Input Market Initiatives For Web

Input market initiatives that support innovation systems in Africa
Contents
Executive Summary: Input Market Initiatives Introduction RelevantLiteratureReview DemandandSupplyofAgriculturalInputs CurrentPoliciesandProgrammes ConstraintsandOpportunities StrategicOptionsforInputMarketInitiatives Input Market Initiatives that Support Innovation Systems and Agricultural Value Chains in Africa 1.0Introduction PurposeandObjectives 2.0LiteratureReview 3.0DemandandSupplyofAgriculturalInputs GlobalMacro-factors TheAgriculturalContext IncomeGrowthandDietaryChange Bio-fuels AdditionalAgriculturalLand Technology 4.0CurrentPoliciesandProgrammesonPromotingEfficientInputMarketInitiatives 5.0ConstraintsandOpportunitiesforPromotingEfficientInputMarketInitiatives 6.0StrategicOptionsforPromotingEfficientInputMarketInitiatives FarmerKnowledgeandSkills TheSCODPApproach RuralAgro-DealerNetworks Research-CommerceLinkagetoTestInputDemand FinancingInputsandAffordability ReducingthePackageSize CreditThroughBuildingFarmerAssociations GroupLending InterlinkedMarketsinTransition TheOut-growerScheme GovernmentCredit ReducingRisks OtherStrategicOptions InputsforReliefandFoodSecurity Government-RunProgrammes 7.0EnablingEnvironmentforStrategicOptions SmallholderChallenges OrganizationofInputMarkets EducationandTraining RoleofGovernmentandPrivateSector 8.0Conclusion 9.0MattersArising References Appendix: Terms of Reference AcronymsandAbbreviations
2 2 3 4 5 5 8 8 10 14 15 16 16 16 17 17 17 19 24 24 24 25 26 26 27 27 28 28 29 30 31 32 32 33 33 33 34 34 34 35 35 36 41 45
Input Market Initiatives that Support Innovation Systems in Africa

Wayo Seini Monty Jones Emmanuel Tambi Gbadebo Odularu
Forum for Agricultural Research in Africa 12 Anmeda Street, Roman Ridge, PMB CT 173, Accra, Ghana 2011
Citation: Wayo Seini, Monty Jones, Emmanuel Tambi, and Gbadebo Odularu 2011. Input Market Initiatives that Support Innovation Systems in Africa. Accra, Ghana. FARA encourages fair use of this material. Proper citation is requested.
Wayo Seini Professor, Institute of Statistics, Social and Economic Research (ISSER), University of Legon, Ghana Monty Jones Executive Director, Forum for Agricultural Research (FARA), Ghana Emmanuel Tambi Director, Advocacy and Policy, FARA Gbadebo Odularu Regional Policies and Markets Analyst, FARA
Forum for Agricultural Research in Africa (FARA) 12 Anmeda Street, Roman Ridge PMB CT 173, Accra, Ghana Tel: +233 302 772823 / 302 779421 Fax: +233 302 773676 Email: info@fara-africa.org Website: www.fara-africa.org ISBN 978-9988-9373-4-3 (print) ISBN 978-9988-9373-0-5 (pdf)
Design: www.bluepencil.in / Print: www.pragati.com
Executive Summary: Input Market Initiatives
Executive Summary: Input Market Initiatives

Introduction
As spelt out in the Terms of Reference (Appendix A), the purpose of the consultancy, therefore, is to document the lessons learnt from (ongoing) successful and failed input market initiatives on innovation systems and agricultural value chain in Africa. The specific objectives are to: 1. Collect and review literature on the input market initiatives that support innovation systems and agricultural value chains in Africa; 2. Identify the parameters (constraints and opportunities) for promoting efficient input market initiatives that support innovation systems and agricultural value chains in Africa; 3. Examine the current policies and programmes on promoting successful input market initiatives that support innovation systems and agricultural value chains in Africa; and, 4. Propose strategic options (technological, approaches, partnerships and socio-economic issues) for promoting successful input market initiatives on innovation systems and agricultural value chains in Africa. The methodology applied in this study is mainly desk review. Most of the review centred on relevant academic publications, project and stakeholder documents.
Relevant Literature Review

Input subsidies appear to be the central theme in the discussion of agricultural input marketing and a successful input marketing strategy for agricultural development hinges on how input subsidies are handled. As noted by Dorward et. al. (2008), agricultural input subsidies were a common element in agricultural development in poor rural economies in the 1960s and 70s, including successful green revolutions. Although subsidies have continued, to a greater or lesser extent in some countries, conventional wisdom as well as dominant donor thinking in the 80s and 90s was that subsidies had an ineffective and inefficient policy instrument in Africa, which contributed to government overspending and fiscal and macroeconomic problems. Dorward et.al. (2008) observe a resurgence of interest in agricultural input subsidies in Africa, in recent years, together with the emergence of innovative subsidy-delivery systems. The case for the resurgence in interest in subsidies in input marketing appears strong in the literature. Subsidies play a primary role of promoting the adoption of new technologies and thus increase agricultural productivity in the process of agricultural development (Ellis 1992). This is possible because subsidies allow farmers to access purchased inputs such as seeds and fertilizers at lower cost, and reduce the disincentives to adoption that result from farmers cash constraints. In spite of the strong case for subsidies, the literature also covers problems with subsidies. The most common problem is that costs of subsidies on inputs are very difficult to control, depending partly on the way they are delivered, for example, fertilizer production or import
2 Input Market Initiatives that Support Innovation Systems in Africa
subsidies. Also, market distortions introduced by subsidies, and particularly parastatal involvement in subsidized input delivery, tend to crowd out and inhibit private sector investment in input markets and provide opportunities for corruption and rent seeking, and hence impede sustainable development (Dorward et. al. 2008). The role of subsidies in input marketing in the successful Asian Green Revolutions has also been widely discussed in the literature. For example, the implementation of a subsidized credit-fertilizer-extension programme (Masagana programme) was a key part of the Green Revolution in the Philippines (Djurfeldt et. al. 2005). Areas with better than average production potential were selected for programme coverage in the early phase of implementation, but subsidies were later re-routed to the small-scale farm sector as it attracted priority. Djurfeldt et. al. (2005) regard the Green Revolution in Asia as a state-driven, marketmediated and small-farmer based strategy to increase the national self-sufficiency in food grains in a string of Asian countries. They argue that technology was an important precondition for the results attained. States or governments drove the development of the food grain commodity chains towards the goal of self-sufficiency, a goal that was motivated not only by the threat of famine, but also by the volatile world markets for grain, which made vulnerable those countries that depended on imports. Dorward et. al. (2004) argue that sustained (but not indefinite) input subsidies were a major part of successful Green Revolution packages, making a critical contribution to thickening and thus kick-starting markets, first within staple-food supply chains and then in the wider rural economy. Gregory (2006) argues that fertilizer subsidies for staple crops are a critical requirement for this process to occur in Africa. Input market policy reforms in Africa and other developing regions also receive attention in the literature. Lack of growth in agro-input business, particularly fertilizers, has been largely due to past governments over-involvement in its production, importation and distribution. Fertilizer subsidies were particularly expensive, thereby making heavy and growing demands on government budgets. These issues became the target of policy reforms in the agricultural sector, particularly from the mid-1980s.
Demand and Supply of Agricultural Inputs

Africas consumption of modern inputs, particularly fertilizers, is comparatively very low. The FAO (2008) projects that the situation will not change much in the short run as Africa will account for less than 3% of world fertilizer consumption by the end of 2012. To understand the current low levels of modern input use in African agriculture one has to take into consideration the developments and factors that drive the demand and supply of these inputs. The demand and supply of agricultural inputs are influenced largely by changing and often interrelated factors: population and economic growth; agricultural production; prices; and government policy. These changes manifest themselves in the global macro-economic factors, the agricultural context, income growth and dietary change, bio-fuels, additional
3
agricultural land cultivated, and technology. They are the main drivers of both agricultural input demand and supply. In addition, changes in technology are crucial in the supply of agricultural inputs. Macro-factors affecting global demand and supply of agricultural inputs include: the economic context; oil; trade; freight rates; and exchange rates. In the economic context, developing countries and economies in transition continue their strong economic performance, and hence a continued increases in the demand for agricultural commodities and inputs (FAO 2008). High oil prices could depress the use of oil-based agricultural inputs (fertilizers and agro-chemicals) which have been behind much of the increases in farm production during the past half century (FAO 2007). At the micro (farm level) the income of farmers is the most important factor affecting their demand for agricultural inputs. Growth of world exports is more than double that of global output marketing, a further deepening of economic integration that can have positive effects on the demand and supply of agricultural inputs that are internationally traded (FAO 2008). The impact of transport costs on imported agricultural input prices will grow as they are produced in fewer localities close to raw materials and ample energy availability (Ibid). The decline in the United States Dollar against most currencies in the world since 2005 has made imports from the United States cheaper (World Bank 2007). This is the major reason behind the brisk world import demand for agricultural inputs, particularly fertilizer and agro-chemicals, that in spite of high prices, shows little sign of retreat.
Current Policies and Programmes

Since input market initiatives in Africa and developing countries in general are dominated by subsidy issues, the new thinking in input market policy and programmes is also dominated by the same issues. The new thinking of subsidies in input market initiatives arise fundamentally from increased questioning by African politicians, NGOs and some policy analysts about the failure of liberalized policies in supporting broad based agricultural development, particularly sustainable intensification of staple food crop production (Dorward 2009). Thus, the concerns expressed by various stakeholders have led to the potential for input subsidies to deliver a wider range of policy objectives than those formerly recognized in the conventional wisdom. These policy objectives, as espoused by Dorward (2009) include: (i) short term private input market development; (ii) replenishment of soil fertility; (iii) social protection for poor subsidy recipients; (iv) national and household food security; and, (v) meeting broad based political demands. Some of the current policy issues are reflected in current programmes in Africa. These include: (1) National Fertilizer Subsidy Programme in Ghana; (2) Zambia Fertilizer Support Programme (FSP); (3) Kenaya National Accelerated Agricultural Input Programme (NAAIP); (4) Malawi Agricultural Input Subsidy Programme (AISP), Targeted Input Programme (TIP), and Starter Pack Programme (SP); (5) Sasakawa Global 2000; (6) Millennium Villages; (7) Malawi Sustaining Productive Livelihood through Iputs for Assets (SPLIFA); and, (8) Developing Agricultural Inputs Markets in Nigeria (DAIMINA).
Constraints and Opportunities

The major challenges faced by the different products in the broadly suitable agro-ecological areas in SSA include: i. Technical challenges and opportunities to increase productivity and stability, though the nature and extent of these challenges and opportunities varies between products and contexts; ii. Underinvestment in public goods provision (technical research and extension, market and institutions) particularly for staples where prices and value chain profits are limited; and, iii. Uncertainty and variability in global commodity prices as they affect input and output prices. This affects all commodities. In addition to these broad challenges classified by product and agro-ecological zones, there are other constraints and challenges pertaining directly to limited expansion in input use by smallholder farmers in Africa. They are mainly supply side issues and include: i. Lack of sufficient agro-input dealers to ensure that smallholder farmers, especially those in remote rural communities have adequate access to agro-inputs. ii. Limited business incentives (mainly tax) for agro-input dealers and business constraints including high transport costs (mainly due to poor infrastructure and long distances covered to source their goods), lack of adequate working capital, low demand, lack of market information, lack of storage facilities, and limited business skills and knowledge. iii. High farm level (or farm gate) prices for agro-inputs, compounded by lack of credit services for smallholder farmers. Nevertheless, there are opportunities for increased productivity in African agriculture. Dorward (2009) argues that the high potential yields achievable with the high response cereals and roots and tubers suggests that these have the potential to make major contributions to driving and supporting pro-poor growth in African countries where these crops can be produced, depending on other potential drivers of growth in these countries.
Strategic Options for Input Market Initiatives

