Road side market selling fresh fruit and vegetables, Oromia, Ethiopia. Credit, Agriculture for Impact.

Road side market selling fresh fruit and vegetables, Oromia, Ethiopia. Credit, Agriculture for Impact.

A market is a process of exchange, facilitating trade and enabling the distribution and allocation of resources. Who benefits and who is left out in the market transactions is a perennial question. Smallholder farmers may not have access to markets or may not obtain a fair price for their products.

Most smallholder farmers in Africa regularly engage with markets, most frequently as consumers, often buying both higher-value complementary foods and staples.[1],[2] Yet, their engagement with markets as producers is limited. In Eastern and Southern Africa, the fraction of farmers selling staple grains is typically between one-quarter and one-third of smallholders.[3] In theory, and to some extent in practice, smallholder farmers through market participation can increase their incomes, and hence invest in the education and health of their children, their farms or obtain other goods and services. Inclusive markets can in essence sustain rural livelihoods.

World Food Programme, Uganda Kapchorwa commercial farmers association. Credit, Alvan Blanch Group.

World Food Programme, Uganda Kapchorwa commercial farmers association. Credit, Alvan Blanch Group.

Inclusive markets allow farmers to benefit from increased production. But there are numerous instances where African farmers have invested in high quality seeds and other inputs only to find they are unable to sell their increased harvest.[4] Sometimes demand in local markets is limited and can be overcome by selling to more distant urban and export markets where the demand is not only larger, but consumers may be willing to pay a higher price for quality products. On the input side, inclusive markets, such a provided by agrodealers, allow farmers access to affordable improved seeds and fertiliser packages tailored to specific soil types, and to farm machinery.

Smallholders represent the majority of all farms in Africa and produce up to 90% of the food in some countries, but they need better and more reliable connections to input and output markets.[5] With Africa’s projected population growth, expected to reach 1.7 million by 2050, there are increasing opportunities for farmers to engage in and benefit from markets. The growing urban population and middle classes are already demanding more nutritious, varied and processed food, generating new jobs and entrepreneurial opportunities for farm households, rural communities and young people through expansion along the African agribusiness value chain.[6]

Produce for sale at a market in Malawi. Credit, IFPRI.

Produce for sale at a market in Malawi. Credit, IFPRI.

At the regional and national level, urban demands for agricultural products are increasing, but the opportunities in intra-African trade remain unexploited. From 2007-2011, only 16.9% of African world trade in food and live animals and less than 15% of agricultural imports took place on the continent.[7] There are also growing opportunities for smallholders to engage in international markets, though there are still substantial barriers and these opportunities are often only open to better-off farmers.

Although there is a spectrum of markets that provide new opportunities for farmers, there are also barriers and risks. Domestic markets in many developing countries are very poorly developed and farmers have limited protection against crop loss, price fluctuations or input costs. Getting timely and reliable market information about prices, volumes and desired characteristics of products is challenging, reducing the bargaining power of smallholders. Inadequate storage often forces farmers to sell produce at unfavourable prices or high input and transport costs may reduce or eliminate profits. Greater investments in road infrastructure and agrodealer networks can improve access to inputs as well as marketing opportunities. Farmers’ risks can also be reduced through participation in cooperatives, access to finance and through the use of insurance products.

Contribution to Sustainable Intensification

To reap the financial benefits that ‎ecological and ‎genetic intensification can provide, farmers also need ‎socio-economic intensification that better links them to inclusive markets where they can sell their crops and make an income. Reducing farmer risks to greater participation in markets can be accomplished with better access to credit, warehouse receipts and other storage systems, for example. Learning how to market products is as important as understanding the soil profile or planting an improved seed.

Linkages to markets can multiply and spread the benefits of growth for smallholders. Rising demand for labour and other farm inputs to increase production in turn can create more jobs downstream from the farm in processing, trading, transport and storage. Jobs are also created from consumption when smallholder farmers spend additional income on locally produced goods and services such as furniture, entertainment, food and drink and house improvements.[8]

Benefits and limitations

Livelihood opportunities

Efficient, fair, transparent and inclusive markets can offer many opportunities for expanding and improving livelihoods. Although many rural households are primarily engaged in agriculture, there are also many additional activities such as processing or transport that enable households to generate additional and more income streams.[9]Inclusive markets are also the basis of rapidly developing agribusiness value chains that, if designed well, provide livelihood opportunities for smallholder farmers and rural communities more broadly. Between 2010 and 2050, the number of young people is set to increase in Africa from 126 million to 265 million.[10] Currently more than 70% of the young live on less than US$2 per day and Africa’s urban labour markets are breaking under the pressures of migration of young people from rural areas into cities.[11]

