African, Pacific and Caribbean countries
We have work experience in the three regions when invited to join a Mission for the EC to help design and prepare a major new initiative at the EC to assist the process of rural development.
EU-ACP Action Plan and EU-Africa Cotton Partnership and other programmes
A long standing worry has been the degree of single commodity dependence on the part of some ACP countries.
Agricultural products constituting more than 20% of total merchandise exports of developing countries.
St. Kitts & Nevis 35% Burundi 79%
Cuba 35% Ethiopia 64%
Belize 26% Uganda 59%
Guyana 24% Rwanda 56%
Fiji 23% Sierra Leone 32%
Mauritius 20% Nicaragua 27%
Swaziland 20% El Salvador 24%
St. Lucia 54% Bukina Faso 39%
St. Vincent 37% Chad 37%
Dominica 27% Benin 33%
Ecuador 24% Mali 30%
Costa Rica 21% Togo 23%
Panama 23% Somalia 23%
Niue 71% Malawi 59%
Sao Tome & Principe 69% Zimbabwe 22%
Cote d'Ivoire 36%
Cashew nuts: Pumpkins:
Guinea Bissau 48% Tonga 44%
Vanuatu 43% Paraguay 39%
Grenada 38% Comoros 34%
Kenya 26% Gambia 20%
Source: FAO (2002): Dependence on single agricultural commodity exports in developing countries: magnitude and trends Analysis 1997-99
The high degree of dependence on one or few commodities leaves the above vulnerable to fluctuations in income. Donors are assisting them to diversify particularly because of the implications of changes necessitated by WTO rules on loss of access to markets in EC for bananas and sugar.and protection given to cotton.
There are a number of programmes specifically targeted to interventions with the ACP countries as a group and, in particular LCDs in that group. The programmes are sometimes oriented to commodities in general as is the EU-ACP Action Plan and the EU-Africa cotton partnership and USAID help to cotton producing countries. There is less coordination among the various interventions with significantly funded projects aimed at increasing production without adequate study of markets.
The Action Plan is based on the importance of conducting rigorous value chain analysis together with farming system studies to give the analysis a pro poor focus. The idea is to allow a participatory commodity strategy to emerge from stakeholders working together. This was meant to be in addition to what the International Organisations have been and are doing anyway. The strategy that emerges would point to the need for greater chain efficiency, horizontal or vertical diversification and regional co-operation. There was always the danger that the IOs would subvert the Plan to merely support their existing activities and it is likely that they will do so.
In reality, the mid term evaluation of the project shows that rigorous value chain analysis is perhaps not being accorded the attention it was meant to be given, farming systems are not being studied as envisaged and the International Organisations are indeed trying to carry on with what they were doing anyway. All dangers that we anticipated. But, it has resulted in some coordination between the agencies which was a core objective and has helped place commodity strategy in focus. The main failling is that the plan is being seen as a project which it could never have been. It was always more of a process than a project. The deliverables are not physical produce but methodology and an increase in farmer incomes.
The AAACP Project has been a terrible disappointment. Although declared a great success by those who spent the money, nothing much has resulted on the ground in the way of wealth creation. Worst of all, the normally robust monitoring and evaluation systems of the European Commission appear to have been ignored and subverted. As a result, there is no external evaluation report on the project available to anybody. Nevertheless, more money has been allocated to those who patently obviously delivered a travesty in the first phase. Still, what is a 45 million Euros down the plug hole, no one cares.
In preparing plans for large projects to increase commodity production, there is often scant attention paid to global balances although those who have done so would understandably deny it. In the case of some commodities for which there is a long term increase in global demand due to rising standards of living in some developing countries and increased ACP production makes a great deal of sense, but there are some where there is a potential over supply particularly in the medium term and a few where the commodity is being made far more vulnerable as a result of non market driven plantings.
The ACP Action Plan of the EU rightly identified the vulnerability of over dependence on one or two commodities and has put in motion a programme that encourages commodity oriented strategy development. Attention is as a result shifting to identification of diversification opportunities.
Diversification and Efficiency
There are three actions possible to overcome commodity dependence within the existing frameworks with a fourth in the form of market interventions to manage supply:
1 Greater chain efficiency
Greater chain efficiency
is the obvious first choice since it does not depend on major changes in some cases. A vigorous value chain analysis lays the foundation. It identifies, amongst other things the 'value added' at each transaction point. The problem lies in the fact that not every transaction point may be imperative and the role of particular transactions may have a disproportionate impact of price make up. It is not possible to defend the role of each actor although it is important why the actor is involved and the reasons for the impact on price make up.
Often the steps required to increase efficiency are small ones, such as sanitary conditions that can be improved, washing and grading poits, farmer markets, packaging and transport. At other times, it may be necessary to invest in infrastructure in the form of irrigation, roads, markets or cold chains.
