FAO - TECHNICAL CONSULTATION ON LEGAL FRAMEWORKS AND ECONOMIC POLICY INSTRUMENTS FOR SUSTAINABLE COMMERCIAL AQUACULTURE IN AFRICA SOUTH OF THE SAHARA

SUMMARY

This paper reviews guidelines for assessing potential markets for farmed fish, gives an overview of the markets for shrimp, tilapia and catfish and presents the current situation in commercial aquaculture in specific countries; it examines the marketing of farmed tilapia and catfish in C�te d'Ivoire, Nigeria, Zambia and Zimbabwe and assesses marketing of farmed shrimp in Madagascar and Mozambique. It proposes recommendations on policy to governments and industry with regard to organization of commercial aquaculture and marketing. Commercial aquaculture requires ready markets. Close proximity of farms and easy access to urban centres are essential if the produce is intended for domestic markets. Logistical concerns such as air cargo arrangements should be well assessed prior to making investment decisions. Product quality, regularity in supplies and high production efficiency are essential. In order to boost private sector investments in aquaculture in sub-Saharan Africa, the investment climate must be attractive to foreign and local capital. Investment codes should therefore make provision for various investment incentives. Government needs to put in place the necessary infrastructure to ensure growth in commercial fish farming. Government aquaculture development policies should encourage the development of hatcheries, feed mill and fish processing plants to support the aquaculture industry. This initiative should be pursued in collaboration with the private sector. Sub-Saharan African countries should consider negotiating bi-lateral trade protocols with potential export markets. African fish farmers should give priority to fish quality to obtain higher prices both on the domestic and export markets. Global markets for farmed fish, particularly shrimp and tilapia, are good. However, market prospects on export markets are closely linked to the strength of the international economies. The Consultation is invited to revise as appropriate and endorse ideas explored in this paper, and to identify actions which, under the framework of FAO, could contribute to implementation of policies discussed in this paper and to the promotion of sustainable commercial aquaculture in sub-Saharan Africa.

1. Tilapia, catfish and carp top the list of farmed finfish in sub-Saharan Africa while marine and brackishwater shrimp (notably Penaeus monodon and P. indicus) are the main cultured shellfish in the region.

2. The main market niche for farmed fish remains the middle and upper-income consumers on the domestic markets. Low-income consumers are unable to afford high-value farmed fish. Site selection has therefore become an important consideration and fish farms targeting the domestic market should be close or have easy access to urban consumption centres.

3. While domestic demand for farmed finfish (tilapia, catfish) has been good in many sub-Saharan African countries, demand for farmed shrimp, in contrast, has been weak. Farmed shrimp is generally targeted to the export market.

4. Because of poor monitoring of artisianal landings and a significant informal fish trade, it is difficult to obtain good fish supply estimates in many sub-Saharan African countries. Per capita fish intake within a country differs from community to community. Invariably, inhabitants of coastal communities, towns bordering lakes and rivers as well as urban dwellers have greater access to fish than population in the interior.

5. Consumer disposable income and purchasing power are important determinants of market potential. While cheap small pelagic fish such as sardinella, mackerel, kapenta, bonga and anchovy have wide consumer acceptance, relatively expensive fish like farmed tilapia, catfish and shrimp are difficult to sell in rural communities where purchasing power is generally low. Therefore, before establishing a fish farm, site selection should be of prime concern. Sites in close proximity and with easy accessibility to urban markets should be favoured because of the relatively high purchasing power of urban consumers.

6. Fish consumption patterns, including species, product form and size preferences, as well as eating habits of consumers are crucial elements in determining the domestic demand for fish. Many West and Central African communities prefer fish in the cured form (smoked, dried, salted). For farmed fish, grilling is gradually gaining prominence in a number of urban communities although utilisation in the cured form is well entrenched. In some isolated cases, it is a taboo to utilise catfish in the fresh form.

