Botswana agrifood value chain project: Beef value chain study

Click here to load reader

  • date post

    25-Jan-2022
  • Category

    Documents

  • view

    0
  • download

    0

Embed Size (px)

Transcript of Botswana agrifood value chain project: Beef value chain study

Botswana agrifood value chain project: Beef value chain studyBeef Value Chain Study
and
the Ministry of Agriculture, Botswana
The designations employed and the presentation of material in this publication do not imply
the expression of any opinion whatsoever on the part of the Food and Agriculture
Organization of the United Nations, or of the Ministry of Agriculture, Botswana, concerning
the legal status of any country, territory, city or area or of its authorities, or concerning the
delimitation of its frontiers or boundaries. The mention of specific companies or products of
manufacturers, whether or not these have been patented, does not imply that these have been
endorsed or recommended by FAO or the Ministry of Agriculture, Botswana, in preference to
others of a similar nature that are not mentioned. The views expressed herein are those of the
authors and do not necessarily represent those of FAO or the Ministry of Agriculture,
Botswana.
All rights reserved. FAO encourages the reproduction and dissemination of material in this
information product. Non-commercial uses will be authorized free of charge, upon request.
Reproduction for resale or other commercial purposes, including educational purposes, may
incur fees. Applications for permission to reproduce or disseminate FAO copyright materials
and all other queries on rights and licences, should be addressed by e-mail to
copyright@fao.org or to Chief, Publishing Group, Office of Communication, Partnerships and
Advocacy, FAO, Viale delle Terme di Caracalla, 00153 Rome, Italy.
© FAO and Ministry of Agriculture, Botswana 2013
All photos are copyrighted by the Ministry of Agriculture - Botswana, except for the hardveld
picture on the cover and pictures 5, 7, 11, 12, 15, 17, 22, and 25 which are copyrighted by
Neven, pictures 8 and 13 which are copyrighted by Van Engelen, and picture 10 which is
copyrighted by the Meat Board of Namibia. Cover pictures: cattle hoof prints in the hardveld
– bull and calves of Botswana’s Musi cattle breed.
Contact Information:
Viale delle Terme di Caracalla Agricultural Hub, Private Bag 003
00153, Rome, Italy Gaborone, Botswana
i
Acknowledgements ........................................................................................................................ viii
Value-chain approach ................................................................................................................... ix
The beef value chain in Botswana ................................................................................................ xi
Conclusion ................................................................................................................................. xvii
Acronyms ....................................................................................................................................... xix
2 Value-chain methodology ......................................................................................................... 2
3 Brief history and review of Botswana’s beef subsector .......................................................... 3
3.1 Pre-independence era ........................................................................................................... 3
3.2 Emergence of the Botswana Meat Commission, 1965–1983 .............................................. 5
3.3 The beef subsector in crisis and structural change in the economy ..................................... 6
3.4 Government response strategies .......................................................................................... 8
3.5 BMC response strategies ................................................................................................... 10
3.6 Disease management in Botswana’s beef subsector .......................................................... 12
3.7 Botswana’s beef subsector today ....................................................................................... 13
PART II Value-chain analysis .......................................................................................... 14
4 End markets for Botswana beef ............................................................................................. 14
4.1 Introduction ........................................................................................................................ 14
4.2.1 Current status ............................................................................................................... 14
4.2.2 Key trends .................................................................................................................... 16
4.3.1 Fresh and frozen beef .................................................................................................. 20
4.3.2 Other beef value-chain products .................................................................................. 22
4.3.3 Comparing Botswana to Namibia ............................................................................... 23
4.4 Markets outside sub-Saharan Africa .................................................................................. 25
4.4.1 European Union market ............................................................................................... 25
4.4.2 Other markets outside of Africa .................................................................................. 31
4.5 Sub-Saharan African markets ............................................................................................ 35
4.5.1 South Africa ................................................................................................................ 35
4.6 The domestic market .......................................................................................................... 39
4.7 Summary and conclusion ................................................................................................... 42
5 Value-chain map and channels ............................................................................................... 43
5.1 Value-chain map ................................................................................................................ 43
5.2 Various channels ................................................................................................................ 43
