Producer and Industry Funding of R&D in Africa
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Transcript of Producer and Industry Funding of R&D in Africa
An Underutilized Opportunity to Boost Commercial Agriculture
Derek Byerlee
ASTI/FARA Conference
Accra, Dec 6th, 2011
Producer and Industry Funding of R&D in Africa
Africa has a great growth opportunity in commercial agricultureExample of Ghanaian cocoaBut R&D critical to ensure competitiveness
Producer/industry funding of R&D by collective action (e.g., a levy) can improve R&D by1) boosting R&D funding,2) improving the effectiveness of R&D
Evidence that it works well in many settings and Africa has tapped only a small part of its potentialCase studies
Main messages
Imports vs Exports
Africa Share of World Exports Still Falling
Africa vs Competitors
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
Shares of World Agricultural Exports
Brazil
Thailand
SS Africa
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
0
5
10
15
20
25
Imports
Exports
$U
S2000 b
illi
onis
Share of world exports
But Variable Performance (exports)
Share of world imports
Rice
Whe
at
Sugar
Pulse
s
Mai
ze
Veget
able
oils
Dairy
Tobac
co
Mea
ts
Hortic
ultu
re
All ag
ricul
ture
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1991-932006-08
% o
f golb
al
agri
cult
ura
l im
port
s
Cocoa
Sesam
eTea
Coffee
Tobac
co
Cotto
n
Cashe
w
Sugar
Rubbe
r
Palm
oil
Hortic
ultu
re
All ag
ricul
ture
0%
10%
20%
30%
40%
1991-932006-08
Ratio of cash crop yields Africa vs Asia/LA
CottonVariety releases fell
60% 1995-05 relative to previous decade
Bt cotton delayed 6-8 yrs vs competitors
Oil palmR&D shifted to SE Asia
where exports > than all agric exports from SSA
Lack of R&D Undermines Competitiveness
Yield performance relates to R&D
Tea
Sugar
Cocoa
Tobac
co
Natur
al ru
bber
Sesam
e
Coffee
Seed
cotto
n
Oil pl
am
0
0.5
1
1.5
Ratio, 1991-93Ratio 2006-08
Market prospectsStrong commodity
market outlookTrillion dollar
domestic market by 2030Regional trade
opport.New industries
BiofuelsCassava for China?
Land and water resourcesCould double land
areaLocational
advantagePrivate investor
interest
Africa Has Huge PotentialComparative advantages
ConceptualCollective action to
overcome scale and non-excludabilityLevy based on output Industry governance
IssuesHeterogeneity of
industryLikely underfunding (use
matching grants)Free riders requires
collective political action
Cost effective to collectExport productsSome domestic
productsInstability of fundingOrganized
producers/industryInstitutional designs
How and Why of Industry Funding
Practical
PotentialAssume min size
industry of $100 M and 1% levyAll exports levied plus
half of commercial crops for domestic mkts
Potential llevy of $PPP 500 M in 2008Equivalent to one third
of total R&D in 2008
Nine countriesCoffee, cocoa, sugar,
tea and tobaccoTotal in 2008 of $PPP
90 MGhana, SA, C’Iv, Kenya
Range of institutional designsMostly nonprofit crop
institute
Levies in Africa: Potential and Actual
Actual
Case Studies
Cenicafe (Coffee, 1938)
The Ceni’s of ColombiaCenipalma (Oil palm, 1991)
CoffeeColombia 2nd placeStrong industry assoc
with over 0.5 M members (1.5 ha average)
Oldest institute from 1938
State of art and successful
But low share to R&D and low research intensity of 0.47%R&D only 14% of
levy
Colombia 4th placeNew industry and
larger producersHigh research
intensity-- value based levy (1.5%)
Successful but faces challenges of pest, science and costs
CENIs Colombia: Single Commodities
Oil Palm
Tea RFK—Single CommodityKenya tea as African
success story1st or 2nd exporter,
smallholder basedSmall institute of 13 FTEs
Historically very effective in serving smallholders
Volume based levyLow research intensity of
0.1%+ some company R&D
Moving to value based levy and improved industry governance 20
0020
0120
0220
0320
0420
0520
0620
0720
0820
0920
100
50
100
150
200
250
300
0
20
40
60
80
100
120
R&D budget Prod value
R&
D b
udget
(M S
hil
lings)
Tea v
alu
e (
B S
hil
lings)
Source: Nzuma, 2011
The little engine that could--highly competitive
0.4% value levy on nearly all products matched by government (by law)Well funded and staffed relative to neighborsReal R&D spending doubled since established
Strong industry governanceFour board members—two gov, two industryCommodity and regional committees
Evidence of impactsOverall B/C at least 16:1 but patchy
INIA Uruguay: Multi-Commodity-Single Institute
Africa’s most successful agric exporterFederation of 14 producer associations
established in 2003R&D contracted mostly to CNRAOnly 18% to R&D, rest to extension etc
Underfunding of R&D especially for major crops like cocoa (research intensity 0.2%)Volume based levies set by industry
Strong industry governance especially where POs are strong
FIRCA, Cote d’Ivoire—Multi-Commodity Funding
Africa has huge potential in commercial agricultureNeeds to invest more in R&D to regain competitivenessR&D on commercial crops underfunded although important
exceptions (e.g., cocoa Ghana)Collective action by industry can increase funding but not
necessarily so Matching funds would provide incentive to raise funds
Strong industry governance improves effectiveness of research and accountability to industryHowever, R&D often shortchanged in allocation Importance of building capacity of POs although well run
parastatals may be a second best (CRIG)FARA, MFIs and others should advocate & facilitate
industry R&D funding (including regional)
Conclusions
Country Product R&D expend. Industry valueb
Specific crop R&D
intensityc
Public R&D intensitya
$PPP M $PPP M % %
Ghana Cocoa 33.25 757 4.4 0.9
Cote d’Ivoire?
Multi 42.6 7,847 na 0.5?
South Africa
Sugar 18.59 673 2.8 2.0
Kenya Tea 3.10 369 0.8 1.3
Kenya Coffee 5.78 45 12.8 1.3
Malawi/Zimb
Tea 2.42 65 3.7 0.7g
Mauritius Sugar 9.89 149 6.6 3.9
Tanzania Coffee 3.43 46 7.4 0.5
Tanzania Tobacco 0.06 81 0.1 0.5
Tanzania Tea 4.10 37 11.1 0.5
Uganda Coffee 4.75 228 2.1 1.2
Examples of Industry Funding in Africa
Source: ASTI files
Funding only or Funding + R&D implementation?
Single commodity vs multi-commodity?Levy funding vs block grants thru parastatal
organizations?National or regional?
Institutional Design Issues