Positioning the EAC as the Food Basket to Africa and the rest of the world

1. Positioning the EAC as the Food Basket to Africa and the rest of the world • Prof. Jean NDIMUBANDI • 3rdEAC ANNUAL SECRETARY GENERAL’S FORUM • “EAC: My Home, My Business” • 12th- 13thSeptember 2014

2. outline • Introduction • Regional Economic Outlook • Institutional changes • SWOT Analysis • Non-tariffs barriers-NTBs • Conclusions • Recommendations

3. INTRODUCTION: EAC Agriculture vs Growth • Agriculture contributes with a significant share of total production in EAC’s economy • Agricultural growth drives growth in other sectors of the economy • Agriculture plays central role in EAC exports • Most poverty still concentrated in rural areas • Agricultural growth drives overall income growth in rural areas • Agriculture significantly contributes to economic growth • Reduces overall poverty, hunger, and malnutrition more than any other sector

4. Regional Economic Outlook

5. EAC Real per capita GDP growth with other Regional Economic Integration

6. Percentage of agricultural contribution to GDP in the EAC Partner states

7. Growth in exports among EAC members increased considerably during the past decade ($billion) 3rd EAC FORUM

8. GDP per capita (PPP) in African regions (2004-2050)

9. INSTITUTIONAL CHANGES (Maputo – CAADP) Framework for restoration of agricultural growth, food security, and rural development with key principles and targets: • Allocation of 10% of national budgets to agriculture • 6% average annual sector growth • Exploitation of regional complementarities and cooperation • Accountability, partnerships, regional coordination Pillar I Land management& Water control Pillar II Infrastructure & Market Access Pillar III Food Supply & Hunger, safety nets Pillar IV Agricultural Research & Technology

11. IAGRI EAC-trade

12. REGIONAL STRENGHTENS-1 • Abundant Natural Resources (land, water) • Fig:Estimated % of underutilization of Arable Land in the EAC

13. REGIONAL STRENGHTENS-2 • Commitment of the political leadership to industrialization, economic transformation, modernization & diversification of the EAC’s production (e.g.EAC Dvt Strategy 2011/12-2015/16; EAC Food Security Action Plan 2011-2015) • Flexible labor force and labor markets i.e. in terms of ease of employing workers • Liberal Policy environment with: a/ Stable macro-economy (predictable exchange rate and single-digit inflation rate b/ Thriving environment for public-privatesector partnerships c/ A growing services sector

14. Regional Challenges • Each region in EAC has its own related challenges: • in the densely populated East African Highlands, farm sizes are often too small to make a living, farmers • the ASAL regions have larger areas but face food shortage attributed to drought and very poor soil conditions Source: FAO/IIASA, 2000

15. With increasing population, the pressure on agriculture to provide food and livelihoods is equally increasing. Fertility rates, 2011 Population density, 2000

16. Africa’s growing urban population

17. Increases 2010 to 2050 Total population: double Urban population: triple Marketed food: 5-6 times Source: UN Urban Projections (http://esa.un.org/unup/; Maddison (2008) income projections; USDA (2010) consumption elasticities

18. Urbanization (3%) + income growth (2%)  rapidly growing food markets  changing composition of demand + meat + dairy + fresh produce + processed foods

19. REGIONAL OPPORTUNITIES • Food staples are locally grown • Expanding high quality local industry • Sizeable corporate middle class, partlyinternationally exposed • Growing crop production and increasing food demand • Raw materials are reasonably priced • Local farmer groups/Unions available • Reliable agriculture extension services available • A consolidated EAC regional market of 145 million people • Expanding Domestic Market: The EAC region has one of the highest population and fertility rates in the world

20. EAC Master Power Plan

21. REGIONAL WEAKENESSES-1 • Inadequate infrastructure; poor quality of electricity supply, inadequate water supply, port and railroad development roads • Inadequacy of industrial finance • Gaps in the institutional frameworks for research and development prioritization • Inadequate managerial skills in quality management and compliance with international standards • Low institutional development and network impair national competitiveness with respect to the general cost of doing business • Low level of technology and lack of indigenous capability of technological mastery: Deficiency in technology and lack of indigenous capacity to develop technology, or the capacity to adopt and adapt foreign technologies • Low level of knowledge management to keep abreast with constantly changingmarkets, technologies, regulations andbusiness practices

