Seven lies against mass markets in developing countries

Like many practices that are seriously misunderstood in developing countries, mass markets are full of distortions, faulty assumptions and wrong thinking. To assist policy makers, investors and ordinary people in getting past a number of lies and discover the real truth about mass markets, eMKambo has taken time to identify and expose the following lies:

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  1. Commodities in the informal mass market are of poor quality. This is one of the biggest faulty assumptions. If it was true, informal food mass markets like Mbare in Harare, Nairobi mass market in Kenya and Makola market in Accra would not attract high income consumers. Supermarkets, hotels, restaurants and hotels would not be seen buying food from these markets.
  1. Mass markets are about low prices. That is not true because sometimes supermarkets can have lower prices, not to mention quality, than mass markets due to various reasons.
  1. Mass markets have one category of middlemen all called Makoronyera, for instance in This is another myth. Mass markets have more than seven types of middlemen, most of whom have been conducting honest business practices for decades, otherwise they would have gone out of business years ago.
  1. Mass markets do not use formal means of payment and terms of trading. In fact all forms of transaction modes and business practices found in the formal economy are also characteristics of mass markets. Many traders in the mass market provide agricultural commodities to hotels and restaurants on credit terms ranging from 7 to 15 days, the same terms given to farmers by some hotels and supermarkets. Commodities that are given to the formal market on such credit terms include butternuts, carrots, green beans, potatoes, peas and many others.
  1. Commodities traded in the mass market lack freshness compared to those traded in the formal market. In fact the opposite is true. The reason why high income earners visit mass markets is because they get commodities fresh from the field unlike commodities that would have moved from one cold room to the other over a week or more days. Consumer consciousness on freshness is increasing and most consumers prefer commodities from farm to fork than from farm to factory to fork. Long supply chains that are typical of formal markets result in some commodities losing freshness, quality and taste.
  1. Another decades old lie is that mass markets experience high commodity losses, especially of perishable commodities. In mass markets only poor quality commodities that would have been brought for speculative selling may be lost. High quality produce is rarely lost since everything is sold fast and cleared daily within hours. Any losses that happen are in proportion to the volumes sold which means they are very minimal. Conversely, formal markets can sometimes throw away high quality commodities due to low sales.
  1. Finally, there is a wrong impression that mass markets do not deal with high value commodities like grapes, strawberries, pears and mushrooms yet all these are traded in the mass market.

Practices that are unique to mass markets

Unlike the formal market where some companies engage merchandisers to promote their products in supermarkets, traders in the mass markets are merchandisers for farmers from whom they buy commodities for breaking bulk and reselling. The merchandising function has been embedded in the owner (trader).  This is an advantage against formal markets where commodities are just displayed with the assumption that the customer knows what s/he wants.  Trader-merchandisers have acquired intimate knowledge about their commodities are ready to share such knowledge with consumers. Such knowledge can include nutritional benefits and methods of cooking particular commodities. The trader-merchandiser-knowledge broker role is critical in mass markets where 100 traders can be selling one commodity, meaning everybody has to bring out his/her product’s unique selling proposition.

Another unique feature of mass markets is that they use informative advertising as opposed to persuasive advertising used by formal markets which border on deception and over-selling commodities as if they perform magic.  Informative advertising provides benefits of each commodity. Forms of sales promotion in the mass market include allowing customers to taste products. Mass markets also have a wide product range and there is always a discount for volume purchases, for instance if you buy 20 cabbages you can get one or two for free. The more significant the volume purchases the more the discount. Mass markets have room for negotiation – all prices are negotiable and no commodity is returned to farmers due to poor sales like what is done by formal markets where perishable commodities like lettuce and spinach can be returned to farmers if not sold.

Mass markets as pathways of innovation

Most seed companies use demonstration plots to develop and assess the performance, size, shelf life and fruit filling (brics) of the their horticulture varieties usually over two to three seasons before releasing the varieties to farmers. Market acceptance for these varieties is also tested through formal markets without investing in getting feedback from the mass market. While formal markets give them feedback on how tomatoes and vegetables are performing in the kitchen and in sandwiches, mass markets are where performance is really proven.

For instance, when Charter Seeds began introducing tomato varieties in Zimbabwe, it started with 11 star varieties but it was in the mass market that Star 9009 and Star 9003 proved to be champions. Feedback from the mass market enabled the company to save resources and concentrate on the few most popular varieties. Star 9003 sold very well in Bulawayo market due to appropriate environment like temperatures and adequate levels of heat. In cold temperatures like Mashonaland East, Star 9009 has remained the performer, thanks to evidence from the mass market.

In another example, the mass market is refusing to accept all other jam tomato varieties except HTX14 which is performing better than Riogrand, Petrorosa and others.  HTX14 has good fruit size while Riogrand has small fruit size. In addition to long shelf life and high yield in the field, HTX14 has good inside flesh (brics) which is required by processing companies. Besides not buying and experimenting with a wide range of varieties, formal markets do not sell jam tomato preferring green-house tomato whose uses are very narrow. On the other hand, mass markets order and sell by variety while formal markets do not ask about variety but are more interested in whether the tomato is produced in the open field or green house.

Decisions to buy seed and other inputs should be informed by micro climates as opposed to generic information. Unfortunately most farmers just buy any seed they see in the retail shops without adequate knowledge on whether it will perform in their area. It is more of guess work than informed decision and that is how farmers lose income through risks associated with wrong decisions.

 

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

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

Mobile: 0772 137 717/ 0774 430 309/ 0712 737 430

 

 

Who really sets prices in the open market?

No matter how many times this question is answered, it continues to be asked again and again.  One of the reasons is that the answer may be correct but unbelievable. As in all other markets, rules of supply and demand influence pricing of agricultural commodities in open markets that are powerful ecosystems in developing countries.  In fact the major determinant of price is supply with demand only responding to supply. In big urban food markets like Mbare in Harare, when the market opens at 5am in the morning, it takes a few minutes for sellers and buyers to see that today there are more tomatoes than yesterday.

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The farmer or trader whose supply coincides with a shortage starts setting the calling price based on the previous day’s price. Another sign of a shortage is the concentration of many buyers around one consignment or heap of tomatoes or potato and this also influencing the price. Some of the buyers pull away from the crowd and approach the seller independently, offering prices. Through a silent auctioning mechanism by buyers and sellers, the day’s prices are quickly agreed upon and trading gets underway.

From the calling price to the actual final price

In all open mass markets across Africa, there is a distinction between the calling price and the final price. The calling price is what the farmer, trader or seller expects to get while the final price is what the commodity finally fetches. In the marketing process buyers resort to several negotiation dynamics like referring to yesterday’s price trends. They can begin negotiations by saying, “yesterday’s prices were lower for the same quality, why are you demanding a higher price today? Your quality is also lower than yesterday and your crates are not full.”

There is also an element of ganging up among buyers. For instance if a new buyer comes along and finds other buyers standing alongside the commodity but not buying, the new buyer gangs up with those standing in order to push the final price down. This ganging up ends up re-setting the price. Another name for this practice is demand response to supply.  While some buyers just stand near the commodity, others buy a few commodities in protest. In addition to complaining about many things related to the commodity, some buyers use comparisons.  They can say, “This same quality of commodity is going for a lower price in the other market and supermarkets.” Some of the buyers go to an extent of verbally abusing the commodity owner or seller. “You are better off taking my offers and going home early than wait for prices to rise when your commodities at the farm have no one attending them.”

