Select an Agricultural Value Chain of your interest and discuss the value chain map including

constraints, opportunities and upgrading objective.

 Growth and Production.

Constraints

i. Access to affordable credit

Access to affordable credit is insufficient for the majority of small-scale producers. Most of

the times, small holder farmers lack sufficient funds to incorporate in the growth and production

phase on their agricultural value chain. Items such as manure, fertilizers, insecticides, and

pesticides need to be purchased and incorporated to maximize the products. On top of enabling

farmers to afford basic inputs, appropriate financial arrangements can help them to be more

productive by allowing them to invest in technology and innovation. Challenges to finance

smallholders include the number and variety of smallholders as well as the lack of security of

land tenure

ii. Resources and Infrastructures

The typical constraints faced by smallholder farmers in include lack of specialized skills and

difficult access to technology, inputs, market, information, credit and external services (Giuliano

et al. (2005). Low levels of available physical resources such as input materials for production

and other input supplies (e.g. energy and water) constrain the growth and production of

agricultural produce.

Supporting infrastructures, resources including knowledge and capabilities are conditional

for these chains to be successful. According to Porter (1990), factor conditions relate to the

nation’s endowment with resources such as physical, human, knowledge, technology and

infrastructure. These factors enable or constrain value chain upgrading.

Smallholder farmers face many challenges competing in the global marketplace. One major

constraint is the lack of access to information and communications, which could be used to make

decisions and reach new markets.

Market Access and Market Orientation

Quality demands, internationalization and market differentiation have led in developing

countries to the emergence of distinct food sub-systems with specific quality and safety

requirements, leaning on different market channels

Supply Chain Management

Information and communication systems are considered the backbone of smoothly running

supply chains.

Opportunities

From subsistence farming to commercial farming

There is a full range of business models supporting smallholder farmers and linking them to

buyers and consumers, such as contract farming or out grower schemes. Small farmers – possibly

organized as a cooperative – and large investors can form mutually advantageous partnerships

and large-scale investment does not necessarily have to result in the conversion from small-scale

agriculture to large-scale agriculture.

Untapped water resources,

Upgrading objective

If agricultural growth is to reap benefits in terms of food security and human development, it has

to happen in a labor-intensive way on small farms. In order to thrive, smallholders need access to

the basics: 1) Land and inputs (water, fertilizer, and quality seeds), 2) Knowledge, 3)
Functioning markets (requiring adequate infrastructure and market information), 4) Affordable

credit and 5) Risk management mechanisms. All are important since inability to get one often

translates into sub-optimal outcome or failure.

Financing agriculture and agribusiness

Financial requirements for African agriculture are substantial. Out of the USD 83bn required

annually to be able to feed 9 bn people in 2050, USD 11 bn would be needed in SSA. At the

same time, limited access to finance is a well-known constraint on agricultural performance

particularly for smallholders but also for larger agribusiness companies

Innovative financing

The range of products available for banks to support agriculture and agribusiness is slowly

increasing. Different innovative financing approaches for agriculture have emerged over the past

few years, linking large capital investments to agricultural development – facilitating access to

financial capital for investment in the agriculture sector and reducing risks to attract private

investors.

Food processing for value addition, reducing waste and the import bill

Global food markets are rapidly growing and over 80% of the value in the global food industry is

in value-added components ranging from sorting, cleaning and packaging for fruits and

vegetables to processing and branding foods and beverages. Some of these value-added activities

require skills, financing and scale but simpler changes can also capture higher value, e.g.

canning, fruit drying, milk cooling or packaging.

Better farming methods

Changing the incentive structure can be achieved by increasing the efficiency of the use of agro-

chemicals and promoting their replacement by agricultural practices which enrich the soil,

reduce emissions and lower both agricultural production costs and import bills

Local production of inputs: Higher availability and affordability

Increasing the local production of chemical fertilizers is a way to make them more available and

affordable while creating employment and decreasing the foreign currency bill.

Conclusion

SSA needs investment in agriculture and agribusiness to ensure efficient and sustainable

agricultural production. This can drive economic growth and poverty reduction in SSA and fulfill

both domestic and global demand for agricultural products. In spite of well-known risks, SSA

offers both huge agricultural potential and fast-growing markets. There is increasing investor

interest in SSA along the whole food supply chain. Challenges remain in terms of infrastructure,

trade, skills and financing but there is increased commitment from governments and other

partners for a sector with strong growth opportunities.