7. The availability of cheaper alternatives or close substitutes from capture fisheries should be considered. Invariably, tilapia and catfish harvested from inland water bodies hold an enormous price advantage over similar products raised through aquaculture. For coastal countries where consumers have access to close substitutes at cheaper prices, domestic demand for farmed tilapia, catfish and shrimp has remained very weak (Senegal, Namibia, Mauritania). Seasonal variations in marine landings should also be considered.

8. The farmer should identify the distribution channels for products destined to both the domestic and export markets. The domestic marketing system usually involves selling on credit basis. The distribution chain often involves a number of intermediaries, including wholesalers who procure from the farms. Due to the relatively high prices associated with cultured fish, the traditional fish processors prefer fish from capture fisheries. The traditional products are mostly destined to the lower-income group, with low purchasing power. Each operator along the chain adds a margin and it is therefore common to find marketing costs, processing costs and profit margins together accounting for nearly 40 percent of the price paid by the consumer.

9. The main clientele for farmed fish includes restaurant operators, supermarket chains and hotels. The system whereby fish farmers directly supply local restaurant operators, supermarkets and hotels is gaining prominence. The profit margins associated with this system are much higher as these establishments offer better prices for top quality products. This distribution system also involves the use of ice to maintain the quality of the products.

10. With the growing global awareness of fish quality issues, quality standards have been set for products destined to international markets. Standards cover operations right from production through handling, processing, storage and transport. Farmers who wish to export must conform to quality standards in international markets and implement the required HACCP (hazard analysis and critical control points) programmes.

11. Prices of tilapia, catfish and shrimp harvested from the wild, as well as prices of close substitutes (marine and inland species) should be determined to guide potential fish farmers in establishing their own prices but also in defining their marketing strategies. In countries or communities where cheaper substitutes are readily available, fish farmers should either target their production to the middle, upper-income consumers or to the export market.

12. In assessing export market potential for fish, the farmer or exporter needs to consider a number of elements such as: i) existing or traditional markets for the identified product, ii) global market outlook, iii) product specification and quality assurance, iv) import regulations in target market, v) export prices and vi) market prospects.

13. Tilapia and catfish are by far the two most important finfish cultured in sub-Saharan Africa. Both species are of immense commercial importance. Based on national statistics, the major producers of cultured fish in sub-Saharan Africa include: Nigeria (about 15 000 t per annum), Zambia (4 800 t), South Africa (4 000 t), Kenya (1 500 t), Zimbabwe (1 250 t), C�te d'Ivoire (1 000 t). Tilapia, catfish and carp dominate farmed finfish production.

14. Domestic marine landings have dropped to under 70 000 t in recent years. Inland catches are now in the order of 12 000 t per annum with tilapia constituting about two thirds and catfish about 15%. C�te d'Ivoire imports 100 000 to 150 000 t of frozen fish annually. Per capita fish intake is today estimated at 15 kg per annum, a drop of about 25% compared to fish consumption levels in the 1980's. Since 1990, aquaculture production has increased from 330 t to 1 000 t.

15. Ivorian fish farmers face very little competition in selling their products. However, the occurrence of low-valued small pelagic fish (sardinella, anchovy, mackerel) during the season needs to be considered. Farms located farther away from main consumption centres such as Abidjan and Bouake are bound to face difficulties in selling their products on the domestic market.

16. The market farmed tilapia and catfish is the urban consumer with relatively high disposable income. Demand is good; the production is absorbed locally. Fish from inland sources are traded close to the landing centres. Distribution of cured fish products from capture fisheries is extensive, covering both urban and rural communities.

17. Except for modest volumes of shrimp which are processed for export, all fish landed in Nigeria is consumed in the domestic market. Per capita fish intake has shown a sharp decline over the last decades and has dropped to about 4 to 5 kg over the last few years. The reasons are attributed to stagnating domestic fish landings, declining imports and a rapid population growth.