Greater effficiency depends on changing structure, organisation and infrastructure. For example, in some countries collectors of some produce can double prices from farm level but they play a role that farmers cannot replace for one reason or another. In other countries, collectors may add a far lower level of costs and play a very useful role, often they are farmers themselves. A farmer group or organisation can under these circumstances lead to a major increase in farmer incomes.
Value addition is a popular strategy to follow. Adding processing can make a big difference. An example is in rubber production. Selling raw rubber is a viable activity at present but developing a rubber processing industry as Malaysia and Indonesia have done can greatly increase returns. Ten kg of latex sheeting is maybe worth $200, but the same sheeting used to make a latex foam mattress can result in a product worth up to $ 2,000.
But not all cases are equally clear. Sometimes having a processing facility, say for tomato ketchup, can lead to pressure to get tomatoes at below those prices they fetch in wholesale markets. Processing can indeed lead to increased poverty if commercial power allows processors to lower farmer returns.
Diversification into high value crops is the most advocated approach followed by commercial crops. The problem is that neigher choice is usually specifically market driven because very little market research is undertaken. There is a prejudice against specific market research with planners sometimes preferring to assume that the new tonnage will not disrupt established markets.
We prefer looking at markets specific to the plans being explored. It is an essential approach, not an option.
There are very important differences between the three regions covered. The ACP catagory is just that, a catagory convenient for aid reasons, there is little else in common.
Only 22 of the countries in the above table are African countries dependent on a single commodity, with Mauritius and Swaziland heavily dependent on sugar, 5 dependent on coffee, 6 on cotton, 4 on cocoa, Malawi and Swaziland on tobacco, Guinea Bissau on cashew, Tonga on pumpkins, Comoros on Vanilla, Kenya on Tea and Gambia on groundnuts.
Heavy dependence on a single commodity is, however, only one of the criteria that can be used to examine poverty through commodity production. Most African countries are, in the way of illustration, dependent on a particular cereal for consumption and production.
6 countries are dependent on bananas (St. Lucia, St. Vincent, Dominica, Ecuador, Cost Rica and Panama), 4 countries have a dependence on sugar (St. Kitts, Cuba, Belize and Guyana), 4 on coffee (Nicaragua, El Salvador, Belize and Guatemala), Paraguay on soyabeans, and Greneda on nutmeg.
The Region suffers from the fact that bananas and sugar used to enjoy quota entry to EU and there is an adjustment process in place. And coffee prices are particularly volatile with fluctuating surpluses and shortages.
It also suffers from frequent hurricanes thatdamage crops, in particular tree crops are vulnerable. Coconut production in the Region has been adversely affected by storm damage as well as waves of lethal yellow disease afflicting the palms.
There are major differences in the situation of particular countries. Some smaller countries, as is the case for Dominica and Greneda, have a very limited range production base. Others, have more production possibilities reflected by the range of commodities that particular countries are dependent on.
Coconuts are a dominant crop in much of the region with Fiji dependent on sugar exports, Niue on cocoa and Kiribati and Vanuatu on copra exports. Coconuts are generally treated as a source for copra exports but there is some production of coconut milk, virgin oil and even cheese in Fiji. In Vanuatu copra accounts for over 40% of merchandise exports. Samoa depends on oil and cocoa exports. Dependence on coconuts is, of course, far higher than merely for copra due to the fact that some export coconut oil rather than as copra, although maybe surprisingly Papua New Guinea has remained a copra exporter. The logic behind exporting copra rather than oil is based on narrow crushing margins and lower freight costs for crude cargo like copra.
Samoa produces some coconut milk, Cook Islands has a range of coconut products, Fiji was producing small quantities of coconut cheese and Tonga coconut wood flooring. All this production has been on a very small scale and no export oriented development has taken place. Large scale processing other than for oil was briefly considered by Unilever plantations in the days when they had large plantations in the Solomon Islands in the 1980s but milk was too far from their usual business and they wanted to get outof their plantations in any case.
Nearly all the countries in the Region are to some extent or other dependent on export earnings from a small basket of commodities as well as fisheries. Production possibilities are limited on many coral islands. Along with coconuts, forestry products, kava, taro and cocoa are common with some coffee and sugar in Fiji. The Vai plantation in Somoa is one of the few estates that is producing coffee and cocoa.
However, it is possible to introduce vegetable and fruit crops, as is the case in Fiji and Samoa. In some countries quite easily, in others enough for local consumption only. In most cases the critical mass is lacking for anything other than inter-island trade. We have seen an enterprising agronomist greatly extend the range of high value vegetable produce in Kiribat on a trial basis despite the low biomass in the soil.