Authors: Guillaume Soullier, Matty Demont, Aminou Arouna, Frédéric Lançon, Patricio Mendez del Villar
Site of publication: Sciencedirect
Type of publication: report
Date of publication: June 2020
The food price crisis in 2008 redirected international attention towards domestic food value chains’ (VCs) capacity and resilience in providing food security in developing countries. In West Africa, the attention turned towards rice VCs because rice is the most important calorie source in this region. To address chronic hunger through macro-nutrient self-sufficiency, African policy makers developed targeted National Rice Development Strategies (NRDS) under the Coalition for African Rice Development.
A decade after the 2008 food price crisis, it is time to make an assessment of the current state of rice VC upgrading in West Africa. Are domestic rice VCs being upgraded in this region, and if they are, what type of investments have been conducted and where? In particular, there is little information about investments in new processing technologies that would help domestic rice compete with imports quality- and cost-wise.
Rice for food security in West Africa
Food insecurity remains an issue in West Africa. At the global level, the number of undernourished people (i.e. people whose dietary energy consumption is below their dietary energy requirement) decreased from 841.7 million in 2009 to 821.6 million in 2018. However, the number of undernourished people in West Africa increased from 31.5 million to 56.1 million over the same period, representing 14.7% of the West African population in 2018. Between 2009 and 2018, there were on average 15.7 million of undernourished people in Nigeria, and at least one million people undernourished in almost each other West African country.
In West Africa, rice is a strategic commodity for food security. Rice consumption quickly expanded since the 1960s driven by demographic growth, rising per capita consumption and urbanization. The annual per capita rice consumption steadily increased from 10 kg in 1961 to 54 kg in 2017. Between 2009 and 2013, rice consumption was more important in West Africa than in any other region of the continent. In particular, the highest rice consumption rates were observed in Guinea, Guinea-Bissau, Liberia and Sierra Leone (more than 90 kg per capita per year), and in Senegal, Benin, Côte d’Ivoire, The Gambia and Mali (more than 50 kg per capita per year).
Between 2009 and 2018, there were on average 15.7 million of undernourished people in Nigeria, and at least one million people undernourished in almost each other West African country
Furthermore, rice consumption rapidly increased in Nigeria (2.3% per year) and Ghana (1.8%), the two most populated countries in the region. Rice therefore becomes an increasingly important source of calories in West Africa. The average energy contributed by rice increased from 367 to 384 kcal per capita and per day between 2009 and 2013. This makes rice a strategic commodity to tackle food insecurity in the region. Since the independence, rice production is rapidly increasing in West Africa. The production steadily increased from around 2.2 million tons in 1962 to 12.7 million tons in 2018.
The main producers in West Africa were Nigeria (3.7 million tons), Mali (1.4 million tons), Guinea (1.3 million tons) and Côte d’Ivoire (1.1 million tons). Furthermore, rice production continues to grow. Over the last decade, the average annual growth rate of rice production was 10.1%. The countries that mostly contributed to this increase were Nigeria, Senegal, Mali, Ghana and Côte d’Ivoire, where production increased between 9.1% and 19.4% per year. This increase was fuelled by an increase in rice areas (7.5% per year). On the contrary, yield gains did not contribute much to production increase, because of low adoption of improved varieties and lack of good quality seed, low use of inputs and low adoption of good agricultural practices.
The main producers in West Africa were Nigeria (3.7 million tons), Mali (1.4 million tons), Guinea (1.3 million tons) and Côte d’Ivoire (1.1 million tons). Furthermore, rice production continues to grow
However, West Africa faces a structural rice deficit, and the region increasingly relies on imports. Indeed, the increase in production is not able to keep pace with the sharp increase in rice consumption. The share of imported rice in total consumption increased from 20% in the 1960s to 46% in 2009. This ratio slightly decreased between 2009 and 2019, due to small reductions in imports recorded in Senegal, Mali, Mauritania and Guinea-Bissau. However, rice import dependency increased in all other West African countries over the same period. The main importers were Nigeria (2.4 million tons), Côte d’Ivoire (1.2 million tons) and Senegal (1 million tons). West Africa therefore remains the second biggest rice importer in the world, after China.
Policies to upgrade domestic rice value chains in West Africa
Domestic rice in West Africa is mainly supplied by traditional VCs. These VCs proliferated after liberalization and the decrease in state control of industrial mills. They are often made of several intermediaries owning little capital and managing small quantities. Traditional millers tend to purchase paddy through spot transactions, which do not include quality criteria and incentives for proper moisture rates, impurity rates, and varietal homogeneity.
