Connecting food value chains in Africa

While being looked at as the global food basket to address future food security challenges, Africa will need tailored AfT support to connect food value chains, both regionally and globally.

Connecting food value chains: boosting economic growth and increasing impacts on poverty reduction in Africa

The 4^th Aid for Trade (AfT) Global Review on 8-10 July 2013 in Geneva, is focusing on “Connecting to Value Chains”, looking at the economic opportunities that trade in value added offers; the constraints that firms in developing, and in particular least-developed countries (LDCs), face in connecting (and moving up) value chains; and how Aid for Trade can assist in this process.

AfT has been increasing steadily since 2005. However, it is only in recent years, after the food crisis of 2008, that attention has shifted to better understanding the political and economic dynamics related to regional agricultural markets and food value chains. AfT has to deal with all sectors of the economy, but evidence has proved that the impact of increased trade on poverty reduction depends on whether trade-induced growth occurs in sectors where a large number of the poor are economically active. In Africa this sector is agriculture, hence the need to enhance AfT in this sector.

The Comprehensive Africa Agriculture Development Programme (CAADP) – see Box – has played a major role in terms of attracting global attention to Africa’s agricultural development as an effective way to respond to global food security. While initially focused on increasing public investment and donor support to public expenditure at country level, CAADP has also led to the realization that a real transformation of Africa’s agriculture will depend on its capacity:

• to develop more efficient agriculture markets and boost intra-Africa trade, and
• to use public resources to leverage private investment, both foreign and domestic.

 Box 2

Unlocking private investment in agriculture– both attracting Foreign Direct Investment (FDI) and promoting domestic investment – is paramount to job creation, the transfer of technologies and know how, and building the capacity of the local private sector. The Grow Africa initiative (1) has been successful in creating solid platforms for engaging private companies, and is now recognized as the main arm for CAADP to facilitate private sector engagement. Other private sector initiatives have been mushrooming around CAADP, including financing mechanisms to support agriculture value chains (2). For such platforms and initiatives to become operational, it is now urgent to provide the enabling conditions for companies to invest, and for African countries to connect their value chains.

The AU Action Plan for Boosting Intra-Africa Trade (APBIT) already provides overall orientation in terms of the intervention areas to boost intra-Africa trade. Numerous initiatives already exist at regional and national level. Many of these have been developed under the AfT umbrella. However, the impact of these initiatives on the agriculture sector and food value chains is often weak due to:

• limited coordination between agriculture and trade institutions in planning and developing coherent national and regional strategies to support agriculture markets and food value chains;
• limited scale and coordination of the blossoming number of initiatives established to catalyse private sector engagement and investment in agriculture, as well as inadequate communication between private sector actors, country and regional partners.

Connecting value chains builds on connecting sectors (3)

The capacity to connect food value chains will depend on the extent to which African countries, with the support of the regional economic communities (RECs), will manage to encourage diversification, increase supply-side capacity and value addition, enhance competitiveness, and improve the business environment and the ability of the local private sector to innovate and take advantage of the opportunities presented.

This calls for a comprehensive approach which considers increasing, diversifying and adding value to agricultural production in synergy with other sectors (e.g. infrastructure, energy, natural resources, trade, etc.). Achieving these synergies is key to streamlining the links between the supply and the demand side, and depends on “connecting the sectors” through their respective policies and planning processes.

This is why the CAADP partners have started to look at building bridges between CAADP and AfT. In addition to promoting policy dialogue, the ambitious objectives of bridging trade and agriculture can be achieved by building synergies between CAADP and AfT implementation structures at regional and country level, as well as by sharpening the focus of AfT on how best to support agricultural markets and value chains based on the regional priorities identified. 

This implies:

• realizing institutional transformation across agriculture and trade institutions to improve coherence of agriculture and trade development plans in defining regional and national priorities for the development of effective agriculture markets and value chains; and
• strengthening the operational capacity of countries and RECs to pool the resources channelled through agriculture and trade institutions and multiple private sector initiatives to target strategic value chains and geographic areas.

The Challenges

A key challenge is that in most countries each sector already “owns” sectoral programmes and processes which are not sufficiently coordinated. The case of LDCs is emblematic to explain the need for enhanced coordination.