A wide variety of efforts have been made to relieve the constraints of agricultural input market initiatives. These efforts have revealed a number of successful strategic options for promoting efficient input market initiatives in Africa, particularly Sub-Saharan Africa (SSA). These options are related to the three broad categories of demand and supply side constraints, i.e. knowledge and skills, financial and risk issues. Farmer Knowledge and Skills: Strategic options identified under this category include: (i) The SCODP Approach; (ii) Rural Agro-Dealer Networks; and (iii) Research-Commerce Linkage to Test Input Demand. Financing Inputs and Affordability: Options in this constraint category include: (i) Reducing the Package Size; (ii) Credit Through Building Farmer Associations; (iii) Group Lending; (iv) Interlinked Markets in Transition; and (v) The Out-grower Scheme.
5
Reducing Risks: Options in this category include: (i) Small packs; (ii) Rescheduling of credit; (iii) Input quality control; (iii) Donor-funded credit guarantees; (iv) Agro-dealer programmes; (v) Buy-back scheme; and, (vi) Contract enforcement. The strategic options are country specific and their successful application in any country will depend on creating the right enabling environment. Options that failed or had minimum success mostly had to do with issues of market failures, much of which was attributable to government intervention and relief programmes. Examples are most Input for Relief and Food Security programmes and Government-Run Programmes.
Input Market Initiatives that Support Innovation Systems and Agricultural Value Chains in Africa
1.0 Introduction
The performance of African agriculture has been disappointing over many decades. For example, sub-Saharan Africa is the only region in which per capita agricultural value added has not seen a substantial increase, with declining trend on average, since 1961, and considerable variation over time and across countries (FAO 2008). As such Africa is the only region of the world where per capita food production has been declining over the past three decades. As a result, there is increasing rural poverty, rising food prices widespread famines and increasing food imports now estimated at US$ 25 billion per year (FAO 2007). Unfortunately, the Green Revolution, which has saved many lives in Asia and South America, has bypassed Africa and hunger still prevails on the continent despite the past research and development efforts. Some of the factors militating against agricultural development in Africa include inter alia, inadequate investment in agriculture; limited access to credit by smallholder farmers; high cost and unavailability of inputs such as fertilizers and improved seeds; inadequate use of modern technologies; inefficient agricultural input markets; and the absence of a conducive policy environment. In particular, the use of improved agricultural inputs is very low in Africa and has remained largely static over the last 25 years, with particularly low usage in smallholder food crop and livestock production systems. In response to this challenge, it is widely accepted that increased use of inputs (seeds, fertilizers and chemicals) play a critical role, along side organic soil fertility enhancing practices, in the technical change needed for sustainable smallholder agricultural growth in Africa. Indeed, farmers require efficient input markets in order to deliver the right product, at the right time, in the right amounts, at a convenient place, and for an affordable price. Against this background, there is a dire need to document the lessons learnt from (ongoing) successful and failed input market initiatives on innovation systems and agricultural value chains in Africa. One of the justifications for this study is that many African policymakers are not well informed about how input markets work and why the prices fluctuate (Heinemann 2002). Further, they are inadequately informed about the successful input market initiatives that support innovation systems and agricultural value chain. There is also a need to increase awareness about policy and institutional implications of successful input market initiatives that support innovation systems and agricultural value chain. This study will provide policymakers and key stakeholders with evidence-based information for strategic input markets policy formulation in Africa.
Purpose and Objectives

The purpose of the consultancy, as spelt out in the Terms of Reference (Appendix A), is to document the lessons learnt from (ongoing) successful and failed input market initiatives on innovation systems and agricultural value chain in Africa. The specific objectives are to: 1. Collect and review literature on the input market initiatives that support innovation systems and agricultural value chains in Africa;
2. Identify the parameters (constraints and opportunities) for promoting efficient input market initiatives that support innovation systems and agricultural value chains in Africa; 3. Examine the current policies and programmes on promoting successful input market initiatives that support innovation systems and agricultural value chains in Africa; and, 4. Propose strategic options (technological, approaches, partnerships and socio-economic issues) for promoting successful input market initiatives on innovation systems and agricultural value chains in Africa. A crucial component of the study will include drawing conclusions and lessons learnt from ongoing unsuccessful input supply because it is more economically impactful to document reasons why an initiative goes wrong than why it works perfectly. This study is in line with the Abuja declaration of December 2006 which highlighted the categories of development initiatives that could be included in the field of research for a successful African Green Revolution. These are: i. National food security programmes to accelerate staple food production, e.g. cassava, NERICA, maize, legumes, livestock products, etc; ii. Effective and financially sustainable support systems to increase farm production, marketing and trade; iii. Staple food processing of high quality products that could be marketed through space and time, e.g. conversion into high value products: feed for livestock and aquaculture production, bio-fuel, and other industrial uses; iv. Effective and sustainable research, extension and producer organization practices for production, processing and commercialization; efficient management of national food reserve systems; v. Linking smallholders to commercial opportunities, such as fast growing supermarket chain operations; vi. Emerging successes to improve nutritional value of staple foods, e.g. fortification, diversification of food commodities, Home Grown School Feeding Programmes, nutrition education, etc; and, vii. Strategies for targeting vulnerable groups and implementing sustainable programmes linking food security objectives with wider developmental goals. The methodology applied in this study is mainly desk review. Most of the review centred on relevant academic publications, project and stakeholder documents. The report is presented in nine sections. After the literature review in section two, the demand and supply of agricultural inputs is discussed in section three. Section four discusses the current policies and progremmes on promoting efficient input market initiatives while the constraints and opportunities for promoting efficient input market initiatives in African agriculture are discussed in section five. Section six discusses strategic options arising from the desk review followed by a discussion on creating an enabling environment for successful implementation in section seven. A brief conclusion is provided in section eight followed by matters arising in section nine.
9
2.0 Literature Review

The literature on input market initiatives in Africa in particular (and in developing countries in general) is largely historical in nature and concentrate on fertilizer, seeds, pesticides and, to a lesser extent, irrigation. Subsidies, experiences of the Asian Green Revolution, government intervention, and policy reforms are the common features in the literature. After independence, most organized economic activities in the African countries were largely owned and operated by the public sector through various public agencies. Such state intervention was partly rooted in the past policy regimes and was partly a de facto outcome due to the absence of the previous entrepreneurs and institutions (Zohir 2001). However, input subsidies appear to be the central theme in the discussion of agricultural input marketing and a successful input marketing strategy for agricultural development hinges on how input subsidies are handled. As noted by Dorward et. al. (2008), agricultural input subsidies were a common element in agricultural development in poor rural economies in the 1960s and 70s, including successful green revolutions. Although subsidies have continued, to a greater or lesser extent in some countries, conventional wisdom as well as dominant donor thinking in the 80s and 90s was that subsidies had been ineffective and inefficient policy instrument in Africa, which contributed to government overspending and fiscal and macroeconomic problems. Dorward et.al. (2008) observe a resurgence of interest in agricultural input subsidies in Africa, in recent years, together with the emergence of innovative subsidy-delivery systems. The case for the resurgence in interest in subsidies in input marketing appears strong in the literature. Subsidies play a primary role of promoting the adoption of new technologies and thus increase agricultural productivity in the process of agricultural development (Ellis 1992). This is possible because subsidies allow farmers to access purchased inputs such as seeds and fertilizers at lower cost, and reduce the disincentives to adoption that result from farmers cash constraints. Subsidies, it is argued, also play a role in rural development and are sometimes implemented to support agricultural development in more remote areas, mainly with pan-territorial pricing and subsidized delivery systems. Input subsidies have also been a means for raising farm incomes particularly where farmers are being taxed in other ways through export tariffs and low fixed domestic prices (Dorward et. 2008). The need for complementary credit and extension services, have been stressed to encourage economically and technically efficient use of inputs (Ibid.). In spite of the strong case for subsidies, the literature also covers problems with subsidies. The most common problem is that costs of input subsidies are very difficult to control, depending partly on the way they are delivered, for example, fertilizer production or import subsidies. It is argued that subsidies could be required for a short term for learning purposes (about both input use and benefits), and then phased out. Yet, strong political pressure for the expansion of subsidies often make exits very difficult, with strong resistance to scaling down or termination of subsidies. Targeting input subsidies to particular types of farmers is very difficult, with problems of diversion and leakage. Even
when it is used by the target group, artificially low prices may lead to overuse of inputs, or the adoption of input-intensive more than more economically efficient labour-intensive production methods (Dorward 2009). Another problem with subsidy in the literature is that benefits may be regressive in that they tend to benefit large farmers who can afford subsidesed inputs. Also, market distortions introduced by subsidies, and particularly parastatal involvement in subsidized input delivery, tend to crowd out and inhibit private sector investment in input markets and provide opportunities for corruption and rent seeking, and hence impede sustainable development (Dorward et. al. 2008). Input subsidies are normally designed to promote the production of an output. Thus, the need for complimentary policies that affect the output has been stressed in the literature. Policies affecting staple food prices, investment in roads, communication infrastructure and agricultural services, and facilitating private sector development and non-farm diversification are required to promote the effectiveness of input subsidies in agricultural development (Dorward et. al. 2007). The role of subsidies in input marketing in the successful Asian Green Revolutions has also been widely discussed in the literature. The implementation of a subsidized credit-fertilizerextension programme (Masagana programme) was a key part of the Green Revolution in the Philippines (Djurfeldt et. al. 2005). Areas with better than average production potential were selected for programme coverage in the early phase of implementation, but subsidies were later re-routed to the small-scale farm sector as it attracted priority. In Indonesia, shortages of fertilizer supplies and domestic credit, at the beginning of the Green Revolution, prompted the government to start the BIMAS Gotong Royong (BGR or mutual self-help programme) in which foreign manufacturers of fertilizers and pesticides were invited to participate directly in supplying credit and distributing inputs and management advice to rice farmers and extension staff in certain locations (Djurfeldt et. al. 2005). The importance of government role in the Asian Green Revolutions was particularly demonstrated in the Indonesian case with the establishment of BULOG (Badan Urusan Logistic), the new food logistics agency directly responsible to the President, which developed into one of Asias most powerful food agencies. BULOG developed and implemented a comprehensive rice policy that benefited both consumers and producers and maintained appropriate price relationships both within Indonesia and international rice markets (Mears and Moeljono 1981). The success of the Indonesian Green Revolution was also attributable to the strong commitment of the government to food self-sufficiency and rural development (Djurfeldt et. al. 2005). The governments vision on rural development resulted in two decades of sustained rural bias which included not only the protection and support of agriculture but also substantial spending programmes to increase the provision of physical infrastructure and social services in rural areas. In addition, the creation and expansion of a national fertilizer industry formed part of the strategy to become self-sufficient in rice. Support to farmers during the Green Revolution was mainly indirect through subsidized inputs fertilizers and credit (Ibid).
11
India represented a major variant of the Asian Green Revolutions in the sense that its agriculture is very diverse. Wheat and other cereals play a significant role making it necessary to consider food grains as a group when trying to understand the countrys agricultural policy. Consequently, the early Green Revolution in India was a question of both wheat and rice production, and it was the early success of the wheat sector that explained most of the growth (Djurfeldt et. al. 2005). Following the recommendations of a group of American experts in the 1959 report on Indias Food Crisis and Steps to Meet It, the Indian government set up the Intensive Agricultural District Programme (IADP) to develop and implement policies for the Green Revolution. The IADP was based on a package approach to increase Indias agricultural yields. The package included institutional, economic and technical innovations that were implemented at the district, block, village, farm, and field level. On the basis of one pilot district in each of the seven states, India marshaled all the inputs that were needed for intensive high-yielding practices, and made available to capable farmers (Perkins 1997). Apart from technical components improved seed, fertilizer, irrigation and pesticides the package approach also stressed the importance of adequate credit facilities, technical advise and a guaranteed price providing an incentive to accept the risk of trying a new technology. Following minimum initial success, due mainly to low yield response to fertilizer and other inputs in use of the then recommended varieties which were locally developed, the objective was narrowed down and institutional support in the credit and cooperative fields was de-emphasized (Barker et. al. 1985). The new strategy was embodied in the High Yielding Varieties Programme (HYVP) and involved a concentration of seeds, fertilizer and extension in areas with high quality irrigation conditions. Shipment of semi-dwarf wheat seeds from Mexico and rice seeds from IRRI were rapidly supplied to the promoted areas. From the late 1970s to 2000, a period during which the Indian population doubled, food production more than doubled as a result of the spread of the Green Revolution within the country (Djurfeldt et. al. 2005). Compared with the Philippine and Indonesia cases, the Indian Green Revolution recorded slow growth rates, at least initially, and had limited impact on poverty (Ibid). Djurfeldt et. al. (2005) regard the Green Revolution in Asia as a state-driven, marketmediated and small-farmer based strategy to increase the national self-sufficiency in food grains in a string of Asian countries. They argue that technology was an important precondition for the results attained. States or governments were driving the development of the food grain commodity chains towards the goal of self-sufficiency, a goal that was motivated not only by the threat of famine, but also by the volatile world markets for grain, which made vulnerable those countries that depended on imports. They argue further that the Asian Green Revolutions were market-mediated in the sense that markets played a fundamental role in different parts of the chain, with regards to farm inputs and the trade and processing of grain. Also the Asian Green Revolutions were small-farmer based, i.e. they were not based on large-scale mechanized farming (Ibid). Djurfeldt et al. (2005) emphasize the critical role of market mediation in the Asian Green Revolution. They argue that really existing markets are not like the ideal type ones which
the economists build their theories around. Really existing markets are not free ones, they show tendency to monopoly and monopsony and, most important of all, they are institutionalized and regulated by the surrounding society and in particular the state. They contend that the Asian Green Revolutions were state-driven and market-mediated, in the sense that governments relied on private business to handle at least parts of the provision of inputs (seed, fertilizer irrigation etc.) and to distribute the food grain produced from the farm gate to the consumer. These markets were not free and in important respects they were controlled by the state. In many of the Asian countries, state agencies operated in farm markets, both on the input and the output sides (Ibid). Dorward et. al. (2004) argue that sustained (but not indefinite) input subsidies were a major part of successful Green Revolution packages, making a critical contribution to thickening and thus kick-starting markets, first within staple-food supply chains and then in the wider rural economy. Gregory (2006) argues that fertilizer subsidies for staple crops are a critical requirement for this process to occur in Africa. Input markets policy reforms in Africa and other developing regions also receive attention in the literature. The conventional wisdom in the 1960s to the early 1980s was for African countries to indulge in large scale (universal) agricultural input subsidies as a major feature of agricultural development policies. These were generally implemented as across the board price subsidies accessible to all producers, or to all producers of a particular commodity (Dorward 2009). Conventional arguments for subsidies in agricultural development have focused on the promotion of agricultural productivity through the adoption of new technologies (Ellis 1992). If subsidized inputs were sold through a state monopsony, then there were often attempts of price discrimination, with, for example, only smallholder farmers allowed to purchase subsidized inputs and forbidden from selling it on. Lack of growth in agro-input business, particularly fertilizers, has been largely due to governments over-involvement in fertilizer production, importation and distribution. Fertilizer subsidies were particularly expensive and made heavy and growing demands on government budgets as they stimulated increased fertilizer consumption. In Nigeria, for example, subsidy on fertilizer was up to 85% of the cost of the fertilizers (FMARD 2003). In many cases price subsidy did not reach the intended beneficiaries because of increasing corruption and inefficiency in the entire chain from procurement to logistics management and delivery (Ibid). These issues became the target of policy reforms in the agricultural sector, particularly from the mid-1980s, when most African countries adopted structural adjustment programmes (SAPs). The ultimate goal of the policy reforms was the liberalization of agricultural input markets. In most countries in Africa, and in most developing countries, reforms followed a similar pattern: deregulation of input prices (particularly fertilizers); phasing out of input subsidies; transfer of procurement (import) and distribution of inputs to private dealers; and divestiture of state-owned agricultural enterprises ( Seini et a. 2005; Zohir 2001). Since the beginning of economic reforms in Sub-Saharan Africa, donors have generally discouraged the use of free or subsidized input distribution. This discouragement was largely due to some financially unsustainable approaches that led many pre-reform
13
governments to the brink of bankruptcy. However, many SSA governments and some donors believe there are legitimate food security and environmental issues that could be addressed by input subsidies (Kelly et al. 2003). In this regard, analysts agree that fertilizer subsidies should only be considered when fertilizer use is economically profitable (Ibid). In other words, there should be a considerably strong crop response that fertilizer use remains profitable when price distortions from subsidies and taxes are removed. Credit is another issue that received attention under policy reforms in SSA, since financing problems have long been evasive and affecting all sectors of the economy and all levels of the input marketing sector. Interventionist policies dominated financial sector markets in the 1960s and 1970s in most SSA countries and became the target of policy reforms (Aryeetey et al. 2000). In many countries poor repayment rates led to huge government deficits that led, in turn, to donor conditionalities on government spending (Commander et al. 1989).
3.0 Demand and Supply of Agricultural Inputs