18. Tilapia and catfish are widely consumed in Nigeria. Both species constitute the bulk of inland catches which have been estimated at 140 000 to 160 000 t per annum over the last few years. Production of farmed fish has also been estimated at 15 000 t per annum. Harvests from the fish farms are dominated by tilapia and catfish.

19. Fish farmers face little competition as demand on the domestic market far outstrips supply. Fish consumption tends to be highest among the lower-income groups because of the low prices of sardine or kapenta and other small pelagic fish. The market niche for farmed tilapia and catfish comprises middle and upper-income consumers.

20. Fish ranks first as a source of animal protein in most parts of the country. Per capita fish consumption is estimated at 8.0 kg. Most of the fish landed is dried or smoked prior to trading on the domestic market. This is largely because the main production centres are remote from the major consumption centres.

21. Women traders dominate the fish distribution network in Zambia. Transactions are usually cash based. Most of the fish harvested from the fish farms are sold with ice and sold to hotels and restaurants.

22. Of the six sub-Saharan African countries under review, Zimbabwe has the lowest level of per capita fish intake, estimated at 2.4 kg. There is strong demand for fish in both rural and urban centres but supplies remain very low, creating a major gap.

23. Consumers in the middle and upper-income brackets prefer fish in the fresh form and include tilapia fillets, trout and marine fish (imports). The lower income group usually prefer small whole tilapia, but this product is relatively expensive and often beyond their reach so they rely mainly on dried or fresh kapenta.

24. As consumer purchasing power continues to erode, an increasing number of middle-income consumers are switching from farmed tilapia to kapenta. Farmed tilapia is therefore being targeted to upper-income consumers as well as export markets.

25. Fish distribution in Zimbabwe follows three distinct patterns: i) dried kapenta from Lake Kariba which is widely distributed in both rural and urban centres, ii) fresh farmed fish and frozen fish imports retailed in supermarket chains, and iii) frozen tilapia fillets exported to UK and South Africa.

26. Major supermarkets in Zimbabwe obtain supplies of fresh tilapia from Lake Harvest Aquaculture (LHA) and other commercial farms. Limited quantities of tilapia from the farms are delivered to hotels in the major tourist centres such as Victoria Falls and Kariba.

27. Export of fresh and frozen tilapia is done by LHA from an EU-certified processing unit to markets in UK and South Africa. Consignments destined to the UK market are transported to Harare and air freighted on weekly basis. Those destined to South Africa are transported by road directly to supermarket, restaurant and hotel chains. LHA exports 10 to 12 t of fresh tilapia fillets per week to the UK and other European destinations, and smaller volumes to the South African Market.

28. Global trade for tilapia grew in importance only in the last decade. US remains the main market for tilapia although imports to European destinations are steadily expanding. US imports of tilapia showed a spectacular growth in the past decade. The main European markets for tilapia include UK, Germany, France, Belgium, Italy and the Netherlands.

29. Tilapia exports from the sub-Saharan African region currently remain insignificant although prospects are good for Zimbabwe, South Africa and Uganda. Prospects for growth in tilapia trade are good. In addition, per capita tilapia intake has improved over the past decade and is expected to remain high, at least in the foreseeable future.

30. US consumption of catfish has shown a tremendous growth over the past decade but demand has been met largely through domestic production. Catfish imports to US are limited but imports from Vietnam have increased recently.

31. The European catfish market is small. In Netherlands, Greece and France, catfish is farmed on a limited scale for the domestic market. Catfish imports to the EU market remain insignificant. It remains to be seen whether the global market for catfish can be developed with the same degree of success as the tilapia market.

32. Of the four sub-Saharan African countries being reviewed with regard to farmed tilapia and catfish markets, only Zimbabwe is currently engaged in an active tilapia export trade. African countries together hold a very minimal share of the US tilapia market. South Africa and Uganda have become the new African players exporting modest quantities of tilapia fillets in 1999.

33. Madagascar is one of the leading shrimp producing countries in sub-Saharan Africa. Total shrimp output from aquaculture has increased from 406 t in 1994 to about 5 000 t in 2000, mainly because of expansion in area farmed.

