On the functioning of agricultural markets in Mali...ON E FCTIONING F ACA AES A SAEES FOR DEEPE SCTL PAE AD CONFDEA Contents I. Executive summary 1 II. An agricultural sector constrained

On the functioning of agricultural markets in MaliSTRATEGIES FOR DEVELOPMENT

FROM THE AMERICAN PEOPLE

• CROSSBOUNDARY

ON THE FUNCTIONING OF AGRICULTURAL MARKETS IN MALI STRATEGIES FOR DEVELOPMENT

STRICTLY PRIVATE AND CONFIDENTIAL

Acknowledgments

This study was commissioned by USAID’s Economic Growth Office under the leadership of Kurt Low (Director, Agriculture & Economic Growth Office), Robert Parker (Deputy Director, Agriculture & Economic Growth Office), Macki Cissoko (Project Management Specialist, Agriculture & Economic Growth Office), and Mark Doyle (Private Enterprise Officer, Agriculture & Economic Growth Office).

It was implemented by the Mali Investment Facilitation Platform led by Malick Daniel Antoine (Principal, CrossBoundary Mali), Marcos Sampablo (Associate Principal, CrossBoundary Mali), and Kelley Gasper (Senior Associate, CrossBoundary Mali).

It is the result of a collaborative effort between CrossBoundary’s Mali Investment Facilitation Platform and local Malian agricultural value chains experts. Specifically, we would like to extend our most sincere thanks to: Julie Ozawa (International Consultant), Salif Niang (Co-founder, Malô SARL), Amadou Sylla (International Consultant), Blaise Buma (Analyst, CrossBoundary), and Yacouba Diallo (International Consultant).

The report was written between August and October 2018.

The team would also like to address its gratitude to the following leaders of organizations supporting Mali’s agricultural value chains: Cheikh Oumar Gueye (gum arabic), Fallery Bolly (rice), and N’Tii Coulibaly (maize). We would also like to thank Aurore Martin for her creative inputs and design of the report. Finally, our special thanks go to the staff and partners of USAID for their support and insights.

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Contents

I. Executive summary 1

II. An agricultural sector constrained by informality and fragmentation 2

A. Cereals production is central to food security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

B. High-value agriculture can bring much needed cash to rural producers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

C. Comparative advantage in livestock production remains underexploited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

III. Consolidation and professionalization of value chains will unlock financing, jobs, and growth 4

IV. Agriculture is fundamental to the Malian economy 7

A. The agriculture sector in Mali . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

B. Outside of cotton, cereals, high-value crops, and livestock are principal value chains in Mali . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

C. Government interventions often favor food security crops like cereals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

V. Value chain development can unlock the potential of Mali’s agricultural sector 11

A. Connection to extension services is essential for growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

B. Access to critical inputs allow smallholders to increase yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12i. Fertilizer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12ii. Seeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

C. Cereals production drive food security and employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15i. Rice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17ii. Maize . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22iii. Millet and Sorghum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27iv. Fonio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

D. High value agriculture can raise incomes and support export competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33i. Shea . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35ii. Mango . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39iii. Vegetables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43iv. Gum Arabic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48v. Cashew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

E. Mali can produce live cattle more efficiently than Senegal and Côte d’Ivoire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57i. Livestock value chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59ii. Red meat value chain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61iii. Milk value chain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

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VI. Opportunities to increase youth employment and technology adoption exist 63

A. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63i. The Malian labor market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

B. Barriers to labor market participation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65i. Access to education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65ii. Access to land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65iii. Access to banking and financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65iv. Access to business services and utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66v. Access to information communication technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66vi. Access to markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

C. Technology and education will be key drivers of employment growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67i. Building knowledge and competencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68ii. Land surveying and management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68iii. Boosting production output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68iv. Creating closed-loop ecosystems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69v. Efficient and transparent markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

VII. Agricultural growth is limited by underdeveloped sources of financing 71

A. Malian capital markets are poorly equipped to provide capital to the sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71i. Commercial banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71ii. Microfinance institutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73iii. Other sources of capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74iv. Other financial services actors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

B. Adoption of tailored working capital solutions can unlock growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75i. Long-term financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75ii. Working capital financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

C. Innovative structures and technology adoption can help underwriters address risks more efficiently . . . . . . . . . . . . . . . . . . . . . . . 80i. Warehouse receipt systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81ii. Value chain digitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82iii. Innovative insurance products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

VIII. Great promise... to realized potential 84

IX. Appendix 84

A. Key government interventions in agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84

B. Livestock comparative advantage analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

C. Selected labor market indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

D. Current initiatives supporting youth training and capacity building. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

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Lexicon

AACA African Cashew Alliance

ACEFOR Améliorer la compétitivité des entreprises par la formation (Improving the Competitiveness of Enterprises through Vocational Training)

ACi African Cashew Initiative

ADFD Abu Dhabi Fund for Development

AFD Agence Francaise pour le Développement (French Development Agency)

AfDB African Development Bank

AMASSA Association Malienne pour la Sécurité et la Souveraineté Alimentaire (Malian Association for Food Sovereignty and Security)

APEFEL Association Professionnelle des Exportateurs de Fruits et Légumes

APEJ Agence pour la Promotion de l’Emplois des Jeunes (Agency for the Promotion of Youth Employment)

API Agence pour la Promotion de l’Investissement (Investment Promotion Agency)

ASSEMA Association Semencière du Mali (Mali Seed Association)

BBCEAO Banque Centrale des Etats de l’Afrique de l’Ouest (Central Bank of West African States)

BCI Banque du Commerce et de l’Industrie (Bank of Commerce and Industry)

BIM Banque Internationale pour le Mali (International Bank of Mali)

BNDA Banque Nationale de Développement Agricole (National Agricultural Development Bank)

BPA Bonnes pratiques agricoles (Agricultural best practices)

BRVM Bourse Régionale de Valeurs Mobilières (Regional Securities Exchange)

CCAA Centre d’Apprentissage Agricole (Center for Agricultural Apprenticeship)

CCMPS Centre de Conditionement pour la Mangue et la Pomme de Terre (Conditioning Center for Mango and Potato)

CGA Crude gum arabic

CIDR Centre International de Développement et de Recherche (International Center of Development and Research)

CILSS Comité inter-états de lutte contre la sécheresse au Sahel (Permanent Interstate Committee for Drought Control in the Sahel)

CIRAD Centre de coopération internationale en recherche agronomique pour le développement (Agricultural Research Center for International Development)

CIRMALI Cadre Intégré Renforcé pour le Commerce (Enhanced Integrated Framework for Commerce)

CMDT Compagnie Malienne pour le Développement du Textile (Malian Textile Development Company)

CNRA Comité National pour la Recherche Agricole (National Committee for Agricultural Research)

CNSLMFM Comité National de Surveillance et de Lutte contre les Mouches des Fruits de Manguiers (National Surveillance Committee for the Fight Against Mango Fruit Flies)

CORAF/WECARD West and Central African Council for Agricultural Research and Development

CPS Cellule de Planification et de Statistique (Planification and Statistics Department)

CREDD Cadre stratégique pour la Relance Économique et le Développement Durable du Mali (Strategic Framework for Economic Recovery and Sustainable Development)


STRICTLY PRIVATE AND CONFIDENTIAL• CROSSBOUNDARY

DDFI Development finance institution

DNA Direction Nationale de l’Agriculture (National Directorate of Agriculture)

DNPIA Direction Nationale des Productions et Industries Animales (National Directorate of Animal Productions and Industries)

DNSV Direction Nationale des Services Vétérinaires (National Directorate for Veterinary Services)

