Overcoming the limitations of membership based organizations

Like other arrangements that make sense on the surface, African agriculture and rural development efforts are characterized by membership-based organizations. These range from farmer unions and diverse sizes of cooperatives to chambers of commerce. While coming together for collective bargaining purposes makes a lot of sense, members should be aware of several blind spots. After many years of existence, some African agricultural membership-based organizations are beginning to realize that success is no longer just about achieving high yields and winning prizes at agricultural shows. It is becoming more about adaptation and resilience.

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That calls for more investment in actionable knowledge in order to overcome assumptions that keep popping up. For instance, a membership focus assumes farmers have the same needs. That results in too much pressure being exerted on the organization with everyone expecting it to provide all the answers.  This creates a dependency syndrome where members expect the organization to look for the market, finance and meet individual requirements of each member. Besides limiting innovation, over-reliance on a membership organization reduces individual members’ creative potential. Most agricultural membership-based organizations struggle to adequately address different needs of their members.  For instance, farmers at various levels of production capacity and experience receive the same short message service through the same channel, irrespective of commodity complexities.

 

Over-reliance on the secretariat

Agricultural membership organizations also tend to over-depend on the secretariat. There is an assumption that the secretariat has all the knowledge yet the most important knowledge and experience is   dispersed among individual members. This is worsened by the fact that most farmer organizations do not adequately characterize farmers by capacity, age, gender, experience, knowledge and other important parameters which should inform targeted service delivery. As a result, information is not properly characterized to meet different needs. In terms of matching services to farming regions, there is also too much generalization of information yet members in high rainfall areas have different needs and experience from those in low rainfall areas.

Lack of growth paths

In addition, most membership based organizations do not have growth paths or weaning strategies which should see members graduating into some kind of upward social mobility.  New members need different knowledge and capacity from the old members. There should be a knowledge-driven graduation mechanism.  Membership should not just be subscription based. In the absence of clear focus, most farmer unions have limited knowledge sharing platforms that take into account members’ different stages.  Consequently, many farmers waste time in training programmes that are not relevant to their context.

 Potential role in aggregating commodities

The most important role that can be fulfilled by agricultural-based membership organizations is aggregating diverse commodities and looking for markets to support economies of scale. That should be the basis of organized production and meeting supply requirements of different specific markets.  When properly organized, farmer unions should be able to quickly see commodity over-supply, shortages and gluts in their members. They should also be able to build business models together with financial institutions in ways that reveal appropriate collateral.  Business models should be the ones constituting collateral as opposed to individual assets. Farmer unions should also assist in national data and evidence collection through profiling each member adequately.  If 70% of farmers are members of farmer unions, information on production, household consumption, sales and surplus for the market should be readily available.  Simple tools for collecting data should be introduced as part of knowledge management.

Combining a membership drive with market-driven models that take into account food security could be the right approach in the new economy.  Ultimately, membership organizations should be able to open local, regional and international markets. Rather than leaving everything to local authorities, farmer unions should mobilize resources for building market infrastructure that can benefit their members.  That is how a warehouse receipt system can become easy to establish, with members gaining capacity to set up business models for particular commodities.  Farmer unions should also be able to support commodity exchanges between their members in different regions – livestock from Gwanda with Potatoes from Nyanga.

Challenges with the proliferation of farmer unions

In Zimbabwe and other developing countries, the proliferation of farmer unions has destroyed the natural culture of communities of practice.  Due to poor characterization, different classes of farmers are found in all farmer unions where benefits are not properly customized. This is mimicking the break down between retailing and wholesaling that has become common place over the past decades.  Ideally, there should be a transition mechanism that allows members to graduate from one farmer organization to another or from one chamber of commerce to another at a higher level.  That way, clustering becomes easy.  It is counter-productive to have four or five farmer unions scrambling for members in one community.  Given that members in the same community often have the same characteristics, existence of many farmer unions creates silos.  In such situations, a membership focus fragments commodities and makes it difficult to aggregate commodities for the market.  It also fuels disorganized production and information asymmetry.  Farmer unions should work together in consolidating curricular informed by reliable farmer characterization.

Towards appropriate funding models

When agricultural membership organizations are properly organized, it should be possible to come up with appropriate funding models where funders work directly with farmer organizations in a revolving fund scheme with local banks as fund managers.  Rather than the current scenario where individual farmers hassle with banks to access finance, farmer organizations should become guarantors whose role is to vet and recommend their members for funding. In the absence of diverse ways of characterizing farmers and articulating value, financial institutions fail to see the folly of using a farmer’s house worth $100 000 as collateral when the farmer only wants to plant a hectare with inputs worth less than $5000.  A business plan should be enough to unlock finance as opposed to irrelevant requirements.  Membership based organizations should enable financial institutions to experiment with diverse progressive models.