Farmers and sellers use the same technique

On the flip side, farmers and sellers also use the same tactics when they find the market in short supply.  The farmer or seller observes the way buyers stampede for commodities and tap into such levels of desperation by buyers to pretend that s/he does not want to sell. As a result buyers bid and increase their offers.  Ultimately this is also how actual prices are determined and set.  This process can be complete within a minute when a commodity is in short supply but can stretch for 30 minutes to an hour if there is a glut. Loaders, off-loaders and those who carry commodities to waiting trucks also respond to the price of the commodity such that if the price increases they also increase their costs correspondingly.

Additional tactics used by buyers on farmers

Even if they may have struck relationships with farmers, buyers keep a bag of tricks. They send part payment and packaging to the farmer so that the farmer starts harvesting butternuts or other perishables. The buyer makes a point of arriving to collect the consignment with a truck when the farmer is packaging or has already finished packaging. At that point the buyer opens the conversation by undermining the quality of the commodity (“Aaah why is this commodity different from the last one?  You have to lower the price for me this time.”)  After a few uncomfortable exchanges, the buyer ends up getting the commodity at a price he determines.  He knows that the farmer cannot start looking for another new buyer when the perishable commodity is already harvested and packaged.

Need for regulations and policy interventions

Dynamics and processes mentioned above show the extent to which linking farmers to the market is not enough unless the entire processes and hidden behavioral economics tricks are fully understood. Ideally farmers should know distances from where they are farming to the market and the cost of moving commodities to the market. They should also strive to be aware of the margin earned by traders from each commodity and consignment. A pricing index and farmers’ diary comprising information related to distances to the nearest markets as well as all critical cost elements should be developed especially for smallholders who often struggle to find usable market information beyond just price.

Circumstances under which price information is critical for farmers include:

  • When a buyer shows up on-farm and the farmer needs to make a decision to sell at the right price.
  • When the farmer has not done his/her costing and wants to use the market price as a guide. This is very common among many farmers.
  • When the farmer wants to sell locally and has to compare with prices elsewhere.
  • When the farmer wants to conduct barter exchange between different commodities. The farmer has to know the monetary value of the two different commodities being bartered.

A major challenge in most developing countries is that it is difficult to regulate the production and supply of rain-fed agricultural commodities. Regulating production and supply is easy with irrigated production. You cannot tell farmers to grow fewer groundnuts or tubers which may be the only ideal commodities in particular areas and farming seasons. One can regulate the production of cabbages, tomatoes and potatoes whose production can be controlled to some extent in response to the market. It does not make sense for government to set the same prices for commodities whose yields can be very low in some areas due to rainfall patterns, soil types and other factors.

 

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

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

Mobile: 0772 137 717/ 0774 430 309/ 0712 737

Why linking farmers to the market is not enough

In spite of millions of dollars that have gone into market linkage initiatives in developing countries over the past few years, farmers still struggle to sell their commodities profitably. Post-harvest losses have not gone down, gluts continue to alternate with shortages and relationships between farmers and processors have not improved. This suggests market linkages is half the story unless the entire agricultural ecosystem including financial liquidity in different markets is fully understood.

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The ‘myth’ surrounding farm gate price

One of the critical issues that has not been solved through market linkages is the difference between farm gate price and market price. This is not only vexing smallholder farmers but some of the most sophisticated commercial farmers often struggle to determine their farm gate price in ways that ensure profitability. The notion of farm gate price does not seem to exist in most smallholder farming communities because each farmer may have a different price depending on distance to the main road and local markets, among other factors. Many farmers who call eMKambo asking for prices of different commodities use feedback from such enquiries to try and set their own prices.  This implies farm gate prices are not readily available but externally-determined in ways that expose farmers to manipulation.

Profit-oriented budgeting as instrument of negotiation

Disputes surrounding contracts between farmers and contract companies stem from the fact that contractors have most of the information for accurate decisions making. For instance, they know their profit margins while farmers are not privy to most of these details.  Ideally, market linkage interventions should ensure farmers have their own negotiation instruments which they pull out when negotiating contracts with private companies. Since most farmers do not have information on up-markets and the entire agricultural ecosystem, this fuels their suspicion that whoever comes to buy from them is going to make a killing through abnormal profits.

In an unregulated market, middlemen cannot resist the temptation to take advantage of uniformed farmers. There is need for a partnership model in which profit-sharing models are embedded, clarifying information about formal and informal markets. The open market tends to be more transparent than other markets because everyone can see what is going on. If the price is unviable farmers cannot force a trader to take more than 20 crates of tomatoes.

All contracts should have enough flexibility that takes into account market variations. The time lag between signing a contract and marketing should be carefully factored in. This issue can be legislated to accommodate price variations. For instance, it can be set at between 10 – 30% such that if the market goes down, farmers can receive 10% bonus and if it goes up, farmers can receive 30% bonus. This arrangement should also consider other external factors like inflation, costs of inputs during production and other variable costs. For instance, the cost of labor can suddenly increase and affect the original contract.

Benefits of fluid budgets that accommodate the changing economy

At the moment, it is not known how much a farmer should put in to make a profit in potato production from different production zones.  Budgets should not be generic but tied to specific niche markets like processors, food chain stores or informal markets. Some buyers end up offering low prices due to costs incurred along the value chain.  All elements of production should be put together and scenarios provided, taking into account different elements. For instance, farmers should look at options in case they see viability in providing their own transport, packaging and different sources of labor.

In almost all African countries, crop budgets are set per hectare without looking at other elements that are sources of differentiation. Budgets should be fluid to accommodate the changing economy.  For instance, fuel and electricity costs keep changing and this should be factored in. On the other hand, farmers who do not use electricity to irrigate have different costs from those who do and that translates to different profit levels.

A system of managing, tracking and updating production budgets for different contexts is important. The return on investment (ROI) in each production zone should be clear. Currently, there are no elements or mechanisms for price negotiation or control in horticulture, taking into account issues like distance, road networks and other factors. In Zimbabwe, a budget for Mazowe and that for Nyanga cannot be the same if the commodity end up sold in one market like Mbare in Harare.  However, Nyanga may have superior climate like good soil and technology for potatoes compared to Mazowe, such that even if Mazowe can be closer to the market, Nyanga farmers can still compete and be profitable.  Nyanga may require different inputs from Mazowe in ways that make both places profitable in different ways.

Farmers should be empowered to evaluate information and knowledge for correct decision making. The breadth and depth of existing knowledge networks from production areas to diverse markets should provide a stronger social safety net for farmers. Different markets can provide dependable information nodes and networks where it is possible to know demand patterns of various commodities. Consumers, farmers, transporters, small scale processors, caterers and other actors would not be flocking to informal open markets if these markets were not dependable.

The significance of understanding different transaction modes

Beyond market linkages, classifying niche markets can enable farmers to make sense of different  transaction modes. While the open market tends to prefer cash, different transaction modes have their advantages and disadvantages. A buyer who pays farmers after 30 days gives consumers time to buy. It takes 30 days for traders and retailers to pull income from different consumers and put a little mark-up. The time lag between selling and consumption has to be understood by farmers, most of whom want to be paid immediately and pass on all risks associated with the slow movement of commodities to traders.  The trader ends up waiting for consumers to buy before returning to farmers for repeat purchases.