EECOWAS Economic Community of West African States

EMPEA Emerging Market Private Equity Association

EU European Union

FFDP Fertilizer deep placement

FGSP Fonds de Garantie pour le Secteur Privé (Private Sector Guaranty Fund)

FIER Formation professionnelle, Insertion et appui à l’Entrepreneuriat des jeunes Ruraux (Vocational Training, Insertion and Support for Rural Youth Entrepreneurship)

FOB Freight On Board

GGDP Gross domestic production

GIC Green innovation center

GiZ German Corporation for International Cooperation

GoM Government of Mali

IICRISAT International Crops Research Institute for the Semi-Arid Tropics

IDB Islamic Development Bank

IER Institut d’Economie Rurale (Institute of Rural Economics)

IFAD International Fund for Agricultural Development

IFC International Finance Corporation

IFM Interprofession de la Filière Mangue (Interprofession for the Mango Value Chain)

IMF International Monetary Fund

INSTAT Institut National de la Statistique du Mali (National Statistics Institute of Mali)

IPR/IFRA Institut Polytechnique Rural de Formation et de Recherche Appliquée (Rural Polytechnical Insitute of Training and Applied Research

IPROFIM Interprofession de la Filière Maïs du Mali (Maize Interprofession Association)

IRAG Institut de Recherche Agronomique de Guinée (Agricultural Research Institute of Guinea)

IRSAT Institut de Recherche en Sciences Appliquées et Technologies (Applied Science and Technology Research Institute)

LLABOSEM Laboratoire des Semences (Laboratory for Seeds)

LCV Laboratoire Central Vétérinaire (Central Veterinary Laboratory)

LOA Loi d’Orientation Agricole (Agriculture Orientation Law)



MMEFP Ministère de l’Emploi et de la Formation Professionnelle (Ministry of Employment and Vocational Training)

MFI Microfinance institution

MIFP Mali Investment Facilitation Platform

MoA Ministry of Agriculture

MoF Ministry of Finance

NNEPAD New Partnership for Africa’s Development

NIDS National Irrigation Development Strategy

NSTA National Seed Trade Association

OODA Official development assistance

ODRS Office de Développement Rural de Sélingué (Sélingué Rural Development Authority)

OECD Organization for Economic Cooperation and Development

OHVN Office de la Haute Vallée du Niger (Upper Niger Valley Rural Development Authority)

OMA Observatoire du Marché Agricole (Agricultural Market Observatory)

ON Office du Niger (Niger Rural Development Authority)

OPAM Office des Produits Agricoles du Mali (Rural Development Authority of Agricultural Products of Mali)

OPIB Office du Périmètre Irrigué de Baguinéda (Baguinéda Irrigated Perimeter Rural Development Authority)

OPV Office de Protection des Végétaux (Rural Development Authority for the Protection of Plants)

ORM Office Riz Mopti (Mopti Rice Development Authority)

ORS Office Riz Ségou (Ségou Rice Development Authority)

PPAFIP Training and Professional Insertion Program (Programme d’Appui à la Formation et l’Insertion Professionnelle)

PCDA Programme Compétitivité et Diversification Agricoles (Agricultural Competivity and Diversification Program)

PDDAA Programme Détaillé pour le Développement de l’Agriculture en Afrique (Detailled Program for Agricultural Development in Africa)

PEJ Programme Emploi Jeunes (Youth Employment Program)

PGA Processed gum arabic

PLAZA Périmètre Logistique Aménagé en Zone Aérportuaire (Logistics Perimeter in Airport Area)

PNIP Programme National d’Irrigation de Proximité (National Proximity Irrigation Program)

PNIP-SA Programme National d’Investissement Prioritaire dans le Secteur Agricole (National Prioritary Agricultural Sector Investment Plan)

PNISA Plan National d’Investissement dans le Secteur Agricole (National Agricultural Sector Investment Plan)

PROCEJ Projet de Développement des Compétences et Emploi des Jeunes (Competency Development and Youth Employment Project)



RRCN Raw cashew nuts

SSCS Service Commercial Silvain International

SDR Secteur du Développement Rural (Rural Development Sector)

SME Small and medium sized enterprises

SOMIEX Société Malienne d’Importation et d’Exportation (Malian Company for Importation and Exportation)

SSA Sub-Saharan Africa

SYSCOA Système Comptable Ouest Africain (West African Accounting System)

UULPC Union Locale des Producteurs de Céréales (Local Union of Cereal Producers)

UN Comtrade United Nations International Trade Statistics Database

UNCPM Union Nationale des Coopératives de Planteurs et Maraîchers (National Union of Market Gardners and Farmer Cooperatives)

WWAAPP West Africa Agricultural Productivity Program

WAEMU West African Economic and Monetary Union

WB World Bank

WDI World Development Indicators

WRS Warehouse receipt systems

WTO World Trade Organization



I. Executive summaryAgriculture has been practiced by Malian farmers utilizing the same systems for millennia. Since the days of the great Mali empire in the 13th century, farmers have planted millet, sorghum, and rice in irrigated parcels along the banks of the Niger river, taking advantage of the country’s resources in water, arable land, and favorable climate. Nomadic herders have utilized the country’s large tracts of pastoral lands moving their herds along routes according to seasonal patterns in search of water and wild forage. During the French colonial period attempts were made to modernize the sector with the introduction of modern techniques developed in Europe. Their adoption by African farmers was largely unsuccessful, but the French did manage to leave behind structures that are still in operation today. The Office du Niger, a large irrigation scheme of nearly 150,000 hectares, was initially established to produce cotton for the emerging textile sector in Lille. It is now a large cereal production zone occupied by smallholder farmers who toil on parcels of less than two hectares to produce primarily for subsistence. The production systems that underlie Malian agriculture are rooted in this historical context and it is precisely the modernization of these systems that concerns us.

We have studied three broad categories of agricultural output in Mali – cereals, high-value agriculture, and livestock – and endeavored to understand the systems that underlie these sub-sectors by focusing on the value addition the many actors producing, processing, marketing, and distributing these products contribute to goods brought to market. This has allowed us, in turn, to look at the market failures that exist in the systems of production and identify potential solutions to remedy them. Ultimately, structuring production of these goods will depend in large part on our ability to integrate these value chains. In all the studied value chains, access to finance has been cited as a principal barrier to the functioning of these markets. We have therefore focused on this structural problem by explaining how the financial markets for agriculture operate, have outlined solutions to encourage reforms, and introduced new financial products to equip financiers with the right tools with which to support the agricultural sector. Lastly, Mali’s workforce is increasingly young and unskilled. Yet, they operate in an economy where technological innovation has demonstrated its ability to generate productivity gains in the sector. As such, we have focused on providing a path for the adoption of these technologies.

Mali is Africa’s largest cotton producer with over 700,000 tonnes brought to market in 2017. In many ways the cotton value chain is the most organized in the country. In its production, the Compagnie Malienne pour le Développement du Textile (CMDT), a state-owned enterprise, manages the production and the marketing of cotton. The CMDT plays the role of an aggregator, providing inputs to farmers, managing the provision of credit to the sector and collecting, ginning, and marketing the final product. There are clearly inefficiencies surrounding the CMDT’s bureaucracy but its central coordinating role in the value chain has allowed production to grow at a rate of 11% per year over the last ten years. In our study of cereals, this central coordinating function held by the CMDT is occupied by many actors organized as oligopolies and often at odds with producers. These producers are organized in associations that are at times federated under larger structures. The dysfunction inherent in the cereals value chains can be traced primarily to the inexistence of organized and structured aggregators. Federations of farmer cooperatives run by professional managers is a good place to start when thinking about who these aggregators should be. We also note an inability by producers and aggregators to access, in time, the liquidity necessary to support and grow production. In these value chains, we outline a new paradigm whereby aggregators are structured in professional organizations with the backing of financial institutions, which for their part, provide tailored solutions to address pre-harvest, inventory and trade financing in the production of cereals.

