Summary of the VCA4D webinar: Covid-19: new challenge or new opportunity to enhance sustainability of agricultural and fisheries value chains in EU partner countries?

In November 2020, Agrinatura organised a webinar entitled “Covid-19: new challenge or new opportunity to enhance sustainability of agricultural and fisheries value chains in EU partner countries?”.  It was organised within the framework of the Value Chain Analysis for Development (VCA4D) programme, which is funded by the European Union (EU). The VCA4D programme involves carrying out analyses of priority value chains in EU-partner countries in order to assess their sustainability and inclusiveness from social, economic and environmental perspectives. 

Attended by more than 100 participants, the event was an opportunity for reflection and dialogue between experts involved in the VCA4D studies and policymakers on disruptions which occurred in various value chains (VCs) as a result of the first wave of the COVID-19 pandemic. Also discussed during the webinar were the pathways of adaptation and their effectiveness. As the health crisis was unfolding, the webinar was a first attempt at identifying emerging impacts and issues for future research. It is acknowledged, however, that hard facts and quantitative data to corroborate some of the perceptions and hypotheses presented by the experts is missing but it is expected that this will come with time.

Key findings from case studies presented:

The experts presented evidence from 10 case studies from Africa and South America. It is evident from these cases that the effects of as well as responses to the pandemic differed across VCs and countries. The following are the key observations which emerged from the case studies:

The experts were unanimous in their conclusion that underlying vulnerabilities in all the VCs were structural and existed prior to the pandemic. COVID-19 only made these vulnerabilities more visible and, in some cases, further contributed to worsening constraints in the VC. There were a few cases where incidence of the pandemic brought about improvements which benefited some actors. VCs which were deemed sustainable and inclusive seemed to cope better during the pandemic and the subsequent disruption.

Export-oriented VCs or sub-chains, such as pineapple in Togo or cotton in Ethiopia, seem to have suffered more than the those targeting the domestic market. Nevertheless, this is not a systematic trend as, for example, the export-oriented cocoa VC in Ecuador even managed to gain access to more markets. On the flip side, offtake of sorghum grains by the domestic-oriented industrial brewery in Ghana dropped significantly, by about 40%.

VC producing processed products (e.g. industrial sorghum beer in Ghana, fruit juice for the national market in Togo, yogurt production in Colombia, etc.) did not seem to have coped well during the Covid-19 crisis. Indeed, their overall contribution to national GDP decreased partly because the formal processors lost market share as the purchasing power of consumers fell and they switched to cheaper artisanal products.

Some effects of the crisis are delayed and will only show with time. For example, smallholder farmers in some staple crops experienced difficulties accessing farm inputs in 2020. This is likely to cause a decrease in production in the coming year (e.g. maize value chains in Zambia and Nigeria). On the contrary, some of the effects were immediate including limited availability of agricultural labour force for planting, harvesting and processing (e.g. Maize in Nigeria, Coffee in Angola and Cacao in Ecuador). This may cause decline in yields as the needed crop husbandry activities may not have been undertaken on time. These impacts need to be monitored because of immediate as well as longer-term implications such as social sustainability.

Value chains in which governments in countries such as in Colombia and Ecuador and/or producers’ organisations (in Ecuador) in which governments proactively intervened, coped better than those that did not benefit from any specific support, as was the case, for example, in the fisheries VC in The Gambia. More fragile value chains, where a consistent portion of actors are vulnerable and live in subsistence (e.g. fisheries VC in The Gambia), suffered more from the crisis, compared to those where efforts were made in the past (before the Covid-19 crisis) to improve performance, such as in the cocoa value chain in Ecuador where investments and innovative systems had been implemented.

There is no real evidence on whether rural markets have been impacted less than the urban ones by the pandemic. It also emerged that some value chain actors adapted to changing market dynamics. For instance, pineapple exporters in Togo diversified their sales towards local and/or sub-regional (neighbouring) markets. This often happened through some forms of collective action/marketing with the support of the producers’ organisations.

Finally, the less resilient producers struggled to reorient their production towards market segments which were less affected by the pandemic. Producers who depend on only one outlet, especially a formal/industrial market for the sale of their produce were particularly vulnerable. Such cases include Ghana Sorghum and Zambia Maize.

