Governance of agricultural value chains: Coordination, control and safeguarding

Agriculture, food and global value chains: issues, methods and challenges

Purpose In developing countries, local buyers often rely on relational contracting based on reciprocity and trust. This paper analyzes relational contracting and global value chain (GVC) governance by focusing on how domestic and foreign coffee exporters in Rwanda confront challenges.Design/methodology/approach Semi-structured interviews were conducted with 25 representatives of Rwandan private, Rwandan cooperative-owned and foreign exporters, and four coffee sector stakeholders.Findings Foreign firms export most Rwandan coffee, and local exporters express concerns about their ability to compete. Rwandan exporters face challenges accessing capital, competing with foreign firms and managing high transaction costs. They use relational contracts to reduce transaction costs, and they benefit from a monopsony zoning regulation that reduces competition. Foreign exporters face regulatory challenges: a government-set coffee price and the zoning regulation. They vertically integrate to reduce costs and lock in suppliers through prefinancing.Research limitations/implications Future research should analyze differences between local and foreign exporters in other contexts to advance understanding of the different challenges faced and contracting approaches used.Originality/value Few GVC governance studies address the role of relational contracts in contexts where enforcement is costly. Considering relational contracts within GVCs can improve value chain analysis, specifically in the developing countries where many GVCs start.

PAPER REMOVED AT THE REQUEST OF AUTHOR, PENDING REQUIRED APPROVAL FROM MYANMAR MINISTRY OF AGRICULTURE.

Global Value Chains - 2[-]Table of Contents - 6[-]Part I Theoretical Contributions - 8[-] 1 Global Value Chains An Overview of the Issues and Concepts - 10[-] 2 The Bottom of the Pyramid (BOP) and the Private Sector A Value Chain Research Approach - 32[-] 3 Value Chains in Developing Countries A Framework for Analysis - 44[-]Part II Local Agricultural Value Chains - 70[-] 4 Beer multinationals Supporting Africa's Development? How Partnerships Include Smallholders into Sorghum-beer Supply Chains - 72[-] 5 Bush-to-energy Value Chains in Namibia Institutional Challenges for Pro-poor Rural Development - 90[-]Part III International Agricultural Value Chains - 118[-] 6 Localizing Global Standards Illustrative Examples from Kenya's Horticulture Sector - 120[-] 7 Using a Partnership to Achieve Sustainable Development of the Palm Oil Value Chain in Malaysia - 138[-]Part IV Value Chains in the Industrial and Services Sector - 164[-] 8 Global Competition in the Semiconductor Industry A Comparative Study of Malaysian and Chinese Semiconductor Value Chains - 166[-] 9 Business-community Partnerships The Link for Sustainable Local Development? - 202[-]Part V Conclusions: Upgrading Value Chains in Developing Countries - 236[-] 10 Upgrading of Value Chains in Developing Countries - 238[-] 11 A Learning Case of a Local Value Chain The Banana Subsector in Arusha Municipality and Arumeru District: Producing Banana Beverages - 252[-]About the Authors - 274[-]Index - 278