In high-value agricultural chains, we’ve noted similar market failures in the coordination of value chains. The key difference here is that, unlike in the cereal value chains where the aggregators can be at the level of the cooperative, farmer cooperatives barely exist in these value chains. Because their production systems require planting a tree that becomes productive only after several years, the stock of tree in Mali tend to grow wild and outside of an organized system. Producers are collectors who, during the tree’s production cycle, will recoup fruit and sell to processors. In these chains, processors are natural aggregators that can provide inputs to better structure collection, as quality standards are principal requirements in the export markets that these goods target. Private sector companies have filled this void and are, in our opinion, the best actors to take on this role. In addition, the provision of financing to this sector, particularly working capital financing, to these companies is critical. Local banks have not been able to take on this role likely due to their lack of understanding of the fundamental underlying economics of the chains.

Similar to high value agricultural chains, in the livestock sector aggregators are also best organized as private sector companies. Yet, the relative complexity of livestock value chains pushes us to evaluate two levels of aggregation. On the production side, companies providing feedstock are positioned to encourage best practices in the form of zootechnical inputs, health services, and other innovations. On the processing side, abattoirs can also play an aggregating role. As these processors naturally aggregate animals for transformation, they are also positioned to provide inputs to producers aimed at reinforcing the quality of supplied cattle. This is particularly important in the short term where livestock producer associations exist in very small numbers and the practice of grazing their herds in remote and ever-changing pastoral land makes it difficult for feedstock providers to play this role.

The creation of private sector companies that will support these value chains is of the utmost importance. While there is no shortage of interest on the part of Malian entrepreneurs in starting companies, there is a lack of experienced managers able to effectively operate companies at an industrial scale. There is also little to no presence of service providers able to help design and structure companies that

1ON THE FUNCTIONING OF AGRICULTURAL MARKETS IN MALI

STRATEGIES FOR DEVELOPMENT STRICTLY PRIVATE AND CONFIDENTIAL

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can draw domestic and international investors. The Mali Investment Facilitation Platform, a program sponsored by USAID and implemented by CrossBoundary, has been in operation in Mali for the past three years. We have interacted with entrepreneurs and have helped them finance projects in the agricultural sector. This has convinced us of the importance of a facilitator able to help local companies structure their investments and gain access to domestic, regional, and international pools of capital.

Lastly, the importance of access to finance cannot be understated. If our goal is to integrate our value chains to create competitiveness within the Malian agricultural sector, funding should be made available to both well-organized operating companies and well-conceived new projects. For private sector companies, pools of funding in the form of equity and long-term debt to invest in capital projects is a necessity. Adapted working capital products to assure the proper functioning of company operations are also necessary. For public aggregators like federated producer organizations, the capital requirements are the same. These organizations will need access to long-term and short-term pools of capital. We should use the existing financial markets concentrated around commercial banks to introduce innovative financial products, systems, and technical assistance to bankers. We should also work to introduce new pools of financing to complement the existing offerings these markets provide.

II. An agricultural sector constrained by informality and fragmentationAgricultural practices in Mali remain outdated in the face of unprecedented demographic, climatic and technological developments. These changes require solutions to more closely align existing value chains with their true potential. We have analyzed three value chain groups that are representative of the Malian agricultural sector. Our intent has been to outline the constraints and market failures inherent to the sector and provide recommendations on improving its performance.

Our analysis focuses on cereals (rice, maize, sorghum, millet and fonio), high-value agriculture (mango, shea, gum arabic, cashew, and vegetables), and livestock. These value chains are grouped together because of the similarities in their production systems and underlying economics. Cereals, for instance, are generally produced by subsistence farmers and consumed domestically and are commercialized when surpluses exist. Fonio is relatively underdeveloped but has the potential to be traded as a cash crop due to its high commercial value both on the domestic, regional and international markets. Millet and sorghum are produced exclusively for self-sufficiency. Cereal production can be irrigated or rain-fed, and the crops can be farmed on large plots (10 ha or greater) but are more commonly produced by farmers on smaller plots (2-5 ha). Because of food security concerns the government promotes maize and rice production by subsidizing key inputs like fertilizer and seeds.

High-value agriculture is comprised of cash crops. Shea, gum arabic, and cashew are the product of wild orchards that are foraged and brought to market. Vegetables are farmed on riverbanks and at time consumed for self-sufficiency, though a large portion is traded or sold as a source of income. Access to the regional and international export market is facilitated by multiple traders and intermediaries. Livestock, similarly to some cereals and high value agriculture products, is first a source of income for local farmers. Their production is largely informal but organized in three systems: Extensive, semi intensive, and intensive. The extensive system, practiced by West African herders for millennia, entails cattle being herded on pastoral lands with intermittent water points. In the semi-intensive system, animals graze on pastoral lands but their diets are complemented with animal feed purchased from a third-party vendor. The intensive cycle is one where cattle are kept on a ranch and are fed exclusively with feedstock. Opportunities to develop downstream activities in this sector have been pursued in recent years, with private sector firms investing in modern abattoirs.

At the production level across all value chains, there exist tensions between producers and buyers that hinder the proper functioning of the primary markets. During periods of surplus, traders manage to impose artificially low prices on small producers who, fragmented, are forced to accept them. Conversely, in periods of low production, producers impose high prices on buyers. This dysfunction can be addressed in part through market regulations and by utilizing technological innovation to communicate prices to farmers and buyers at different stages of the value chain. Across these value chains, access to finance in both upstream and downstream activities is cited by actors as a recurring problem. The liquidity needed to purchase raw materials, transport, condition, stock and ultimately sell products can only be addressed in a formal, well-functioning, financial market able to provide actors with the appropriate forms of financing. Without addressing this fundamental constraint, the potential of Mali’s agricultural sector will continue to be defined by its “missed opportunities”.


STRICTLY PRIVATE AND CONFIDENTIAL2 • CROSSBOUNDARY

A. Cerealsproductioniscentraltofoodsecurity

The systems that underlie Mali’s cereals value chains are constrained with inefficiencies rendering scaling or addressing food self-sufficiency difficult propositions at best. Cereals form the base of the Malian diet with spending on sustenance representing a significant portion of household expenditures. Nationwide, this figure is 68.2% although there are significant variations amongst region. In Kayes food accounts for 82.5% of household budgets compared to just 47.6% in Bamako. In Sikasso, a major maize producing region, stands at 62.9% compared to 70.5% in Ségou where most of Mali’s rice is produced.1 These figures underscore cereals’ importance to food security.

The agricultural sector faces several constraints that affect value chain productivity. While improved seed varieties exist, only a minority of producers have regular access to them. Inadequate logistical infrastructure, such as warehouses and roads, prevent efficient movement of goods and contribute significantly to post-harvest losses. Transiting cereals are an equally important consideration as approximately 10% of maize and rice produced is lost to spoilage during slow transit in aging vehicles. The deficient post-harvest infrastructure contributes not only to the loss of revenue but also to malnutrition and food security crises.

The production of rice and maize benefits from fertilizer subsidies of approximately 40%, but subsidies to produce other cereals are much lower or non-existent. Irrigation technology is a major input for production and its absence limits production to just one cycle per year which increases the volatility of production. Moreover, the deficiencies of the Malian agricultural extension system make technical know-how a rare input. Cereal production is mostly performed using traditional equipment and methods with less than 10% of all cereal farmers using modern production techniques. This is even lower for millet and sorghum.