22. REGIONAL WEAKENESSES-2 • Lack of necessary Skills on the part of enterprises: technical skills in industry, financial management, production, material and project management • Low Labor Productivity due to poor work culture, poor attitudes and lack of technical skills required of an industrial labor force which impairs cost competitiveness of industrial output • Low on-farm productivity which limits the cost competitiveness of agricultural raw material available for industrial processing and full exploitation of the agricultural potential • Lack of adequate serviced industrial parks to attract private sector investment in general and industrial development in particular • Poor Quality of Products: A number of EAC’s products are not competitive in the regional and international markets largely due to their low quality

23. Non-tariffs barriers-NTBs • Import and export bans • Multiple roadblocks • Numerous weighbridges and corruption along the Northern corridor • Burdensome import licensing requirements • Lack of harmonization in regulations related to standards • Rules of origin

24. Opportunities for agri-business initiatives • Increase crop and animal production • Improve linkage of small scale farmers into the supply chain access to market and market information • Create Jobs • Improve access to resources ( capital, land, water) • Transfer knowledge and adapted technology • Develop agro-industries for value-addition processing But there is a major concern that where/when agricultural development resulted as a series of opportunistic/spontaneous events or where it was driven by sporadic market forces alone, it did not deliver a sustainable development trajectory;

25. In any future scenario the key words for small scale agricultural development should be: • Integrated, comprehensive, innovative, interactive; • Not big push effects; rather “Tipping Points” - actions that cause the agricultural development “virus” (productivity and growth) to spread –- farm by farm (hybrid seed corn, USA,1930’s – Gladwell, Ryan & Gross; Green Revolution cases, 1980’s): • “Tipping Points” likely to be found in trade driven ag-food business systems ; super markets; supply chain management; farm business contracts; good governance; food security management & politics; • Opportunities not grasped – yet!

26. Demand has increased - the market is there; small farmers are struggling to keep up! • Aim is that small scale farm producers should become "members of the food business team”, operating in an integrated and coordinated manner with processors and retail/supermarkets. • Be aware that International and local food and agbiz value chains will drive the “scramble” for land and water resources and in this the • Competition will be between chains.

27. CONCLUSIONS EAC has potential for positioning itself as a food basket for Africa and the rest of the World (relatively good climate, capacity to grown many food crops, big size of arable and irrigable land, etc.) EAC has to address the following in order to improve the trade performance: • Improvement of the physical infrastructure in the region (roads, railways, airways, communication) • Education of traders/businessmen on how to manage and improve their businesses • Informal trade: hence the region can see ways on how to harmonize domestic laws and regulation, tax systems so as to reduce this form of trade • Any attempt to increase formal cross-border trade in EAC should be accompanied by the design and implementation of joint trade policies as well as effective customs procedures.

28. Policy makers, scientists, researchers- Providing opportunities to study in the wider contexts of economic dev’t, security, world trade, climate change (climate-smart agriculture) Entrepreneurs, traders, processors, wholesalers & those who interface with producers and business people -Improving agribusiness education in agribusiness Extension workers/change agents-Training in soft /personal mastery skills Rural technicians and artisans- Technical and vocational training Small-holders and farmers -Empowering them with both opportunities for learning and information , i.e. Make them knowledge-able

29. Recommendations -1 Continue the big fight to reduce/remove non-tariff barriers that continue to stifle marketing and trade Avoid policy reversals and backsliding of regional agreements-strengthen capacity to understand the benefits of agreed policies

30. Recommendations -2 iii) Inculcate among partner states the need to think regionally and strengthen capacity of members in understanding what they need from policy analysts iv) EAC to make a more deliberate effort to fund market and trade-facilitating mechanisms that enable partners states to be more cognizant of the need to implement the agreements.

31. EAC : building synergies

32. “The agriculture is the mother of all arts. When it is well conducted, all other arts prosper. When it is neglected, all other arts decline” Xenophon (430-355 BC), The Economics, V Think twice,…& Thank You all.