STAPLE FOODS VALUE CHAIN ANALYSIS COUNTRY REPORT - ZAMBIA January 2009 This publication was produced for review by the United States Agency for International Development. It was prepared by Chemonics International Inc. The author’s views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government. ACRONYMS AND ABBREVIATIONS ACF Agricultural Consultative Forum ACT Competitiveness and Trade Activity AGCI African Growth and Competitiveness Initiative AGOA African Growth and Opportunities Act BOZ Bank of Zambia CAADP Comprehensive Africa Agriculture Development Programme CEE Citizens Economic Empowerment CEEC Citizens Economic Empowerment Commission CF Conservation Farming CFU Conservation Farming Unit COMACO Community Market for Conservation COMESA Common Market of Eastern and Southern Africa CPI Cost Price Index CSO Central Statistics Office DMMU Disaster Management and Mitigation Unit DNA Deoxyribonucleic Acid DRC Democratic Republic of Congo EAC East African Community ECZ Environmental Council of Zambia FAO Food and Agriculture Organisation FBS Food Balance Sheet FEWSNET Famine Early Warning Systems Network FISP Farmer Input Support Programme FNDP Fifth National Development Plan FoB Free on Board FRA Food Reserve Agency FSP Fertiliser Support Programme STAPLE FOOD VALUE CHAIN ANALYSIS – ZAMBIA iii FSRP Food Security Research Project GART Golden Valley Research Trust GDP Gross Domestic Product GFRS Global Food Security Response GMO Genetically Modified Organism GTAZ Grain Traders‟ Association Ha Hectare IEHIA Initiative to End Hunger in Africa Kg Kilogramme LUSE Lusaka Stock Exchange MACO Ministry of Agriculture and Cooperatives MAZ Millers‟ Association of Zambia MCTI Ministry of Trade Commerce and Industry MFN Most Favoured Nation MMD Movement for Multiparty Democracy MOU Memorandum of Understanding Mt Metric tons (Tonne) NAMBOARD National Agricultural Marketing Board NAPSA National Pension Scheme Authority NEWU National Early Warning Unit NFBS National Food Balance Sheet NGO Non-Governmental Organisation NMC National Milling Company PAM Programme Against Malnutrition PHS Post Harvest Survey PQPS Plant Quarantine and Phytosanitary Services R Rand REWU Regional Early Warning Unit STAPLE FOOD VALUE CHAIN ANALYSIS – ZAMBIA iv RSA Republic of South Africa SADC Southern Africa Development Community SAFEX South African Futures Exchange SAGIS South African Grain Information Service SCCI Seed Control and Certification Institute SI Statutory Instrument SMS Short Message Service SPS Sanitary and Phytosanitary UNZA University of Zambia VAT Value Added Tax WFP World Food Programme WRS Warehouse Receipt System WTO World Trade Organisation ZABS Zambia Bureau of Standards ZAMACE Zambia Agricultural Commodity Exchange ZANACO Zambia National Commercial Bank ZARI Zambia Agricultural Research Institute ZEGA Zambia Export Growers Association ZESCO Zambia Electricity Supply Company ZNFU Zambia National Farmers‟ Union STAPLE FOOD VALUE CHAIN ANALYSIS – ZAMBIA v Contents ACRONYMS AND ABBREVIATIONS ................................................................................................... III LIST OF FIGURES ......................................................................................................................................... X LIST OF FIGURES ........................................................................................................................................ XI EXECUTIVE SUMMARY ............................................................................................................................. 1 1. INTRODUCTION ................................................................................................................................... 6 1.1. THE CONTEXT OF THE STUDY ...................................................................................................... 6 1.2. THE SIGNIFICANCE, OBJECTIVES AND SCOPE OF THE STUDY .................................... 6 1.3. THE METHODOLOGY USED IN THE STUDY ............................................................................ 7 1.4. STUDY LIMITATIONS ........................................................................................................................ 7 1.5. STRUCTURE OF THE REPORT ........................................................................................................ 8 PART ONE: THE ECONOMY ............................................................................................................... 9 2. AN OVERVIEW OF ZAMBIA’S ECONOMY ................................................................................ 9 3. THE STATUS OF THE AGRICULTURE SECTOR ................................................................... 10 3.1. THE SIGNIFICANCE OF THE AGRICULTURE SECTOR ..................................................... 10 3.2. DYNAMICS OF GROWTH OF THE SECTOR ............................................................................ 10 3.3. MAIN COMMODITIES PRODUCED ............................................................................................ 13 3.4. MAIN CHALLENGES AND CONSTRAINTS ............................................................................. 13 3.5. AGRICULTURE SECTOR POLICIES ........................................................................................... 15 PART TWO: VALUE CHAIN ANALYSIS FOR SELECT STAPLE COMMODITIES ............ 18 4. THE MAIZE SUB-SECTOR .............................................................................................................. 18 4.1. MAIZE PRODUCTION ...................................................................................................................... 18 4.1.1. Production ..................................................................................................................................................... 18 4.2. MAIZE CONSUMPTION ................................................................................................................... 20 4.2.1. Domestic Consumption Production vs. Consumption................................................................. 20 4.2.2. Maize Exports and Imports .................................................................................................................... 21 4.3. VALUE CHAIN MAPPING ...................................................................................................................... 22 4.4. CONSTRAINTS AND OPPORTUNITIES ................................................................................................. 25 4.4.1. End market analysis .................................................................................................................................. 25 4.4.2. Vertical linkages ......................................................................................................................................... 27 4.4.3. Horizontal linkages ................................................................................................................................... 28 4.4.4. Supporting markets/services .................................................................................................................. 29 4.5. QUANTITATIVE ANALYSIS ................................................................................................................... 30 5. WHEAT.................................................................................................................................................... 