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Dr Gift Mugano
There is generally consensus amongst Zimbabweans and even in Government on the need to work on value chain approach to raise national competitiveness. Government in particular is seized with this matter so as the Confederation of Zimbabwe Industries. It is therefore important to add to the board of knowledge on this subject by drawing lessons from other countries to inform Zimbabwe strategies. This is a technical and complicated field, hence the style of my writing this week.

What are Value Chains?
Chains in general are composed of companies (or individuals) that interact to supply goods and services are variously referred to as productive chains, value chains, marketing chains, supply chains, or distribution chains. These concepts vary mainly in their focus on specific products or target markets, in the activity that is emphasised, and in the way in which they have been applied.

What they have in common, however, is that they all seek to capture and describe the complex interactions of firms and processes that are needed to create and deliver products to end users. Moreover, they all strive to identify opportunities for and constraints against increasing productivity.

Typically, “value chain” describes the full range of value-adding activities required to bring a product or service through the different phases of production, including procurement of raw materials and other inputs, assembly, physical transformation, acquisition of required services such as transport or cooling, and ultimately response to consumer demand.

As such, value chains include all of the vertically linked, interdependent processes that generate value for the consumer, as well as horizontal linkages to other value chains that provide intermediate goods and services. Value chains focus on value creation-typically via innovation in products or processes, as well as marketing-and also on the allocation of the incremental value.

Malian Context
At the turn of new millennium, Senegalese rural folk’s incomes and livelihoods were threatened by spreading and deepening poverty. The once-vibrant agricultural region has seen a steady economic decline as a result of the slump in world groundnut markets, climate change and continued degradation of the land. The region has a potential for agricultural diversification, but most small-scale farmers are unable to enter the markets that are opening up.

The Government of Senegal embraced value chains integrate farmers into profitable value chains based on local agro-ecological potential. Its most innovative feature is its focus on consolidating local value chains as instruments for fostering broad-based, self-sustaining and inclusive local development.

In 2005, the Government of Mali, with the support of a $46,4 million loan from the World Bank, launched the Agricultural Competitiveness and Diversification Project (PCDA) in hopes of diversifying the country’s agricultural income into markets with clear competitive advantages for Mali. The project team identified target sectors for support by comparing Mali’s agricultural sector using a series of analytical tools with a broad range of data.

Through this process, the team identified value chains for export markets, which provide a basis for import substitution, improve livelihoods for Malian small growers, and contribute to Mali’s national output, that is, Gross Domestic Product (GDP).

Approach to Value Chain Analysis and Selection
The Government of Mali and the World Bank enlisted the Geomar International Group, a Canadian-based global consulting firm, to assist with the project’s sector review component, which used step by step approach to assess Malian agricultural competitiveness.

Each step built on the previous and helped practitioners’ progress from a comprehensive list of sectors to those with true marketability, competitive advantage, and comparative advantage.

This process also took into account the demand in existing end-markets, identification of new potential end-markets, regional climate and growing factors, production capacity, access to finance, and infrastructure, and other determinants.

Step 1: Defining Mali’s broad portfolio of agricultural value chains
The first step here was to create a comprehensive list of agricultural value chains in the country, including the informal ones. This was followed by categorisation of each value chain using criteria that defines its particular storage and/or delivery needs, such as perishable, semi-perishable, durable, transformed, semi-transformed, or processed.

Next, classification of each value chain based on potential end markets, such as export markets for consumption or processing, regional markets for consumption, or local markets for consumption. And, finally, summarisation of the structure of the various value chains by organising the categories defined earlier, incorporating upstream-downstream relationships and key factors of value addition.

Step 2: Analysing market demand and market entry conditions
In this stage, the Senegalese created a market demand data sheet for every value chain listed in step 1, providing a comprehensive snapshot of that chain’s viability and market opportunities.

This helped them to chart opportunities in each end-market for all identified classifications.

For example, they identified European markets for perishable product/value chains intended for export markets, including value and quantity. They did the same for other end markets and sector classifications.

