Supporting Agricultural Transformation in Ethiopia:
P4P contribution
January 2013
Ethiopia’s Growth Transformation Plan envisions economic expansion
driven by increases in smallholder productivity
Ethiopia Growth Transformation
Plan (GTP) 2010-2015
Excerpts …
“Maintaining Agriculture as the major source of economic
growth”
“Ensure smallholder agriculture becomes the main source of
agricultural growth by scaling up interventions …”
“GTP targets, cereals productivity: increase from 1.7 tons per ha
in 2010 to 2.2. tons per ha by 2015…”
Ethiopian Agricultural
Transformation Agency (ATA)
Source: ATA team analysis
•
Federal Agency created to lead problem solving and support
implementation of transformative changes in agriculture
•
ATA approach: holistic, collaborative and focused. Centered
on systemic issues and value chains with large potential to
deliver on GTP goals
2
ATA has identified 17 interventions across crop value chains that if
addressed holistically can increase the productivity and income of
smallholder farmers
TECH. RESEARCH &
PROMOTION
Improved research
system effectively
linked to extension,
generating and
disseminating
location specific
technologies to SHFs
INPUT
PRODUCTION
INPUT DISTRIBUTION
& ACCESS
Improved
local production
and/or international
procurement of
inputs
1 Identification of the most
appropriate varieties of the crops
under production for specific
agro-ecology
2 Identification most appropriate
agronomic and soil conservation
practices for the specific crops
under production in each target
agro-ecology
3 Identification of the most
appropriate mechanization (on
farm and post-harvest) for the
agro-ecology and crop
4 Soil mapping to identify the
nutrient deficiency and the
fertilizer formulate necessary for
crops in each target agro-ecology
5 Identification of an approach mix
of crops by agro-ecology for soil
health, markets, nutrition and
overall food security
Improved
distribution of and
physical & financial
access to inputs by
SHFs
6 Production of
sufficient quantity
and quality of
improved seed of
the specific
varieties needed
for each target
agro-ecology with
efficient
distribution
channel links
7 Availability of
sufficient amount
of the specific
type/ formula of
fertilizer for each
crop in the target
agro-ecologies
(either through
import or local
blending)
ON-FARM
PRODUCTION
Increased SHF
access to improved
technologies &
knowledge on
sustainable
product. practices
ACCESS TO POSTHARVEST TECH.
Improved SHF
access to post
harvest handling
technologies and
practices
8 Improve input demand
estimation, contractual
relations and logistics to
make sure that input
supply meets demand on
timely basis
9 Ensure that primary
cooperatives and unions
have the operating
capacity to run efficient
input distribution business
including access to credit
in order to source inputs
in financial viable models
10
 Ensure farmers have
access to financial
services (i.e. credit,
insurance, etc. ) in order
to facilitate improved
input adoption
MARKET
LINKAGES
Improved linkages
between SHF
production and
major demand
sources
DEMAND SINKS
DEVELOPMENT
Increased value
addition and
improved market
demand for SHF
outputs
 Equip FTCs to act as
11
effective resource
centers to promote
improved agronomic
and on-farm and
post harvest
practices
 Equip coops with the
14
storage capacity and the
output financing to
properly support farmers
on aggregating in order to
effectively compete with
traders
 Train DAs with
12
location specific
information and
tools to
appropriately train
local farmers
 Create more efficient and
15
direct link between coops
and domestic and
international markets
 Create public,
13
private or other
modalities that
facilitate farmer
access to on-farm
and post-harvest
technologies and
mechanization
16
 Identification of specific
and reliable markets
(domestic/international)
able to source production
from smallholder farmers
 Develop domestic value
17
addition and processing
opportunities that enable
smallholder farmers to
access higher end market
opportunities
3
ATA’s Maize value chain program focuses on 10 interventions, of which
four are done in partnership with WFP - P4P
ATA
TECH. RESEARCH &
PROMOTION
Improved research
system effectively
linked to extension,
generating and
disseminating
location specific
technologies to SHFs
INPUT
PRODUCTION
INPUT DISTRIBUTION
& ACCESS
Improved
local production
and/or international
procurement of
inputs
1 Identification of the most
appropriate varieties of the crops
under production for specific
agro-ecology
2 Identification most appropriate
agronomic and soil conservation
practices for the specific crops
under production in each target
agro-ecology
3 Identification of the most
appropriate mechanization (on
farm and post-harvest) for the
agro-ecology and crop
4 Soil mapping to identify the
nutrient deficiency and the
fertilizer formulate necessary for
crops in each target agro-ecology
5 Identification of an approach mix
of crops by agro-ecology for soil
health, markets, nutrition and
overall food security
Improved
distribution of and
physical & financial
access to inputs by
SHFs
6 Production of
sufficient quantity
and quality of
improved seed of
the specific
varieties needed
for each target
agro-ecology with
efficient
distribution
channel links
7 Availability of
sufficient amount
of the specific
type/ formula of
fertilizer for each
crop in the target
agro-ecologies
(either through
import or local
blending)
ON-FARM
PRODUCTION
Increased SHF
access to improved
technologies &
knowledge on
sustainable
product. practices
ACCESS TO POSTHARVEST TECH.
