Agro-Allied Industrialization and Regional Value Chains Ousmane Badiane, Director for Africa

ECONOMIC GROWTH AND DEMAND OUTLOOK Most Countries Will Reach Middle Income Status In 2030 All Countries Will Reach Middle Income Status By 2050 Source: Sulser T. B. et al. 2015.

ECONOMIC GROWTH AND DEMAND OUTLOOK Intraregional Trade By 2025 Under Current Trends Source: Badiane et al. 2014

ECONOMIC GROWTH AND DEMAND OUTLOOK Regional Trade In Staples: Major Source of Future Income Growth Increase in Demand and Incomes in Billion US$ + $100B = Growth of staple food demand in urban markets in Africa + $30B = Potential income for smallholder farmers IFPRI/Badiane

THE RISE OF PROCESSED FOODS ECONOMIC GROWTH AND DEMAND OUTLOOK THE RISE OF PROCESSED FOODS Projected Demand Growth 2010 – 2014 (Estimated Purchased Food Budget Share in 2040) UNPROCESSED PROCESSED LOW VALUE ADDED HIGH VALUE Non- Perishable 4x (8%) 5.5x (17%) 7x (23%) 6.5x (20%) 8X (18%) 10X (15%) Source: Tschirley, D et al. 2014.

RAPDIDLY TRANSFORMING REGIONAL VALUE CHAINS 1. TRADITIONAL MILLET VALUE IN SENEGAL

RAPDIDLY TRANSFORMING REGIONAL VALUE CHAINS 2. MILLET BASED MEALS

RAPDIDLY TRANSFORMING REGIONAL VALUE CHAINS 3. THE NEW MILLET VALUE CHAIN HOME BASED MILLET PROCESSING READY TO COOK MILLET PRODCUTS ON THE SHELF

RAPDIDLY TRANSFORMING REGIONAL VALUE CHAINS 3. THE NEW MILLET VALUE CHAIN HOME BASED MILLET PROCESSING READY TO COOK MILLET PRODCUTS ON THE SHELF TRADITIONAL MILLET BASED MEALS

RAPDIDLY TRANSFORMING REGIONAL VALUE CHAINS 3. THE NEW MILLET VALUE CHAIN HOME BASED MILLET PROCESSING READY TO COOK MILLET PRODCUTS ON THE SHELF TRADITIONAL MILLET BASED MEALS READY TO EAT MILLET MEALS ON THE SHELF

EMERGING AGRO-ALLIED INDUSTRIAL SECTOR Profitability, Growth And Maturation Current characteristics of regional agro-allied industries Rising number of firms producing the same low quality, often imitated goods # Time Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)

EMERGING AGRO-ALLIED INDUSTRIAL SECTOR Profitability, Growth And Maturation Current characteristics of regional agro-allied industries Rising number of firms producing the same low quality, often imitated goods As new entrants copy same products, profitability declines for everyone No capacity to invest and innovate; stifling firm growth and maturation $ # Time Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)

AGRO-ALLIED INDUSTRIALIZATION STRATEGIES Two Key Questions How to bend the profitability curve and escape from low and declining profits? How to promote enterprise growth through consolidation and specialization? $ # Time Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)

AGRO-ALLIED INDUSTRIALIZATION STRATEGIES Three Priority Areas for Policy and Investment Process and product innovation: Vocational training & Technology acquisition Market development: Trade & competition policy, quality & standards Cost of services and Infrastructure access: Power, Telecom, Transport $ # Time Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)

AGRO-ALLIED INDUSTRIALIZATION STRATEGIES Three Priority Areas for Policy and Investment Process and product innovation: Vocational training & Technology acquisition Market development: Trade & competition policy, quality & standards Cost of services and Infrastructure access: Power, Telecom, Transport $ # Time Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)

A. SKILLS DEVELOPMENT FOR TRANSFORMING VALUE CHAINS Absence of professional & vocational training opportunities means: No skill upgrading for existing smallholder farmers No skill development for emerging value chain professions Machine operations and maintenance Processing technology skills Product and process innovations Management and sales Packaging and distribution Food quality and safety Page <#>

AGRO-ALLIED INDUSTRIALIZATION STRATEGIES Three Priority Areas for Policy and Investment Process and product innovation: Vocational training & Technology acquisition Market development: Trade & competition policy, quality & standards Cost of services and Infrastructure access: Power, Telecom, Transport $ # Time Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)