34. Due to the high shrimp prices, domestic demand for shrimp is very low. Local consumers usually go in for the relatively cheap small and medium-sized dried shrimp originating mainly from the artisanal fisheries sector. The high quality, large-sized industrial shrimp landings are targeted to the export market although significant quantities are sold to local restaurants, supermarket chains and hotels.

35. Annual per capita fish intake is estimated at 10.0 kg. Consumption is as usual concentrated in the urban as well as coastal communities.

36. Each of the existing Malagasy shrimp farms is associated with a large shrimp fishing company with its own established marketing network. Somaqua markets its shrimp through the existing distribution network of its affiliate - Somap�che (owned by Maruha Corporation of Japan). Maruha supplies 10% of the Japanese market and has a well-established market network in Europe. Aqualma similarly sells its shrimp through PNB's established EU market network.

37. Although shrimp accounted for a little over 10% of the total fish landed in 1999, it remains by far the most valuable species harvested in Mozambique. Annual per capita fish supply is estimated at 6.0 kg with the bulk coming from the artisanal sector. Industrial and semi-industrial operators focus on high-value shrimp for the export market.

38. Prospects for marine shrimp farming in Mozambique look good. An experimental farm was established to study the culture of giant tiger shrimp (Peneaus monodon), Indian white shrimp (Peneaus indicus), and brown shrimp (Metapeneaus monocenos), all native to the coast. Initial results have been encouraging and the Government has decided to promote shrimp culture through private sector initiatives and ease the pressure on the capture shrimp fisheries. Poor infrastructure limits fish distribution in rural

communities and in the interior. Marketing problems have been accentuated by a long coastline and dispersed production centres.

39. Madagascar, Mozambique and Senegal are the leading shrimp exporting countries in sub-Saharan Africa. Malagasy shrimp exports have substantially increased since 1996 and this has been attributed to the expansion of shrimp farms. The growth in shrimp exports is likely to continue as existing commercial farms are adding new ponds while some experimental farms intend to enter the commercial phase.

40. The main markets for Malagasy shrimp are France and Japan. Significant volumes are also exported to Reunion, Mauritius, South Africa, Portugal and United Kingdom.

41. Mozambican shrimp exports have also significantly improved over the last couple of years following good catches. The main markets for Mozambican shrimp are Spain and Japan. The Spanish link has been favoured by investments by Spanish companies in Mozambique through joint-venture operations in Pescamar and Krustamoz. The Japanese trade has also been favoured by the establishment of Efripel, a joint-venture fishing company involving Maruha of Japan and Emopesca of Mozambique.

42. In Mozambique, a programme aimed at upgrading Fish Inspection Laboratory Service was initiated in 1997. The rationale behind the programme was to establish an effective fish inspection system and to assist seafood exporters in meeting the quality standards in the EU market. Human resource capacity needs to be strengthened in terms of staff capacity and training on trends in Quality Assurance and the HACCP concept.

43. All four shrimp farms in Madagascar have entered into technical and commercial agreements with well-established foreign seafood companies. The shrimp farms do not only benefit from technical advice of the foreign partners but also use their extensive marketing network to sell their products. The commercial agreements enable the local fish farms to sell their products on the export markets under well-established brand names.

44. The EU, USA and Japan by far constitute the major markets for shrimp. In Europe, Spain, Denmark, UK and France accounted for 62% of the total European shrimp imported in 1998. Large volumes of imported shrimp are processed and re-exported. This is particularly true for Spain and Denmark.

45. Europe is a very heterogeneous market with significant differences from country to country. Consumers in Northern Europe tend to prefer cold-water shrimp while tropical warm-water shrimp is preferred in Southern Europe. However, warm-water shrimp is becoming popular with the decline in supplies of cold-water shrimp and they are gaining increasing acceptance in the UK, Germany and the Netherlands.

