Agricultural_Commercialization_Clusters_(ACC)_Overview_-_February_2016.pdf

Overview of the Agricultural Commercialization Cluster (ACC) Initiative

February 2016

Why Smallholder Farmer Commercialization?

Concept of Agricultural Commercialization Clusters (ACCs)

Design and Geography of the ACCs

Current Status of Implementation

Agenda

Evidence strongly suggests smallholder commercialization as a means of transforming farmers lives and driving overall national economy development

• No profit or additional income is generated: There is not usually much harvest to sell or trade:, and what surplus there is tends to be stored to last the family until the next harvest

• Limited specialization and diversification: Staple crops for subsistence continue to dominate production, while traditional raw commodities dominate exports

• Doesn’t encourage investment by small holder farmers: without a strong linkage to markets, the farmer will not have incentive to produce quality surplus produce by investing on inputs and recommended best practices

In the long-run, subsistence agriculture may not be a viable activity to ensure sustainable household food security and welfare

Smallholder commercialization is assumed to lead towards more specialized production systems based on comparative advantages in resource use

Empirical evidence and case studies suggest commercializing smallholder agriculture is an indispensable pathway towards economic growth and development for most developing countries relying on the agricultural sector

Source: ILRI –Smallholder commercialization, World bank, Afric Dev’t Promise, ATA analysis

In subsistence production, the farmer’s objective is food self-sufficiency by using mainly non-traded and household generated inputs and selling only whatever surplus product is left after household consumption requirements are met (IFPRI).

Commercialized households are targeting markets in their production decisions, rather than being related simply to the amount of product they would likely sell due to surplus production

• Smallholder Income and employment effects:

commercialization tends to generate more household income due to its comparative advantages over subsistence production. It also creates employment especially when labor demanding high-value commodities are targeted

• Macroeconomic Effects: developing countries with large population shares in the agricultural sector can generate more income, thus economic growth

• Increased raw materials for the industry: Enhances stability and quality of supply of commodities for processing and value addition

• Growing global demand for food: Global demand for food and agricultural goods is growing rapidly with ~4X greater opportunity for Ethiopia in processed goods

Successive poverty-reduction strategies in Ethiopia seek to achieve industrialization through commercialization of smallholder agriculture

“Inherent in Ethiopia’s process of agricultural transformation is the transition of our smallholder farmers from subsistence based farming towards market orientation and broader agricultural commercialization.”

H.E. Prime Minister Hailemariam Desalegn

“…achieving a sustainable increase in agricultural productivity and production, accelerating agricultural commercialization and agro-industrial development, including value chains, reducing degradation and improving productivity of natural resources….”

Agricultural Sector Policy and Investment Framework (PIF), 2010/11

– 2019/20

“Integrated Agro- Industrial Parks (IAIPs) are one option to transform Ethiopian agricultural production from being fragmented and supply-driven to becoming organized, safe, demand-led and quality-oriented” IAIPs, Ethiopia PCP Program

Ethiopia’s agricultural-led industrialization growth demands for commercially driven production of agricultural raw materials for the development of agro-processing and light industry (textiles, leather, etc)

Realizing smallholder commercialization requires a new approach, a change from business as usual.

Smallholder farmer commercialization is also consistent with the GTPII goals of agricultural specialization, diversification and intensification

High-level goals for the Agricultural Sector

I. Accelerated growth in agricultural production with gradual shift towards high-value commodities

II. Sustainable, broad-based, and inclusive agricultural development

III. Elimination of national food gap

IV. Establishment of a market system that benefits farmers and non farm actors

V. Improved implementation capacity

Strategic objectives

1. Increased and market oriented crop production and improved productivity focus on strategic crops

2. Increased livestock production and productivity

3. Reduced degradation and improved productivity of natural resources

4. Enhanced food security at national and household level

GTP II developed around five high-level and four strategic objectives

Commercialization of Smallholder farmers would compliment the strategic objectives of GTP II

Source: GTP II Document, ATA analysis

• Ensures specialization of smallholder farmer production to high-value strategic commodities, with increased income and employment opportunities

• Market oriented production/commercial orientation of farmers will ensure supply of sufficient quantity and quality of raw material inputs for agro-processing industry

• Establishment of market systems to ensure efficient aggregation and supply of production, with farmers getting the right income for their produce

• Increased export in livestock and other export-oriented commodities, contributing to increased export shares and enabling smallholder farmers directly benefit from international markets through cooperative development etc

• Ensuring raw material supply for four agro-industry parks to be established during GTP II though diversified production system

“…implementing the scaling up strategy fully and implementing cluster based agriculture development and solving the problems in relation to agricultural input supply and technology adoption will be the strategic direction of the next (GTP II) growth and transformation plan.” GTP II

Design and Geography of the ACCs

Current Status of Implementation

Many countries have used geographically focused approaches to drive agricultural specialization and overall commercialization

Such approaches have been used to drive agricultural transformation and rural industrialization in various different forms in Asia, Latin America and Africa

“ An agro-based cluster is simply a geographic concentration of producers, agribusinesses and institutions engaged in the same agricultural or agro-industrial sub-sector, that interconnect and build value networks when addressing common challenges and pursuing common opportunities. ”

- FAO Study on Agro-Clusters in Developing Countries

• Industrial zones / corridors

• Development corridors

• Agro-processing / Food parks

• Agricultural growth corridors

• Agro-clusters

• Innovation / technology clusters

Commodity value chain focused geographic clusters provide a strategic, market-driven platform to implement multiple, priority interventions in a manageable and tailored way