Why should financial institutions understand these market dynamics?

Financial institutions need to understand these dynamics if they are to remain relevant in agile agricultural ecosystems. For instance, they need to know that aggregators or traders who buy agricultural commodities from diverse farmers and supply in bulk also require long-term finance so that they can sustainably satisfy different niche markets. Such long-term financing should have a component of exploration. A trader should be able to use that money for market research like visiting regional and international markets to find out gaps and needs. Unfortunately, at the moment, most financial packages in Africa do not have a component of exploration and capacity building. The assumption is that the borrower has already done research using his or her own resources yet circumstances are rapidly changing such that continuous evidence gathering will benefit every actor.

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

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

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

Questions that must be answered before poor countries import or export food

In the absence of evidence-based agricultural policy formulation and implementation, most developing countries always rush to import food without sufficiently understanding their national contexts. During gluts, farmers in areas where fruits are produced in abundance do not benefit from selling nationally compared to when there are shortages.  On the other hand, when the price of a commodity goes up due to shortages, we cannot conclude that farmers are getting good prices because such supply shortages may result from the seasonality of the commodity.

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As long as policy makers are not able to spread the supply of a particular commodity around the country, decisions to import that particular commodity will be uniformed. That is why market-oriented budgeting is critical in showing the best price for a farmer to break-even, indicating excess or shortages of different commodities. Unless we know the best price for an orange or tomato, it is difficult to see if farmers are incurring losses or earning profits. Equitable distribution of horticultural commodities across the country can show volumes during gluts and how much could be preserved to cover shortage periods.

Supply side considerations

On the supply side, there is definite need for evidence before deciding to import commodities. Important questions include: What volumes of commodities are being produced and consumed at household and community level and what surpluses are finding their way to the market?  To answer this question, farmers and value chain actors should keep basic records to show supply trends from different production corridors.

Most African countries are famous for producing a diverse range of commodities, mostly during different seasons. The commodities range from different types of livestock, crops such as small grains, legumes (beans, groundnuts, cowpeas, etc.,), fruits (exotic and indigenous), vegetables (exotic and indigenous), maize, wheat and non-consumables like cotton and tobacco. These commodities are produced on different land sizes from communal, resettlement, large scale to large estates.  A critical question is what role does each type of land play in producing food before a country decides to import or export food?  Unfortunately, it seems African countries have not invested in clearly aligning production systems to land sizes.  A large estate can be seen producing cabbages that should be produced in the backyards of peri-urban dwellers or gardens run by rural grandmothers.

In addition, each country has different agro-ecological regions that support the production capacity of various commodities. For instance, some regions are associated with horticulture while other are known for fruits and yet others famous for livestock. This categorization provides a broader picture showing the way supplies of different commodities can be organized. Some regions have high production capacity for specific commodities. Regions with lower production capacity for particular commodities are the demand targets, ensuring better returns locally. Once a commodity is in abundance, it does not have a market where it is produced abundantly. For instance, in Zimbabwe bananas do not have a market in Honde Valley.

Since most African agricultural production patterns are seasonal due to the natural characteristics of different commodities, no matter, the amount of research exerted, commodities like small grains cannot be grown during winter in East and Southern Africa.  Wild fruits, due to their natural characteristics, are always in and out of season. The availability of irrigation can see some commodities like green mealies being grown all-year round. The potential of irrigation to address seasonal availability of food is now well known but not fully exploited as countries feel more comfortable to import food at the slightest sign of food shortages.

Demand side imperatives

The majority of African countries are witnessing a growth in different socio-economic classes and this is driving changes in consumption patterns, tastes and preferences. These tastes and preferences can be further broken down according to age, gender, health consciousness literacy and location.  High mobility within the local population is also creating and expanding markets for different commodities. For instance, people who come from Chipinge district of Zimbabwe where they grew up eating yams called Madhumbe but now stay in Harare have created demand for Madhumbe in Harare. Those from Muzarabani district where they grew up eating Masawu and now live in Bulawayo have promoted the consumption of Masawu in Bulawayo, cultivating a new market for the commodity.

Another telling trend is rural urbanization. With urbanization spreading to rural areas across Africa, most facilities that used to be a preserve of cities are now found in most rural areas. Such facilities include electricity, transport networks, food processing enterprises, retail businesses and other services that are creating wage employment in rural areas.  Financial institutions like banks and micro finance institutions are also picking their spot in rural areas.  All these trends are influencing consumption patterns in rural areas. Given this shifting landscape, there is need for decision makers to answer these questions:

 

  1. What are the price trends in different markets? This should inform a comparative analysis between prices in different markets, for instance the price of banana in Mutare and Bulawayo versus sources like Honde Valley. Tracking prices and sources will show the highest and normal price of a commodity.
  2. What are the break-even prices for different commodities? If there was an alternative market, which commodities would fetch better prices or economically reasonable prices, assuming there are markets where prices tend to be high?  What is the benchmark that can be used to compare prices in different markets?  After removing all marketing-related costs, it is possible that a box of banana that costs $3 in Mutare, fetches $15 in Bulawayo.  Unless we know bench mark prices that can enable farmers to earn profit, sustain or grow their business, it is difficult to tell which price is good or bad.
  3. What is the effective demand for different commodities? This refers to consumers’ willingness versus ability to buy a commodity.  Demand is not just general but related to consumers’ ability to afford a commodity because they have income that enables them to obtain commodities in line with their tastes and preferences.
  4. Who are the customers for different commodities? We cannot say everyone is willing and able to afford an orange. That is why consumers are defined by class, gender, location, age, ethnicity, religion, income class and other factors.  Not everyone wants to consume small grains, even if they may have income to afford small grains. That is why consumers have to be carefully categorized in order to create a food basket for different classes of consumers.  It is not just about importing food without understanding consumers.  If you are going to import wheat or grapes, which consumer group are you targeting?  Otherwise, you can spend foreign currency importing commodities for a small class of consumers who can even afford to import their own food. In a poor country like Zimbabwe how many consumers are interested in the importation of wheat?

The power of understanding all year round distribution and consumption patterns

In the event of a commodity’s price going beyond the reach of specific consumers like poor people or a commodity being out of season, what are the close substitutes?  If orange prices go up, what fruits do consumers buy in order to get the same satisfaction for the same budget?  The right questions can see consumers mentioning alternative substitutes and reasons for their choices.  Unless we understand all year round distribution and consumption patterns of different commodities, we cannot make informed decisions regarding exporting or importing food. Would consumers consider processed or preserved products of the same commodities and get similar satisfaction?  Since there are times when mangoes are in a glut, if we dry or produce juice during those periods, would consumers get the same satisfaction if the processed products are availed during shortages?  Would biltong give consumers the same satisfaction they get from fresh beef?

Have we exhausted all distribution channels for particular commodities to a point of at least getting break-even prices that enable farmers to continue farming?  Without such evidence, the country can import for one region or city when other cities and regions have gluts of the same commodity.  Are imports coming in as a way of outcompeting relatively high local prices due to shortages or high local cost of production?  Imports from South African may simply be attracted into Zimbabwe by higher prices being offered for the same commodity in Zimbabwe compared to South Africa.  It could be a cost push factor.  Shortages can be an advantage to farmers who produce consistently because there are times when they incur losses due to gluts and should be allowed to recoup their costs during shortages.