Processing of agricultural cereals is done using dated artisanal methods and wasteful machines. The sector is plagued with small processing units that are woefully inefficient and contribute to post-harvest losses. This is very much the case for rice, the value chain which ironically has several large industrial mills. Fonio presents a most interesting opportunity for growth. The size of the grain makes utilization of existing equipment, generally used for rice, millet, and sorghum, inadequate.

Only a fraction of cereals is sold in open markets. Cereal markets are informal and often lack transparency in terms of pricing and quality. Cereal value chains are reliant on wholesalers for financing transactions that remain largely unstructured and based on kinship networks. Cereal trading is an oligopolistic activity with Bamako supplied by around twenty cereal wholesalers. By leveraging their distribution networks through a waterfall pre-financing system—some also pre-finance collectors and aggregators—these wholesalers secure stock at favorable prices. More innovative actors including some with their own rice processing equipment provide inputs and financing to farmer cooperatives and recoup their investment in-kind.

B. High-valueagriculturecanbringmuchneededcashtoruralproducers

High-value agricultural commodities generally require limited labor and capital inputs. Mali’s competitiveness in high value commodities is a result of favorable natural endowments than it is of created advantage. The climate and soil conditions of Mali’s southwestern geographies are ideally suited to the growth of shea, gum arabic, mango, and cashew trees. Despite these advantages, actual production falls short of meeting each sub-sector’s full potential. Quantities brought to market are even smaller, as collection relies almost exclusively upon manual labor provided by seasonal workers who lack access to production areas. The export of high-value agricultural commodities in Mali is constrained by technical and logistical barriers. Though these value chains’ focus is almost exclusively on regional and international export markets, producers frequently struggle to observe required international quality standards.

Conditioning is closely linked to product standardization and exportability. By simply sorting, weighing, packaging and treating agricultural products in a consistent way, actors enhance their value and increase their competitiveness significantly. Conditioning, however, requires some form of warehousing and specialized equipment or materials that are expensive. While some institutional investments, such as the World Bank’s Programme de Compétitivité et de Diversification Agricoles (PCDA), has, in part, addressed this deficiency, significant capacity challenges remain. Initiatives to promote training and capacity building are being introduced by producer associations but awareness of the importance of this standardization is still in nascent stages.

In the absence of adequate processing capacity and quality control systems, Mali exports much of its high-value agricultural output in raw form. Shea kernels, raw cashew nuts, fresh mangoes, shallots and sweet potatoes (the only vegetables officially exported) and crude gum arabic all fail to undergo a domestic transformation process. Shea butter, roasted cashews, mango pulp or juice and processed gum arabic, for example, all command significantly higher prices in export markets. A general inability to perform such processing puts the country at a competitive disadvantage. This deficiency is the result of chronic, economy-wide underinvestment in capacity for value addition and a general lack of value chain codification.

1 Institute of National Statistics (INSTAT), Enquête modulaire et permanente auprès des ménages (EMOP), 2017.



• CROSSBOUNDARY

Some interventions, however, have seen some initial success. The mango, shea, gum arabic value chains have interprofessional associations coordinating actors across the value chain. Targeted efforts on structuring the mango value chain were initiated by the public sector through the support of the World Bank. Shea has benefited from donors and NGOs’ interventions because of the strong involvement of rural women in the sector. Private sector efforts are underway as well. In the shea value chain, for example, a large shea processing plant with a capacity to process 30,000 tonnes of raw shea nut is expected to begin production in 2019. Vegetable value chains, alternatively, remain unstructured and ignored by donor interventions despite the strong involvement of rural women.

C. Comparativeadvantageinlivestockproductionremainsunderexploited

The livestock sector in Mali represents an opportunity to create value for the many actors involved. Mali has a clear advantage relative to regional trading partners in the production of cattle. The country’s endowment of agro-pastoral lands, dry climate and water allow Malian pastoralists to produce heads of cattle at a lower cost per-animal than regional competitors. This results in an absolute advantage over neighboring countries, which must import feedstock and invest in rearing inputs.

Yet, sector-wide underinvestment and informality prevent pastoralists from bringing the quality animals to market and commanding the highest possible prices. This under-performance of Malian cattle is contributed to a lack of appropriate zootechnical inputs that discourage animal breeding and the mixing of cattle races to encourage the development of traits that will yield higher meat content. While the carcass of a healthy European animal might yield meat equivalent to 70% of its live weight, Malian cattle’s yield per carcass hardly exceeds 50% for animals in good condition and around 47% for lean animals.2 The average carcass weight is 110 kg for cattle, 9 kg for sheep and 8 kg for goats, lower than European breeds and inferior compared to international benchmarks.3

Animal feed production has not kept up with demand. While the production of enhanced feedstock based on maize or rice by-products mixed with molasses or other forms of glucose represents an opportunity, the activity remains largely informal. Animal health services remain uncodified and unregulated and are generally offered by private sector actors without standards and quality control. There is also a general lack of value-enhancing education across the sector. Cattle breeders’ isolation from more developed markets hampers the dissemination and adoption of innovative practices that benefit the whole of the value chain such as artificial insemination.

The livestock sector in Mali has largely failed thus far to vertically integrate. The few slaughterhouses that do exist within the country are parastatals that are poorly managed and fail to respect basic standards of hygiene. Pervasive underinvestment in the energy sector preclude the construction of at-scale refrigerated warehousing systems, a problem compounded by few refrigerated freight options and a poor road network. As a result, most animals are slaughtered informally. While the private sector has sought to address some of these deficiencies, projects are challenging to fund and susceptible to inefficiencies across the value chain. A lack of market information on prices is also an impediment to value creation at the processing level.

III. Consolidation and professionalization of value chains will unlock financing,jobs, and growth

Agricultural value chains in Mali are all characterized by informality and fragmentation. This leaves their primary actors—input providers, producers and some processors—reliant upon traders, collectors and wholesalers to bridge gaps in market information and connectivity. While even well-functioning value chains rely on intermediaries of some kind, in Mali these actors often add complexity without adding value, taking advantage of information and resource asymmetries to engage in rent-seeking behavior. This damaging dynamic does more than depress sale prices at the top of a given value chain; it frustrates development of the codified economic and physical infrastructures that are preconditions to investment and growth. Disintermediation, formalization, and transparency should underpin any intervention addressing the proper functioning of the sector.

Identifying key points in a value chain for consolidation and connectivity is a central first step. This may take the form of supporting a critical aggregator which reinforces a value chain both above and below the point of intervention, sharing market information, organizing logistics, promoting best practices, facilitating access to credit and redistributing risks among the value chain actors. The role played by one or more critical aggregators will vary across value chains in accordance with the scope and depth of available ecosystems. More mature and structured value chains, for example, will rely less on one key linkage than on a universe of enablers. Regardless, identifying and empowering the right intermediary to effect these changes while excluding those that destroy value requires significant discretion and is critical for growth.

2 National Directorate for Animal Production and Industries (DNPIA), Annual Report 2015, 2016.3 National Directorate for Veterinary Services (DNSV), Annual Report 2015, 2016.



Source: CrossBoundary analysis

Figure 1.A more streamlined value chain

ProducersFamily farms

Urban wholesalers(Aggregators)

Ruralaggregators

ProcessingExport

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Processors

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Ruralcollectors

Initial focus should be placed upon better structuring the production and collection of raw materials. As Mali’s many thousands of smallholder producers are geographically dispersed, creating or reinforcing strong sector-based cooperatives, or federations of cooperatives, is a key step towards increasing competitiveness. Most fundamentally, these organizations should initially be supported with funding that allows them to hire talented managers who are professionally trained and properly incentivized. Facilitating fundraising and investment that allows these managers to deploy capital against the infrastructure needs of their cooperatives should follow. Agricultural value chains, at times, require large investments in infrastructure, and in a country with generally poor physical networks their development requires a common denominator of logistical connectivity. In the cereals value chains, for instance, federations of cooperatives could build, own and operate regional networks of modern warehouses that would enable conditioning and storage of output, promoting consistent quality.