Developing agricultural markets can offer livelihood opportunities to young people in rural areas. Opportunities along the agribusiness value chain such as production or distribution of agricultural supplies; improving farming technologies and practices with the use of mobile networks; working in a commodities market; employment in processing, transport, marketing or retailing can offer more attractive careers to young people. Growth in smaller cities, towns and villages are also increasing can provides market outlets closer to farmers, providing new jobs along the agribusiness value chain.[12]

International markets

Agricultural exports from sub-Saharan Africa are expected to reach US$20 billion by 2030 up from US$11 billion in 2000.[13] Unfortunately, there are a variety of constraints that prevent the poorest farmers from accessing these markets. Prices can be volatile and the transmission of prices from international markets to the farm gate is poor. Smallholder farmers may be unable to pay for the transportation of their goods, or the transport infrastructure may not connect easily to markets or ports. In addition, high-value export markets tend to exclude smallholder production due to customs costs and higher process and product standards, such as GLOBALGAP, which requires investment from farmers to meet the standard. As a result, only a limited numbers of better-off farmers tend to benefit from supplying international markets.[14]

National and regional markets

Due to the barriers smallholder farmers face to integrate into international markets there is a growing focus on production for national and regional markets.[15] The demand for high-value products that are currently imported could be satisfied by production and processing in country by replacing the circle of exporting raw materials and re-importing processed goods. For example, the Cassava Adding Value for Africa (C: AVA) project is working to promote the use of high quality cassava flour (HQCF) as a versatile raw material. C:AVA ensures a constant supply of materials, drives market demand, and builds market shares in Ghana, Tanzania, Uganda, Nigeria, and Malawi. Farmers are supported in production and processing through partnerships with NGOs and extension services. C:AVA hopes to improve the livelihood and income of at least 90,000 smallholder households, including women and disadvantaged groups.

National and regional markets will grow from US$50 to US$150 billion from 2000-2030,[16] however, the creation of transparent and competitive national markets is crucial to greater involvement by smallholder farmers. Further, regional markets that can also offer opportunities to smallholders are hampered by overlapping and sometimes conflicting trade rules,[17] but some regional initiatives spearheaded by the regional economic communities (RECs) are trying to overcome these challenges. The Common Market for Eastern and Southern Africa (COMESA) and the Economic Community of West African States (ECOWAS) RECs are funding programmes to promote the integration of regional markets and raise the competitiveness of local products.[18] COMESA is developing a regional processed foods sector strategy to accelerate growth in the sector by raising the capacities of private entrepreneurs.[19] As part of the Comprehensive Africa Agriculture Development Programme (CAADP) process, ECOWAS has been at the forefront of developing and implementing Regional Agricultural Investment Plans (RAIPs) that address cross-border barriers to agricultural market development.[20]

Market price fluctuations

Market price fluctuations are normal, as markets should be responsive to changes in supply or demand. They can, however, cause significant concern and disruption when they move quickly, unexpectedly or drastically. Fluctuations are often caused by changes in the supply chain, such as population growth rate and shifts in dietary habits, which result in changes in the consumption of feed grain and food. Fluctuations can also be induced by harvest losses caused by bad weather, or market speculation. Whilst market price fluctuations can benefit farmers when the price for a crop increases, a sudden or drastic decrease that is insufficient to cover costs of production is a detriment. Without any protections, the result is insecurity and financial risk for all market participants.

Market price information

Limited by insufficient information on market processes and prices, farmers are often at the mercy of buyers at the farm gate, who decide how much they want to pay for the crop. New communication technologies can help to get a better price for farmers, by rapidly delivering market price information and linking buyers and sellers. For example, Ghana-based technology provider Farmerline[21] aims to empower 500,000 smallholder farmers in West Africa by 2019. Today 75% of Africans own a mobile phone, making it increasingly easier to reach those located in remote rural areas with timely price information or weather forecasts.[22] Farmerline provides better communication channels for smallholder farmers through mobile phones voice services and SMS. Information such as farming advice, weather forecasts and inputs services can help farmers improve their harvest and access new markets and gets better prices for their crops.