Improved SHF
access to post
harvest handling
technologies and
practices
8 Improve input demand
estimation, contractual
relations and logistics to
make sure that input
supply meets demand on
timely basis
9 Ensure that primary
cooperatives and unions
have the operating
capacity to run efficient
input distribution business
including access to credit
in order to source inputs
in financial viable models
10
 Ensure farmers have
access to financial
services (i.e. credit,
insurance, etc. ) in order
to facilitate improved
input adoption
MARKET
LINKAGES
Improved linkages
between SHF
production and
major demand
sources
WFP – P4P
DEMAND SINKS
DEVELOPMENT
Increased value
addition and
improved market
demand for SHF
outputs
 Equip FTCs to act as
11
effective resource
centers to promote
improved agronomic
and on-farm and
post harvest
practices
 Equip coops with the
14
storage capacity and the
output financing to
properly support farmers
on aggregating in order to
effectively compete with
traders
 Train DAs with
12
location specific
information and
tools to
appropriately train
local farmers
 Create more efficient and
15
direct link between coops
and domestic and
international markets
 Create public,
13
private or other
modalities that
facilitate farmer
access to on-farm
and post-harvest
technologies and
mechanization
16
 Identification of specific
and reliable markets
(domestic/international)
able to source production
from smallholder farmers
 Develop domestic value
17
addition and processing
opportunities that enable
smallholder farmers to
access higher end market
opportunities
4
ATA and WFP are partnering with Sasakawa Global 2000 to improve
access to agro-processing and post-harvesting technology at cooperative
union farmer organizations
TECH.
RESEARCH &
PROMOTION
INPUT
PRODUCTION
INPUT
DISTRIBUTION
& ACCESS
ON-FARM
PRODUCTION
ACCESSTO
TO
ACCESS
POSTPOSTHARVEST
HARVEST
TECH.
TECH.
MARKET
LINKAGES
Maize sheller maintenance
Grain cleaner repair
Engine maintenance
Maize unions received the
following sheller support:
basic maintenance,
concave part replacement,
and modification of
threshing drum spikes and
inlets. This maintenance
activity was done in
workshops, where
technicians received onthe-job training on how to
maintain the shellers going
forward.
Grain cleaners have been
maintained at the Sidama
Elito cooperative union,
through collaboration
between Saskawa
technicians and the
Selam Awassa Business
Group. Activities
undertaken include:
repair of oscillating links,
replacement of bearings
and washers, and
threading of shaft
Engines for maize
shellers and cleaners
were serviced and
repaired, with attention
paid to major
components: spark
plugs, ignition coils,
fuel lines and tanks, and
ignition coils.
Additionally, on-the-job
refresher trainings has
been provided to
engine operators
DEMAND
SINKS
DEVELOPMENT
5
The P4P program supports agricultural transformation by providing a
large and structured demand sink, and by building aggregation capacity
of farmer organizations
TECH.
RESEARCH &
PROMOTION
INPUT
PRODUCTION
INPUT
DISTRIBUTION
& ACCESS
ON-FARM
PRODUCTION
ACCESS TO
POSTHARVEST
TECH.
MARKET
LINKAGES
DEMAND
SINKS
DEVELOPMENT
By 2015
2012
Efficient
aggregators
~ 100,000 maize
farmers
16 unions receiving
management support
WFP Forward
contracts for 30,000
MT maize for local
WFP use
> 500,000 maize
farmers
Aggregation by ~ 50
unions; majority
efficient and
sustainable
Forward contracts for
up to 300,000 MT
cereals for local and
regional WFP use
Source: ATA team analysis
6
Both domestic and international partners are working together to ensure
30,000 MT of maize is successfully delivered – one of the largest quantity
ever sourced from farmer organizations by P4P
TECH.
