Modules on Sustainable Agriculture MOSA

Sustainable Value Chains

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 Key questions

• What is a value chain?

• Why working with and promoting value chains for

development? – The sustainable value chain

• How to develop a value chain?

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 Modules on Sustainable Agriculture MOSA

What is a value chain?

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Value chains for High
Quality Cassava Flour
(HQCF) in Ghana,
Tanzania, Uganda,
Nigeria and Malawi

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The value chain “map”
Actors

Interventions

Activities / sequences of functions

Specific Trans- Trade Consump-

Production
Inputs formation tion
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 “Value chain” means….

 the sequence of related business activities (functions) from the

provision of specific inputs for a particular product to primary
production, transformation, marketing and up to final
consumption

 an institutional arrangement linking and coordinating

producers, processors, traders and distributors of a particular
product

Source: GIZ.ValueLinks Manual. 2008. 6

Advantages of a chain approach:

• Allows the identification of key stakeholders that make the

chain work and encourage processes of negotiation between
them.

• Facilitates the identification of critical points that limit strategic

chain development, both organizational and technological.

• Allows to understand the chain as a system, which favors a

more comprehensive management of information between
actors.

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 Objective of the value chain approach

Salaries for
workers
To efficiently capture value in end
markets Taxes Net profits for
revenues to entepeneurs
BUT the and asset
Government owners

Value added means different things

for different actors!!
Better food Net impact on
supply for the
consumers environment

FAO (2014): Developing sustainable food value chains – guiding principles. Rome 8
Exercise

Groups: 4 groups

Time for preparation: 10 min

© Botswana Agricultural Marketing Board

Task: Develop a Food Value Chain Map for a product of your

choice (animal or crop based) and country of your preference.

What activities and actors are involved in the value chain?

Outcome: ca. 3-5 min presentation for each group

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 Modules on Sustainable Agriculture MOSA

Why working with and promoting

value chains for development?

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 Why promote value chains?
Private Sector:
Markets do not always develop & function on their own!
The growth potential remains unused, because public support services are insufficient:
 infrastructure is bad
 legal & administrative rules are not appropriate
 lack of trust, skills, transparency…

Economic globalization calls for:

 Close coordination of production and distribution along the chain to comply
with quality requirements and reduce cost of logistics
 Networking between firms in order to promote investment and enhance value
addition
The answer of public policy:
Economic development generates social benefits by promoting market success:
 jobs are created and incomes increase
 more tax income is generated that can be spent on education, infrastructure, protection
of resources etc.
 MSMEs and marginalized regions can be integrated into the market
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 Generic factors limiting the market participation of the poor
Location Productive assets &
Property rights

Business environment & Access to cross cutting

policy service markets

© GIZ 12
Dimensions of pro-poor growth

“Pro-poor growth”
= greater employment and income for poor people

Economic growth Poverty alleviation

= greater volume sold,
higher value products
(“the cake grows”)
= the poor benefit at least
equally or above average
from the income generated
(poor get their “share of the
cake”)

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 The sustainability element

► reduced use of and

impact on non-
renewable resources

► more equitable
distribution of the
increased value added

FAO (2014): Developing sustainable food value chains – guiding principles. Rome 14
An extended definition – The sustainable food value chain…

is defined as…
…the full range of farms and firms and their successive coordinated value-
adding activities that produce particular raw agricultural materials and
transform them into particular food products that are sold to final consumers
and disposed of after use…
in a manner that is profitable throughout,
has broad-based benefits for society,
and does not permanently deplete natural resources.(FAO,
2014)

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VC development – holistic perspective
Currently, focus often lies on creation of economic value and
reduction of transaction costs of a certain commodity chain, but:
Especially for small farmers, diversified livelihood strategies are
necessary to manage risk and increase resilience against external
shock!
• Sustainable VC development should contribute to meaningful
asset building at household level
• Multiple purposes of VC: better nutrition & health, climate
resilience and food security

 Combination of value chain development with other approaches

to rural development

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 Modules on Sustainable Agriculture MOSA

How to develop a value chain

development project?
• VC analysis and VC selection
• VC upgrading and promotion strategy

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Selection criteria: Why selecting this vc for promotion?

