Background
(Texte en français)

  The workshop is part of a project on diversification and commodity based development, financed by the United Nations development account.

  The project's objectives are: (i) to promote the horizontal, vertical and geographical diversification of production and trade structures ; (ii) to improve governments' capacities to formulate focused, effective and sequenced policies in this respect ; (iii) to increase the competence of enterprises in adapting their business strategies and supplies to the Post-Uruguay Round trading framework ; and (iv) to strengthen positive linkages between the commodity sector and the rest of the economy.

  Under this project, several regional and subregional workshops will be organized to address specific diversification and commodity development issues. The workshop, which will bring together the private sector and governments, as well as farmers and traders is aimed to contribute to the diversification and development of the horticultural sector in Africa. It will emphasize discussions and exchanges of views and experiences among participants, supported by presentations on different aspects of the role of horticulture in economic growth and diversification. The goal of the workshop is for participants to increase their understanding of the potential of horticulture development, to broaden their knowledge of policy options, and to provide them with an opportunity to establish a network of contacts and improve their knowledge of the means available for obtaining advice and assitance.

  They will discuss also issues related to market access as determined by tariff and non tariff barriers on trade of unprocessed and processed horticultural products, product development and quality standards, support measures that African countries would like to adopt in favour of their own producers, processors and traders, including obstacles to enter distribution channels in importing countries and the operation of large transnational corporations in this area.

PROGRAMME

TENTATIVE PROGRAMME (May 23, 2001)

Day 1

09.00 - 09.30 Registration

09.30 - 10.00 Official opening of the Workshop
- Welcome Speech (Government of Kenya) Minister of Agriculture
- Introductory remarks (UNCTAD)

10.00 - 10.30 Coffee Break

10.30 - 11.30 Session One: Constraints to the development of the horticulture sector and improvement of supply capacity

10.30 - 11.30 Presentations:

(i) Kenya "off-season" and specialty fresh vegetables and fruits (Mr. M. Okado, HCDA).
(ii) Small producers organization in Ghana and Kenya, Mr. K. Frempong, VEPEAG (Ghana), Mr. N. Muhoro (CARE International), and FPEAK, Kenya.

11.30 - 12.30 Discussions

12.30 - 14.00 Lunch

14.00 - 17.30 Session One (continued)

14.00 - 14.45 Presentation:
(iii) Product development: Variety innovation, processing, quality enhancement (Ms. M. Wabule, KARI and J. Karuga, Everest Enterprises).

14.45 - 15.30 Discussions

15.30 - 16.00 Coffee Break

16.00 - 16.30 Presentation:
(iv) Production and trade logistics

16.30 - 17.00 Discussions

17.45- Evening Tour to Kenyatta Airport Cargo Freight Services

Day 2

Session Two: African horticultural products and the international market

09.00 - 10.00 Presentations:

(i) Experience of Zimbabwe cut flowers (Dr. S. Heri)

(ii) Experience of Morocco tomatoes and strawberries (Mr. O. Aloui)

10.00 - 10.30 Discussions

10.30 - 11.00 Coffee Break

11.00 - 12.00 Presentations:

(iii) Experience of South Africa canned fruits (Dr. D. P. Keetch)
(iv) Trade opportunities and market news dissemination (Mr. J. Henri, ITC)
(v) Impact of WTO Agreements on Trade

12.00 - 12.30 Discussions

12.30 - 14.00 Lunch

14.00 - 18.00 Session Two (continued)

14.00 - 15.30 Presentations:

(vi) Problems of importing horticultural products from Africa, and in comparison with Latin America and Asia (Mr. J. Henry, ITC).

(vii) The requirements for and potential of organic agriculture: production, processing and marketing" (Mr. M. Shaefer, FIBL Switzerland).

(viii) Video on quality inspection in Kenya and comment on maximum residue levels MRLs EU new requirements and the floriculture code of conduct (Dr W. Songa, KEPHIS and KFC, Kenya).

15.00 - 15.30 Discussions

15.30 - 16.00 Coffee Break

16.00 - 17.00 Discussions (continued)

Day 3

Session Three: Production and trade finance in the horticulture sector - mechanisms and financing costs

09.00 - 10.30 Access to finance in the horticulture industry (from production to export: principal mechanisms of financing).

Presentations:
(i) Needs and problems of access to finance for small holders, the role of micro-finance (Mr. A. Dondo K-REP, Kenya).
(ii) Exploring different financing structures in the horticulture market: a banker's perspective (Mr. P. Macau, ABN AMRO Bank, Kenya - to be confirmed).
(iii) Existing structures of finance and conditions for an enabling environment: regional experience (Mr. A. Danino, IFC East & Southern Africa Region).

