enabling environments for agribusiness and agro-industry development in africa

158 Pages·2009·1.58 MB·English

ENABLING ENVIRONMENTS
FOR AGRIBUSINESS
AND AGRO-INDUSTRY DEVELOPMENT
IN AFRICA

Proceedings of a FAO Workshop
ENABLING ENVIRONMENTS
FOR AGRIBUSINESS
AND AGRO-INDUSTRY DEVELOPMENT
IN AFRICA

Proceedings of a FAO Workshop
Accra, Ghana
8-10 October 2007

Edited by:

Alexandra Röttger
Agribusiness Economist

Carlos A. Da Silva
Agribusiness Economist

Agricultural Management, Marketing and Finance Service (AGSF)
Rural Infrastructure and Agro-Industries Division

FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS
Rome, 2008
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© FAO 2008
Preface
After many years of near stagnation, Africa is beginning to experience an era of renewed
economic growth. In contrast with the general situation in the 1990s, conflicts have mostly
subsided, economic performance has improved and some countries have emerged as fast growing
economies. In recent years, 24 African countries have had average growth rates of above 5
percent. Growth in sub-Saharan Africa (SSA), which averaged 2.4 percent in the 1990s, rose
increasingly over the last decade, and improved macroeconomic performance has been observed
with respect to growth rates, exports, imports, and value adding industries.

Yet, despite these recent positive trends, the African continent still faces many development
challenges. Notwithstanding the fact that poverty has diminished in some countries, more than
40 percent of the population of SSA still lives with less than a dollar a day. The Millennium
Development Goal (MDG) to reduce the number of poor by 50 percent for the year 2015 is not
likely to be achieved. Deficiencies in infrastructure persist, governance problems remain serious
in a number of countries and as a consequence, private investors, both domestic and foreign, by
and large remain reluctant to invest. This is particularly true in sectors where the risk / return
ratios are not as favourable as those in such areas as natural resources or services.

Africa continues to trail most developing regions in indicators of business climates such as
starting a business, registering property, trading across borders and accessing credit. Other
fundamental obstacles to private sector development remain: the weak market institutions, the
low technical capacity of firms, the low skills of management and workers and the size of
markets. The challenge ahead is the promotion of inclusive and equitable economic growth and
within this context, agro-industries and agribusiness have an important role to play in Africa, as
countries in the region are predominantly agricultural-based economies.

The existence of a proper business climate, or an enabling environment where enterprises can
initiate and prosper, is an essential pre-requisite for economic development. As revealed by the
growing amount of evidence on cross-country assessments of business climate, proper policies,
institutions and services have enabled numerous countries to successfully promote investments,
attract capital and engender economic growth. Yet, even though the essential elements that
constitute an enabling environment for business investments are cross-cutting, non-sector
specific, there are particularities in certain economic sectors that make it desirable to differentiate
their nature and extent. Agribusiness and agro-industrial sectors, in particular, have not had their
peculiar characteristics sufficiently examined in traditional assessments of business climates.

In order to address this need, the Rural Infrastructure and Agro-Industries Division (AGS) of the
Food and Agriculture Organization of the United Nations (FAO) conducted a series of cross-
country assessments of enabling environments for agribusiness and agro-industry development in
four regions of the world, namely Eastern Europe, Latin America, Asia and Africa. The
objectives were to identify, characterize and assess the set of policies, institutions and support
services that form the “agro-based” business climate in selected countries. This was carried out to
identify lessons and best practices from induced changes in policies, institutions and support
services that have led to increased investments and improved competitive performance in specific
agribusiness and agro-industry subsectors.

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This document presents a synthesis of the work that took place during the African session of the
series of international workshops. The event was held in Accra, Ghana, from October 8 to 10,
2007, under the auspices of AGS, FAO, Rome and FAO’s Regional Office for Africa (RAP).