32 5.1. WHEAT PRODUCTION .................................................................................................................... 32 5.1.1. Production ..................................................................................................................................................... 33 5.2. WHEAT CONSUMPTION ................................................................................................................. 34 5.2.1. Domestic Production vs. Consumption ............................................................................................. 34 5.2.2. Wheat Imports.............................................................................................................................................. 35 5.3. VALUE CHAIN MAPPING ...................................................................................................................... 38 5.4. CONSTRAINTS AND OPPORTUNITIES .................................................................................................. 40 5.4.1. End market analysis .................................................................................................................................. 40 5.4.2. Vertical linkages ......................................................................................................................................... 42 5.4.3. Horizontal linkages ................................................................................................................................... 42 5.4.4. Supporting markets/services .................................................................................................................. 42 5.5. QUANTITATIVE ANALYSIS ................................................................................................................... 42 6. RICE ......................................................................................................................................................... 44 STAPLE FOOD VALUE CHAIN ANALYSIS – ZAMBIA vi 6.1. RICE PRODUCTION .......................................................................................................................... 44 6.1.1. Production ..................................................................................................................................................... 44 6.2. RICE CONSUMPTION ....................................................................................................................... 44 6.2.1. Domestic Production vs. Consumption ............................................................................................. 44 6.2.2. Rice Exports and Imports ....................................................................................................................... 45 6.3. CONSTRAINTS AND OPPORTUNITIES .................................................................................................. 48 6.3.1 End market analysis .................................................................................................................................. 48 6.3.2 Vertical linkages ......................................................................................................................................... 48 6.3.3 Horizontal linkages ................................................................................................................................... 49 6.3.4 Supporting markets/services .................................................................................................................. 49 6.4. QUANTITATIVE ANALYSIS ................................................................................................................... 49 7. SORGHUM ............................................................................................................................................. 52 7.1 SORGHUM PRODUCTION ..................................................................................................................... 52 7.1.1 Projections for the period 2009 – 2013 ............................................................................................ 52 7.1.2 SORGHUM CONSUMPTION .............................................................................................................. 53 7.1.3 Sorghum Exports and Imports .............................................................................................................. 54 7.1.4 Value Chain Mapping .............................................................................................................................. 54 7.2 CONSTRAINTS AND OPPORTUNITIES .................................................................................................. 55 7.2.1 End market analysis .................................................................................................................................. 55 7.3 QUANTITATIVE ANALYSIS ................................................................................................................... 57 8. MILLET ................................................................................................................................................... 58 8.1 MILLET PRODUCTION .................................................................................................................... 58 8.1.1 Projections for the period 2009 – 2013 ............................................................................................ 58 8.2 MILLET CONSUMPTION ................................................................................................................ 59 8.2.1 Domestic Production vs. Consumption ............................................................................................. 59 8.2.2 Millet Exports and Imports .................................................................................................................... 59 9. BEANS ...................................................................................................................................................... 60 9.1 BEANS PRODUCTION ...................................................................................................................... 60 9.1.1 Bean Exports and Imports ...................................................................................................................... 60 9.2 VALUE CHAIN MAPPING ...................................................................................................................... 61 9.2.1 Value Chain Map ....................................................................................................................................... 61 9.2.2 End market analysis .................................................................................................................................. 62 9.2.3 Vertical linkages ......................................................................................................................................... 62 9.2.4 Horizontal linkages ................................................................................................................................... 63 9.2.5 Supporting markets/services .................................................................................................................. 63 9.3 QUANTITATIVE ANALYSIS .................................................................................................................. 