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					               THE M I S S I NG L I NK:
 Ag ro - p ro cessi n g , Market i n g an d Trad e
                               by
                    Joyce Cacho, Ph.D.
              Director – Agribusiness Initiatives




                             At the
                 Expert Group Meeting
                               on
AGRICULTURE and RURAL TRANSFORMATION in AFRICA
         United Nations Economic Commission for Africa
                      Addis Ababa, Ethiopia


                     April 23-25, 2007
     OUTLINE
     I.          Context
     II. Strategic framework for agriculture
         and rural transformation
     III. Key components for catalyzing
          transformation
     IV. The common threads
     V. Finally…


UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                    Page 2 of 23
Addis Ababa, Ethiopia                             jcacho@africacncl.org
     OUTLINE
     I.          Context
     II. Strategic framework for agriculture
         and rural transformation
     III. Key components for catalyzing
          transformation
     IV. The common threads
     V. Finally…


UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                    Page 3 of 23
Addis Ababa, Ethiopia                             jcacho@africacncl.org
I. CONTEXT: Strategy evolution + assumptions

   Economic growth in Emerging Market Economies
                        ISSUES TARGETED by INDIVIDUAL GOV'TS and DONORS




                               Technical Sustainability   Environmental Sustainability


UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                                    Page 4 of 23
Addis Ababa, Ethiopia                                             jcacho@africacncl.org
I. CONTEXT: Strategy evolution + assumptions
 Managing economic growth in Emerging Market Economies segmented
                     into FUNCTIONAL SILOS
                                                  HISTORICALLY




                                                                                    MORE
         Closed financial capital markets                                      MACROECONOMIC
         Closed information markets                                            CONTROL AT THE
         Diverse political frameworks, i.e. on-going Cold War                  COUNTRY LEVEL
UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                                   Page 5 of 23
Addis Ababa, Ethiopia                                            jcacho@africacncl.org
I. CONTEXT: Strategy evolution + assumptions
Relevance of managing economic growth in Emerging Market Economies
 via segmented into FUNCTIONAL SILOS…under tremendous pressure!
                                                  SINCE 1996




 Financial capital markets began opening in 1972 – end of Gold                            NEED
    based global monetary system                                                            FOR
 The internet is a ubiquitous source of information and can be                         INTEGRATED
    accessed via mobile telephony technology                                             ECONOMY
                                                                                       MANAGEMENT
 The pluralistic political framework remained standing at the end                       STRATEGY
    of the Cold War, of which markets are the instrument of
    population-wide inclusiveness
UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                                 Page 6 of 23
Addis Ababa, Ethiopia                                          jcacho@africacncl.org
     OUTLINE
     I.          Context
     II. Strategic framework for agriculture
         and rural transformation
     III. Key components for catalyzing
          transformation
     IV. The common threads
     V. Finally…


UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                    Page 7 of 23
Addis Ababa, Ethiopia                             jcacho@africacncl.org
II. STRATEGIC FRAMEWORK: ‘Silo’ integration
             An Agri-based Value Chain: GRAINS
     RAW
     MATERIAL
     FLOW
                                              REGIONAL
                     2.                      COMMMODITY
                                                                                                  8.
                                              MARKET(S)
                 COLLECTION/                                                                 DISTRIBUTION
                  STORAGE                                          5.
                                                               SECONDARY                           +
                                                               PROCESSING                       RETAIL
        1.                    3.                       4.
                                                                                   7.
      FARM                WHOLESALE                 PRIMARY
                                                                               PACKAGING
   PRODUCTION                Bulk                 PROCESSING       6.
                                                                                                9.
     SEEDS                                                     WHOLESALE
                                                                                             EXPORT/
                                                                  Bulk
    FERTILIZER                                                                               IMPORT
   CHEMICALS
      WATER              RURAL                                                    URBAN
                                                                                              VALUE
                                                                                               FLOW




                    AGRICULTURE is AGRIBUSINESS!
UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                                       Page 8 of 23
Addis Ababa, Ethiopia                                                jcacho@africacncl.org
II. STRATEGIC FRAMEWORK: ‘Silo’ integration
                 An Agri-based Value Chain: DAIRY
                                   CONSUMERS

         RURAL                                                                                            URBAN
                                         Rural