RESEARCH &
PROMOTION
INPUT
PRODUCTION
INPUT
DISTRIBUTION
& ACCESS
ON-FARM
PRODUCTION
ACCESS TO
POSTHARVEST
TECH.
MARKET
LINKAGES
DEMAND
SINKS
DEVELOPMENT
Institution
Regional Cooperative
Promotion Agencies
• Audits
• Monitoring, Learning & Evaluation
Commercial Bank
of Ethiopia
• Output financing
TechnoServe and
ACDI/VOCA
• Management support
Sasakawa
Global 2000
• Post-harvest handling training
Ethiopian Agricultural
Transformation Agency
• Primary Government liaison
• Linkages between unions and other partners
P4P/WFP
• Forward delivery contracts
• Technical assistance
Source: ATA team analysis
7
For example, multiple parties convened to provide forward contracts
and enable local banks to provide financing without arduous collateral
requirements
TECH.
RESEARCH &
PROMOTION
INPUT
PRODUCTION
INPUT
DISTRIBUTION
& ACCESS
ON-FARM
PRODUCTION
ACCESS TO
POSTHARVEST
TECH.
MARKET
LINKAGES
DEMAND
SINKS
DEVELOPMENT
Forward Delivery Contract
•
•
Defined quantity, minimum price and delivery period
Provides confidence to banks that the unions have a secure market
Tripartite agreement
•
•
CBE
Union
Bank, Union and WFP agree payment modalities for deliveries against forward
contracts
Banks reassured that proceeds will flow through the designated accounts,
enhancing probability of repayment
Management support
• TechnoServe and WFP provide management support to specific unions to help ensure delivery against
contracts, and proper management of output credit provided by banks
• Third party support provides an extra layer of comfort to banks that financing provided to unions will be well
managed
Majority of the unions participating in the 2012 trial received financing from the Commercial Bank of Ethiopia,
without the usual large collateral requirements
Source: ATA team analysis
8
Support to unions has been provided with sustainability in mind, with a
clear exit and path to scale
Integrated support to unions
Markets
Unions graduation path
• WFP forward contracts
• Total 30,000 MT maize contracts to 16
unions
Finance
Advanced
• Output financing from Commercial Bank
Intermediate
of Ethiopia
• US $ 4 million total financing
Basic
Management
• Support by TechnoServe, ACDI-VOCA
• Competitive
tender
Storage &
Post-harvest
handling
• Training and maintenance support
provided by SG 2000 and WFP
• Direct
•
Extension
• Extension support from SG 2000
procurement
Intensive
support
Yr 1- 2
~100,000
farmers
in 2012
Source: ATA team analysis
• Soft tender
• Mild
• No support
support
Yr 2- 3
Yr 3 - 5
~500,000
farmers
by 2015
9
The first year of implementation has provided several lessons and
challenges
Lessons
-
-
With proper support, unions can deliver on large forward contracts
The “forward” element of these contracts is essential to unlock participation by other players
in the value chain, such as local finance providers. This relies heavily on WFP’s food purchase
facility
Zero-collateral output financing is possible, but requires significant coordination between the
buyer (WFP), government agencies (ATA), banks, unions, and management service providers
In initial phases, unions require significant amount of on-the-ground management support
Challenges
-
Unions still lack the physical infrastructure and managerial capabilities needed to aggregate at
commercially significant levels
Financial institutions still consider agricultural lending to be particularly risky, and they lack the
capability to accurately assess this risk
Determining and agreeing upon the final purchasing price is particularly time-consuming and
inefficient, because of poor market information and general misunderstanding of forward
contracts
10
Going forward, we see clear value for P4P engagement in developing
cereal markets in Ethiopia, and with a long-term vision for Ethiopia
transitioning from food aid to food assistance
P4P can be leveraged to help develop:
A
Structured demand
• Forward contracting with producers
• Collaboration with financiers to ensure timely and cost-effective aggregation
• Collaboration with other value chain participants to optimize production and aggregation
• Improved reliability of production, enabling a transition from food aid to food assistance
B
Transparency within the value chains
• Use of WFP purchasing power to encourage transparency across the various levels of the
marketing chain, down to farm gate
• Increased reliability and traceability of product going forward
C
Commercial-scale aggregation capability
• Development of a local pool of aggregators with the ability to fulfill large commercial
contracts
• These actors could fulfill large-scale demand from both public and private sector players, as
well as domestic and regional markets
Source: ATA team analysis
11
Innovations to help our country grow