The agriculture transformation agenda in LDCs is also driven by CAADP, and builds on the CAADP Compact and Investment Plan (IP) to define the approach and concrete actions to implement it. The CAADP IP offers the basis to identify concrete areas around which partners have a mutual interest in targeting their activities. These areas include providing support to agriculture trade development, and pointing out priority regions and value chains.

On the other hand, the trade development agenda in LDCs is driven by the Enhanced Integrated Framework (EIF) for Trade Related Technical Assistance, and builds on the Diagnostic Trade Integration Study (DTIS) and Action Matrix to identify national trade development priorities to catalyze partners’ support. Such priorities also include agriculture trade development, and target specific value chains. 

When taking a close look at the EIF and CAADP, as sketched in Table 1, remarkable commonalities can be noticed. 

Despite the aim of both processes to promote cross-sectoral coordination through their respective national arrangements, a close look at them suggests that they are actually “parallel” processes, respectively spearheaded by trade and agriculture ministries, as illustrated in Figure 1.

Increased effectiveness of such processes could be achieved by aligning the planning and implementation of the agriculture and trade sector priorities.

Possible solutions

To strengthen coordination and planning capacity across sectors and private sector initiatives, the African Union Commission (AUC) and the New Partnership for Africa's Development (NEPAD) Planning and Coordination Agency (NPCA), in collaboration with the RECs and CAADP Development Partners, have established two complementary platforms:

• the Joint Action Group on Regional Trade and Infrastructure (JAG-RTI) aiming to mobilize coordinated support for the development and implementation of regional CAADP Compacts and Investment Plans (IPs), by pointing out priority interventions for strengthening regional agriculture markets, promoting regional value chains and agricultural trade corridors and improving dialogue and coordination with trade institutions; and
• the Joint Action Group on Private Sector Initiatives (JAG-PSI) aiming to facilitate coordination, complementarities and synergies of CAADP-related private sector initiatives, and to promote focused multi-stakeholder partnerships based on value chains and geographic areas in an effort to reach the scale of investment required for real agriculture transformation. 

The efforts of the AUC and its partners will require further support and AfT to:

• facilitate the overall process of ”bridging” trade and agriculture through the engagement of the RECs and their member states in policy dialogue and the alignment of CAADP IPs with trade development plans; and
• develop and implement projects and programmes at regional and country level drawing on enhanced planning frameworks and increased interaction across sectors.

Regional CAADP Compacts and IPs are currently under development and may become the instruments for the RECs to identify and operationalize the synergies among the different sectors, coordinate their respective initiatives, prioritize related actions, engage the different stakeholders’ groups (i.e. member states, farmers’ organizations, private sector, development partners, South-South partners, etc.) and mobilize coordinated support for implementation.

National CAADP Compacts and IPs can be connected to parallel processes for the making of trade development plans, including the EIF in LDCs, to ensure consistent planning and integrated actions.

Supporting RECs and member states to develop coherent regional/national strategies for the development of effective agriculture markets and value chains will also require capacity building for agriculture and trade institutions to improve their awareness and understanding of the development priorities of each sector and of the sectoral processes established to support them.

Eleonora Canigiani is Trade & Market Access Officer at Global Mechanisms. Susan Bingi is Trade and Regional Advisor, East and Southern Africa at Global Mechanisms.

Footnotes
1. http://growafrica.com/
2. Private sector initiatives attached to CAADP include among others African Agribusiness and Agroindustry Development Initiative (3ADI), Making Finance Work for Africa (MFW4A), African Facility for Inclusive Markets (AFIM). Multi-donor Trust Funds and private equity funds include e.g. Global Agriculture and Food Security Programme (GAFSP), African Agriculture Fund (AAF), Agvance Africa, and others.
3. For further reading on connecting sectors see also GM-ECDPM policy brief on “Mobilizing Aid for Trade to Enhance CAADP Regional Trade and Private Sector Initiatives”, February 2013, www.ecdpm.org/bn47

This article was published in Great Insights Volume 2, Issue 5 (July-August 2013)