Competition issues in agriculture sector in 7up4 countries

1. Competition issues in agriculture sector in 7up4 countries Cornelius Dube & Rijit Sengupta Final Project Conference 7Up4 project 6-7 August 2010 Dakar, Senegal

2. Outline of Presentation • Why the agriculture sector? • Brief Methodology • Nature of Market in production • Competition concerns in inputs market (Seed) • Competition issues in marketing • Other areas of concern • Conclusions • A few recommendations

3. Why the Agriculture sector? • Backbone of economic activity in all countries • Largest employer of labour • Significant foreign currency earner • Significant contribution to GDP

4. Brief Methodology • A major crop selected for each country, in terms of importance to economy • Assessment done at all three levels of value chain; for Mali and Togo restricted to the input segment • Inputs collated from country reports + analysis of secondary data/information + analysis of primary data • Elements of Competition Assessment Framework (CAF) utilised in overall assessment of competition concerns • Involves identification of major players, calculation of market shares and estimation of concentration

5. Nature of market in production • Competition concerns arise if production is controlled by few large farmers, who can influence prices • Production is dominated by small-scale farmers, uncoordinated across households • Producers have no control over prices in input or output markets • Existing associations do not provide farmers any bargaining power • With so many producers and uncoordinated activity, no competition concerns were noted

6. Competition concerns in inputs market (Seed) • Seed market analysed from perspective of the selected crop • Informal market dominates the supply of seeds for farmers • Formal seed market (govt deptt/research institutions) – weak ‘extension services’ • Seeds easily available from ‘informal sources’ • Private sector participation is minimal (little incentives) • Governments supply certified seeds through some programmes – weak reach-out

7. Competition concerns in inputs market (Seed)(Contd.) • Seed market is generally not concentrated in Gambia and Senegal, moderately concentrated in Nigeria • A dominant private firm present in Burkina Faso • Two SoEs together control 78% of seed supply in Togo • Rice and maize seed supply are each dominated by one player in Mali - supplying 98% and 76% respectively • Allegations of excessive pricing and shortages common in highly concentrated markets

8. Competition issues in marketing • A stage where several competition concerns are witnessed • Characterised by monopolies in Gambia, Ghana and Burkina Faso • GCC has exclusive marketing rights, after licensed buying cos. (LBCs) buy from farmers • COCOBOD has exclusive marketing rights for cocoa beans after LBCs buy from farmers • SOFITEX is involved throughout the cotton value chain in Burkina Faso • Dominant private firm emerged from privatisation in Senegal • Fair competition is noted in the Nigerian rice (processing)

9. Competition issues in marketing (Contd.) • Strategic, natural and policy-induced barriers to entry influence the market structure • In Gambia and Ghana, scope for introducing competition exist at LBC agents level • In Senegal, the dominant company is a direct beneficiary of the privatisation process • Allegations of abuse of dominance in Senegal and UTPs in Ghana • Farmers have remained with no bargaining power

10. Other areas of concern • Structure of market greatly determined by government policies • Subsidies and support for SoEs • Absence of competitive neutrality (exclusive rights) • Dominant firms cast high level of influence over entire value chain • Non-transparent licensing regime • High investment and low incentives for private players to compete with SoE

11. Conclusions • Considerable competition noticed in production • Farmers (and associations) have no bargaining power • High concentration in inputs markets have implications for low productivity • Concentration among buyer’s at farm gate impact farmers • Lack of incentives for monopolies to be efficient – no threat of competition • Various policy-induced factors act as ‘entry barriers’ – need to be reviewed • Little private sector participation • Improper process of setting ‘prices’ of products

12. A few recommendations • Focus on reducing concentration in input markets for improving productivity • Promote competition among LBCs through appropriate measures • Explore ways to attract private participation in marketing of quality seeds (public-private-partnership) • Review composition and modus operandi of price setting committees • Competition authorities to closely monitor behaviour of dominant players (& monopolies)

13. THANK YOU!