Creating the right...

Creating the right environment for adding value in agribusiness

A poor enabling environment for entrepreneurs is one of the main obstacles to lift African agriculture, traditionally focused on commodities trading, into a flourishing agribusiness sector. New approaches should lead to a sector which sells its products to local and regional markets and has serious job creation potential.

This was one of the conclusions of an expert panel of the conference “Making the Connection: Value Chains for Transforming Smallholder Agriculture” in Addis Ababa on November 8, in which infoDev Program Coordinator Ms. Ellen Olafsen participated.

At the panel, Ellen joined value-chain experts in exploring the constraints for agribusiness development, and more importantly, the solutions at hand.

When speaking about the role of governments in facilitating an agribusiness sector or supporting value chain development, often the discussion in Africa focuses on the farmers and small holders’ level. Panellist Jacqueline Mkindi from the Horticulture Association of Tanzania highlighted that if governments are closer to the stakeholders operating in a higher segment of the value chain, some issues could be resolved more easily. "The policies might be clear, but administrators often miss the technical capacity to enforce them efficiently, and facilitate access to markets for businesses."

infoDev's Ellen Olafsen raised the question: “What is the role of the government beyond the "crop level"?  Can the government support entrepreneurs with increased knowledge of markets at local, regional and international levels?" Certain public sector building blocks, such as access to water, electricity and roads, need to be in place for agribusiness  to thrive. But also access to finance plays an important role. "Financiers often say that they are not lending money because of the lack of financial management of the enterprises," Ellen continued. "That may be true, but a big hurdle is the lack of market understanding among stakeholders due to their limited access to information and limited skills".

Ellen emphasized that the issue of trust among stakeholders, including entrepreneurs and government actors, is an important one. Predictable regulations, i.e. “no changing rules of the game” are important. André Dellevoet of the Africa Enterprise Challenge Fund (AECF) underscored this as well. “Take the rule of law seriously. You need champions in the government to drive the reform agenda, to establish rules of the game that everyone is clear on. Then the private sector is enabled to work efficiently," he added.

Other experts honed in as well on the financing issue, and on the need to break through certain established patterns. In the Carribean, commercial importers are very powerful and prevent the development of local processing businesses who have a real market opportunity to seize. Donald Keith Amiel from the Caribbean Agri-business Association (CABA) emphasized that “nothing must be produced that cannot be marketed”, that is the best way to incentivize financial institutions to invest in local agribusinesses.

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