Agro-processing & Horticultural Exports from Africa Emiko - - PowerPoint PPT Presentation

Agro-processing & Horticultural Exports from Africa

Emiko Fukase and Will Martin

WIDER Development Conference Helsinki, Finland 13 September, 2018

Context

• Improved transport & communications allow unbundling of

global value chains (Baldwin, 2016)

▪ Labor-intensive activities in developing countries ▪ New opportunities for African countries: location-specific comparative advantages

• Pessimism about prospects of Asian-type manufacturing export

growth for Africa

• Can agricultural processing and horticultural exports become

Africa’s engine of growth?

• How might African governments act to influence the

development of high-value agricultural exports?

Outline

1. . Con

• ntext

2. . Cha hangin ing pa pattern of

• f ag

agri ricultural exp xport rts 3. . Im Impa pacts of

• f pol

polic icy reform 4. . Polic

• licy que

questio ions 5. . Con

• nclu

lusions

Outline

• 1. Context

2. . Cha hangin ing pa pattern of

• f ag

agri ricultural exp xport rts

• 3. Impacts of policy reform
• 4. Policy questions
• 5. Conclusion

Agri small share of Africa’s exports

20 40 60 80 100 120

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Agriculture Resources Manuf Services

Changing composition of agricultural exports 1988-2014

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

World

Bulk Proc Semi Proc Hort 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Africa

Bulk Proc Semi Proc Hort

Share of Processed Agri VA in total Agri VA rises with income

.2 .4 .6 .8 1 6 8 10 12 LnGDP

SSA Non SSA Fitted Line

Share of Processed Agri exports in total agri exports also rises with income

.2 .4 .6 .8 1 6 8 10 12 LnGDP

SSA Non SSA Fitted Line

Structure of Agri Exports, 2013

No

• of
• f

exports Top it item sha share Top 20 20 Sh Share Nos

• s Equiv

Her Herfin indahl Ind Index (%) (%) Ethiopia 249 23 96 7 Ghana 362 59 96 3 Kenya 520 40 85 5 Mozambique 208 37 94 5 Nigeria 299 32 90 7 Rwanda 233 22 93 9 Senegal 591 14 82 17 South Africa 655 7 53 44 Tanzania 357 12 80 18 Uganda 402 30 82 9 Afr fric ica as as a a gr group 670 670 13 13 56 56 33 33 Intra-Africa 662 662 8 48 48 54 54

Structure of Agri Exports, 2013

No

• of
• f

exports Top it item sha share Top 20 20 Sh Share Nos

• s Equiv

Her Herfin indahl Ind Index (%) (%) Ethiopia 249 23 96 7 Ghana 362 59 96 3 Kenya 520 40 85 5 Mozambique 208 37 94 5 Nigeria 299 32 90 7 Rwanda 233 22 93 9 Senegal 591 14 82 17 South Africa 655 7 53 44 Tanzania 357 12 80 18 Uganda 402 30 82 9 Afr fric ica as as a a gr group 670 670 13 13 56 56 33 33 Intra-Africa 662 662 8 48 48 54 54

Africa’s agricultural exports are highly concentrated

Top it item sha share Top 20 20 Sh Share Nos

• s Equiv

Her Herfin indahl In Index* (%) (%) Ethiopia 23 96 7 Ghana 59 96 3 Kenya 40 85 5 Mozambique 37 94 5 Nigeria 32 90 7 Rwanda 22 93 9 Senegal 14 82 17 South Africa 7 53 44 Tanzania 12 80 18 Uganda 30 82 9 Afr fric ica as as a a gr group 13 13 56 56 33 33 Intra-Africa 8 48 48 54 54

*Numbers Equivalent of the Herfindahl Index measured as

1 σ 𝑇𝑗

2 where Si is the share of each product

in total agricultural exports.

Is Africa exporting new Products?

Co Country Share of

• f

‘new goods’** in 2013 (%) Ethiopia 47 Ghana 10 Kenya 3 Mozambique 7 Nigeria 16 Rwanda 69 Senegal 8 South Africa Tanzania 8 Uganda 12

**’New items’ is defined as a set of the ‘bottom

2%’ items in the initial year (Kehoe and Ruhl, 2013).

The importance of ‘Big Hits’

• Exports from African countries are dominated by a small number
• f ‘big hits’ (Easterly and Reshef 2010)
• Policies that encourage entrepreneurs to discover successful

exports of the future are important (Hausmann and Rodrik 2003)

• Example of a ‘big hit’: Case of Ethiopia’s cut flowers (HS06031)

▪ From a ‘bottom 2% item’ to the second largest African cut flower exporter

▪ $527 million exports in 2013

▪ Key factors of success (Gebreeyesus, 2017)

✓ Comparative advantage: favorable agro-climatic conditions & abundant labor ✓ ‘Private entrepreneurship experimentation’ ✓ Government support programs (land, duty-free import of machinery, tax exemption, credit) ✓ Foreign Direct Investment (FDI) inflow ✓ Market access: international auction markets ✓ Transport: the light weight of flowers made air transportation viable