Turning agricultural shows into marketing shows

If African agricultural membership organizations were really strong, they would turn national agricultural shows into marketing events as opposed to events where big businesses show their hitech machinery whose price is beyond smallholder farmers. Rather than being a mere window showing what countries are producing, agricultural shows should be marketing shows for diverse buyers who can place orders. Show-casing is not enough without focusing on marketable products, volumes, capacity to supply and price negotiations where diverse buyers can bid for commodities. It does not help to show agricultural commodities when the majority of farmers are stuck with commodities and do not have money in their pockets.

African smallholder farmers have a lot of unanswered questions. Each community has lived with more questions than answers for decades. There are also numerous partial answers which do not provide a complete picture. Data can assist in pointing out trends and minimize cases where potential investors and value chain actors get lost in the weeds. To avoid the scourge of unsolicited messages, agricultural knowledge has to be demand-driven. A lot of farmer statistics and profiles should be collected and consolidated in order to improve characterization.

 

Charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

Responding to narrow margins and slow growth in African agriculture

The fact that African agriculture is beset by narrow margins and slow growth elevates the need to invest in data and evidence. People who get into agriculture expecting quick returns are often disappointed because African agriculture is no longer a one-step dance. Obsession with quick returns is one reason why opportunists tend to congest one or two commodities. Taping into existing and new data will enable investors to unlock value across a range of agricultural commodities and agribusiness models.responding-to-narrow-margins-and-slow-growth-in-african-agriculture

Data and evidence about diverse commodities is becoming more important because lines between agricultural commodities, services and agribusiness ecosystems are blurring. Consumers, farmers and traders are no longer just interested in commodity prices or information services. Instead, they are buying the idea and experience of agricultural ecosystems. This opens opportunities for smart value chain actors who can provide integrated experiences to diverse consumers, most of whom are becoming more conscious about their health.

 Evolving characteristics of informed agricultural entrepreneurs

Given an increase in the amount of information and sources, many farmers and traders now need few rules of thumb rather than a lot of information that ends up confusing them.  Contrary to the widespread notion that the customer is always right, informal markets are revealing the great extent to which many customers learn from traders, farmers and other actors who frequent informal markets.  Since not every value chain actor can possibly know everything, they thrive on trusting other people’s knowledge.  Some of the key characteristics of smart agricultural entrepreneurs include:

  • Very dynamic and responsive to environmental changes.
  • Driven by owners’ characteristics and personality traits.
  • High commitment to succeed because the enterprise is a major source of livelihood.
  • Customer base built on networks, trust and relationships.
  • Customised products and services.
  • Exposed to ‘free‘skills and knowledge transfer for business and products/services improvement.

Beyond facts and figures

From eMKambo’s experience, many farmers no longer need too many facts and figures but solutions to their pain points.  They need information on a just-in-time basis not just-in-case it becomes useful in the future.  Unfortunately, most external capacity building interventions are based on just-in-case knowledge provision approaches on the assumption that communities will use that information when the project comes to an end. Value chain actors are realizing that it is no longer enough to celebrate a few field days. Success comes from drawing on information from different parts of the agricultural sector, generating a complete on how actors engage and retain knowledge as well as customers.

Strengthening knowledge ecosystems

Knowledge management is more than information and technology but extends to building a network of committed people from different persuasions. It does not help for knowledge experts to continue sharing knowledge among themselves. Knowledge mobilization has to be stepped up through communities and that is where indigenous knowledge becomes superior at enhancing social inclusion. Efforts should go into understanding indigenous businesses in rural areas, growth points and high density areas in terms of the calibre of consumers who buy from them.  This can feed into analyses that take into account volumes of commodities going into different markets. Aggregation is about responding to the market and one has to know the end user. Ultimately, creative value chain actors can begin to tease out options for extending periods in which seasonal commodities like sweet potatoes can be supplied for various uses including processing. Tasting the market differently and walking the whole length with different agricultural commodities is a fundamental process in dealing with narrow agricultural margins and slow growth.