• Export processing zones

• Special economic zones

• Free trade zones

Over 10 countries were studied to identify best practices to drive agricultural transformation and rural industrialization in geographically focused approaches

Legend: Export Processing or Special Economic Zones

Agricultural Clusters and Corridors

Mexico

Chile

Brazil

Nigeria Kenya

Mozambique

Tanzania

India

Japan

South Korea

IndonesiaMalaysia

Thailand

China

More recent Asian Industrial Corridors continued to apply similar concept to drive economic growth

Background and Objectives Results to DateIndustrial Corridor Initiative

Special Economic Zones (SEZs), People’s Republic of China

East Coast Economic Region (ECER), Malaysia

• Six SEZs were initiated since the late 1970’s, with quasi-legislative powers and flexible economic policies in order to create and attract foreign investments, primarily through the export of processed goods

• Among the major incentives, China offers special financial, investment and trade privileges for FDIs within the SEZs

• Started in 2007 with a span of 12 years, ECER was master-planned by Malaysian oil and gas company, Petronas, and aims to improve manufactured exports and tourism, as well eradicate poverty

• Includes extensive infrastructure upgrades to create a major logistics and trade hub

• Increase of GDI, export, FDI and jobs: By 2007, SEZs made up ~22% of GDP, ~46% of FDI, ~60% of exports and >30 million jobs

• Regional growth: Shenzhen’s SEZ population grew from ~30K to >1M in 20 years by employing Youth from rural areas

• Terengganu, one of the states part of the ECER, has alone attracted ~6bn USD in private investments,

• Created 10,847 new jobs

• Established 789 new SMEs in the last 5-6 years

Incheon Free Economic Zone (IFEZ), South Korea

• Comprising 170 km2 and established in 2003 to transform the region into an international hub for technology industries and exports including specifically youth-led businesses

• Development in three stages: (1) Infrastruc-ture development (2003-09) (2) Expansion of infrastructure (2010-14) (3) Become a top 3 economic zone in the world (2015-2020)

• Extensive major infrastructure completed including roads, bridges, waterways and sewerage, industrial parks, other urban infrastructure

• $65B in foreign investment into the IFEZ has been committed

• Four top international universities opened l programs within the IFEZ

Source: How Do Special Economic Zones and Industrial Clusters Drive China’s Rapid Development?, World Bank, March 2011; http://www.ecerdc.com.my/; http://www.ifez.go.kr/ http://www.ecerdc.com.my/ http://www.ifez.go.kr/

Fruit Clusters in Latin America demonstrate how this approach can be successfully applied in agriculture

Source: Agro-based clusters in developing countries: staying competitive in a globalized economy: FAO, 2010

Location Fruit Hectares planted

% of national production

% of total exports of fruit

Brazil - Rio Grand do N.

Melon 4,545 38% 70%

Brazil - Santa Catarina

Apple 13,046 51% 96%

Brazil - Petrolina Juazeiro

Mango 10,432 26% 90%

Brazil - Petrolina Juazeiro

Grape 5,683 8% 30%

Chile - Maule Raspberry 8,330 80% (no data)

Chile - Valparaiso Avocado 12,000 70% (no data)

Mexico - Michoacán

Avocado 83,055 88% (no data)

Mexico - Colima Lemon (no data) 35% 18%

Mexico – Veracruz Pineapple 7,221 64% 5%

Avocado

Raspberry

Lemon

Avocado

Pineapple

Ecuador

Peru

Bolivia

Paraguay

Uruguay

Brazil

Argentina Chile

Colombia

Venezuela Guyana

Suriname

Mexico

Melon

Mango

Apple

Latin American Fruit Clusters

Grape

> 50% share

Nigeria is restructuring its agriculture sector with a large-scale national Crop Processing Zone framework

Source: Agricultural Transformation Agenda: Repositioning agriculture to drive Nigeria’s economy, presentation by the Minister of Agriculture and Rural Development for Nigeria, November 2012

~$1B Staple Crop Processing Zones (SCPZ) initiative to significantly reduce imports

SCPZ’s introduced to move away from isolated projects that do not clearly grow the sector in a clear and measurable way

SCPZs also compliment range of other measures taken to spur production and processing

• Focusing on value chains where Nigeria has comparative advantage

• Integrating food production, storage, processing and industrial manufacturing (‘farm to fork’)

• Investment-driven partnership with private sector

• Joint ‘investment drives’ with States

• Full deregulation of seed and fertilizer sectors

• Marketing reforms to restructure markets

• New agricultural investment framework

SCPZs expected to generate 1M new jobs (direct employment) and $4B to $8.5B for the economy

14 SPCZs being established across the country focused on specific priority commodities

• Cereals: Rice, Sorghum, Maize

• Fruits and Veg.: Onions, Tomato

• Livestock and Fisheries

• Other: Soybean, Cassava, Cotton, Cocoa, Palm Oil

~$550M of support committed from UNIDO, World Bank and African Development Bank

Each SCPZ also has a large domestic or international private sector investor who anchors the corridor

• $8B+ pledged by local & foreign investors in 2012

Significant policy and regulatory incentives in SPCZs

• Removal of investment restrictions, including maximum equity ownership by foreign investors

• Pioneer tax holiday for agricultural investments

• No currency exchange controls

Each SCPZ focused on a priority commodity, anchored by a lead firm

Ethiopia has also initiated similar geographically focused initiatives with initial success and also some challenges