6 Production ................................................................................................................................ 48
6.1 Introduction ........................................................................................................................ 48
6.5.1 Farm-level analysis ..................................................................................................... 61
6.5.2 Feedlot-level analysis ................................................................................................. 69
7 Processing ................................................................................................................................ 75
7.1 Slaughtering ...................................................................................................................... 75
8 Distribution ............................................................................................................................. 83
9 Support services ...................................................................................................................... 86
9.1.2 Veterinary drugs ......................................................................................................... 88
9.2 Public veterinary services ................................................................................................. 89
9.2.1 Introduction ................................................................................................................ 89
9.2.4 Cattle movement and foot-and-mouth disease control ............................................... 94
9.2.5 Food-safety inspection ................................................................................................ 96
9.3 Finance and insurance ....................................................................................................... 98
9.3.1 Investment finance ...................................................................................................... 98
9.3.2 Working capital .......................................................................................................... 99
9.4 Transport ......................................................................................................................... 100
9.5 Extension ........................................................................................................................ 102
10 Policy issues ........................................................................................................................... 104
10.4 Rangeland and wildlife management .............................................................................. 109
11 Governance, margins and impact on smallholder farmers ............................................... 111
11.1 Governance mechanisms ................................................................................................ 111
11.2.1 Pricing ....................................................................................................................... 114
PART IV Strategic analysis and recommendations ........................................... 118
12 Vision for the subsector ........................................................................................................ 118
13 SWOT analysis ...................................................................................................................... 119
14.3 Slaughter level and the BMC ........................................................................................... 127
14.4 Processing level ............................................................................................................... 128
14.5 Market level ..................................................................................................................... 129
14.5.2 Other export markets ................................................................................................. 131
14.5.3 The domestic market ................................................................................................. 132
14.6 Support services level ...................................................................................................... 132
14.6.1 Input supply ............................................................................................................... 132
14.6.2 Veterinary services .................................................................................................... 133
14.6.4 Extension ................................................................................................................... 135
14.7.1 Restructuring of the beef subsector and the BMC ..................................................... 137
PART V Conclusions .......................................................................................................... 139
Annex 2 – Additional end-market information .......................................................................... 144
Annex 3 – VC mapping quantitative analysis details ................................................................. 152
Annex 4 – Domestic cattle price data by region ......................................................................... 154
Annex 5 – Profit and loss analysis background .......................................................................... 155
Annex 6 – Key informants ............................................................................................................ 167
Annex 7 – Botswana’s agro-ecological zones and crop suitability ............................................ 169
References ...................................................................................................................................... 172
iv
List of Figures Figure 1: Agriculture in Botswana's gross domestic product (GDP), 1960–2008 (in real terms) ...... 7
Figure 2: Global beef imports, 2003–2010....................................................................................... 17
Figure 3: BMC exports by country (share of value), 2010 ............................................................... 22
Figure 4: Botswana’s imports of processed beef products (US$ ‘000) ............................................ 23
Figure 5: Live bovine animal imports into Botswana (US$ ‘000) ................................................... 24
Figure 6: Namibia’s Meatco’s shifting customer profile ................................................................. 26
Figure 7: Imports of frozen beef into South Africa, 2003–2010 ...................................................... 36
Figure 8: Gross national income in sub-Saharan Africa, 2003–2009 ............................................... 37
