Concretely, this means that the agricultural product is no longer a basic ingredient or commodity, but a complex good, embedding a range of services (such as quality, control logistics, storage facilities, packaging, insurance, distribution, and so on) that contribute to the production technology that enhances the quality of the product. These examples also show that in addition to value addition and higher productivity, participation in value chains can facilitate the shift to activities that are based on new, nonroutine tasks that require a high level of interpersonal interactions, networking, and technological innovation. Therefore, removing the barriers at different points along the value chain and integrating foreign know-how and technology can have a profound, transformative impact on the structure of the agriculture sector at the production, processing, and distribution levels.

# **_Objective_**

Against this background, the objective of our novel exploratory analysis is to invigorate and deepen the discussion about _transformational productivity growth and upgrading within agriculture in Africa_ and _the role of value chains and contractual arrangements in supporting such structural transformation_ .

This report adopts a broader interpretation of _structural transformation_ as opposed to traditional views that emphasize the reallocation of production factors or resources between sectors. The traditional view considers structural change to be fundamentally dependent on modifications in the relative importance of different sectors over time, as measured by their share of output or employment. However, more recent literature on structural transformation stresses the role that productivity growth within sectors can play and the potential of reallocating factors of production between firms within sectors. This can be achieved through (i) _product upgrading_ —moving to higher value-added products, and (ii) _process upgrading_ —specializing in the tasks and activities of comparative advantage and putting more technology, know-how, and auxiliary services into these tasks that will ultimately translate into value addition and higher productivity.

The forms of structural adjustment most closely investigated in this work are functional upgrading and process upgrading. This does not exclude transitioning over time from an agricultural to a services economy or _intersectoral upgrading_ (moving across value chains within agriculture). Nevertheless, the focus chosen allows us to assess closely how African agricultural producers embrace higher value-added production or more productive activities in the same sector or type of commodity or in other sectors/commodities, and how they make the transition from informal production to formal activities with the assistance of more technology, services, and know-how, as well as better linkages to input and output markets.

Focusing on maize, cassava, and sorghum in Ghana, Kenya, and Zambia, the analysis aims to understand whether the involvement of farmers in value chains supports structural transformation within the agriculture sector. The analysis looks at farmers who are suppliers to value chains as well as nonparticipants and dropouts, to shed light on policies that can support farmers to upgrade to higher-value intermediate and/or final outputs and earn a higher and more stable income. The analysis is based on a survey covering 3,935 farmers, 60 aggregators, and 56 buyers, and a pilot survey covering 654 farm households, 41 key informants such as processors and brewers, and eight stakeholders in the three countries.

In our framework, we look at complex production processes involving a variety of forms of participation, ranging from farmers’ access to inputs and services (such as fertilizers, extension services, market linkages, packing material, and so forth) from lead firms or another international 5