Business for Development 2008:
Promoting Commercial
Agriculture in Africa
27th May 2008
FASID Tokyo
Denise Wolter

1Promoting Commercial Agriculture
What Do We Mean?

Source: OECD Development Centre 2008.

2Presentation
1. World Agricultural Trade andAfrica
2. Mapping Big Business:
Agro-Food Enterprises in Africa
3. Aid for Trade and African
Agriculture
4. Lessons from Five Countries:
Ghana, Mali, Senegal, Tanzania,Zambia
3World Agricultural Trade and Africa
A Few Countries Share a Small Pie• Africa has lost its market share in international tradesince the mid-1980s¾ The share of African products in world agricultural imports declined from
5.4 per cent (1985) to 3.2 per cent (2006).

• Three countries account for more than 50% of Africa’sagricultural exports¾ Over 2002-2005, South Africa, Côte d’Ivoire and Ghana accounted for 56
per cent of the total exports of SSA• Bulk commodities continue to dominate, despitesome growth in horticulture¾ In 2005, Africa’s major export products were cocoa, cotton, wine, sugar,
tobacco and tea
4World Agricultural Trade and Africa
Product Mix Exported from Africa
Share of Exports by Product Group(1985 - 2006)

Percentage Share

Declining
Bulk Commodities

Bulk Commodities–Horticulture
Processed
Semiprocessed

Emerging
Horticulture

Source: United Nations / Comtrade.

5World Agricultural Trade and Africa
Missing the Train?
• World agricultural trade is no longer dominated bybulk commodities¾ Global agro-food trade has moved downstream along the value
chains• Africa has found it difficult to move into processed,
higher value products¾ No SSA country is among the world’s leading exporters ofprocessed goods• China and India: New markets for Africa?
¾ Already today, China and India account for 7 per cent of Africa’s
agricultural exports
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Mapping Big Business in Africa:
Foreign and Domestic Agro-Food Firms

Number of Companies

Spread of Agro-food Enterprises
across Africa

Source: OECD Development Centre 2008.
Note: The number of companies present in each region may include
multiple subsidiaries of the same company.

•Southern Africa leads thefield•

North Africa shows alarge presence of MNCs
also thanks to ties andproximity to the EU•

Central Africa appears tobe the least attractive
region so far

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Mapping Big Business in Africa:
Distribution of African Agro-Food Enterprises•

Agro-food firms among African Top 500•

Country headquarters and subsidiaries

Source: OECD Development Centre 2008.

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Mapping Big Agro-Business in Africa:
Facts and Trends (1)• Few hubs for large agro-food firms¾ South Africa and Côte d’Ivoire host most company headquarters• Market size matters¾ Nigeria’s population and sheer market size are appealing• African firms move beyond borders¾ South Africa’s agro-food firms spread to neighbouring countries• Company presence does not guarantee food security¾ Ghana attracts companies from other countries but relies on foodimports
9Mapping Big Agro-Business in Africa:
Facts and Trends (2)• Beverage companies have the most developedbusiness network¾ The beverage segment is the most integrated between multinationalfirms and African companies• Input products: insufficient demand => insufficient
supply¾ Low fertilizer usage means too small a market for MNCs

• Regional integration could foster agro-food business¾ Firms struggle with the limited movement of goods and people aswell as differing quality and standards which increase production
and transaction costs

10Aid for Trade (AfT)
Some Stylised Facts• Africa received 1/3 of global AfT¾ Over the 2002-05 period total AfT to Africa amounted to $ 6.1 bn• Top 3 donors are: EU, World Bank and AfDB
¾ They provided half of total AfT to Africa during the same period• Infrastructure investments received most of the funds¾ Trade-related infrastructure received $ 3.1 bn, followed byproductive capacity building ($ 2.7 bn) and trade policy andregulations ($ 0.2 bn)
Where is the link between Aid for Tradeand African agriculture?
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Aid for Trade and African Agriculture
Defining the Links
Productive Capacity Building$2.7 billion(44%)

Trade Related Infrastructure$3.1 billion(52%)$6.1billion

Trade Policy & Regulations$0.2 billion (4%)

Source: OECD, DAC/CRS.

Agriculture$1.5 billion (74%)

Agro & Forest Industries$0.03 billion (1%)

Rural Development$0.5 billion (25%)$2.03billion• Broad definition of aid toagriculture
12Aid to Agriculture in Africa
Making its Way back on the Agenda• Aid to agriculture declined in the past 15 years¾ Aid to agriculture decreased in absolute terms from $ 2.6 bn to $ 2.0 bn
and as a share of ODA (from 11 to 5.4 per cent)• Why did aid to agriculture decline?
¾ 1990s: A shift to structural adjustment lending and limited success ofaid to agriculture¾ More ODA flowed to social infrastructure and services due to lower
transaction costs and link to Millennium Development Goals• But: Aid to agriculture is back on the agenda!
¾ African countries have committed to increase spending in theframework of NEPAD/CAADP¾ More international support to agriculture has been promised

