Improving Market Access to the Poor in Africa Assefa Admassie Ethiopian Economic Policy Research Institute.
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Improving Market Access to the Poor in Africa Assefa Admassie Ethiopian Economic Policy Research Institute
1. Introduction Global progress has been made in meeting the MDG target of reducing poverty by half by 2015. But, Sub-Saharan Africa is clearly not going to achieve the target. New pathways and actions are required to reach out the extremely poor and hungry people in Sub Saharan Africa. Improving market access and connecting the poor to markets could be one such strategy.
1. Introduction…Cont Efficiently operating input and output markets provide opportunities for the poor to improve their incomes and livelihoods. Well functioning markets helps in: modernizing agricultural production, creating economic opportunities, improving food security, motivating farmers to acquire and use productivity increasing inputs,
1. Introduction … Cont. assuring effective vertical integration and coordination in input supply, credit and output marketing, encouraging farmers to specialize in productions where they have competitive advantage. Nevertheless, many farmers in Africa don’t participate in the market and produce largely for their own consumption. Why ?
2. Major Challenges Hindering Market Access Participation in the market - both costly and risky. Marketing costs are high due to: poor transportation and communication networks remoteness of production activities and dependence on uncertain and seasonal environment and production process Very small and thin markets Weak regulatory and support policies
2. Major Challenges…. Cont. Production risks are high: Producing for markets might require intensive and costly input use, Growing a new variety involves more uncertainty than growing a staple food crop, Returns to commercial crops take time, Costs of improved technologies high Unavailability of improved technologies.
2. Major Challenges ….Cont. Marketing risk is also high: Weak input and output markets, High price volatility, Limited purchasing power, limited capacity for agro processing, Limited access to market information, Weak bargaining power, Absence of standards and grades, Low industrial base.
3. Some Policy Actions to Improve Market Access New and increasing market opportunities A global shift in demand towards high value commodities, Growing urban market. Policy interventions required to enable poor farmers to tap opportunities and improve their participation in the market.
3. Policy Actions … Cont. Improving Policy Environment Overregulation increases marketing costs, Unpredictable and ad hoc public intervention in markets leads to uncertainties. Improving Market Infrastructure Improved transport and communication infrastructure, Investments in market sheds and collection points, Investments in storage facilities.
3 Policy Actions …. Cont. Developing Market Institutions Stable and robust institutions: reduce coordination costs and risks, enforce contracts, Improve participation and empowerment, Reduce vulnerability to market risks.
3. Policy Actions … Cont. Providing Market Information Unable to respond to market signals, Weak bargaining power, Risk premium increases, Market information provided by radio and newspaper. New opportunities - the Internet and mobile phones.
3. Policy Actions.. Cont. Supporting Framers Organizations Capacity of farmers strengthened Marketing costs reduced Vulnerability of farmers reduced, Bargaining power improved Economies of scale optimized. Providing Advisory Services Help to improve farmers production and marketing strategies
3. Policy Actions … Cont. Improving Risk Management Systems Risk-management instruments and greater price security. Crop/weather insurance mechanisms Development of Commodity exchange systems warehouse receipt system, and Food- security reserve systems.
3. Policy Actions.. Cont. Other Potential Policy Interventions Promoting contract farming Promoting private sector development Enhancing intra-regional trade Enhancing the developmental role of the state
4. Conclusions Framers in Africa produce largely for their own consumption due to weak market opportunities. Urgent interventions needed to improve market access and reduce costs and risks. Support for farmers in the form of price support and/or subsidies for inputs, outputs or credit market Improved market coordination and institutional setups Linking technological development with market approach