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4.1 Corridor Clusters

The corridors are drawing on existing physical infrastructure: roads and railways, electricity grids, telecommunications systems. Within the ARC concept, investments will be made bringing infrastructure to the more remote areas, including feeder roads, electricity lines, and bulk water supply, easing farmers' access to inputs and opening output markets, as well as providing crop storage facilities and processing options. Not least important, by harnessing efficiencies in value chains this will lead to smallholders gaining from lower cost of vital inputs and services, such as seeds and fertilizers, electricity and financing. However, the hubs will not only benefit farmers; they are designed to support surrounding communities within a radius of 25 kilometers of the farm hubs with improved roads, water and electricity, and to enhance local job opportunities and provide financial services, including micro-financing and -insurance.

The perceived gains are based on the potential of “competitiveness through clustering”; due to economies of scale, farmers and agribusinesses are most likely to be successful when they are located in proximity to each other and related service providers. Each cluster,[1] containing a number of components (see Fig. 1)

Fig. 1. SAGCOT – Southern Agricultural Growth Corridor of Tanzania

requires investments along the full agricultural value chain. A typical AGC cluster will include suppliers of farm inputs, machinery, and agriculture support services (extension agents, financial services), commercial farmers (large and small), processors and providers of infrastructure such as irrigation and roads. Clusters also include governmental and other institutions, such as universities, vocational training providers, and trade associations. Cluster development will be driven by the private sector, based on the actual needs and opportunities of the respective areas. Investments in sustainable, productive agriculture will be encouraged throughout the corridors.

Such clusters are considered vital for successful development, not only in Africa. In a 2011 article in the Harvard Business Review, Michael E. Porter and Mark R. Kramer write that: “Clusters are prominent in all successful and growing regional economies and play a crucial role in driving productivity, innovation, and competitiveness.” [2]The authors cite the agricultural growth corridors as a leading innovation in the field of creating shared value. During 2009–10, Yara participated with other major companies in the development of the WEF roadmap document New Vision for Agriculture,[3] unveiled in January 2011. Arguing that innovative tools can break bottlenecks in the value chain, and pointing to the BAGC as one example, the roadmap states that: “By coordinating their efforts, stakeholders can mitigate risk, leverage their contributions and build on each other's competencies to harness market forces for sustainable growth,” calling for “coordinated investment in an infrastructure system to jumpstart and facilitate rural markets and reduce logistical inefficiencies.”

The idea of clusters or hubs is not new, and there is considerable experience to draw upon, as well as support to harness.[4] The World Bank, in its new Africa strategy (Africa's Future), points at the value of clusters, growth poles, and agglomeration externalities when opting to enable small-scale entrepreneurs in agriculture, manufacturing, and services to scale up in a time of rapid urbanization. Developing a new breed of operations, the Growth Poles Project,” the bank is set to help African countries deploy a critical mass of reforms, infrastructure investments and skill-building, with a sub-set focused on key agribusiness industry. The bank follows up on its 2008 Agriculture for Development report[5] in the Agriculture Action Plan 2010–2012.[6] Here, the bank points to the need to link farmers to markets and strengthen value chains through targeted investments in market places, rural roads, telecoms (market information) and electrification for agribusiness – and scaling up business models that better enable smallholder farmers to compete in growing higher-value markets. Facilitating agricultural entry and exit, and rural non-farm income, the bank will support regional clustering of economic activity.

4.2 Corridors Established

By 2011, two corridors had been established: the BAGC and the SAGCOT. The choice of initial corridors is based on two main factors: They were identified by the AU as potential regional breadbaskets having the conditions for strong economic development. They received dedicated support from the governments of Mozambique and Tanzania. Both projected corridors have large areas with high agricultural potential as well as a backbone of existing infrastructure.

  • [1] A cluster is defined as geographic concentrations of interconnected companies, specialised suppliers, service providers, and associated institutions.
  • [2] Porter and Kramer, “Creating Shared Value. How to reinvent capitalism – and unleash a wave of innovation and growth”, (HBR, January–February 2011), citing Yara's involvement in forging clusters is an example cited as a “good example of a company working to improve framework conditions”.
  • [3] Defined as a roadmap for stakeholders, the New Vision for Agriculture is the outcome of a process in which 17 major companies working within the food sector participated, supported by McKinsey & Company. Yara (incl. the author) participated in the Project Board and in the Working Group.
  • [4] Among these is the case of Mali's mango export, boosted through developing a value chain including organizing, transportation, and quality control, enabling fruit from the land-locked country to be shipped out by sea, reducing transportation costs, increasing competitiveness.
  • [5] Here, one of the points made, is that getting agriculture moving, “requires improving access to markets and developing modern market chains”.
  • [6] World Bank, “Agriculture Action Plan 2010–2012”, 2010.
 
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