Value Chain Introduction

1. Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH Module 1 Value Chains for poverty alleviation Presentation 1.1 Value Chains and Pro-poor Growth - an introduction Andreas Springer-Heinze / Michael Schultze

2. 10.06.09 The specifics of the VC approach Differences between subsectors in terms of PPG potential ? VC approach and pro-poor growth Value Chains & Pro-poor growth 3 1 Contents 4 Choosing a product / a VC to invest in 2

4. 10.06.09 Value Chain: Visualization as “map” 1 Categories of actors in value chains and their relations Specific Input providers Primary producers Traders Final Con- sumers Logistics centres, Industry Specific Inputs Provide - equipment - inputs Production Grow, harvest Produce the primary stage etc. Trans- formation Classify Process Pack Trade Transport Distribute Sell Con- sumption Prepare Consume Basic functions

5. 10.06.09 VC – the institutional side of markets 1 Institutional factors in market-led development Networks and contractual arrangements along the VC, Trust & Reputation, Market transaction costs Collective interests of VC participants Joint marketing, common export interests Forward and backward linkages Market institutions Infrastructure, Information, Services, Market finance, contractual security, Standards

6. 10.06.09 Increasing Significance of VC in world markets 1 Globalization of Value Chains Asian producers integrated as suppliers into GVC, but still in a junior position Mounting quality requirements VC are an instrument of quality management Increasingly integrated VC As VC organization is a competition factor, costs can be reduced through better logistics

9. 10.06.09 Combining the sectoral and the spatial approach to economic development 1 Entry point in particular markets … activating the growth potential of a product -> Value chain promotion Entry point at particular locations … activating the growth potential of the location -> Local/ Rural Economic Development

11. 10.06.09 The specifics of the VC approach Differences between subsectors in terms of PPG potential ? VC and pro-poor growth Value Chains & Pro-poor growth 3 1 Contents 4 Choosing a product / a VC to invest in 2

12. 10.06.09 What is “pro-poor growth” ? Growth is pro-poor , when the income of the poorest (e.g. of the lowest quintile) increases more than the average income. PPG stresses the need to make the poor participate directly in the economic growth, and does not rely on „ trickle down “ processes or social transfers A generic definition: 2

13. 10.06.09 Two dimensions of pro-poor growth “ Pro-poor growth” = greater employment and income of poor people Economic growth = greater volume sold, higher value products (“the cake grows”) Poverty alleviation = the poor benefit at least equally or above average from the income generated (poor get their “share of the cake”) 2

15. 10.06.09 The specifics of the VC approach Differences between subsectors in terms of PPG potential ? VC and pro-poor growth Value Chains & Pro-poor growth 3 1 Contents 4 Choosing a product / a VC to invest in 2

17. 10.06.09 Exploring the PP Growth opportunities Traditional (domestic) agricultural markets 3 Traditional export commodities (?) High-value food products Non-traditional export products Agric. products for regional markets

21. 10.06.09 Assessing the growth potential Lead Questions: At what cost can the product be supplied to the consumer? What are the prospects for demand growth? Are traders willing to buy more of the product? 3

22. 10.06.09 Assessing the pro-poor potential Lead Questions: How many producers are currently involved? Does the product require large scale of production? Does the product require major capital investment? Does production and marketing require additional services that can be provided locally? 3

25. 10.06.09 The specifics of the VC approach Differences between subsectors in terms of PPG potential ? VC and pro-poor growth Value Chains & Pro-poor growth 3 1 Contents 4 Choosing a product / a VC to invest in 2

26. 10.06.09 Choosing a subsector to invest in The choice of products includes to: 4 Assess the actual growth potential. Anticipate/ judge the distribution of the additional income across different groups in society Consider the resources available for chain promotion (time, money, know-how) Identify promising opportunities for partnership