Food security in Africa was impacted as a result of supply chain disruptions and government lockdowns brought on by the Coronavirus Disease of 2019 (COVID-19) pandemic. With participation from important actors in the agricultural value chain, the Sasakawa Africa Association (SAA) assessed the effect of COVID-19 on agri-food system in Ethiopia, Mali, Nigeria, and Uganda. Farmers, agro-processors, private service providers, off-takers and merchants, input dealers, and Ministry of Agriculture Extension service personnel are among the value chain actors that took part in the study. The survey, which was held from April 13 to April 16, 2020, used semi-structured tools and questionnaires aimed at the different stakeholders. The study used a cluster sample technique. The data were analyzed using SPSS software, which included frequency counts, percentages, rank correlation, and categorical regression. Based on the severity of the lockdowns associated to COVID-19, the survey found that the outcomes differed by country. The analysis shows a negative association between e-extension and education during the COVID-19 epidemic, but a high and positive correlation (p < 0.01) between extension services and postharvest services, as well as credit availability. Factors such as transportation, labor availability, price fluctuations, output market activity, loan availability, and food and nutrition security were significantly and positively correlated with COVID-19 awareness. Additionally, the respondents indicated that price changes were favourably correlated with labour availability and transportation, and that farming activities were significantly and positively correlated with food and nutrition security, labour availability, and the output market. According to the perspective data collected in every country during the COVID-19 epidemic, postharvest services, agricultural input activities, and food and nutrition security all heavily relied on extension services, with postharvest services having a negative correlation with extension services. The results of the analysis show that COVID-19 impacted several variables that are associated with extension services across the four countries. For instance, the R2 value of the relationship between value chain variables and extension service delivery across Mali (0.485), Nigeria (0.621), Ethiopia (0.426), Uganda (0.529), and the combined countries (0.511) indicates that the variation of the dependent variables can account for 48.5% of the variation in the values of the independent variable (extension service delivery) in Mali, 62.1% in Nigeria, 42.6% in Ethiopia, 52.9% in Uganda, and 51.1% in the combined countries. Farmers' access to agricultural labour, credit services, inputs for agriculture, and output markets was restricted by the ban on travel and social gatherings. Smallholder farmers should employ digital solutions more to strengthen the agricultural value chain's actors' resilience against potential pandemics or conflicts, according to the study's implications for extension services. This will reduce the requirement for extensive personal touch and travel in the delivery of extension services. The study also highlights how crucial it is for extension services to show tangible outcomes and benefits in order to increase farming communities' and value chain actors' resilience in any difficult circumstances. Key words: COVID-19, food systems, extension services, value chain actors, output markets

The objective of this work is to empirically assess the determinants used in global value chain governance trade through interfirm relationship and their effect on competitive advantage of horticultural value chains in developing economies. The paper is based on a Kenyan survey of 83 horticultural exporters of fresh fruits and vegetables accessed out of 120 exporters registered with Fresh Produce Association of Kenya (FPEAK) and Horticultural Crops Directorate (HCD). It employs a nonlinear principal component analysis procedure of categorical principal component analysis (CATPCA). From the CATPCA output, five components considered to be key food value chain governance determinants affecting the export oriented horticultural value chain in Kenya were extracted and named as standards & certification, nature of transactions, level of chain integration, nature of contract and relational characteristics. The current research shows that with prioritisation of requisite food safety standards & certification schemes and discernment of transactional demands of heterogeneous export markets, horticultural exporters may expect to be competitive by means of improved product differentiation, process flows, logistical advantage and promotion of marketing & organisation management innovativeness. The implication therefore to the chain managers that standards & certification schemes are taking a critical position in determining food value chain governance especially through remote governance or governance from a distance other than the governance structure continuum of markets and hierarchies previously defined by transactional cost economics.

The study was conducted to explore gender dimensions in the local chicken value chain in northern Uganda. Specifically, it focused on characterizing local chicken value chain actors, ascertaining level and determinants of gender participation as well as relationships between gender, access and control over income from local chicken enterprises. Primary data were collected using structured questionnaires administered in a cross-sectional survey of 200 randomly selected local chicken value chain actors. Data were analyzed using SPSS version 10 and StataSE 13 software from which simplified gross margins, descriptive statistics, correlations and a Logit regression model were estimated. Results revealed that majority of value chain actors were aged 20–48 years and males were dominant across most segments in the value chain. Men participated more in input supply, house construction, marketing and barbequing while women participated in production and stewing local chickens. Among actors, processors (UGX 1,911,274) and farmers (UGX 159,691) had the highest and least annual gross margin respectively. The Logit model revealed that age, education level, marital status and income control positively influenced (Pr = 0.00) gender participation. Men had more control over income than women. An engendered innovation platform could be established for training and empowerment of local chicken value chain actors.

Past studies did not fully address how value chain governance mechanisms and transaction attributes influence value chain integration. The paper, hence, investigates how value chain governance mechanisms (i.e. relational and contractual) and transaction attributes (i.e. dependency, asset specificity and uncertainty) correlate with chain integration. Survey data obtained from 320 farmers and 100 traders participating in the malt barley value chain in Ethiopia were used for the study. In addition, interview responses from 64 selected members of the chain were used for data triangulation. Descriptive statistics and ordered logistic regression were used for data analysis. The study highlights the following key findings: (a) the use of contract relates positively to value chain integration at all interfaces except at the traders-malt factory interface; (b) trust correlates positively with value chain integration at all interfaces; and (c) asset specificity relates negatively to value chain integration at the farmer–trader interface based on traders' survey data, while dependency and uncertainty relate positively to value chain integration at some of the studied interfaces. Copyright © 2016 The Institute of Brewing & Distilling