Key Design FeaturesObjectives

Economic Growth

Corridors

(EGC)

Agricultural Growth Program

(AGP) - MoA

Current Status Main Challenges

• Initially broad objectives to ‘drive agricultural development’ (PASDEP)

• National framework (2010) to harmonize approach and regional efforts

• Coordination of spending and resources, sufficient geographic concentration

• National framework (2010) not officially endorsed by GoE with no implementation to date

• Regions have continued to focus on initial plans developed from PASDEP (see next slide)

• 96 selected woredas for AGP I and 157 Woredas for AGP II

• Selection based on production with the objective of increasing agricultural productivity, farmer income, market linkage and food security

• AGP II planning underway

• Large infrastructure gap

• High cost of an ECG

• Low prevalence of financial institutions

• Difficulty attracting foreign investment

• Focus woreda are geographically scattered

• Procurement delays affecting implementation calendar

• National Framework (2010) based on learnings from Malaysia & Vietnam

• Strong criteria for corridor selection: agro-ecology and comparative advantage

• Concern with balancing social equity versus economic efficiency

• Dedicated AGP officer for each woreda to coordinate partners and interventions

• Formed by a consortium of partners led by the MoA and the

WB

• Specific focus area assigned to each partner

Regions in Ethiopia have tried to take forward the Economic Growth Corridor concept with important learnings and some results on the ground

Main findings from engagement at National and Regional level

Key challenges identified by Regions in implementation

Strategy and approach

• Lack of common understanding of EGCs across and within regions and sectors

• Low specialization and diversification

• Low focus on markets, value addition

• Limited value chain approach

• Difficulty of prioritization

Implementation modalities and resources

• Weak Coordination among actors

• Limited alignment and integration with other programs and activities

• Insufficient financial resources

• Major infrastructure gaps

• Poor market linkages

Some initial progress was made

• Commodity and geography prioritization

• Identification of implementing organizations

• Basic and agro-processing Infrastructure improvements

• Mobilization of community leaders

• Creation of new institutions including Technical Committees, research groups

Some areas have started to refocus on more targeted initiatives for priority commodities

Lessons from international case studies identify critical elements and success factors for design and implementation of cluster approach

Importance of appropriate platforms and discussion forums to effectively engage all public, private and NGO partners in both the design and execution of the concept

Bridging public & private sector

Execution and program management

Ownership & governance structure

Creating the right incentives and enabling environment to facilitate increased investment from the private sector

Focus on market requirements and strengthening backward and forward linkages as well as supporting service providers

Strong political leadership and ownership at the highest level of government at both the Federal and Regional level

National level alignment on objectives and priorities and selection of commodities

Lean and effective governance structure with clearly defined roles and responsibilities for all actors involved in implementation

Rigorous performance management approach with clear targets and empowered program management at all levels, with robust decision-making and reporting

Building capabilities throughout the effort, from leadership to front line

Critical success factors

The Agricultural Commercialization Cluster (ACC) concept brings together many of the initiatives from the Transformation Agenda in GTPI with greater integration

Key features of the GTP-I Transformation Agenda Approach for the ACC initiative

Focused on market needs and clear linkages between inputs, production, processing, value addition, high-value export and domestic markets

Market-orientation linked to production focus

• Interventions spread across different regions in Ethiopia

• Limited geographical overlaps of various interventions limited the impact from synergies

Geographical focus but weak coordination

Integration of solutions to more efficiently solve for the commodities (cereals, livestock, horticulture) prioritized by smallholder farmer and GTPII targets

Incorporates mixed cropping system used by smallholdersFocus on individual crops

Specific interventions designed for cereals – tef, maize, wheat without including horticulture and livestock

Full set of interventions focused on the same high potential geographies bringing out synergies

Geographic approach with focus on coordination

• Production focused interventions with emphasis on seeds, soil, research, extension, crop packages, and irrigation

• Key examples:

- Direct Seed Marketing

- Rural Financial Service

- Tef (TIRR) package

Production oriented approach

Rural financial Services

Design and Geography of the ACCs

Current Status of Implementation

ACC’s vision is to support agricultural led growth and rural transformation

Overall Vision

Rapid, sustained and inclusive development of priority agricultural commodity value chains in a geographically-focused approach that provides a strategic and commercially viable platform for the implementation of multiple, priority interventions for agricultural transformation-led growth and rural transformation

• Drive specialization, diversification and commercialization of agriculture for priority commodity value chains in surplus-generating geographic areas

• Enhance production and productivity, quality of outputs, aggregation, value addition and market linkages

• Scale up existing yet proven initiatives that are being undertaken with in the Agricultural Transformation Agenda by the ATA, MoA, RBoA and other partners

• Increase processing and other value addition activities within clusters to generate economic growth within a cluster

• Provide an integrated platform to implement multiple, priority interventions across the value chain and across sectors

• Improve focus and coordination among public sector, private sector, donors and NGOs

• Lay the ground for information delivery infrastructure to optimize extension service provision and develop timely decision support system

ACC Goal ACC specific objectives

Increase incomes of small-holder farmers

Improved access to domestic and international market

Increased agro-processing and value addition

Create off-farm employment opportunities

ACCs will use various approaches to achieve its vision and objectives

Commodity and geography specific clusters focused on commercialization provide a strategic and sustainable platform to drive agricultural transformation-led economic growth:

• Clustering of woredas to support rapid enhancement of priority commodities and value chains through proximity of actors

• Ultimate focus on processing and value addition to ensure specialization, diversification and sustained growth

• ACCs can drive integration and effective execution of multiple, prioritized interventions across value chains, actors and sectors

Overall Approach

Cluster Development

Approach

Intervention Prioritization Coordination

Approach

• Clustering of adjacent Woredas to support rapid enhancement of priority commodities and value chains

• Optimal size balancing proximity and value chain integration with sufficient production and economies of scale

• Minimum existing production capacity as well as infrastructure to support rapid development

• Multiple commodity value chain approach in each cluster area with commodity interconnections in multi-cropping, farming systems, feed requirements for livestock, cold chain requirements etc.

