Ethiopia: LEGAL AND REGULATORY REVIEW FOR A COMPREHENSIVE CONTRACT FARMING LEGAL FRAMEWORK TO SUPPORT VALUE ADDITION AND AGRO-PROCESSING IN ETHIOPIA - Ethiopia
Terms of Reference
Alliance for a Green Revolution in Africa (AGRA)
REQUEST FOR PROPOSALS: LEGAL AND REGULATORY REVIEW FOR A COMPREHENSIVE CONTRACT FARMING LEGAL FRAMEWORK TO SUPPORT VALUE ADDITION AND AGRO-PROCESSING IN ETHIOPIA
Consultancy task: to carry out policy and legal reviews and analyses to build a case for a contract farming legal and regulatory framework that supports value addition and agro- processing in Ethiopia
The Alliance for a Green Revolution in Africa (AGRA) is a not-for-profit organization formed in 2006. AGRA’s mission is to catalyze agricultural transformation in Africa through innovation- driven and sustainable productivity increases and access to finance that improve the livelihoods of smallholder farmers.
AGRA is implementing a five year Micro Reforms for African Agribusiness (MIRA) project in Burkina Faso, Ethiopia, Ghana, Nigeria and Tanzania. MIRA will provide these governments with access to high quality local and international technical assistance for identifying, prioritizing and reforming specific agricultural regulations that currently deter or limit private investment in agribusinesses operating in smallholder agricultural value chains. In doing so, the MIRA project will help to build the capacity of African governments to continuously review and reform regulations that unintentionally limit private investment in local agribusinesses operating in smallholder value chains.
In Ethiopia, MIRA and government counterparts have identified and prioritized 4 reforms:
• Develop and approve a comprehensive contract farming legal framework that supports agro-processing and value addition
• Revisit import duties on agricultural machinery spare parts, irrigation equipment, and animal feed ingredients and compound feeds, and avoidance of double taxation on animal
• Develop and approve Guidelines/Directive for streamlining of policy processes under which cereals export restrictions are introduced and revoked
• Develop and approve Directives and Technical Guidelines to implement the Seed Proclamation and Council of Ministers Seed Regulation
As part of its support to the Ethiopian Agricultural Transformation Agency (ATA), AGRA wishes to undertake a series of economic assessments and legal reviews to build the case for various reform options. The reviews are intended to help the ATA and its Transformation Council, and other relevant government agencies in articulating policy, legal, and regulatory review options.
Context for this consultancy work
As stated above putting in place a comprehensive contract farming legal and regulatory framework to support agro-processing and value addition is one of the policy reform area that MIRA supports in Ethiopia.
The Government of Ethiopia, and especially the ATA has been promoting contract farming/out grower schemes as a means to increase yield, reduce post-harvest loss and create strong market linkages by connecting local producers with reliable buyers that typically provide farmers with input and extension services for a reliable supply of high quality output.
The current Government of Ethiopia five years plan the second Growth and Transformation Plan(GTP 2)(2015-2020) reemphasizes on commercializing smallholder agriculture and the importance of contract farming/out grower schemes as one means of linking smallholder farming with reliable and big buyers.
The Agricultural Commercialization Cluster (ACC) and Private Medium and Large Scale Farm Development Program are two major ongoing GTP 2 initiatives to leverage contract farming/outs grower schemes for increasing market linkages.
ACC is an ‘anchor’ Agricultural Transformation initiative for the s GTP 2 that focuses on measurable impacts on smallholder farmers working on specific high priority commodities in clearly identified geographies. Private Medium and Large Scale Farm Development Program aims to link commercial farmer with smallholder farmers. A strong legal and regulatory environment (including enforcement mechanism) for contract farming is one of the building blocks for the success of these two initiatives and strengthening contract farming /out grower scheme market linkage model in Ethiopia.
