Commercialised supply of training & certification to improve quality and safety of animal products and exploit market demand Conference on Climate Change Adaptation Strategies, Capacity Building and Agricultural Innovations to Improve Livelihoods in Eastern and Central Africa: Post- Copenhagen (UNFCCC/COP15), Addis Ababa, Ethiopia, 7 – 9 June 2010 Amos Omore, ILRI, Nairobi, Kenya
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Commercialised supply of training & certification to improve quality and safety of animal products and exploit market demand
Presentation by Amos Omore to Conference on Climate Change Adaptation Strategies, Capacity Building and Agricultural Innovations to Improve Livelihoods in Eastern and Central Africa: Post-Copenhagen, Addis Ababa, Ethiopia, 7 – 9 June 2010
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Commercialised supply of training & certification to
improve quality and safety of animal products and exploit
market demand
Conference on Climate Change Adaptation Strategies, Capacity Building and Agricultural Innovations to Improve
Livelihoods in Eastern and Central Africa: Post-Copenhagen (UNFCCC/COP15), Addis Ababa, Ethiopia, 7 – 9 June 2010
Amos Omore, ILRI, Nairobi, Kenya
OutlineOverview
– Role of informal businesses in pro-poor development
– Can they be integrated into formal value chains?Description of the innovationUsersCritical factors for promotionChallenges in disseminationOvercoming the challengesLessons learntGender considerations
Overview Small-scale & informality dominate the supply
animal products and employs many (e.g., >80% in dairy). Informal dairy traders in Kenya alone estimated at >40,000
But they often operate without official support due to policies addressing quality and safety concerns
Consumers are also concerned and willing to pay for improved quality and safety
The policies and concerns are important barriers to market access, esp for livestock products
Training & certification (T&C) thro’ BDS providers has been demonstrated as a high impact mechanism for addressing the concerns and improving market access
Role of informal businesses in pro-poor development
Because they dominate, the majority poor (& many not-so-poor) depend on them
Policy has historically focussed on their displacement by formal capital intensive production & marketing
Protection of public health is often the excuse, but rules are often unrealistic and not based on locally derived information, which is usually lacking
Vested interests often re-enforce their displacement
Available services have not tailored to them Basis for more widespread agro-industrial
•legal status?•poor, small-scale•myriad, often part-time •haphazardly organized•voice-less •discouraged / no policy support •Lower priced products•In dairy: raw milk sales
Informal actorsFormal industry
How?
The problem being addressed Informal markets, small volumes, and largely
generic products make product differentiation difficult
This stifles innovation toward value addition in response to market signals
Certification, for which training is a pre-requisite, provides a differentiation mechanism in such market settings, and upon which further marketing innovation can be built
Policy makers also require well-documented justification for departures from prevailing procedures toward the informal sector
Training & certification T&C provides an appropriate level of justification
in this context by addressing two key problems: a) the need to bridge the gap between
regulated and unregulated markets, and b) the need to overcome food safety concerns
by consumers and health regulators. The approach been shown to address safety
concerns and bridge the regulatory gap, while creating employment and providing greater access to quality nutrition for the poor.
Traders
Training Service Providers (BDS)
Certification Authority
Certific
ation/lic
ensin
gTraining & certificates of
participation in training
Accreditation / monitoring
Reporting
Cess f
ee
Training guides
Commercialised supply of training and certification using a BDS Approach
Training fees
Justification Livestock offers the main opportunity in ASALs Overcoming market barriers in these areas is one
way to adapt under climate change. Available evidence:
– Milk- and meat – borne health risks are often over-played and are largely eliminated through cooking.
– Consumers are willing to pay price premiums for improved product image e.g., 2x for Nyirinyiri
– T&C allows a balance between strict implementation of regulations, which creates strong incentives for markets to avoid them due to the costs of compliance, and market access.
Where promoted T&C has been piloted in Kenya (now with over 200
accredited BDS providers) and initiated in Tanzania and India. Uganda and Rwanda appear convinced through EADRAC
Recent impact analysis of the T&C pilot by the Kenya Dairy Board (KDB) in Kenya showed significant benefits to the economy amounting to USD 33 million annually
A version involving training, packaging and branding of camel meat (Nyirinyiri) has also been tried among women groups in Garissa, Kenya.
Key partners ASARECA East Africa Dairy Regulatory Authorities Council members Kenya Agricultural Research Institute Ministry of Livestock Development Kenya Camel Association
Users
Certification authorities including regulators, standards bureaus, BDS providers, associations representing market chain actors and development agencies
The innovation relies on application of BDS to bridge the gap through building capacity, assuring product quality, labelling and branding
The BDS approach extends the reach of the certification authorities while providing employment and income opportunities
The market chain actors benefit through increased knowledge, reduced post-harvest losses, official recognition and increased consumer confidence in the products they sell.