The cost-benefit analysis of exporting

If a poor country has surplus and considering to export, it is important to assess the cost benefit analysis of export different food commodities. Without this action, the excitement of earning forex can create local shortages, triggering increases in the price of local commodities.  We can unknowingly export potatoes but compromise the quality of local food (people eating junk low quality food when the best food is being exported). This can also compromise nutrition as necessities become luxuries.  What gaps are we creating as we export?  Is the foreign currency earned being directly channeled back into agriculture in order to improve agricultural competitiveness?  How do farmers benefit from their proceeds if foreign currency goes to the national pool? Why are tobacco farmers earning export returns in local currency when forex should be used as a store of value for their enterprises?  If farmers want to import chemicals, fertilizer and other inputs, they should be able to do it directly through their farmers’ associations than the forex being given to companies to import inputs on farmers’ behalf. When such inputs lend, they are more expensive as the importing companies want to earn more by charging exorbitant prices, way beyond the capacity of farmers to buy.

An important second action is determining steps being taken to ensure commodities move from high production areas to low production areas before we rush to import.  Managing the national distribution of food can translate to best return on investment (ROI) and ensure we tackle issues like nutrition and food security that ultimately affect the national budget if not handled properly.  As we distribute food, we need to rationalize food availability through equitable wealth and nutrition distribution in the form of food.  It is not ideal to leave communities in Binga consuming fish, those in Honde Valley consuming bananas and those in Chivi just surviving on small grains.

Food can really be a smart way of distributing wealth through commodities. There are limits to which development interventions and models from outside can solve local challenges. In as much as development agencies can pour money into district or provincial resilience projects, natural and external factors like climate change may set boundaries and limits of what can be achieved. Setting up agribusiness hubs in high production areas and close to food insecure regions can be a better solution than forcing dry regions to produce small grains, rehabilitate boreholes and keep livestock. What are the processing and preservation measures in place to cater for times of shortage and import substitution? Have we exhausted all processing avenues before rushing to import?  What infrastructure development plans are in place to ensure production and supply is consistent? To what extent have we reached the maximum capacity of our dams and irrigation schemes to the point of importing onions, oranges and apples?

 

 

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

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

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

Balancing gender with technology and rural industrialization

Developing countries that have made commendable strides in using formal education to avail equal opportunities to men and women still have a lot of work to move beyond white collar opportunities. While scores of women are now occupying managerial positions that used to be monopolized by men, a formula is yet to be found for extending opportunities to women in low income jobs that are mostly labor-intensive.  For instance, agricultural technology has remained gender blind to the disadvantage of women who do most of the labor-intensive duties.

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However, the informal sector has done its part in generating women-friendly technologies and tools such as small scale peanut butter machines, soap making machines and machines for producing French fries for sale and household consumption. Although these machines and tools are still being improved, the informal equipment fabrication industry has revealed the extent to which mechanization and industrialization initiatives in most developing countries have ignored the needs of low income women and men whose economic contributions are in the form of manual labor.

Technological needs at the Bottom of the Pyramid

The majority of people at the Bottom of the Pyramid try to eke a living from agriculture. Unfortunately, national mechanization strategies have not developed close substitutes to the ox-drawn plough and the hand hoe which remain symbols of smallholder agriculture. In many households, men continue to use the plough for planting while women use the hoe to weed and replant when germination is poor. There have not been meaningful efforts to develop technologies that can enable men and women to cross traditional gender roles in agriculture. With most men leaving for mining and other opportunities, agriculture is now a domain for women and women-headed households but equipment manufacturers have not responded to this critical socio-economic trend.

Naturally, there are labor-intensive roles that can be fulfilled by men, for instance, on the agricultural production side.  Traditionally, there were also roles defined for women, for instance, winnowing and weeding while men focused on ploughing. These roles were defined according to the physical nature of men and women. Technological development has not addressed the physical expressions and requirements of men and women in ways that enable crossing of physical barriers so that women can do duties that were previously male-dominated.

Some women roles have remained locked in specific agricultural value chains like groundnuts, small grains and indigenous poultry. Unfortunately, technological developments have not followed these value chains which give women a sense of ownership and decision-making power.  For instance, the whole production, processing, preservation and marketing of small grains has not been improved from a technological perspective.  Women continue to face the same traditional burdens yet wheat, which is also a small grain, has become highly mechanized because it is a male-dominated value chain.

Technology as an expression of power

Where men become heavily involved, they end up exercising more power in decision-making because their input will be more than that of women. When mechanization and technology development initiatives support commodities like maize, wheat, sugar cane, tobacco and soya bean which need large land sizes, men end up controlling decision-making because they will be heavily involved. For instance, men can decide to buy machines like combine harvesters and sophisticated irrigation systems because they will be intuitively aware of what needs to be done in order to maximize production and productivity.

 Failure to recognize women as originators of recipes and innovations

In spite of women being originators of most food recipes, industrial technologies for adding value to agricultural commodities continue to marginalize women from the economy. As commodities go up the ladder, women recipes are hijacked by men who end up owning restaurants, food chain stores and beverage companies.  As if that is not enough, development organizations and gender activists whose main mandate is improving the status of women have failed to commercialize feminine ideas. They just support women to exhibit their recipes and ideas at food fairs and agricultural shows where men poach the ideas and commercialize them.

Women ideas are also limited in terms of finance where financial support to women still largely depend on approval from men (loan officers and husbands). Even if women own their own enterprises, once their husbands guarantee access to loans, the men end up controlling the business. It seems African countries have not done enough to enable women to independently make investment decisions without the approval of men and a whole male-dominated business culture. As if that is not enough, where technology is available, men tend to have better technology than women. For instance, the husband can have a smartphone while the wife has a lower class feature phone.  That means if 90 percent of women have feature phones, they cannot access or share information that requires a smart phone.

Toward women-centred value addition and rural industrialization

Modern rural industrialization should be about working with value chains within an ecosystem rather than transporting commodities from rural to cities and then export countries.  Such a colonial model has continued to lock women at production level and restrict their participation in value addition yet they are the generators of recipes.  Women cannot continue to be consumers of finished products processed outside when they could easily input their knowledge in the entire production and value addition process. Developing countries have to dumb the colonial value addition notion where agricultural commodities had to move from farming communities to districts, then to national levels and then exported to other countries. In the new fluid economy backed by data, commodities should move within Communities of Practice (CoPs) where different layers of value addition can easily happen.

If women are empowered through technology, they can produce and modernize different products and pack diverse natural foods. Urban industrial technologies have caused some commodities and sources to lose their identity, with the final product being associated with manufacturers while the original producers become invisible.  This can change if women are empowered with value addition technologies in rural areas where they stay.  At the moment it remains difficult for most women to follow their groundnuts or small grains to the city where more benefits accrue to male-dominated manufacturing industries.

Under the current industrial model, the price of value added products increases from urban to rural areas when it should be the other way round. For instance, potato crisps which can cost $1 in the city, cost $2.50 when they reach rural areas. Processing at source will reverse this pattern and ensure the price of finished commodities increase as they leave rural areas for cities and export markets.

How can technology tap into women’s intangible knowledge?