Eucalyptus wood products contribute significantly to the income of smallholder growers in many parts of Ethiopia. This has incentivized smallholders to convert arable lands to Eucalyptus plantation. Given the limited attention and availability of empirical evidence, this study examined the Eucalyptus wood products value chain in terms of the actors engaged, the type and importance of channels, margins analysis and the overall value chain governance in the main Eucalyptus growing areas of the Blue Nile highlands of Northwestern Ethiopia in 2019/2020. Sources of data were randomly selected 388 Eucalyptus grower households and 166 Eucalyptus wood traders, complemented by an interview with key informants, group discussions and direct observations. The results reveal that a total of 2,051,114.75 m3 of Eucalyptus wood was produced in the study area and Eucalyptus plantations are expanding over crop lands at a rate of 102.35 ha a year on average. Many actors involved handle a large volume of wood in eight main channels with a high disparity in the shares of the margins. We found that Eucalyptus is the main source of cash earning, contributing about 45.76% to the total annual income of smallholder growers. Little policy attention, a lack of sectoral integration, missing infrastructure and an absence of modern wood processing factories are among the key challenges impeding the performance of the wood sector value chain. There are however existing opportunities for the development of the wood sector value chain such as favorable growing conditions and the spectacular growing demand for wood products. The study provides valuable insights about the wood sector value chain and actions towards ensuring sustainable value chains and the commercialization of the sector.

To demonstrate the development impact of their outputs, agricultural research and development (R&D) organizations used to focus on the efficiency and effectiveness of technologies. In recent years, innovation systems thinking has started to address institutional and organizational barriers to technological change in African agriculture. The main approach used has been the multi-stakeholder innovation platform (IP). This paper analyses the requirements for improving the competence and skills of IPs actors in agricultural value chains, food systems, and natural resource management. As case studies, it uses IPs in the maize and cassava value chains that were initiated in the dissemination of new agricultural technologies in Africa (DONATA), in both West and Central Africa, and made reference to the rice IPs facilitated by AfricaRice. Yields and incomes in maize and cassava IPs significantly increased and inter-actor relationships and behavioural change among the diverse social and economic operators were enhanced. This achievement built on three capacity development interventions: (i) learning workshops that sensitized and informed technocrats and policy-makers and nurtured their involvement and ownership, (ii) competence and skill training of IP facilitators and practitioners, and (iii) coaching and mentoring of these facilitators and practitioners. To better facilitate IPs, facilitators and practitioners need to learn to observe, recreate, test, and perfect the IP process and value chain approach. Practicable tools that can be visualized and put into practice by the IP actors are essential. The DONATA on which the paper is based has been invaluable in terms of experiential learning.

This empirical study suggests that Japanese competitive advantage in complex-product industries is at least partly due to differences in value chain governance and interfirm asset co-specialization. Comparative data are offered which indicate that U.S. firms rely largely on markets and hierarchies to facilitate exchange, whereas Japanese firms rely largely on “hybrid” governance or alliances. The empirical findings suggest that Japanese automotive firms (value chains) have been able to achieve a competitive advantage over their U.S. counterparts by effectively using hybrid/alliance governance for three primary reasons: (1) Japanese automotive value chains are characterized by greater interfirm asset co-specialization than U.S. chains. In particular, greater human asset co-specialization between firms results in superior coordination, information sharing, and learning which is critical in complex-product industries, (2) hybrids/alliances as employed by Japanese automakers realize virtually all of the advantages of hierarchy (e.g., asset co-specialization) without the disadvantages (e.g., loss of market discipline, loss of flexibility, higher labor costs), and (3) Japanese automotive value chains incur lower transaction costs than U.S. value chains. Thus, alliances, as structured in Japan, simultaneously realize the benefits of decentralization and competition without sacrificing economies of scale, coordination, or co-specialization of assets. These findings support transaction cost theories which suggest that effectively aligning governance structures with transactions will result in efficiency advantages. However, inconsistent with extant transaction cost theory, findings from this study suggest that: (1) hybrid governance may be more efficient than hierarchical governance under conditions of uncertainty, and (2) transaction costs do not necessarily increase with an increase in asset specificity.