The policymakers’ insights:

Catharina Bamps (EU Delegation to Angola) and Katrine Mulvad Thomsen (EU Delegation to Nigeria) talked about their concerns regarding the impacts of the COVID crisis as well as the main responses by the partner governments and the actions by EU Delegations to back them up. The highlights are reported below.  

In Angola, the government concentrated on structural changes to overcome the financial and macroeconomic crisis caused by the drop in global oil prices resulting in part from the COVID-19 crisis.  The government was supported by the IMF and the EU. In the coffee VC a fairer price for farmers was negotiated, which is in line with recommendations in the Coffee VCA4D study.

Ms Thomsen reflected on the risk that food and nutrition security could be given a lower priority compared to the COVID-related health issues. The Government of Nigeria implemented short-term measures grain supply shocks, especially in urban markets. This includes approval of importation of 262,000 tonnes of maize in October 2020 and the release of 30,000 tonnes of maize from its national food reserves. At the same time that this happened, there were reports that some grain producers were struggling to market their crop due to disruptions resulting from COVID and a pre-pandemic imposition of restrictions on grain exports. The World Food Programme (WFP) also implemented a “Cash and Food Assistance” action to address short-term food supply and price shocks. However, Ms Thomsen stressed that structural reforms are needed to ensure better and more effective reactions to crises of this nature (i.e. COVID). Actions needed include agricultural trade policy reforms as well as institutional innovations to improve inputs supply and enhance access to agricultural finance and an efficient output marketing system. 

Finally, Guy Faure from INTPA F3 highlighted the importance of the recovery measures to be aligned to the EU Green Deal, as that offers a pathway to more sustainable food production both in EU and partner countries as well as ensuring a speedy and stable green recovery. On food-systems, the EU aims to reduce the use of chemicals inputs for agricultural production, promote a circular economy and short-circuit value chains, improve the affordability of quality food, and promote animal health. According to Mr Faure, VCA4D studies which analyse the value chain from an economic, social and environmental point of view provide a valuable picture of the VC, and such studies are a powerful tool to help decisionmakers in taking steps towards a greener agriculture, especially as the cooperation for the period 2021-2027 is currently being programmed.

Points of discussion

Panellists and participants agreed that the contraction of the world economy due to the pandemic and the reductions of oil receipts will have a long-lasting impact over markets and growth dynamics, particularly of the more international value chains. In response, actors may have to diversify the markets into which their products are sold, including scaling up sales into local and subregional markets. According to some participants, this trend could decrease the negative environmental impacts of high “food miles” (e.g. less emissions, less consumption of non-renewable energy, etc.). It is also likely to open a window of opportunity to build new, more sustainable trajectories of value chains’ development, challenging the dominant role (and narrative) of export-oriented chains and markets. Indeed, the diversification of markets can be an important risk management strategy, but the viability of solutions needs to be better investigated to understand, notably, the effective absorption capacity of local and subregional markets.

For “traditional” export commodities such as cocoa, coffee, tea and cotton, domestic markets tend to be rather small relative to the global markets (on average about 5-10%). Hence, the scale of diversification is likely to be limited. For perishables (e.g. fruits and horticultural products), the preferred target tends to be the premium, export market. However, actors in such agricultural export value chains tend to cope better with decline in global demand and/or logistic challenges if they diversify. This is because the domestic market is able to absorb some produce intended for export, thereby cushioning the impact of disruptions triggered, for example, by the pandemic. More evidence validating this strategy needs to be garnered and shared.

Beyond this, some experts also stressed the importance of avoiding stigmatising export-oriented chains because they remain strategic for many countries. The development of such VCs should therefore not be neglected while continuing at the same time to invest on the valorisation of local food systems.

Another discussion point was on the market viability for value chain products that adhere to international food standards (e.g. organic and fair-trade standards). Some panellists argued that niche organic and fair fair-trade markets seemed to be less vulnerable the COVID crisis than the conventional markets. Other participants however argued that access to such markets by smallholder farmers may be restricted because of the need for technical support, input provision and auditing for producers. During COVID, all these activities became more difficult to access due to movement restrictions. Furthermore, even if demand for such products remains stable, producers may encounter other difficulties, especially due to the rather long logistics chain (linking production areas to more affluent Western markets).