The Ethiopia Commodity Exchange (ECX) law requires that mandated commodities can only be traded in the ECX trading floor and must be exported in a prescribed timeframe. The Coffee Regulation (Council of Ministers Regulation No. 161/2009) and the Sesame and White Pea Beans Regulation (Council of Ministers Regulation No.178/2010) forbid agro-processors of coffee, sesame and white pea beans buying these commodities outside of the ECX floori . There is some regulatory uncertainty whether processors adding value to their products can source from ECX) mandated products such as sesame, coffee and pea beans through contract farming. This regulation affected especially the more developed sesame processing industry that was barred from sourcing raw material from contracted smallholder farmers they had developed working relations. Following a serious consultations between Government and industry representatives, the then Ministry of Agriculture and Rural Development adopted a Sesame and White Pea Beans Transaction Execution Directive allowing sesame processor to source sesame through contract farming if the processor is also operating a nucleus farm nearby the contract farmers. Similarly, some sesame processors who do not have their own farm have secured a waiver by a letter from the Prime Minister’s office to regional authorities to set up out grower schemes and purchase the sesame directly from the contracted farmers. The decision was made by the National Export Coordination Committee, which is chaired by the Prime Minister.
The current situation is untenable on multiple levels; A Ministerial Directive or a letter from the Prime Minister’s office cannot, in a strict legal sense, override a Council of Ministers Regulation (in this case Sesame and White Pea Beans Transaction Council of Ministers Regulation No. 178/2010). If this Directive or letter were challenged in court it would most likely not be upheld; the requirement that the processor also becomes a producer in the same area as the contract farmers puts an unnecessary burden on processors and limits the potential location for contract farming to areas where there is land available.
Contract farming has not been that much an issue for other commodities that are mandated to be traded at ECX floor including coffee in the past since most Ethiopian commodities are exported unprocessed. However, there is currently more interest for contract farming in the coffee sector in particular as more actors get into coffee processing business. And hence, the issue should be addressed to facilitate the development of a local coffee processing industry.
Furthermore, this is a timely issue as GTP 2 for agriculture gives greater emphasis on agro processing and value addition and at the same time there is a proposal to expand the number of ECX mandated crops and the restrictions on contract farming could become applicable on other crops including staple food crops unless the legality for processors irrespective of whether they have their own farm to purchase or not ECX mandated commodities through contract farming is clarified and expanded to other commodities too.
ATA has done extensive work in identifying main challenges in contract farming in Ethiopia and has developed a draft contract farming policy/law.
Objectives of the Consultancy
The main objective of this consultancy is to:
• Undertake in-depth analysis on how current policies and legal frameworks might be affecting agro-processors in sourcing from smallholder out growers, ECX, and cooperatives
• Undertake legal analysis of whether the existing legislations in Ethiopia including the Civil Code of 1960 are adequate enough to govern emerging issues in contract farming. If no, whether this inadequacy could be addressed by amending existing legislations or there is need to pass new separate contract farming legislation. In the case of the former, identify the specific legislations and relevant provisions and draft amendment to same, and in the case of the later draft a contract farming legislation using the ATA developed contract farming policy/legal text as a basis
• Undertake a thorough analysis of provisions of the draft contract farming policy /legal text developed by the ATA to make sure that it includes provisions that clarify and expand the legality for processors to purchase commodities, including ECX mandated commodities, through contract farming and recommend how the legal framework should be amended to facilitate agro processing and value addition; and;
• compare and contrast the ATA developed contract farming policy/legal draft text with best practices from other countries’ contract farming laws; and produce a report with actionable recommendations including draft legislation(s)
Scope and approaches of the consultancy
The contractor shall undertake an in-depth analysis of existing policy and legal frameworks that govern the transaction of commodities, including ECX mandated commodities, and the provisions of ATA draft contract farming policy/law text, at minimum to determine:
• To what extent existing policies and legal frameworks affect processors to source raw materials from ECX and/or directly from smallholders through contract farming
