Agribusiness
Agribusiness is an integral component of rural development, and forms part of a strategy to improve regional economic development and ensure a safe food supply. Agribusiness may be defined as all market and private business-oriented entities involved in the production, storage, processing, and distribution of agro-based products; in the supply of production inputs; and in the provision of services, such as extension, research, finance, and agricultural policies.
Agribusiness enterprises in developing countries are mostly labour-intensive small and medium enterprises located near agricultural production sites in rural areas or in rural centers. While transition processes from subsistence-oriented to market-oriented agriculture are extending, economic success of those agricultural enterprises is increasingly determined by the perfomance and capacity of upstream and downstream sectors. After all, profound changes in the economies of almost all developing and reform countries such as market liberalisation have led to increasing levels of international competition in local markets in recent years. Strong market protection measures and parastatal produce-purchasing programs have been abandoned. Agribusiness entities need to respond to this by improving their efficiency and market orientation but rural entrepreneurs' experiences and skills are often limited with regard to market needs and consumer preferences. What is lacking is access to international expertise, the availability of market information, and sufficient management skills.
Agribusiness support considers itself to be an integral part of a country's economic development concept, and is targeted towards the creation of jobs and income in mainly rural areas. In line with a common business concept, the guiding principle is always the market orientation of all support activities.
In line with the expected increasing competition for jobs in the primary agricultural sector, combined with a growing rural population, the creation of non-farm jobs represents a key future challenge. In many rural areas the agricultural service and trade sectors are often the only alternatives that offer such job opportunities. In the absence of governmental trade monopolies and the declining importance of governmental provision of agricultural services, the prospects for new business opportunities seeking to fill the vacuum appear promising. However, these opportunities need to be further exploited. Population growth, for example, is still very high in many developing countries, and continued rural migration is resulting in so-called megacities with huge urban populations. On the one hand, the food supply will continue to present a challenge for national agribusiness entities, while on the other hand, promises to offer fairly reliable job opportunities in the future.
Some aspects are common to all business support strategies, such as:
their focus on the abilities and capabilities of entrepreneurs of small and medium-sized business entities in the agricultural and food sectors,
the centrality of the agricultural and food sector in at least a defined region, if not the entire country, according to the decision-makers; and that this is an integral part of national economic development, not merely a transitional stage towards industrialization.
Employment promotion and poverty alleviation in rural areas are additional purpose of promoting agribusiness. Many agribusiness enterprises are known to be very labour-intensive. Not only does primary production require additional workers, but new jobs are also created in the processing industry, and especially in the service sector. With public financial support for agricultural services now redundant, the private sector faces an additional challenge - not purely in terms of filling the service vacuum, but also in finding clients who are willing and able to pay for these services.
The establishment and support of a service system for agribusiness development in a very weak financial environment remains difficult. So far there have been few examples of successfully implemented strategies in extremely poor developing countries. It appears that for a private agribusiness service sector to develop, the general environment needs to be supportive and to a certain extent sufficiently advanced to meet the prerequisites of positive development.
Support of agribusiness has never been an exclusive concept for developing countries. Many developed countries are currently implementing very innovative agribusiness support programmes in poorer regions with agricultural potential in order to generate economic development. Here some useful hints and experiences can be gained regarding the use of new information technologies or in improving framework conditions.
Experience shows that there are some areas that offer particularly high potentials for successful promotion of the agribusiness sector. These so-called intervention points include:
Product quality and trade
Management of agribusiness-related support services
Development and management of market infrastucture
Management of food chains
Voluntary organisations and cooperation in production and marketing
PPP as promoted by GTZ, in the form of partnerships between companies based in Germany and agribusiness enterprises in developing or transition countries, presents yet another successful intervention point. Lessons learnt in agribusiness PPP projects underline the importance of market orientation and quality standards as intervention points for support strategies. New concepts in agribusiness PPP, for example in the cocoa sector, aim at forging so-called strategic alliances between international development agencies, private enterprises or their associations as well as public and civil society organisations in producer and consumer countries with the aim of realising issues of both public and private interest such as: market growth for cocoa and chocolate products, ensuring sufficient raw material supply, ensuring the application of social, ecological and quality standards etc.
Here, you will get more detailed information on agribusiness and its promotion. This website also offers strategies for agribusiness development based on scenarios depicting different realities from developing and NIC countries. In addition, you will find an introduction to supply chain analysis, an instrument used in the development agricultural supply chains.
More of Agribusiness: Services in the Agricultural Sector
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