The audience also stressed that the causal pathways connected to Covid-19 disruptions are complex and should be properly modelled. This should include assessing the potential negative environmental effects resulting from farmers responding to labour shortages by adopting a more intensive use of inorganic inputs (e.g. for weed control). Experts urged robust assessment of environmental and social impacts.

Conclusions and recommendations:

Overall, it was recognized that governments prioritised the health risks associated with the pandemic and justifiably so. However, attention needs to be paid to non-health impacts, including general economic contraction, food and nutrition insecurity as well as rising income uncertainty among the poor and those whose livelihoods depend on agriculture and the informal economy. Whether agricultural value chains are prioritised in carrying out the needed reforms will depend on the evidence generated on impacts as well as feasible solutions.

The type of economic disruptions and VC actors affected by the crisis, differ across countries and VCs. Winners and losers vary as, for example, exporters in export-oriented VCs may have faced problems in accessing airfreight for perishables, aggregating stocks from remote locations and getting labour for processing. Some of them may have been compelled to use alternative shipping routes and/or shifted sales into local and subregional markets, a process which entails uncertainty and costs. Domestic consumers may have suffered from rising prices, especially for staple food crops, though some may also have benefitted from an increase in local sales of products which could not be exported. In some VCs the Covid-19 restrictions triggered innovations in marketing including increased use of digital platforms. New businesses and/or markets also emerged, for example, for Personal Protection Equipment such as masks, sanitizers etc.

The social effects which were noted include high levels of job losses, especially in the informal sector in urban areas. There was a worsening in farmers’ living conditions as rural household incomes declined and a drop in domestic and foreign remittances occurred. The consequent welfare implications of these developments include increased inequalities and a rise in food and nutrition insecurity. These effects seem evident in both export and domestic VCs.

As far as the environment is concerned, the impacts appear rather speculative. In most cases it is suspected that there were no significant adverse environmental impacts but rather unintended positive effects due, for instance, reduction in vehicular traffic and associated emissions. It is likely, however, that the lack of inputs and access to labour, may have adverse impacts on yields and productivity in the medium term.

Keeping in mind the diversity of reactions to the COVID-19 crisis, experts provided some general recommendations. They suggested support to promote diversification of production by smallholder farmers and the review of government support programmes which focus exclusively on export crops and/or major grain staples.  The pursuit of markets diversification for export commodities should also be supported and strong and independent farmers organisations promoted. Bailouts in the form of ineffective input credit schemes need to be reviewed; and collaboration between governments and the private sector should be pursued so that joint programmes can be implemented to address the long-term structural constraints and vulnerabilities in the VCs. There is also the need for awareness campaigns and preparedness against the possibility of future outbreaks.

The main message behind these recommendations is that an opportunity is there to push for political will to solve evident structural problems. It is evident that this sudden and rather widespread crisis created real challenges for VC actors and policymakers. The crisis has, however, revealed deep-seated problems in VCs represents an opportunity policymakers and researchers to rethink and/or renew strategies which can turn around the performance of agricultural VCs, ensuring sustainable and inclusive growth and development. 

Further research is needed to answer to the many open questions, including in particular assessment of the impacts of the following: the COVID-19 pandemic across different socioeconomic categories (with disaggregated data); the reduction in remittances from emigrated workers on the diets in the recipient populations; and the lack of manpower on farm yields for the next harvesting seasons. More research is needed to quantify, analyse and understand the positive or negative impacts as well as coping strategies in order to come out with evidence-based recommendations for policymakers and investors. The webinar can be considered as a good first step in that direction.

Another point is that data matters for a fact-based and transparent government and EU action. The topic confirmed the value of the VCA4D initiative and approach. Analysing the extent to which a VC is viable, inclusive and sustainable, has demonstrable benefits in feeding into long-term development strategies, but it has also been shown to be useful in understanding how actors can cope with adversity.

To conclude, the COVID-19 pandemic, despite its severe adverse impacts, offers an opportunity to revamp dialogue between policymakers and the private sector, with the support of research, to take joint actions which enhance the sustainability and inclusiveness of agri-food value chains. This fits in well with the European Green Deal, the top EU priority, which offers a way forward and a roadmap for the promotion of a truly green, resilient and innovative recovery in the EU and its partner countries.

For more information on the VCA4D please feel free to contact us at: vca4d@agrinatura-eu.eu