46. A unique feature of the US market is that there is demand for shrimp of all sizes. Shrimp imports have however been dominated by headless as well as peeled and deveined shrimp, in both the raw and cooked forms. Shrimp consumption is strongly linked to the economic health of the US economy.

47. Japan remains one of the most important shrimp markets in the world with annual imports exceeding 250 000 t for most of the past decade. The leading Japanese shrimp buyers in sub-Saharan Africa include: Maruha Corporation (ex-Taiyo), Mitsui and Co. Ltd., Mitsubishi Corporation and Marubeni Corporation.

IV. MARKETING POLICY FRAMEWORK FOR AQUACULTURE DEVELOPMENT IN SUB-SAHARAN AFRICA

48. As part of the structural adjustment programme pursued over the past decade, many sub-Saharan African countries have liberalised their trade policies. Exporters are now able to repatriate their export earnings; this has contributed to attracting foreign investment including for the establishment of commercial fish farms in sub-Saharan Africa.

49. In Zimbabwe, the decision by foreign investors to set up Lake Harvest Aquaculture, was largely based on the ability to retain and repatriate foreign exchange earnings. In Madagascar, Japanese and French companies have engaged in commercial shrimp farming and their investment decisions have similarly been favoured by the liberalised investment climate.

50. To boost both domestic and foreign investments in a number of sub-Saharan African countries, various Investment Acts have been promulgated aimed at providing investment incentives. The establishment of Export Processing Zones or Free Trade Zones has become a popular strategy to achieve this objective.

51. Popular investment incentive measures have included: i) duty-free importation of capital equipment, ii) tax holidays for the initial operational phase (usually first five years depending on type of project), iii) reduction in corporate tax rates, etc. This policy measure has equally been instrumental in attracting both domestic and foreign capital inflows to boost Africa's industrial development. A typical example is the Togo Free Port Zone which attracted a lot of investments in the 1980's and 1990's, including two fish processing plants.

52. Export subsidies create trade distortions and constitute a heavy economic burden on State resources. In most sub-Saharan Africa countries, export taxes, in the form of miscellaneous and handling charges are very minimal.

53. One of the pre-requisites for a successful fish farming venture is to adopt an effective marketing strategy, finding ready markets for the company products in order to avoid long grow-out periods and excessive feed costs. Production should be programmed so that harvesting coincides with the lean fishing season when fish is scarce on the domestic market. Size preferences in target markets are important.

54. Site selection is also an important consideration for improving market efficiency. Poor road network has often prevented fast and efficient fish distribution. The problems are often exacerbated when production centres are located far from the urban areas where demand for farmed fish is concentrated.

55. Today's global market for fish and fishery products has become so competitive that products with mediocre quality have little chance in international markets. Market diversification is essential to take advantage of better prices thereby optimising one's export earnings.

56. Availability of up-to-date market information has favoured exporters' ability to diversify their markets. Trade support agencies such as National Chambers of Commerce, Export Promotion Councils, Fish Exporters' Associations, etc., should be encouraged to set-up Market Information Centres with the aim of providing the aquaculture industry up-to-date information on: i) fish commodity prices, ii) market trends, iii) trade opportunities, iv) tariff structures, v) directory of fish importers, etc.

57. In an effort to develop fish exports, trade promotion campaigns are encouraged. These should include demand surveys in target markets, organization of buyer/seller meetings and participation in trade fairs. The demand surveys in target markets will seek to assess market size, tariff and non-tariff structures, import regulations and procedures, labelling requirements, transport options, key importers and market prospects.

58. In many parts of sub-Saharan Africa, women operators dominate the processing and marketing of farmed fish in the domestic market. Efforts aimed at improving processing and marketing activities within the aquaculture industry should therefore be focused on women operators. The support should centre on providing: i) credit to expand and improve their activities, ii) training to enhance their processing and marketing skills (improved smoking and drying techniques, promoting the use of ice, etc.) and, iii) training in basic book-keeping and management skills.