• Crops, livestock and horticulture as focus commodities

• Establishment of multi-stakeholder platforms to prioritize, sequence and coordinate the activities of all relevant stakeholders

• Prioritized interventions related to production, productivity and market linkage will be implemented in all woredas of the cluster.

• In the future, large scale interventions on agro-processing and value addition will be concentrated in selected strategic locations to obtain greatest result and economies of scale within the cluster.

Design features of ACCs consider critical success factors to bridge public-private sector, ensure ownership and effective program management

Appropriate platforms

Performance management

Governance structure

Building capabilities

Market requirements & linkages

Political leadership & ownership

National level alignment

Right incentives & enabling environment

Establishment of value chain alliances bringing together the technical expertise necessary to adequately sequence and coordinate the activities of all relevant stakeholders, roll out the identified interventions and problem solve issues

ACC Regional Secretariats and Regional Councils introduced to provide effective multi-stakeholder coordination; oversight supported by the NCCU at the National level

Targets setting and interventions planning in ACCs driven by market demand and requirements, considering all parts of the value chain

Rigorous performance management including various stakeholders (public sector, development partners, private sector);

Implementation of standardized processes and tools for performance tracking and program management in all ACCs

Capacity building internally from national level to ACC Support Teams to support effective cluster approach and externally through the focus on market- and data-driven target setting and planning exercise

Federal oversight provided the Agricultural Transformation Council chaired by the Prime Minister; Regional oversight provided by the Councils chaired by the Regional Presidents

Establishment of the National Coordination & Capacity Building Unit notably in charge of providing analysis & recommendations for national level policy refinements and incentives based on inputs from Regional level ACC Secretariats

Align of the ACC program with the national prioritization of commodities and major initiatives (Livestock Master Plan, MoI Integrated Agro Industrial Food Parks and othe major donor programs Agricultural Growth Program (AGP), Feed the Future, others

Bridging public & private sector

Execution and program management

Ownership & governance structure

Critical success factors Design features of ACC in Ethiopia

Clusters & commodities were identified using a 3-step process involving rigorous analysis by ATA and extensive consultation with federal and regional stakeholders

Step 3: Prioritize clusters by commodity and prioritize overall

Step 2: Identify candidate clusters for each commodity

Step 1: Prioritize commodities

1. Production potential and smallholder farmer coverage by commodity

2. Size of export / import substitution and domestic market opportunity

3. Ethiopia’s comparative advantage in the international market by commodity

4. Strategic drivers by commodity at regional or national level

1. Woredas with high production potential and production system for prioritized commodities

2. Woredas with sufficient natural resource endowment

3. Groups of woredas that meet cluster size and initial scale requirements

1. Potential production by commodity

2. Basic infrastructure by cluster

3. Value addition capacity by cluster, including aggregation & storage, processing, links to transport & market proximity t

4. Access to markets by cluster

5. Presence of institutions and ongoing initiatives in the cluster

List of priority commodities for the region

List of potential clusters for each priority commodity identified in step 1

List of regional clusters with an internal order of priority for each crop

Decision inputs

Output

ATA will focus support on a few specific clusters and value chains during GTP II, although some regions have clustered their entire region

Steps 1. Production potential 2. Strategic Drivers for ATA focus

Poultry Horticulture Poultry & soybean Sesame Wheat Coffee Beef Diary Honey

Maize Chickpea Tef Malt Barley Cotton Potato Haricot bean Sorghum etc

VC output description

Current and future Production potential and smallholder farmer coverage by commodity

Size of export / import substitution and domestic market opportunity; Ethiopia’s comparative advantage in the international market by commodity

VC output

1. Sesame

2. Maize

3. Tef

4. Wheat

5. Malt Barley

6. Haricot Bean

7. Coffee

8. Beef

9. Diary

10. Poultry

11. Honey

12. Horticulture

Focus of implementation for

2008EC (2016)

Design of interventions in

2008 EC (2016)

Regions’ clustering exercise

Entirely Mapped To be Mapped

Amhara

SNNP

Tigray

Oromia

While ATA will focus on the above VCs in GTP II, the regions will be working in many other commodities across the entire region

ATA will sequence its efforts in 12 Value within 26 cluster geographies

12 VCs have selected for focus by ATA in GTP II

National overview of ACC woredas and overlap with Integrated Agro-Industry park

Amhara Region: geographic overview of ACC woredas and overlap with Integrated Agro- Industry park

Oromia Region: geographic overview of ACC woredas and overlap with Integrated Agro-

SNNP Region: geographic overview of ACC woredas and overlap with Integrated Agro-park

Tigray Region: geographic overview of ACC woredas and overlap with Integrated Agro-

