Market information systems: empowering the private sector
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CTA. 1997. Market information systems: empowering the private sector. Spore 69. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/48725
CTA convened a working group of about 30 people at Wageningen in January 1997
Keen competition and the need for rapid access to reliable information are major elements in the food marketing chain now that governments have pulled back and market systems are free of the burden of state management. Governments have not, however, withdrawn completely from the scene and they must still ensure the transparency (although it may be somewhat relative) that is essential for the smooth operation of an efficient marketing system. The key question is: what form should a reliable, cheap and permanent market information system take and how can it be set up? As government monopolies and publicly owned marketing boards progressively withdraw from economic activity, the emergence of a free market creates the need for new sources of information. Thus, for example, the prices of many foodstuffs that were long controlled by the state are now having to respond to the ever changing balance between supply and demand. Knowledge of all the factors affecting this balance, and at each stage of the chain, is essential for strategic planning by private operators. The competition inherent in a free market also means that a capability to anticipate which way a market will move will have a significant influence on whether businesses flourish or fail. Early access to reliable information may thus be vital to success. Towards an efficient marketing system Those already active in the private sector, and especially market traders, usually have a very good information system that helps them to keep their businesses on a sound footing. For example, the marketing chain that supplies Abidjan with onions from Niger (in competition with imports from Europe), is controlled by fewer than ten large Hausa concerns. They dominate the market in Abidjan and are closely in touch with consumer demand as to both price and quantity needed. They are also very well informed about what is happening in the distant producing areas. Each business has a well-organized network of agents in Niger that is provided with the credit necessary for purchase and dispatch of the onions and that ensures that information reaches Abidjan in good time. Telephones and fax machines are the essential tools of this business. These master manipulators do not, however, hesitate to pay other sources, and particularly customs officials, to supply data on a daily basis about quantities in transit and expected dates of arrival. The Hausa businesses share information amongst themselves in order, for example, to prevent a glut on the market that would reduce their profit margins by leading to a fall in prices. They are very careful, however, to make sure that none of this information leaks out to new businesses trying to get into the import trade. A market is not truly efficient unless there is real competition. When there is competition for a piece of the market, and only when there is competition, must limit their profit margins and reduce their costs by operating more efficiently Without sufficient competition the mere throwing open of operations to the 'rules of the market place' is not without considerable risk regarding both availability and price. In liberalizing the market the State must not evade its responsibilities in respect of equity and food security. It must ensure that what replaces state control is professional, competitive and efficient. In the role of facilitator, governments must ensure, as far as possible, that transparency prevails and that the information needs of new operators wishing to enter the market are freely available. No single 'model' information system Quite apart from the normal practical difficulties of collecting information and then making it available, the diversity of marketing systems and their scattered nature provide some indication of the complexity of the problem. No single type of information system can be expected to satisfy completely all the various situations. Market information systems must therefore be built, piece by piece, in relation to needs, to the resources available and to the characteristics of each component. In order to identify a methodological approach that could be adjusted to any particular situation so that an information system suitable to each case could be designed, CTA convened a working group of about 30 people at Wageningen in January 1997. The workshop participants identified seven different stages in this process: 1. Identification of the type of marker is the essential first step. One case, for example, might concern a local traditional marker, whereas another might relate to a more modern market dealing with high value products. The Output could be directed to the domestic market, a regional market or a distant export market - or even to all three at the same time. The definition of the market is fundamental to the whole exercise. 2. Identification of potential users of the system and possible partners whose characteristics may differ considerably in the various marketing systems. Some classes of possible users are farmers, traders, policy makers, cooperative managers, scientists, transporters, development workers, processors, bankers and exporters. 3. Analysis of the initial state of the market for information needs revolves around a three-pronged question. Who needs which type of information and to what use will it be put? Such an analysis allows identification of the essential elements and a decision to be made on the information system that will supply them. 4. Identification of the key people in the market chain from the list of possible users under point 2 above. 5. Identification of available information systems and equipment leads to an understanding of the way existing information channels operate. In addition to the traditional media sources such as radio, newspapers, newsletters, and to standard equipment such as telephones and faxes, other means of communication including visits, meetings, direct advice, professional associations, producer groups and women's groups should also be used. G. Participatory analysis of all these stages is the final step before a specific plan of action is defined. Which types of organization or institution should be involved? At what stable level can the need for complementarily between public and private sectors be set? What are the costs? Who is going to pay and how? It would be better to use an existing system, if there is one, to effect cost reductions rather than to attempt to start a new one from scratch. Preference should also be given, again in the interests of cost effectiveness, to simpler and more flexible systems that can be more easily adapted to changing conditions. 