Infrastructure and market access

Investments in infrastructure, such as roads, transport, and power can help farmers access markets where they may be able to fetch a better price than if they sold their produce at the farm gate. Roads also help farmers’ access input markets providing seeds, fertilisers and extension services. However, only 34 % of rural Africans live within 2 kilometres of an all-season road, compared to 65% in other developing regions. Lack of rural road connectivity constrains agricultural production: the cost of moving produce can be as high as $2.00 per ton per kilometre.[23]

Inland transport represents 40% of the total cost of moving exports to their port of destination. With so many landlocked countries this is a multinational problem that must be confronted on a regional basis. The port-to-rail link is often inhibited by conflicts between rail and port jurisdictions. The lack of integration prevents effective operation of the container trade, as containers are loaded and unloaded in port areas, exacerbating congestion.[24]

Access to storage

Prices are at their lowest when the market is flooded with crops after harvest. Therefore, farmers need access to facilities to safely and securely store their crops until the market prices are more favourable. There are currently 200 post-harvest loss innovations in use, but they are not widely available to smallholders.[25] AGRA and the Rockefeller Foundation, through its Food Waste and Spoilage Initiative recently launched a project to test three innovative storage technologies: hermetic cocoons, metal silos and Purdue Improved Cowpeas (PIC’s) bags. The alternative is to invest in dedicated warehouses that clean, dry, fumigate and grade crops after harvest.

In Uganda, the warehouse AgroWays (U) offers transport, cleaning, drying, grading and storage to smallholder farmers at affordable prices. AgroWays (U) encourages farmers to organise into village associations with up to 60 farmers to collectively produce 5MT, the minimum amount required for pick-up at village aggregation centres. To prevent spoilage, the grain is collected within 2 days of harvest, taken to the warehouse in Jinga. Farmers gain mainly from reducing post-harvest loss, but also through direct price negotiation with buyers. Once a price is agreed, the farmers associations (or farmer as the case may be) are paid for the amount of grain deposited, less the warehouse charges.