The traditional technologies used by millers include manual milling, as well as the simple huller, monobloc (one-pass mill) and minirizeries. As a result, traditional millers generally produce rice of low quality and purity featuring a heterogeneous mix of varieties and high rates of broken grains, leading to low cooking quality of the product. These traditional VCs have difficulties competing against structured import VCs in terms of quality, cost and scale.
The average energy contributed by rice increased from 367 to 384 kcal per capita and per day between 2009 and 2013. This makes rice a strategic commodity to tackle food insecurity in the region
In West Africa, policies mainly aim at upgrading rice VCs through technical and organizational changes, in order to increase the quantity produced and decrease production costs through economies of scale. Policies targeted an increase in paddy production by providing small-scale producers with access to improved inputs and increasing the area planted in rice through land developments. Policies also encouraged and supported investments in semi-industrial or industrial milling technologies. Indeed, these technologies perform functions that dramatically improve the quality of milled rice.
These functions include pre-cleaning, drying, cleaning, stone picking, weighting, hulling, separating, whitening, grading and bagging. Two broad types of upgraded technologies exist. The semi-industrial milling technology is a milling line performing at least four quality upgrading functions and with a theoretical capacity ranging between two and three tons of paddy per hour.
The industrial technology is a milling line performing at least six quality upgrading functions and with a theoretical capacity ranging between three and five tons of paddy per hour. Investments in such technologies often include large storage capacities. The investments in these upgraded technologies were promoted by international organizations, and several states created national agencies supporting foreign investors. Some policies also supported traditional millers to upgrade their technologies through subsidies.
Challenges in rice value chain upgrading in West Africa
The evidence suggests that vertical coordination is fraught with several challenges, as contract farming in West Africa reached at most 9% of the national population of rice growers in a country. First, several upgraded mills were found to be unprofitable because of limited availability of paddy. This was most notably observed in Niger, Côte d’Ivoire, Senegal, and Burkina Faso, and it was reported to constrain industrial millers in other countries as well. Contract farming and vertical integration are then deployed to source reliable volumes and quality of paddy.
This contrasts with more productive rice export VCs in Asia, where contract farming is predominantly used for governing quality. Contract farming in domestic VCs in West Africa faces similar challenges as in export VCs in Asia, though. First, contract terms must be tailored to farmers’ preferences. This particularly includes the timing of input delivery and payment. Second, contracts must improve farmers’ living conditions to secure their participation. In the case of export VCs of high value products, the literature documents that most contract schemes improve farmers income. Some of these positive impacts also extend to the case of rice export VCs and even to domestic rice VCs in West Africa, e.g., in Ghana, Côte d’Ivoire, and Nigeria.
Managing new technologies
Investments in industrial milling are sometimes undertaken by actors who lack experience in managing the new technologies. The technological change requires millers to develop skills to master equipment and infrastructure, which involves hiring staff and properly training them. Local availability of experts and support services to maintain the equipment and manage the plant are therefore crucial challenges. Furthermore, unavailability and lack of local markets for spare parts of imported milling equipment can hamper proper technology maintenance and provoke milling breakdowns.
This situation is in contrast with global supply chains which are usually close to equipment fabricators. Asian millers are directly supplied in the countries by equipment fabricators such as Alibaba in Thailand. Similarly, larger rice mills prioritize education, training, technology, and innovation. However, global supply chains are still dominated by many small rice mills located in regions where the quality of education and educational opportunities are limited.
The share of imported rice in total consumption increased from 20% in the 1960s to 46% in 2009
Finance
Finance is a major constraint hampering domestic rice VC upgrading. Financing rice growing is a common constraint among family farmers, which can explain their preference for contract farming. However, millers face similar constraints. They rarely have access to formal credit from banks and rely on their own savings, particularly when they are domestic actors. However, significant operational funds are required to invest and collect sufficient paddy to reach profitability. his explains both the low rate of contract offers and, hence, contract participation among rice farmers and the limited adoption of vertical integration mentioned before.
Developing consistent policies for a heterogeneous milling sector
Milling technologies are heterogeneous in scale and in their ability to compete against imports in terms of quality and cost. Modern rice VCs governed by industrial and semi-industrial mills supply high quality rice, while traditional rice VCs have more difficulties in supplying quality rice, particularly in terms of homogeneity and purity. The different types of VCs supply different market segments and, hence, contribute differently to food security and income generation. Policy makers face the challenge of creating an enabling environment that encourages equitable and inclusive VC upgrading that benefits large-scale VC entrepreneurs as well as smallholders.
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