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Promoting Commercial Agriculture
Lessons from Five Countries• Ghana, Mali, Senegal, Tanzania and Zambia• Transformation of the agricultural sector has yet tooccur, despite political commitment• Among the largest recipients of aid to agriculture¾ Between 2002-2005, the five countries received over 20 per cent oftotal commitments of aid to agriculture in Africa• Donors are shifting towards promoting agribusiness• Interesting donor interventions¾ Zambia: pioneer of a sector investment programme in agriculture¾ Tanzania: moving towards a sector-wide approach¾ Ghana, Mali, Senegal: agribusiness promotion in horticulture14Lessons from Five Countries
Aid to Agriculture – Back on the Agenda?
Aid to Agriculture in the Five Countries

USD Million(1980 - 2006)

Source: OECD DAC, CRS Database.

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Lessons from Five Countries
Productivity of Food Crops Has Been Stagnant(B) Roots and Tubers Yields(A) Cereals Yields

AfricaKg per hectare

Kg per hectare

Southeast Asia
Southeast Asia

Five Countries

AfricaFive Countries

Source: ProdSTAT, FAO Statistics Division.

16Lessons from Five Countries
Food Crop Production Is Far Below Potential• Example of Zambia:¾ Only 15 per cent of arable land is cultivated¾ Only 10 per cent of suitable land is irrigated¾ 40 per cent of households active in subsistence agriculture• Traditional smallholder production dominates¾ Rain-fed agriculture => dependent on weather conditions¾ Little acreage => no economies of scale¾ Limited intensification => low yields per hectare• Dualistic structure¾ Small commercial sector, large number of subsistence farmers
17Lessons from Five Countries
Positive Developments in the Export Sector• Emerging horticulture in Ghana, Senegal, Mali andZambia¾ In Tanzania horticulture is still very small¾ Donor support has been crucial, especially in Senegal; lately in Ghana• Success due to contract farming schemes¾ Costly, but helps to overcome the scale problem¾ Private sector involvement helps to ensure sustainability¾ Risk: can create new dependencies• Is it possible to extend the models to food crops?
– First pilot projects launched for example in Ghana
18Promoting Commercial Agriculture
Areas Where Governments Could Do Better•Financial resources are below the CAADP target¾ Mali is the only country where the government budget for agriculture isabove 10 per cent•Too little is spent on R&D and extension¾ In the five countries, resources have declined in the past 3 decades¾ R&D and extension have been crucial for the green revolution in Asia

•Inter-Ministerial coordination needs to be improved¾ Responsibilities are split between various ministries: trade,infrastructure, environment, rural development, agriculture¾ No coherent strategy on how to promote private sector development inagriculture•Strengthening public sector capacity is crucial!

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Lessons from Five Countries
Areas Where Donors Could Do Better• Donor coordination should be improved¾ Coordination happens only on an ad hoc basis¾ Ghana, Mali, Tanzania register over 100 projects which can beclassified as promoting private sector development in agriculture¾ 12 donors are active in the Malian mango sector• Positive: Value chain approach is becoming a standard¾ Trying to tackle several bottlenecks may lead to greater coordination¾ Commercial approach brings sustainability into focus• Sector-wide approaches in agriculture still remain achallenge
20Promoting Commercial Agriculture
Ways Forward• Emerging horticulture needs to be sustained¾ Outgrower schemes have proven to be successful as amechanism to connect smallholders to the market and realise
economies of scale• Local food industries need to be developed¾ Food security problems in some African countries, due tounderdeveloped marketing infrastructure (transport andinformation)¾ Agro-processing is in its infancy, despite sizable local andregional markets

Commercial potential of food crops
needs to be recognised.

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Thank you!
For more information and the five case studies:www.oecd.org/dev/publications/businessfordevelopment22

African Agriculture 2008
The Agro-Food Supply Chain
AGRICULTURALINPUTSTop 3 foreign firms:
Basf
Dow ChemicalBayerTop 3 African firms:
SASOL
AECI
Omnia Holdings

FOOD PROCESSORSa
Top 3 foreign firms:
Nestlé
UnileverArcher Daniels Midland
Top 3 African firms:
ONA Group
Tiger Brands
Cévital
BEVERAGE
Top 3 foreign firms:
Coca-Cola
InBev
Anheuser-Busch

FOOD RETAILERS/DISTRIBUTORSc
Top 3 foreign firms:
CarrefourMetro(not available)
Top 3 African firms:
BidVest Group
Pick' n Pay Stores
Massmart Holdings

Top 3 African firms:
SAB Miller South Africa
Distell Group
Nigerian Breweries
FOOD SERVICESbTOBACCOTop 3 foreign firms:
Altria GroupBritish American Tobacco
Japan Tobacco
Top 3 African firms:
Altadis Maroc
Eastern Co.
SNTA

Source: OECD Development Centre (2008) based on Fortune Global 500 (2007) and Jeune Afrique (2007).

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