Joseph Karugia Coordinator ReSAKSS-ECA ILRI

1. Conducting Public Expenditure Reviews for Livestock Sub-sector: Issues and suggestions for draft framework Joseph Karugia Coordinator ReSAKSS-ECA ILRI Agriculture Public Expenditure Review Workshop, May 11-12, 2009 ILRI, Addis Ababa

2. Introduction • Public expenditure is an effective instrument for enhancing growth and reducing poverty – key goals of national policy • Expenditure prioritization is important for achievement of these goals • Livestock is vital to the economies of many developing countries

3. Livestock Sector contribution to AgGDP-Average 2000-2005

4. Livestock trends…. • Livestock fastest growing part of the agricultural sector, largely driven by the Livestock Revolution in emerging economies • Need to double livestock production in developing world by 2020 to meet rising demand for livestock products

5. Livestock trends…. • Doubling livestock production puts pressure on natural resources: water, land, biodiversity • Food standards rising – rise of supermarkets • Market chains are getting longer and complex – small producers marginalized

6. Contribution of livestock not fully appreciated.. • Milk, meat, manure, draft power, hides and skins are the commonly cited outputs of the livestock sector • In SSA, beef is ranked top in terms of value of production of key commodities with a 10.1 % share of total (ReSAKSS, 2008)

7. VALUE OF PRODUCTION RANKINGS OF KEY COMODITIES IN SUB-SAHARAN AFRICA Sources: i) Year totals: FAOSTAT 2002 and international prices 1989-1991 Notes: Percent production value is calculated as the percent of value of production of current crop in total value of agricultural production of regional average (1998 -2000). Values were constant 1989-1991 international dollars. Only crop, with at least 1% of value of production are included.

8. But other important contributions are often ignored… • Integrate and complement crop production • Savings • Reserve against risks • Indirect, non- market values include • Option values – option to use in the future • Existence values – utility of knowing that a good or service exists • Environmental services • Social-cultural values

9. Ignored in policy discourse…. • In HIPC countries, livestock featured poorly in PRSPs, even those with relatively large pastoralist populations (Blench et al, 2003) • Why? • Poor articulation of investment needs of the sector? • Poor representation in the PRSP process • Even IMF and WB’s Joint Staff Assessments do not help • Poor evidence base on which to base plans and demonstrate outcomes – livestock numbers, populations affected, production systems, etc • Poor representation in Budget making process • Political economy issues • Client-patronage relationships, poorly organized

10. Some guiding principles… • What is the right level and composition of public livestock expenditures? • Need to address market failures (public goods, externalities, natural monopoly) – comparative advantage v/s private sector • Cost-Benefit analysis to optimize social gain and equity – in line with stated national policies • LE often include animal/human health, the environment, livestock services (breeding, feeding), extension, marketing support, credit, and consumer support programs

11. What to do… (1) • Link PE to national policy • Often, expenditures support commercial sub-sector • To reach the poor target expenditure programs that matter most to the poor – Benefit incidence analysis • Need evidence on role of livestock in poverty alleviation of • Externalities • Confer unfair advantage to intensive production systems • Loss of biodiversity – e.g. cross-breeding programmes • Cross-border externalities – disease control • Understand production systems and their dynamics • Composition of expenditures will change with level of development and past investments • Link to crop agriculture

12. What to do… (2) • Understand market dynamics and design appropriate market interventions • Market imperfections characterize livestock sector, especially pastoral systems • Do not overemphasise international markets at the expense of domestic and regional markets -developing countries are net importers of livestock products (FAO, undated) • Disease free zones? – high cost, low intensity, enforcement • Export slaughterhouses in remote areas – quality, transportation problems • SPS requirements stringent

13. What to do… (3) • Develop domestic and regional markets • Improve physical market places, holding grounds, loading ramps, etc • Improve price information • Exploit the unique power of ICTs to overcome remoteness • Link pastoral areas with higher potential areas by providing finishing infra-structure and incentives • Improve transport routes • Provide credit interventions to both producers and traders

14. What to do… (4) • Improve water infrastructure • Invest in veterinary services and focus on key diseases • Invest in early warning systems for drought and diseases • Improve security - develop effective approaches for the traceability of livestock

15. THANK YOU!