Investment in infrastructure accomplishes more than just physical connectivity. It also serves to reduce information asymmetries between value chain actors. Properly stored and conditioned agricultural output can be valued by a professionalized third-party assessor, providing pricing power and flexibility to sellers, transparency and accountability to buyers, and verified, quantified collateral information to finance providers. Complementary leveraging of technology-based price dissemination mechanisms brings transparency to markets, making them more efficient and reducing the risk of abusive practices or value-destroying activities like side-selling. Other infrastructure investments have similar effects on reducing uncertainty. Advanced irrigation assets, for example, mitigate climate-driven production volatility, while improved roads throughout a production region help to minimize and standardize travel times, reducing delay-related spoilage.

Greater transparency brought about by infrastructure investment and professionalized value chain management serves to reduce risks, ultimately lowering transaction costs for a value chain’s potential lenders and investors. If burdensome elements of banks’ underwriting diligence processes, for example, are addressed by certified third-party inventory valuations, creditors can originate secured loans in greater volumes or at lower rates. Whether financing is provided for working capital or asset purchases and expansion, transparency is critical.

Professional aggregators have a key role to play in this financing process through on-lending to the constituents of their cooperatives or cooperative federations. Equipped with formal management training and a mandate to expand their respective value chains, these aggregators can effectively interface with credit committees, articulating and quantifying risks in order to permit efficient pricing and structuring of debt facilities. These financed aggregators, in turn, provide producers with the necessary inputs to maximize volumes and yields. Surplus production, properly stored, conditioned and valued, can then be commercialized via an efficient warehouse receipt system, where applicable. Such standardized transactions give banks visibility over value creation and ownership transfer along a value chain, increasing their confidence in borrowers’ creditworthiness and encouraging continued relationships. The government and donor communities also have a role to play by developing risk mitigation measures such as guaranty funds, insurance or subsidies. Such instruments reduce banks’ risks, giving their credit committees much-needed exposure to the nuances of underwriting agricultural risk.

Finance providers to the agricultural sector focus primarily on the provision of working capital, and while medium- and long-term debt to finance growth is sometimes available, a parallel effort is needed to facilitate paradigm-shifting investment in processing capacity. Mali’s vast endowment of agricultural land provides significant advantages in primary production, but further value addition is only possible through modern, industrial processors that comply with international quality and traceability standards and compete regionally and internationally. Such investments have spill-over effects on value chains, placing processors closer to their raw material suppliers, allowing knowledge transfer and remedying underdeveloped or poorly disciplined production practices.



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~ USAID I • CROSSBOUNDARY '=" ™>MTHEAMEIOCAN PEOPLE

Large industrial projects in the agricultural sector often struggle to raise capital given the limited development of capital markets in the country. Loans from local and regional commercial banks have traditionally been the only instrument available to fund growth, though these lenders are significantly limited in their ability to originate medium- and long-term debt. Furthermore, their technical capacity to evaluate agricultural risk, and to price and structure transactions accordingly, suffers from underwriters’ general neglect of the sector. Alternatives to debt capital, however, are also underdeveloped. Private equity firms’ investment committees regard opportunities in Mali with extreme skepticism, and are either unwilling or unable to dedicate resources to carefully diligencing opportunities. Without a dedicated intermediary on the ground to facilitate all facets of the origination process, even impact-oriented funds view information asymmetries as insurmountable. Development finance institutions, for their part, though more willing to engage capital-seekers in principal, remain prone to significant bureaucratic inertia. Their diligence and origination timelines, and the cumbersome feasibility studies their investment committees require, often exhaust project sponsors and entrepreneurs, who often ultimately seek capital from more responsive but less technically capable sources.

In light of these various structural limitations, there is an opportunity to develop a dedicated local fund with local market knowledge and to tailor its approach to the needs of local companies. Structured along the lines of national and regional agricultural funds existing elsewhere in Africa such as AgDevCo and the Agriculture Fast Track Fund, such an organization could facilitate the growth and development of new companies at an ever-smaller scale, replicating the work of challenge grant funds promoting early stage projects such as the Africa Enterprise Challenge Fund. In parallel, resources should be allocated to the development and modernization of the local financial system promoting, for instance, innovative market structures and technologies that allow underwriters assess and manage risks more efficiently. Amongst others, areas with potential for modernization and efficiency improvement include the development of warehouse receipt systems, value chain digitalization and innovative insurance products.

The Malian labor market is one of youngest in the world with 65% of potential workers between ages 15 and 34. By 2030, 9.5 million Malians are projected to be in this age group. Currently, the agricultural sector is the only sector in position to absorb such a large influx. To adequately prepare the sector for this challenge, capital investments to modernize the sector should be promoted. In promoting these investments, focus should be boosting output by investing labor-augmenting technologies. Moreover, supporting research on improved varieties, production techniques, and the promotion of more efficient technology to increase productivity should also be considered. Adopting mobile technology to increase information sharing can be a cost effective of way to providing timely information to actors across value chains. WeFarm, for instance, enables farmers to ask peers technical and practical questions and share information via SMS without the need for an internet connection thus addressing information asymmetries that currently plague the sector. In Nigeria, Hello Tractor allows farmers to hire tractor services via smartphones from local entrepreneurs thus creating opportunities for enterprising youth while addressing the problem of insufficient mechanization. By simultaneously promoting market-oriented initiatives such as the integration of markets and the formalization of commercial arrangements between parties, there is also significant potential to improve efficiency and facilitate access to finance for actors across the value chain.



IV. Agriculture is fundamental to the Malian economy

A. TheagriculturesectorinMali

Agriculture is a critical sector to the economic and social stability of Mali because of its central role in the national economy, in food security, and in job creation. Agriculture and pastoralism provide employment to nearly 80% of the workforce.4 They contribute to 40% of GDP and, excluding gold, 70% of exports.5

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Figure 2.Mali GDP sub-sector distribution (%)

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fishing,forestry

Agrofood industrySource: WB WDI, MoF

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Figure 3.Export products distribution (%)

Source: UN Comtrade

Between 2000 and 2016 Mali’s GDP grew at an annualized rate of 5%. Agriculture has been one of the drivers of growth with the added value in the sector growing at the same rate of 5% to reach F CFA 3.6 trillion (EUR 5.48 billion) in 2017.6 Growth in the production of cereals, including rice, corn, millet and sorghum has been particularly strong, with output increasing from 2.5 million tonnes in 2001 to 9.4 million tonnes in 2017.7 In the same period, the land surface dedicated to the cultivation of cereals has increased from 2.5 to 5.7 million hectares. The production of cotton, the main cash crop and one of the main export products, suffered a severe slump in the second half of the last decade, but has since recovered to reach 703,000 tonnes in 2017 with 704,000 hectares destined to its cultivation, making Mali the biggest producer in Africa.8 The positive performance of sectors such as cereals and cotton is partially explained by government efforts to structure the cotton value chain around Compagnie Malienne pour le Développement des Textiles (CMDT), the state-owned enterprise in charge of cotton marketing, and by initiatives to promote access to technologies, fertilizer and other inputs.

