USING VALUE CHAIN APPROACHES IN AGRIBUSINESS AND ...

1 USING VALUE CHAIN APPROACHES IN AGRIBUSINESS AND agriculture IN SUB-SAHARAN AFRICA A METHODOLOGICAL GUIDE Tools That Make VALUE Chains Work: Discussion and Cases Prepared for the world bank Austin Associates, Inc. Principal Author: Martin Webber, Austin Associates, Inc. Program Director: Patrick Labaste, The world bank i Acknowledgements This Guide was prepared by Austin Associates for the Sustainable agriculture Group of the world bank . The work was directed by Mr. Patrick Labaste of the world bank .

2 The Principal Author and team leader was Mr. Martin Webber, Executive Vice President of Austin Associates, Inc. Principal contributors and coauthors from Austin Associates included Marcos Arocha, Virginia Brandon, Lisa Carse, Grant Cavanaugh, Michael Ducker, David Feige, Michael Gorman, Carlton Jones, Jennifer Lynch, Jane Shearer, Justin Stokes, and Gina Tumbarello. Principal world bank collaborators were Malick Antoine and Jean-Luc Bosio. Jean Michel Voisard also served as reviewer. The authors convened a roundtable of industry experts, who provided suggestions and experiences that enhanced this Guide. The roundtable participants included : Graeme Dixie, Richard Henry, Steve Jaffee, Svetlana Meades, Paul Siegel, Yolanda Strachan and Uma Subramanian of the world bank Group ; and Susan Bornstein (TechnoServe), Jeanne Downing (USAID), Paul Guenette (ACDI-VOCA), Olaf Kula (ACDI-VOCA), John Lamb (Abt), Frank Lusby (Action for Enterprise) and Lynn Salinger (AIRD).

3 Many, many people contributed their expertise and experience, particularly to the case studies. They shared their own stories, and their analyses and observations. Their personal experiences and generous willingness to share their stories and conclusions make this Guide a particularly rich source of ideas and information. We sincerely apologize for any omissions, which, of course, are inadvertent. _____ _____ ii Table of Contents vii Section 1: Agricultural VALUE Chains and Africa s Development Agenda ..1 Opportunities and Threats of Trade and Market Globalization for African Economies2 Comparison of Agricultural Productivity ..4 Objectives of the Guide ..6 Organization of the Section 2: Concepts and Definitions of VALUE Chains/Supply Chains.

4 9 VALUE Chains: Definition of Concepts ..9 How VALUE - CHAIN Analysis Has Been Analyzing and Evaluating VALUE Chains ..11 Limitations of VALUE CHAIN Implications of the Operating Environment: Beyond the VALUE CHAIN ..14 Section 3: Review of Existing Literature on VALUE /Supply Summary of General Themes and Structure from the Literature Review ..20 Creating Trust ..20 Governance: What Type of Power Relationship Exists and Is Information Shared?22 Market or Bargaining Power (Buyer vs. Producer) ..23 Innovation, Information, Information Sharing, and Knowledge ..25 Intervention Entry Points and Initial Focus ..26 Section 4: Discussion of Individual Tools ..28 Introduction and Overview ..28 Theme One: Designing strategies and business plans Obtaining and USING Theme Two: Developing robust new Theme Three: Supplying the market Aligning supply to match market opportunity28 Theme Four: Reaching the market Market positioning and market opportunities.

5 29 Theme Five: Improving the business and policy environment ..29 Theme Six: Building partnerships ..29 Theme Seven: Monitoring results in VALUE CHAIN Tool 1: Choosing Priority Sectors for VALUE CHAIN Interventions ..32 Initial iii Box 1: How to Choose VALUE Chains for Intervention: The Example of Senegal's Project Croissance Economique ..34 Market Analysis ..35 Domestic Capacity and Economic Impact ..35 Testing Commitment ..35 A Step-by-Step Summary of Tool 1: Choosing Priority Sectors for VALUE CHAIN Interventions ..36 Case Study: Prioritizing VALUE Chains by USING Comparative Analysis VALUE CHAIN Selection in Mozambique.

