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Friday, 6 January 2017

Understanding agri-food value chains for nutrition

by Nigel Poole, Haris Gazdar and Mar Maestre

Photo credit: Flickr/ADB

Undernutrition is a central and persistent challenge for global development, above all in South Asia. Mobilising agri-food businesses to support efforts to reduce undernutrition is challenging. The LANSA (Leveraging Agriculture for Nutrition in South Asia) team has been researching for the past two years how the markets for food can be improved so that substantive and sustained consumption of nutrient-dense foods by the poor in households that are post-farm-gate is achieved. Here, nutrient rich foods are those that, if consumed in adequate quantities (WASH and health conditions not considered) are likely to improve the nutritional status of individuals who are undernourished in terms of micronutrients. We understand agri-food value chains as the initiatives, either donor, government or business driven that we will be analysing.

To do so, we developed a framework to assess the nutrition-sensitivity of agri-food value chains post-farm gate. The conceptual framework combines value chain analysis to assess the sustainability of the business model, with an assessment of the consumer, to ensure that the product is safe, nutrient-dense and consumed by the targeted population. We have used the framework to produce a set of case studies in Bangladesh, India, Pakistan and Afghanistan and are in the process of publishing the results. By assessing the limits of what business can and cannot achieve in a given market environment, policy makers and other relevant stakeholders will be more capable of creating incentives and an appropriate institutional environment that shapes how these value chains operate for the benefit of nutritionally-vulnerable target groups. We expect design and implementation of more effective policies and strategies for market-based initiatives and public sector interventions.

We have already some initial findings from the work in Afghanistan and Pakistan, outlined below.


Afghanistan

The work in Afghanistan has been very interesting, and shows a different set of challenges than those of the other three countries. Key informants provided evidence about the importance of the institutional environment for agribusiness and nutrition in Afghanistan. Under current circumstances, the incentives underlying the private sector’s drive for viable and sustainable businesses do not match public objectives of food and nutrition security, or public health and safety. We were told that the public sector must invest:

1. ‘The private sector has an important role. The majority of problems we face right now are because of the lack of a private sector. Recently several NGOs gave support to these private businesses and somehow these businesses improved but, because there was no support from the government side, again these businesses collapsed. If we can improve our private sector it will have a positive impact on the improvement of food security and nutrition.

2. Afghanistan needs public investment in physical and institutional infrastructure. National trade policies for agribusiness will address many current problems such as undue reliance on foreign imports; allegations of inadequate food safety controls; lack of national micronutrient fortification of foods; insecure physical access to food; and lack of agricultural incentives for farmers and food chain entrepreneurs.

3. The extreme geography, inadequate communications and logistics infrastructure and insecurity in Afghanistan mean that regional and national markets are not well articulated with local markets in more remote regions. Pro-nutrition interventions may be better targeted at the regional or provincial level rather than the national level: but we have not been able to test the markets for local entrepreneurship outside the framework of value chain interventions by non-governmental organisations.

4. Afghanistan is also a case where acute gaps in availability and affordability of nutrient-dense foods can be reduced through public sector and international humanitarian food distribution interventions. High costs and prices which cause chronic situations of low availability and affordability and hence demand for nutrient-dense foods among the poorest can be addressed by subsidized public distribution through institutions such as schools and clinics, and by direct cash transfers – but depends on resources and equitable distribution systems that are not present at this stage.


Pakistan

The economy of Pakistan is much bigger and more developed than in Afghanistan, although some of the conditions of fragmentation and insecurity prevail. It is evident that the Base of the Pyramid (BoP) is less attractive than higher margin markets that can be more easily reached by existing distribution systems. The dairy sector is one in which business innovation has occurred in response to the market conditions of consumer demand. In the business-driven dairy sector in Pakistan market research for new products at the BoP has led to the introduction of low-cost and non-nutritious alternatives to unprocessed milk. Non-dairy creamers have begun to replace genuine dairy products in one of the principal uses of milk: addition to tea.

By contrast, in the wheat flour fortification value chain, which is driven by public funding, there has been relatively little attention to consumer behaviour, leading to issues with targeting and uptake. Challenges for national coverage of food fortification include linking with the traditional small-scale private sector grain milling and distribution enterprises: as in Afghanistan, the poor linkages between modern and traditional food systems must be overcome.

There are three lessons from our Pakistan case studies:

1. Any intervention must have a clear and specific commitment to nutrition. Such a commitment can be elicited through incentives and/or regulation. It does need to be enforced, so we can reiterate the importance the public sector in creating a pro-nutrition, pro-health enabling business environment. Business development requires pro-nutrition regulation.

2. There needs to be greater attention to consumer behaviour and preferences. This is an area in which the private sector enjoys a clear advantage over the public sector, and this element of its advantage needs to be leveraged.

3. Modern business models are not always the most competitive in developing countries. There is a host of institutional factors which keep informal and small-scale businesses competitive. Care needs to be taken that public investment through modern business organisations (even if they are couched in pro-nutrition terms) are not being utilised to simply take market share from the more competitive informal and small-scale producers and service providers. So, public sector intervention in market facilitation and regulation matters; public investment in enterprise that is in competition with a vibrant small-firm economy is likely to be unsustainable.

Based on our case studies in Pakistan, we feel that such private and public sector alliances (via PPPs or other models) and are not really making significant contributions to ending undernutrition. However, examples of public-private partnership in delivering nutritious foods to poor people has been shown to work in India. Overall, the findings clearly suggest that, for any intervention to be successful on this, they must have a clear and specific commitment to nutrition. Such a commitment can be elicited through incentives and/or regulation. Institutions for enforcement are essential.

Overall we are seeing that market-based solutions alone are not sufficient. Building effective linkages between food value chains and nutrition requires initiatives on multiple fronts. Once the set of cases is published it will enable us to identify the circumstances where market solutions are likely to be more effective, how they might be improved, with an equally sound understanding of the limitations of market-based solutions and the need to complement these with other approaches to reducing undernutrition.

*An earlier version of this blog was originally published on The Practitioner Hub for Inclusive Business

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