Competition issues in agriculture sector in 7up4 countries Cornelius Dube & Rijit Sengupta Final Project Conference 7Up4 project 6-7 August 2010 Dakar, Senegal

2 Outline of Presentation Why the agriculture sector? Brief Methodology Nature of Market in production Competition concerns in inputs market (Seed) Competition issues in marketing Other areas of concern Conclusions A few recommendations

3 Why the Agriculture sector? Backbone of economic activity in all countries Largest employer of labour Significant foreign currency earner Significant contribution to GDP

4 Brief Methodology A major crop selected for each country, in terms of importance to economy Assessment done at all three levels of value chain; for Mali and Togo restricted to the input segment Inputs collated from country reports + analysis of secondary data/information + analysis of primary data Elements of Competition Assessment Framework (CAF) utilised in overall assessment of competition concerns Involves identification of major players, calculation of market shares and estimation of concentration

5 Nature of market in production Competition concerns arise if production is controlled by few large farmers, who can influence prices Production is dominated by small-scale farmers, uncoordinated across households Producers have no control over prices in input or output markets Existing associations do not provide farmers any bargaining power With so many producers and uncoordinated activity, no competition concerns were noted

6 Competition concerns in inputs market (Seed) Seed market analysed from perspective of the selected crop Informal market dominates the supply of seeds for farmers Formal seed market (govt deptt/research institutions) – weak ‘extension services’ Seeds easily available from ‘informal sources’ Private sector participation is minimal (little incentives) Governments supply certified seeds through some programmes – weak reach-out

7 Competition concerns in inputs market (Seed) (Contd.) Seed market is generally not concentrated in Gambia and Senegal, moderately concentrated in Nigeria A dominant private firm present in Burkina Faso Two SoEs together control 78% of seed supply in Togo Rice and maize seed supply are each dominated by one player in Mali - supplying 98% and 76% respectively Allegations of excessive pricing and shortages common in highly concentrated markets

8 Competition issues in marketing A stage where several competition concerns are witnessed Characterised by monopolies in Gambia, Ghana and Burkina Faso  GCC has exclusive marketing rights, after licensed buying cos. (LBCs) buy from farmers  COCOBOD has exclusive marketing rights for cocoa beans after LBCs buy from farmers  SOFITEX is involved throughout the cotton value chain in Burkina Faso Dominant private firm emerged from privatisation in Senegal Fair competition is noted in the Nigerian rice (processing)

9 Competition issues in marketing (Contd.) Strategic, natural and policy-induced barriers to entry influence the market structure In Gambia and Ghana, scope for introducing competition exist at LBC agents level In Senegal, the dominant company is a direct beneficiary of the privatisation process Allegations of abuse of dominance in Senegal and UTPs in Ghana Farmers have remained with no bargaining power

10 Other areas of concern Structure of market greatly determined by government policies Subsidies and support for SoEs Absence of competitive neutrality (exclusive rights) Dominant firms cast high level of influence over entire value chain Non-transparent licensing regime High investment and low incentives for private players to compete with SoE

11 Conclusions Considerable competition noticed in production Farmers (and associations) have no bargaining power High concentration in inputs markets have implications for low productivity Concentration among buyer’s at farm gate impact farmers Lack of incentives for monopolies to be efficient – no threat of competition Various policy-induced factors act as ‘entry barriers’ – need to be reviewed Little private sector participation Improper process of setting ‘prices’ of products

12 A few recommendations Focus on reducing concentration in input markets for improving productivity Promote competition among LBCs through appropriate measures Explore ways to attract private participation in marketing of quality seeds (public-private-partnership) Review composition and modus operandi of price setting committees Competition authorities to closely monitor behaviour of dominant players (& monopolies)

13 THANK YOU!