Key factors necessary for the development of a value-added cowpea subsector in West Africa: The case of cowpea flour

Miriam Otoo, Purdue University

Abstract

The development of new subsector markets in agricultural commodity chains such as cowpea flour markets is of paramount importance for poverty alleviation and economic development in West Africa. While the technical expertise exists, industrial processing of cowpeas remains largely nonexistent in West Africa with newly developed cowpea-based products such as cowpea flour confined to laboratories and rarely reaching the point of commercialization where they might alleviate poverty. Thus, the major objective of this study was to identify the key factors necessary for the development of the cowpea flour industry. First, the economic importance of the cowpea-based street food sector in West Africa and implications for value-added processing of cowpeas were examined. The focus of this study was on a common cowpea-based product – "kossaï." Next, a contract theory framework and experimental methods were employed to examine the business dynamics and informal contracting agreements between kossaï vendors and their key input suppliers - cowpea grinders. Additionally, the potential demand for cowpea flour by kossaï vendors was assessed using a non-hypothetical real purchase decision mechanism. Three key results were found in this study. First, the cowpea street food sector is a vital component of the cowpea value chain and is important for poverty alleviation and economic development. In particular, kossai vending represents an important source of income for women with low levels of literacy that they spend on food, medicine, savings and school supplies to support their families. Additionally, significant quantities of locally-produced cowpea grains are used in the preparation of kossaï which create market linkages that promote domestic agricultural production. Second, kossaï vendors face significant business challenges related to opportunistic behavior of their key input suppliers – grinders. Informal contracts characterized by varying degrees of contractual incompleteness and relational incentives were found to be important mechanisms used by the kossai vendors to address their business challenges. Providing evidence that supports the theory of "strategic ambiguity," kossaï vendors were found to have a preference for highly incomplete contracts which allowed them to self-enforce contract agreements, though these were associated with weaker pre-contractual incentives. Relational incentives also helped kossaï vendors mitigate grinder opportunistic behavior and decrease ex-ante transaction costs as long-term kossaï vendors were able to successfully negotiate and implement highly incomplete contracts that motivate high-quality grinding service and were associated with relatively lower contract payments. Third, a demand exists for cowpea flour by kossaï vendors, who are willing to pay a price inclusive of production costs and a 20% retail margin. Willingness to pay values were higher for vendors operating in more affluent neighborhoods, those using the traditional wet milling processing technique, those with limited grinding access and medium and large scale vendors. These results provide pertinent demand and market segmentation information that will be useful in the commercialization of cowpea flour. The implications of the development of value-added agricultural products for hunger and poverty alleviation cannot be overemphasized. This work has shown that understanding the organizational structure of agricultural commodity value chains is imperative to moving newly-developed products from laboratory shelves to the marketplace, thus creating an avenue for research to have direct impact on improving the livelihoods of the poor.

Degree

Ph.D.

Advisors

Fulton, Purdue University.

Subject Area

Agricultural economics

COinS