This paper explores inclusive business practices by focusing on the relationship between investments for-profit and social impact for small-scale farmers. Value chain mapping was used and combined with business model canvas to enable fact-finding and linkage between profit-taking action and social impact in the coffee value chain. The study was performed in two regions: East Java and North Sumatra. The study interviewed 72 farmers from Bondowoso District, East Java, and 30 farmers from Mandailing Natal District, North Sumatra. The qualitative analysis revealed the role of local organization networks in supporting the extension and improving performance in value chain governance. The organization networks supported social issues and provided access to diverse resources and environments for companies to build commitments. Furthermore, the business model canvas modeled value propositions that were practically tackling the dimensions of profit and social impact to the organization's context. The coffee value chains in both regions were differ based on key features and elements of small farmers' inclusion in the coffee value chain. The findings show that the coffee business model in Mandailing Natal encouraged smallholder farmer inclusion better than in Bondowoso. Therefore, the study implies that a shifting from profit into social initiatives in inclusive business is needed. This study provides practical evidence of business model canvas in the coffee value chain cases, showing how to develop a mission social innovation in a profit organization. Keywords: inclusive business models, business model canvas, value chain, coffee

PurposeThis paper seeks to bring together ethical governance theory and empirical findings to examine the shifting nature of governance in global value chains, and the implications of this shift for mainstream companies. In particular, it aims to examine one of the more mature models of ethical value chain governance, Fairtrade, and how this is being used by business.Design/methodology/approachInformation is derived from a longitudinal study of multi‐stakeholder co‐governance in Kenya and the UK, and an analysis of the literature on similar co‐governance models.FindingsThe paper shows that mainstream companies are looking to multi‐stakeholder models not only to protect their reputation, but as a way of governing ethical dimensions of their value chains. However, rather than a form of co‐governance, it has become a way of outsourcing governance, enabling companies to strengthen their public credibility, while simultaneously transferring an especially difficult element of modern value chain governance to organizations enjoying high consumer trust. Yet, primary data suggest that these governance systems are not delivering the benefits promised, at least at the producer level.Practical implicationsBy outsourcing governance to initiatives with dubious credibility in this way, companies may seem at risk. However, the mismatch between the promise and delivery of Fairtrade does not seem to be affecting consumer confidence and, until it does, companies may continue to benefit from the halo effect of being a Fairtrade ally. But there are also opportunities for companies to use Fairtrade's weaknesses to make the value chain a better avenue for delivering ethical governance, with implications for similar co‐governance models.Originality/valueThe study draws on one of the very few pieces of longitudinal field research on the impacts of Fairtrade. It approaches Fairtrade from a governance rather than reputations perspective, and emphasizes the implications for mainstream business rather than the co‐governance movement.

Fragmented governance of international value chains, operating in multiple jurisdictions, is insufficient to prevent social and environmental mismanagement. Smart Mixes, which are combinations of compulsory and voluntary measures, have been proposed as a possible means of securing environmental and social standards, but the concept has not been operationalized in the academic literature. We aim to identify the factors that have contributed to, or hindered, the performance of existing Smart Mixes in three international value chains (conflict minerals, palm oil, and bonds) using data from interviews with 32 experts, supplemented by a literature review. The results suggest that Smart Mixes are effective when they cover a specific issue under conditions in which enforcement mechanisms create a level playing field: thereby aligning public and private sector interests. The keys to success in a Smart Mix include positive interactions, harmonization, and complementary and supportive measures, which combine to motivate engagement by the private sector. We conclude that Smart Mixes can contribute to sustainability in value chains but their effectiveness is dependent on the strength of the relationships between the measures that compose them.

The concept of agricultural value chain covers full range of activities and participants involved in moving agricultural products from farmers’ fields to consumers’ tables. (Farm gate to food plate). Value chain participation by farmers can be merely as suppliers, in which case they do not get any share of the further value added. If, however, the farmers are aggregated into large numbers, and enabled to own parts of the value chain, they can benefit from the downstream value addition as well. For this, they need to invest capital and the value chain has to be integrated. To create an effective agricultural value chain, financing of agricultural value chains is a very important need. Agricultural value chain finance is a structured way of financing agriculture that links stakeholders operating within the value chains and lending institutions, and reduces the risks that are commonly associated with traditional agricultural financing. This paper shows number of approaches that are emerging in financing the building of agricultural value chains and emphasizes on need for many more innovative approaches, particularly to support small farmers to become an integral part of profitable value chains.