Since knowledge generation goes beyond the mandates of many international development organizations, there is need for knowledge ecosystems that bring everyone together. African agriculture cannot afford to continue suffering from poor and fragmented data whose accuracy and accessibility remains questionable, although ICTs are becoming ubiquitous.  When agricultural value chain actors lack insight into the broader context in which agricultural commodities compete, they are less likely to recognize opportunities and threats.  In the absence of robust evidence, part of the agricultural sector such as the seed industry will continue to reach different conclusions about their agribusiness priorities, based on incomplete evidence. The consistence and sustainability of the entire agricultural sector remains a dream in such situations.

Charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

How and why relationships move more food than markets

As containers of knowledge, African agricultural markets continue to inspire, clarify and reorient our awareness. Latest evidence gathered by eMKambo shows how and why the movement of food from farming communities to urban markets is based mostly on relationships as opposed to money. Agricultural markets are not just an endless parade of stories and examples but enlightening ideas that spark immense possibilities. Energizing and empowering agricultural transformation cannot be achieved without seeing and sharing the whole picture. It is through making sense of things together that value chain actors can see the whole ecosystem and start honoring their collaborations.how-and-why-relationships-move-more-food-than-markets

The role of relationships in market penetration

Agricultural commodities do not just penetrate formal and informal markets in a linear fashion. A new commodity begins with entering households where relationships foster adaptive consumption. People in different households share food, seed and other commodities via relationships expressed through gratitude for either paying a visit or hosting a traditional event where relatives come together. From households, appreciation of commodities moves to communities, cities and eventually, to the market. Associated knowledge is also transferred through relationships, emerging from households. This knowledge transition can happen along gender lines – father to son to son-in-law or mother to daughter to daughter-in-law.  Knowledge can also transfer through age – old to young people in a community or through peer to peer food and knowledge exchange.

Although these knowledge patterns are fundamental to the regeneration and sustainability of agricultural ecosystems, they are easier to take for granted.  They remain largely unnoticed to modern commercial mindsets which are becoming used to linear processes like value chains.  The movement of agricultural commodities from households to extended families and to communities cultivates local markets from which external markets can obtain what is available in particular communities. Adaptive consumption takes place from households all the way to markets. That is why most African agricultural commodities are associated with their original sources in terms of production communities.

Relationships as anchors of local markets

Visitors enter new markets through relationships and that marks the evolution of new relationships. Labour markets are also prevalent in most agricultural communities and such services are paid for through commodities whose value is agreed upon by the community. Where a farmer was supposed to go and look for money from a bank or borrow from elsewhere, labour payments are made in the form of commodities.  This reduces pressure from the national monetary system because cash is not involved in every transaction. In most African countries, cash circulation is concentrated in urban centres and that means rural communities have less cash in circulation. Why should everyone who wants to eat food be forced to look for scarce cash when local commodities can easily substitute cash in ways that smoothen the exchange of valuable services and commodities?

Relationships also play a critical role in building various food baskets riding on visits such as rural to rural and rural to urban, all the way to the market. As producers get into markets they build relationships through totems, home areas or through networks built by someone already in the market for a long time.  These relationships drive agricultural transformation.  Given different ecological regions that characterize many African countries, there are many cases where farmers from drought prone areas migrate to high rainfall areas, leaving behind many of their relatives.  Eventually, those left behind create a market for commodities produced by their relatives who will have migrated to high rainfall areas. Seed, crop varieties and livestock breeds are exchanged through visits and these create a market in areas of scarcity.  Relatives in high producing areas also function as a food reserve for their relatives in low production areas. In most cases, commodities kept for relatives do not find their way to the formal market.

Rather than making conclusions on the basis of food that gets into formal and informal markets, it is important to find ways of figuring out volumes of food exchanged through relatives from one community to another.  This practice has an impact on the functioning of formal and informal markets.  Where markets will be expecting consumers to come and buy, relationships will be satisfying more than 70% of consumers’ requirements.  When conducting visits, most people carry a farmer’s eye.  A livestock farmer is on the look-out for good livestock breeds and same with a crop farmer.  Farmers visiting their relatives like sons, daughters or in-laws in new communities use their local relatives to access good breeds and crop varieties from new communities. A community usually develops its own market in the local community.  Through relationships, some commodities penetrate areas where they didn’t use to exist.  For instance, Avocados from Makoni find their way to Chivi districts of Zimbabwe, same with mangoes and other crops making in-roads into new areas.