ACCs operational structure has strong linkage between Federal and Regional ACC Secretariats

Members

MOA

RBOA’s ATA (Secretariat)

EIAR

MoT

MOI

MOWE

MOFED

Amhara:

Regional

President & ACC Secretariat

Oromia:

Regional

President & ACC Secretariat

SNNP:

Regional

President & ACC Secretariat

Tigray:

Regional

President & ACC Secretariat

Agricultural Transformation Council

Industry Advisory Group

Note: Focal points in Federal Ministries and Agencies support the National ACC Coordination and Capacity-building Unit

Prime Minister

National ACC Secretariat &

Coordination & Capacity-building

Unit

Implementation structures introduced in the Regions provide effective multi-stakeholder coordination and oversight

Commodity Value Chain Alliance

ATA MoA

Regional ACC Council Members

Regional ACC Council

Regional ATA branch office/ACC secretariat

Industry Advisory Group

Regional President

ACC #1 ACC #2 ACC #3 ACC #4

Secretariat Lead

Backstopping and support

Commodity Value Chain Alliance

Second Reporting Line

Value Chain Alliance Commodity Value

Chain Alliance

Commodity Value Chain Alliance

Value Chain Alliance

ACC Support Team

ACC Support Team

ACC Support Team

ACC Support Team

Commodity Value Chain Alliance

Commodity Value Chain Alliance

Value Chain Alliance Commodity Value

Chain Alliance

Commodity Value Chain Alliance

Value Chain Alliance

Design and Geography of the ACCs

Current Status of Implementation

ATA is working with Regions to develop a 5 year master plan for each Cluster with a targeted interventions to guide implementation

• Menu of 5-year interventions, output, targets, and costs developed

• 108 required interventions identified, prioritized and sequenced for GTP II

• Robust 5 year ACC Targets - Production to Marketing

• 5-year ACC strategies / strategic planning to drive annual intervention and operational planning

ATA has worked with the Regions to identify 28 broad intervention areas for focused attention in each cluster during the GTP II period

Aggregation & Transport

Research, Input supply & distribution (S&D)

Processing & Value Addition

Commodity production

Domestic & Export Marketing

Infrastructure, Institutional Capacity Building, and Value Chain Development Support

Demand and technology driven research

Seed / seedling S&D

Livestock breed and other input S&D

Soil heath and fertility inputs S&D

Agrochemical inputs S&D

Mechanization, irrigation and on-farm storage input S&D

Input finance and risk insurance services

Extension and information services

Mechanization and irrigation services

Livestock-related services

Management and technical capacity building

Product and brand development services

Investment incentives and support

Market centre infrastructure, information and transaction platforms

Collective branding, marketing and export promotion support

Road, electricity, ICT and irrigation infrastructure development

Cooperatives development

SME development

Contract farming and out-grower scheme promotion

Commercial farming promotion

Professional association and value chain alliance development

Enhance capacity of governance and institutional arrangements for ACC implementation

Food safety, quality, traceability and verification / certification services

Materials, equipment, machinery and packaging research, supply, and services

Aggregation, output, trade finance and other financial services

Primary market infrastructure, information and transaction platforms

Storage infrastructure, mgmt. capacity & cold chain development

Supply chain mgmt.

capacity development

Inclusive and Environmental Sustainable Growth across the value chain

The deliverables in the Transformation Agenda will also be implemented directly with each ACC Cluster

Increase crop and livestock production and productivity

Enhance implementation capacity

29 program areas Pillars of the

Transformation Agenda

Crops

• Seed supply and distribution

• Fertilizer supply & distribution

Livestock

• Livestock breed and genetic Improvement

• Livestock feed and feeding

• Livestock health

Environmental sustainable and inclusive growth and national food security

• Soil health and fertility

• Rural land use & administration

• Climate change adaptation, mitigation & agricultural risk management

• Irrigation and drainage

• Watershed & agro-forestry development

• Bio-diversity

Commercial orientation of smallholder agriculture and market development

2 • Market services

• Market infrastructure

• Cooperative development

• Commercial & contract farming

• Agro-processing & value addition

• Domestic & export market development

• ICT for agricultural services

• Organizational and human resources capacity

• Evidence-based planning & MLE

• Private sector in agriculture

Crops & livestock

• Demand-driven research

• Market-oriented extension

• Rural finance

• Mechanization

NRM and Food Security

Inclusive Growth

• Targeted livelihood support (specially for youth, pastoralists, agro-pastoralists & food insecure populations)

• Gender equality

• Nutrition

• Crop protection and health

“Anchor” Deliverable

The Agricultural Commercializatio n Cluster Initiative as a means of integrating the solutions within the 29 Program areas. Focus on measurable impacts on smallholder farmers working on specific high priority commodities in clearly identified geographies.