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Figure 6.Evolution of cereal production(tonnes/hectare)

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Figure 5.Evolution of cereal production(million hectares)

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4 The World Bank, World Development Indicators (2017). Retrieved from https://data.worldbank.org/indicator/SL.AGR.EMPL.ZS?locations=ML5 UN Comtrade, International Trade Statistics (2016). Retrieved from https://comtrade.un.org/data/6 CrossBoundary calculation based on Ministry of Economy and Finance data.7 Ministry of Agriculture, CPS/SDR, Enquête Agricole de Conjoncture (EAC) 2015/2016, 2016.8 Ibid.



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Figure 8.Evolution of cotton production(million hectares)

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Figure 9.Evolution of cotton production(tonnes/hectare)

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The high rates of growth are driven by an increase in the surface cultivated and facilitated by a high population growth rate, which at 3.1% has led to a population increase from 10.3 million people in year 2000 to 19.5 million in 2018. Overall the agricultural sector remains internationally uncompetitive. The sector is highly fragmented and subsistence farming is the dominant model. Farms are small (68% of farmers work on fewer than 5 ha of land) and few have access to modern production technologies (only 1% of farmland uses mechanized tractors).9 Only two products, cotton and livestock, account for 90% of total agricultural exports. Given the expected high rates of population growth, Mali faces the challenge of increasing job opportunities in the agricultural sector while also increasing productivity and incomes.

With 6.4 million hectares of arable land, Mali surpasses its neighbors Senegal (3.2 million hectares) and Côte d’Ivoire (2.9 million hectares).10 Only 20.0% of the 2.2 million hectares of potentially irrigable area is irrigated.11 Thus, the potential for agriculture growth and expansion is high. Two rivers, the Senegal and the Niger, cross the country providing abundant water for irrigation and agriculture. The country has the biggest internal water surface in the region, with almost 2.0 million hectares.

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Figure 10.Internal water surface (million hectares)

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Figure 11.Agricultural land (million hectares)

8.8

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B. Outsideofcotton,cereals,high-valuecrops,andlivestockareprincipalvaluechainsinMali

Within the primary sector, certain value chains have more social and economic significance. Cotton and livestock are the 2nd and 3rd largest exported products, accounting together for close to 20% of total export earnings in 2016. Cotton is the main cash crop, while cereal crops (rice, maize, millet and sorghum) constitute the main food crops. Other high value-added products, such as agro-forestry (fruits and nuts) and fishery products also play important roles. Dry cereals contributed close to 43% of primary sector’s share of overall GDP. Livestock made up 36% of share of the sector’s overall GDP, while rice and cotton alone represent 15% and 5% respectively.12

9 Food and Agriculture Organization (FAO), Mali: country fact sheet food and agricultural policy trends, 2017.10 Food and Agriculture Organization (FAO), Corporate Statistical Database (2016). Retrieved from http://www.fao.org/faostat/en/#data/RL11 Ministry of Rural Development, Plan d’investissement dans le secteur agricole, 2014.12 Institut Nationale de la Statistique (INSTAT), Annuaire Statistiques 2016, 2016.


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Figure 12.Share of primary sector GDP in 2016 (%)

Livestock

Cereal crops

Source: INSTAT, 2016

Fishery

Agriculture forexportation

Agro-foresty

1.3%Other

36.1%

8.1%

6.9%

5.1%

42.3%

Mali is West Africa’s largest cotton exporter. Cotton provides income to 40% of the rural population and contributed to 10% of export earnings and 12% of the state’s budget revenue in 2016.13 Given its large contribution to GDP, cotton benefits from strong policy support and close public monitoring of the value chain. The cotton value chain is managed at all levels by the state-owned CMDT. The CMDT offers fixed prices to producers through timely payments receipts. Despite targeted efforts pursued to strengthen the cotton subsector, exacerbated focus on cotton may be working to the detriment of other agricultural outputs.

Cereal production (rice, millet, sorghum, fonio, maize and wheat) is estimated at 9.5 million tonnes for the 2017 season.14 Despite annual fluctuations due to rainfall, according to official statistics, there has been a 97.6% net increase in cereal production over the last decade, explained by an increase in harvested area and improvements in yields. As staple foods, cereals are produced mainly to ensure self-sufficiency at production level. Rice producers, in particular, have benefited from continued public-sector attention through input subsidies.

Government spending on rice accounted for a quarter of the government’s agriculture budget and subsidies have been extended to other cereal crops as well (especially maize). The priority given to cereal production has been predominantly addressed within the context of food security.

The livestock sector has been experiencing continuous expansion with annual growth rates of 3.1% for cattle, 5.2% for sheep/goats and 1% for camels.15 Its significant economic weight is evidenced by the fact that 10 to 35% of the total cash income of rural households is generated by livestock sales.16 Livestock is both an export-oriented agricultural product and a form of capital in rural society. A relatively minor dietary component domestically (only 5% of daily protein intake),17 livestock is predominantly utilized in agriculture as a source of cash, fertilizer production and as beasts of burden. The market supply of livestock is uneven throughout the year with the dry season concomitant with animals losing weight. Livestock accounts for an important share of employment in agriculture as many traders intervene in the value chain, each applying a premium on sale price. A wide array of actors, ranging from breeders to fatteners, follow multiples channels through which the final product is routed to different markets. The livestock sector uncovers ample opportunities for higher value addition notably through the production of derived products, such as milk.

High-value products, such as mangoes, cashew, shea, gum arabic, and horticultural produce (tomato, potato and shallots) have gained accrued attention from government and donors for their high export potentials. These crops remain largely below their exploitable potential, despite external demand rising steadily, with Europe leading imports of mangoes, gum arabic and shea worldwide. Domestic demand for market gardening produce is also growing at the pace of urbanization. Leveraging this growth in demand will require removing the various inefficiencies inherent to the current value chains notably the seasonality of production.

C. Governmentinterventionsoftenfavorfoodsecuritycropslikecereals

Government plays an important role in shaping agricultural markets in Mali. It supports policy development, research, management of agricultural zones, subsidies and is an owner of some major agricultural companies. Agriculture consistently accounts for some 15% of the government budget, well above NEPAD’s target of 10%. The government budget for 2018 amounts to F CFA 2,330 billion of which 40% is allocated to capital expenditure.18 Agriculture is after education the sector, the highest budget allocation, with an allocation of F CFA 349.8 billion. Of these, 80% was allocated to investment projects and 15% to funding transfers and subsidies.

Agriculture is at the core of government strategies and development policies. Since the early 2000s, government policies in the agricultural sector have been focused on two main objectives: boosting production volumes of key crops and ensuring national food security. This has been addressed through various development strategies in the form of agricultural policies, targeted public expenditure and cross-sectoral policy objectives aiming at improvements in productivity and competitiveness, introduction of new technologies, and better management of natural resources.

13 Ibid.14 Ministry of Agriculture, Plan de campagne agricole consolidé et harmonisé 2018/2019, 2018. 15 Direction Nationale des Productions et des Industries Animales (DNPIA), Annual report 2015, 2016.16 Ibid.17 Food and Agriculture Organization (FAO), Mali: Country fact sheet, 2016.18 Ministry of Economy and Finance, Document du budget : note conjointe de conjoncture du 1er trimestre 2018, Octobre 2018.



~ USAID I • CROSSBOUNDARY '=" ™>MTHEAMEIOCAN PEOPLE

Defense

Security

Health

General servicesand administration

Education

Agriculture

Culture, etc.

