Competition issues in agriculture sector in 7up4 countries

Cornelius Dube & Rijit Sengupta

Final Project Conference

7Up4 project

6-7 August 2010 Dakar, Senegal

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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

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Why the Agriculture sector?

Backbone of economic activity in all countries Largest employer of labour Significant foreign currency earner

Significant contribution to GDP

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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

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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

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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

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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

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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)

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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

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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

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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

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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)

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THANK YOU!