As interest in African agriculture grows, governments, NGOs and multinationals are working with agribusinesses to link farmers with consumers. Food giants including General Mills and Nestlé have initiated projects aimed at improving productivity and providing farmers with greater market access, training and technology.
“We’re addressing a more systemic need by helping companies in Africa improve food processing operations while producing high quality, nutritious and safe food at affordable prices,” says Ken Powell, chairman and chief executive officer of General Mills.
It is in everyone’s interests for the continent’s smallholders to have more access to better tools and skills, as a recent World Bank report points out. Growing Africa: Unlocking the Potential of Agribusiness says Africa’s farmers and agribusinesses could create a trillion dollar food market by 2030 if they can expand their access to capital, electricity, technology and irrigation to grow high-value nutritious foods.
Jeff Dykstra, CEO of Partners in Food Solutions, a non-profit set up by General Mills, says his organisation has built on its founder’s R&D capacity. He explains: “We’ve taken advantage of that core knowledge and shared it with the small and growing food processors. We believe they will be an engine for driving more reliable demand from farmers, as well as the engine to put healthier, better, more formal products into the marketplace.”
Aggregation
Mr Dykstra can see the improvements as smallholders come together. “In Zambia, I used to buy peanut butter that came from South Africa across two inefficient borders at $8 a gallon for fuel. Yet 2km from where I shopped there was a peanut farm, but that ability to locally process wasn’t there,” he says. “One of the companies we worked with in Zambia now produces peanut butter using locally sourced groundnuts, and sells those through Spar, Shoprite and other retail outlets. It sources from about 45,000 smallholder farmers, and it’s an example of how everyday knowledge that multinational companies have can be passed on to these companies and really drive improvements and new product development.”
The Syngenta Foundation for Sustainable Agriculture is also helping smallholders work together. It has helped establish outgrower schemes for rice production in three locations in West Africa, and is set to launch a similar scheme for vegetables and potatoes in Kenya.
“We organise farmers in groups, link them with buyers, and help them to increase their rice production,” says Fritz Brugger, Syngenta’s head of agricultural support services. “We bring together the different players, bring in technology for the right agronomy, and bring in our Farmforce mobile business solution – which is designed to manage outgrower schemes with smallholder farmers – to make it all work.”
Supply chain
The next problem is market access. Poor infrastructure and communications often make it hard for rural smallholders to connect with markets, providing one of the biggest bottlenecks to their development – but various interventions are being trialled. The trade and institutions division of the International Food Policy Research Institute is focused on two areas: improving contract farming (where production is carried out through an agreement between buyers and farmers) and reducing bottlenecks for collective marketing. Its ‘Contracting Out of Poverty’ project is already up and running in several developing countries, including Tanzania. The aim is to provide smallholders with access to dynamic markets through efficient contract farming arrangements.
Eduardo Maruyama, research coordinator for the markets, trade and institutions division at IFPRI, explains: “In Tanzania, the project studied the contractual relationship between the Maasai women in the Morogoro region and a local milk processing firm. Milk in the country comes mainly from indigenous cattle and production is highly seasonal. The firm found that farmers could not get a consistent supply of milk and that they often sold to informal traders who offered high prices during the dry season. The project tested whether adding a clause that rewarded farmers for sticking to their contract would increase the consistency and amount of milk produced. Farmers were randomly selected to receive a reward for delivering milk regularly. They were also given an increasing payment per additional litre, to reward both loyalty and production. Results show that the incentives reduced reneging and that the total supply of milk to the firm increased.”
The organisation has also set up the ‘Working Together for Market Access’ project to improve the lives of smallholders. It aims to build market access for the members of rural producer organisations in Senegal and Uganda.
“In Senegal, we designed a field experiment implemented in collaboration with farmer groups involved in the joint commercialisation of their agricultural product,” explains Mr Maruyama. “We invited selected members of these groups to attend a collective marketing training event, varying which and how many members of each group attended. Our results indicate that the training has a strong and positive effect on the famers’ willingness to risk their production through collective marketing.”
ICT and mobile money
ICT and mobile money are also playing an increasingly important role in connecting smallholder producers to buyers. “Mobile technology enables access to vital information, such as authentic market prices for crops, daily weather reports and agricultural advice and news,” says Jawahar Kanjilal, vice president and global head of Nokia Life. “All this can help reduce dependence on middlemen, by helping farmers make better, more informed choices.”