Multimedia
References
  1. [1] Barrett, C. B. (2008), ‘Smallholder Market Participation: Concepts and Evidence from Eastern and Southern Africa’, Food Policy, vol. 33, no. 4, pp. 299–317.
  2. [2] Jayne, TS, Haggblade, S, Minot, N, & Rashid, S 2011, ‘Agricultural Commercialization, Rural Transformation and Poverty Reduction: What have We Learned about How to Achieve This?’ Synthesis report prepared for the African Agricultural Markets Programme Policy Symposium, Alliance for Commodity Trade in Eastern and Southern Africa, April 20-22, 2011, Kigali, Rwanda.
  3. [3] Wiggins, S & Keats, S 2013, Leaping and Learning: Linking smallholders to markets in Africa, Agriculture for Impact, Imperial College & Overseas Development Institute, London.
  4. [4] Pretty, J, Toulmin, C & Williams, S 2011, Sustainable intensification in African agriculture, International Journal of Agricultural Sustainability, vol. 9, no. 1, pp. 5-24.
  5. [5] Agriculture for Impact 2014, Small and Growing: Entrepreneurship in African Agriculture, A Montpellier Panel Report, London.
  6. [6] Agriculture for Impact 2014, Small and Growing: Entrepreneurship in African Agriculture, A Montpellier Panel Report, London.
  7. [7] United Nations 2013, Economic development in Africa: Intra-african trace: Unlocking private sector dynamism, United Nations Conference on Trade and Development (UNCTAD), Geneva.
  8. [8] Wiggins, S & Keats, S 2013, Leaping and Learning: Linking smallholders to markets in Africa, Agriculture for Impact, Imperial College & Overseas Development Institute, London.
  9. [9] International Fund for Agricultural Development (IFAD) 2003, ‘Promoting Market Access for the rural poor in order to achieve the millennium development goals’ Roundtable Discussion paper for the 25th Anniversary Session of IFAD’s Governing Panel, IFAD, Rome.
  10. [10] Brooks, K, Zorya, S, Gautam, A & Goyal, A 2013, ‘Agriculture as a Sector of Opportunity for Young People in Africa’ Policy Research Working Paper 6473, The World Bank, Washington, DC.
  11. [11] Agriculture for Impact 2014, Small and Growing: Entrepreneurship in African Agriculture, A Montpellier Panel Report, London.
  12. [12] Agriculture for Impact 2014, Small and Growing: Entrepreneurship in African Agriculture, A Montpellier Panel Report, London.
  13. [13] African Smallholder Farmers Group (ASFG) (no date), Supporting Smallholder Farmers in Africa: A Framework for an Enabling Environment, Available from: <http://www.asfg.org.uk/framework-report/overview> [10 July 2015].
  14. [14] Jaffee S, Henson, S & Diaz Rios, L 2011, Making the Grade: Smallholder Farmers, Emerging Standards, and Development Assistance Programs in Africa, A Research Program Synthesis, World Bank, Washington, DC.
  15. [15] African Smallholder Farmers Group (ASFG) (no date), Markets Availabel from: <http://www.asfg.org.uk/framework-report/markets> [9 July 2015].
  16. [16] African Smallholder Farmers Group (ASFG) (no date), Supporting Smallholder Farmers in Africa: A Framework for an Enabling Environment, Available from: <http://www.asfg.org.uk/framework-report/overview> [10 July 2015].
  17. [17] World Bank 2011, Doing Business 2011: Making a difference for entrepreneurs. Southern African Development Community (SADC), World Bank Group, Washington, DC.
  18. [18]The New Partnership for Africa’s Development (NEPAD) 2012, Market Access, Available from: <http://www.nepad.org/foodsecurity/agriculture/marketaccess> [9 July 2015].
  19. [19] The New Partnership for Africa’s Development (NEPAD) 2012, Market Access, Available from: <http://www.nepad.org/foodsecurity/agriculture/marketaccess> [9 July 2015].
  20. [20] Acquaye, D 2012, The roles and opportunities for the private sector in Africa’s agro-food industry, The United Nations Development Programme (UNDP), Johannesburg.
  21. [21] Farmerline (2013), Farmerline: Agro-Industry Content Provider Available from: http://farmerline.org/ [Accessed 20 January 2015].
  22. [22] United Nations Development Programme (UNDP) 2014, Farmerline joins the Business Call to Action with commitment to provide mobile communication services to rural farmers, Available from: <http://www.undp.org/content/undp/en/home/presscenter/pressreleases/2014/10/15/farmerline-joins-the-business-call-to-action-with-commitment-to-provide-mobile-communication-services-to-rural-farmers.html> [28 April 2015].
  23. [23] African Development Bank Group 2011, Better access to roads in rural areas is critical to raising agricultural productivity, Available from: <http://www.infrastructureafrica.org/key-msg/sector/better-access-roads-rural-areas-critical-raising-agricultural-productivity> [8 July 2015].
  24. [24] African Development Bank Group 2011, Poor linkages among transport modes in Africa cause long delays and raise costs in the movement of international freight, Availabel from:<http://www.infrastructureafrica.org/key-msg/sector/poor-linkages-among-transport-modes-africa-cause-long-delays-and-raise-costs-movement> [9 July 2015].
  25. [25] Global Knowledge Initiative 2014, Reducing Global Food Waste and Spoilage, a Rockerfeller Foundation initiative: Assessing resources needed and available to reduce post harvest loss in Africa, The Rockerfeller Foundation, Washington, DC.

Case Studies

Download These Case Studies (pdf)
Case study 1: Soy processing Uganda, Sesaco
Sesaco packaging. Credit, Agriculture for Impact.

Sesaco packaging. Credit, Agriculture for Impact.

The Uganda Development Trust (UDET), supported through financing from the Alliance for a Green Revolution in Africa (AGRA), United States African Development Foundation (USADF), and the Rockefeller Foundation, assists small and medium enterprises (SMEs) to prepare business plans and access credit. From this support, enterprises improve their profits, operating margins, production volumes and number of smallholder farmer suppliers, to name a few achievements.[1] One example is SESACO, a food processing company that offers employment opportunities, especially for women. SESACO Foods Company, created in 1987 on the outskirts of Kampala, Uganda, specialises in producing high value nutritious foods made from millet, maize, soybeans, groundnuts and sesame. Notable products include Soya Cup, an instant soy-milk beverage and brown butter, a mixture of roasted sesame, groundnuts and soybeans, used as a seasoning and a substitute for dairy butter. The company has 80 employees (55 of whom are women) with a monthly sales average of UGX 100 million (US$ 39,000). SESACO caters for neighbouring countries Rwanda, Burundi and the Democratic Republic of Congo.

While SESACO was effectively “up and running” since 1987, UDET’s audit in 2011 found that in addition to inadequate working capital, SESACO did not have a streamlined supply chain for raw materials, its products were sold haphazardly in lieu of a functioning marketing and distribution strategy, management did not provide guides or manuals for staff and the factory machinery was poorly organized resulting in wasted production time. After working through these challenges, SESACO received working capital from the US African Development Foundation to improve machinery, package materials with clear nutritional information, and partner with Makerere University’s Food Technology Department to work on product development.