B. TRADE & COMPETITION POLICIES FOR TRANSFORMING VALUE CHAINS Three policy options for competitive domestic value chains in regional markets Notes: Notes: * COMESA+Tanzania. Figures on top of bars indicate cumulative increases in regional export supply in 1000 mt. Source: Badiane et al. 2014

AGRO-ALLIED INDUSTRIALIZATION STRATEGIES Three Priority Areas for Policy and Investment Process and product innovation: Vocational training & Technology acquisition Market development: Trade & competition policy, quality & standards Cost of services and Infrastructure access: Power, Telecom, Transport $ # Time Source: Badiane, O. and M. McMillan. 2016; Based on Otsuka and Sonobe (2011)

C. INFRASTRUCDTURE CHALLENGES AND OPPORTUNITIES Harness ICT for Quick Gains Africa’s infrastructure gap is lowest in the Telecom Sector While investing in power and transport infrastructure Tap into Modern ICT to leapfrog Torero, M. (2014)

USING ICT TO INNOVATE, CUT COST AND GO TO SCALE How ICT can be leveraged for smallholder agriculture Lower cost of overcoming physical and institutional obstacles Bridge the distance to millions of dispersed smallholders Extend the reach of limited technical staff Lower cost of access to technology and services Tap into global knowledge networks Enable self-learning and peer-to-peer learning Link smallholders to other value chain operators Traders, exporters, processors Financial services providers Technology services providers Page <#>

THE CHALLENGE: TAKING ICT SOLUTIONS TO SCALE Current ICT tools target…. …. an isolated business problem for a separate segment of a given value chain often in specific geographies They provide solutions that are not replicable nor scalable. Needed are integrated solutions that digitize all major interfaces between smallholders and other value chain actors.

References Badiane, O. and T. Makombe. 2016. Beyond a Middle Income Africa: Transforming African Economies for Sustained Growth with Rising Employment and Incomes. ReSAKSS Annual Trends and Outlook Report. Badiane, O. and M. McMillan. 2016. Economic Transformation in Africa: Patterns, Drivers and Implications for Future Growth Strategies. In Badiane, O. and T. Makombe (Eds.). Beyond a Middle Income Africa: Transforming African Economies for Sustained Growth with Rising Employment and Incomes. ReSAKSS Annual Trends and Outlook Report. Badiane, O., S. Odjo and S. Jemaneh. 2014. More resilient Domestic Food Markets through Regional Trade. In Badiane, O., T. Makombe, and G. Bahiigwa (Eds.): Promoting Agricultural Trade to Enhancing Resilience in Africa. Annual Trends and Outlook Report. Regional Strategic Analysis and Knowledge Support Systems. Washington DC. PP: 38-53. Badiane, O., T. Makombe, and G. Bahiigwa. 2014. Promoting Agricultural Trade to Enhancing Resilience in Africa. Annual Trends and Outlook Report. Regional Strategic Analysis and Knowledge Support Systems. Washington DC. Otsuka, K. and T. Sonobe. 2011. A Cluster-based Industrial Development Policy for Low-income Countries. Policy Research Working Paper No. 5073. World Bank. Washington DC. Sulser, T. B.; D. Mason-D’Croz; S. Islam; S. Robinson; K. Wiebe and M. Rosegrant. 2016. Africa in the Global Agricultural Economy in 2030 and 2050. In Badiane, O. and T. Makombe (Eds.). Beyond a Middle Income Africa: Transforming African Economies for Sustained Growth with Rising Employment and Incomes. ReSAKSS Annual Trends and Outlook Report. Torero, M. 2014. Infrastructure Challenges and Opportunities for Africa South of the Sahara. In Badiane, O. and T. Makombe (Eds.). Beyond a Middle Income Africa: Transforming African Economies for Sustained Growth with Rising Employment and Incomes. ReSAKSS Annual Trends and Outlook Report. Tschirley, D; T. Reardon; M. Dolislager and J. Snyder. 2014. Presentation at CAADP Annual Trends Outlook Report Methodology Workshop: Towards a Middle Income Africa: Long Term Growth Outlook and Strategies. IFPRI Washington DC. December 12.

Thank you!