the role of smes in promoting science, technology and innovation in food security and sustainable...

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The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture By: Ambassador Wendell McIntosh (President / Chairman of ADA COMMERCIAL INC., Monrovia, Liberia) At the occasion of the 5 th EABF and 4 th EU- Africa Summit on 31 st March 2014 in Brussels, Belgium

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By: Ambassador Wendell McIntosh (President / Chairman of ADA COMMERCIAL INC., Monrovia, Liberia) At the occasion of the 5th EABF and 4th EU-Africa Summit on 31st March 2014 in Brussels, Belgium

TRANSCRIPT

Page 1: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

The Role of SMEs in promoting Science, Technology and Innovation in

Food Security and Sustainable Agriculture

By:Ambassador Wendell McIntosh(President / Chairman of ADA

COMMERCIAL INC., Monrovia, Liberia)

At the occasion of the 5th EABF and 4th EU-Africa Summit on31st March 2014 in Brussels, Belgium

Page 2: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

Outline of Presentation

1. Challenges in African Agriculture2. Contributions of SMEs3. Constraints faced by Agribusiness SMEs4. Way forward (Roles of SMEs in innovations for

food security)5. Conclusions6. Recommendations7. Research needs

Page 3: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

1. Challenges for agricultural SMEs

• SMEs in Africa have failed to be a major force in advancing Science and Technology Innovations, especially in our agricultural productive systems

• Agricultural productivity remains low.• There is heavy reliance on food aid and food

imports in Africa.• Problem mainly attributed to business and policy

environments not conducive for SMEs to operate and compete in domestic and international markets.

Page 4: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

Challenges for agricultural SMEs• Some of the unfavourable situations hindering SME

growth and development in Africa include:– Unstable political climate;– Lack of business and investor confidence in the economy;– Unstable and unpredictable macroeconomic environment; – The difficulty in doing business, and – The perceived corruption of governments in most African

countries.

Page 5: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

Challenges for agricultural SMEs

• Africa’s ability to break the relative food insecurity and poverty challenges would largely depend on:

– Public sector/government leadership to harnesses the entrepreneurial and/or innovative potentials of agribusinesses in the private sector,

– Technical and financial support to the efforts of especially infant and distressed agribusinesses.

Page 6: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

2. Contributions of SMEs

• SMEs have been defined variously depending on the context.

• The Ministry of Commerce and Industry of Liberia defines Micro, Small, and Medium-Scale Enterprises (MSMEs) in terms of full-time, non-family employment: – Microenterprises (0-3)– Small Enterprises (4-20)– Medium Enterprises (21-50), and – Large Enterprises (> 50)

• Irrespective of the definition, SMEs create employment and contribute substantially to the GDP of their respective countries

Page 7: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

Contributions of SMEs

• Contribution of SMEs in Liberia:– Serve as a source of family income for over 80% of Liberians– Contribute about 20-30% of the value of manufacturing output– SME manufacturing firms contribute a maximum of about 2% to

GDP. – SMEs engaged in trade and services in Liberia account for about 2-

3% of GDP.

• In Ghana:– SMEs provides about 85% of manufacturing employment– Contributes about 70% to GDP, and – Account for about 92% of businesses.

• In Republic of South Africa:– About 91% of the formal business entities– Contributes between 52 to 57% to GDP, and– Provide about 61% to employment in that county.

Page 8: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

Contributions of SMEs

• Compare to China (2012):– SMEs in China comprise 99 % of all firms– Account for 60% of GDP and fiscal revenues, and– Employ nearly 80% of the country's population

(Ministry of Industry and Information Technology)

– Accounted for 65% of the country's all invention patents,– 75% of corporate innovations, and – 80% of new product developments.

Page 9: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

3. Constraints faced by Agribusiness SMEs

• Several constraints hinder innovative potential of SMEs to break through the food insecurity and poverty cycles.

CONSTRAINTS1. Lack of political will on the part of government– Claim by governments to put agriculture first in its

development and food security agenda not credible.– CAADP targets not fulfilled by almost all African

governments• Increase agricultural production by 6% per year• Increasing public spending in agriculture by devoting at least

10% of their annual budget to agriculture.

Page 10: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

Constraints faced by Agribusiness SMEs

• Empirical evidence: most African governments have not been committed to these target.

2. Low productivity• Farms in Africa characterized by low productivity.• Appropriate technological innovations with external

inputs is a key challenge for most African peasant farmers.

• Some research findings have contributed to productivity improvements.

• Some technologies are difficult to adopt based on socio-economic and socio-cultural factors.

Page 11: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

3. Cheaper imports into domestic markets• SMEs in Liberia, for example, have not fully exploited the

benefits of globalization.• Developing countries under pressure from the influx of

cheaper (and sometimes inferior) foreign imports onto the domestic market.

• This unfair competition is a major challenge for SMEs in Liberia and African in general.