When society insists on knowledge being expressed through tangible assets like machines, it limits the expression of intangible knowledge which is mostly intrinsic in women. Male knowledge is more visible and tangible while feminine knowledge is more intangible and informed by intuitive wisdom. Intangible knowledge explains why women have powerful copying strategies. While men may be thinking about food in its physical form, women will be thinking about how to quieten a hungry child. In countries where social safety nets are absent or weak, social issues move from national to household levels where women are in the forefront of coming up with copying strategies using their intangible knowledge.

The promotion of Science Technology, Engineering and Mathematics (STEM) in many developing countries is a very noble idea.  However, to what extent will STEM address gender imbalances? Are there roots showing how STEM is going to assist ordinary women in the street and marginal communities? To what extent can STEM be informed by Indigenous Knowledge Systems in developing countries?  If not grounded in the needs of the majority, STEM will only go back to assist formal industries and reinforce the prevailing socio-economic injustices.  Rural women will continue to process small grains using pestle and mortar while men own and control processing companies.

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

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

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

Differentiating specialization from monocultural knowledge pathways

While monoculture is mostly understood as the cultivation of a single crop on a farm, area or country, the other half of its definition is the dominance of a single culture, worldview, mindset, set of tools as well as one way of gathering and sharing knowledge. Farmers who think success comes from producing one commodity all the time are addicted to monoculture. The same applies to academies who think formal education is the only source of truth. Fortunately, digital technology is not just disrupting monoculture but increasing ways through which knowledge can be generated, shared and made sensible.

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There is nothing wrong with farmers and knowledge workers specializing as long as they know who else is specializing. Unfortunately, due to information asymmetry, many African farmers and academics specialize blindly and end up losing potential income and relevance. They are not aware that each market for commodities and knowledge has a dedicated demand for a particular commodity and knowledge asset in terms of how the consumer budget is shared among different commodities. That is why it is important for farmers and traders to know other market players as well as the market’s absorptive capacity.

Knowing the market’s absorptive capacity enables farmers, traders and other actors to determine volumes that can ensure good Return on Investment (ROI) and clearly identify producers who can meet the ROI capacity. Farmers who specialize are usually passionate and have invested their time in producing the best cabbages, potatoes, tomatoes, cattle, milk, apples and other commodities. See-saw production and supply patterns, common in most open markets, is caused by price chasers and band-wagoners who just follow and imitate what the specializing farmers do.

Difference between specialization and monoculture

Specialization is where a farmer puts more resources in a commodity in order to produce and supply the market consistently. Other commodities act as a buffer in the event of uncertainties that can face a specialized commodity. The good thing is that for each farmer there is some element of specialization although the difference is in the degree of specialization. Critical questions include: To what extent does the producer dedicate resources to one or two crops? Some allocate 75% of their resources to one or two crops. Others dedicate 50% to specialized crops while the other 50% goes to complementary crops.

On the other hand, external factors like climatic conditions often force farmers and communities to specialize – translating to a community perspective on specialization. In this case, emphasis is not just on skills or knowledge in producing particular commodities or understanding market prices but adaptation of  particular commodities to particular areas. This is how one agro-ecological area become known for fruits while another becomes famous for small grains or livestock.

The merits of specialization and balancing act

Farmers who specialize tend to enjoy economies of scale and are able to capture a greater part of the market share as well as increase their bargaining power. Specialization is also critical for recognition in the market. Those who specialize create their own niche market that they will serve consistently.  It is not viable to be in the market for a short period and out of the market for longer periods. To address this challenge, farmers can specialize on one or two commodities for the purpose of participating in the market regularly and creating a market niche that can sustain their enterprises. However, in trying to balance different agricultural commodities, farmers have to ensure resources put in alternative commodities are enough to revive the specialized commodity by covering gaps like temporary gluts.

Alternative commodities should sustain the production of specialized commodities in the event of temporary gluts and price distortions. Alternative commodities should not be produced in high volumes to the point where if their prices fall on the market, much of the resources to cover them end up coming  from specialized commodities.  For instance, if you specialize in potato and onion production, you need a plot of cabbage as a fallback position. Any fall in cabbage prices on the market should not result in losses that will eat into a greater percentage of the profit that you should have earned in potato and onion production. Profit from cabbage should be big enough to cover losses that can be incurred by temporary price falls in potatoes and onions.

To maintain presence in the market, farmers should specialize on two or three commodities, definitely not more than four if they are to sustain participation in a dynamic market. Other commodities should support the main commodities that the farmer is known for in the market. The road for specialized commodities should be smooth. It is the role of alternative commodities to build bridges for specialized commodities and smoothen their flow against price fluctuations. This will also enable farmers to maintain presence in the market and generate income from specialization.

Building a case for specialization at community level

In developing countries, specialization should be done at community level as opposed to individual level due different levels of resource endowments at individual household level. For both communities and individuals, the percentage of resources allocated to specialized agricultural commodities can differ since one household may focus on subsistence while the other may want to embrace commercialization of particular commodities. Farmers with other sources of income like remittances may not prioritize subsistence production but try to go commercial.  For a poor family, the greater percentage (90% of $500) of resources can go towards specialized commodities to ensure a strong source of livelihood and food security.  On the other hand, those with alternative sources of income can devote 75% of a greater amount of resources (75% of $5000) towards commercialization of specialized commodities because they want to maintain market participation.

The more farmers produce as a community, the more bargaining power they acquire. Specialization also reveals a community’s knowledge such that gaps and surpluses can be known. After consolidating the knowledge, it becomes possible to arrange it in layers so that beginners can know where to start while experts do not have to waste time delving into what they already know. Without knowledge assessments and layering, development actors end up bringing knowledge that will not be absorbed or used.

At national level, developing countries should coordinate production and all value chain actors to ensure consistent supply and best ROI. Important questions include: What are the substitutes when potatoes flood the market? Which other commodities can be produced in line with available resources?  Which are the major drivers of nutrition?  Monoculture is very dangerous because farmers do not have anything to lean on in the event of market failure at global and regional levels. That is why many African farmers tend to be tied to unfavorable contracts which are more like debt traps. Most export crops like tobacco have reached their ceiling in terms of absorptive capacity and do not have a local market. If the international market collapses all the advantages are wiped off. In a competitive world, it is important for developing countries to focus on commodities for which they can develop market options.

Specializing on commodities equals specialized knowledge

Specializing on commodities is tantamount to specializing on knowledge.  A key advantage of specializing on knowledge is that it translates to high quality of commodities. Jumping from one commodity to another does not guarantee specialization of knowledge and low quality knowledge leads to low quality commodities. That is why clearly identifying and characterizing actors is very important. Farmers have to know each other and coordinate in order to avoid flooding of commodities.  In African informal markets, traders who have been specializing on specific commodities like tomatoes, green pepper and cucumber are known. Others are known for fruits, potatoes, cabbages, sugar beans, poultry, eggs, fish, small grains and many other commodities. In the same vein, farmers should try to be known for two to three commodities that can balance each other or share similarities.

Farmers who try to jump from pearl millet to cabbage end up stretching their knowledge because the two commodities are not closely related.  That is why data collection has to be fluid and not wait for crop and livestock assessments that happen once a year.  When a specialized commodity collapses on the international market, it leaves a knowledge vacuum and creates expectation challenges. Developing countries should avoid specializing on commodities whose market they do not control, for example coffee, cocoa, cotton, flowers and tobacco. On the minerals side, it is dangerous to specialize on gold or platinum whose prices are set and manipulated in western and global markets.