At the most recent Transformation Council meeting, the PM suggested greater focus on Production, Productivity & Market Linkages

Aggregation & Transport

Research, Input supply & distribution (S&D)

Processing & Value Addition

Commodity production

Marketing & Export

Seed, Fertilizer, Input Finance1 Extension and capacity building2 Aggregation and Market Linkages3

a. Expand Direct Seed Marketing approach

b. Strengthen community-based seed multiplication

c. Improve accountability and transparency of inspection/ certification system

d. Develop Woreda & commodity group specific fertilizer recommendations

e. Develop Woreda & commodity specific soil amendments recommendations - Lime, BBM for clay soils, compost

f. Popularize soil fertility mapping

g. Improve linkages between importers and distribution channels for agro-chemicals & pesticides

h. Scale up Input Voucher system

i. Improve fertilizer demand assessment into market based system

j. Improve fertilizer supply chain management

a. Develop commodity-specific extension package recommendations that takes into consideration agro-ecology

b. Expand large scale demonstrations (FTCs, ATVETs, Village Gate, Model Farmers)

c. Create Innovation testing protocols and large scale demonstrations

d. Strengthen capacity of DAs, FTCs and farmers on commodity, agro-ecology and climate specific issues

e. Expand mass communication of commodity/ agroecology specific extension info. (e.g. ICT)

f. Expand farmer field days

g. Build capacity of DAs and Woreda experts to reach both FHHs and WiMHHs through tailored content and a differentiated approach

h. Provide training to DAs and farmers on pre-and post-harvest handling

a. Facilitate buyer-seller linkages (E.g. events)

b. Invest in cooperative storage capacity development (hardware and software, incl.

cold storage, silos, warehouses, etc.)

c. Establish national and/or local electronic market matching platforms to link buyers and sellers of commodities at various stages of processing and value addition (E.g. ECX)

Illustrative

This may also require some additional interventions identified from the master list of 108 interventions but not covered in TADs. These will come out of the Cluster and the Value Chain program diagnostic currently underway

Overall objective: Ensure sufficient quantity and quality of agricultural raw materials for agro-processing

Efforts in processing and value addition in the clusters will partly leverage the Integrated Agro-Industrial Parks project

IAIPs driven by infrastructure development, private sector incentives and aggregation centers

IAIP defined as ‘spatial clustering’ of agro-food value chain

Key intervention areas within Parks include:

• Common hard and soft infrastructure including utilities, processing, cold chain, storage, logistics for transport

• Knowledge and training hubs (e.g. R&D support, market information, product and business development, )

Rural Transformation Centers around Parks meant to provide

• Collection and aggregation points for producers

• Quality grading, sorting and short-term storage services

• Potentially other supporting services such as input provision and banking

Surplus production from clusters as input for IAIPs

• The ACCs are a good source of input for the agro-processors to be located in the IAIPs though contract farming schemes.

• The IAIP’s Rural Transformation Centers (RTC) serves as collection and aggregation points for producers and are potential service provision and input distributors for Small holder farmers.

• Common hard and soft infrastructure including utilities, processing, cold chain, storage, logistics for transport developments should supplement the ACCs.

• In addition, new investments should focus on promoting processing, value addition and market linkages

• Joint task force from ATA and MoI established.

1. Geographical and value chain overlaps identified

2. RTCs and Park locations mapped with ACC geographies

Initial alignment of the two projects started

In addition, ATA is working with relevant partners in developing investment cases for selected value chains to secure private sector investments in the ACCs

• For Ethiopia to more effectively engage domestic and multinational corporations in the agricultural sector and provide a strategic platform to help connect smallholder farmers with commercial value chain. In particular, to support the ATA in:

‒ Analyzing priority commodity value chains in the Ethiopian agricultural sector, assessing market opportunities, and developing investment cases o Mapping value chain actors, activities and constraints o Estimating the size of the market opportunity for investment o Estimating financial benefit for potential investors and smallholder farmers in each of the high-potential investment opportunities

‒ Packaging opportunities and developing promotional materials

‒ Establishing a living database of investors, processes to manage relationships, and guidelines to promote responsible investment that will last beyond this engagement

‒ Engaging potential investors and working closely with them in pursuit of these opportunities by facilitating responses to their questions/concerns

‒ Helping to build systems and capacity within the Private Sector in Agriculture team to continue private sector facilitation in the long-run

• Secured 10 or more investment commitments, ideally within ACCs

• Codified the ISP engagement’s “investor-centric approach” and promoted new norms for investor engagement

• Strengthened relationships between the ATA and government entities (esp. MOA, EIC, MOI)

• Transferred knowledge through appropriate training and dissemination of tools and information developed during ISP engagement

Objectives What Success looks like

For Discussion

Producers & Multilaterals Funds & impact investors

Detailed conversations with 29 investors conducted and additional informal interactions with 20 investors across types

TIRET

Private Chinese investor (Cheung)

Investment case studies for eight areas have been developed to date, at least one case study will be developed in each of the 12 prioritized VCs

Value Chain Investment Case

Cattle

1. Cattle fattening and abattoir for the domestic Ethiopian market and regional and

Middle Eastern markets

2. Packaged Ultra-High-Temperature Processing (UHT) long-life milk for the medium to high-end domestic market and regional export

Fruit & Vegetables

3. Cut, packaged fruit and vegetable for export to European and Middle-Eastern supermarkets

4. Mango juice and concentrate processing for Middle Eastern and European export markets

5. Tomato concentrate processing for domestic and export markets

Poultry & Soybean

6. Soybean crushing and processing for domestic consumer markets and B2B sales for animal feed

7. Vertically-integrated poultry processing (hatchery and meat processing) for chicken meat sales to the Ethiopian mass market

Wheat 8. Large-scale wheat processing for pasta, bread, and biscuits for sale on the domestic market and export to regional markets

In 2016, the ACC will focus on three major sets of activities

Major push on the production, productivity and market linkage side for the prioritized cereals, pulses and oilseed where significant work has already been done in the clusters during GTP I

Design of interventions for Horticulture, Beef, Dairy, Honey and Coffee in the current Meher season for implementation beginning in September

Establish the concept among key policy makers at Federal & Regional level, identify high priority commodities and clusters and establish a fact base for targets and interventions during GPT II for each Cluster.