• Evidence: • Liberia currently challenged with cheap rice imports of low

quality• Yet potential and capacity exists, through ADA COMMERCIAL’s

proven experience, to produce, supply, and saturate the domestic market with quality milled rice at competitive prices.

Constraints faced by Agribusiness SMEs

Page 12: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

4. The policy and regulatory environment• A conducive policy and regulatory environment necessary

for SMEs to operate efficiently.

• Available evidence:– General policy environment in Africa is weak and sometimes

non-existent .– Farmers and agribusinesses unable to efficiently compete and

prosper.– The policy environment does not provide safety nets for start-

ups and distressed businesses to manage risks from foreign competition.

– Local agribusiness entrepreneurs either neglected or discriminated against by their own national governments in favour of foreign companies.

Constraints faced by Agribusiness SMEs

Page 13: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

5. Infrastructure Policy• Good infrastructure facilities provide a conducive

environment for productive SME activities growth.

• Lack or inadequate infrastructure, such as roads (trunk, feeder, and first class roads), electricity, water, telecommunication, research facilities, etc.

• The enabling environment upon which private sector (SMEs) can depend on to spur growth and development is mainly absent

Constraints faced by Agribusiness SMEs

Page 14: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

6. Lack of Access to Finance• Access to finance remains a major challenge to most SMEs in Liberia

and Africa.

• Agribusiness is a profitable venture and perceived as very risky– Therefore discriminated against by financial institutions and national

governments for support.

• SMEs (from production to distribution to value addition) have been crippled by the lack of financial support.

• Very little done by African governments to adequately support SMEs access loans at low interest rates.

• For example, interest rates charged to SMEs in Liberia, Ghana and South Africa on average are above 29%.

Constraints faced by Agribusiness SMEs

Page 15: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

4. Way forward

• Agriculture is a big business and Africa considered as last agricultural frontier to feed the world.

• African SMEs in the agribusiness sector need innovative pro-poor sustained strategies that will guarantee food security using appropriate technologies.

Page 16: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

1. Workable science and technological innovations policy

• Research institutions in Africa need to re-examine the kinds of research output they produce and how it has benefitted the agricultural sector.

• A forum should be created where SMEs (including farmers) could regularly meet with Ministry of Agriculture and other relevant Ministries, Research and financial institutions to understand the needs and concerns of agribusinesses.

Way forward

Page 17: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

• SMEs could lead the direction of technological innovations from the research institutions

• SMEs can directly engage other essential stakeholders, including researchers for appropriate and improved seed varieties that will improve on the food security situation.

• For example, ADA Commercial is linking up with Africa Rice Centre to ensure the right rice varieties suited for the Liberian climate are produced:• In commercial quantities for massive mechanized rice

production in Lofa and Nimba Counties in Liberia.

Way forward

Page 18: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

2. Innovation for competitiveness• Strategic linkages and collaborations between

agricultural research institutions across Africa and individual SMEs need to identified and mapped out for specific demand-driven innovations.

Way forward

Page 19: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

3. Collaboration with big firms• Cooperation with big firms will enable SMEs withstand

various levels of risk which will put them in a better position to be resilient to unfavourable economic difficulties.

• Off take agreements need to be signed with key institutions to guarantee ready markets for agribusiness SMEs.

• For example, ADA Commercial has signed an off take agreement with ECOWAS to:– Produce and supply rice– To feed the Food Banks of all ECOWAS Member States

Way forward

Page 20: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

4. Financial and technical support• Agriculture and related agribusinesses require both financial and

technical support from governments and private sector.

• Promising and strategic agribusinesses need to be deliberately identified by governments and key stakeholders

• Special attention devoted to them in terms of technical and financial support.

• An example: ADA Commercial has land and machinery and equipment to commercially produce and supply grains to the ECOWAS sub-region.

• Capital injection with appropriate partnerships is required to succeed in such agribusiness ventures.

Way forward

Page 21: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

• Agribusiness SMEs can lead the quest for appropriate technological innovations for increased food security for sustained agriculture.

• ADA Commercial in Liberia has the experience and capable of spearheading the agricultural technological drive in the rice sector.

5. Conclusions

Page 22: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

6. Recommendations

• Serious brainstorming sessions required on the part of Government, Ministry of Agriculture, and financial institutions to define modalities for supporting Agribusiness SMEs.

• There is the need to deliberately identify and support SMEs with the capacity to go into large scale production.

• Agribusiness SMEs must partner with research institutions to produce appropriate innovations.

Page 23: The Role of SMEs in promoting Science, Technology and Innovation in Food Security and Sustainable Agriculture

7. Research needs

Small and suitable field production machinery• Pre-harvest mechanization: Precision planting,

nursery industry and efficient use of water• Improvement of agricultural technology and

system management• Post harvest mechanization for processing of

agricultural productRenewable energy technology• furnaces for bio char • Bio gas digesters