6 37 Case Study: Geomar - Innovative APPROACHES to Assessing the Competitiveness of VALUE Chains ..43 Tool 2: Designing Informed Strategies Across the VALUE CHAIN ..43 Enhancing VALUE CHAIN Assessing the Overall Status of the VALUE Assessing Strategic Assessing Operational Productivity ..48 Assessing the Quality of Supply CHAIN Assessing Human Resources Across the VALUE CHAIN ..50 Assessing the Business Case Study: Understanding the VALUE CHAIN and Integrating Information Into Strategy: Nigerian Domestic 52 Tool 3: Conducting Benchmarking and Gap Assessments of VALUE Chains ..59 Benchmarking Background ..59 The Benchmarking Tool ..59 Box 2: Uganda Benchmarking Constraints in the Coffee Industry ..61 Box 3: Tanzania Cotton Benchmarking A Step-by-Step Summary of Tool 3: Conducting Benchmarking and Gap Assessments of VALUE Chains.

7 66 Case Study: Uganda Floriculture: Benchmarking and Gap Analysis ..68 Tool 4: Upgrading and Deepening the VALUE CHAIN ..76 Deepening Through Adding Operations ..76 Box 4: Mongolian Meat Industry Upgrading the VALUE CHAIN ..77 Methods for Deepening the VALUE Box 5: Deepening the VALUE CHAIN : Glass Jar Production in Armenia ..79 iv Conclusion ..80 Case Study: Kenyan Green Beans and Other Fresh Vegetable Exports ..81 Tool 5: Identifying Business Models for Replication ..85 Box 6: Replicable Business Models - Rwanda Coffee Washing Box 7: Dairy Pakistan Identifying and Replicating Business Models within the VALUE CHAIN ..86 A Step-by-Step Summary of Tool 5: Identifying Business Models for Replication ..87 Case Study: Identifying and Implementing Replicable Business Models-Mozambique Cashews.

8 88 Tool 6: Capturing VALUE Through Forward and Backward Integration ..92 Vertical Integration from the National VALUE CHAIN Perspective ..92 Considerations for Integration ..95 Box 8: Benefits of Vertical Integration ZEGA and Zambia s Horticultural VALUE CHAIN ..96 Box 9: Bulgaria Wine Integrating Operations to Secure Sourcing of Raw Material ..98 Case Study: Capturing VALUE Through Integration The Ghanaian Pineapple Industry and Blue Skies Holdings ..100 Tool 7: Horizontal Collaboration - Creating and Taking Advantage of Economies of Scale ..105 A Step-by-Step Summary for Tool 7: Horizontal Collaboration - Creating and Taking Advantage of Economies of Scale ..106 Case Study: Creating and Taking Advantage of Economies of Scale The Ghana and C te d Ivoire Experiences.

9 107 Case Study: Creating and Taking Advantage of Economies of Scale Within the Mozambican Cashew VALUE Tool 8: ..Positioning Products and VALUE Chains for Greater VALUE and Competitiveness ..116 Box 10: Ecuadorian Cacao Positioning the VALUE CHAIN for Greater VALUE and Competitiveness ..116 Box 11: Thailand GAP Cluster Positioning Products (and the VALUE CHAIN ) for Greater VALUE and 118 Leveraging Other VALUE CHAIN Initiatives ..117 v Product Positioning ..118 Summary ..118 A Step-by-Step Summary for Tool 9: Positioning Products and VALUE Chains for Greater VALUE and Case Study: VALUE CHAIN Strategies for Market Repositioning Rwandan Tool 9: Applying Standards and Certifications to Achieve Greater Vocabulary.

10 127 Standards Are Part of VALUE CHAIN Elements of Certification Bodies ..129 Box 12: Thailand GAP Cluster Use of Standards and Certifications to Upgrade VALUE ..129 Importance of Implementing EurepGAP Through the VALUE CHAIN ..130 Use of Certification and Branding for Local Markets ..130 Information Management Oversight and Lead Firms ..131 Associations and Cooperatives ..132 Government Box 13: Ecuador Cacao Improving Quality at the Producer Level to Achieve Higher Market Prices ..132 In 135 Case Study: Uganda Nile Perch Quality Management and Certification ..135 Tool 10: Identifying Needed Support Services for the VALUE Box 14: Uganda Cotton Enterprise-Linked Extension Services Model ..141 Box 15: Sri Lankan Cinnamon.