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Strategies for commercialising smallholder agriculture

Elizabeth Sibale, a Malawi-based consultant at the Food and Agricultural Organisation (FAO) of the United Nations, looks at how smallholder agriculture in Africa can be commercialised.

Smallholder farmers

African smallholder farmers need to be linked to big buyers.

The importance of agriculture in sub-Saharan Africa cannot be underestimated. Over 70% of the arable land is under smallholder agriculture. The sector employs more than 70% of the workforce, and is the primary source of income for rural populations. It contributes significantly to foreign exchange earnings and accounts for more than 35% of national gross domestic product.

It is therefore important that smallholder farmers are supported to modernise their operations in order to grow viable business enterprises that can generate enough income to sustain the needs of their households. Linking farmers to the market should be a priority for any agricultural programme that aims at poverty reduction.

Challenges to market linkages for smallholder farmers

Initiatives to develop market linkages for smallholder agricultural production have faced a number of challenges. Smallholder farmers are typically poor and practice low input agriculture, not by choice but due to poverty. This results to low productivity and production. Big buyers find it problematic to deal with this category of farmers due to inconsistency and unpredictability of supply. Encouraging farmers to organise into viable producer groups could provide some solutions to these challenges. It is therefore important to build capacity in group governance as well as transparency for group leadership, so that they can effectively manage and administer the groups’ affairs. Other challenges to market linkages include:

Transport infrastructure Poor transport infrastructure makes marketing of agriculture produce uneconomical. Most productive areas are remote and not well connected to the main market hubs. Transport to and from these areas is very expensive for transporters as they have to take wear and tear costs into consideration. Governments can accelerate development of smallholder commercial agriculture production by upgrading feeder roads.

Lack of market information Due to the scattered and unorganised nature of smallholder agriculture and lack of communication tools, most farmers are ignorant of potential markets. They rely on extension workers, where they exist; otherwise it is by word of mouth, which in most cases the information is distorted or inaccurate. It is therefore important that a good information system is developed for smallholder farmers so that they can make informed decisions for their enterprises.

Climate change Climate change poses a big threat to agricultural production, more so for smallholder agriculture, which is mostly dependent on rainfall. Changing rainfall patterns is a challenge to consistent production and productivity. Any interventions that will mitigate the impact of climate change on agricultural production should be mainstreamed in any initiative that promotes commercialisation of smallholder agriculture.

Considerations for linking producers to markets

Initiatives intending to support farmers to increase production for the market should ensure that the following issues are considered during the planning stage:

1) Market – Is there a market? How big is the market? What are the specifications for the product to be sold?

The majority of agro-processors seem reluctant to deal directly with farmers due to negative experiences in the past where small suppliers have failed to honour obligations. Bulking and warehouse receipt systems would help address some of these challenges. The key is to develop reciprocal relationships of mutual trust among players for the development of sustainable, longer-term linkages.

Flow of information, transparency and accountability are key elements. Promotion of dialogue through national platforms, to facilitate linkages between producers, processors and buyers is vital for the growth of agribusiness and development of associated value chains.

2) Production – Where is the production in relation to the market? What is the current level of production? What is the capacity of farmers to produce? Is there scope for expansion?

One critical challenge in commercialisation of agricultural commodities has been inadequate production to meet industrial demand. Issues such as inadequate availability of produce due to scattered, small-scale production; low productivity and competing uses for food and the market, need to be addressed. Engaging more organised, commercially oriented farmers and adopting better production technology would contribute to improvements in the level and consistency of production.

3) Organisational capacity Are farmers organised? How best can they be organised?

Another challenge is to create a business culture amongst farmers so that they are able to relate production to the needs and expectations of the market. The capacity of farmer groups in issues of governance, planning and group marketing is very limited. There is a need to strengthen this capacity, moving towards the formation of more structured organisations with clearly defined mandates.

4) Coordination of development initiatives

African countries have witnessed a plethora of agribusiness development initiatives over the years. However, coordination has often been weak, resulting in duplication of activities and less than optimal allocation of resources. Improved coordination of agribusiness development initiatives is vital in order to create synergies, share lessons and good practices, and optimise resource allocation.

National platforms have a role to play in coordination, raising awareness and dissemination of relevant information. However, experience shows that sector development programmes have largely been spearheaded by public institutions with little involvement of the private sector. It is therefore essential that increased effort is made to engage commitment of the private sector in order to develop both the demand and supply sides of value chains.

5) Supportive policies

There is a need for concerted action to raise awareness amongst policy makers and the private sector on the agro-processing potentials for various commodities, and advocate for policy changes that will expand markets and attract investment. Some of critical areas requiring support are:

a) Reduction of taxes on processing equipment. In many countries, access to agro-processing equipment is a key challenge in terms of cost and availability. Due to lack of local expertise, processors are forced to import equipment. This increases the cost not only through transport, but through the high import duties imposed by governments. Reduction of import duties would facilitate access to processing equipment and encourage investors to set up processing plants.

b) Establishment of investment funds. Lack of finance for investment in small-scale processing facilities has been a major drawback to the development of the agro-processing. The establishment of a fund targeting the development of agro-processing industries would assist many small-scale entrepreneurs.

c) Equitable distribution of government subsidies amongst staple crops. Currently, subsidies are skewed towards selected crops such as maize, making it difficult for other crops to compete favourably. It is therefore necessary that governments provide more balanced support.

d) Reliable crop production estimates. Official production estimates in most African countries are often contentious. Reliable estimates would do much to boost the confidence of potential investors and assist policy makers to design appropriate policies.

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