Differences in the state of agricultural development between countries and regions of the world can sometimes be explained or illustrated by the intensity/quantum of consumption/ usage of agricultural inputs per unit of land. Table 1 shows the levels of fertilizer (Nitrogen) usage in regions in the world. Clearly, Africas consumption is comparatively very low. The FAO (2008) projects that the situation will not change much in the short run as Africa will account for less than 3% of world fertilizer consumption by the end of 2012. To understand the current low levels of modern input use in African agriculture one has to take into consideration the developments and factors that drive the demand and supply of these inputs. Three major developments in recent times distinguish current state of agricultural markets from past fluctuations: hike in world prices (affects nearly all food and feed commodities); record prices at the time of abundance rather than scarcity; and, the strengthening of linkages between agricultural commodity markets and other markets. These observations
Table 1: Regional Fertilizer (nitrogen) Consumption, 2008 Region Africa Europe America Asia Oceania N fertilizer (%) 3.4 14.1 19.8 61.4 14.1
Source: FAO Rome (2008): Current World Fertilizer Trends and Outlook to 2010/11. 14 Input Market Initiatives that Support Innovation Systems in Africa
refer to a paradigm shift in agriculture away from decreasing real food prices over the past thirty years (FAO 2008). This paradigm shift has effect on the demand and supply of agricultural inputs, particularly fertilizers. The demand and supply of agricultural inputs are influenced largely by changing and often interrelated factors: population and economic growth; agricultural production; prices; and government policy. These changes manifest themselves in the global macro-economic factors, the agricultural context, income growth and dietary change, bio-fuels, additional agricultural land cultivated, and technology. They are the main drivers of both agricultural input demand and supply. In addition, changes in technology are crucial in the supply of agricultural inputs.
Global Macro-factors
Macro-factors affecting global demand and supply of agricultural inputs include: the economic context; oil; trade; freight rates; and exchange rates. In the economic context, developing countries and economies in transition continue their strong economic performance, and hence a continued increases in the demand for agricultural commodities and inputs (FAO 2008). High oil prices contribute to price increases for most agricultural crops by raising input costs on the one hand, and by boosting the demand for agricultural crops used as feedstock in the production of alternative energy sources (bio-fuels) on the other (Integer 2007). High oil prices could depress the use of oil-based agricultural inputs (fertilizers and agrochemicals) which have been behind much of the increases in farm production during the past half century (FAO 2007). World trade expanded rapidly in the recent three years driven by increased trade of oil and non-oil commodities as well as capital goods (FAO 2008). Growth of world exports is more than double that of global agricultural commodity output marketing, a further deepening of economic integration that can have positive effects on the demand and supply of agricultural inputs that are internationally traded (Ibid). Freight rates have become a more important factor in agricultural markets than in the past. Increased fuel costs, stretched shipping capacity, port congestion, and longer trade routes due to altered trade patterns, have pushed up shipping costs. The impact of transport costs on imported agricultural input prices will grow as they are produced in fewer localities close to raw materials and ample energy availability (FAO 2008). Exchange rate swings play a critical role in all markets, including agricultural markets. Yet rarely have currency developments been as important in shaping agricultural prices as in recent times. The decline in the United States Dollar against most currencies in the world since 2005 has made imports from the United States cheaper and lessons the true impact of the rise in world prices (World Bank 2007). This is the major reason behind the brisk world import demand for agricultural inputs, particularly fertilizer and agro-chemicals, that in spite of high prices, shows little sign of retreat.
15
Global economic growth is seen as remaining sufficiently robust to sustain demand for food (especially high value foods such as meat, fruits and vegetables) in emerging economies, thereby strengthening demand for fertilizers and other agricultural inputs (FAO 2008). At the micro (farm level) the income of farmers is the most important factor affecting their demand for agricultural inputs.
The Agricultural Context

Global population and economic growth are the major forces driving increased world food demand, crop production and agricultural input use. With regards to population growth, absolute annual increments continue to be large in spite of slowing down of word population. More food and fibre will be required to feed and clothe these additional people and to increase the daily uptake of millions of undernourished worldwide. There is thus significant scope for further increases in demand for food and for that matter agricultural inputs, even as population growth slows down (FAO 2007).
Income Growth and Dietary Change

Global agricultural value added per capita has grown at an average rate of 0.4% per year in real terms since 1961. Sub-Saharan Africa is the only region in which per capita agricultural value added has not seen a substantial increase with declining trend on average for the period and considerable variation over time and across countries (FAO 2008). At the same time, global dietary patterns have changed dramatically over the past four decades, both reflecting and driving these changes (Ibid). Income growth, relative price changes, urbanization and shifts in consumer preferences have altered dietary patterns particularly in developing countries. Diets have shifted away from staples such as cereals, roots and tubers and pulses towards more livestock and fishery products, vegetable oils and fruits and vegetables. Increasing meat and aquaculture production will require more feed (coarse grain and oilseed meals). Conversion of grain areas to vegetable and food production will translate into higher fertilizer and agrochemical agricultural input demand as average application rates for these inputs are about double those of grain crops (FAO 2007). The above trends support continuing and increasing demand for agricultural inputs, particularly mineral fertilizer to restore and enhance fertility of the worlds agricultural land for higher yields and improved produce quality.
Bio-fuels
High oil prices are creating new markets for agricultural commodities that can be used as feed stocks for the production of bio-fuels. Bio-fuels are being promoted as contributing to a wide range of policy objectives, most notably as providing greater energy security with regards to liquid fuels, increasing rural incomes, lowering greenhouse gas emission and providing economic opportunities for developing countries (Integer 2007). Increasing production of bio-fuel agricultural commodities could lead to increased demand of agricultural inputs.
Additional Agricultural Land

