adminDr Gift Mugano Correspondent
Zimbabwe’s number one enemy is lack of competitiveness. Addressing competitiveness is not an overnight goal.
The tested and tried approach in building national competitiveness is to work through value chains.
The needs of specific sectors are diverse. The specific problems and solutions can be worked through specific sectoral value chain.
Because of the complexity of the subject, this week’s discussion will focus on livestock value chains and lessons will be drawn from Uganda.
The livestock value chain can be defined as the full range of activities required to bring a product (e.g. live animals, meat, milk, eggs, leather, fibre, manure) to final consumers passing through the different phases of production, processing and delivery.
It can also be defined as a market-focused collaboration among different stakeholders who produce and market value-added products.
Value chain analysis is essential to an understanding of markets, their relationships, the participation of different actors, and the critical constraints that limit the growth of livestock production and consequently the competitiveness of smallholder farmers. Generally, farmers receive a small fraction of the ultimate value of their output, even if, in theory, risk and rewards should be shared down the chain.
In recent years, in many countries, traditional marketing channels with ad hoc sales are being gradually replaced by co-ordinated links among farmers, processors, retailers and others.
In this context, the question is not whether, but how to include the different actors in the value chains, including women, applying a balanced approach that takes into account both competitiveness and equity issues.
A number of countries have combined strengths of value chain analysis with the needs of poor livestock keepers, with a market-based, commercially viable and sustainable solution that with a view benefiting all the various actors of the chain.
There a number of good examples of countries which has successfully implemented the value chain successfully. In this week’s discussion, we will focus on Ugandan experience.
Uganda developed a value chain for the livestock industry. In this sector, farmers, processors, intermediaries, government institutions and NGOs are the key players in the dairy industry.
The dairy sector in Uganda before the establishment of the value chain was faced with numerous market constraints which include:
Power imbalances in participation — the dairy retail market were largely controlled by milk intermediaries who procure milk over large distances. These agents operate without self-policing and sometimes adulterate milk by adding water to increase volumes or chemicals to prevent the milk from turning sour;
Lack of a ready market for fresh milk and lack of modern technology for processing milk into milk products;
Information asymmetry between producers and marketers. This led to overpriced inputs and under-priced outputs, and also discourages increased production;
Low milk price — farmers were assured of a ready market for their milk by lowering the price. Moreover, they were not always paid promptly, which hampers their production;
Lack of or inadequate capital. Because of capital constraints, very few dairy-based agribusinesses had access to modern farm inputs such as milk processing and preserving equipment; and
Weak/small formal sector, which contrasts with the large, undisciplined but dynamic informal sector (milk traders).
In addressing these constraints, the Ugandan government and relevant stakeholders (private sector, farmers and developmental partners) inclusively came up with the following strategies which saw the establishment of robust value chain within the dairy sector:
Development of stronger linkages among stakeholders in the dairy sub-sector aimed at harmonising activities, eliminating duplication and harnessing the ensuing synergies.
Provision of supportive measures and incentive structures which were needed to encourage more formal sector participation in the dairy industry.
Provision of basic dairy inputs, credit and animal health.
In implementing these strategies, farmers were organised at production level as groups or cooperative societies, and registered with the dairy regulatory arm of the Government. Registered farmers were allowed to establish linkages with support agencies including non-governmental organisations (NGOs).
Milk processors and other intermediaries were involved to ensure a stable supply of milk and milk products.
They preserved milk in the form of pasteurised milk and processed milk products (yoghurt, ice cream, cheese, powdered milk, and ghee) to satisfy the increasing demand.
The Dairy Development Authority of Uganda (a government institution) was charged with the co-ordination and guidance to achieve/maintain self-sufficiency in the production of milk. It promoted production and competition in milk collection and processing, and serves as a monitor for milk and dairy product markets.
The involvement of NGOs in the dairy industry was very instrumental in contributing to expansion of the dairy sector from subsistence to commercial production, and to promoting competitiveness in the sector to ensure that farmers find a ready market and consumers have access to safe, good-quality and nutritious milk and milk products.
Dairy sub-sector linkages among key players ensured a ready market for milk even in peak production periods when milk surpluses are likely.
Member farmers also had access to (limited) credit services provided by their respective organisations in the form of dairy inputs, including access to veterinary services (drugs, artificial insemination services) and animal feeds.
Ugandan experience is close home. The same challenges the dairy sector had before the adoption of the value chain approach are similar to Zimbabwe situation today.
The dairy sector was just an eye- opener in build a case for value chain as a way of building industrial competitiveness. The main lessons from this discussion are:
Each particular sector/sub-sector has unique problems which can be solved by stakeholders within that sector/sub-sector;
Business linkages are a panacea in harmonising resources and raising competitiveness;
Each value chain requires effective and strong institutions, that is, from Government side, there should be a strong regulator (like the Dairy Development Authority as in the Ugandan case) while from the private sector side must have vibrant business membership organisation;
Government role must be relegated to the one of a referee and not a player.
Zimbabwe can address its competitiveness through value chain initiative. As long as we put all our efforts on address economic challenges affecting us today in a wholesome way we are going to take a long journey in getting the job done. In many cases we have found ourselves wondering why we are importing everything even tomatoes, cabbages, toothpicks, sweets, etc.
Interestingly, some sectors in our economy do not need money to bounce back into business but resurgence of demand!
Imagine what can happen to Dunlop Zimbabwe, PG Glass and other players in the value chain if Government and parastatals begin to buy cars from Willowvale Mazda Motor Industries!
Dr Mugano is an economic advisor, author and expert in trade and competitiveness. He is a Research Associate at Nelson Mandela Metropolitan University (SA) and Visiting Lecturer at Zimbabwe Ezekiel Guti University. Feedback: Email: [email protected]. Cell: +263 772 541 209.
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