7. There must be a monitoring and evaluation system to measure the effectiveness of the information supplied. Easy access, rapid availability and accuracy in the short and the long-term are some of the measures of effectiveness. The monitoring system must be able to provide the data needed to assess how the information is employed and its value to the users of the system. The burden of state systems for cereal markets Existing information systems are very diverse in nature. The market information systems set up in the Sahel countries, particularly those in Burkina Faso, Mali and Niger, about 10 years ago at the start of privatization of the wholesale trade are the most complicated. Mali's system is based on collection of data from 56 standard wholesale, direct wholesale to consumer, and retail markets scattered throughout the country. The information covers the millet, sorghum, maize and rice which are the staple foods of the region. Data on the amounts traded each week in the main wholesale markets are collected. Quality considerations, for example whole rice, broken rice, 40% broken rice/paddy mixture, are also taken into account. All the work involved in collecting and analysing the data is done by the staff of the National Cereals Board. These people are usually former storekeepers who were 'recycled' when the state monopolies were disbanded and the private sector took over. The scheme makes use of about a hundred people on a part-time basis and ensures dissemination of the information by radio and in the press. It also publishes a weekly price summary, a monthly commentary and a six monthly analysis of trends. Blanket cover allows the authorities to detect the least variation in price in any part of the country and to act rapidly if there is a shortage or any other problem on the supply side. A recent survey paints a less rosy picture for potential private sector users of this market information system. The survey attempted, through direct interviews, to assess the contribution of information supplied by the system in relation to the real needs of each type of user. Producers in general clearly make little use of any of it. On the one hand they have access only to the nearest markers, for which their information sources are more direct. On the other hand there are many reasons, and especially the urgent need for cash, why they are always in such a poor bargaining position vis-a-vis the large traders; knowledge of the retail price in the major urban markets would be of little help to them. With regard to the large wholesale traders, their own information networks provide them with a daily update of the state of the market. This is much more useful than the official information sources that are always, at least to some extent, out of date. These traders do, however, have other information needs such as cross-border prices and public sector policy on food aid that, were it not available to them, could upset all their planning. The small and medium-sized wholesalers who are now beginning to enter the market seem to be the most frequent users of market information systems. These new traders are more specialized in the cereal markets than the very large concerns, who often trade in a purely opportunistic way and are usually closer to the producing areas than they are to the major urban markets. This type of business has no network of its own and is always looking for information from areas where it does not have any agents. Information is not, however, the only factor mitigating against them becoming large scale operators as their lack of access to credit is also a major problem. One possible way of responding to the needs of these new enterprises identified by the survey of the market information systems would be to set up service centres in the major producing areas in the south of Mali that would provide information on the demand for the main commodities. To try to stimulate regional trade these centres would supply all kinds of information about the markets in neighboring countries. This is especially so in the case of Côte d'lvoire, which is a large food importer. The information supplied would relate not only to price and the quality and quantity of the commodities being sought, but also to legal aspects and to the possibilities of obtaining credit. These types of information systems have so far been operated as 'projects' by the main donor organizations who, in their turn, now wish to withdraw. The problem of how they are going to be financed in future remains to be solved. One possibility is that the state and international agencies, as well as traders, may be asked to subscribe for the information. Another is the imposition of a general statistical tax if the information IS to remain in the public domain. There are very few other possibilities of financing these very costly systems that were set up under Structural Adjustment Programmes and which may now have to be less ambitious with regard to the scale of their operations. Harnessing the Informal sector The 'Economic Observatory of Senegalese Horticulture' has been operating in the Dakar market since 1994. Its strategy is very different from that of state-managed systems and consists of organizing operators in the marketing chain in order to make it more efficient. The initiative was taken by the Horticultural Department of the Ministry of Agriculture and by scientists of the Agricultural Research Institute (Institut senegalais de recherche agricole, ISRA) which was already collecting price data in Dakar. The origin of the system is thus in the state sector, but the private sector was also involved right from the start. Foremost among the latter group was the National Horticultural Association (Conseil national interprofessionel de ['horticulture, CNIH) which was set up to fight the challenge of other exporting countries, particularly Burkina Faso and Kenya, competing for the European market. CNIH's membership comes from all levels of the marketing chain, including one association of large and one of small exporters. All parts of the chain from both the public and private sectors meet every week to discuss developments. The Agricultural Research Institute provides information on market prices, the Customs Service supplies data on imports and exports, and producers talk about the stage of development of their crops and indicate disease problems that might be of interest to the research organization. The downstream side looks to what it might do if it seems that there is going to be a gap in production and the upstream side can set about trying to respond to the market demand. Papa Abdoulaye Seck, special adviser to the Director-General of ISRA, has said that 'As President Senghor would have said, the Association both gives and takes because once people are together they can talk about their problems and find common ground from which to manage the conflicts that are inevitable in a market chain in which the problems of one section are not necessarily the same as those of another. Discussion leads to mutual understanding and to a consensus from which everyone, including the consumer, benefits.' The effectiveness of the Observatory could be improved still further, particularly as a provider of information by, for example. distributing to the various media the two page minutes of its weekly meeting. This would be cost effective because 'as everyone freely gives of the information that he has there is very little additional expense.' The Senegalese Horticultural Observatory is lean, participatory and has practically no formal organizational structure. It has, however, benefited from one especially favourable circumstance which Papa Seck considers very important: 'Agricultural policy in our countries since independence has resulted in very little interference in the horticultural sector. When one is not circumscribed and encumbered by directives it is natural to be self-reliant and to grasp the initiative. Horticulture was well to the front when 'liberalization' and 'disengagement' became the watchwords. This is why private sector initiatives in horticulture have flourished in recent years compared to those in other agricultural sectors that were for long under the yoke of tight government control.' This clearly confirms that a single type of market information system cannot be applicable to all situations. It also shows the need for those most closely involved in the business to be fully a part of it. Retail Price of Local Potatoes in Guinea (1996)
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