakeholders (GNSAS) develop and implement a new business plan.

Ultimately, the aim of these activities across Africa is to reach as many smallholder farmers as possible so that they can transform their subsistence operations into profitable businesses through better access to markets. In doing so, they will not only be able to improve their incomes and livelihoods, but ensure Africa's food security for present and future generations.
However, the key challenge is how to strengthen and empower important institutions such as the EAGC that promote private sector engagement and facilitate regional trade so that they become sustainable in the long-term? How can they mobilise large memberships and develop income generating services for their members so they depend less on donor support for their work?
EAGC has made tremendous progress in these areas in the last few years and I hope it will continue to be innovative and ambitious. CTA will continue to partner and support EAGC in its efforts to promote structured grain trade in Africa.

I look forward to an exciting and fruitful 6th African Grain Trade Summit.

Thank you."

Michael Hailu, CTA's director

Resources

Visit the Summit's website

Download the programme

Learn more about CTA's participation at the event