Figure 9: Cattle slaughtered at municipal abattoirs, Botswana, 1984–2009 .................................... 41
Figure 10: Share of municipal abattoirs in total slaughters, Botswana, 1984–2009 ........................ 41
Figure 11: The Botswana beef value chain map, 2010 .................................................................... 44
Figure 12: Number of cattle in Botswana, 1995–2010 (thousands) ................................................. 49
Figure 13: Calving percentage and offtake and mortality rates for communal farms in
Botswana (%) .......................................................................................................................... 51
Figure 14: Calving percentage and offtake and mortality rates for large commercial farms in
Botswana (%) .......................................................................................................................... 51
Figure 15: Carcass weights for Botswana and selected beef exporters, 2000–2010 ........................ 57
Figure 16: Number of cattle slaughtered per quarter, Botswana, 2000–2009 .................................. 78
Figure 17: Aggregated commercial loans to the beef value chain in Botswana (in BWP) .............. 99
Figure 18: SWOT Analysis for the Botswana beef value chain ..................................................... 120
Figure 19: Strategic activity options for Botswana’s beef value chain .......................................... 122
List of Tables Table 1: Selected data on the top 30 net exporters of beef in 2010 .................................................. 15
Table 2: Predictions of world beef trade volume by country, 2011–2025 ....................................... 18
Table 3: Beef exports from Botswana by product type, 2001–2010 ................................................ 21
Table 4: Export of frozen and chilled bone-in and boneless beef cuts from Botswana by
destination market, 2005 and 2010 .......................................................................................... 21
Table 5: A comparison between beef exports from Botswana and Namibia ................................... 24
Table 6: Forecast net trade in beef and veal, Europe, 2011–2020 .................................................... 27
Table 7: Selected data on the import of boneless beef cuts by EU countries, 2010 ......................... 27
Table 8: Sources of EU imports of beef and live cattle, 2006–2009 ................................................ 30
Table 9: Trade data for importers of boneless bovine cuts in non-EU Europe ................................ 31
Table 10: Trade data for importers of boneless beef cuts in North Africa and the Middle East ..... 32
Table 11: Forecast net trade in beef, Russia, 2011–2020 ................................................................. 33
Table 12: Beef import quotas set by Russia, 2008–2012 ................................................................. 33
Table 13: Forecast net trade in beef, South Africa, 2011–2025 ....................................................... 35
Table 14: Main sub-Saharan African imports of frozen boneless cuts by country, 2010 ................ 38
Table 15: Selected beef and cattle prices in Botswana ..................................................................... 40
Table 16: Potential impact of improved production parameters in Botswana’s beef value chain ... 52
Table 17: Communal livestock holdings by region, Botswana, 2008 .............................................. 55
Table 18: Number of cattle passing through feedlots operated under the direct cattle purchase
scheme, Botswana, 2009–2011 ............................................................................................... 59
v
Table 21: Farm-level analysis, key management variables, Botswana ............................................ 64
Table 22: Live-weight assumptions for finished farm product (kg per head), Botswana ................ 64
Table 23: Total annual sales of livestock by management level, Botswana .................................... 65
Table 24: Live-weight price assumptions, Botswana ....................................................................... 65
Table 25: Farmer costs and profits from cattle production at current base prices, Botswana .......... 66
Table 26: Total costs, including government vaccinations, borehole development and value
of the standing herd, and profits from cattle production at current base prices ....................... 67
Table 27: Costs and returns from cattle production per unit at current prices, Botswana ................ 68
Table 28: Sensitivity analysis of previous price range, current and old prices, Botswana .............. 68
Table 29: Financial analysis of a commission-based feedlot, Botswana ......................................... 71
Table 30: Financial analysis of an independent feedlot (at base cost of feed), Botswana ............... 72
Table 31: Sensitivity analysis of an independent feedlot (required feed price to give target
profit of BWP150 per head), Botswana................................................................................... 73
Table 32: Financial analysis of small butchery, Botswana .............................................................. 82
Table 33: Cattle development goals in Botswana’s National Development Plan .......................... 105
Table 34: Summary of gross margins for selected value-chain activities, Botswana .................... 116
Table 35: Summary of net margins for selected value-chain activities, Botswana ........................ 116
Table 36: Selected data on the top 25 global exporters of frozen beef, 2010 ................................ 144
Table 37: Selected data on the top 25 global exporters of fresh/chilled beef, 2010 ....................... 145
Table 38: Selected data on the top 25 global net exporters of fresh/chilled beef, 2010 ................. 146
Table 39: Selected data on the top 25 global net exporters of frozen beef, 2010........................... 147
Table 40: Selected data on the top 25 global exporters of fresh boneless cuts, 2010 .................... 148
Table 41: Selected data on the top 25 global exporters of frozen boneless cuts, 2010 .................. 149
Table 42: Regular duties for EU beef imports ............................................................................... 151
Table 43: Average cattle prices in BWP/head by district/region, Botswana, 2007–2008 .............. 154
List of Pictures Picture 1: Borehole with pump ........................................................................................................... 4