 

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

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

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

More reasons for decolonizing banking systems in developing countries

While some developing economies are evolving rapidly, local banks are clutching onto colonial identities. For instance, in most African countries banking as a practice has kept colonial labels such as Commercial Bank, Merchant Bank and Building Society, among other categories whose meaning and differences are not clear to ordinary people. This identity crisis, with colonial origins, is visible to ordinary people who continue to raise questions like: What is a savings bank? What is a merchant bank?  Is a building society only concerned about housing?  If agricultural traders are merchants, why are they not getting financial support from existing merchant banks?

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Unmasking the dilemma in African financial systems

A major dilemma in most African countries is the prevalence of several financial institutions whose roles, responsibilities and differences are not clearly understood by ordinary people and potential borrowers.  Conversely, the financial sector has not done much to clarify and explain distinctions between diverse financial actors in ways that inform intended beneficiaries and potential clients.  Each financial institution continues to market its products and communicate its mandate separately. Financial authorities do not sufficiently share financial policies with different target groups, leading to many unanswered questions.  In most countries, major sources of finance include government through the fiscus, the reserve bank, different types of banks, development agencies like the UN system, international NGOs, Micro Finance Institutions (MFIs) as well as Internal Savings and Lending (ISALs), among others.

Unfortunately, there is no clear definition or explanation for potential entrepreneurs to make sense of all these institutions from a financial policy perspective. As if that is not enough, most African countries have not built pathways along which the financial sector can adequately inform socio-economic development. Boundaries and overlaps are not clear. For instance, government can finance farmers directly through input schemes instead of empowering an agricultural bank to do so. The reserve bank can also be seen financing some economic activities directly through its subsidiaries. Not to be outdone, UN agencies, international NGOs, the World Bank and MFIs are also often seen extending different forms of funding directly to diverse classes of beneficiaries. Besides lacking coherence, such interventions by several financial actors are not based on consistent pathways for financing growth patterns. Gaps and opportunities are often not clear.  Many financial institutions end up competing to give loans to formerly employed civil servants on the basis of a pay slip.  Traders and other economic actors with more authentic need for finance are denied finance due to absence of pay slips although their businesses are viable.

 Shifting mandates and the power of clear identities

Traditionally, banks were meant for safe-keeping money.  Depositors would take their money to the bank mainly for safe-keeping. Banking money was also an investment opportunity because depositors earned interest. Banks were also conduits for building official business performance transactions, for instance, through gathering records on sales. Such evidence of a business’ performance was part of a transaction  history that would later be used to get a loan since the records spoke for one’s business, showing how much your business was worth.

Clarifying financial categories and identities can enable strong synergies between financial institutions and active economic actors like Micro, Small and Medium Enterprises (MSMEs).  With proper definition and clustering it becomes possible to arrange financial facilities in line with each category. That way, smallholder farmers do not waste time applying for loans from financial institutions where chances of getting loans are close to zero. Traders and processors can be aligned with appropriate sources of finance.

Currently, African banks do not seem to have their own formulae for developing their SME departments. For instance, the difference between a bank’s SME department and an independent MFI is not clear. There should be a distinction or link between these institutions given the fact that a bank’s SME department and MFIs are often fishing from the same pond – try to serve the same clients offering similar services. On the other hand, development organizations that want to support SME growth through youth and women in agriculture seem to lack friendly channels for extending such facilities without attaching their facilities to formal banks’ conditions. Funds from development organizations targeting socio-economic development are forced to pass through formal banks where they attract all conditions for private funds. Once this happens, it is no longer development finance. Given that development finance comes at concessionary rates, banks do not often prioritize it, preferring their own expensive commercial funds. Since banks are for profit while development agencies are for development, it is a conflict of interest to expect profit-oriented banks to offer non-profit development finance.

Socio-economic transition and death of benefits

Over the past few decades, in countries like Zimbabwe, people have lost trust in banks because depositors can no longer earn interest from their deposits. Instead, interest earnings have been converted into bank charges, to the benefit of banks. There is no longer any incentive for depositors like MSMEs to bank their money in formal financial institutions.  On the other end, a performance history is no longer enough for a business to secure a loan as banks now emphasize other stringent conditions like collateral in the form of immovable property, which may not be related to the business at all. For instance, a house has no relationship with trading in agricultural commodities. The collapse of large corporates has also given birth to a robust SME sector that is detached from banks which no longer provide traditional benefits.

Banking as a practice and profession is dying a slow death and in its place a new fluid financial economy that responds to immediate cash needs has germinated. SMEs no longer see the need for their business performance evidence to be institutionalized in banks. MFIs have come in to fill that gap by starting to engage MSMEs from scratch, building transaction and business track records that enable active enterprises to get loans without having to produce bank statements. In addition, MFIs and MSMEs are forging their own business performance evidence through internal systems.  They have realized, they do not need to save or bank their money but money has to be kept within the enterprise so that loans are repaid as income is generated within the enterprise.

MFIs and MSMEs now innovating collaboratively

In the spirit of building relationships, MFIs have responded by adjusting interest rates in line with the rate of business in the MSME sector.  For instance they have structured repayment period to within a week to six months. This is in line with the speed of transactions among MSMEs which generate quick turnaround for loans. MFIs have also reduced bureaucracy by processing loans quickly unlike banks where it can take at least one to two months for a borrowers to get a loan. By the time such a loan is availed, opportunities and original intended purposes for the loan will have evaporated – leading to the burden of defaults.

MFIs are also warming up to the fact that innovation is no longer about business history but recognizing an innovative idea. Where banks use terms like green field as an excuse for not funding new business ideas, MFIs embrace green field ideas as opposed to supporting copycat businesses that are preferred by formal banks. New ideas or green fields are found within Communities of Practice (CoPs) such as informal markets. Instead of focusing on an individual enterprise, understanding the new economy is about assessing the potential of the entire business cluster or sector. Whereas banks are more interested in loan repayments with little attention to value added services, MFIs are providing additional benefits like training in entrepreneurship, financial literacy and business management. This enhances business performance and reduces default rates.

Unfortunately, policy makers are reluctant to recognize this new economy. Frustrated by the rigidity within formal banking systems, many bank executives are forming MFIs through which money from banks is being channeled to innovative business ideas. Insisting on financing already existing enterprises and traditional forms of collateral in an economy where over 60% of enterprises are dominated by women and youth is to completely miss the mark.  Supporting old businesses and ignoring active economic actors whose only limitation is lack of collateral in preference for financing businesses that have exhausted their economic runway and are on the verge of phasing out due to lack of innovation is failure to predict the future. Financiers that refuse to recognize and support green field businesses are blind to the importance of building a base for future socio-economic growth. Such decisions are also tantamount to unwillingness to tap into innovations by women, youths, MFIs, ISALs and others at grassroots who are critical sources of socio-economic business models free from colonial appendages.

Mobile money is accelerating the demise of traditional banking

Although the proliferation of mobile money is being celebrated in many African countries, it is creating more challenges than solutions for banks and ordinary people.  There is currently no clear justification for one to have a bank account and a mobile account. If SMEs can keep their money in a mobile wallet and transact anytime, what role does a bank account play? Why should someone transfer money from a bank account to a mobile wallet and what are the advantages of such actions?  Rather than creating a false sense of convenience, there should be one form of keeping money and transacting. SMEs are realizing that there is incentive for keeping the same money in the bank and in the mobile wallet. Costs of moving money between a bank account and a mobile wallet eat into the amount of money that should be circulating in the business.

