| The first lesson I received from my father about marketing agricultural produce was "We (fruit growers) do what the fruit marketer wants us to do so that he can get us the best deals." In a developed market, where there is trust between a value chain's components, each part is focused on satisfying the following component in the value chain, hence, advancing the common goal of the chain. The fact of the matter is that a component in the value chain will grow and prosper as long as the entire value chain thrives, and vice versa. However, TRUST is a scarce commodity in emerging markets, and a disintegrated value chain is a common sight. The state of agriculture in emerging markets is merely a reflection of the value chains in those markets. A market failure, which leads to African farmers producing only 10% of the mangoes in the EU, is the result of the ineffective value chain. If we wish to improve the agriculture and the economy in Africa and other emerging markets, we need to enhance their value chains. Unfortunately, that is not an easy task. MEASURING THE VALUE CHAIN The value chain top success challenge is realized and measured by export activity operation and value. This is when a nation gets the real feedback, in the form of the amount of foreign currency influx, of how good and effective its value chain is. The mango industry in sub-Sahara African countries holds a huge potential to become a leading export industry. To improve the value chain, we need to characterize it, measure its components' performance, and understand its problems. This way, we can introduce and implement the necessary changes to increase the value it creates to its parts and the country. Hence, the first step is to define the mission and function of each component in the value chain. Structural failures, which are the most common, are discovered at this early stage. Let's start by asking a fundamental question; what are the value chain's role and purpose regarding the mango agri-export from Africa (or any other place)? Answer: To enable the export of as many mangoes as possible, at the highest price per kg, to maximize the income and return on investment (ROI) for parties in the value chain and the state's economy. In practice, it means; taking from Africa as many mangoes as possible and bringing those to EU consumers that are ready to pay the highest price. Due to the abundance of mangoes in Africa and proximity to the EU market, we would expect Africa to supply at least 50% of the EU demand for that fruit. In reality, the EU imports only 10% (≈70K tons) of its mango demand from Africa, and African mangoes do not fetch the highest prices. A markdown gap of 300K tons between expectations to reality indicates that there is much room for improvement in the value chain of mango exports from Africa to the EU, and probably to other markets. EXAMPLE: AFRICAN MANGO-EXPORT VALUE CHAIN The process of improvement contains the analysis of the Current State versus the future state, which we inspire to achieve. Hence, bridging between the two states is the main task. If we wish to increase mango export from Africa, we need to start by analyzing the African value chain's current state. Here I will analyze three of the main parts of the Africa-EU mango export value chain. Let's start by asking; what are our expectations from the following parties composing the value chain? THE INPUTS SUPPLIERS (including distributors) – the ability to supply, at a competitive price, the required technologies, knowledge, finance, services, etc., necessary to grow and export the best agri-produce. That part also includes the services and knowledge provided by the government. THE FARMERS – the ability to produce the high yield, high quality, right varieties, and harvested at the best time for best quality. THE EXPORTERS/IMPORTERS – the ability to supply buyers, at the best time, with the required quality and quantity. Hence, fetching the best market prices. THE OVERALL VALUE CHAIN EFFECTIVENESS AND COMPETITIVENESS can be measured by:
(1) Price per kg (quality) - received at the export markets versus exports from other countries,
(2) Quantity - how many tons were exported (imported to the EU) versus other countries
(3) Income and profit - of each of the chain's elements. EMERGING MARKETS' AGRI-INDUSTRY IMPAIRMENTS After analyzing three of the main elements in the value chain, we know and understand what to expect from each of them and what abilities they should have. The next step is to describe the real Current State of those similar elements. By its nature, the description below is general, and hence simultaneously fits all and none. Its purpose is to shed some light on some of the common challenges. THE INPUTS SUPPLIERS – lack the technology, knowledge, and protocols to effectively fight the main group of pests (fruit flies), which causes tens of percent of yield loss and are quarantine pests. There is also an acute lack of experts in mango growing, a lack of suitable laboratories to inspect chemical residues, and ineffective quality control (including phytosanitary) at the exit ports. THE FARMERS – Farmers lack proper technologies, knowledge, and services to produce a higher quality yield. Currently, the yield per hectare is low, i.e., 3 to 10 tons per hectare, versus 40 to 80 tons per hectare in the advanced countries. Please stop and think for a moment of the influence when we improve the yield and quality of mangoes, increasing African export to EU to 50% of EU demand, instead of the current 10%. Farmers are also missing an effective protocol for fruit fly management, which results in a very high fruit fly infestation (30% to 80%). The high infestation pushes farmers to spray frequently and harvest as early as possible, often too early. The outcome is frequent interceptions of fruits infested by fruit flies, containing chemical residues above permitted MRL, short export season, and mangoes' taste sub-optimal. A common practice among big mango growers and packinghouses is to collect and export mangoes from smallholders, which often operate without any quality control. This reflects negatively on the overall mango quality, interceptions, and the reputation of African mangoes. THE EXPORTERS/IMPORTERS – they get the produce from the mango growers but have low or little ability to run in-depth quality control. Exporters/Importers receive low volume and quality produce, making it impossible for them to create competitive advantages on the international market. Furthermore, many local exporters do not have access means and required acquaintance with leading premium export markets. For example, how many African mango exporters export to the lucrative markets of Japan, China, USA, India, etc.? Furthermore, francophone countries tend to export to France, even when prices are higher in other EU markets. Such an approach dramatically limits the economic potential of mango exports from Africa. The current African overall value chain effectiveness and competitiveness are low, with a low trust level among parts within the value chain. Ultimately, it leads to the current state where -