• Whether the ATA draft contract farming policy/legal text adequately addresses the constraints of processors to source raw materials from ECX and/or smallholders through contract framing
• Whether the ATA draft contract farming policy/legal text is broad enough to facilitate the sourcing of raw materials by processors, in particular as additional commodities are mandated to be traded through ECX. If not, rewrite the draft policy/legal text to fill this gap
The contractor shall undertake the necessary legal analyses using the following approaches:
• Desk review of legal and regulatory texts/documents and relevant literature including the work that has been done by ATA Commercial/Contract Farming Team and Core Analytics Team
• Interviews of key informants including key policy/decision makers, agribusinesses, farmers organizations, regulatory authorities and development practitioners
• Compare and contrast provisions of the draft ATA Contract Framing Policy/Law with contract farming legislation of other countries such as Kenya, Vietnam, India, Guatemala, Zimbabwe, and any other countries that have legal framework relevant for Ethiopia
• Review of provisions of the draft ATA Contract Framing Policy/Law and propose specific amendments
The contractor is also expected to carry out the following tasks:
• Present a kick-off meeting to clarify expectations and agree approach;
• Familiarize consultancy work team with salient details of the proposed consultancy
• Identify and review relevant legislations relevant to proposed reforms;
• Carry out the policy and legal analysis
• Present initial findings to the ATA and AGRA MIRA country team;
• Revise and complete legal, and reviews in line with feedback;
• Prepare a written report summarizing findings for the analysis ;
• Present findings to the ATA and AGRA MIRA country team and relevant stakeholders
Initial presentation of findings to ATA and AGRA MIRA country team of a written report based on in-depth analysis of how the current policy and legal environment is affecting agro- processors, particularly on sesame and coffee processors, that do produce or not their own raw material input in sourcing from ECX or from smallholder farmers through contract farming/out grower arrangements. As more commodities are mandated to be traded through ECX, it is going to seriously constrain the growth of agro- processing and value addition in Ethiopia; how the legal framework should be amended to facilitate agro processing and value addition; and undertake through analysis of provisions of the draft Contract farming policy /legal text developed by the ATA to make sure that it includes provisions that clarify and expand the legality for processors to purchase current and future ECX mandated commodities through contract farming; compare and contrast the ATA developed contract farming policy /legal draft text with best practices from other countries contract farming laws; and draft new legislation(s) and/or amendment to existing legislation(s)
Final presentation of findings (to ATA ,AGRA MIRA country team, and relevant stakeholders
All deliverables should be succinct but informative, and key points should be easily understandable to a wide range of stakeholders. Deliverables should be submitted in English
AGRA wishes to contract a law firm or team of lawyer(s) and agricultural development practitioner(s) with the following skills and qualifications:
• Extensive experience in the context of enabling legal and regulatory environment for agricultural development in Africa preferably in Ethiopia
• Previous experience of conducting legal reviews of regulations and/or legislation in agricultural policies, laws and regulations
• Good understanding of relevant legislations and agreements affecting agricultural regulation in Ethiopia
• Ability to present complex problems in easy-to-understanding language
• Understanding of the policy, legal, and regulatory framework for Ethiopia Commodity Exchange system and contract farming
• Experience of working with the ATA or any other government agency(ies) with agriculture sector mandate
• Country presence in Ethiopia
Duration of the assignment: 3 months
Reporting arrangements: The consultant will report to AGRA’s Head of Policy and Advocacy throughout the engagement period. The consultant will also directly report to ATA/ MIRA Ethiopia team and will provide a biweekly updates on progress to a steering committee to be consisted by ATA.
Proposal submission: Taking into account the TOR, the consultancy candidate should submit a proposal containing the following elements:-
• Understanding of the assignment
• Outlining past experience of the firm/ consultant (Please provide a minimum of two concrete samples of similar work done for other organizations)
• Methodology proposed for the assignment (including tools proposed for the assignment)
• Work plan that includes clear timelines for the assignment
• Summary resume(s) of key staff who will work on the AGRA account
• Consultancy fee for undertaking the assignment and budget breakdown