Since banks no longer keep business performance records for clients, SMEs now keep their business records in their mobile phones. Banks are becoming increasingly irrelevant to the business needs of MSMEs. They urgently need to find ways of reviving their role in anchoring business growth patterns. The new economy is forming its own new roots different from the former colonial roots. It is building its own foundation starting from the micro levels anchored on MFIs which are part of the socio-economic context. Most SMEs and MFIs tend to be confined to their niches due to lack of resources. Supporting such institutions will spur more outreach. Where MFIs where only financing smallholder farmers, with the right pathways, they can start extending their tentacles to other business levels like processors, restaurants and others. As long as they remain micro, their clients will also remain micro.

Upward economic mobility

Traders are initiating upward mobility, growth and transition for most MSMEs.  It is the trader or buyer whose activities are pushing farmers to produce more as the market increases its capacity to trade.  That is why the market should finance production. When government and financial institutions start by financing agricultural production, they create gluts and mismatches between demand and supply – leading to frustrations among farmers. On the other hand, financing the market creates and broadens demand. Those who access finance through the market have entrepreneurial mindsets. That way the market becomes a screening process where levels of participation in the market determine how much an actor gets from US$100 000 circulating in the market.

Building a medium scale market requires a robust screening process that enables traders to be reliable  aggregators for processors and for exports. Most market traders have stories that can inform appropriate financial inclusion pathways. They can also be pacesetters in financial inclusion from the market. For instance, they can support building of contract models from the market since they are powerful off-takers whose role is not understood by the formal economy. In the new MSME-driven economy, deep knowledge goes beyond a series of facts or information compiled in a brochure by banks. Critical knowledge embraces economic actors’ true knowledge of their role and new business processes. Such knowledge leads to mastery of the entire business ecosystem. On the contrary, banks and other formal institutions continue to confuse knowledge sharing with road shows and conferences that are based on showing and telling. A road show trying to persuade traders to open bank accounts is a waste of resources without first understanding and articulating the concerns and needs of potential clients.

 

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

The character-building role of African ‘informal’ economies

People who co-exist with Kombi drivers in Zimbabwe, Matatu drivers in Nairobi’s traffic jammed roads, boda-boda motorcyclists in Kampala and similar situations in African cities have always wondered if those drivers are from the same mother. This is due to their character which is exactly the same. ‘Informal’ traders and MSMEs also share the same character which makes customers wonder whether they went to the same school.  If formal education systems had a long lasting influence on people’s character, economists who attended the same university and read the same books would have the same character.

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African ‘informal’ economies and character building

The above examples demonstrate the extent to which fluid and ‘informal’ business ecosystems shape people’s character more than external factors like money or formal education. These markets are able to build the character of farmers, traders, transporters, consumers and other value chain actors in ways that formal training institutions like colleges or universities cannot do. They are an open knowledge sharing institution where various ways of learning include observing, lurking and experimenting. This kind of knowledge acquisition and sharing does not always happen in formal settings. By teaching farmers and traders how they should show up, ‘informal’ markets are able to creatively build and shape the character of economic actors.

In a highly competitive world, character is becoming more important than talent or skill. While skills can easily be acquired, a dynamic character is difficult to acquire. Many farmers and farmer leaders can succeed at producing agricultural commodities but fail to perform in the market. While development agencies, government extension departments and private sector contractors spend money and time trying to develop farmer skills through farming as a business and other approaches, most of these efforts fall short in building the character of farmers and traders. In the ‘informal’ and increasingly digital knowledge economy, the most important thing about leadership is character, followed by talent and skill. This is mainly because informal economies are driven more by trust and relationships than by rules and regulations. Formal institutions like banks which operate based on guidelines and policies need to revisit their business models to embrace trust and relationships as critical pillars of lending.

Relationship between character and entrepreneurship

Evidence from African ‘informal’ economies indicate success in entrepreneurship is now more about character and critical thinking as opposed to talent, strength or skill. If talent was everything, economies with highly talented people would be self-sufficient. We are not saying countries should stop investing in identifying and cultivating talent. Character is becoming central to entrepreneurship.  As part of character building, informal economies compel aspiring and growth-oriented entrepreneurs to seek the highest good of others, speak the truth in ways that are useful to others and lead in ways that meet the needs of other actors and customers. They also obtain expertise in noticing strength in others and show generosity by using their talents to advantage others.  All these attributes are not obtained from formal schools and textbooks but from the business ecosystem. Instead, formal educational institutions promote competition rather than collaboration for the greater good of all.

Modern fast moving economies are about consistency in behavior, supply and participation in the market. To be successful, farmers and traders have to provide predictable signals to market demands. Consumers must know how farmers respond before they do anything. That means farmers have to show up in ways that seek the highest good of consumers and competitors. Character is not about talent or skill but consistency in behavior and predictable responses. A farmer’s character scores over talent in the long-run and helps in building his/her enterprise as a brand to be trusted for planned expansion and growth.

The market and consumers have to be rewarded from time to time with openness and fairness. Character is also easily tied to equity or justice so much that consumers will start associating a predictable farmer’s commodity with a unique, value-added lifestyle.  Through participating in ‘informal’ economic ecosystems, Kombi drivers, Matatu drivers, boda-boda motor cyclists, food vendors, traders and others actors have become aware that things that make them remarkable go beyond talent to the practice of humility and love.

Broadening the notion of formality

The way African ‘informal’ markets are evolving into hybrid economies, signals the need for policy makers and economic actors to broaden the definition of formality from paper work to how businesses and socio-economic ecosystems are structured or organized. Formality should no longer be limited to legal requirements like company registration or tax clearance.  Food ecosystems and MSMEs do not require too much formality as long as traders and other actors produce commodities safely and as fast as consumers need them. Besides, most people’s markets in developing countries are formal in their own ways. Otherwise they would have stopped functioning a long time ago.  They have their own employees, time to open and close, use cash transaction and digital technology. All these practices exemplify formalism.  It should not just be about fixed aboard and certificate of registration that unintentionally end up punishing innovation at the expense of enabling growth.

 Individual character versus ecosystem character

Financial institutions have to realize that public engagement and financial inclusion is sustained by trust and relationships. Insisting on collateral and enforcing strict repayment processes has less power and sustainable meaning than trust and relationships. In business clusters like SME clusters, the character of the cluster is more significant than the character of individual SMEs. As shown through the case of Kombi drivers and Matatu drivers, for SMEs, the competitive environment and relationships control and influence the character of actors in the market. Everyone policies everyone so that the entire market ecosystem is not tarnished to the point of losing customers.  On the contrary, banks continue to ignore the entire ecosystem preferring to deal with individuals whose actions are apparently influenced by the ecosystem.

Formality should not be a basis for lending because it has nothing to do with a business’s growth pattern or the business owner’s character.  Rarely do the majority of customers inquire about registration in order to buy a commodity. The relationship between enterprises is more powerful than the need for formality. Otherwise shelf companies would be the ones doing more business than self-organized informal actors who focus more on delivering value than satisfying legal business requirements.  We are not advocating for the complete removal of legal processes and identities but the major question is: Which is more important legal identity or capacity to satisfy customers? If registration and legal requirements were more fundamental, consumers would insist on seeing a company registration from every farmer or producer before buying commodities.

