THAT corruption has become endemic, hydra-headed and even emasculated the .....

Overcoming Challenges To Agribusiness In Edo State

Being a presentation by Dr. Graham Hefer, Managing Director, Okomu Oil Palm Company Plc, Okomu-Udo at the 1st Edo State Agribusiness Summit on April 23, 2012 at Best Western Hotel, Benin City.

WHAT ARE THE MAIN CHALLENGES AFFECTING AGRIBUSINESS IN EDO STATE?

- fragmented/disputed land areas
- Poor security of tenure & contract sanctity
- Poor infrastructure & limited/regulated input access
- Poor govt policies & weak rule of law
- poor baseline data & market info
- Neglected research, development & extension
- high unemployment & a poor skills base
- A weak value added chain & limited access to finance
- Low productivity

OVERCOMING THESE CHALLENGES TO TRANSFORM AGRIBUSINESS IN EDO STATE

-enhancing agricultural productivity
- upgrading value chains
- exploiting local (& regional & international) demand
- strengthening technology & innovation capabilities
- promoting effective & innovative financing
- stimulating private sector participation
- improving infrastructure & energy access

1. ENHANCING AGRICULTURAL ACTIVITY

Challenges include:

- an inability to shift resources from on farm to off farm players
- poor/inconsistent government policies &/or institutional entities
- little market driven specialisation & low productivity (low input access)
- reducing real food costs &
increasing agribusiness competitiveness
- reducing transaction costs
Prime movers
(i) An enabling environment
(ii) Access to technologies
(iii) Horizontal & vertical coordination
(iv) Market access
(v) Management

2. UPGRADING VALUE CHAINS

Challenges include:

- inflexible trade &/or regulatory barriers
- outdated or inaccessible technology, information &/or skilled labour
- a lack of profitability of goods in local markets
- an inability to produce the requisite volumes, logistical &/or quality
specifications
- an inability to access raw materials (poor infrastructure/availability)
- competition from other entities for the same market/resources.
Prime movers:
* Globalisation & an open market
* International value chain demands
* Government policies need to be inclusive, flexible & with a clear strategy
* Access to finance & markets
* Infrastructure to access markets & obtain inputs

3. EXPLOITING LOCAL (REGIONAL & INTERNATIONAL) DEMAND

Challenges include:

- ineffective/conflicting local &/or regional integration & regulations
- institutional weaknesses in customs & illegal imports
- lack of harmonisation in documentation, regulation, double taxation
- non convertibility of African currencies & conflicting financial regulations
- poor infrastructure & convoluted Government policies
- high transaction costs
Prime movers:
* Diversification
* Flexible & compatible Government policies & facilitation
* Upgraded infrastructure
* Upgraded quality standards through training & skills development
Securing of borders (eg: SGS?) & a return to rule of law

4. STRENGTHENING SCIENCE, TECHNOLOGY & INNOVATION (STI) CAPABILITIES

Challenges include:

- poor geographical/agricultural &/or marketing data throughout the value chain
- moribund research facilities
- outdated/ineffectual school, college &/or tertiary curricula/research
- outdated/no access to technology
- poor infrastructure & outdated/ineffective institutional departments (research centres/extension services/customs/phytosanitary)
- ineffectual/outdated &/or un/over enforced policies

Prime movers:
- updating of geographical, agricultural &/or marketing data throughout the value chain
- revitalising moribund research facilities through
PPP’s
- revamping of school, college & university curricula to include new, pertinent technologies
- access to technology (internet/libraries/chemical laboratories)
- upgrading of infrastructure through PPP’s/NGO’s, public sector funding
- policy changes to make Edo State the centre for STI for Nigeria & W. Africa – international recognition & collaboration?
- formation of farmers/commodity associations/value chain organisations
- revamping of training institutions (eg: ITF) &/or installation of sector education training authorities or the like
- upgrading & internationalisation of institutional departments & processes

5. PROMOTING EFFECTIVE & INNOVATIVE FINANCING

Challenges include:

- removing the perception that the sector is risky & yields are unattractive
- ensuring that contract sanctity & enforcement are guaranteed
- removing the perception of erratic law & order enforcement
- poor (land) economies of scale which increases the cost of capital
- poor expertise & managerial ability both in the public & private sectors
- poor rural infrastructure
- high bank transaction costs & interest rates
- the lack of collateral & current emphasis on debt financing, as opposed to capital financing