Unfortunately, instead of supporting these natural and organic processes of food and knowledge exchange to unfold and continue, financial institutions and development organizations tend to intervene superficially when relationships and local markets can do a good job. Rather than spoon-feeding farmers and forcing them into narrow value chains, development agencies and financial institutions should carefully examine and support relationship-based food demand and supply models. They can also usefully support exchange of commodities between commodities to avoid situations where food leave communities to urban areas and then back to adjacent farming communities where they are mostly needed.  Besides tracking and accounting for local food movements, such efforts can open new markets for diverse commodities looking for a market during long periods of the season. Community to community commodity exchange will prevent cases where commodities are pushed to urban centres before the market’s absorptive capacity has been ascertained.

Reviving the power local markets

While local markets have existed for centuries, their recognition has taken too long. Many African communities are getting concerned about how their indigenous food and knowledge systems are being lost to scientifically-produced foods, at the expense of the naturalness of our food systems.  This is also destroying the social fabric which was built through people congregating around local beer, mahewu and cultural practices in which food was a glue. However, the proliferation of ICTs is now making it possible for communities to capture the power of informal distributed markets that function through households, extended families, clans and communities.

Lack of markets is provoking all these questions. Following a bumper harvest in Zimbabwe and other southern African countries, local communities are stuck with tons of commodities while local people continue to consume commodities from other countries or urban centres. For instance, many communities have tons of small grains like finger millet, pearl millet and sorghum yet industrially-produced opaque beer flows from urban centres to rural business centres when local resources badly need value addition into local beer and other products. This practice is also sweeping away the little cash available in rural communities back to urban centres. The good thing is that communities are beginning to revive their relationships through which to sell commodities. ICTs are empowering these processes to by-pass formal markets. This is also releasing pressure from formal and urban informal markets which can no longer cope with the influx of commodities following a bumper harvest.  Commodities shared through these relationships include pumpkins, sweet reeds, vegetables and livestock breeds.

Using relationships to build resilient socio-economic strategies

Embedding rural economies and enterprises into the money economy has weakened local communities where commodities were previously used to obtain knowledge, skills and services like labour. Unfortunately, a few commodities being produced under contract farming models cannot be used as currency in cases where money is not available. For instance, a farmer cannot pay for labour through bales of tobacco because workers prefer money even if it is not readily available. On the other hand, farmers are compelled to put their best resources (soil, water & time) to a few contracted commodities.

Models that were built through relationships should be revived so that commercial models can ride on these. Most SMEs that are now producing agricultural tools like ploughs and hoes acquired their skills from indigenous knowledge systems. This knowledge has moved to growth points and urban centres.  Modern grinding mills were inspired by traditional grinding stones, mortar and pestle whose evolution can be traced to gender-informed traditional value addition practices.  All this knowledge is on the verge of extinction, in the name of modernization. It should be captured and recognized as an economic driver for rural industrialization and development.

Charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

How informal food markets disrupt and correct the notion of staple foods

For a very long time, each country has had what it considered a staple food for its citizens.  However, climate change, globalization and changes in consumption patterns are disrupting traditional staple foods. My word web describes staple food as a necessary commodity for which demand is constant. Rather than continue promoting a few staple commodities, countries are being forced to think in terms of broad nutritional food baskets. A major question is: How can developing countries tap into the resilience and flexibility of smallholder farmers, traders and informal markets to build nutritional security for the next generation?how-informal-food-markets-disrupt-and-correct-the-notion-of-staple-foods

Mobilizing, redistributing and rationalizing nutritional baskets

One of the most under-estimated virtues of African informal agriculture markets is their capacity to harness the convening power of urban centres to pull together food baskets from diverse farming areas. As each informal market breaks bulk it mixes and matches commodities according to diverse nutritional needs. For instance, in Zimbabwe, commodities travel in bulk from Mbare market in Harare to Malaleni in Bulawayo where the local market consolidates food baskets for local consumers. This mixing and matching role needs to be fully understood because it influences consumption patterns.

When the consumer budget is strained, some commodities are rejected. This is how commodities are given weight in terms of whether they are necessities or luxuries.  For instance, luxuries like carrots, peas and cauliflower can sometimes be forgone in preference for tomatoes and leafy vegetables.  A necessity is hardly substituted fully and that is why a tomato is always in the market because it is a necessity. For those that are considered necessities, when demand is high, prices tend to be high due to an intrinsic tendency by consumers to have an appetite for them. Lettuce, carrots, peas and fine beans are not produced in large quantities because they are sometimes considered luxuries not necessities.  Unfortunately, while these are highly perishable, most countries have not developed appropriate preservation methods for them, besides putting in the fridge (which in some cases affects taste).