References
    [1] Agriculture for Impact 2014, Small and Growing: Entrepreneurship in African Agriculture, A Montpellier Panel Report, London.
Case study 2: The Kapchorwa Commercial Farmers Association in Uganda
Warehouse machines in use. Credit, WFP.

Warehouse machines in use. Credit, WFP.

Kapchorwa Commercial Farmers Association (KACOFA) was started in 2006 by 27 farmers who produce barley, maize, coffee and sorghum. Until recently, KACOFA was unable to support its’ members production and marketing activities due to a weak organizational structure and institutional systems. Additionally, the farmers had limited marketing skills and no access to storage. This resulted in low quality grain, low levels of production and few offers for affordable credit.

In order to remedy these challenges, the Minister of Trade, Industry and Cooperatives and the World Food Programme (WFP) established a US $1.4million, 2,000MT warehouse. KACOFA procured fertilisers, hired extension officers, obtained delivery contracts with the WFP and established a warehouse receipt system for its members.[1]

Without a warehouse, around 40% of produce is lost post-harvest. The new warehouse is intended to significantly reduce this loss and increase access to important services including grading, weighing, cleaning, drying and packaging.[2] The KACOFA association has since grown to 6,328 members and has 19 staff members that provide support in production and marketing activities. This has resulted in more secure and productive livelihoods for its members. For example, Joyce Banan, a founding member of the KACOFA, was previously unable to produce more than 8 bags of maize per hectare of land. She can now produce yields of more than 35 bags per hectare, and has been able to send her 3 children to university.[3]

References
  1. [1] Agriculture for Impact 2014, Small and Growing: Entrepreneurship in African Agriculture, A Montpellier Panel Report, London.
  2. [2] International Fund for Agricultural Development (IFAD) 2010, Rural Poverty Report 2011: New realities, new challenges, new opportunities for tomorrow’s generation, Quintily, Rome.
  3. [3] Wamala, L 2012, ‘Farmers in Uganda Welcome Another WFP-sponsored Warehouse’ 22 February 2012 World Food Programme: Stories Available from: <https://www.wfp.org/stories/farmers-welcome-another-wfp-sponsored-warehouse> [26 June 2015].
  4. [4] World Food Programme (WFP) 2009, Purchase for Progress: Connecting Farmers to Markets, Stilgrafica srl, Rome, Available from: WFP.org [26 June2015].
Case study 3: Lecofruit exports, Madagascar
Lecofruit bean crops. Credit, Lecofruit.

Lecofruit bean crops. Credit, Lecofruit.

Lecofruit is the Malagasy subsidiary of the French company Basan, which has been operating in Madagascar since 1989. Since 2012, Lecofruit has received support from various EU initiatives including the Europe-Africa-Caribbean-Pacific Liaison Committee (COLEACP) and Deutsche Gesellschaft fur Internationale Zausammenarbeit (GIZ) in order to diversify farmer income sources and increase productivity.[1] Lecofruit builds relationships between smallholder farmers and exporters to enable smallholders to profit from growing export markets. Contracts are limited to a small portion of farmer’s land (typically contracted plots are just 1/100th of a hectare, although households may have more than 1 contract).

One of Lecofruit’s main exports is hand-picked French beans, destined for Europe. Lecofruit has contracts with more than 11,000 smallholder vegetable farmers, each with a hectare of land or less. Lecofruit advances seed, fertiliser and pesticides and provides an extension worker for small groups of growers to help them meet the standards required by European supermarkets.[2]

Lecofruit extension worker and farmer. Credit, GIZ.

Lecofruit extension worker and farmer. Credit, GIZ.

Lecofruit is in the process of expanding their scope to provide exports for the growing European organic market. Currently 10% of Malagasy French beans are organic, so Lecofruit has ‎‎trained around 70 technicians in organic farming practices, who have passed on their knowledge to 1,270 farmers.

As scarce water supplies and inefficient irrigation are large contributors to low productivity in the region, Lecofruit invested in micro-irrigation systems and extension training, employing 370 instructors to help 5,000 farmers. On average, farming households with a contract with Lecofruit experienced a lean period of 1.7 months, compared to 4.4 months for a similar household with no contract demonstrating that contracts can be extremely important for seasonality smoothing.[3] Lecofruit contracts have increased smallholder annual incomes by 8% for conventional farmers and 64% for organic farmers.

References

Room for Innovation

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