We have work experience in the three regions when invvited to join a Mission for the EC to help design and prepare a major new initiative that had been thrashed out at the EC to assist the process of rural development. Due to the illness of the Team Leader. Vinay was asked to assume the role. In reality, the task took far longer than budgeted for but the Team worked on to complete the task.

 

 

  A long standing worry has been the degree of single commodity dependence on the part of some ACP countries.

 

Agricultural products constituting more than 20% of total merchandise exports of developing countries.

 

Sugar:                                                      Coffee:

 

St. Kitts & Nevis                35%                  Burundi                     79%

Cuba                                35%                  Ethiopia                     64%

Belize                               26%                 Uganda                      59%

Guyana                             24%                 Rwanda                     56%

Fiji                                    23%                 Sierra Leone              32%

Mauritius                           20%                 Nicaragua                  27%

Swaziland                         20%                  El Salvador                24%

                                                                Guatemala                 24%

                                                                Honduras                   23%

 Bananas:                                                 Cotton:

 

St. Lucia                           54%                 Bukina Faso               39%

St. Vincent                        37%                 Chad                         37%

Dominica                           27%                 Benin                        33%

Ecuador                            24%                 Mali                           30%

Costa Rica                        21%                 Togo                          23%

Panama                            23%                 Somalia                     23%

 

Cocoa:                                                     Tobacco:

 

Niue                                  71%                Malawi                        59%

Sao Tome & Principe          69%                Zimbabwe                   22%

Cote d'Ivoire                       36%

Ghana                               24%

 

Cashew nuts:                                           Pumpkins:

 

Guinea Bissau                    48%               Tonga                        44%

 

Copra:                                                     Soyabeans:

 

Vanuatu                             43%               Paraguay                   39%

 

Nutmeg:                                                   Vanilla:

 

Grenada                            38%                Comoros                    34%

 

Tea:                                                        Groundnuts:

 

Kenya                               26%                Gambia                      20%

 

 

The high degree of dependence on one or few commodities leaves the above vulnerable to fluctuations in income. Donors are assisting them to diversify particularly because of the implications of changes necessitated by WTO rules on loss of access to markets in EC for bananas and sugar.and protection given to cotton.

 

There are a number of programmes specifically targeted to interventions with the ACP countries as a group and, in particular LCDs in that group. The programmes are sometimes oriented to commodities in general as is the EU-ACP Action Plan and the EU-Africa cotton partnership and USAID help to cotton producing countries. There is less coordination among the various interventions with significantly funded projects aimed at increasing production without adequate study of markets.

 

The Action Plan is based on the importance of conducting rigorous value chain analysis together with farming system studies to give the analysis a pro poor focus. The idea is to allow a participatory commodity strategy to emerge from stakeholders working together. This was meant to be in addition to what the International Organisations have been and are doing anyway. The strategy that emerges would point to the need for greater chain efficiency, horizontal or vertical diversification and regional co-operation. There was always the danger that the IOs would subvert the Plan to merely support their existing activities and it is likely that they will do so.

 

In reality, the mid term evaluation of the project shows that rigorous value chain analysis is perhaps not being accorded the attention it was meant to be given, farming systems are not being studied as envisaged and the International Organisations are indeed trying to carry on with what they were doing anyway. All dangers that we anticipated. But, it has resulted in some coordination between the agencies which was a core objective and has helped place commodity strategy in focus. The main failling is that the plan is being seen as a project which it could never have been. It was always more of a process than a project. The deliverables are not physical produce but methodology and an increase in farmer incomes.

 

In preparing plans for large projects to increase commodity production, there is often scant attention paid to global balances although those who have done so would understandably deny it. In the case of some commodities for which there is a long term increase in global demand due to rising standards of living in some developing countries and increased ACP production makes a great deal of sense, but there are some where there is a potential over supply particularly in the medium term and a few where the commodity is being made far more vulnerable as a result of non market driven plantings.

 

The ACP Action Plan of the EU rightly identified the vulnerability of over dependence on one or two commodities and has put in motion a programme that encourages commodity oriented strategy development. Attention is as a result shifting to identification of diversification opportunities.

 

 

 

There are three actions possible to overcome commodity dependence within the existing frameworks with a fourth in the form of market interventions to manage supply:

 

1     Greater chain efficiency

2     Vertical

3     Horizontal

 

 

is the obvious first choice since it does not depend on major changes in some cases. A vigorous value chain analysis lays the foundation. It identifies, amongst other things the 'value added' at each transaction point. The problem lies in the fact that not every transaction point may be imperative and the role of particular transactions may have a disproportionate impact of price make up. It is not possible to defend the role of each actor although it is important why the actor is involved and the reasons for the impact on price make up.