Growth potential/competitiveness

Potential for poverty reduction

Outreach

Prospect of success

Program related aspects

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 A fundamental vision for upgrading
Increased value = price obtained * volume sold
The focus may be on volume, on prices or on both

Volume Price
Income

Providers of Primary Logistic Traders Final

specific producers centres, Retailers consumers
inputs Industry

Specific
inputs Production Processing Trade

Source: GIZ.ValueLinks Manual. 2008. 19

 Value adding to local products by:
• Improving product quality
• Improving post harvest technology
• Adding processing steps
• Improving supply chain efficiency
• Innovating new products
• Applying modern packaging
• Introducing new designs
• Fulfilling international standards
• Branding the products
• …..
Which leads to:
• Higher income for producers
• Higher income to the processors
• New market for exporters and
traders
• Stable relationships
• Higher export earnings
• More investment
• More jobs
• Environmental sustainibilty of the sub-sectors
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 How to arrive at the value chain project
2
1 Assessing
markets and
Value chain competitive
analysis advantage

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Vision and
upgrading 4 5 6
strategy
Assessing
needs & Fields of Action
constraints upgrading planning

Facilitating the start of VC upgrading activities

Source: GIZ.ValueLinks Manual. 2008. 21

VC Analysis

The enabling environment: Pro-poor growth!

- Economic
- Social
- Environmental How to equally
- Political distribute value?

Value Chain:
Stakeholders
Linkages
Gaps How to grow?
Specific: cost-benefit, quality, food losses,
nutrition, gender…

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Exercise

Groups: 4 groups

Time: 10 min

© GIZ

Task: How would you improve your presented

value chain in respect to all three sustainability
elements based on your role along the VC?

Outcome: ca. 3 min presentation

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 Modules on Sustainable Agriculture MOSA

How to develop a value chain

development project?
• VC analysis and VC selection
• VC upgrading and promotion strategy

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 Designing a chain project has two dimensions

1. What the VC actors must do to become

more competitive and to generate greater value added
Value chain upgrading strategy

2. The role of facilitators,

i.e. government and development agencies running chain
development projects and providing assistance
Facilitation of VC upgrading or
value chain promotion

Source: GIZ.ValueLinks Manual. 2008. 25

 Upgrading - What has to change in the chain?
Constraint / need /
opportunity related to… Field of Upgrading
Market access Vertical business linkages
Contract conditions Producer associations

Technology, inputs Service arrangements

Information Capacity of service providers
Finance Financial arrangements

Quality assurance Introduction of standards

Access to specialty markets Implementation of standards
Product safety Certification systems

Business environment Private-public dialogue

Resource degradation Sectoral economic policy

Source: GIZ.ValueLinks Manual. 2008. 26

 Designing a chain project has two dimensions

1. What the VC actors must do to become

more competitive and to generate greater value added
Value chain upgrading strategy

2. The role of facilitators,

i.e. government and development agencies running chain
development projects and providing assistance
Facilitation of VC upgrading or
value chain promotion

Source: GIZ.ValueLinks Manual. 2008. 27

 The role of facilitators

External agencies facilitate upgrading by collaborating with

appropriate partners within the value chain.

Facilitators
• Create awareness, enhance understanding and trust
• Help stakeholders get to know each other and to exchange
• Help building a joint vision of the future and upgrading strategy
• Enhance business linkages
• Enhance new business transactions and investment
• Facilitate joint learning of VC stakeholders and process innovation
• Capacity Development and Institution building

Source: GIZ.ValueLinks Manual. 2008. 28

Competitive African Rice Initiative (CARI) in Nigeria
Goal Upgrading solution
High quality seed Increased availability of quality seed
Lack of irrigation facilities Provision of irrigation
Professional producer organizations Farmer Business School Training
Strengthen business management of
producer organizations
Lower unit cost from mechanization Private farm mechanization services
Business-relevant extension Cost effective services from ADP + private
service providers
Value from Post-Harvest & Processing Private investments in warehousing +
milling
Quality Industry Standard for Nigerian Paddy &
Rice

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Conclusion

• The sustainable value chain approach allows to develop a systemic

thinking which favors a better coordination between actors

• It allows the identification of key stakeholders and their interests as

well as opportunities of collaboration between them

• It promotes a multi-dimensional approach on different stages along

the chain

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 Modules on Sustainable Agriculture MOSA

Further reading
FAO (2014): Developing sustainable food value chains – Guiding principles. Rome.
GIZ (2013): Value chain development by the private sector in Africa – Lessons learned
and guidance principles. Available at: http://www.giz.de/expertise/downloads/giz2013-
en-africa-value-chain-development.pdf.
GIZ (2013): Gender and value chains. Available at:
https://www.giz.de/fachexpertise/downloads/giz2012-en-gender-and-value-chains.pdf.
GIZ (2008): ValueLinks manual. Available at:
http://eprints.icrisat.ac.in/10641/1/valuelinks_complete.pdf.
Gómez M.I., Rickets, K.D. (2013): Food value chain transformations in developing
countries: Selected hypotheses on nutritional implications. ESA Working Paper No. 13
05. Available at: http://www.fao.org/fileadmin/templates/esa/
Papers_and_documents/WP_13_05_Gomez_Ricketts.pdf.

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Agricultural Value Chains to reduce Post-Harvest-
Losses

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