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Transcript of 2010 driving africas-competiteness_in_agribusiness
Copyright © 2010 by Monitor Company Group, L.P.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means — electronic, mechanical, photocopying,
recording, or otherwise — without the permission of Monitor Company Group, L.P.
This document provides an outline of a presentation and is incomplete without the accompanying oral commentary and discussion.
COMPANY CONFIDENTIAL
Africa Leadership RetreatDriving Africa’s Competitiveness in Agribusiness
July 8th, 2010
John Gregg, Director,
Monitor Emerging Markets Group
2Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Monitor Introduction
National EconomicDevelopment and
Security
Corporate andBusiness UnitStrategy
Branding andMarketing Strategy
Financial Strategy
OrganizationalStrategy
InnovationStrategy
CapabilityBuilding
Leadership andExecutiveDevelopment
E-Learning
Network and TalentManagement
CapitalServices
Monitor Capital(MCAP)
Monitor ClipperPartners (MCP)
Monitor VenturePartners (MVP)
Other funds andfund managementcompanies
AdvisoryServices
Economic strategyand implementation
Geographicinvestment andexpansion
Constituencymapping andmanagement
Competitivenessnetwork
Focus of Today’sSession
3Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Africa’s Agri Potential: Re-Confirmed Every 10 Years
‘Can Africa Claim the 21st Century?’ ‘Lions on the Move’
Source: “Can Africa Claim the 21st Century?” – World Bank Report, 200; “Lions on the Move: Progress and Promise of African Economies” – McKinseyGlobal Institute, 2010
Africa has huge potential for morediversified production and exports,
including in agro-processing,manufacturing, and services”
World Bank 2000
“There is still much to be gained fromyield improvements in every African
country”
World Bank 2000
“Comprehensive improvements inpolicies, institutions, and investment
could accelerate agricultural growth tolevels that would help reduce rural
poverty”
World Bank 2000
“An African Green Revolution couldraise agricultural production to $880
billion per annum by 2030”
McK Institute 2010
“Aside from midstream production,downstream processing offers the
largest opportunity”
McK Institute 2010
4Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Agri the Primary Economic Factor in Most Countries…
Source: CIA World Factbook
Pe
rce
nta
ge
of
La
bo
ur
Fo
rce
Em
plo
yed
inA
gricu
lture
Agricultural Production % of GDP vs. % of Labour Force Employed in Agriculture, 2008
30
40
50
60
70
80
90
100
110
0 10 20 30 40 50 60 70 80 90 100
Agriculture Percent of GDP
ZambiaUganda Tanzania
Rwanda
Nigeria
Niger
Mozambique
Mali
Malawi
Kenya
Ghana
Ethiopia
Burkina Faso
5Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
… Lack of Competiveness Persists – But, Improvements
CountryGCI Rankings
(2009-2010)
Chile 30
South Africa 45
India 49
Brazil 56
Vietnam 75
Ukraine 82
Senegal 92
Kenya 98
Nigeria 99
Tanzania 100
Uganda 108
Ghana 114
Mozambique 129
Source: World Economic Forum (rank out of 133 countries). Mauritius, Botswana, Namibia, and The Gambia ranked between South Africa and Senegal
Bottom30%
6Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Limited Use of Natural Resources …
Total land cultivated = arable land (replanted after harvest – e.g., maize, rice) & permanent crops (not replanted after harvest – e.g., fruit trees, coffee)Source: CIA World Fact Book – 2010
7Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
… And Subsistence Continues to Dominate
Small Scale and Subsistence Maize Farmers, 2004 – 2007
85
9990
70
9890
9885
7975858583
60
93
60
85
50
70
33
Tanzania Nigeria Malawi
0
Rwanda Ethiopia ZambiaMozambique
60
40
20
Uganda Mali Ghana
100
80
Small scale farmers as a % of total number of maize farmers
Subsistence farmers as a % of small scale maize farmers
0
10
20
30
40
50
60
70
80
90
Mozambique
5%
Ethiopia
11%
Malawi
17%
Tanzania
28%
Zambia
40%
Rwanda
40%
Nigeria
40%
Kenya
40%
Uganda
75%
Mali
20%
% of Maize Produced that Is Commercialised
Source: FAOSTAT; IFPRI Country Reports
8Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
At the Same Time: Significant Resource Strain …
77
7270
686665
61585756
5149494847
44444341
2725
23
0
10
20
30
40
50
60
70
80
90
SouthAfrica
ZambiaMoroc-co
BurkinaFaso
Senegal Tanza-nia
GhanaEthiopia NigeriaNigerCoted’Ivoi
re
Mozam-bique
MaliSudanCame-roon
Benin Mada-gascar
UgandaKenya AngolaMalawiRwanda
Average Losses of Nitrogen, Phosphorous and Potassium, 2002-04 Cropping Seasons
kg
/h
ap
er
yea
r
Source: “Agricultural Production and Soil Nutrient Mining in Africa“, J.Hanao & C.Baanante (IFDC
9Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
… and Climate Vulnerability
Source: “Mapping Climate Vulnerability and Poverty in Africa”, ILRI (2006
10Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
How to Leap Frog the Current Development Pace?
