Improving Market Access to the Poor in Africa

1. Improving Market Access to the Poor in Africa Assefa Admassie Ethiopian Economic Policy Research Institute

2. 1. Introduction • Global progress has been made in meeting the MDG target of reducing poverty by half by 2015. • But, Sub-Saharan Africa is clearly not going to achieve the target. • New pathways and actions are required to reach out the extremely poor and hungry people in Sub Saharan Africa. • Improving market access and connecting the poor to markets could be one such strategy.

3. 1. Introduction…Cont • Efficiently operating input and output markets provide opportunities for the poor to improve their incomes and livelihoods. • Well functioning markets helps in: • modernizing agricultural production, • creating economic opportunities, • improving food security, • motivating farmers to acquire and use productivity increasing inputs,

4. 1. Introduction … Cont. • assuring effective vertical integration and coordination in input supply, credit and output marketing, • encouraging farmers to specialize in productions where they have competitive advantage. • Nevertheless, many farmers in Africa don’t participate in the market and produce largely for their own consumption. • Why?

5. 2. Major Challenges Hindering Market Access • Participation in the market - both costly and risky. • Marketing costs are high due to: • poor transportation and communication networks • remoteness of production activities and dependence on uncertain and seasonal environment and production process • Very small and thin markets • Weak regulatory and support policies

6. 2. Major Challenges…. Cont. • Production risks are high: • Producing for markets might require intensive and costly input use, • Growing a new variety involves more uncertainty than growing a staple food crop, • Returns to commercial crops take time, • Costs of improved technologies high • Unavailability of improved technologies.

7. 2. Major Challenges ….Cont. • Marketing risk is also high: • Weak input and output markets, • High price volatility, • Limited purchasing power, • limited capacity for agro processing, • Limited access to market information, • Weak bargaining power, • Absence of standards and grades, • Low industrial base.

8. 3. Some Policy Actions to Improve Market Access • New and increasing market opportunities • A global shift in demand towards high value commodities, • Growing urban market. • Policy interventions required to enable poor farmers to tap opportunities and improve their participation in the market.

9. 3. Policy Actions … Cont. • Improving Policy Environment • Overregulation increases marketing costs, • Unpredictable and ad hoc public intervention in markets leads to uncertainties. • Improving Market Infrastructure • Improved transport and communication infrastructure, • Investments in market sheds and collection points, • Investments in storage facilities.

10. 3 Policy Actions …. Cont. • Developing Market Institutions • Stable and robust institutions: • reduce coordination costs and risks, • enforce contracts, • Improve participation and empowerment, • Reduce vulnerability to market risks.

11. 3. Policy Actions … Cont. • Providing Market Information • Unable to respond to market signals, • Weak bargaining power, • Risk premium increases, • Market information provided by radio and newspaper. • New opportunities - the Internet and mobile phones.

12. 3. Policy Actions .. Cont. • Supporting Framers Organizations • Capacity of farmers strengthened • Marketing costs reduced • Vulnerability of farmers reduced, • Bargaining power improved • Economies of scale optimized. • Providing Advisory Services • Help to improve farmers production and marketing strategies

13. 3. Policy Actions … Cont. • Improving Risk Management Systems • Risk-management instruments and greater price security. • Crop/weather insurance mechanisms • Development of • Commodity exchange systems • warehouse receipt system, and • Food- security reserve systems.

14. 3. Policy Actions .. Cont. • Other Potential Policy Interventions • Promoting contract farming • Promoting private sector development • Enhancing intra-regional trade • Enhancing the developmental role of the state

15. 4. Conclusions • Framers in Africa produce largely for their own consumption due to weak market opportunities. • Urgent interventions needed to improve market access and reduce costs and risks. • Support for farmers in the form of price support and/or subsidies for inputs, outputs or credit market • Improved market coordination and institutional setups • Linking technological development with market approach

16. Thank You