In the longer term, new land could be cultivated in SSA. In particular, marginal lands could be brought into cultivation as fertile lands become scarce with population growth. However, developing such land and placing output in domestic and international markets would require large investments into transport and other infrastructure, which could take years. Increasing productivity on existing cropped land by inter alia using more agricultural inputs, particularly fertilizer and improved seeds, remains the most likely path for farmers to increase production (FAO 2008).
Technology
The scope for introducing higher yielding technologies, including fertilizers and improved seeds, lies mainly in developing countries where technology adoption is lowest. At the same time, concerns about the impact of Nitrogen and Phosphate losses to the environment will call for increased recycling of organic nutrient sources which should improve nutrient use efficiency (Ibid). The adoption of improved technology is thus likely to contribute to increased agricultural input use, especially fertilizers.
4.0 Current Policies and Programmes on Promoting Efficient Input Market Initiatives
There has been a lot of new thinking on policies and programmes to promote efficient input market initiatives in Africa. Since input market initiatives in Africa and developing countries in general are dominated by subsidy issues, the new thinking in input market policy and programmes is also dominated by the same issues. The new thinking of subsidies in input market initiatives arise fundamentally from increased questioning by African politicians, NGOs and some policy analysts about the failure of liberalized policies in supporting broad based agricultural development, particularly sustainable intensification of staple food crop production (Dorward 2009). Thus, the concerns expressed by various stakeholders have led to the potential for input subsidies to deliver a wider range of policy objectives than those formerly recognized in the conventional wisdom. These policy objectives, as espoused by Dorward (2009) include: (i) short term private input market development; (ii) replenishment of soil fertility; (iii) social protection for poor subsidy recipients; (iv) national and household food security; and, (v) meeting broad based political demands. In addition there has been growing interest in the development of new instruments and approaches in designing and delivering new input subsidies, popularly referred to as smart subsidies. Morris et al. (2007) list ten features of smart subsidies: (i) promoting fertilizer as part of a wider strategy; (i) favouring market-based solutions in input supply; (iii)promoting competition in input supply; (iv) paying attention to demand; (v) insisting on economic efficiency; (vi) empowering farmers; (vii) evolving an exit strategy; (viii) pursuing regional integration; (ix) ensuring sustainability; and, (x) promoting pro-poor economic
17
growth. Instruments proposed for implementing smart subsidies include (i) demonstration packs; (ii) vouchers; (iii) matching grants; and, (iv) loan guarantees. Nevertheless, the interest in getting input subsidies to serve new functions and policy objectives, and the extent to which input subsidies are the most cost-effective way of achieving these policy objectives continues to be controversial. For example, while recognizing all the features of smart subsidies listed above, the 2008 World Development Report on Agriculture for Development takes a more restricted and conventional position, focusing on the roles of subsidy as being to provide sustainable solutions to market failures, through market smart approaches to jumpstart agricultural input markets, underwrite risks of early adoption of new technologies to help achieve economies of scale to reduce input prices, as part of a comprehensive strategy to improve productivity with credible exit options (World Bank 2008). In other words subsidies, no matter how laudable the policy objectives may be, should have a life span. Some of the current policy issues are reflected in current programmes in Africa. These include: (1) National Fertilizer Subsidy Programme in Ghana; (2) Zambia Fertilizer Support Programme (FSP); (3) Kenya National Accelerated Agricultural Input Programme (NAAIP); (4) Malawi Agricultural Input Subsidy Programme (AISP), Targeted Input Programme (TIP), and Starter Pack Programme (SP); (5) Sasakawa Global 2000; (6) Millennium Villages; (7) Malawi Sustaining Productive Livelihood through Iputs for Assets (SPLIFA); and, (8) Developing Agricultural Inputs Markets in Nigeria (DAIMINA). These current programmes are well spread in all sub-regions in SSA. They are ongoing and success or failure cannot be judged now. However, the current programmes in Africa have some common features in line with the new policy thinking, and also embody a range of different approaches. With the exception of the Global 2000 programme, all of the current programmes were initiated in response to the high food prices as well as rising fertilizer prices in early 2008. The common feature in all the current programmes is the role of government and the involvement of private sector operatives. Private companies import the fertilizers and other inputs under government tender. The distribution is done through a government agency (as in the cases of Ghana and Nigeria), prastatal input suppliers (as in the case of Malawi), cooperative societies (as in the case of Zambia) or through private agro-input dealers (as in the case of Kenya). A number of innovative approaches are also involved in these new programmes: i. Starter Pack: All farm households under the Malawi programme were given an input starter pack comprising 15kg of fertilizer, 2kg of maize seed and some legume seed in an attempt to boost production of maize and legumes. ii. Targeted Input Programme: Targeted beneficiaries were selected and inputs (mainly fertilizer) were provided to them (Malawi). iii. Demonstration Plots: An approach used by Sasakawa Global 2000 under which farmers were given assistance in acquiring inputs on demonstration plots iv. Millennium Villages: Integrated projects in selected villages to demonstrate the substantial changes that are possible with investments in health, agriculture and
community development. A major part of this is the provision of subsidized agricultural inputs (seed and fertilizer). v. Inputs for Assets (IFA): This innovative project aims at sustaining productive livelihoods through inputs for assets under which food insecure households in particular communities in Malawi were provided with input vouchers as payment for public works, i.e. work for inputs rather than work for cash. A commonly occurring feature of the innovative approaches are subsidies on the inputs involved and the use of vouchers to pursue the twin objectives of agro-input dealer development and increased producer access to and use of inputs, as well as food security among poor subsistence farmers. The new programmes arising from the new policy thinking have encountered some limitations or drawbacks. In Ghnanas programme, voucher redemption prices varied geographically to provide pan-territorial farmer prices in district capitals, but this tended to discourage suppliers from supplying fertilizers outside district capitals as neither redemption nor farmer prices covered cost of transport outside district capitals. Anecdotal, press and survey evidence show that in Zambias fertilizer support programme, substantial quantities of subsidized fertilizers are diverted from cooperatives and smallholder farmers to fertilizer traders, who then sell it at unsubsidized prices (Doorward 2009). The subsidized fertilizer that does reach smallholder farmers tends to go to less poor farmers (who, on efficiency grounds, are explicitly targeted by the programme). In Nigerias case, the standard national programme purchased fertilizer from importers and then distributed to state level blenders and agricultural development programs. This national progrqamme, however, undermined the development of the private sector, commercial sales, and suffered from substantial leakages and non-payment from states to the federal government (Ibid). In all three cases and countries, the programmes seem to have, so far, failed to reach poor smallholder rural farmers. On the other hand, the innovative approaches discussed above seem, so far, to be successful marketing initiatives, particularly in Malawi.
5.0 Constraints and Opportunities for Promoting Efficient Input Market Initiatives
Dorwards (2009) classification of the development opportunities, and constraints facing African farmers in Table 2 is an appropriate starting point for this section. They consider constraints and opportunities for growth for different agricultural products in different situations in Africa. It is particularly important to identify the situations where input subsidies could work to take opportunities and overcome constraints facing African farmers. Table 2 sets out (i) the major roles for increased productivity for different types of agricultural products in countries with different characteristics and then (ii) the major challenges that
19
20
Table 2: Typology of Agricultural Products by Roles, Countries and Challenges and Opportunities Non Staple Producers Low response cereals Sorghum, millet Least cost welfare, growth platform Subsistence, support and spread growth Subsistence and support growth Subsistence Technology Yield package? Public goods Policy coordination Processing? Various Various Various Major driver and then supporter Support growth Regional driver and supports growth Support growth Support growth Support growth Support and spread growth Support and spread growth Support and spread growth Pro-poor growth Support growth, with staple spillovers Support growth, with staple spillovers Roots/tubers Cassava, (sweet potatoes) Domestically consumed non-tradable Domestically consumed tradable Traditional / nontraditional exports Drive growth with staple spillovers? Minor driver and spreads growth Regional driver and supports growth Driver
Staple Producers
High response cereals Maize, rice? wheat?
Broad role
Pro-poor growth
Countries with minerals
Support and spread growth
Coastal, no minerals
Regional driver and supports growth
Land locked, no minerals
Major driver and then supporter
Irrigation
(research, infrastructure, institutional environment)
Challenges
Complementary service coordination Global commodity and product prices (profitability, input affordability)
Price instability (intra and inter seasonal)
Price / productivity tightrope
Seasonal input finance
Source: Dorward A. 2009. Rethinking Agricultural Input Subsidy Programmes in a Changing World.
need to be addressed in order to achieve increased productivity. Distinctions are made between different types of crops and products (and implicitly between different agroecological zones associated with them). In the Table 2, maize, rice (notably NERICA) and possibly wheat (a much less important crop in Africa) are classified in Dorward (2009) as cereals with potentially high responses to significant investments in inorganic and organic fertilizer application. Millet and sorghum have generally lower yield potential, but there are still possibilities for significant yield responses in the context of integrated soil fertility management (ISFM) practices, involving, for example, better water control, use of organic matter and micro-dosing with critical nutrients (Ibid). Root crops, particularly cassava sweet potatoes and yam, have the potential for significant yield increases with intensification but will require significant increases in fertilizer inputs, there are initial opportunities for major yield increases from improved varieties. Non-staple products are considered in terms of non-tradables and tradables, the latter broken down between domestically consumed and exported tradables. Dorward (2009) argues that the high potential yields achievable with the high response cereals and roots and tubers suggests that these have the potential to make major contributions to driving and supporting pro-poor growth in African countries where these crops can be produced, depending on other potential drivers of growth in these countries. On the other hand, in the more challenging agro-ecological conditions the low response cereals achieve improved yields that are still low. These improved yields will not be able to drive growth substantially but they should have important roles in supporting growth and in providing a lower cost and more developmentally beneficial subsistence safety net (as compared with humanitarian relief). These developmental opportunities will vary between countries with opportunities for minerals, manufacturing industries and cash crops to drive growth (Ibid). Nevertheless, the more challenging agro-ecologies where these crops are grown are also likely to limit cash crop and livestock development options. In these situations, investment in increased staple productivity may be a least cost way of providing safety nets in a way that encourages economic activity rather than dependency. The lower part of the Table 2 lists the major challenges faced by the different products in the broadly suitable agro-ecological areas. These challenges include: i. Technical challenges and opportunities to increase productivity and stability, though the nature and extent of these challenges and opportunities varies between products and contexts; ii. Underinvestment in public goods provision (technical research and extension, market and institutions) particularly for staples where prices and value chain profits are limited; and, iii. Uncertainty and variability in global commodity prices as they affect input and output prices. This affects all commodities. The location of the text and thickness of arrows in the Table 2 show that there are considerable differences between different products in the challenges they face.
21
22
Figure 1: Identifying and Reducing Input Marketing Constraints
A. Farm-level constraints
Trader training programs No Information campaign by research and extension Promotion of input trader associations Input vouchers No
B. Trader constraints
Yes No
Does farmer have knowledge of profitable inputs that No he is not using? Yes Extension Advertising On-farm demos Participatory research Yes Develop supply Does trader have enough technical knowledge to order and market inputs?
Does trader believe there is effective demand?
No
Yes
Does farmer have knowledge and skills needed to efficiently use the input?
Yes Does trader have capital needed to stock inputs? Yes Is there a supplier available?
Are inputs available?
No
Yes
Are inputs affordable or credit available?
No
Mini-packs Credit Subsidy
Link with credit services Agro-dealer programs
Yes
Are inputs the best use of available financial resources? Improve profitability relative to alternative uses through research or subsidy Yes
No
No
Program to support suppliers building distribution networks Support input dealer associations Can transportation be arranged for a reasonable price? Is level of risk acceptable? No Rural road investments Lower vehicle taxes
Yes
Is level of risk acceptable? No Mini-packs ISFM Output price support Insurance

Yes
Yes
Purchase Inputs
No
Supplier risk sharing Insurance
Source: V. Kelly et al./Food Policy 28 (2003) 379404
Supply Inputs
Dorward (2009) notes that while high response cereals (with root and tubers) are the products with the greatest importance and potential for driving and/or spreading growth, they are also the crops which are most affected by challenges and failures in complementary services coordination, price instability, the price/productivity tightrope and seasonal input finance provision. In addition to these broad challenges classified by product and agro-ecological zones by Dorward (2009), there are other constraints and challenges pertaining directly to limited expansion in input use by smallholder farmers in Africa. They are mainly supply side issues. Thus, these constraints and challenges stem mainly from farm services provided by agroinput dealers, the constraints and challenges they face and the policy and institutions required in order to enhance the environment for a sustainable expansion of their areas of coverage and the access of smallholder farmers to farm inputs and other services that they provide (Chianu et al. 2008). These include: i. Lack of sufficient agro-input dealers to ensure that smallholder farmers, especially those in remote rural communities have adequate access to agro-inputs. ii. Limited business incentives (mainly tax) for agro-input dealers and business constraints including high transport costs (mainly due to poor infrastructure and long distances covered to source their goods), lack of adequate working capital, low demand, lack of market information, lack of storage facilities, and limited business skills and knowledge. iii. High farm level (or farm gate) prices for agro-inputs, compounded by lack of credit services for smallholder farmers. Kelly et al. (2003) stress the need for profitability of technology in expanding the use of inputs to zones and farmers where there is a reasonable expectation that their use is both financially and economically profitable. Economic profitability is an important yardstick for measuring the benefit to a country of investments of scarce resources in input promotion programmes (Monke et al. 1989). However, the ideal situation is when both financial and economic analysis suggests that input use by farmers is likely to be profitable, but farmers are not using inputs. This then calls for the identification and reduction of the constraints impeding input use by farmers. In order to identify and reduce input constraints, Kelly et al. (2003) take the position that both demand and supply can be constrained. They discuss the issue of determining why a farmer would not be using a potentially profitable input with the aid of the Figure 1. According to them, the A part of Figure 1 provides a streamlined picture of the questions that must be asked to understand a farmers decision to either purchase or not purchase an input. In situations where the farmers constraint is the non-availability of inputs, supplyside constraints must be overcome and costs reduced. The B part of Figure 1 provides a picture of these supply-side constraints. They then categorize both the demand and supply side constraints into three broad issues: (i) knowledge and skills constraints; (ii) financial constraints; and, (iii) risk issues. This framework of demand and supply constraints form the basis for the discussion of many recent efforts to expand input use in Sub-Saharan
23
Africa, identifying the constraints that programmes attempt to address, evaluating their successes in increasing input use and their contribution to input market development. It is such analysis of programmes in Africa that provided the options for promoting efficient input market initiatives in the next section.
6.0 Strategic Options for Promoting Efficient Input Market Initiatives

A wide variety of efforts have been made to relieve the constraints of agricultural input market initiatives identified in the previous section. These efforts have revealed a number of successful strategic options for promoting efficient input market initiatives in Africa, particularly Sub-Saharan Africa (SSA). These options are related to the three broad categories of demand and supply side constraints, i.e. knowledge and skills, financial and risk issues.
Farmer Knowledge and Skills