                                      On-Farm


            RAW                       Off-Farm
            MATERIAL                 Local rural /
                                      Peri-urban
            FLOW
                                      Homes /
                                      Kiosks
                                                                                                         BEVERAGE
                                                                                   Packaging     D      CONSUMERS
                                                                                                              Urban
            PRODUCTION*              Traders                                                     i
                                                                                                 s         Kiosks
              Smallholder                                                 PRODUCT                t
              Mixed Activity         Delivery           Bulking                                  r
                                                                       MANUFACTURING                       Food
                Farmers                                                                          i        Retailers
                                                                           Pasteurizing          b
             Medium/Large Dairy
                  Farmers           Collection          Cooling                                  u       Institutions
                                                                                                 ti
                                                                   Bulk Transfer                 o
                                                                      with only                  n        VALUE
                                                                    INSULATION                            FLOW




                      AGRICULTURE is AGRIBUSINESS!
UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                                                        Page 9 of 23
Addis Ababa, * Dominated by dairy cows. Smallholder farmers also milk goats.
               Ethiopia                                                               jcacho@africacncl.org
II. STRATEGIC FRAMEWORK: ‘Silo’ integration
   Regional approach addresses the need for market size, i.e. economies of scale
    and size
   It is a system of constant feedback, i.e. consumer to mixed activity farmers to
    consumer…continuously
   Shift to coordinated, simultaneous investment (public, private, domestic, foreign)
   Timing of actions is pivotal to catalyzing improvement in competitiveness
       RAW
       MATERIAL
       FLOW

                                            REGIONAL
                        2.                 COMMMODITY
                    COLLECTION/             MARKET(S)
                                                                                                          8.
                     STORAGE                                       5.                               DISTRIBUTION +
                                                               SECONDARY                                RETAIL
                                                               PROCESSING
           1.                   3.                    4.
                                                                                      7.
         FARM               WHOLESALE              PRIMARY
                                                                                  PACKAGING
      PRODUCTION               Bulk               PROCESSING
                                                                   6.
                                                                                                        9.
         SEEDS                                                 WHOLESALE
                                                                                                     EXPORT/
                                                                  Bulk
       FERTILIZER                                                                                    IMPORT

      CHEMICALS
                             RURAL                                                     URBAN
         WATER

                                                                                                     VALUE
                                                                                                      FLOW


UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                                              Page 10 of 23
Addis Ababa, Ethiopia                                                       jcacho@africacncl.org
     OUTLINE
     I.          Context
     II. Strategic framework for agriculture
         and rural transformation
     III. Key components for catalyzing
          transformation
     IV. The common threads
     V. Finally…


UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                    Page 11 of 23
Addis Ababa, Ethiopia                             jcacho@africacncl.org
III. KEY COMPONENTS for CATALYZING TRANFORMATION

   PROBLEMS – ISSUES - CHALLENGES
 A. Land tenure…99 years is not perpetuity!
 B. Individual title versus Community ownership
 C. Financial markets open…the lowest hanging fruit is urban
    population need for cash security and government financing need
 D. Government institutions (directed financing, extension
    services)….collapsed, eliminated, privatized…slowing down
    productivity enhancing technology at the farm level
 E. Governments overwhelmed with needs to design new systems and
    standards for a market based, pluralistic economy
 F. Private sector stakeholders have been crowded out by donors and
    governments
 G. Legacy of ‘silo’ technical and analytical training, prescriptive
    approach, need to dominate approach to ‘international
    development’
UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                    Page 12 of 23
Addis Ababa, Ethiopia                             jcacho@africacncl.org
III. KEY COMPONENTS for CATALYZING TRANFORMATION
 I.     WORK TOGETHER
        Ministries of Agriculture, Livestock, Water, Energy, Commerce & Industry,
        Finance
 II. KNOWLEDGE
        Cross training in specialized language of various stakeholders
         Agricultural production knowledge for bankers
         Financial knowledge for agricultural entrepreneurs
         Private sector knowledge for donors and policymakers
         Explicit recognition that policymakers/politician respond to constituents
          to get win votes. The timing of elections is an explanatory factor in
          action…or inactions.
 III. EDUCATION
        Bachelor of Commerce and MBA in Agribusiness programs IN AFRICA to
        develop skills in negotiation, cash-flow financing structures for agriculture,
        designing and managing labor intensive, agri-based business operations
 IV. TRUST
        The need for belief that there is ‘something in the deal’ for each
        stakeholder/party and that each party is responsible for continuing a
        relationship that is productive.
UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                       Page 13 of 23
Addis Ababa, Ethiopia                                jcacho@africacncl.org
     OUTLINE
     I.          Context
     II. Strategic framework for agriculture
         and rural transformation
     III. Key components for catalyzing
          transformation
     IV. The common threads
     V. Finally…


UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                    Page 14 of 23
Addis Ababa, Ethiopia                             jcacho@africacncl.org
IV. THE COMMON THREADS…Missing Links!
          Commercial Financing & Private Sector
   Financing needs/opportunities are at the core of
         energizing individual segments of the value-chain
   The often referred to POOR AFRICAN FARMER, in
         fact is a BRILLIANT RISK MANAGER that carries
         the responsibility of achieving aspirations of
         her/his household and those of the extended
         family
   In the absence of risk management markets, the
         AFRICAN FARMER manages risk with a portfolio
         of farming activities, i.e. mixed farming
UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                    Page 15 of 23
Addis Ababa, Ethiopia                             jcacho@africacncl.org
IV. THE COMMON THREADS…Missing Links!
    Commercial Financing & Private Sector
                                                  (continued)
   A distinct focus on COMMERCIAL FINANCING of FARM
         LEVEL SERVICE PROVIDERS (potential entrepreneurs such
         as example…veterinarians, crop specialists, livestock
         artificial insemination technicians…where successful
         business operations requires close interaction with farmers)
         will effectively foster rejuvenation of the FARM EXTENTION
         SERVICE
   Opportunity to address cross-cutting factors, such as
         burdensome business licensing, lack of tax differentiation
         for strategic value-chain industries, absence of credit
         scoring systems, that constrain strong entrepreneurship
         and financial capital investment from catalyzing rural and
         agricultural transformation
UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                                  Page 16 of 23
Addis Ababa, Ethiopia                                           jcacho@africacncl.org
IV. THE COMMON THREADS…Missing Links!
    Commercial Financing & Private Sector
                                                  (continued)
   Pivotal to achieving POVERTY MITIGATING economic
         growth rates in Africa are:
         Recognizing that the farm household is producer
               AND consumer, simultaneously
         Incentivizing the EXISTING INFORMAL PRIVATE
               SECTOR to join the formal private sector whose
               circulation is included in GDP statistics
         Including SACCO’s (group saving organizations,
               typically regulated by the Ministry of Cooperatives)
               as the beginning of Finance Industry in Africa…as it
               has been in many regions
UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                                  Page 17 of 23
Addis Ababa, Ethiopia                                           jcacho@africacncl.org
     OUTLINE
     I.          Context
     II. Strategic framework for agriculture
         and rural transformation
     III. Key components for catalyzing
          transformation
     IV. The common threads
     V. Finally…


UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                    Page 18 of 23
Addis Ababa, Ethiopia                             jcacho@africacncl.org
V. FINALLY…
   A additional word on SUSTAINABILITY…



                                                  2

                                              1         3




UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                        Page 19 of 23
Addis Ababa, Ethiopia                                 jcacho@africacncl.org
V. FINALLY…
   Public-private Agribusiness Initiative…led by CCA