 

Often the steps required to increase efficiency are small ones, such as sanitary conditions that can be improved, washing and grading poits, farmer markets, packaging and transport. At other times, it may be necessary to invest in infrastructure in the form of irrigation, roads, markets or cold chains.

 

 

 

 Value addition is a popular strategy to follow. Adding processing can make a big difference. An example is in rubber production. Selling raw rubber is a viable activity at present but developing a rubber processing industry as Malaysia and Indonesia have done can greatly increase returns. Ten kg of latex sheeting is maybe worth $200, but the same sheeting used to make a latex foam mattress can result in a product worth up to $ 2,000. 

 

But not all cases are equally clear. Sometimes having a processing facility, say for tomato ketchup, can lead to pressure to get tomatoes at below those prices they fetch in wholesale markets. Processing can indeed lead to increased poverty if commercial power allows processors to lower farmer returns. 

 

 

Diversification into high value crops is the most advocated approach followed by commercial crops. The problem is that neigher choice is usually specifically market driven because very little market research is undertaken. There is a prejudice against specific market research with planners sometimes preferring to assume that the new tonnage will not disrupt established markets.

 

We prefer looking at markets specific to the plans being explored. It is an essential approach, not an option. 

 

 

 

There are very important differences between the three regions covered. The ACP catagory is just that, a catagory convenient for aid reasons, there is little else in common.

 

 

Only 22 of the countries in the above table are African countries dependent on a single commodity, with Mauritius and Swaziland heavily dependent on sugar, 5 dependent on coffee, 6 on cotton, 4 on cocoa, Malawi and Swaziland on tobacco, Guinea Bissau on cashew, Tonga on pumpkins, Comoros on Vanilla, Kenya on Tea and Gambia on groundnuts.

 

 Heavy dependence on a single commodity is, however, only one of the criteria that can be used to examine poverty through commodity production. Most African countries are, in the way of illustration, dependent on a particular cereal for consumption and production.

 

 

6 countries are dependent on bananas (St. Lucia, St. Vincent, Dominica, Ecuador, Cost Rica and Panama), 4 countries have a dependence on sugar (St. Kitts, Cuba, Belize and Guyana), 4 on coffee (Nicaragua, El Salvador, Belize and Guatemala), Paraguay on soyabeans, and Greneda on nutmeg.

 

The Region suffers from the fact that bananas and sugar used to enjoy quota entry to EU and there is an adjustment process in place. And coffee prices are particularly volatile with fluctuating surpluses and shortages.

 

It also suffers from frequent hurricanes thatdamage crops, in particular tree crops are vulnerable. Coconut production in the Region has been adversely affected by storm damage as well as waves of lethal yellow disease afflicting the palms.

 

There are major differences in the situation of particular countries. Some smaller countries, as is the case for Dominica and Greneda, have a very limited range production base. Others, have more production possibilities reflected by the range of commodities that particular countries are dependent on.  

 

 

Coconuts are a dominant crop in much of the region with Fiji dependent on sugar exports, Niue on cocoa and Kiribati and Vanuatu on copra  exports. Coconuts are generally treated as a source for copra exports but there is some production of coconut milk, virgin oil and even cheese in Fiji. In Vanuatu copra accounts for over 40% of merchandise exports. Samoa depends on oil and cocoa exports. Dependence on coconuts is, of course, far higher than merely for copra due to the fact that some export coconut oil rather than as copra, although maybe surprisingly Papua New Guinea has remained a copra exporter. The logic behind exporting copra rather than oil is based on narrow crushing margins and lower freight costs for crude cargo like copra.

 

Samoa produces some coconut milk, Cook Islands has a range of coconut products, Fiji was producing small quantities of coconut cheese and Tonga coconut wood flooring. All this production has been on a very small scale and no export oriented development has taken place. Large scale processing other than for oil was briefly considered by Unilever plantations in the days when they had large plantations in the Solomon Islands in the 1980s but milk was too far from their usual business and they wanted to get outof their plantations in any case. 

 

Nearly all the countries in the Region are to some extent or other dependent on export earnings from a small basket of commodities as well as fisheries. Production possibilities are limited on many coral islands. Along with coconuts, forestry products, kava, taro and cocoa are common with some coffee and sugar in Fiji. The Vai plantation in Somoa is one of the few estates that is producing coffee and cocoa.

 

However, it is possible to introduce vegetable and fruit crops, as is the case in Fiji and Samoa. In some countries quite easily, in others enough for local consumption only. In most cases the critical mass is lacking for anything other than inter-island trade. We have seen an enterprising agronomist greatly extend the range of high value vegetable produce in Kiribat on a trial basis despite the low biomass in the soil.