Three strategic options can be identified for this group of constraints, namely, the SCODP approach, rural agro-dealer networks and Research-Commerce Linkage to Test Input Demand. The SCODP Approach The Sustainable Community-Oriented Development Project (SCODP) to increase input use among poor farmers in Nyanza Province of Kenya by promoting fertilizer and seed provides a major strategic option for this category of constraints. It is a pro-poor programme since the targeted zone is characterized by extremely low crop yields and incomes, representing a pocket of poverty in the otherwise agriculturally prosperous region of Western Kenya. The SCODP approach includes: i. Raising farmers awareness of modern inputs; ii. Participatory input testing; iii. Blending and packaging of fertilizers into affordable mini-packs; and, iv. SCODP distribution network (rural stockists selling on a cash basis from SCODP shops or through promotion programmes at markets, churches and schools) An unanticipated knowledge outcome of the programme was that local traders learned by observing SCODP shops that there was effective demand for inputs and began stocking them, particularly fertilizers (Kelly et al. 2003). The innovative approach has been successful in developing demand among some of Kenyas poorest farmers and improving their physical and financial access to purchased inputs for use on food crops generally grown for home consumption (maize, beans and collard greens) in an effort to improve food security.
The awareness-raising campaigns, carried out at markets and churches where farmers congregate, are a key component of the success. They were complemented with extension assistance to farmers willing to test the inputs. The strength of the programme appears to be its ability to inform both farmers and traders about inputs, and its ability to address multiple constraints: farmer knowledge through awareness campaigns, farmer skills through participatory input testing, affordability through the use of min-packs and availability by establishing SCODP shops and stimulating general merchandise traders to stock fertilizers. The lesson from the SCOPD experience is that effective demand for inputs to be used on food crops can be developed among poor farmers if the knowledge, skill, availability, and affordability constraints are addressed. The most crucial step appears to have been raising awareness of inputs and their potential among farmers seldom targeted by extension services (Kelly et al. 2003). In spite of the numerous successes of this strategic innovative option, its sustainability will be dependant on measures that are taken to mitigate the effects of subsidy withdrawals when donor support ends. Rural Agro-Dealer Networks Rural agro-dealer programmes increase retailer knowledge and decrease supplier risks. Therefore, an increasingly popular innovative strategic approach to agricultural input promotion focuses on rural agro-dealer networks (Kelly et al. 2003). These networks increase input availability by first improving the technical knowledge of inputs and managerial skills among rural traders and then reducing capital constraints through a system of guarantees that reduce the risk of input distributors supplying credit to retailers (Ibid). There are three distinguishing features of rural agro-dealer networks: i. Rural shop owners are trained by NGOs on general business management and technical knowledge of agricultural inputs; ii. Once certified, the agro-dealers are connected to major input supply companies using a credit guarantee scheme, which covers some of the risk-related costs normally borne by firms building rural input supply networks; and, iii. Linking agro-dealers to farmers field schools, where they exist, to build effective demand for inputs by improving farmers knowledge. Kelly et al. (2003) identify three advantages to this strategic input marketing approach: i. It builds on existing entrepreneurs who already have business skills and are able to take risks; ii. It moves inputs closer to farmers through a viable private sector system; by bearing a high proportion (up to 50%) of the input guarantee costs and retailer training, the suppliers share in the risk of developing these networks; and, iii. Scaling up is based on the ability of the agro-dealers to sell their products and repay inventory credit, rather than donor funds.
25
Agro-dealer networks have been used in input marketing programmes in Zimbabwe, Malawi and Mozambique. In general, performance in these cases suggests that agrodealer programmes can effectively link input suppliers to rural markets. As rural markets expand, farmers input search costs and prices should decline. An absence of policy reversals or government interventions that cripple private sector incentives is critical in the development of agro-dealer networks. Research-Commerce Linkage to Test Input Demand Most smallholders in Africa cultivate open-pollinated crops (e.g. millet, sorghum, peanuts, soybeans, cowpeas). Much research has gone into improved varieties of open-pollinated seeds (OPV), yet the number of farmers using these improved varieties on a regular basis remains very small (Kelly et al. 2003). Local traders are often unwilling to stock such seeds because they perceive farmer demand as weak. Even when demand is strong, the fact that farmers need to purchase the OPV seeds only once in a year and can then subsequently produce their own seeds tend to hinder the development of commercial OPV seed markets. ICRISAT undertook a pilot programme with Seed Company of Zimbabwe (SeedCo) to improve the companys knowledge of potential demand for OPV maize seeds, and recognized the importance of addressing the affordability constraint at the farm level. To improve affordability, the company was encouraged to sell OPV seeds in small packages. SeedCo, the major wholesaler of hybrid maize seed in Zimbabwe, then introduced the OPV small packs to farmers using an already well-established network of 14 credit-worthy retailers in Southern Zimbabwe who were familiar with seed marketing. SeedCo offered retailer credit and reduced retailer risk by taking back unsold stocks at the end of the season. However, the programme was disrupted by government price controls that forced wholesale margins to zero and a free distribution programme that increased uncertainty not only in the emerging OPV seed market but also in the traditional hybrid maize market. Nevertheless, the experience shows that research institutions have an important role to play in raising awareness of new inputs among potential suppliers. This type of research-private sector partnership, worked well in Zimbabwe (at least for some time) because a strong commercial seed sector had already been developed to supply hybrid maize. Consequently, SeedCo was able to draw on financial reserves and distribution networks to test the market for OPVs. Two important sub-components of the success story in this case were SeedCos buy-back policy, which reduced retailer risk, and their attention to affordability through prescribed retailer margins and packaging in smaller units. On the other hand the case also shows that a supportive policy environment (i.e. absence of unreasonable price controls and competition from seed give-away programmes) is necessary for both the initial success and long-run sustainability of commercial input markets.
Financing Inputs and Affordability

A number of recent efforts on the alleviation of agricultural inputs affordability constraints employ two broad categories of strategic options: (i) reduction in package size and (ii) a variety of activities to improve access to input credit. Many publications have noted
that the current credit problem in Sub-Saharan Africa is typically characterized by one of market failure associated with imperfect information in the presence of risk (for examples, Dorward et al. 1998; Kydd et al. 2002). They intimate that market failures occur because it is costly to screen input credit applicants and institutions for contract enforcement are weak; moreover insurance is absent (for similar reasons) and farmers lack collateral for loans. Nevertheless, there have been innovative efforts, in recent times, to solve the credit problems of smallholders. These have been led mainly by donor-funded NGOs to build farmer associations capable of accessing private sources of input credit, group lending, interlinking market arrangements for export crops in various stages of transformation from pre-reform parastatals to post-reform competitive markets, out-grower schemes, and government-run input credit programmes (Kelly et al. 2003). Reducing the Package Size Small packages of inputs appeal to farmers in general and to smallholder farmers in particular for various reasons. It makes it possible for them to experiment with new seed varieties without making a major financial commitment; they can diversify their crops to reduce risk by purchasing small packages of several different seed types; and they can purchase fertilizers in small, incremental quantities as the rainy season progresses as this reduces the risk of purchasing large quantities that cannot be used effectively due to poor rainfall. An enabling policy environment is crucial to encourage trader-led small-pack approach to input marketing. Policy reforms that remove price controls and subsidies as well as government withdrawal from direct market intervention in the input sector are necessary to create an enabling input market environment. Both the SCODP and SeedCo programmes in Kenaya and Zimbabwe respectively (discussed earlier) attribute a large share of their successes to the use of small and affordable packages. The trader-led small-pack approach in response to policy reform worked well where input dealers were already present and agriculture was highly profitable. However, in the continued absence of commercial networks in marginal production zones, there is the need for the expansion of NGO initiatives to act as catalyst to develop the demand necessary to enhance the commercial sector (Kelly et al. 2003). Credit Through Building Farmer Associations The logic behind the association building approach is that collective action has the capacity to reduce farm-level transaction costs for potential input suppliers and output buyers. The approach is an attempt to foster the development of bottom up associations characterized by self-selection and self-management. There are several examples of the association based approach in several countries in SSA. A collaborative CARE/CLUSA effort in Mozambique through the Viable Initiative for the development of Agriculture (VIDA) used this approach to organize 80,000 farm families into 1400 associations to access credit from commercial companies for input purchase and output marketing. Maize yields doubled and incomes increased by 20-30% for participating farmers (Kelly et al. 2003).
27
In Malis cotton zone, USAID encouraged banks to provide input credit by offering loan guarantees to CLUSA-supported associations during their first four operating seasons. Both guarantees and farmer training were necessary to get the credit process started. Again in Mali, the promotion of village savings and loans associations substantially improved access to input credit and repayment in Malis Office du Niger irrigated rice production zone where major credit defaults were common in the early 1990s (Kelly et. al 2003). An example of an integrated association system is a five-year CLUSA programme in Zambia that has supported farmers in creating 371 rural group businesses (RGB), a network of 97 depots (groups of RGBs which coordinate input distribution and crop dispatch), and a farmer-operated extension service. According to Kelly et al. (2003), maize yields for participating farmers have tripled and the production of newly introduced cash crops (paprika and chilies) has increased input use and net income. A common thread in the programmes for developing famer associations is the need to develop farmer literacy and management skills for both individual and cooperative activities. Another important element is the need to support banks through assistance with management information systems and/or loan guarantees. Also, promoting agricultural input credit through farmer associations works best when there are profitable input technologies (often a function of public goods such as roads, markets, irrigation infrastructure as well as technology research) and strong contract-enforcement institutions (either social, political, or legal). Group Lending An approach to microfinance for rural farmers which has gained popularity among NGOs, in particular, and donors in Ghana is the group lending scheme which is quite similar to farmer associations. The rationale for group lending is to reduce transaction costs to the banks as well as the borrower, and to enhance repayment rates. Loans are accessed by groups of farmers (10-20) but disbursed to individuals within the group who are solely responsible for repayment. However, all group members are held jointly responsible for the total loan amounts (Al-Hassan 2000). Group lending has been useful in targeting poor and vulnerable rural farmers, particularly female farmers. Interlinked Markets in Transition Interlinked markets permit exporters or processors to use farmers expected harvests as collateral for seasonal input credit. The system is expected to be mutually beneficial: farmers get credit for yield-increasing inputs while buyers can lock-in potential supply. Kelly et al. (2003) have observed that historically, credit repayment offered in the context of interlinked markets in SSA has experienced higher than average rates of repayment because the output markets were monopsonistic farmers had no alternative outlet so they sold to their creditor. However, as competition for the targeted crop grows, opportunities diminish for linking input/output transactions capable of reducing credit risk and lowering input financing costs. Examples of programmes involved in interlinked markets abound in SSA. Cotton production in Francophone West Africa has long been done under an arrangement where national
governments aligned with a French cotton company maintain monopsony output market positions, while supplying inputs to farmers. Input use was stable and increasing in the 1990s and resistance to reform is high due, in part to cotton company concern that input credit repayment and production will fall. An example of an interlinked market arrangement that failed was that of Uganda. Ginners formed an association with mandatory membership. Members used a governmentguaranteed loan to provide farmers with inputs. Prices offered to seed farmers were net of a standard deduction per kg to cover input costs, and ginners reimbursed the credit fund in direct proportion to the quantity of cotton they ginned. The programme failed because of poor harvests resulting in deductions that were not adequate to cover the loan. In Ghana, the Cotton Development Board implemented arrangements similar to that of Uganda, and failed. Subsequently, cotton companies tried to reduce side-selling after liberalization by offering a common price, while competing through quality of services and other non-price incentives. A culture of strategic default and switch evolved whereby farmers defaulted in payments with one firm and got credit from another the following season. Also, lack of price competition has resulted in lower cotton prices relative to other crops, leading farmers to neglect cotton production in favour of the more profitable alternatives (Poulton et al. 1998). The strength of credit provision through interlinked markets has been its ability to reduce credit defaults substantially, particularly strategic defaults. In some cases, there is also evidence that the costs of input acquisition are reduced (Kelly et al. 2003). On the other hand, evidence of very low shares of world prices being paid to farmers participating in some vertically integrated production systems raises questions about the true costs and benefits of the system for farmers (Ibid). The examples cited suggest that the lost of linked markets tends to have a negative impact on input use and access to credit. To smooth the transition from monopsonistic interlinked markets to competitive interlinked markets, Dorward et al. (1998) suggest that farmers associations must improve their management skills and ability to reduce strategic default and governments must develop more effective contract laws and enforcement procedures. The Out-grower Scheme The out-grower scheme started in Ghana as a pilot with the rational to reduce cost of borrowing to the bank and borrower, and enhance loan recovery and increase access of smallholders to modern agricultural inputs and out put markets. The bank identifies a successful large scale farmer (Nucleus farmer) through whom credit is provided to a number of small scale producers (out-growers). In 1998, there were 21 nucleus farmers for maize who serviced 1490 out-growers (about 75 out-growers per nucleus maize farmer). Both the bank and nucleus farmers prefer to work with fewer out-growers since this facilitates supervision and management (Al-Hassan 2000). Credit covers farm inputs including seed, fertilizer, pesticides, sprayers, water pumps, maize dryers and maize blowers. The credit is not given in cash but in kind in the form of
29
the required inputs. The Agricultural Development Bank (ADB) identifies input suppliers who are authorized to supply inputs to the nucleus farmers. It is the responsibility of the nucleus farmer to distribute inputs to out-grower farmers, monitor their use, and recover loans from the out-growers. Because the nucleus farmer is required to be a successful large scale farmer (and in some cases a processor of the raw commodity, in addition) he/ she is expected to impart best practices to the out-growers. The target crops under the scheme in Ghana are maize, pineapple, plantain, rice, soybeans, and vegetables. These are selected for reasons of improved food security (maize and plantain), increased non-traditional agricultural exports (pineapple and vegetables) and as import substitutes to save foreign exchange (soybean). The out-grower scheme in Ghana has particularly been successful in oil palm production. Government Credit Government-run input credit programmes have been a common feature in most SSA countries, particularly in the pre-reform era. Such credit programmes make credit more accessible in situations where commercial banks find costs prohibitively high. Moreover, government-run credit programmes can increase aggregate demend for purchased inputs when there is a credit market failure, thereby boosting commercial interest in developing input supply networks. However, the poor performance of these programmes suggests a failure to address the underlying problems. Many beneficiaries often regard such credit as gifts from government and in the emerging democracies, ruling political party activists regard government credit as rewards for their efforts. Thus, repayment rates are often very low, ranging from 30% in Zambias programme to 60% in the case of Senegal (Kelly et al. 2003). A sort of success story is the Ethiopia government-guaranteed credit scheme which was the driving force behind the Participatory Agricultural Development and Extension Training Service (PADETS), which followed the successful introduction of improved maize technologies by Sasakawa Global 2000. Approximately 42% of farm households rich and poor had access to modern inputs, and the programme is credited with making a major contribution to increased cereal production and a very high (over 98% in most years) loan repayment rates (Howard et al. 1999). The high repayment rate is attributed to Ethiopias very strong stand on repayment, with arrest or confiscation of assets where necessary (Kelly et al. 2003 with reference to Stepanek 1999). The success of the programme led to a drastic drop (80%) in maize prices, illustrating the need to combine technology promotion programmes with output market development activities, including improvement in transportation infrastructure to stimulate more trade between surplus and deficit zones. This second generation problem arising out of a success story was encountered in Malawis agricultural input subsidy programme (MAISP) too (Chirwa et al. 2010). The issue of lack of cost-effectiveness of these programmes in stimulating commercial input market development has been raised. This arises out of the high cost of the programmes; heavy credit administration obligations placed on extension staff, making it difficult for them to perform normal extension activities; and high levels of rent seeking associated
with a tendency to favour politically well-placed suppliers, thereby constraining the development of lower cost, truly commercial input supply networks (Chirwa et al. 2010; Jayne et al. 2003; FSRP Zambia 2000).
Reducing Risks
Upton (1979) points out both price and production risks that face African farmers (both subsistence and commercial farmers) and stresses the fact that household food security is the major objective of smallholder farmers rather than output maximization. Thus, African smallholder farmers are often reluctant to use new inputs because of both production and price risks that can render input use unprofitable in a given season or threaten food security. It is reported that risk averse behavior on the part of SSA farmers, has been found to account for fertilizer application rates that are, at least, 20% below economically optimum rates (Binswinger and Sillers 1983). Most of the strategic options discussed above addressed the risk issues in some way. These include: i. Small packs that reduce the monetary outlay necessary for input use thereby reducing the size of potential losses; ii. Rescheduling of credit reduces farmers risk of having to pay for the negative consequences of production risks in a single season; iii. Input quality control reduces the risk of farmers purchasing ineffective inputs; iv. Donor-funded credit guarantees provide a bridge between banks and farmer associations and reduces the risk to banks and potential input suppliers, thus encouraging them both to enter the market and expand distribution networks; v. Agro-dealer programmes provide a donor/distributor risk sharing mechanism that encourages distributors to offer credit to new input retailers; vi. The SeedCo buy-back scheme encouraged small retailers to participate in testing the market for improved OPVs because they did not need to worry about the risk of carryover stocks; and, vii. Contract enforcement in Ethiopia has reduced the risk of default and contributed to sustainable funding of an input credit programme. In addition to these, governments can reduce risks associated with input use and marketing in relatively low-cost ways as suggested by Kelly et al. 2003: i. Support for market information systems that report input and output prices on a regular basis will help farmers and traders make better input use and supply decisions; ii. Extension services that train farmers participating in demonstration programmes to evaluate the profitability of input use over time, taking into account production price variability, can improve farmer decision-making concerning input use; iii. Research and extension to provide soil fertility management practices can reduce the risks and costs of input use;
31
iv. National programmes of input quality controls can increase farmers confidence in input suppliers and protect honest suppliers against competitors selling adulterated products; v. In negotiating more equitable terms of trade for African farmers through WTO, African governments could reduce price volatility in export markets and protect farm incomes; vi. Crop insurance programmes tend to be costly and inefficient in developing countries, but recent research on rainfall insurance may ultimately provide a viable alternative for reducing production risk associated with bad weather. Risk is widely regarded as pervasive at both the farm and commercial level. Governments have numerous opportunities to invest in public goods capable of reducing risk and should not be in a position of increasing risks for economic actors through unnecessary interventions.
Other Strategic Options