63 10. PULSES (PIGEON PEA, COW PEA, CHICK PEA) ............................................................... 64 10.1. PULSE PRODUCTION .................................................................................................................. 64 11. THE CASSAVA SUB-SECTOR .................................................................................................... 65 11.1 CASSAVA PRODUCTION ............................................................................................................... 65 11.1.1 Projections for the period 2009 – 2013 ............................................................................................ 66 11.2 CASSAVA CONSUMPTION ............................................................................................................ 67 11.2.1 Domestic Production vs. Consumption ............................................................................................. 67 11.2.2 CASSAVA Exports and Imports............................................................................................................ 68 11.3 CONSTRAINTS AND OPPORTUNITIES .................................................................................................. 68 11.4 MATRIX OF FUNCTIONS AND ACTORS ............................................................................................... 69 11.4.1 End market analysis .................................................................................................................................. 69 11.4.2 Vertical linkages ......................................................................................................................................... 70 11.4.3 Horizontal linkages ................................................................................................................................... 70 12. GROUNDNUTS ................................................................................................................................. 71 STAPLE FOOD VALUE CHAIN ANALYSIS – ZAMBIA vii 12.1 GROUNDNUT PRODUCTION ........................................................................................................ 71 12.2 GROUNDNUT CONSUMPTION .................................................................................................... 72 12.2.1 Domestic Production vs. Consumption ............................................................................................. 72 12.3 VALUE CHAIN MAP ............................................................................................................................... 72 12.4 CONSTRAINTS AND OPPORTUNITIES .................................................................................................. 73 12.4.1 End market analysis .................................................................................................................................. 73 12.4.2 The consumer price ................................................................................................................................... 73 12.4.3 End market characteristics .................................................................................................................... 73 12.5 VERTICAL LINKAGES ............................................................................................................................ 74 12.6 HORIZONTAL LINKAGES ....................................................................................................................... 74 12.7 SUPPORTING MARKETS/SERVICES ...................................................................................................... 74 12.8 QUANTITATIVE ANALYSIS ................................................................................................................... 74 PART THREE: THE BUSINESS ENABLING ENVIRONMENT FOR TRADE IN AGRICULTURAL COMMODITIES ....................................................................................................... 76 13. THE POLICY ENVIRONMENT .................................................................................................. 76 13.1 PRICING AND MARKETING POLICIES .................................................................................... 76 13.1.1 Role of Government in pricing and marketing of staple foods ................................................ 76 13.2 PRODUCTION AND POST HARVEST STORAGE FACILITIES .............................................................. 77 13.3 SUPPLY OF INPUT SERVICES ................................................................................................................ 78 13.4 ROLE OF THE PRIVATE SECTOR IN MARKETING OF STAPLE FOODS ............................................. 78 13.5 BUSINESS ENABLING ENVIRONMENT ................................................................................... 79 13.5.1 Tariffs .............................................................................................................................................................. 79 13.5.2 Tariff applicable on imports of staple foods from the region and outside the region ... 79 13.5.3 Concerns of traders on application of the tariffs when importing products from EAC, COMESA, SADC and Rest of the World. .............................................................................................................. 80 13.5.4 Views of stakeholders on whether the tariff applied on imports from third countries (EAC CET) is appropriate and if not their proposal of alternative tariff ............................................... 80 13.5.5 Non-Tariff Charges ................................................................................................................................... 83 13.5.6 Traders’ and regulatory authorities’ opinion on the effects of the non tariff charges .. 84 13.5.7 Recommendations to address the concerns ..................................................................................... 85 13.6 REGIONAL STRUCTURED TRADING SYSTEM PLATFORM ........................................... 85 13.6.1 The Food Balance Sheet .......................................................................................................................... 85 13.7 CONTENT OF THE NFBS ....................................................................................................................... 86 13.7.1 Procedure for construction of the food balance sheet ................................................................ 86 13.7.2 Role of the private sector (national consultative mechanism on food balance sheet) ... 87 13.7.3 Application of the food balance sheet as a policy tool ............................................................... 88 13.7.4 Dissemination of information on the food balance sheet .......................................................... 88 13.8 PERCEIVED NEED FOR A REGIONAL FOOD BALANCE SHEET ......................................................... 88 13.8.1 Appropriate mechanism for assembling regional food balance sheet ................................. 89 13.9 POLICY USE FOR THE REGIONAL FOOD BALANCE SHEET .............................................................. 89 13.10 WAREHOUSE RECEIPT SYSTEM ..................................................................................................... 89 13.11 THE COMMODITY EXCHANGE ........................................................................................................ 89 14. THE REGULATORY FRAMEWORK ....................................................................................... 