ICT has made a real difference to the work carried out by Partners in Food Solutions. “The big breakthrough for us was being able to do 95 percent of our work remotely. This has enabled us to think about ultimately working with hundreds of companies across the continent to improve their capacity and ability to build their businesses,” Mr Dykstra says. “Connectivity means we get pictures from food processors that are 100 miles from a paved road showing us a particular problem or challenge – and that simply wouldn’t have been possible even five years ago.”
Developments in the sector are also helping farmers improve the quality of their produce. “One of the challenges is that it can be difficult to control production through smallholder farms and ensure they comply with standards,” says Mr Brugger. “Syngenta’s Farmforce technology enables aggregators to have real-time information about what is going on in the field. And that can increase internal control systems and allow much better management of schemes.”
Beyond the bottom line
Donors are also helping local farmers to improve their environmental and social performance. As Cynthia Donovan, deputy director of the Feed the Future Legume Innovation Lab, points out: “Donors can play a crucial role in ensuring that information and analysis is available to private companies, especially in new environments. Donors can continue to fund research that offers options and highlights win-win situations…Cost-effective solutions to water and air quality problems can be sought as private and public interests work together.”
She adds: “Donors have invested – and continue to invest – in farmer organisations. They are providing assistance such as literacy, nutrition and productivity training to enhance the well-being of farming families, while improving the potential for companies to work with farmers at lower cost. This relationship between donors, NGOs, private companies and farm families takes time and resources, but it also contributes to long-lasting change.”
Access to finance is still a challenge for smallholders. “As yet, it is still difficult for smallholders to access credit in many countries,” says Ms Donovan. “In Mozambique, for instance, outgrower schemes in which credit for inputs is tied to commodity sales at harvest are still one of the most common ways for farmers to get access to credit, but that is only viable for a few selected cash crops. Small farmers do not have the collateral required for traditional bank loans, and without crop insurance, using land or other assets if they do have them is very risky.”
ICT and mobile money are becoming valuable solutions in this area. “Mobile money is the next key enabler for farmers in the supply chain. It can help farmers bank easily and right from the place of trade. It brings them within reach of governments who can provide financial support via direct disbursements,” says Nokia’s Mr Kanjilal.
“ICT may provide some low-cost options, leapfrogging traditional bricks and mortar banks. The use of mobile wallets may be one way for rural farmers to establish financial savings programmes in the absence of banks and other financial institutions,” Ms Donovan agrees. “In Kenya, M-Pesa gives rural farmers the possibility of receiving funds for inputs from their urban relatives via mobile phones, without the physical presence of a financial institution. These types of innovations may be the way forward for rural finance in Africa, at least for smallholders.”
Social investment is also an interesting source of funding. For example, Root Capital began investing in Rwanda’s Dukundekawa coffee cooperative, also known as Musasa, in 2005. Since being set up in 2004, Musasa’s membership has grown from 300 to more than 1,800. In 2005, based on Musasa’s contracts with leading speciality coffee buyers, Root Capital lent the cooperative $90,000 to purchase raw beans from its members. When the processed beans were shipped and buyers had sent their payment, a portion of the proceeds paid off the Root Capital loan. Since then, Root Capital has provided Musasa with more than $1m in financing.
Kenya’s Wilmar Flowers, which supplies flowers grown by small- and medium-sized farms, has developed thanks to funding supplied by the African Agriculture Capital Fund. The funds pumped into Wilmar Flowers mean it has been able to double its supply and increase profitability by boosting the number of smallholders from which it sources produce. USAID has also supported the company through its Kenya Horticulture Competitiveness Program, which works to strengthen the cut flower value chain, linking smallholders with reliable markets.
Speaking in 2012, Wilmar managing director Wilfred Kamami, said: “USAID’s horticulture programme has helped us to develop an outgrower scheme that can be reliably scaled up. The programme has helped us to train the farmers we have under contract to supply a variety of flowers that meet the highest phytosanitary and quality standards. USAID facilitated credit through Equity Bank so that our smallholder partners could get loans to buy improved technologies such as shade nets, drip irrigation systems, soil analysis, improved varieties, and other farm inputs that enable them to supply flowers that meet the markets’ demands.
Wilmar’s experience is a testimony to the benefits African producers are beginning to enjoy as they look to a broader range of support networks and partners.