There are other strategic options often applied by Non-Governmental Organzations and governments. They are controversial in nature and widely applicable to the three general categories of constraints. Such controversial strategic options include inputs for relief and food security; and government-run programmes. Inputs for Relief and Food Security Following drought or civil unrest, governments (and donors) often institute programmes of input distribution to victims as a relief measure. They are also sometimes used to redress circular declines in agricultural productivity and rising food insecurity. Such programmes, however, increase risk and uncertainty for the emerging commercial sector. Seed is often distributed after a drought when it is thought that seed stocks have been depleted. However, the tendency of governments and donors to resort rapidly to input distribution programmes, which are sometimes continued beyond the initial emergency, erodes the incentives for local traders to develop markets that can respond to future emergencies. Among the recent innovations for reducing the negative market impacts of relief programmes are: i. The use of empirical data to establish a real need for relief. For example, ICRISAT has developed a Seeds Needs Assessment Tool which has been used successfully in Mozambique; ii. Local purchase of seed by relief agencies; iii. Distribution of cash rather than seed (used successfully in Mozambique); iv. Distribution of vouchers redeemable for seed through established seed retailers or at seed fairs. Vouchers have been used in many African countries to the benefit of both beneficiaries and input marketing agents. Vouchers can target poor household while promoting commercial input distribution. For examples, cash-equivalent input vouchers, which farmers can redeem from a menu of approved inputs, have been used in Zimbabwe; the SG 2000 programme uses vouchers to distribute their inputs in Uganda; Malawi used vouchers in conjunction with its starter pack and targeted input programme. Also seed vouchers have
been used in conjunction with seed fairs sponsored by Catholic Relief Services (CRS) when the key constraint was access rather than availability. This offers the farmers flexibility in terms of suppliers as vouchers can be redeemed for local seed purchased from other farmers or commercial seed purchased from established retailers (Remington 2002; Jones 2002). Government-Run Programmes Concerns over the slow expansion of commercial input supply networks in the face of declining soil fertility and rising food insecurity have rekindled interest in government-run distribution programmes. A typical example is the Malawi starter pack (SP) programme which aimed to increase household and national food security by promoting national food self-sufficiency. The instrument for achieving these objectives was free distribution of seed and fertilizer packs permitting all farmers to plant 0.1 ha of maize/legume intercrops. Resource constraints led to more targeted distribution and this targeted input programme (TIP) encountered numerous difficulties in limiting the input packs to the most needy farmers (Chirwa et al. 2010). SP/TIP used vouchers rather than direct delivery in an effort to contribute to input market development. However, SP/TIP largely passed up the opportunity to build commercial capacities to estimate, finance, procure, store and distribute inputs. Retailers simply act as depots for turning starter packs over to voucher recipients. There is also general agreement that SP/TIP is responsible for some crowding out of demand for fertilizer purchases (Adesina 2002). Government input distribution programmes face several problems: political interference, ineffectiveness of means-targeting, sizable leakages, procurement and distribution delays, and inadequate farmer training that reduces the effectiveness of the package (Chirwa et al. 2010).
7.0 Enabling Environment for Strategic Options

Dorwards (2009) classification of development opportunities and constraints facing African farmers by ecological zones implies that these strategic options are country specific. Besides, the behavior of private operators in the input markets will vary from one country to another. Thus the successful implementation of the strategic options will depend on the creation of a favourable enabling environment in each specific country. It is particularly pertinent to address issues pertaining to the challenges and factors that confront smallholder farmers in accessing input markets; the organization of input markets; the role of education; and the specific roles that governments and private sectors need to play in creating the enabling environment.
Smallholder Challenges
The major challenge that smallholder farmers face is poverty that also affect all aspects of their use of modern inputs. Smallholders often rely on their own sources of input supply, particularly seeds, that lead to low productivity. Even when they use modern inputs their
33
application is often below recommended dosage or time of application. They often face long distances to the supply base of inputs and this adds to the cost of modern inputs. Smallholders also face challenges from the input suppliers in the input market chain. Inputs are often not properly stored or catered for in storage with the result that the inputs get to the farmers in very poor state with their viability questionable. The general impression is that there are too many actors in the input market chain feeding on the poor smallholder farmers. This is exacerbated by cartels that exist among the oligopolistic input dealers in Africa who are often protected by rent seeking officials in privilege positions to influence policy.
Organization of Input Markets

In most sub-Saharan African countries, the agricultural input markets are not well organized and are difficult to understand. An enabling environment for the successful implementation of the strategic options requires a well organized and transparent input market system. Transparency must transcend from input imports or manufacturing through wholesalers and agro-input dealers down to the smallholder farmer. Transparency will be enhanced by well defined enforceable laws, rules and regulations that must be obeyed by all stakeholders in the input market chain, and there must be no protection for deviants no matter their status.
Education and Training

Education will create awareness among stakeholders and farmers and improve input markets in Africa. It is a well known fact that human capital is the most strategic factor for agricultural development. The education and training of stakeholders will create input market chains that will open the doors to knew knowledge and allow them to enter into reliable arrangements for the efficient delivery of inputs. The training of smallholder farmers will enable them to use inputs efficiently, increase their demand for inputs and improve on their productivity. In particular, education and training of stakeholders and smallholder farmers will enhance the use of modern technologies such as information and communication technology (ICT) as a devise to transform input market space. For example, the use of electronic platform to deliver prices of inputs to smallholder farmers through the medium of cell phones requires an understanding of stakeholders and smallholder farmers.
Role of Government and Private Sector

The role of government and the private sector in creating an enabling environment for the successful implementation of the strategic options is crucial. Governments in Africa need to shift emphasis from commodity markets, where they often like to intervene, to that of making factor and input markets work more efficiently. Governments need to build strong institutions with legal mandate to provide input quality control, particularly with regards to industrial inputs such as fertilizer, fungicides and pesticides. There are five functions that these public institutions must serve for the input markets to work adequately: protection of property rights, market regulation, macroeconomic stabilization, social insurance and conflict management.
African governments must actively limit the role of monopolies in the input markets, either through a positive competition policy or by regulation where competition is not a viable alternative. Regulations and legislation should guarantee rights agreed to under contracts, rules for weights and measures in markets, and other measures of this type that are aimed at improving the functioning of rural input markets. There is therefore the need to pass enforceable laws to regulate the input markets. This will ensure that good quality and viable inputs get to smallholder rural farmers and reduce their risks in using them. Government extension services are important in creating awareness of the benefits of agricultural inputs and improved technologies. Unfortunately, public agricultural extension services have proven disappointing in many African countries. Funding and management deficiencies have led to the frequently observed syndrome of extension agents spending more time in the office than on farms, and linkages between extension and research services generally have been weak (Norton 2004). With policy reforms in sub-Saharan Africa, most agro-input dealers along the input market chain are private sector operators. A strong link with the public sector will enhance a market friendly input distribution system. For example, agricultural extension is in disarray in many countries, a fact that bodes ill for such countries that must accommodate the new paradigm that is increasingly being shaped by global trends toward market-driven and highly competitive agribusiness enterprises. Linking agro-input dealers to public sector extension system for training to deliver extension packages along side inputs could go a long way to improve efficiency in input markets as well as increase smallholder productivity.
8.0 Conclusion
The desk review of recent policies and programmes in an effort to promote input use and input market development in Africa and lessons learned from other parts of the world, particularly the Asian Green Revolutions, lead to the conclusion that African governments have a very important role to play in promoting the expansion of input use beyond the initial adopters. Governments need to be investing in basic public goods that will stimulate farmers to intensify agricultural production and the commercial sector to supply improved inputs efficiently. Governments in Africa need to be firmly seated at the drivers wheel if they are to drive agricultural development in a market-mediated manner for the smallholder food producers to deliver Africas own Green Revolution.
9.0 Matters Arising