91 14.1 CUSTOMS DOCUMENTATION AND CLEARING PROCEDURES ................................... 91 14.1.1 Customs documents and clearance procedures and release time .......................................... 91 Procedure for Exporting .............................................................................................................................................. 91 14.2 STANDARDS ........................................................................................................................................ 92 14.2.1 Standard specification .............................................................................................................................. 92 14.2.2 Application of the standards – for exports ...................................................................................... 93 14.2.3 Application of the standards – for imports ...................................................................................... 93 14.2.4 Challenges faced by ZABS in facilitating cross border trade ................................................. 94 STAPLE FOOD VALUE CHAIN ANALYSIS – ZAMBIA viii 14.2.5 ILLEGAL IMPORTS ................................................................................................................................. 94 14.2.6 Application of the standards – for Exports ...................................................................................... 94 15.2 SANITARY AND PHYTOSANITARY REQUIREMENTS ..................................................... 95 15.2.1 Sanitary and Phytosanitary Measures ............................................................................................... 95 16. TRADE (IMPORT AND EXPORT) RESTRICTIONS ........................................................... 97 16.1 SEASONAL EXPORT/IMPORT RESTRICTIONS .................................................................................... 97 16.2 VIEWS FROM FARMERS, TRADERS AND PROCESSORS ON THE IMPACT OF THE BAN ON INVESTMENTS, PRODUCTION AND TRADE. ..................................................................................................... 98 16.2.1 Seasonal Import restriction .................................................................................................................... 99 16.2.2 NON-TARIFF BARRIERS ....................................................................................................................100 PART FOUR: CONCLUSIONS, POLICY IMPLICATIONS AND RECOMMENDATIONS .......................................................................................................................................................................... 101 17. MAIN CONCLUSIONS ................................................................................................................ 101 18. POLICY IMPLICATIONS .......................................................................................................... 101 19. RECOMMENDATIONS .............................................................................................................. 103 ANNEXES ..................................................................................................................................................... 106 ACKNOWLEDGMENTS ......................................................................................................................... 141 STAPLE FOOD VALUE CHAIN ANALYSIS – ZAMBIA ix LIST OF FIGURES Table 1 Maize plantings, production and sales ___________________________________ 18 Table 2 Maize production vs consumption balance _______________________________ 28 Table 3 Zambian maize exports into the region __________________________________ 21 Table 4 Informal maize meal exports __________________________________________ 21 Table 5 Maize imports from the region ________________________________________ 22 Table 6 Informal maize import from the region __________________________________ 22 Table 7 Maize functions matrix ______________________________________________ 24 Table 8 Maize end-market characteristics ______________________________________ 25 Table 9 Maize Value Chain _________________________________________________ 39 Table 10 Wheat Planting, production and prices _________________________________ 33 Table 11 Wheat Production vs Consumption Balance _____________________________ 35 Table 12 Durum Wheat imports from the region _________________________________ 35 Table 13 Wheat imports excluding durum ______________________________________ 36 Table 14 Wheat flour imports from the region ___________________________________ 36 Table 15 Wheat flour exports to the region _____________________________________ 38 Table 16 Wheat functions matrix _____________________________________________ 38 Table 17 Wheat end-market characteristics _____________________________________ 40 Table 18 ZAMACE grades premiums for wheat _________________________________ 41 Table 19 Wheat Value Chain ________________________________________________ 43 Table 20 Rice planting production and prices ___________________________________ 44 Table 21 Rice Production vs Consumption balance _______________________________ 44 Table 22 Exports of rice in husk, milled or broken into the region____________________ 45 Table 23 Imports of rice into the region ________________________________________ 45 Table 24 Total Rice imports _________________________________________________ 46 Table 25 Rice functions matrix ______________________________________________ 47 Table 26 Value chain for rice ________________________________________________ 51 Table 27 Sorghum planting, production and prices _______________________________ 52 Table 28 Sorghum and Millet combined Production vs Consumption Balance __________ 53 Table 29 Sorghum imports from the region _____________________________________ 54 Table 30 Sorghum exports to the region _______________________________________ 63 Table 31 Sorghum matrix of functions _________________________________________ 54 Table 32 Sorghum End-market characteristics ___________________________________ 56 Table 33 Sorghum Value chain analysis _______________________________________ 57 Table 34 Millet planting, production and prices __________________________________ 58 Table 35 Beans plantings, production and prices _________________________________ 60 Table 36 Beans regional imports _____________________________________________ 70 Table 37 Beans value chain _________________________________________________ 71 Table 38 Beans value chain analysis __________________________________________ 73 Table 39 Cowpeas plantings, production and prices_______________________________ 64 Table 40 Cassava plantings, production and prices _______________________________ 66 Table 41 Cassava Flour Production vs Consumptions Balance ______________________ 67 Table 42 Cassava matrix of functions _________________________________________ 69 Table 43 Groundnuts plantings, production and prices ____________________________ 71 Table 44 Groundnuts imports ________________________________________________ 82 Table 45 Groundnut Value Chain_____________________________________________ 74 Table 46 Tariffs applicable to trade ___________________________________________ 79 Table 47 Import parity template ______________________________________________ 94 Table 48 Food balance sheet 2008/09 _________________________________________ 97 STAPLE FOOD VALUE CHAIN ANALYSIS – ZAMBIA x