Character and propensity of a business to grow should be major determinants in a financial institution’s decisions to extend loans. This will ensure micro and medium scale actors with capacity and room to grow are not denied funding in preference of large corporates who many continue to be prioritized for credit when their growth has reached a ceiling. Compared to formal institutions, in ‘informal’ economies knowledge feels much more alive and social, rather than just coming from a textbook or organizational manual. Traders and farmers benefit immensely from observing collaboration in action. Understanding the entire economic ecosystem can enable financial institutions, development agencies and policy makers to excel at planning, scaling and extending their influence as well as satisfying unmet needs some of which are hidden in plain sight.

 

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

 

Stimulating more value by tracking what is happening

Tracking local activities and keeping daily updates does not just enable communities to practice what they preach. It also helps them to increase awareness and value for the wider society. When farming and fishing communities are able to track local activities, they build their own capacity to analyze what is going on and identify next steps towards positive outcomes. The ability to analyze what is happening at local levels clarifies the nature and size of the local economy and surfaces progressive ideas.

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Pattern recognition

Inability to track activities limits the capacity of many communities in developing countries to know how to improve. Once they are able to track their work, they will know about their situation, behavior and prune future plans. Another key benefit of consistently tracking what is happening is heightened awareness, leading to pattern recognition. For instance, communities that track their production and consumption practices long enough are able to limit damaging practices like land degradation and maximize positive practices like water harvesting. Community intentions and opportunities become more tangible when tracked, leading to positive reinforcement. This does not just speed up change but enable communities to move from old agricultural models to new digitally-enabled ones. Unfortunately, in most African communities there is no one responsible for tracking collective incomes and expenditures.

Tracking can also reveal circumstances under which focusing on local activities can be too small to be viable and how an international focus can be too disconnected to local reality due to diverse interests.  It is through tracking changes in the local environment that communities can embark on activities that enable them to get local rivers flowing again and create a local movement to improve natural resources management. Without tracking, it can be easy for farmers and other value chain actors to focus on crops and forget grass, livestock and wildlife. The contribution of each farming community to national food supply can also be made visible through tracking volumes, seasons and other critical factors. For instance, in Zimbabwe, tracking commodity supplies into informal agricultural markets has made it possible for eMKambo (www.emkambo.co.zw) to persistently notice that more than 70% of commodities flowing into informal markets come from communal areas, except potatoes, oranges, bananas and cabbages which require bigger pieces of land for profitability.

The power of tracking agricultural production corridors through agricultural markets

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The charts (above) show that Manicaland province has remained a major source and supplier of sugar beans into Mbare, Harare maket over the past three years (50%), followed by Mashonaland East (26%), then Mashonland Central (18%) and lastly Mashonaland Central (6%).  More evidence shows that this trend has been driven by investments in irrigation facilities by government and development partners in Manicaland as well as suitable climatic conditions. The trends also reveal the potential of sugar bean to be  a key agro-economic driver that can influence rural industrialization in Manicaland province.

Assimilating local experiences into mainstream views

Tracking and gatherig local evidence can empower farming communities to influence change and get their worldviews assimilated into mainstream national decision-making processes. This can happen if these communities have skilled people who can recognize and capture strategic opportunities. A community that tracks its activities can establish a stronger foundation for scaffolding growth and set achievable ambitions. New grounds for interpreting local knowledge can be inspired through persistent tracking and updating local evidence.  Some of the most important insights that can be generated include existing food supply networks, driving forces, adaptability of food systems to dynamic environments and relationships between food and identity.

 

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

The sum of community knowledge is greater than the sum of individual expert knowledge

While it is true that community knowledge is broader and deeper, most African farming communities hesitate to make decisions without consulting an extension officer. The need to cross-check and verify facts through an extension officer can be counter-productive if it causes farmers to stop experimenting and learning from their innovations. Surveys by eMKambo over the past three years have shown how smallholder farmers with less exposure to formal extension officers innovate more and are more confident of their own knowledge than those running to extension officers for every bit of advice. However, some farmers who figure out answers on their own tend to look down upon extension advice even in cases where it would be important to confirm existing knowledge.

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Expert opinion versus evidence synthesis

The brain drain has not only affected developing countries who have lost the best talent to the developed world. Rural communities in developing countries have also lost their best talent to urban centres, the same way government institutions have lost the best talent to development agencies. Some of the most critical skills that have left rural areas for cities is the capacity to gather and synthesize local evidence into reliable knowledge. Short-term capacity building efforts like training in farming as a business or marketing initiatives introduced into communities by private companies selling seed or livestock breeds cannot build sustainable knowledge pillars without foundational pillars of knowledge like formal education systems. It is like planting seed when the soil is not ready. This is visible through communities’ excessive reliance on expert opinion from extension officers, veterinary doctors and nurses even on practices that should be very basic.

Although the sum total of community knowledge is way greater than that possessed by individual experts, several agricultural and rural development initiatives continue to be based more on expert opinion than on syntheses of existing knowledge. Local communities of practice that can consolidate existing evidence into practical procedures are lacking in most African rural areas. As a result, there is enormous depletion of knowledge and best practices that have kept the social fabric intact for generations. There is definite need for evidence-based agriculture and rural development. In the agriculture sector, this can take into account how farmers use pesticides so that corrective measures can be taken to ensure food safety for everyone. Simple tools for capturing, assessing and standardizing evidence on food safety should be developed and introduced to communities so such knowledge does not remain laboratory science.

 Linking evidence to reality on the ground

The way farmers use evidence should translate to improved outcomes like better yields, more money in the pocket and a nutritious livelihood. The definition of research should not be limited to activities by researchers in formal research institutes alone. Instead, the way farmers conduct their own research and generate useful evidence for improving their practices should be considered an extension of many shades of practical research. As long as what communities are doing improves production practices, enhances practical science, provides accountability and maintains the ethical responsibility of farmers as researchers, it should qualify to be called research. That means, when governments set aside research budgets they should not just consider formal research stations but ordinary communities’ appetite for research and evidence generation. This can be the best way of decentralizing advantages for positive impact on development.

Empirically supported agriculture and rural development are an integral part of a knowledge economy. Assessing a community’s readiness to accept new ideas requires practical research in the right context. Farmers who receive an empirically supported seed variety or livestock breed get significantly better yields than those with no access to such advantages.  However, the main challenge is fragmentation of manuals among government extension services, development agencies and the private sector with no point at which the manuals can be distilled into a single user-friendly practical tool.

On the other hand, strategies for teaching evidence-based interventions are falling short, with little evidence of transfer between the classroom and the workplace or the research station to farming community. While extension officers can learn the rudiments of an intervention at college or university, it is in the practice context that they will develop their knowledge and begin to shift their approach. Methods of teaching evidence-based practice need to change, to become more routed in the practice environment within a community of learners. The sum of the community’s knowledge is greater than the sum of individual agricultural practitioner’s knowledge. As the collective of the group advances, so too does the individual’s knowledge. Knowledge acquisition within the context of a community of practice fosters continuous learning and shape the way communities adapt to new approaches.

 

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

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

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