At the validation workshop on the draft report it was suggested that: 1. FARA should initiate a study to document all the activities within an input value chain. 2. FARA should conduct a study on who controls what and who regulates the activities of all the agents across the input value chain.
35
References
Al-Hassan, R. M. (2000). Inventory of Agricultural Production Support and Financial Services. A Report Prepared for the Semi-Arid Food Grains Research and Development Institute (SAFGRAD)/ CSIR. Council for Scientific and Industrial Research (CSIR), Accra, August 2000. Aryeetey, E. (2000). Intervention and Liberalization: Changing Policies and Performance in the Financial Sector. In Aryeetey, E., J. Harrigan, and M. Nissanke (eds.), Economic Reforms in Ghana: The Miracle and the Mirage. James Curry Ltd, UK; Africa World Press, USA; Woeli Publishing Services, Accra,Ghana. Barker, R., R. W.Herdt, and B. Rose. (1985). The Rice Economy of Asia. Resource for the Future, Washington, DC. Binswinger, H., D. A. Sillers. (1983). Technological Priorities for Farming in Sub-Saharan Africa. World Bank Research Observer 3, pp8198. Chianu Jonas. N., F. Mairura, I. Ekise and Justina. N. Chianu. (2008). Farm Input Marketing in Western Kenya: Challenges and Opportunities. African Journal of Agricultural Research Vol.3 (3), pp. 167173, March 2008. Chirwa E. W., V. Mhoni, R. Kachule, B. Chinsinga, E. Musopole, B. Makwenda, C. Masankhidwe, and C. Kankangadza. (2010). The Malawi Agricultural Input Subsidy programme: Lessons from Research Findings. Future Agricultures, Policy Brief 034, January 2010. Commander, S., Howell, J., and Seini, W. (1989). Ghana: 198387. In Commander, S. (ed.) Structural Adjustment and Agriculture. James Currey & Heinemann, Portsmouth. Dorward, Andrew. (2009). Rethinking Agricultural Subsidy Programmes in a Changing World. Centre for Development, Environment and Policy, School of Oriental and African Studies (SOAS) University of London. A Report Prepared for the Trade and Markets Division, Food and Agriculture Organization (FAO) of the United Nations, Rome: April 2009. Dorward, A., P. Hazell and C. Poulton. (2008). Rethinking Agricultural Input Subsidies in Poor Rural Economies. Future Agricultures: Briefing. Dorward, A. R., E. Chirwa, D. Boughton and V. A. Kelly. (2007). Evaluation of the 2006/7 Agricultural Input Supply Programme, Malawi Interim Report, Imperial College, London: March 2007. Dorward, A. R.., J. G. Kydd, J. A. Morrison and I. Urey (2004). A Policy Agenda for Pro-Poor Agricultural Growth. World Development 32 (1): 7389. Djurfeldt, G., and M. Jirstrom. (2005). The Puzzle of the Policy Shift The Early Green Revolution in India, Indonesia and the Philippines. In: Djurfeldt, G., H. Holmen, M. Jirstrom and R. Larssson (eds.): The African Food Crisis: Lessons from the Asian Green Revolution. CABI Publishing, Cambridge MA, USA, Oxen, UK. 4363. Djurfeldt, G., H. Holmen, M. Jirstrom, and R. Larsson. (2005). African Food Crisis The Relevance of Asian Experiences. In: Djurfeldt, G., H. Holmen, M. Jirstrom and R. Larssson (eds.): The African Food Crisis: Lessons from the Asian Green Revolution. CABI Publishing, Cambridge MA, USA, Oxen, UK. 18. Ellis, F. (1992). Agricultural Policies in Developing Countries. Cambridge, Cambridge University Press. FAO. (2008). Current World Fertilizer Trends and Outlook 2011/12. Food and Agriculture Organization (FAO) of the United Nations. Rome.
FAO. (2007). Food Outlook, Global Market Analysis. Global Information and Early Warning System on Food and Agiculture. Food and Agriculture Organization (FAO) of the United Nations. Rome. FMARD. (2003). Agricultural Input Policies and Nigerian Development. Proceedings of a National Workshop held in Abuja. Federal Ministry of Agriculture and Rural Development (FMARD), Nigeria. August 2627, 2003. FSRP Zambia (Food Security Research Project Zambia). (2002). Fertilizer Market Reform Strategies in Zambia. Working Paper. Zambia Food Security Research Project, Lusaka. Gregory, I (2006). The Role of Input Vouchers in Pro-Poor Growth. Background paper for the African Fertilizer Summit, June 913, 2006, Abuja, Nigeria. Muscle Shoals, Alabama, IFDC. Heinemann, E. (2002). The Roles and Limitations of Producer Associations. Paper Presented at the European Forum on Rural Development Cooperation, Montpellier, September 46, 2002. Howard, J., V. Kelly, M. Maredia, J. Stepanek, and E. Crawford. (1999). Progress and Problems in Promoting High External-Input Technologies in Sub-Saharan Africa: the Sasakawa Global 2000 Experience in Ethiopia and Mozambique. Department of Agricultural Economics Staff Paper No. 9924. Michigan State University, E. Lansing. Integer. (2007). Bio-fuels Boom and Fertilizer Report. Integer Research Limited, www.integerresearch.com. Jayne, T. S., J. Govereh, J Nyoro, A. Mwanaumo, and A. Chapoto. (2002). False Promise or False Premise: Food Market Reform in Eastern and Southern Africa. World Development 30 (11), pp. 19671986. Kelly, V., A. A. Adesina, and Ann Gordon. (2003). Expanding Access to Agricultural Inputs in Africa: A Review of Recent Market Development Experience. Food Policy 28. Elsevier Ltd, pp.379404. Kydd, J., A. Dorward, J. Morrison, and G Cadisch. (2002). Agricultural Development and Pro-Poor Economic Growth in Sub-Saharan Africa: Potential and Policy. ADU Working Paper 02/04. Imperial College, Wye. Mears, L. A., and S. Moeljono. (1981). Food Policy. In: Booth, A., and P. McCawley. (eds) The Indonesian Economy During the Soeharto Era. Oxford University Press, Kuala Lumpur. Monke, E. A. and S. R. Pearson. (1989). The Policy Analysis Matrix for Agricultural Development. Cornell University Press, Ithaca and London. Norton, R. D. (2004). Agricultural Development Policy: Concepts and Experiences. John Wiley and Sons Limited. Chichester, England. Perkins, J. H. (1997). Geopolitics and the Green Revolution: Wheat Genes and the Cold War. Oxford University Press, New York. Poulton, C., A. Dorward, and J. Kydd. (1998). The Revival of Smallholder Cash Crops in Africa: Public and private Roles in the Provision of Finance. Journal of International Development 10 (1), pp. 85103. Remington, T. (2002). Getting Off the Seed and Tools Treadmill with CRS Seed Vouchers and Fairs. Located Through Southern Africa Flood and Drought Network. Website: http://edcw2ks40.cr.usgs. gov/sa_floods/article.asp?sid=120. Seini, A. W. and V. K. Nyanteng. (2005). Smallholders and Structural Adjustment in Ghana. In: Djurfeldt, G., H. Holmen, M. Jirstrom and R. Larssson (eds.): The African Food Crisis: Lessons from the Asian Green Revolution. CABI Publishing, Cambridge MA, USA, Oxen, UK. 4363.
37
Stepanek, J. (1999) Lessons from Ethiopias High-Input Technology Promotion Program: How the Organization of the Fertilizer Sub-Sector Affect Maize productivity, Ph. D. Dissertation, Michigan State University, E. Lansing, MI. Upton, Martin. (1979). Farm Management in Africa: The Principles of Production and Planning. Oxford University Press. World Bank. (2007). Global Economic Prospects. Annual Report, World Bank, Washington DC. Zohir, Sajjad. (2001). Impact of Reforms in Agricultural Input Markets on Crop Sector Profitability in Bangladesh. Bangladesh Institute of Development Studies. January 2001.
38
Appendix: Terms of Reference
40
Appendix: Terms of Reference

Consultancy to Document the Successful Input Market Initiatives that Support Innovation Systems and Agricultural Value Chains in Africa REF: NSF3/3.2.1/A
1. Introduction
The Forum for Agricultural Research in Africa (FARA) is a continent-wide forum of stakeholders engaged in African agricultural research and development. FARA has been mandated by both the African Union Commission and AU-NEPAD Planning and Coordinating Agency (NPCA) to serve as the Lead Institution for CAADP Pillar IV on agricultural research, technology dissemination and adoption. FARA provides a strategic platform for catalyzing and facilitating continental and global networking to reinforce the capacities of Africas national agricultural research systems and sub-regional research organizations. FARA makes this contribution through the FARA Secretariat and its five Networking Support Functions (NSFs). FARA recognizes the need for appropriate regional policies and efficient markets for sustainable agricultural development and is committed to ensuring that African agricultural development is achieved through appropriate policies that facilitate growth in agricultural productivity and promote access to markets. Networking Support Function 3 on Regional Policies and Markets (NSF3) contributes to FARAs specific objective of achieving broad-based agricultural productivity, competitiveness and markets in Africa by enhancing strategic agricultural policy formulation, as well as promoting and facilitating policy and market analysis in order to provide policymakers with evidence-based policy options and decision-making tools. Some of the factors militating against agricultural development in Africa include inter alia, inadequate investments in agriculture; limited access to credit by smallholder farmers; high costs and unavailability of inputs such as fertilizers and improved seeds; inadequate use of modern technologies; inefficient agricultural input markets, and the absence of a conducive policy environment. More specifically, the use of improved agricultural inputs is very low in Africa and has remained largely static over the last 25 years, with particularly low usage in smallholder food-crop and livestock production systems. In response to this challenge, it is widely accepted that increased use of inputs (seeds, fertilizers and chemicals) play a critical role, alongside organic soil fertility enhancement practices, in the technical change needed for sustainable smallholder agricultural growth in Africa. In fact, farmers require efficient input markets in order to deliver the right product, at the right time, in the right amounts, at convenient place, and for a reasonable price. Two main policy initiatives are being used to provide seed and other inputs to vulnerable farmers in Malawi, Mozambique and Zambia: direct seed distribution and voucher-based. While the fertilizer and seed subsidy program of the Malawian Government is credited for the significant increases in maize harvest, its voucher program is the largest and most cited smart subsidy success stories in Africa. Further, there exist copious studies which analyze regional1 and international2 experiences on agricultural input vouchers or coupons. Four conclusions from such studies are: [1] they make it
1. 2. FANRPAN Policy Brief Series 11/07: The Potential of Using an Input Voucher System to Integrate the Commercial and Non-commercial input distribution systems in the Southern African Development Community (SADC), November, 2007. Minot N. And T. Benson, (2009), Fertilizer Subsidies in Africa: Are Vouchers the Answer? IFPRI Issue Brief 60 July, 2009. 41
possible to target poor smallholders and increase their capacity to purchase inputs necessary for increasing production. [2] because the coupons are redeemed through private agro-dealers, they contribute to strengthening the commercial agricultural inputs markets in rural areas. [3] Mozambique has limited but mostly positive experience in vouchers redeemed at seed fairs. [4] some countries such as Malawi have gone further and use coupons as the main mechanism to target fertilizer and seed subsidies. Against this background, there is a dire need to document the lessons learnt from (ongoing) successful and failed input market initiatives on innovation systems and agricultural value chains in Africa. Therefore, FARA is seeking a competent and experienced consultant to document the lessons learnt from (ongoing) successful and failed input market initiatives on innovation systems and agricultural value chains in Africa.
2. Rationale for the study