- outdated/convoluted government policies
- provision of current financial/agricultural data for the sector
- guarantees (or the lack thereof)
- the non payment of government incentives (EEG)

Prime movers:
* Government should emphasize & show their commitment to the rule of law
* Land tenure & agribusiness policies need to be defined & adhered to
* Micro & macro financing options need to be formalized
* PPP’s/BOT/sale/rental/IPO’s of moribund government estates
* Commercial financiers need to re-assess differing ways to finance the value added chain
* Capacity building of managers/entrepreneurs/public servants;
* The provision of agricultural insurances to mitigate risk to financiers
* Access to upgraded infrastructure, guarantees/refinancing by Government/international donor agencies to build capacity
* Financing of contract farming/co-operatives by value chain participants who also offer guaranteed markets & market related prices
* Simplifying loan procedures, but maintaining near market rates may be more beneficial than subsidized rates

6. STIMULATING PRIVATE SECTOR PARTICIPATION

Challenges include:

- the informality of the sector
- insecurity & weak adherence to rule of law
- a small SME sector
- inequitable trade regimes (locally, inter State,
regionally & internationally)
- poor expertise, skills & managerial ability
- poor infrastructure & services (especially rural)
- high transaction costs (extortion/illegal tolls/double taxes/insecurity)
- inappropriate policies & an unsupportive legal & institutional framework
- a lack of information/data
- limited access to financing systems, technology, R&D & inputs
- weak partnerships
- weak adherence to international norms & standards
- foreign exchange controls & non adherence to legislation (eg: incentives)
- weak market linkages
- high transport costs & delays at congested ports
- land tenure issues
- poor energy & ICT infrastructures
- a lack of any recognised agribusiness sector forum for constructive dialogue between public & private sector & within some of the various sectors
- a poorly managed natural resource base

Prime movers:
* Public sector needs to invest in physical & social infrastructures
* Concentrate on niche markets & their value chains
* A presence of large scale private sector agribusinesses
* A fairly advanced financial sector
* Land and labour are available
* Ministries of Agriculture, Land & Environment to coordinate policies
* Potential for PPP’s/BOT/IPO’s/co-ops throughout value added chain
* R&D facilities are present & can be restructured (eg: PPP’s)
* Updated policy & trade regimes
* Visible policing & rule of law
* Sector forums
* Upgrading of ICT infrastructure
* Free trade zones & industrial parks & business advisory & support services
* Moribund plantations can be packaged for investors
* Human capital development by public sector (eg: ITF/SETA’s)

7. IMPROVING INFRASTRUCTURE & ENERGY ACCESS
Challenges include:

- congested ports, poor roads, inconsistent electricity
- poor institutional infrastructures (customs/policing/int revenues)
- an ambiguous water policy (irrigated land?)
- inconsistent policies on alternative energies
- constrained ICT networks & the high costs thereof
- lack of a co-ordinated, integrated policy approach
- more efficient use of existing capital
- inadequate schools, clinics & access to appropriate technology

Prime movers:
* Road infrastructure is being upgraded
* Electricity infrastructure refurbishment beginning
* Streamlining of institutional departments
* Government policies need to be communicated to all roleplayers
* Funding of infrastructure costs – public/private/PPP?
* Possibility of a port? – what are the cost implications?
* Airport under renovation, but no consultation with various stakeholders on the possibility of creating a business hub/park/warehousing nearby?

CONCLUSIONS

Edo State Govt is to be commended in the following areas
of its Master Plan:
* urban road upgrading
* airport upgrading
* revenue collection
* a stable political environment
* school & health transformation programmes

The Public sector should:

- be solely a facilitator, creating an enabling environment for the private sector to work in & should intervene only to enhance domestic capacity in infrastructure (social & physical), natural resources, human capital, technology, bulk financial systems & responsible governance, and
- determine policies that are inclusive & sector determined – (maybe establish a trade & policy unit to oversee & ensure competitiveness?)

The private sector should:

- engage constructively with Govt & also begin to invest in all aspects of the value chain, including the small grower sector, in partnership with Govt

ACKNOWLEDGEMENTS
Yumkella K.K, Kormawa P.P, Roepstorff T.M & Hawkins A.M (eds), 2011.

AGRIBUSINESS FOR AFRICA’S PROSPERITY. UNIDO

Nwuneli N.O, 2010. A LOOK AT AGRICULTURE & AGRIBUSINESS IN NIGERIA. Grain De Sel No 51, July – Sept 2010