My New Placement
I am one week in to my new placement in Ghana and I am very excited. It is an agricultural initiative called ADVANCE. One of the things that I am particularly interested in is the fact that it is a private sector based approach, which I see as having the potential to teach farmers and agribusinesses “how to fish” as opposed to “giving them fish”. To me this presents an opportunity to push some sustainable changes that do not disappear as soon as the project ends.
Why agriculture?
This is an important first question to address. Across rural sub-Saharan Africa, agriculture is by far the primary economic activity. It can be seen as logical, or even obvious to some. Farming produces food. Food is important. The funny thing is, growing up in Canada in an industrialized, arguably overdeveloped country, many lose touch with the reality of the importance of farming. I am guilty myself. I was raised with little experience on farms and developed a peculiar notion that food comes from the grocery store. Really, this is not very different from believing that a stork delivers babies. My ignorance blocked me from perceiving the economic reality of my country. I think that much fewer rural African kids have a disconnection to how food gets to their plate. In rural Africa, agriculture is a way of life. It is how most families meet their basic needs.
Rice Farmers in Akuse, Ghana
Lack of economic opportunity exists in urban settings as well. Lacks of opportunities are also attributed to other barriers as well such as access to health services, safe drinking water, infrastructure and many others. For me, I see hope in agriculture. Agriculture is a strong asset for rural Africa. I believe it is an asset that can and will be built.
The ADVANCE Project in Ghana
The ADVANCE (Agriculture Development Value Chain Enhancement) project is a $30M project that aims to increase the economic productivity and competitiveness of Ghana’s agricultural sector. The project works in nine of Ghana’s ten regions (it will operate in all ten by next year). It seeks to achieve its aims by working in six main commodities; the staple crops of maize, rice and soyabean as well as fruits such as pineapple, mango and citrus fruits. The project uses a market facilitation approach to achieve its goals. There are seven field offices throughout the country with different implementing partners. To understand more about agriculture value chains and market facilitation, read on…
Agriculture Value Chains 101
A value chain is an economic term that is related to the concept of a supply chain.
A supply chain is the path of economic production, from raw materials to consumer. In agriculture, it starts with inputs such as seeds and sometimes fertilizer, along with soil and water. The farmer then does his work and transforms these initial products into food. This food is then bulked and transported and sold to consumers. The following is a very oversimplified Agriculture supply chain…
Simplified Supply Chain
When we use the term value chain, it is because we will be talking about how much value each actor in the chain attributes to the chain’s overall production. This value is not measured with how valuable any individuals perceive that work, but how valuable the market environment perceives that work.
An Example of a Value Chain
Let’s look at a totally made up example. We will introduce some characters. Their names appear in the box that corresponds to the economic activity that they carry out.
At the Supermarket there are pomegranate juice is sold for Twenty eight shillings the store usually sells about one hundred boxes of juice a month. Everyone in the supply chain makes some money when you buy a pomegranate.
One day, in the store you get curious and ask the store manager how all this stuff gets here and who has their livelihood related to pomegranates. His name is Kamwendo and he is a really nice guy so he invites you in for a glass of milk and explains.
“Actually I know nine other people that work in the pomegranate industry, let me tell you about them…”
“Hideki and Ayano each have seed operations where they acquire, refine and breed the best seeds. After they balance their books in the big scheme of things, their profit is about three Shillings for every pomegranate sold. They compete with one another but they both do great work.
All the farm guys work really hard. It’s funny to think that they are the guys that do the magic but they make less money than anybody in the industry in this town. I don’t buy directly from them. There are a lot of pomegranate farmers in this community which is starting to attract a lot of attention from other places which could be great for the community. For the time being, the high number of farmers does two things:
– One, having to outcompete each other drives the price down.
– Two, having to share the market means they each only get a smaller portion of the sales.
Diego and Hector are business people like me. Diego was on the scene first, pressing pomegranates into juice using this old device that he got from his grandpa. It took him a lot longer in those days, and he sure charged a lot more for his product. Now Hector is a really innovative mind, he found a way to speed up the process and started undercutting Diego a little. I was happy when the price came down, when it did, I sold it for cheaper in the store. People started drinking it a lot more and sales really rose. Hector coming on the scene really helped the local pomegranate industry if you ask me.
As for me, I do make a lot of money and I kind of have a little monopoly going on here in town. Everyone gets their groceries from me. You know what though. It was really hard setting up this business and it was a really big risk. I had to borrow money from three family members to get it off the ground. I love this community and I charge reasonable prices. If I didn’t, someone else would come along and start up a competing grocery store in a second.”
A value chain showing actors and their value add
Market Facilitation 101
Market facilitation is a value chain intervention approach that focuses on helping develop relationships between actors as opposed to replacing or overlapping with actors.
An example of an Intervention that is not market facilitation…
In the above example, many people believe that the farmers are undervalued. A foreign NGO promoting farmer empowerment comes in to town; they have received a big grant from an international donor to help farmers with little opportunity. They arrive and start providing seeds to farmers for half of the typical price thinking that a temporary increase in farmer productivity will earn them more cash and make them more capable to farm as a business in the future if they earn some extra cash.
An intervention that replaces a value chain actor
As time goes on…
– Farmers increase production.
– The processors start paying less for pomegranate, the price of juice that Kamwendo sources it for remains the same.
– Hector and Maria start earning more for their activities
– The share of seed sales is by and large taken away from Hideki and Ayano, sales plummet, they eventually go out of business.
– The NGO leaves once their term is completed. The seed suppliers are out of business and the value chain is worse off than it was in the beginning.
An example of an intervention that is market facilitation…
A market facilitator meets individually with Dan and Shirley (farmers), Diego (processor) and Hideki (input supplier) to assess the barriers to their businesses expanding.
– Diego says that he can prosper if the farmers produce more
– The farmers say that they can produce more but the timing of their payment from the processor is too late every season to purchase inputs for the following season, thus hindering their growth.
– Hideki has a reasonably stocked store but cannot afford to discount his products, he would like to sell more but this will only happen if the farmers grow more.
A market facilitator fosters relationships without entering the value chain
The market facilitator sees that if these actors could empathize with each other’s troubles they could work something that could benefit them all. He briefs them all on his findings and invites them all out to lunch. At the meeting, Diego agree to pre-finance inputs from Hideki’s shop for the farmers that will be taken off of the transactions after harvest as long as they promise to sell an agreed amount of produce to him.
As time goes on…
– Hideki sells more inputs thanks to Diego’s farmer loan
– The farmers produce higher quantities with their increased amount of inputs
– Diego purchases and produces much more juice than the year before and starts to outcompete Maria
– Maria hears what has happened and approaches Ayano and the remaining farmers and offers an even better deal so that they will cooperate with her instead of Diego.
– The value chain produces more and everyone’s profit margin increases after three years, although Maria’s profits actually fell after Diego’s first loans.
– The Market facilitator leaves the community having facilitated sustainable progress
This is obviously an oversimplified example of the complexities of relations between value chain actors and the work that a market facilitator must carry out but it serves to show a general overview of how market facilitations should work. It shows how market facilitation is sustainable, whereas an organization temporarily inserting itself as a value chain actor is usually unsustainable.
Kulemela 