                                            …and PRIVATE SECTOR




            Agribusiness Initiative builds
           bridges between Africa and G8
            agribusiness companies for
           investment and policy input in
             Africa’s regional economic
                communities (REC’s)
UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                              Page 20 of 23
Addis Ababa, Ethiopia                                       jcacho@africacncl.org
V. FINALLY…AGRICULTURE is AGRIBUSINESS
                                                      Fork  farm…and back!
 Possible if ALL stakeholders, play an APPROPRIATE ROLE, i.e.
  Government policy makers and donors with the capacity to manage LARGE
      PROJECTS concentrate on INFRASTRUCTURE to connect markets (roads,
      telecommunication, education).
     Politicians harmonize policies across REC member countries, i.e. pass the same
      legislation establishing a UNIFORM COMMERCIAL CODE where warehouse
      receipts are legitimatized as COLLATERAL.
  Commercial banks have to shift their attention from the security of sovereign risk
      in government treasuries to profitable operations that include agri-based
      businesses, of all sizes, in their portfolio.
  Private sector view themselves as responsible for developing markets, delivering
      value to consumers…in exchange for a consistent NATIONAL/REGIONAL raw
      material supply.
  Donors, NGO’s and multi-lateral food and agriculture agencies dramatically
      improve systemization of their actions within and across their agencies 
      removing the local market distorting impact AND improving availability of their
      resources to reduce grassroots vulnerability to weather and conflict risks.
  International Research/Universities link production risks with regional consumer
      demand.
UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                         Page 21 of 23
Addis Ababa, Ethiopia                                  jcacho@africacncl.org
V. FINALLY…
    Each STAKEHOLDER has an APPRORIATE role!
  RAW Donors; Multi-
  MATERlateral food                                                                   Private Sector
  IAL   agencies;                                                                    (entrepreneurs +
          NGO’s                                              Farmer
  FLOW                                                     Associations                established
                                               REGIONAL
                                                                                       companies)
                     2.                       COMMMODITY
                                                                                                              8.
                                               MARKET(S)
                 COLLECTION/                                                                             DISTRIBUTION
                  STORAGE                                                 5.
                                                                      SECONDARY                                +
                                                                      PROCESSING                            RETAIL
        1.                    3.                       4.
                                                                                            7.
      FARM                WHOLESALE                 PRIMARY
                                                                                        PACKAGING
   PRODUCTION                Bulk                 PROCESSING              6.
                                                                                                             9.
       SEEDS                                                          WHOLESALE
                                                                                                          EXPORT/
    FERTILIZER                                                           Bulk
                                                                                                          IMPORT
    CHEMICALS                   Int’l
                              Research              Politicians
       WATER                                                                                       Nat’l/Regional
                                                                          Commercial               Governments;
                                                                                                 LARGE multilateral
                                                                            Banks                  concessionary
                                                                                                     financiers
                                                                                                              VALUE
                                                                                                               FLOW
UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                                                Page 22 of 23
Addis Ababa, Ethiopia                                                         jcacho@africacncl.org
V. FINALLY…
  What is your APPROPRIATE role?
  Keep in mind…time is ticking!...COMPETITIVENESS WILL NOT WAIT.
                                                                      ECONOMIC GROWTH IN
 ECONOMIC                                                              AFRICA SUB-REGIONS
  GROWTH                                                                         after
                                                                     Coordinated implementation
                                                                     of agri-value chain strategy
                                                                 • Decreased volatility
                                                                 • Manageable uncertainty
                                                                 • Consistent investment
                                                                 • Economic revival of rural
                                                                   areas
                                                                 • Diversified REGIONAL
                                                                   economies



                                                                                 CURRENTLY
                                                                                 AFRICA SUB-
                                                                                  REGIONS
                                                                            • Volatile
                                                                            • High Uncertainty
                                                                            • Inconsistent
                                                                              investment
                                                                            • Chronic
                                                                              vulnerability in
                                                                              rural areas


                                                            YEARS
UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                    Page 23 of 23
Addis Ababa, Ethiopia                             jcacho@africacncl.org
V. FINALLY…
 Value-chain strategy attacks the INCOME component of
 FOOD SECURITY by INVESTING FOR WEALTH CREATION.
                                                                      ECONOMIC GROWTH IN
 ECONOMIC                                                              AFRICA SUB-REGIONS
  GROWTH                                                                         after
                                                                     Coordinated implementation
                                                                     of agri-value chain strategy
                                                                 • Decreased volatility
                                                                 • Manageable uncertainty
                                                                 • Consistent investment
                                                                 • Economic revival of rural
                                                                   areas
                                                                 • Diversified REGIONAL
                                                                   economies



                                                                                 CURRENTLY
                                                                                 AFRICA SUB-
                                                                                  REGIONS
                                                                            • Volatile
                                                                            • High Uncertainty
                                                                            • Inconsistent
                                                                              investment
                                                                            • Chronic
                                                                              vulnerability in
                                                                              rural areas



UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                    Page 24 of 23
Addis Ababa, Ethiopia                             jcacho@africacncl.org
                     ~ ~ ~ ~ ~ HO L D THE DATE ~ ~ ~ ~ ~




                AGRIBUSINESS CONFERENCE
                      July 11-12, 2007
                    Washington, DC; USA

                                         www.AFRICACNCL.org
    Membership for Individuals & Companies/Organizations of all sizes.

                                                   Join now!  25 of 23
UNECA - EGM: Agriculture & Rural Transformation
April 24, 2007                                                Page
Addis Ababa, Ethiopia                                          jcacho@africacncl.org

				
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