It is hoped that the results of the presentations and debates that took place during the three day
event can serve as a reference for activities in support of assessments and reforms of enabling
environments, as a way to promote investments in and favour the competitiveness of
agribusiness and agro-industrial enterprises.
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Contents
PREFACE iii
ACKNOWLEDGEMENTS 1
ACRONYMS 2
SYNTHESIS REPORT OF THE WORKSHOP 5
Workshop summary 5
Plenary country papers on enabling environments for agribusiness
and agro-industry development 7
Plenary papers on special issues in African agribusiness and agro-industry 13
Round table discussions 25
FULL COUNTRY PAPERS 30
The Gambia 30
Ghana 46
Kenya 76
Mozambique 106
The United Republic of Tanzania 118
ANNEX I: LIST OF PARTICIPANTS 145
ANNEX II: WORKSHOP PROGRAMME 147

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List of figures
Figure 1. Priority rankings: Legal and regulatory frameworks 28
Figure 2. Priority rankings: Public-private cooperation and agro-specific issues 28
Figure 3. Production indices of food and beverage industries,
1995 – 2006 (1997=100) 63
Figure 4. Total volume of non-bank financial institutions and rural/ community
bank credit allocations, 2001 – 2006 66
Figure 5. Kenya’s agro-industrial structure 77
Figure 6. The most problematic factors for doing business in Kenya 85
Figure 7. Corruption Perception Index (CPI), 2007 86
Figure 8. Bribe requests by public agency or service, as a percantage of firms
that used the service 86
Figure 9. Ranking Kenyan transport constraint perception against other countries 88
Figure A. Rail transportation 103

List of tables
Table 1: Average applied tariff rates by industry (percent) 36
Table 2: Selected Competitiveness Indicators - The Gambia & other
African countries, 2006 40
Table 3: The structure of sectoral lending (Percent of total new loans) 41
Table 4: Percentage distribution of respondents in national survey who sell farm
produce through the open market 50
Table 5: Top ten non-traditional exports, 2005 – 2006 61
Table 6: Top ten non-traditional agricultural exports, 2005 - 2006 61
Table 7: Major sources of micro-loans in Ghana 67
Table 8: Comparison of Kenya’s financial system in the region 90
Table A: Comparison of electricity tariff for manufacturing industries
(Unit: US$/kWh or user) 101
Table B: Electricity Generated in 2003 in Selected African Countries
(unit: Million KWh) 101
Table C: Typical examples of processing scale in MSE
~ Jua Kali Processing Units in 2005 101
Table D: Trends in agro-industrial production index (1996 = 100) 102
Table E: Status of management in large-scale manufacturers 102
Table F: Number of vehicles registered 103
Table G: Kenya railway line system 103
Table H: Volume of freight handled by KPA 2001-05 104
Table I: Agro-Machinery industry in Kenya economic structure 104
Table J: Imports of selected agro-machinery 105
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Table K: Import of food processing machines and facilities (2000 – 2005),
(Unit : Ksh mil [US$1=Ksh67]) 105
Table 9: Agro-industries and institutional arrangements with smallholders 108
Table 10: Sources of financing by type of agro-industry 109
Table AA: Tax regimes and other measures to promote agriculture in
The United Republic of Tanzania 141

List of boxes
Box 1. Over valued shilling impacts on the Tea industry 79
Box 2. Infrastrucutre 88
Box 3. Security concerns in Kenya 91
Box 4. Limited direct government intervention in horticultural markets 92
Box 5. Industrial and domestic sugar import licensing 94
Box 6. Reducing cotton farming costs through streamlined regulations 94

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Acknowledgements
The editors wish to acknowledge the support of FAO’s Regional Office for Africa (RAP), which
managed the local arrangements and the logistics of the workshop. The contributions of
Mr. Robert van Otterdjik, Agro-Industries Officer, AGS, FAO, Rome (formerly at RAP), in
planning and conducting the workshop, are greatly appreciated. Also thanks go to
Mr. Josef Kienzle, Agro-Industries Officer, AGS, FAO, Rome, for his collaboration in the
organization and his participation in the event. Further we would also like to thank Mr. Michael
Boateng, from Business Strategies and Solutions, Ghana, for his role as rapporteur of the
workshop, and Larissa D’Aquilio for the desktop publishing

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