One of the justifications for this study is that many African policymakers are not well informed about how input markets work and why the prices fluctuate (IITA, 2001; Freeman and Silim, 2001; Heinemann, 2002). Further, they are inadequately informed about the successful input market initiatives that support innovation systems and agricultural value chain. There is also a need to increase awareness about policy and institutional implications of successful input market initiatives that support innovation systems and agricultural value chain. This study will provide policymakers and key stakeholders with evidence-based information for strategic input markets policy formulation in Africa.
3. Purpose and objective of assignment

The purpose of the consultancy is to document the lessons learnt from (ongoing) successful and failed input market initiatives on innovation systems and agricultural value chain in Africa. The specific objectives are to: Collect and review literature on the input market initiatives that support innovation systems and agricultural value chains in Africa; Identify the parameters (constraints and opportunities) for promoting efficient input market initiatives that support innovation systems and agricultural value chains in Africa; Examine the current policies and programmes on promoting successful input market initiatives that support innovation systems and agricultural value chains in Africa; and Propose strategic options (technological, approaches, partnerships and socio-economic issues) for promoting successful input market initiatives on innovation systems and agricultural value chains in Africa. A crucial component of the study will include drawing conclusions and lessons learnt from ongoing unsuccessful input supply because it is more economically impactful to document reasons why an initiative goes wrong than why it works perfectly.
4. Scope and approach of work

The consultant will be required to produce a report that documents the successful and failed input market initiatives on innovation systems and agricultural value chains in Africa. In the documentation of these initiatives, the consultant will be required to consider the following issues, inter alia: Current status of input markets in Africa: In order to place this documentation into proper context, it will review the current status of input supply and demand, and ascertain whether the supply and demand are being met. The document will also identify the types of input market policy initiatives
that exist and determine their suitability as instruments that can be supported / used to promote access to input markets by small and medium scale farmers. Supply / Demand drivers of input markets in Africa: The report will also look at the factors and / or necessary conditions that define a conducive environment for an efficient input market system. In particular, it will determine the supportive systems/facilities that are required for effective functioning of input market systems; establish alternative options for smallholder farmers to access a wide variety of inputs; and also define the alternative options that an agro dealer could adopt in order to effectively target smallholder farmers. For instance, due to the large potential demand for increased input use at lower price, governments frequently sell inputs at low and controlled prices or choose to subsidize the sale of these inputs. This has many implications for market intervention, government costs, input costs and equity to users, and private sector participation. The report should address the issues articulated in the concept note which form part of these TORs including, an identification of the supply-side and demand-side drivers of / constraints to successful input market initiatives and propose alternative options for mitigating them. It should also recommend alternative options that policymakers can support or adopt in order to promote smallholder farmers access to inputs markets. The document should indicate how smallholder farmers can be integrated into the mainstream inputs market so that they can benefit from the existing successful input market initiatives. In addition, it should identify the modalities for linking smallholder farmers to inputs markets. The documentation of successful and failed input market initiative on innovation systems and agricultural value chain will be a desk top exercise that involves a review and assessment of literature on or of relevance to input market initiatives.
5. Reporting and time schedule of deliverables

The consultant will work under the supervision of the NSF3 Director. The following are the deliverables and timelines required for this assignment: i. Meeting with FARA NSF3 Director of Regional Policies and Markets and the Policies and Markets Analyst to: a) Jointly review the TORs in order to have a common understanding of the tasks to be performed by the consultant and the responsibilities of FARA. b) Agree on modalities and timelines for delivering the products. c) Develop a draft table of contents for the report. ii. Submission of a preliminary draft report on the 12th day of the consultancy iii. Submission of the second draft (incorporating comments from FARA) of the report on the day following the last day of the assignment. iv. Make a power point presentation of the draft report to key stakeholders for their comments/ inputs one week after submission of the draft final report. v. Submit a revised final report that incorporates comments/inputs three days after the presentation.
6. FARAs responsibilities
The responsibilities of FARA in order to realize the purpose of this assignment include: Facilitate meetings with the consultant. Provide comments to the consultant on the preliminary and second drafts of the report. Facilitate the organization of the workshop to present the draft report to key stakeholders.
43
Provide any additional or complementary relevant information that may be available at the FARA Secretariat to the consultant. Electronically disseminate the key messages and recommendations of the study to FARAs stakeholders. Further, develop the messages into policy briefs which will be circulated to policymakers at all levels in order to influence and inform policy work.
7. Beneficiaries
The direct beneficiaries of this consultancy are the small and medium scale farmers; and agro dealers. It will empower smallholder farmers by providing them with different options on how to access input markets that are required for sustainable smallholder agricultural growth in Africa. The target group includes policymakers at national, sub-regional and regional levels who will be better informed about the successful input market initiatives that support innovation systems and agricultural value chain; parliamentarians; officials of government ministries; NGOs; and Civil Society Organizations (CSOs).
8. Expected Outputs
The expected output of the consultancy is a document that: Identifies the parameters (constraints and opportunities) for promoting efficient input market initiatives that support innovation systems and agricultural value chains in Africa; Examines the current policies and programs on promoting successful input market initiatives that support innovation systems and agricultural value chains in Africa; and Proposes strategic options (technological, approaches, partnerships and socio-economic issues) for promoting successful input market initiatives that support innovation systems and agricultural value chains in Africa. A crucial component of the study will include drawing conclusions and lessons learnt from ongoing unsuccessful input market initiatives because the best lessons are generated from initiatives that should be avoided rather than those that should be replicated.
9. Competencies and experience

The consultant should have a post-graduate degree in economics, agricultural economics, or related field with considerable experience in input supply systems. In addition, (s)he should possess at least ten years sufficient experience in agricultural input market initiatives and in writing reports for institutions and/or programmes engaged in agricultural research and development.
44
Acronyms and Abbreviations

AISP: Agricultural Input Subsidy Programme (Malawi). CARE: Cooperative for Assistance and Relief Everywhere. CLUSA: Cooperative League of the United States of America. DAIMINA: Developing Agricultural Inputs Markets in Nigeria. FAO: Food and Agriculture Organization. FMARD: Federal Ministry of Agriculture and Rural Development (Nigeria). FSP: Fertilizer Support Programme (Zambia) FSRP: Food Security Research Project (Zambia). HYVP: High Yielding Varieties Programme (India). IADP: Intensive Agricultural District Programme (India). ICRISAT: International Crop Research Institute for Semi-Arid Tropics. NAAIP: National Accelerated Agricultural Input Programme (Kenya). NGO: Non-Governmental Organization. OPV: Open Pollinated Variety. PADETS: Participatory Agricultural Development and Extension Training Service (Ethiopia). SAPS: Structural Adjustment Programmes. SCOPD: Sustainable Community-Orientated Development Project (Kenya). SAFGRAD: Semi-Arid Food Grains Research and Development. SPLIFA: Sustaining Productive Livelihood through Inputs for Assets (Malawi). SSA: Sub-Saharan Africa. TIP: Targeted Input Programme (Malawi). USAID: United States Agency for International Development. VIDA: Viable Initiative for the Development of Agriculture.
45
About FARA
FARAistheForumforAgriculturalResearchinAfrica,theapexorganizationbringingtogetherand formingcoalitionsofmajorstakeholdersinagriculturalresearchanddevelopmentinAfrica. FARAisthetechnicalarmoftheAfricanUnionCommission(AUC)onruraleconomyand agriculturaldevelopmentandtheleadagencyoftheAUsNewPartnershipforAfricas Development(NEPAD)toimplementthefourthpillaroftheComprehensiveAfricanAgricultural DevelopmentProgramme(CAADP),involvingagriculturalresearch,technologydisseminationand uptake. FARAsvision:reducedpovertyinAfricaasaresultofsustainablebroad-basedagriculturalgrowth andimprovedlivelihoods,particularlyofsmallholderandpastoralenterprises. FARAsmission:creationofbroad-basedimprovementsinagriculturalproductivity, competitivenessandmarketsbysupportingAfricassub-regionalorganizations(SROs)in strengtheningcapacityforagriculturalinnovation. FARAs Value Proposition: toprovideastrategicplatformtofostercontinentalandglobal networkingthatreinforcesthecapacitiesofAfricasnationalagriculturalresearchsystemsand sub-regionalorganizations. FARAwillmakethiscontributionbyachievingitsSpecific Objective ofsustainableimprovementsto broad-basedagriculturalproductivity,competitivenessandmarkets. KeytothisisthedeliveryoffiveResults, whichrespondtotheprioritiesexpressedbyFARAs clients.Theseare: 1.Establishmentofappropriateinstitutionalandorganizationalarrangementsforregional agriculturalresearchanddevelopment. 2.Broad-basedstakeholdersprovidedaccesstotheknowledgeandtechnologynecessaryfor innovation. 3.Developmentofstrategicdecision-makingoptionsforpolicy,institutionsandmarkets. 4.Developmentofhumanandinstitutionalcapacityforinnovation. 5.Supportprovidedforplatformsforagriculturalinnovation. FARAwilldelivertheseresultsbysupportingtheSROsthroughtheseNetworkingSupport Functions(NSFs): NSF1/3.Advocacyandpolicy NSF2. Accesstoknowledgeandtechnologies NSF4. Capacitystrengthening NSF5. Partnershipsandstrategicalliances FARAsdonorsaretheAfricanDevelopmentBank(AfDB),theCanadianInternationalDevelopment Agency(CIDA),theCentredeCooprationInternationaleenRechercheAgronomiquepour leDveloppement(CIRAD),theDanishInternationalDevelopmentAgency(DANIDA),the DepartmentforInternationalDevelopment(DFID),theEuropeanCommission(EC),the InternationalDevelopmentResearchCentre(IDRC),theSyngentaFoundation,theUnitedStates DepartmentofAgriculture(USDA),theWorldBankandtheGovernmentsofItalyandthe Netherlands.
Forum for Agricultural Research in Africa 12 Anmeda Street, Roman Ridge, PMB CT 173, Accra, Ghana Telephone: +233 302 772823 / 302 779421 Fax: +233 302 773676 / Email: info@fara-africa.org
www.fara-africa.org

Input Market Initiatives For Web

Enviado por

Dados do documento

Descrição original:

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

Input Market Initiatives For Web

Enviado por

Direitos autorais:

Formatos disponíveis

Input market initiatives that support innovation systems in Africa

Input Market Initiatives that Support Innovation Systems in Africa

Design: www.bluepencil.in / Print: www.pragati.com

Executive Summary: Input Market Initiatives

Executive Summary: Input Market Initiatives

Relevant Literature Review

Demand and Supply of Agricultural Inputs

Current Policies and Programmes

Constraints and Opportunities

Strategic Options for Input Market Initiatives

Input Market Initiatives that Support Innovation Systems in Africa

Purpose and Objectives

2.0 Literature Review

3.0 Demand and Supply of Agricultural Inputs

The Agricultural Context

Income Growth and Dietary Change

Additional Agricultural Land

High response cereals Maize, rice? wheat?

Countries with minerals

Support and spread growth

Regional driver and supports growth

Land locked, no minerals

Major driver and then supporter

Input Market Initiatives that Support Innovation Systems in Africa

(research, infrastructure, institutional environment)

Price instability (intra and inter seasonal)

Price / productivity tightrope

Seasonal input finance

Figure 1: Identifying and Reducing Input Marketing Constraints

Does trader believe there is effective demand?

Are inputs available?

Input Market Initiatives that Support Innovation Systems in Africa

Are inputs affordable or credit available?

Mini-packs Credit Subsidy

Link with credit services Agro-dealer programs

Is level of risk acceptable? No Mini-packs ISFM Output price support Insurance

Supplier risk sharing Insurance

Source: V. Kelly et al./Food Policy 28 (2003) 379404

6.0 Strategic Options for Promoting Efficient Input Market Initiatives

Farmer Knowledge and Skills

Financing Inputs and Affordability

Other Strategic Options

7.0 Enabling Environment for Strategic Options

Organization of Input Markets

Education and Training

Role of Government and Private Sector

9.0 Matters Arising

Input Market Initiatives that Support Innovation Systems in Africa

Appendix: Terms of Reference

Input Market Initiatives that Support Innovation Systems in Africa

Appendix: Terms of Reference

2. Rationale for the study

3. Purpose and objective of assignment

4. Scope and approach of work

5. Reporting and time schedule of deliverables

9. Competencies and experience

Input Market Initiatives that Support Innovation Systems in Africa

Acronyms and Abbreviations

Você também pode gostar