Step 3: Analysing the competitiveness of potential Malian offerings
Here, in order to come up with a clear analysis of the competitiveness of the Malian offerings, the first approach was to determine the production potential for each sector using information from the first two steps by adding data on number of producers, production, farm yields, unit price, and revenue.

This was followed by the analysis of the regional potential based on comparative advantages through the mapping of key production regions (in Mali) to determine target areas for select agricultural products, highlighting geographic advantages (for example, access to water or growing seasons); constraints (for example, distance from main markets, distance from Bamako for transport, pollution, or poor climate); and producible crop sectors.

This was followed by creation of sub-regional identification sheets that pre-sent annual rainfall, temperature, sun exposure, and humidity for each sub-region to determine the suitability of crop selection.

This information helped them to illustrate the growing months and seasonal market demands for all products to show areas of opportunity for producers based on their production cycles and periods of crop availability.

At the same time, they conducted an analysis that shows constraints and subsequent interventions that would improve value chain competitiveness well in advance.

Step 4: Defining priority sectors
The first step here was to prioritise value chain criteria by triangulating the interests of various stakeholders. The priorities for each value chain was ranked based on production sophistication, number of solvent operators that could be integrated into the strategy, strategy duration, social impact, market appropriateness, existing professional organizations, and existing programs. Here, a matrix that identifies priority sectors was created.

The priority sectors (in matrix) were organised by area using the regional analysis conducted in step 3 that shows which value chains should be implemented in which regions of the country. This table/matrix also provided an at-a-glance view of the crops that can be grown in several regions.

Step 5: Competitiveness planning: putting the analysis into action
The first step here was to determine which approach will improve the competitiveness of the sectors in question. In this instance, the team recommended that Mali’s competitive strategy include short-, medium-, and long-term objectives, each with pragmatic and obtainable interventions.

They addressed the issues with solutions, taking into consideration the constraints highlighted in step 3 and their associated investment needs. For example, “improve technical skills and human productivity by introducing new technologies and training facilities.”

The entire strategy was wrapped together by providing implementation guidelines and a framework that encompasses standard, specific activities that fall under four stages: provisioning, production, logistics, and marketing. In some cases, they overlapped these stages with cross-cutting activities.

What happened?
The value chain strategy that the team recommended to Mali is currently being implemented. About 10 value chain competitiveness strategies and action plans have been developed and are being implemented.

More than 14 000 households, that is, approximately 84 000 individuals in the rural areas benefited through improvements in incomes.

In committing to these strategies and actions, Malians will have invested in a strategy that takes into account the many elements of value chain analysis that have often been overlooked in previous strategies. This, in itself, will prove to be beneficial in increasing the institutional knowledge, not only for the Government, but also for all stakeholders taking part in the implementation of PCDA.

What are lessons for Zimbabwe?
Implementation of value chain is not a straight jacket. It requires a well thought approach and technical thinking. In the same vein, it requires a great deal of investment of commitment from all stakeholders with respect to time and resources! What is obvious is not obvious until it is systematically well thought. The thought process must backed up by evidence which is rigour.

What is striking from the Senegal case study so as other countries in Africa who followed the same route like Botswana, Ghana, Kenya, Mozambique, Nigeria, Rwanda and Zambia is that value chain analysis is a going concern — it is a continuous process.

From this case study, the Senegalese started this work since 2005 and up to now more than 10 years later they are still working on the concept and improving and at the same time implementing strategies. For us, our history is not very good when it comes to policy implementation. The take away from this discussion is that to achieve real change in a globally competitive environment we have to always apply technical thinking and walk the talk consistently.

Dr Mugano is an Economic Advisor, Trade and Competitiveness Expert, Research Associate at Nelson Mandela Metropolitan University (SA) & Lecturer at the Graduate School of Management (University of Zimbabwe). He is currently in Bangkok, Thailand. Feedback: Email: [email protected] <mailto:[email protected]>, cell: +263 772 541 209.