1. Africa provides only 10% (about 70K tons) of the EU mango demands, although its proximity to that market.
2. Most African countries producing mangoes are under export ban or risking one in the coming years. Hence, we may see mango export volume and value coming from Africa to the EU continue dropping.
3. The Farmers manage to “survive” but are incapable of investing and improving their agri-business. WHAT IS THE SOLUTION? The problems described above are due to fundamental failures in the value chain. Hence, one can expect a change as a result and after correcting those failures. The most significant barrier to coping with is the current ineffective protocol for managing fruit flies, followed by the need for improved quality control systems. THE SOURCE OF TROUBLES In the example of the African mango industry, we can observe essential characteristics. Every party in the value chain is focused on optimizing its financial results without considering the overall effect on the entire value chain. In short, Local Optimization of individual elements in the value chain is at the expense of Global Optimization of the entire value chain. This is similar to a factory with many workstations, some of which work efficiently, and some of which fail. Workers at the efficient stations will not earn more as long as the less efficient stations' failures are not corrected. Identification of failures, repair, and synchronization of all stations is the workers' responsibility at each station together with the plant management. "A Chain is As Strong As The Weakest Link" Sure, no one wants the entire mango value chain to deteriorate and fail, but it happens anyway when there is no one representing the whole value chain's shared interests. Let's take a look at how the current state of focusing only on the Local Optimization damages the value chain's common interest, which produces low results, leading to lower income for all. In the African mango-export industry, fruit fly control is very critical to its success. Let's look into how the various parties perceive their role and deliver their responsibility regarding this challenge. INPUT SUPPLIERS - supply ineffective fruit fly control solutions, resulting in 50% to 80% fruit damage! This is a direct result of doing business where the seller cares more about his short-term financial interest and none regarding his client results. Such behavior is not in line with the long-term interest of suppliers and the value chain goals. FARMERS - similar attitude leads farmers to export fruits known to be of high risk, e.g., when fruit fly infestation increases or produce received from smallholders not under any quality control. This is, too, against the long-term interest of the farmers and the value chain. EXPORTERS/IMPORTERS – they are ready to export produce, which didn't pass through the necessary quality control process. Even when they know it is not according to required export demands or regulations in the designated country. Just like everybody else, they too focus on short-term financial success. Hence, compromising the long-term interest of the entire value chain. The above example demonstrates the catastrophic outcome when each party is focused on maximizing its short-term profit. When this occurs, the disintegration of the system is unavoidable, and the long-term interest and trust are hopelessly jeopardized. In such a situation, there is no winner, but many losers. The cure for this fundamental value chain problem is balancing the Local Optimization activities with the Global Optimization activities. But how the balancing of activities is performed in practice? We can draw inspiration from how Israel chooses to deal with that challenge and how it managed to balance its agri-export value chain. In the Israeli case, the results were outstanding, leading to long-term economic success for all value chain parties. ISRAEL – INTEGRATING THE VALUE CHAIN Agrexco Agricultural Export Company Ltd. (i.e., Carmel Agrexco) is an Israeli company that contributed a lot in turning Israel's agri-industry into a powerhouse, fully export-oriented. What Agrexco did that enable it to catapult the Israeli fresh agri-export industry? Although Agrexco was, by definition, an export company, having offices across Europe and elsewhere, they cared most about the quality of the produce which they were exporting. However, unlike other export companies, they didn't wait for the harvest to see the quantity and quality. Instead, they worked year-round, closely with the farmers and with the state's extension services to ensure they will get the required quality. A farmer that wouldn't stand up to the required quality couldn't export! Agrexco took full control and coordination responsibility, all the way from the farmer to the buyers in Europe and elsewhere. Quality was the king, and Agrexco was familiar with everybody active in the markets. As a result, they could fetch the best prices for the best produce! In a short while, Agrexco built a strong brand that buyers associated with Israeli fruits' quality and good taste. | 