Overview of Key areas and major progress achieved at the National ACC level

Federal Transformation Council stats to oversee the ACC project

ACC Governance Structures

Major ProgressAreas

National Framework for ACCs

Cluster /Commodity Identification and Strategy development

Key Milestones

• Agreement has been reached for the Federal Transformation Council to have a separate meeting on ACC and will provide high level guidance and leadership. The first meeting will be held on January 13th, 2016.

Develop a National Framework and agree with key stakeholders

• National ACC Framework validation workshop held by end of October 2015 at the presence of key ministries and development partners.

• Valuable input received at this workshop is being incorporated and a final draft that captures recent thinking in the ACCs, with emphasis on alignment with other policies strategies, is soon to be completed

Vision, target and 5 year interventions developed for the prioritized clusters and commodities

• During the GTP II, 21 clusters and 9 strategic commodities have been prioritized across 4 regions, in consultation with Regional and Federal stakeholders.

• This prioritization considered key drivers in reaching a consensus:

• Limited/focused clusters for maximum impact

• Commodities with Ethiopia’s comparative advantage and market opportunity

• Alignment of clusters/commodities with key policies/strategies

• Recent thinking and experience from the first year

• Cluster based Visions, Targets and Interventions for the next 5 years have been developed for primary commodities and the same would be developed for other commodities. Full fledged strategies for each clusters to follow starting in 2016

ACC Results Framework

ACC Results Framework finalized

• The Results Framework for the ACC is finalized and shared with IFPRI who are responsible for undertaking the baseline survey for the ACC. The document has been continuously refined to align with various strategies including the Livestock, horticulture strategies and cross cutting Initiatives(Gender and Climate).

• Furthermore, the baseline survey design is on-progress and expected to be conducted by February 2016

Regional Activities update: Amhara

For 2015/16, work in Amhara commenced mainly in Sesame and Maize Clusters, with other VCs work also underway

Sesame Maize

Production & Productivity

• 67 demonstrations conducted on the sesame innovation package

• Input Voucher System implemented and adopted: total value of 20.1 million birr in fertilizer and seed were distributed through IVS (21% distributed on credit)

• 177 large scale demonstrations conducted on the maize innovation package

• Urea, NPS and DAP fertilizer distributed throughout the cluster

• Input Voucher System implemented and adopted: total value of 799.9 million birr in fertilizer and seed were distributed through IVS (17.6% distributed on credit)

Seed Multiplication

• Over 350 quintals of Humera-1 seed distributed throughout the cluster

• 1,040 quintals of Humera-1 and Abasena seed multiplied for next season

• 15,657 quintals of hybrid seed distributed and planted

• Over 66,000 quintals of seed under multiplication for next planting season

Market Linkages and Contract

Farming

• 305 million ETB allotted for sesame output marketing (185 million utilized)

• A sesame market performance evaluation workshop was conducted, during which the 2008 E.C. plan was evaluated and approved for cooperatives

• Contract signed between 4 unions and WFP for 109,000 quintals of maize

• Contract signed between Merkeb Union and Ethio-chick PLC for 25,000 quintals of maize

• EGTE agreed to purchase 250,000 quintals of maize from Merkeb & Damot

Regional TC, strategic platforms and Value Chain alliances

• Amhara Regional transformation council is established and held its meeting

• A Value Chain Alliance meeting was held to familiarize members with the Cluster and Value Chain Alliance concepts

• A total of 250 participants attended the initial workshop

• A Value Chain Alliance forum was established and two workshops were conducted,

• 63 participants took place in the first workshop, and 61 in the second

Regional Activities update: Oromia

For 2015/16, work in Oromia commenced mainly in Malt Barley and Durum Wheat Clusters, with other VCs work also underway

Malt Barley Durum Wheat

Production & Productivity

• Demonstrations and promotion of two new varieties (Traveler and Grace) were conducted in 2 zones, 7 woredas, 21 FTCs and 126 farmers plots to increase productivity

• 489,529 quintals of grain expected from 64,560 hectares

• Production should meet 98% of the Assela Malting Plants capacity, substituting approximately $21M from imports

• Innovation demonstrations showing productivity enhancement were conducted on 57 farmer’s plots, at 10 FTCs and on 4 village gate plots

• A total of 625,296 quintals of grain yield is expected to be supplied

Seed Multiplication

• 17,921 quintals of improved seed was distributed

• 71,600 qt of C1 and C2 is expected to be available for next planting season, provided that 60% of the planted seed meets the required quality criteria

• A total of 6,702 quintals of improved durum wheat seed is under multiplication by OSE and SARC in which cluster woredas will be prioritized

• 12,500 quintals of C1 durum wheat is under multiplication by unions where seed is sourced by SARDEC-CYMMIT with informal seed multiplication

Market Linkages and Contract

Farming

• A contract farming agreement was made between 3 agro-processors, 7 unions, and 50 Primary Cooperatives representing 23,426 farmers

• A total of 34,954,766 birr was delivered for input finance by Agro-industries to farmers

• 244,576 quintals of wheat was planned to be delivered to industries through post cultivation forward delivery agreements with cooperative unions, so as to reduce imported durum wheat