Outline

• 1. Context
• 2. Changing pattern of agricultural exports

3. . Im Impa pacts of

• f pol

polic icy reform

• 4. Policy questions
• 5. Conclusion

Destinations of Africa’s Exports

TOTAL AGRICULTURE

SSA 19% ECA 5% EU 40% USA 6% Australia/NZ 1% Japan 2% China 5% Kor/Taiwan/ HK 2% SEA 5% SA 5% LAC 1% MENA 7% Others 2%

PROCESSED AGRICULTURE

SSA 35% ECA 3% EU 41% USA 5% Australia/NZ 1% Japan 3% China 1% Kor/Taiwan/ HK 2% SEA 2% SA 1% LAC 1% MENA 4% Others 1%

Source: Global Trade Analysis Project Database version 9

Structure of Ad Valorem Equivalent (AVE) Protection

Afr frica Exp xports Afr frica Im Imports World ld Average EU on

• n

Afr frica In Intra-Africa (%) (%) (%) (%) (%) Bulk 7.7 7.4 8.3 0.1 3.3 Horticulture 3.8 10.6 5.2 1.4 8.8 Proc Agriculture 7.6 13.6 8.6 1.3 12.6 Total 7 12.2 8.2 0.8 10.1

Tariff Escalation within the same value chains

• Paddy rice (1.2 %) vs. processed rice (5.7 %)
• Sugar cane(0.4 %) vs. sugar (9.1 per cent)
• Raw milk (0.0%) vs. dairy products (10.9%)
• Cattle, sheep, goats, horses (1.3%) vs. cattle, sheep,

goat and horse meat (33.7%)

Impacts of reforms on exports

Sim Sim (1) (1) Sim im(2) Sim im (3 (3) Sim im (4 (4) Sim im (5 (5)

Rem emove Ag g Tar ariff Esc Escala latio ion Lo Lose se EU EU Ag g Pref Rem emove In Intra-Afri rica Ag g pr protection 10% 10% pr productivity inc inc ag ag pr proc Cut ut own n pr protection on

• n

all all

(%) (%) (%) (%) (%) Bulk

• 4.6
• 1

0.3

• 2.5

6.4 Horticulture

• 3.5
• 3.3

1.5

• 1.9

4.3 Processed Agri 114

• 12

13 30 11 Total agri 39

• 5.5

5.1 9.6 7.5

Outline

• 1. Context
• 2. Changing pattern of agricultural exports
• 3. Impacts of policy reform

4. . Polic

• licy que

questio ions

• 5. Conclusion

Policy questions: External

• Tariff escalation in the same value chains by

Africa’s trading partners hurt agro-processing exports

• Benefit from the preferential access to the EU

especially for the processed goods (high preference margin)

• Regional Integration matters
• Intra-Africa protection is high (10.1% vs. 7.0%)
• Tariff escalation is particularly notable within Africa
• Opportunity of diversification (lower fixed cost;

local value chains tailored to local taste and consumption)

Policy Questions: Domestic Policies

• Create an environment without disincentives for exports
• No value-subtracting restrictions on exports of raw materials
• Important to have access to intermediates at world prices

▪ Processing agriculture operates with low margin ▪ Encourage experiments by entrepreneurs (future ‘big hit’)

• Investments in Trade logistics important

▪ Unbundling of global value chains requires a mastery of logistics for the transfer of materials and knowledge ▪ Costs associated with customs clearance and domestic transport and customs clearance may make processing uneconomic ▪ Horticultural exports are perishable and particularly vulnerable to delays in shipping

• Good policies lead to more, and efficient, processed

agricultural exports

▪ Don’t make increased processing an independent goal

▪ Inefficient processing undesirable

Outline

• 1. Context
• 2. Changing pattern of agricultural exports
• 3. Impacts of policy reform
• 4. Policy questions
• 5. Conclusions

Conclusions

• High-valued agricultural exports could play an important role

in increasing overall exports

▪ African exporters moving from bulk to processed agriculture ▪ Horticulture successful in joining GVC

• Important to encourage experimentation

▪ While minimizing disincentives to exports ▪ Investing on trade logistics (infrastructure, trade facilitation)

• Seek policy reforms that also encourage exports of other

goods and services.

• Relying only on high-valued agricultural exports limiting
• Agriculture only 10% of African exports

Thank you!

w.martin@cigar .org efukase@worldbank.org

References

• Baldwin, R. (2016). The Great Convergence. Harvard University Press.
• Easterly, W. and Reshef, A. (2016), ‘African Export Successes: Surprises,

Stylized Facts, and Explanation’ in Edwards, S., Johnson, S. and Weil, D.

• eds. African Successes, Volume III: Modernization and Development

University of Chicago Press, Chicago, pp297–342.

• Gebreeyesus, M. (2017). ‘Industries without Smokestacks: Implication

for Ethiopia’s Industrialization’. UNU-WIDER Working Paper 2017/14. Helsinki: UNU-WIDER.

• Hausmann, R., and D. Rodrik (2003). ‘Economic Development as Self-

Discovery’. Journal of Development Economics, 72: 603– 33.

• Kehoe, T.J., and K. J. Ruhl (2013). ‘How Important is the New Goods

Margin in International Trade?. Journal of Political Economy, 121(2): 358-392.