1,500
1,300
3,650
3,050
0
1,000
2,000
3,000
4,000
1996 1998 2000 2002 2004 2006
Cereal Yields Over Time(1996-2006)
South East Asia
Africa
Roots and Tubers Yields Over Time(1996-2006)
Kg
pe
rh
ect
are
Kg
pe
rh
ect
are
9,000
8,000
15,200
11,100
1996 1998 2000 2002 2004 2006
6,000
2,000
18,000
14,000
10,000
0
South East Asia
Africa
Source: ProdSTAT, Food and Agricultural Organization of the United Nations
11Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Let’s Take a Step Back: Drivers of Prosperity
Competitiveness is a fundamental determinant of prosperity, andimprovements in the competitiveness of an economy create measurable,positive impacts for the prosperity of a population
The most effective path to accelerating prosperity is derived fromunderstanding and enhancing the competitiveness of a nationaleconomy
The key economic challenge facing any nation or region is the quest forprosperity
12Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Strong Link between Prosperity and Competitiveness
Source: World Economic Forum
13Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Clusters, not industries or sectors, are the critical unit of analysis formeasuring how an economy functions and how companies interrelate foroptimal advantage
Macroeconomic, political, legal and social context is important, but themain driver of competitiveness is the micro-economic businessenvironment which is comprised of four elements
– Factor conditions, context for firm strategy and rivalry, demandconditions, related and supporting industries
It is not what sectors, clusters, or industries a region competes in thatmatter most for prosperity, but rather how the firms compete
Guiding Principles of Competitiveness
14Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Accelerating Economic Development – Our Framework
15Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
3 Areas of Focus to Start the Discussion
Defining aCompetitiveEconomicStrategy
Review the current composition, structure, anddynamics of an economy
Perform cluster competitiveness assessment tobenchmark performance and identify clusteropportunities that can fuel growth
1
MozambiqueCashews
EnablingCluster
Development
Evaluate the current level of cluster developmentand identify key gaps, opportunities, and constraints
Develop supply and demand-side activationstrategies to ensure cluster growth in aneconomically viable and sustainable fashion
2
Nigeria DomesticCatfish
Upgrading theBusiness
Environment
Create and implement action-oriented campaignsthat tackle underlying obstacles to competitiveness
– Includes cross-cutting and cluster-specific policylevers that will impact the context for economiccompetitiveness
3
Uganda NilePerch
16Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Case Study – Region in Ukraine
Introduction
Project Context
A foundation was set up by an Eastern European Oligarch to improve economicdevelopment through regional programs
– Foundation financed a 2 year study to drive competitiveness of a Region
– Region’s government was responsible for funding programs in theimplementation plan
#1: Define CompetitiveEconomic Strategy
Cluster CompetitivenessAssessment
Cluster Map – Gaps,Opportunities and Constraints
#2: Enable ClusterDevelopment
Action-oriented Campaigns
#3: Upgrade the BusinessEnvironment
Analytical Approach
17Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Case Study – Region in Ukraine
#1 – Define Competitive Economic Strategy
18Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Case Study – Region in Ukraine
#2 – Enable Cluster Development
Fertile land but lowproductivity due to lack ofinputs & land ownershipand limited agribusiness
knowledge
Unsatisfied localdemand for fruit,vegetables, and
meat
Lack of financing andinfrastructure are key
constraints
Large shareof sub-scaleinefficientfarmers
Opportunities forcollaboration existbetween producers
and processors
Difficulty meetingquality standards
in exportdestinations
19Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Case Study – Region in Ukraine
#3 – Upgrade the Business Environment
ProductionSupport
Ensure availability of fertilizers and high quality seeds
Launch educational and research programs
Increase use of modern machinery
ClusterStructure
Consolidate small-scale farmers into coops
Facilitate long contracts and partnershipswith companies downstream
OptimizedDistribution
System
Develop a Grain Exchange toreduce the number ofmiddlemen
Investmentsand Financing
Attract investors to improve agricultural infrastructure
Ensure affordable financing for cluster firms
RegulatoryEnvironment
Create efficient land markets; establishment of landregistry and development of efficient mechanisms ofland ownership transfer
20Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Agri-Clusters in Africa – Complex Trade-Off Challenges
Export vs. DomesticMarkets
Position on GM
Smallholder / LargeScale Farming
What will the cluster focus on – production /processing for domestic or export markets?