The market as a nutrition basket and how it responds to seasonality

In much of Southern Africa, food crops start flowing into informal food markets as from January all the way to July.  This period accommodates 90% of commodities and their varieties.  The diversity covers field crops, staple foods, cash crops, fish, eggs, varieties of meat, legumes and small grains.  After harvesting, around March and April or May, farmers re-allocate their time from field crops to horticulture, poultry and fish farming, among other critical socio-economic activities. They start producing tomatoes and all kinds of vegetables.  As the winter season comes to an end and water becomes low, farmers switch to commodities like carrots, peas and broccoli which do not occupy large spaces and use less water.

While seasonal changes influence the demand and supply of different commodities, winter tends to have the biggest variety of commodities which translate to better nutrition. Consumers consciously decide what they can eat in the cold season.  In winter Mondays, consumers take advantage of low prices to buy in bulk and avoid braving the winter cold going to the market.  However, during the hot season, they can buy in small batches because trips to the market may not be affected by the weather. When bulk buyers come to the market once a week, commodity prices tend to be reduced during the middle of the week.

Commodities like avocadoes, bananas and other fruits that are ripened on-farm or at the market ripen at a slower pace during the cold season and this affects the rate at which they enter the market.  It is said sugar in these commodities influence the speed of ripening because sugar hastens fermentation processes which also influence taste. The cold season is also characterized by a broader nutrition basket comprising tsanga midzi, garlic, mhiripiri, lemon, magaka, masawu, tsunga vegetable, a wide range of fruits, zviyo porridge and other foods that are traditionally believed to cushion people against cold. The supply of chickens and eggs tend to be low during winter because chickens do not eat or drink a lot during this period compared to other seasons. With increasing awareness, consumer choices are influenced by nutrition although income is another determinant.

Knowledge as a builder and conveyor of nutrition baskets

Farmers who bring commodities to informal markets make it a point to speak to consumers so that they fully understand market requirements. Sharing knowledge makes it possible for them to become aware where tomatoes are being produced in abundance so that they decide to change to other commodities rather than going back home to produce what other areas are producing better and in more volumes. That is how knowledge becomes a builder and conveyor of nutrition baskets. During winter, most smart farmers who participate in the market acquire knowledge which they use to plan for the next season’s winter production. They get to learn what type of commodity to grow and when?

Exchange of nutritional knowledge is also high during this period. Nutritional knowledge is associated with commodities and source areas. Each commodity has nutritional explanations from the areas where it is produced and used for subsistence. That knowledge is extended to the market and becomes a Unique Selling Proposition for particular commodities. On the other hand, the diversity of commodities on the market compels consumers to rationalize their budgets and pick commodities through nutritional lenses.  They try to ensure their budgets accommodate fruits, vegetables, tubers, field crops – building a complete nutrition basket. In most cases they do it unconsciously without knowing specific nutrition elements or vitamins in their choice of commodities.

The power of gathering evidence

Continuous evidence gathering is critical for identifying and updating nutrition basket drivers from various climatic regions. Such evidence should be built into models and investment plans towards national nutrition security reserves. Just as African countries build food reserves in the form of maize silos, they need to focus on building reserves of other nutritional components in order to balance the national nutrition equation. Continuous maize production and consumption exacerbates nutritional challenges. Up to date evidence can enable increasing the shelf life and consistency in the supply of nutritional commodities. Ultimately, it should be possible to build an all year round nutritional basket.

Financing should be tailored accordingly rather than congesting funding in a few commodities in ways that skew the national nutritional balance.  This big picture can only result from connecting the dots. To the extent that focus on value chains results in all support going to a few value chains, transformative agriculture can result from a unified nutritional basket framework approach. That way, financial institutions move from financing over-subscribed value chains like sugar beans, soya bean, tobacco, maize, cotton and sugar cane to funding elements of a nutritional basket based on gaps in the nutritional framework.  Growing cash crops like tobacco and cotton in order to supplement missing nutritional elements is not sustainable partly because it is impossible for such measures to sustainably fill all nutritional gaps, some of which can easily be met locally.

Charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

 

How market price is not a major determinant of profit in agribusiness

A keen interest by African farmers to know the price of commodities on the market is understandable. However, tracking activities in informal agricultural markets by eMKambo over the past few years has proved that price is not a major determinant of profit-making in agribusiness. Profit-making is a result of creatively managing production costs, quality, losses and aggregating commodities.  The market is always available, usually with set prices.  It is about how a farmer’s commodity becomes competitive per given price. As an ecosystem, the market is a collection of many factors including ideas and experiences.how-market-price-is-not-a-major-determinant-of-profit-in-agribusiness

Converting resources into dollars and cents

Profitability is about converting water, soil and labour into commodities that give you dollars and cents.  Farmers should figure out best ways of converting their knowledge into products. Indigenous knowledge has to be embedded in competitive commodities not just price on the market. Price is just an expectation guide. A good price may mean nothing if a farmer has already incurred losses. Approaching agriculture from the market’s big picture provides a growth pattern that can enable farmers to make choices within available resources. Informed by the big picture, farmers can choose to diversify into high value crops.

The market also shows who else is producing what a farmer is trying to produce and the number of players involved. Such intelligence will avoid the band wagon effect where farmers get into the same commodity irrespective of competitive advantage. Unless farmers track their commodities, it is difficult to intelligently plan and project outcomes on the market. Trends surrounding a farmer’s particular commodities can provide an idea on how the farmer can adjust costs and quality in line with his/her resources. The market provides a general map and guidance that empowers a farmer to make intelligent choices.

The power of understanding competition dynamics

Where the market segments commodities into 1st price, 2nd price and 3rd price, farmers have to fit their commodities in those price parameters. While lack of organized production in the whole agricultural sector can be beyond an individual farmer’s influence, commercially-minded farmers should make an effort to understand supply levels and competition dynamics in the market. It is also important for farmers to know other competitive forces outside their commodities. For any given commodity volume, price might fall or increase not due to gluts or shortages but due to new entrants and exits in the market that either stretch or release the market budget.  For instance, if U$500 000 is circulating for given volumes of commodities in the market and one commodity, accounting for 5% cash in circulation, moves out of the market, it means the same budget begins to cover fewer commodities.  On the other hand, if for the same amount of cash in circulation, a new commodity enters the market, the budget in circulation is stretched in ways that translate to less demand for other commodities.

Buying power is determined by the influx and withdrawal of various commodities. Unlike the situation with mono crops like tobacco which do not have substitutes and whose price is determined by demand and supply only, in informal markets more than 70 commodities can substitute each other. For instance, following a good rainfall season, besides maize, other commodities like sweet potatoes and groundnuts start competing with maize. An increase in sweet potatoes means people will eat less porridge which is a derivative of maize.  Sweet potatoes, pumpkins and cow peas all compete with maize.

Matching standards with market expectations

Farmers can also reduce losses through market-oriented production calendars that inform them when to produce. Understanding market standards and expectations also reduces losses. It is usually through a mismatch between market standards and expectations that farmers lose out.  Another key issue is grading. If farmers do not understand commodity grades and how to aggregate their commodities, they end up depending on the market’s umbrella decisions about quality and other critical factors. When well-informed, farmers can be able to grade appropriately and push medium to high quality commodities to the market while low quality commodities can be re-purposed for livestock and other uses.

Consistency in production and supply is also a very important factor. It is not possible for a commodity to perform well throughout the season. Farmers should specialize on at least three commodities in order to spread their risk.  That way there are 60% chances of getting better prices.  A strong relationship with the market can also be cultivated as farmers become famous for being consistent suppliers. Traders do not often want to waste time and resources looking for new suppliers. Commodities destined for the market face competition, based on factors like price, buyers, standards and specifications. When producing for the market, farmers should make sure the best resources are devoted in order to satisfy customers’ value for money. It is unlike when farmers are producing for satisfying their own household tastes. Consumers have competing forces on their budgets.  Why should a consumer buy your sweet potatoes instead of bread?

Charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

Mastering the benefits of adding value to agricultural commodities

Like many well-intentioned phrases, ‘value addition’ is not just an expression. It is a practice whose dynamics are yet to be fully understood and embedded, especially in African agriculture. More than 80 percent of agricultural commodities in developing countries are consumed in a raw state. Lack of modern value addition technology makes it difficult to convince people that processing agricultural commodities can create more employment than raw commodities. Informal food markets continue to employ more people than processing plants. While a lot of resources are being directed at adding value to agricultural commodities, there is insufficient evidence-based analysis of the inherent benefits, challenges and opportunities.

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However, with adequate and appropriate investment, value addition can create more employment and lead to sustainable economic growth.  In most African countries, raw commodities like vegetables, fruits and tubers move from farming areas to the market and then to households and finally into the toilet. This shorter route does not add much value to the economy compared to a much longer value addition journey where commodities move through more steps: farmer – processor – retailer – wholesaler- consumer. When commodities travel a shorter distance from production to markets and consumers, enormous pressure is exerted on monetary circulation because commodities are consumed before they complete their cycle along the value chain. Ideally money in circulation should effectively exhaust all stages from processing to retailing and consumption or end-use.