Picture 2: Traditional well with pump ................................................................................................ 4
Picture 3: A cordon fence in Botswana .............................................................................................. 4
Picture 4: Cattle Herding in Botswana ............................................................................................... 5
Picture 5: ECCO beef and competing products.................................................................................. 8
Picture 7: Loading ramp for cattle ...................................................................................................... 9
Picture 8: Cattle wandering on communal land ............................................................................... 10
Picture 9: Cattle in a Feedlot ............................................................................................................ 11
Picture 10: Meatco products in Europe ............................................................................................ 26
Picture 11: Halal beef in a Botswana butchery ................................................................................ 42
Picture 12: Farmer making a purchase at a Livestock Advisory Centre .......................................... 47
Picture 13: Bull at a breeder ............................................................................................................. 53
Picture 14: Half carcasses at the BMC ............................................................................................. 57
Picture 15: A cattle lick sold in Botswana ....................................................................................... 62
Picture 16: View at feedlot operation ............................................................................................... 69
Picture 18: Small beef-processing operation .................................................................................... 77
Picture 19: Storage at a small processing operation ......................................................................... 77
Picture 20: Processing at the BMC ................................................................................................... 79
Picture 21: Small butchery in Botswana .......................................................................................... 84
Picture 22: Supermarket butchery in Gaborone, Botswana .............................................................. 85
Picture 24: Portable computer and scanner used in the Livestock Identification and
Trace-back System .................................................................................................................. 91
Picture 25: Boluses recovered at a slab butchery ............................................................................. 93
Picture 26: Foot-and-mouth disease checkpoint with dipping basin ................................................ 94
Picture 27: Cattle truck at a loading ramp ...................................................................................... 101
Picture 28: Buffaloes are carriers of foot-and-mouth disease ........................................................ 110
Picture 29: Competition at an auction facility ................................................................................ 112
List of Maps Map 1: Rainfall distribution in Botswana ........................................................................................ 49
Map 2: Potential grazing capacity in Botswana ............................................................................... 50
Map 3: Livestock zones in Botswana ............................................................................................... 95
Map 4: Map of the livestock advisory centres, Botswana .............................................................. 103
List of Boxes Box 1 - Bones and hides ................................................................................................................... 76
Box 2 - Impact of the use of licks .................................................................................................... 87
Box 3 – The cost of large-scale vaccination ..................................................................................... 90
Box 4 – Sales of cattle ear tags boom in Namibia ............................................................................ 92
vii
Preface Beef is the most important component of the agrifood sector in Botswana. It is an important foreign
exchange earner, has many linkages along the chain, and is a source of income for a large segment
of the country’s population. As such, the beef value chain is important in terms of food security.
But, despite its importance, the value chain has been facing a series of challenges that have
constrained its performance. Productivity has stagnated or decreased over the last decade. The
number of cattle entering the chain is constrained resulting in significant overcapacity in the
processing sector and consequently low profitability for processors. Existing opportunities in local,
regional and international markets are largely unexploited. In today’s highly competitive and
globalizing agrifood sector, including the livestock subsector, quality-based differentiation is a key
success factor and branding is essential to signal the quality of the product. Also key is reliability of
supply in terms of volumes, prices and quality throughout the year and from year to year. While
Botswana struggles with these aspects, it is losing market share to its competitors.
To address these challenges, the Ministry of Agriculture of Botswana requested the collaboration of
the Food and Agriculture Organization of the United Nations (FAO) to apply the value chain
framework to analyse the beef subsector and to provide a set of strategic recommendations aimed
at promoting its sustainable development and competitiveness. Funded through an FAO Technical
Cooperation Programme facility, the study represents the first work under a new Botswana
Agrifood Value Chain Project which is being driven by the Botswana Agricultural Hub. The beef
value chain study will stand as a template for development support to other agrifood value chains.
The study is based on extensive consultation with stakeholders throughout the value chain: input
suppliers, producers, processors, retailers, government officials and other support providers.
This timely study has been developed as part of FAO’s technical assistance and demonstrates a
