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  • World Export Development Forum 2011

    Private sector engagement with ldcs for tourism-led growth and inclusive sustainable development

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    The tourism industry has huge potential as a market for agro-industry producers in least developed countries (LDCs) in African and elsewhere. However, the evidence suggests that very few agro-industries in Africa, especially in the horticulture subsector, are currently integrated into the supply/value chains serving local and regional hotel, restaurant and supermarket companies. Governments in LDCs are working hard to connect small-scale farmers producing fresh fruit and vegetables to commercial agro-industry operations led by multinational corporations (MNCs) and serving the ever-growing tourism industry. This requires developing business models to link these farmers to tourism businesses that create shared value along the supply/value chain: generating incomes and making profits for all involved.

    The objective of the workshop on integrating horticulture in the tourism supply chain was to discuss successful methods that are being used in countries to tackle this problem and identify the best solutions for LDCs. Tanzania was used as a case study to identify ways to establish supply chains that could achieve significant horticulture-tourism integration. The workshop brought together the key business leaders and stakeholders dealing with these issues: growers, intermediaries, processors and hotel operators.

    Mr. Felix Mosha, Chairman of the Horticulture Development Board in Tanzania, said that tourism has overtaken agriculture as the number one sector in Tanzania and is currently the fastest growing sector in the country. Paradoxically the country often has to import horticultural products from other countries while their own horticultural products end up as waste if not sold at markets. The government is investing heavily to increase the share of the market the horticultural sector represents from 10% to 20%. In order to lift smallholder farmers from poverty, backward linkages need to be created between tourism and horticulture. This is to be done by institutional capacity building and by coordination between the two, which are currently working in isolation. The government has to be involved and promote these backward linkages instead of just tourism.

    From the industry side there were comments that experience with local farmers showed that maintaining quality, supply and variety was a challenge. Despite several attempts to encourage local farmers to better their quality, variety, etc., hotels ended up having to import products. The conclusion was that it is not cost-effective to work directly with local farmers and therefore co-operatives and hubs should be established to supply farmers with basic needs such as finance and technical support. Smallholder farmers need to be helped and guided in starting co-operatives.

    The main conclusions of the workshop were:

    1. Experiences from around the world, for example, Colombia and Turkey, indicate that it is possible but by no means easy to establish viable value chains stretching from small-scale commercial farmers to the hospitality industry. Experience also indicates that there is no one model that fits all and that establishing viable, predictable and reliable value chain systems is a process that takes time (years) to accomplish.
    2. All stakeholders have to be involved from the beginning of the project’s formulation as it requires long-term (multi-year) commitment and related agreement on the ‘game rules’ from all sides: buyers, suppliers and intermediaries. The project must start with understanding of the market/demand, and subsequently discuss strategies to meet this demand.
    3. Being able to supply the international hospitality industry does not only provide a market opportunity but also serves as a quality assurance stamp, also potentially allowing producers to supply other demanding (international) market segments.
    4. Intermediaries (consolidators) are needed to mitigate the risks involved in the value chain (fluctuations in supply, quality assurance, losses due to poor transport and storage, etc. (making prices non-competitive), pooling of produce from several small sources, etc.). However, involving a consolidator is itself not without risk as middlemen also have profit motives and might squeeze the farmers while demanding high prices from hotels. These consolidators can be individual commercial companies but also, for example, an arm of a farmers’ co-operative, or part of an association.
    5. Quality and consistency (in addition to competitive prices) are key parameters for the hospitality industry. The intermediary has to meet those demands and hence must overcome issues related to seasonality, quality, variety, regionality of where one can grow what, etc.
    6. Not all international hotel client groups have the same demands, so the client base of individual hotels will impact upon what will be demanded by a specific hotel. The appreciation of local produce means more to some client groups than others.
    7. A public-private partnership is typically needed to facilitate the development of viable value chains stretching from small farmers to the international hospitality industry and to overcome related challenges, for example in relation to infrastructure (lack of cooling hubs where produce can be stored and distributed), extension services to farmers, facilitation of credit/trade finance provisions, relevant supportive legislation, etc.
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