10.30 - 11.00 Coffee Break

11.00 - 12.00 Presentations:
(iv) Zimbabwe experience (Mr. E. M. Moyo)
(v) Tunisian experience (Mr. F. Gritli)

12.00 - 12.30 Discussions

12.30 - 14.00 Lunch

14.00 - 15.00 Session Three (continued)

Presentations:
(vi) Structured finance instruments in commodity sectors (Mr. S. Malumo, Fieldstone Group, South Africa).
(vii) AFREXIM Bank facilities for strengthening access to finance at a competitive cost (Mrs. C. Abou-Lehaf AFREXIM Bank, Egypt).

15.00- 15.30 Interactive session:
· How to obtain financing for your project.
· How to get international buyers to support financing structures of horticultural products.
· Interaction among the principal actors: producers, purchasers, agents, distributors and bankers.

15.30 - 16.00 Coffee Break

16.00 - 16.30 Discussions (concluding)
16.30 - 17.00 Closing of the workshop

 

Summary of discussions and
workshop recommendations

This summary of discussions and recommendations made by participants at the workshop on horticulture sector diversification and development for English speaking African countries has been prepared by UNCTAD secretariat. It will help the secretariat and participants in follow-up activities and possibly to identify future cooperation activities.
Based on case studies from African countries which have succeeded in penetrating the international market for fruits, vegetables and cut flowers, participants have identified a set of critical success factors in the horticulture sector concerning organizational and financing aspects as well as market conquest and penetration activities.

I Domestic issues and initiatives for organizational efficiency

In many African countries, the bulk of horticulture export is from small farmers who are faced with constraints that, if not addressed urgently, may cause their demise and a loss of competitive edge by African countries in the world horticulture market. The most serious constraints to the growth and diversification of small farmers are the following:
• Insufficient organization and absence of pressure groups to defend their interests;
• Limited technical and managerial skills to acquire and apply appropriate and up-to-date production and post harvest handling technology on one hand, and to run a horticultural farm as a profitable business on the other.
• Expensive and inadequately supplied production inputs. These are compounded by insufficient or no maintenance of such key infrastructure as roads; railways, energy and telecommunications networks, which causes inefficiencies in the supply chain from production to market outlets, for large as well as small producers.
• Small-scale farmers are seldom equipped to meet stringent SPS and quality standards of the international market.
• Small-scale farmers have no or little access to production and trade finance.

Recommendations to the horticulture sector

• Small-scale farmers should create producers' organizations from the grass roots up to the national level aiming at developing into pressure groups for increased access to support and to market information.
• Producers should develop a code of practice for the horticultural industry, such as those established in Kenya and Zimbabwe in order to forge and maintain a good image of the national origin.
• Producers' organizations need to find mechanisms whereby stakeholders have a control on the content of research and development programmes (such as variety research) of state research institutes and contribute to raising funds (e.g. through the payment of a levy per Kg exported) for horticulture.
• Exporters have to pay attention to good packaging techniques and material to insure optimal protection of produce between the production site and the market outlet.
• A code of practice should be established for forwarders/transporters whereby mishandling problems would be prevented through the monitoring of container quality (temperatures and moister control and other necessary measures). This should be negotiated between the horticulture industry and the forwarders with the facilitation of governments.
• Producers organizations should explore ways of implementing « group export schemes », in order to (i) decrease their dependence on middlemen, (ii) increase the share of final export price which goes directly to the small-scale farmer by reducing the monopsony power of exporting firms, and (iii) make use of collateral guarantee schemes by lead firms in credit negotiations with banks
• Producers organizations should explore ways of building their financial sustainability such as bulk import of inputs at a locally competitive price for small farmers, or developing into a provider of consultancy as well as export brokerage services to the horticulture sector.

Recommendations to African governments

• African governments are urged to facilitate the development of basic infrastructure, which is necessary for the development of a vibrant horticulture sector. These include: irrigation and water supply systems, post-harvest handling facilities, decentralized cold storage, energy supply, transportation networks, telecommunication networks, provision of appropriate landing rights.
• African governments should assist small-scale farmers in accessing good quality inputs by facilitating cooperation between producers' organizations, the private sector and public research institutes in variety innovation and on-farm evaluation activities as well as extension training, in order to insure constant supply of high-yielding varieties of superior quality (with characteristics required by consumers, resistant to diseases etc).
• A regulatory framework has to be instituted and enforced by African governments in collaboration with the horticulture industry to insure seed and crop quality and to protect plant breeders' rights.
• African governments are urged to empower producers' organizations by providing incentives for processors and fresh produce exporters to involve small-scale farmers in the process of organizing industry advocacy groups.
• African governments should coordinate to adopt a common stance at a regional level with regards to trade negotiations in the WTO and to take advantage of international funding initiatives in favour of developing countries.
• African governments should increase pressure to advocate for issues of interest to the agriculture sector in the WTO negotiations.