Is it supported by government, investorsand development institutions?
What are the political vs. economic goalsand how are the trade-offs valued?
Subsidy or no subsidy - especially forfertilizer?
Inputs
Cash vs. StapleCrops
What will the cluster focus on – staple cropsor high value cash crops?
21Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Learnings from our Recent Agri Work in Africa
Improving competitiveness in smallholder agri value chains is complexand takes time - end to end solutions are key
Important to secure downstream uptake of volumes and/or team with topof supply chain player in order to provide sustainability of upstreaminvestments and create sustainable linkages
Development of markets must be undertaken as an integrated systemintervention as typically many levers need to be touched (i.e. credit,infrastructure, farmer organization, market information, …)
Storage investments often key to enabling better decision making at thefarmgate level of small holders and in order to limit trader abritrage
Critical to make well informed trade-off decisions on where to invest interms of commodities – both from a relative competitiveness as well aslong-term climate perspective
22Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Backup Material on Climate Change in Africa
23Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Predicted Climate Change in Africa (1/2)
Source: “How Will Climate Change Shift Agro-Ecological Zones and Impact African Agriculture?” , P.Kurukulasuriya & R. Mendelsohn
Predicted Change in Distribution of Agro-ecological Zones with (CCC Scenario), 2003 – 2100e
OBSERVED CCC 2100
Desert
High elevation dry savannah
High elevation humid forest
High elevation moist savannah
Lowland dry savannah
Lowland humid forest
Lowland moist savannah
Lowland semi-arid
Lowland sub-humid
Mid-elevation dry savannah
Mid-elevation humid forests
Mid-elevation moist savannah
Mid-elevation sub-humid
Legend
24Africa Leadership Retreat (ALR) Copyright © 2010 Monitor Company Group, L.P. — Confidential
Predicted Climate Change in Africa (2/2)
Phenomenon andDirectionof Trend
Likelihood ofFuture Trends
Based onProjections
Examples of Major Projected Impacts by Sector
Agriculture, Forestry andEcosystems
Water Resources
Over most land areas,warmer and fewer cold daysand nights, warmer andmore frequent hot days andnights
Virtually certain1
Increased yieldsin colder environments;decreased yields in warmerenvironments; increased pestoutbreaks
Effects on water resourcesrelying on snowmelt; effects onsome water supplies
Warm spells / heat waves.Frequency increases overmost land areas
Very likely2
Reduced yields in warmerregions due to heat stress;increased danger of wildfire
Increased water demand; waterquality problems, e.g., algalblooms
Heavy precipitation events.Frequency increases overmost areas
Very likelyDamage to crops; soil erosion,inability to cultivate land due towater logging of soils
Adverse effects on quality ofsurface and groundwater;contamination of water supply;water scarcity may be relieved
Area affected by droughtincreases
Likely3
Land degradation; lower yields /crop damage and failure;increased livestock deaths;increased risk of wildfire
More widespread water stress
Tropical cyclone activityintensifies
LikelyDamage to crops; windthrow(uprooting) of trees; damage tocoral reefs
Power outages causingdisruption of public water supply
Increased incidence ofcoastal inundation (excludestsunamis)
LikelySalinization of irrigation water,estuaries and fresh-watersystems
Decreased fresh-wateravailability due to saltwaterintrusion
Notes: 1 Greater than 99% probability; 2 Greater than 90% probability; 3 Greater than 66% probabilitySource: IPCC Fourth Assessment Report