Housing

Social welfare

Environment

Figure 13.Government budget by sector (billion F CFA)

Other economic affairs

350

397

552319

272

130

124

100


55

22

9

In 2003 Mali adopted the Programme Détaillé pour le Développement de l’Agriculture en Afrique (PDDAA) engaging to commit at least 10% of the government budget to agriculture. In 2006, the government of Mali passed the Loi d’Orientation Agricole (LOA) aiming at developing an intensive and diversified agriculture. In 2009, it adopted the NEPAD’s Comprehensive Africa Agriculture Development Programme (CAADP)-Mali. In 2011, it adopted the Programme National d’Investissement Prioritaire dans le Secteur Agricole (PNIP-SA), providing a blueprint for agricultural development for 2011-2015. In 2013 it approved the Plan de développement Agricole (PDA). Most recently, in 2015 the government adopted the Programme National d’Investissement dans le Secteur Agricole (PNISA) in order to implement the LOA.

As many agricultural products face significant obstacles in investment, production, processing and marketing, governmentinterventions remain crucial for daily operations, especially to guarantee access to inputs. A critical element of the plan is the extension of agricultural land and irrigation schemes. The Programme National pour l’Irrigation de Proximité (PNIP) has the

goal of developing 48,000 hectares of land-under improved irrigation for an estimated cost of F CFA 118 billion (US$ 236.2 million) during 2016-2021.19 The plan has received funding from government and donors such as Germany, the EU, Canada, and the USA. More detailed information on key government policies in the agricultural sector is available in table 13 of the annex.

The government budget for 2018 allocates F CFA 56 billion, 15% of the budget of agriculture, to grant subsidies for the acquisition of agricultural inputs.20 The biggest share goes to fertilizers destined to the production of selected products, notably cotton and cereals. The purchase of fertilizer for these value chains is coordinated each year by state-owned companies such as CMDT and government agencies for the development of agriculture, such as Office du Niger, Office Riz Mopti and Office de la Haute Vallée du Niger. These organizations forecast farmers needs and launch public tenders through the process described in Figure 16. Public tenders account for some 80% of the fertilizer consumed in the country.21

These agencies administer irrigation agriculture development schemes across the country, including: Office de Développement Rural de Sélingué (ODRS), Office de la Haute Vallée du Niger (OHVN), Office du Niger (ON), Office des Produits Agricoles du Mali (OPAM), Office du Périmètre Irrigué de Baguinéda (OPIB), Office de Protection des Végétaux (OPV), Office Riz Mopti (ORM), and Office Riz Ségou (ORS). Along with irrigation, they oversee the implementation of national development schemes relegated at regional levels. They also launch and monitor several programs to meet annual objectives set by the government.

Since the late 1980s structural adjustment, which oversaw the end of fixed price state monopolies and marked the beginning of liberalization, only one state-owned company, in process of privatization, has subsisted in the primary sector. The CMDT ensures 95% of cotton production and conducts all processing and commercialization through 17 cotton factories.22 Poor management and the blatant inefficiency of the chain have brought about debate over the necessity for its privatization, which resulted in the creation of four subsidiaries in late 2010. Yet, structural constraints have inhibited the new branches to be operational. To gradually launch the autonomy of the subsidiaries, the CMDT was remodeled as the CMDT Holding responsible for the same activities but under a new management system more focused on grasping economic opportunities of industrial scale cotton with the dismissal of its long mission of public service in rural development.

19 USAID, Mali small scale irrigation project, Feed the Future brief, 2016.20 MoA, Plan de campagne, 2018.21 Based on interviews with fertilizer distributors.22 Cotton Interprofessional Association (IPC), Annual report 2015, 2016.

Figure 14.Government budget in agriculture by type of expenditure (%)

Investments

Transfersand subsidies

Salaries

Goods and services

78%

16%


4%

2%


STRICTLY PRIVATE AND CONFIDENTIAL10 ~ USAID I • CROSSBOUNDARY '=" ™>MTHEAMEIOCAN PEOPLE

The Government is also present, on a lesser extent, in the sugar sector. Sugar production is performed by industrial conglomerates (Sukala and N-Sukala) in the Ségou region, the state holds 40% of the two sugar mills, with the remainder owned by Chinese investors. The Governmentalso signed a cooperation agreement with Indian majority shareholders, for the Markala Sugar project which seeks to implement 14,000hectares of irrigated sugar plants to secure 40% of national demand, and the construction of a processing plant.23

V. Value chain development can unlock the potential of Mali’s agricultural sector

A. Connectiontoextensionservicesisessentialforgrowth

Extension and advisory services are provided by both private and public entities. Public research is led by the Institut d’Economie Rurale (IER) which coordinates actions with local research centers as well as with sub-regional and international partners. Local research institute include the Institut Polytechnique Rural and Institut de Formation et de Recherche Appliquée (IPR/IFRA) and the Comité National pour la Recherche Agricole (CNRA) as well as multiple laboratory units. IER undertakes research on agricultural technologies and plant development. It manages the development of the first generation of improved seeds, which are then replicated by a network of certified farms. Through its research stations in Baguineda and Sikasso, the Institute conducts research on the fight against fruit flies. The various Centres d’Apprentissage Agricole (CAA) are a public extension service aiming to provide practical training and certificates.

Public research is predominantly financed by donors and centers coordinate with international institutions for technical assistance. Main researched subjects are subsistence crops, especially rice and millet, cotton, livestock and increasingly legumes, they account for half of the resources allocated to research. International institutions in extension include the CIRAD research institutes incorporating four offices in Mali: Africa Rice, the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT), the International Livestock Research Institute (ILRI) and the World Agroforestry Center (ICRAF). The World Vegetable Center holds office in Mali as well and leads innovation in the vegetable subsector.

Various sub-regional and international development programs provide technical and practical support. The World Bank’s West Africa Agricultural Productivity Program (WAAPP) has the objective to provide and disseminate improved technologies in the primary sector. Other programs include USAID’s Feed the Future which provides institutional assistance for the dissemination of improved technologies and management. GiZ’s Green Innovation Centers (GIC) adopts a value chain approach to addressing marketing and production practice improvements in the mango, rice and potato chains.

Extension and advisory services come in various forms with the same objective of building capacities. Methods include: resources centers like best practices hubs, demonstration plots and showcasing of improved techniques, value chain approaches providing market information, agricultural entrepreneurship through the reinforcement of producer cooperatives’ capacities.

23 African Development Bank, Markala Sugar Project – Agricultural Component Appraisal Report, 2010.



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B. Accesstocriticalinputsallowsmallholderstoincreaseyields

Value chain analysis

Supportingenvironment

• EXTENSION SERVICES• Lack of knowledge disseminati on on

the benefi ts of improved seeds andgood ferti lizer practi ces

• Limited research and extensionservices

• INFRASTRUCTURE• Limited public investment in

technologies for seed producti on• Lack of private investment in quality

seed producti on infrastructure(irrigated land, processing plant, andadapted storage faciliti es)

• Poor transportati on infrastructure• Underdeveloped distributi on networks

and market access

• FINANCE• High cost of quality seeds and freight

cost of imported ferti lizers• Lack of understanding of input sector

by banks• Limited provision of credit to seed

companies

• Fragmented private sectorcomprised of small-scaleactors

• Limited producti on ofcerti fi ed seed

• Low producti on of breederand foundati on seeds

• Poor disseminati on ofmarket informati on

• Adulterated andcontaminated ferti lizerproducts

• Presence of phosphate rockin Tilemsi, Gao

• Prevalence of manual seedprocessing

• Limited ferti lizer processing

• Inadequate and insuffi cientstorage faciliti es

• Perceived high cost ofacquiring seeds andferti lizers

• Poor synergies betweenactors

• Marketi ng costs associatedwith introducti on of newseeds

• Rigid import procedures forferti lizers

• Low adopti on rate ofimproved seed varieti es

• Limited awareness ofimportance of quality seeds

• Ferti lizer consumpti ondependent on subsidiesand policy support

• Doubt in potency offerti lizers due toadulterati on practi ces

PRODUCTION PROCESSING MARKETING CONSUMPTION

Figure 15.Seeds,fertilizer,andpesticidechainoverview

i. FertilizerThe fertilizer sector registers a high level of government intervention. The consumption of chemical fertilizers is concentrated in the production of cereals and cotton which combined account for some 95% of total consumption.24 The use of fertilizers in the production of these crops is favored by government subsidy programs, and in the case of some crops by the existence of a formalized value chain where pre-season commercial agreements allow to finance the purchase of agricultural inputs. This is particularly the case of the cotton sector which, structured around the state-owned company CMDT, accounts by itself for 73% of fertilizer consumption.25 With the goal of promoting access to inputs and agricultural productivity, the government started implementing in 2009 a fertilizer subsidy program. Originally focused on rice and cotton, the program has been expanded to cover other crops such as maize, millet, sorghum and wheat.