59. Fish farming in sub-Saharan Africa has been receiving increasing attention over the past decade. Commercial farming involving semi-intensive and intensive methods are gradually gaining grounds. Fish farmers are increasingly using formulated feeds, adopting high stocking densities and improving yield per hectare.

60. Tilapia, catfish and carp top the list of cultured finfish in sub-Saharan Africa. The other species of high commercial importance farmed in the region is shrimp (P. monodon, P. indicus). Fish farming initiatives in the region seek to concentrate farms in strategically advantageous locations, enabling economies of scale in harvesting and processing as well as enhancing efficiency in supplying fish seeds, feed, and other inputs. One of the lessons learned from past experiences is to locate farms close to urban centres with easy access to markets. The social benefits of aquaculture ventures sited in remote and dispersed locations therefore have to be evaluated against the economic disadvantages.

61. As economies of most sub-Saharan African countries continue to deteriorate, consumers are finding their purchasing power steadily eroding. This is having a negative impact on domestic demand for farmed fish. The majority of consumers in sub-Saharan Africa are now switching from farmed fish to cheaper alternatives like sardine - kapenta, dagaa (for Eastern and Southern African countries) or sardinella, anchovy, mackerel (for Western and Central African countries). Domestic markets for farmed tilapia still remain good in the region. In contrast, farmed shrimp is generally targeted to the export markets.

62. An effective take-off or expansion in the aquaculture industry in sub-Saharan Africa calls for availability of ready markets. With regard to domestic markets, close proximity of farms and easy access to urban centres are essential. Concerning export markets, the availability of air cargo space or alternative chartering arrangements should be well assessed prior to making the investment decision. Product quality, regularity in supplies, high production efficiency are all essential ingredients to ensure a successful aquaculture venture.

63. To boost private sector investments in aquaculture in sub-Saharan Africa, the investment climate should be conducive enough to attract both foreign and local capital. Investment codes should therefore make provision for various investment incentives including: i) tax-exempt status on capital equipment; ii) tax holidays for commercial fish farmers for up to the first five years of operation, iii) tax rebate on corporate profits; iv) repatriation of foreign exchange earnings; v) immigrant quota for expatriate technical staff.

64. In order to facilitate export trade, sub-Saharan African countries need to negotiate bi-lateral trade protocols in potential export markets. Where possible, governments are encouraged to co-ordinate common positions in multilateral trade negotiations.

65. Production strategy should be designed in such a way that regularity in supplies is ensured. This is particularly true for producers who target the export market. After price and quality considerations, importers look for regular supplies. For producers who are targeting the domestic market, production strategy should be designed so that harvesting coincides with the "lean fishing season".

66. High quality standards have to be maintained if the fish farmer is to compete successfully on both the domestic and export markets. From harvesting through handling and processing, ice should be used. Product specification and presentation are important parameters for sales in export markets.

67. Limited air cargo capacity has impeded the development of fresh fish export trade in sub-Saharan African countries like Mauritania and Namibia. For the countries under review, direct air links to the EU and US are less developed for Mozambique, Madagascar, Zimbabwe and Zambia.

68. Drawing on experiences of the Malagasy farmed shrimp as well as the Zimbabwe farmed tilapia industries, the association of external partners has not only benefited the farms technically but also enabled them to have easy access to export markets. These farms sell their products in the EU and Japanese markets using the existing network developed by their partners. Whenever possible, potential fish farmers are encouraged to seek technical and commercial partnership.

TECHNICAL CONSULTATION ON LEGAL FRAMEWORKS AND ECONOMIC POLICY INSTRUMENTS FOR SUSTAINABLE COMMERCIAL AQUACULTURE IN AFRICA SOUTH OF THE SAHARA

Arusha, Tanzania, 4-7 December 2001

MARKETS AND TRADE OF COMMERCIALLY FARMED FISH AND SHRIMP FROM SUB-SAHARAN AFRICA

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