II. The African horticulture sector and the international market

With regard to the international market, discussions among participants covered inter-African trade issues and Africa - European Union trade issues. Good information on supply and demand patterns was identified as vital in identifying trade opportunities both regionally and internationally. Participants have underlined the importance of transport for the development and expansion of the horticulture sector in Africa. Logistical problems partly due to high air fares in most countries and poor road networks which increase lags in the supply chain, often make it difficult for exporters to take advantage of sea transport possibilities.
Among specific constraints hampering African horticultural products' access to the international market, participants pointed out the following:
(i) Inter-African trade
• Transport logistics (air, road and sea);
• Lack of database on demand and supply trends (insufficient trade information);
(ii) Africa-EU trade issues
• Subsidies provided by the European Union (EU) to European farmers;
• Tariff and non-tariff barriers to trade including stringent sanitary and phytosanitary measures by the EU.
• The complexity of supply chains making it difficult for African firms to design strategies for capturing a substantial share of horticultural products the value added.
• Existence of bottlenecks in communication with buyers.

Recommendations to the horticulture sector

• The producers need to acquire a mastery of the standards of each market segment in the importing market. A special attention has to be paid to the use of distributors' audits to monitor producers/exporters' compliance with agreed standards.
• African exporters should establish a private-sector driven "Inter-African Trade forum (network of exporters)".

Recommendations to African governments

• African governments should generate consensus on trade negotiation on agriculture;
• African government should find ways to facilitate the harmonization of phyto-sanitary standards and of tariffs.
• African governments should take measures to improve airfreight logistics, and negotiate the correction of the often-large discrepancy between northbound and southbound airfreight rates.
• African governments should improve and coordinate infrastructure development, e.g. major road from the Cape to Cairo, and standardize cross-border clearance. In order to facilitate cost-effective access for land-locked countries to sea transport, appropriate measures should be taken.

Recommendations to the international community

• The donor community is urged to support producers' organizations financially and technically in meeting international standards.
• The European Union is urged to have unified standards (not variable from country to country) and to accept the participation of African countries in setting these standards.
• The donor community should assist in funding the transition process of horticulture sector diversification.
• UNCTAD should assist the African exporters in establishing the «Inter-African Trade Forum», through the organization of workshops for producers/exporters organizations.
• UNCTAD should liaise with African regional organizations to promote inter and extra-regional trade through the organization of thematic workshops of interest to the horticulture sector across countries and other capacity building technical assistance.
• International organizations including UNCTAD are urged to facilitate African countries access to market information on horticulture products.
• UNCTAD is requested to organize follow-up workshops at national and sub-regional levels and make available the content of the material presented at the workshop on its web site.

III. Financing issues and proposed measures

Inadequate access to finance is a major constraint to production and trade in the horticulture sector in Africa. The behaviour of formal financial institutions in most African countries has been characterized by neglect from rural areas where most horticulture growers are based, to concentrate mainly on a few large-scale clients in major cities. Moreover, high transaction costs have systematically led to the exclusion of small-scale farmers from accessing credit at reasonable terms.
While banks consider the horticulture sector as too risky, farmers often lack conventional collateral as required by lenders or are faced with social constraints associated with land tenure. In Kenya, one of the continent's leaders in horticulture, export interest rates are much higher that the average rate of return on investments. Although micro-finance institutions and NGOs involved in small business development have been providing credit to small-scale producers, financing has been insufficient to satisfy the sector's demand. Consequently small-scale farmers lack working capital for the purchase of input, optimal land preparation and post-harvest handling. This situation constitutes a major threat and hindrance to the sector's growth and competitiveness.

Recommendations to African governments, the horticulture sector, the banking sector and the international community

• In each African country, horticulture stakeholders in collaboration with the government should conduct a national study on the horticulture industry structure to design a strategic plan highlighting needs and proposing practical solutions for enhancing the country's competitiveness vis-à-vis the international market. The proposed study should be comprehensive and cover technical issues, quality standards issues, social issues, commercial issues, as well as finance. This study could eventually lead to a pilot project on innovative horticulture financing and business development solutions, which have proven effective elsewhere.
• Each country's horticulture sector stakeholders should engage in a dialogue with banks and other financial institutions to develop viable mechanisms of developing the industry. Governments should play a facilitating role and bring in international expertise where necessary.
• African governments should put in place a national guarantee fund to provide finance for small and medium-scale producers and exporters and to provide insurance for natural disaster affecting the horticulture sector and serve as a recourse for banks in case of loan defaulting. Initial seed money could be supplied through a special levy on various activities across the economy and by mobilizing international funding. In this regard, the Tunisian export guarantee scheme could serve as a model.
• Capacity building covering horticulture industry financing mechanisms and practices as well as business skills in horticulture should be organized for farmers, exporters and bankers. This will enable all players to understand the requirements of trade finance instruments (recievables financing, forfaiting, factoring, warehouse receipts, etc). In this regard UNCTAD could help countries learn from the expertise available in other developing countries, which are more advanced in the area of trade finance, and to implement financing mechanisms.