In the last season of 2017/18 the government subsidized the acquisition 446,173 tonnes of fertilizer with 36.6 billion F CFA, of which 26.6 billion for cereals crops and 10 billion F CFA for cotton.26 The purchase of fertilizer is coordinated each year by government entities such as CMDT and multiple Offices, through the process described in Figure 16. At the start of the season, CMDT and the offices consolidate the demand for

24 MoA, Plan de Campagne, 2018.25 Ibid.26 Ibid.



chemical fertilizer in their respective zones of intervention and organize public tenders. Once the fertilizer is delivered, they distribute it to farms and settle the payment with providers, collecting dues from farmers and from government which subsidizes 35% to 40% of the cost. The production of crops not benefiting from government subsidies, either suffers from low use of fertilizer or relies on locally available organic fertilizers and manure. This is particularly the case of the production of export mangoes which target upscale organic markets.

Government

Subsidy payment

Fertilizer importer Suppliers

Fulfill orders

Delivery

Retail sale of fertilizers

Government agencies, e.g.CMDT, ODN

Ports

Orders for imports Request for orders

Distribution

Farmers $

$

$

Bag and load fortransportation

Figure 16.Process for public tendering of fertilizer

A small number of local companies such as Toguma, Gnoumani, Somadeco, Sengoye and Sogefert, import and market fertilizers in Mali, generally responding to government tenders. Fertilizer components are imported separately and blended in the country. While this is cost-effective and results in lower import duties, differences in density and grain size cause even well mixed blends to sort and separate by nutrient during transportation. This reduces the effect of fertilizer, yields and product quality. Mali has deposits of high-quality phosphate in Tilemsi, in the Tombouctou region. These deposits have the potential to reduce the cost of imported fertilizers and a few local and international companies such as Toguna and Great Quest have acquired exploration and production licenses. Nevertheless, the fragile security situation in the region has made impossible the exploitation of the resource to date. Elephant Vert Mali, a Malian organic fertilizer producer, has a production unit with a capacity of 50,000 metric tonnes per year.27

Average fertilizer prices are estimated to be an 82% higher than in Thailand, due in part to high transportation costs (accounting for one third of total cost) and other inefficiencies. The cost of distributing fertilizer in Mali is estimated at US$ 514 per tonne in 2014 and US$ 569 per tonne in 2016. The cost of urea and the cost of NPK blend were estimated in 2012 at US$ 620 per tonne and US$ 883 per tonne respectively. The use of modern fertilizers is concentrated in the cotton sector. The expansion in the use of fertilizer, such as in the recent case of rice, has shown its significant impact in crop productivity.

The cotton sector shows how critical the structuring of a value chain is in facilitating access to season credits and production inputs. The expansion in the use of fertilizer can be promoted instead by fostering long-term contracts between producers and processors, which can mobilize lending from financial institutions and allow farmers to pre-finance inputs such as seeds and fertilizers to producers. Initiatives to reduce the cost of fertilizer in Mali such as USAID’s “Scaling up Fertilizer Deep Placement and Microdosing Technologies in Mali” should be promoted. The project promoted and disseminated namely two innovative climate-smart fertilizer technologies for targeted crops. Fertilizer Deep Placement (FDP) is the method of placing briquettes under the soil close to the plant roots while microdosing consists of applying very small quantities of fertilizer directly at plant root. The project has shown the potential to reduce fertilizer use by 33% while increasing rice yields by 15%.28

27 CrossBoundary research.28 USAID, Scaling up Fertilizer Deep Placement and Micro-dosing Technologies in Mali, Feed the Future brief.



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0

100

200

300

400

500

600

Product cost Transport Overheads TaxesFinance cost Distribution

Mali Thailand

Figure 17.Comparative average fertilizer costs in 2014 (USD/tonne)

252 229

31

165

4532200

Total cost514

Total cost282

0 148

0.2

Source: CrossBoundary analysis based on industry sources

0

200

400

600

800

1,000

Product cost Transport TaxesFinance cost Distribution

Urea - Mali NPK blend - Mali

Figure 18.Selected fertilizer costs in Mali in 2014 (USD/tonne)

320

544

1607577

175525220

28

Source: CrossBoundary analysis based on industry sources

Total cost620

Total cost884

ii. SeedsThe production of cereals requires an estimated 120,000 tonnes of seed. It is estimated that only one third of the seeds in use are improved seeds. Most often farmers rely on their own stock. Sales of certified seeds are estimated at 5% of total demand. Accounting for the recycling of these seeds over four years, the share of improved seeds is at most one third of the total consumption.29 The cultivation of cotton requires some 15,000 tonnes of seeds.

The limited use of improved seeds is constrained by multiple factors. First, there is a limited production of improved seeds. Second, there is the logistic challenge of reaching and distributing millions of farms in rural areas. Third, most farmers involved in subsistence agriculture have no financial capacity to purchase improved seeds. The cultivation of vegetables and horticultural fruits, where the production of seeds is more complicated, relies generally on imported seeds. These seeds can be 10 to 100 times more expensive than cereal or cotton seeds, and are generally self-financed by producers, which will resell the product in local markets.30 To reduce the cost of inputs producers generally re-use seeds over several seasons.

As highlighted above, the production of cereals relies mostly on the use of local seeds that farmers select and stock from year to year. Nevertheless, in the last decades we’ve witnessed the emergence of a network of developers of improved seeds. IER and some international research centers are engaged in the research and development of improved seeds and new plant varieties. These seeds are then replicated over few years by a network of 150 farm cooperatives supervised by organizations such as IER and CDMT and certified by the Laboratoire des Semences (LABOSEM).

29 Haggblade et al, Revue du système semencier au Mali, Laboratoire d’Innovation FSP, 2015.30 Ibid.

Table 1.Nationalseedrequirementspercrop

Surface Seed requiredSeed

requiredShareof

improvedseedsShareof

improvedseeds

ha kg/ha kg % kg

Cotton 704,000 22 15,488,000 100% 15,488,000

Millet 2,155,729 6 12,934,374 26% 3,362,937

Sorghum 1,585,986 6 9,515,916 26% 2,474,138

Rice 767,874 90 69,108,660 36% 24,879,118

Maize 1,233,008 25 30,825,200 30% 9,247,560

Cowpea 366,540 25 9,163,500 10% 916,350

Groundnut 401,090 60 24,065,400 21% 5,053,734

Source: Haggblade et al., Revue du système semencier au Mali, 2015


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FasoKaba is Mali’s foremost agricultural-seed company that is active in the production and distribution of a wide variety of agricultural seeds in Mali and neighboring countries. Faso Kaba processes and distributes cereal (maize, sorghum,

Documents

On the functioning of agricultural markets in Mali...ON E FCTIONING F ACA AES A SAEES FOR DEEPE SCTL PAE AD CONFDEA Contents I. Executive summary 1 II. An agricultural sector constrained