continued commitment to the Ministry’s approach to supporting the agricultural sector. It is
expected that the recommendations – organized around public–private partnerships, institutional
change, trade and market liberalization and knowledge-driven development – will provide a solid
foundation from which Botswana’s beef subsector can grow strongly toward a rewarding future for
all its stakeholders. It is also hoped that through this study a wider audience can benefit from the
information and analysis provided.
Minister Director
Government of Botswana Food and Agriculture Organization of the UN
viii
Acknowledgements This study is the result of efforts by many individuals. It is difficult to acknowledge everyone’s
input, but we are particularly indebted to the following people who played a direct role in the
production of the report.
Our thanks go firstly to Neil Fitt, who has relentlessly and in a multitude of ways supported the
realization of the study during its long completion process, and to Philip Fischer, who first
proposed the idea for the study and has provided many insightful comments on each successive
draft of the report.
We are indebted to Mmadima Nyathi and her staff at the Agricultural Hub: Stillwell Dambuza,
Keleemetse Garebamono, Kebotsemang Ofaletse, Orman Roy, Unoziba Majore, Gorata Boikanyo,
Matthews Sekake, Rantshilo Seketeme, and Tumelo Kgamanyane. Without their invaluable
contributions this report could not have been realized
Equally, we are very grateful to Keith Jefferis, Carlos da Silva, Kristin De Ridder and Jacqueline
Solway, who reviewed and commented on earlier drafts, and in doing so allowed for great
improvements to the report. We particularly thank the members of the review group in Gaborone
for their comments on the first full draft of the document. We would also like to thank Derek Baker
for providing excellent background materials and helping us think through the issues at the start of
the study, and to Paul Neate, for his excellent work on the final editing of the report.
We would like to express our sincerest thanks to the large number of people who participated in the
two workshops conducted in Gaborone in the course of the study.
Last, but certainly not least, we are extremely grateful to the many people in Botswana who
graciously volunteered their time to sit down with the authors for interviews throughout the
country: Jaap Arntzen, Mark Atkinson, Leonard Baleseng, Bas Bastiaensen, Cecil Botha, Micus
Chimbombi, George Derek, Edwin Dikoloti, Peter Ensor, Werner Faber, David Falepau, Malouki
Faletsi, Elizabeth Fleck, G. Gaopatwe, Gumelo, Hamid Orban, Chris Herbst, Baboucar Jaw, Hans
Kampmann, Suvijith Kelat, John Kempf, Kerapetsahularo, Rancher Kevin, John Kgosiemang,
Erence Kotokwe, Peter Lindsey, J. Lobeko, M. Luke, Mahabile, Neo Mapitse, Clive Marshall,
Boweditswe Sethare Masilo, D. Matsila, Banusi Mbaakanyi, Moffat Mbaakanyi, Zenzile Moesi,
Wameotsile Mahabile, Sunny Molapisi, Bonaventura Mtei, Nametso Munanetsi, T.K. Nowshad,
Ram Ottappath, Dave Perry, Rancher "Prof", Aubrey Ranko, W. Ranatijwane, R. Rashed Al
Shamsi, D. Segakisa, Tebogo Seleka, G. Sent, Jon Smith, L. Venkataraman, Jaco de Villiers and
Isabel Vorster. It is their testimonies that bring the text alive.
None of the individuals mentioned above are responsible for the views expressed in this report, or
for any inaccuracies; those responsibilities rest with the authors alone.
The authors
December 2012
Background to the study
This is the first study completed under the Botswana Agrifood Value Chain Project (BAVCP)
which is implemented by the Ministry of Agriculture’s Agricultural Hub and partly funded by the
Food and Agriculture Organization of the United Nations (FAO) under Technical Cooperation
Programme Facility TCP/BOT/3301.
Both government and private-sector representatives in Botswana recognized the need for thorough
assessments of the country's main agrifood subsectors in order to guide the design of policies and
programmes that promote competitiveness while taking economic, social and environmental
sustainability issues into account. The project will
address this need by conducting a set of studies that
follow the value-chain paradigm. The first of these
studies is on the beef value chain. Its primary objective is
to provide practical and actionable recommendations for
a sustainable and inclusive competitiveness strategy that
will lead to development and growth in the beef
subsector. The secondary objective is to create a template
for the analyses of additional chains under the BAVCP.
The beef value chain was chosen first because of its importance in Botswana’s agrifood system, the
fast-changing nature of the markets in which it competes, the ongoing shift to a new production
model and the momentum offered by current discussions on proposals for fundamental institutional
changes. The beef subsector is the largest component of the agrifood system in Botswana. It earns
significant amounts of foreign exchange and is a direct source of income for a large segment of the
rural population. However, productivity has stagnated or decreased over the last decade or so. The
supply of animals for slaughter for export has been
constrained resulting in significant underutilization of
processing facilities and consequently low profitability in
processing. A failing traceability system blocked access to
the key European Union (EU) export market for 19 months
and a cattle disease outbreak further aggravated the situation
in 2011. Existing opportunities in local, regional and
international markets are not well exploited. As Botswana
struggles, competitors such as Namibia and Brazil are
expanding their share in these markets.
Value-chain approach
bottlenecks in the system, unearths their root causes and
proposes holistic strategies for upgrading that lead to farms and firms that are more competitive
and sustainable. The value-chain approach assesses how value in an end market is created by a
sequential chain of activities conducted by actors who are supported by various business-service
providers and who are influenced by the particular business environment in which they operate.
Value-chain analysis goes beyond behavioural assessments at the individual actor level by
examining the nature of vertical linkages between suppliers and buyers and of horizontal linkages
between agribusinesses of the same type. The end markets, actors and their linkages, service
providers and operational environment are typically not static, but rather are evolving in various
directions. Value-chain development takes these…