Regional TC, strategic platforms and Value Chain alliances

• Oromia Regional transformation council is established and held its meeting

• A Strategic Platform was established, with 26 members identified, and 5 initial meetings held

• A Value Chain Alliance was also established, and its first meeting held

• A Strategic Platform was established with 43 stakeholder members from 22 public and private institutions formally assigned by the Regional President

• A Value Chain Alliance was also launched (with 69 members) and an initial workshop was held

Regional Activities update: SNNP

For 2015/16, work in SNNP commenced mainly in Wheat and Haricot Bean Clusters

Wheat Haricot Bean

Production & Productivity

• In order to mitigate the El Nino induced drought scenario, moisture conserving structures such as tied ridges were implemented

• 175 large scale demonstrations were carried out at 25 FTCs, 125 model farmer plots, and 25 village gate farms

• 170 large scale demonstrations were carried out at 23 FTCs, 122 model farmer’s plot and 25 village gate farms

• Prevention of common haricot bean pests was made using systemic pesticides

• Total production from the cluster was 493,501 qt with an average productivity of 14.3 qt/ha (of this, 279,018 qt was marketable)

Seed Multiplication

• 89,630 ha of land were covered by improved wheat seed

• 92,378 qt of improved seed has been demanded for the upcoming season, to be supplied by SSE, Edget, and other private producers

• 38,055 ha of land was covered with improved haricot bean seed

• 3,796 qt of improved variety seeds of Nasir and Hawassa Dume was supplied and distributed

Market Linkages and Contract

Farming

• An agreement was signed between five cooperative unions and different buyers (6 millers, EGTE and school feeding program) to supply a total of 300,000 qt of wheat

• 3,800 qt was collected at union level so far

• Four Cooperative Unions have signed contract agreements with 3 buyers (Soreti International, Acos Ethiopia and Regional coop federation) to sell a total of 105,000 qt of Haricot Bean

• A total of 20,088 qt has been collected and marketed so far

Regional TC, strategic platforms and Value Chain alliances

• SNNP Regional transformation council is established and held its meeting

• The Value Chain Alliance was established on August 5 and 6, 2015 in Hosanna

• It was decided that priority should be given to ACC woredas in providing improved seed

• Financial institutions were also engaged to provide loans for output marketing. For example, the Cooperative Bank of Oromia agreed to give 19 million birr to Licha Hadiya Cooperative Union for wheat marketing.

• Potential stakeholders were identified to establish a Haricot Bean Value Chain Alliance

• A draft MoU was prepared to launch the Alliance

Regional Activities update: Tigray

For 2015/16, work commenced mainly in Sesame and Wheat Clusters, with other VCs as well

Sesame Wheat

Production & Productivity

• Training was given to 280 DAs and 17,800 farmers

• Farmers used 827 quintals of improved Homera-1 & Setit-1 seed (67% of planned)

• 80,176 quintals (92%) of fertilizer was distributed

• Intensive trainings were held for 435 DAs and 79,357 farmers

• 4,448 quintals of improved seed (104% of the plan) were used

• 80,176 quintals of fertilizer were distributed

Seed Multiplication

• Basic and pre-basic sesame seed supply (Setit and Humera) was severely affected by uneven rainfall distribution

• K/Humera BoA office collected a total of 1,573 quintals of sesame grain

• 190 hectares of basic and pre-basic wheat seed were planted (127% of planned).

• From this area, the expected production is 5,700 qt.

Market Linkages and Contract

Farming

• Primary cooperatives, such as the Mikadra PC, have agreed on a contractual basis to supply 91,000 qt of sesame to SELIT and DIPASA

• The primary coops have delivered 10,960 qt of sesame to Selit and DIPASA so far

• Of the total sesame production, about 177,909 qt have already been delivered to buyers

• A contract agreement for 288,000 qt of wheat grain was signed, to be delivered within 5 months (Dec 2015 – May 2016)

• So far, unions have delivered 1,949 quintals of wheat to the processors (Lemlem complex, Huda and Diplomacy).

The volume will increase as more grain is harvested.

Regional TC, strategic platforms and Value Chain alliances

• Tigray Regional transformation council is established and held its meeting

• A Sesame Value Chain Alliance was established

• During the first meeting, the following outcomes were achieved: Enabled common understanding among stakeholders, roles and responsibilities thoroughly discussed, built trust and strengthened relationships among sesame VCA stakeholders

• A Wheat Value Chain Alliance was established, with two initial meetings held

For horticulture, coffee and livestock commodities, value chain diagnostic and prioritized interventions are under development in 2016

1. Profile of priority commodity and woredas

2. Details for one priority horticultural product value chain Priority market opportunities and required capabilities

• Priority Market Opportunities - International

• Priority Market Opportunities – Domestic

• Current production and harvest cycle

• Current cost structure

• Market opportunity synthesis

• Required Capabilities across the Value Chain

Current state of value chain in each cluster

• Current State of Value Chain – Highlights

• Current State of Value Chain – Gap Analysis

• Current State of Value Chain - Value Chain Mapping

• Current State of Value Chain – Key Actors

Target state of value chain

• Target Value Chain – Smallholder Linkage Model

• Target Value Chain – Enhanced Value Chain Structure

Priority interventions

• Target Value Chain – Priority Interventions

Target Value Chain – Priority systemic interventions

Impact Assessment and Cost Estimate of priority initiatives

Background: Amhara Region ACC status update

I. Overview of clusters and commodities

II. Cluster level vision and update

III. Regional ACC major…