Conducting Public Expenditure Reviews for Livestock Sub-sector: Issues and suggestions for draft framework Joseph Karugia CoordinatorReSAKSS-ECAILRI Agriculture Public Expenditure Review Workshop, May 11-12, 2009 ILRI, Addis Ababa

Introduction  Public expenditure is an effective instrument for enhancing growth and reducing poverty – key goals of national policy  Expenditure prioritization is important for achievement of these goals  Livestock is vital to the economies of many developing countries

Livestock Sector contribution to AgGDP-Average

Livestock trends….  Livestock fastest growing part of the agricultural sector, largely driven by the Livestock Revolution in emerging economies  Need to double livestock production in developing world by 2020 to meet rising demand for livestock products

Livestock trends….  Doubling livestock production puts pressure on natural resources: water, land, biodiversity  Food standards rising – rise of supermarkets  Market chains are getting longer and complex – small producers marginalized

Contribution of livestock not fully appreciated..  Milk, meat, manure, draft power, hides and skins are the commonly cited outputs of the livestock sector  In SSA, beef is ranked top in terms of value of production of key commodities with a 10.1 % share of total (ReSAKSS, 2008)

CommoditySubsector Group% of Total Value of Production 2000 BeefLivestock10.1 CassavaRoots & Tubers8.3 YamsRoots & Tubers6.5 MaizeCereals5.9 GroundnutsOil Crops5.1 Cow MilkLivestock4.8 SorghumCereals3 RiceCereals2.9 MilletCereals2.8 PlantainsFruits2.7 Chicken MeatLivestock2.7 CottonFiber Crops2.5 Vegetables, NetVegetables2.3 CocoaTree Nuts1.9 Goat MeatLivestock1.9 Mutton/LambLivestock1.9 Hen EggsLivestock1.8 SugarcaneTree Nuts1.5 Beans, DryPulses1.4 CoffeeTree Nuts1.4 BananasFruits1.3 TaroRoots & Tubers1.1 Pig MeatLivestock1.1 CowpeasPulses1.0 Total75.9 VALUE OF PRODUCTION RANKINGS OF KEY COMODITIES IN SUB-SAHARAN AFRICA Sources: i) Year totals: FAOSTAT 2002 and international prices Notes: Percent production value is calculated as the percent of value of production of current crop in total value of agricultural production of regional average ( ). Values were constant international dollars. Only crop, with at least 1% of value of production are included.

But other important contributions are often ignored…  Integrate and complement crop production  Savings  Reserve against risks  Indirect, non- market values include Option values – option to use in the future Option values – option to use in the future Existence values – utility of knowing that a good or service exists Existence values – utility of knowing that a good or service exists Environmental services Environmental services Social-cultural values Social-cultural values

Ignored in policy discourse….  In HIPC countries, livestock featured poorly in PRSPs, even those with relatively large pastoralist populations (Blench et al, 2003)  Why?  Poor articulation of investment needs of the sector? Poor representation in the PRSP process Poor representation in the PRSP process Even IMF and WB’s Joint Staff Assessments do not help Even IMF and WB’s Joint Staff Assessments do not help Poor evidence base on which to base plans and demonstrate outcomes – livestock numbers, populations affected, production systems, etc Poor evidence base on which to base plans and demonstrate outcomes – livestock numbers, populations affected, production systems, etc Poor representation in Budget making process Poor representation in Budget making process Political economy issues Political economy issues Client-patronage relationships, poorly organizedClient-patronage relationships, poorly organized

Some guiding principles…  What is the right level and composition of public livestock expenditures?  Need to address market failures (public goods, externalities, natural monopoly) – comparative advantage v/s private sector  Cost-Benefit analysis to optimize social gain and equity – in line with stated national policies  LE often include animal/human health, the environment, livestock services (breeding, feeding), extension, marketing support, credit, and consumer support programs

What to do… (1) Link PE to national policy Link PE to national policy Often, expenditures support commercial sub-sectorOften, expenditures support commercial sub-sector To reach the poor target expenditure programs that matter most to the poor – Benefit incidence analysisTo reach the poor target expenditure programs that matter most to the poor – Benefit incidence analysis Need evidence on role of livestock in poverty alleviation ofNeed evidence on role of livestock in poverty alleviation of Externalities Externalities Confer unfair advantage to intensive production systemsConfer unfair advantage to intensive production systems Loss of biodiversity – e.g. cross-breeding programmesLoss of biodiversity – e.g. cross-breeding programmes Cross-border externalities – disease controlCross-border externalities – disease control Understand production systems and their dynamics Understand production systems and their dynamics Composition of expenditures will change with level of development and past investmentsComposition of expenditures will change with level of development and past investments Link to crop agricultureLink to crop agriculture

What to do… (2) Understand market dynamics and design appropriate market interventions Understand market dynamics and design appropriate market interventions Market imperfections characterize livestock sector, especially pastoral systemsMarket imperfections characterize livestock sector, especially pastoral systems Do not overemphasise international markets at the expense of domestic and regional markets - developing countries are net importers of livestock products (FAO, undated)Do not overemphasise international markets at the expense of domestic and regional markets - developing countries are net importers of livestock products (FAO, undated) Disease free zones? – high cost, low intensity, enforcement Disease free zones? – high cost, low intensity, enforcement Export slaughterhouses in remote areas – quality, transportation problems Export slaughterhouses in remote areas – quality, transportation problems SPS requirements stringent SPS requirements stringent

What to do… (3) Develop domestic and regional markets Develop domestic and regional markets Improve physical market places, holding grounds, loading ramps, etcImprove physical market places, holding grounds, loading ramps, etc Improve price informationImprove price information Exploit the unique power of ICTs to overcome remoteness Exploit the unique power of ICTs to overcome remoteness Link pastoral areas with higher potential areas by providing finishing infra-structure and incentivesLink pastoral areas with higher potential areas by providing finishing infra-structure and incentives Improve transport routesImprove transport routes Provide credit interventions to both producers and traders Provide credit interventions to both producers and traders

What to do… (4) Improve water infrastructure Improve water infrastructure Invest in veterinary services and focus on key diseases Invest in veterinary services and focus on key diseases Invest in early warning systems for drought and diseases Invest in early warning systems for drought and diseases Improve security - develop effective approaches for the traceability of livestock Improve security - develop effective approaches for the traceability of livestock

THANK YOU!