Critical factors for promotion Recognition that:
– most consumers are poor and have few affordable alternatives, hence their dependence on informal markets
– movement along the continuum between informality and formality is a gradual process that does not simply involve moving from one fixed state to another
– informal actors require some of the protective benefits that formality can offer to overcome the constraint of low investment into business often related to low education, awareness, information and lack of capital
– livestock-mediated livelihoods improvement backed by, increasing demand for livestock products (e.g., growth in dairy ranked by ASARECA as the most important sub-sector in the ECA region in terms of potential GDP gains
Challenges and how to overcome them
Overcoming mind-sets against the role of informal agribusiness in development
Tendency to adopt international food-quality-assurance standards without considering local contexts and consumer health protection
– Need effective dialogue based on robust evidence
Promotion of investment by value chain actors in the T&C (besides other businesses) upon which further marketing innovations can be built– Public investment initially then work on appropriate split
between public and private responsibility
Lessons learnt
The combination of practical demonstration with generation and dissemination of robust evidence
Collaborative and participatory approaches in both the generation of evidence and engagement of beneficiaries
Commercializing the supply of the innovation and reducing public responsibility as it catches on
Documentation and dissemination of the impacts to stakeholders and the economy at large
Involvement and leadership by a mandated government agency
Gender considerations Women control of income derived from dairy, even
though men may own the production assets Direct participation of women in marketing declines
relative to that of men as marketed output increases Women are more likely to receive money from milk
sold informally No evidence that any specific gender is unduly
disadvantaged in as far as BDS provision is concerned
Thank you
Authors: Simeon Kaitibie, Amos Omore, Karl Rich, Beatrice Salasya, Nicholas Hooton, Daniel Mwero and Patti Kristjanson www.ilri.org and http//:impact.cgiar.org
Estimates of welfare benefits
Annual change in benefits (with 2005 as year when benefits start accruing)
Scenario
Economy-wide(Million US $)
Nairobi area gross benefits
(Million US $)
Benefits to consumers 8.01 1.46
Benefits to producers 16.04 2.98
Benefits to SSMVs 4.32 0.75
Benefits to input suppliers 5.09 0.90
Total benefits 33.46 6.09
Less annual SDP expenditure (1997-2004)
0.63
Less annual costs of training and licensing by SSMVs (2005-2039)
0.58
Less annual cess fees (2005-2039) and municipal, council costs
12.72
Annual Benefits minus costs (2005-2039) 19.53
Net Present Value (@5.00%) (to 2039) 230
Impact Analysis: Distribution of benefits
Reduction in margin due to reduced spoilage, rent-seeking 10+%Annual benefits to Kenya economy
Incremental gain at individual level, but substantial at aggregate level
Appendix 1. PORIA data sources and methods
SDP findings and SDP costs – SDP reports and files, ODI/ILRI study on SDP learning processes
SDP outputs – SDP reports and other outputs
Policy influence, policy and behavioural changes – SDP reports and other outputs, interviews with policy makers,
regulators and SSMVs
Economic impacts – SDP reports; Equilibrium displacement model (see Freebairn, Davis,
and Edwards, 1982; Wohlgenant, 1993); NPV
Attribution of impacts/counterfactual – Interviews with SDP actors; NPV with SDP compared NPV without
SDP
Appendix 2:ODI Study
Informal Traders Lock Horns with the Formal Dairy Industry: The role of research in dairy policy shift in Kenya. ODI Working Paper 266, Leksmono et al, 2006
RAPID Outcome Assessment (Research and Policy in Development Assessment)– Tracking back from policy change: Episode Studies of
specific policy change– Tracking forward from research: case study analysis– Outcome mapping: observing behaviour change
among policy-makers and stakeholders
Appendix 3: Values for estimating welfare changes attributed to new dairy policy
Variable description Value (Nairobi area)
Value (Kenya-wide)
Source of information
Raw milk production 493 million liters
4016 million litres
SDP, updated (SDP Policy Brief #10, September 2006)
Retail price Ksh 21.70/liter
Ksh 21.57/litre Study survey (averaged over all locations and SSMV sales
Farm price Ksh 15.97/liter
Ksh 15.58/litre Study survey (averaged over all locations and SSMV purchases
Non-market input cost per unit of output
Ksh 6.90/liter Ksh 7.06/litre Estimated using data from Salasya et al. (2006) and updated SDP milk production data
Elasticity of milk demand at retail
-0.97 -0.97 Salasya et al. (2006)
Elasticity of milk supply at farm
0.35 0.35 Salasya et al. (2006)
Elasticity of marketing services supply
2 2 Freebairn et al. (1982)
Cost reduction due to changes in transaction costs and elimination of NTB
Ksh 0.80 KSh 0.54/litre Study survey, decrease in retail farm price margin (comparing before and after policy change)