Benefits of a longer cash circulation cycle

The speed and length travelled by money in circulation has to be long if it is to translate to Gross Domestic Product (GDP). An example of a long route is farmer – consumer –retailer – processor – trader – consumer. Such a distance is long enough to minimize inflation and stabilize prices.  For instance, if $100 worth of commodities move from the farmer to the trader, $20 is added to become $120.  When the same commodity moves from the trader to the processor, $30 worth of value may be added, translating $150. At the retailer level, another $30 can be added, becoming $180 and when end-users or consumers add $20 worth of value, the total value of the initial $100 becomes $200. Adding all these values defines GDP. Going through five cycles enables money to add value along the value chain unlike from farmer to consumer where only $20 is added.

When African agricultural economies limit themselves to raw commodities, they undervalue and underestimate their potential GDP. The revenue base cannot be meaningfully increased when commodities move a shorter route from the farmer to the trader. Value added tax (VAT) is generated through value that is added along a much longer route. At the moment, most horticultural commodities are not generating VAT yet farmers are using resources like dams and roads which need to be financed by the government.

The value of understanding and financing the entire system

Instead of continuously financing production, financial institutions and development organization should see the value of financing the whole system including processing and markets. This prevents scenarios where farmers have excess commodities than the market or processors can absorb in a given time. There are many cases where processors like Best Food Processors in Zimbabwe try to tap into the fresh market to supplement their stocks. The company requires more than 50 tons of tomatoes per day to keep its  processing machinery running.

However, negotiating relationships between processing companies and farmers should be done by a neutral knowledge and relationship broker. The broker will break the impasse where farmers want high prices for their commodities while processing companies want to pay low prices in order to be viable. Evidence-informed knowledge brokering can result in a win-win relationship between farmers and processors. While many processing companies enter into contractual arrangements with farmers, such relationships are often not sustainable because although farmers are guaranteed a market, prices offered are so low that most contracted farmers are not able to stand on their own feet. On the other hand, where processors want to colonize the whole value chain, they end up driving their costs causing them to offer low prices for farmers (10c/kg).  Ideally, processors should focus on processing while other actors handle logistics and production issues.  Why should processors employ agronomists when government extension departments and NGOs are available to offer the same services to more producers?  The cost of extension can eventually go down because farmers can share knowledge with their peers.

The power of aggregation

Aggregating agricultural commodities is the best way to sustain agro-processing.  Farmers become confident that the market is available while processors are assured that commodities will be available consistently. In recent years, many contractual arrangements have bred suspicion between farmers and contract companies. A few decades ago, market availability was more important than contractual arrangements. Farmers would grow their groundnuts fully aware that government parastatals would buy commodities with no need for contracts. A guaranteed market can compel financial institutions to offer short-term finance to farmers through a flexible financial facility that can reduce interest rates to sustainable levels.

On the other hand, consistent processing can result in processed products competing with raw commodities in ways that ultimately control the price of raw commodities.  For instance, when tomato sauce is used to eat rice, there will be less demand for fresh tomatoes- leading to fair prices unlike the current situation, for instance in Zimbabwe, where prices can swing between 50c and $10/crate. The more market options the more competitive the market will become. Gluts can suppress prices yet if there are options, gluts can be managed in ways that do not adversely suppress prices.  By rationalizing tomato prices, other commodities are rationalized as well given that tomato is a necessity which influences the performance of other commodities.  Usually tomato prices influence prices of other commodities.

Flexible finance for agile institutions

A financial facility should be put in place to enable purchasing and mobilization of agricultural commodities by commodity brokers. Rather than extend loans directly to farmers, financial institutions can be paid by the warehousing facility which morphs commodities from scattered farmers. It does not help to extend loans to farmers when they are still stuck with commodities looking for a market. There is the danger of farmers taking loans to complement little income from the existing market and try to break-even. It is like taking a loan to cover up for losses in the market.  For instance, if a farmers is expecting $10 000 and the market gives him/her $5000.00, receiving a loan amount to $5000.00 will be like subsidizing outcomes from the markets.

A facility that supports buying of commodities from farmers creates space for financial institutions to extend loans to farmers so that they continue growing.  This also ensures processors have consistent supply for up to six months as farmers quickly go back to the land.  Processors cannot keep stocks for a season because doing so is locking money in stocks. Processors generate income from consumers and that is why they should keep fewer stocks and supplement as consumers buy.  If they lock all their money in stocks, they will not have enough money for other requirements.

Charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

 

From Corporate Social Responsibility to Sustainable Agribusiness Modelling

The failure of donor-funded programmes to transform African agriculture is resulting in more attention turning to the private sector as a potential source of better agricultural outcomes. Several multi-million dollar donor programmes have been launched with pomp and media saturation but the end has often not been as loud as the beginning.  At the end of three or five years, most donor programmes quietly disappear or assume a new name.

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Limitations of challenge funds

In the past few decades, donors have begun to promote challenge funds as a way of luring innovative private actors into the agriculture sector. While this approach sounds noble, challenge funds are accessed by a few privileged applicants with access to reliable internet and based in urban centres. On the other hand, successful agribusinesses have not been built through pitching business ideas in front of judges most whom have no clue about contextual issues surrounding the idea being pitched. Agribusiness is more about passion than expressing business ideas through rehearsals and 10 – 15 minutes presentations.

 Unpacking Corporate Social Responsibility

The private has, for a long time, used Corporate Social Responsibility (CSR) as a route to supporting communities. Unfortunately, CSR has not benefitted farming communities. Most proceeds have been directed to non-agricultural sectors such as elite sport like cricket which are not found in farming areas. Resources that are used for CSR are normally generated through sales.  It is the same money that the company gets from consumers that is returned back as CSR.  It means every product has an embedded CSR component. If an agricultural company ploughs back US$1 million into a community that money will have come from the same pockets but is presented under a new name – CSR.

 Why not just offer better prices?

Where a company was supposed to buy sorghum or any agricultural commodity from farmers at $500/ton but decides to lower the price to $450 so that $50 is later used as CSR, it makes sense to offer better prices right from the beginning. Rather than a retail food chain store buying vehicles worth $1 million to be won by a few consumers, why not reduce prices of its products by $1 million so that more consumers and communities benefit?  It is also not clear who owns, generates and provides resources for CSR. In the case of agribusinesses, resources come from farmers or consumers. For instance, where a private company is dealing with farmers, it will either under-pay farmers so that it then comes back with CSR money as if it’s a bonus when the farmers should have benefitted from better prices. From a consumer perspective, the food chain store will over-charge consumers so that some of the proceeds come back as CSR. Instead of giving back US$1million in the form of prizes and presents to be won by a few consumers, more consumers would benefit if commodity prices are reduced by $1 million.

 Hidden motives

CSR has remained a marketing gimmick funded by resources from farmers and consumers. The private sector does not get CSR resources from other sources but the very same people who use its products.  It is like milking the same cow twice while giving it crumbs. Being profit-oriented, the main focus for companies embracing CSR is promoting a brand and widening the customer-base. CSR is an in-built blind-folding mechanism which makes farmers and consumers believe a favor is being done to them when it is their own money coming back with a different identity.  Besides being a marketing gimmick, CSR is probably used as tax evasion by some corporates.  If it is genuine CSR, who determines priorities? Who says funding cricket in urban centres is better than funding dam or road construction in farming areas?  To be more inclusive in sustainable ways, CSR has to be informed by societal needs.

 Towards Sustainable Business Models

Where a private company is contracting farmers to produce groundnuts or sorghum at $450/ton, it is better to offer $500/ton so that from every ton, $50 goes back to the community for local development.  What is the rationale of first getting all the money into a company’s coffers and then returning the crumbs? Moreso, CSR does not ensure benefits go back to people or communities that generated the income. If a company is working with farmers in Muzarabani or Hwange, benefits should go to these communities instead of funding cricket in urban areas. Rather than paying CSR at national level, why not decentralize the benefits to local levels so that benefits are extended to local customers? That is how agribusiness becomes a partnership where the essence of corporate does not just mean the whole ownership of the business is in the hands of the corporate sector.

While the corporate sector provides the market, communities contribute either as producers of raw materials or consumers of finished products. An inclusive business model should see corporates aggregating the market while producers and consumers continue contributing in various ways. While the corporate sector has power to mobilize income from producers and consumers, it should not personalize results or outcomes. Why would agricultural proceeds that should benefit producers end up subsidizing elite urban sport?  How can one person win a vehicle worth $50 000 when such income can go a long way in developing a community?  In a new world economy dominated by SMEs, corporates should re-think their CSR models.  CSR should come in the form of affordable services and products. Rather than donating to elite conferences, banks should just lower their interest rates in ways that benefit more borrowers.

Charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6