Revisiting the role of informal markets in distributing income

Informal markets have existed for centuries, as contexts where communities make sense of their resources and exchange value. However, urbanization has given these markets a more pronounced role particularly in meeting the needs of different classes of consumers and farmers. In many African countries, informal markets are the fastest ways for transferring income from buyers or consumers to farmers.

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Where formal institutions like processing companies and supermarkets take two weeks to a month to pay farmers, informal markets pay farmers promptly. That is very important because farmers do not have control over external factors like rainfall, input prices, dry spells and droughts which cannot be managed through longer payment periods. Unfortunately, financial inclusion efforts are trying to foist an employer-employee mindset on smallholder farmers and informal markets when that is not how actors want to relate. While Point of Sale (POS) machines are ideal for formal actors like supermarkets, policy makers and financial institutions have not developed systems for farmers, traders and transporters whose transactions are based mostly on relationships. Trying to force farmers and traders into a formal financial system without taking into account several unique elements is proving counter-productive.

The informal agriculture market as a bank

To the extent each informal market has a certain amount of money in circulation all the time, farmers use their commodities to withdraw money from the market. Likewise, when traders buy commodities from farmers in the market, they deposit their money into commodities until they get money from the next buyer. This deposit and withdrawal process goes on up to the end user. The entire process accelerates   development along agricultural value chains by avoiding barriers in transaction systems like those in formal systems. Where a farmer or trader would spend hours in a bank queue to get cash or make a transfer, in the market it takes less than a minute to do a transaction.

More importantly, where cash transactions happen between farmers, traders and transporters in the informal market, no charges are incurred. Conversely, where farmers and traders transact through formal banks, transferring money from a trader’s bank account into a farmer’s bank account would cost $5 through bank transfer, irrespective of amount transferred. There are also charges when using mobile transfer from one account to another. Given that a trader can do at least 100 transactions a day, using mobile or bank transfer will result in a lot of money going to the bank or Mobile Network Operator (MNO).  This money taken out through charges is no longer part of the commodity being traded or part of a farmer’s income. These charges are also passed on to several farmers, traders and consumers.

On the other hand, in the informal market, farmers get more cash from money in circulation. Markets have a much higher velocity of money (rate at which money changes hands) and this has implications on development. Where some formal actors keep money for 24 hours or more before hoarding stock, it means the money is lying dormant when it could be used to fuel development. If the farmer had plans to use $1000 from produce sales to buy inputs but it takes 30 days to get that money from a supermarket or processors, it means inputs worth $1000 that could have been instantly bought by the farmer lie dormant (ideal dormant locked by the transaction system).  The land on which the inputs were supposed to be used lies dormant for a month, same applies with labor and water which gets wasted, evaporates or the water tables become depleted with some water flowing along the river.

Delays in payments have opportunity cost implications along the value chains as well as resources. Not to mention business opportunities like missing orders. Some inconsistencies in supply are caused by delayed payment system.  These hidden costs derail development.  There is need for an assessment of how much money is locked in formal transaction systems per day or per week and implications in terms of business opportunity costs.  The recipient is not using the money and the depositor is also not using the money- so this doubles the costs.  Farmers are mindful of the opportunity costs and that is why they would rather go to the informal market. To stay relevant, banks should creatively tap into the informal market system

Informal markets absorb and reduce opportunity costs incurred along transaction systems. In most developing countries, financial systems are still colonial and have not invested in carefully segmenting clients or users. For examples, car sales and agricultural traders are subjected to the same transaction system. Car sales do not mind bank transfers because there are checks and balances undertaken before a vehicle fully changes ownership. But when it comes to trading of already ripened commodities in trading businesses like agricultural markets where the rate at which money changes hands is linked to the rate at which transaction takes place, different charges are needed. If charges are part of the transaction, they contribute a significant cost to the transactions.

Financial institutions should invest in segmenting markets for transacting purposes

One segment like agriculture markets, with many transactions processes per given period, should attract lower charges. Banks can still earn the same if not more revenue due to the number of transactions, riding on the volume of transaction rather than the value. At the moment, when selling a vehicle one can be charged $5 per transaction by the bank, same as someone buying a bucket of groundnuts worth $20 which is 25% charge.  If someone is charge $5 for a vehicle worth $5000 that is 0.1% and insignificant.

In the market, money plays its real role as a medium of exchange where, otherwise, there is a lot of commodities exchanging their value. A farmer can sell agricultural commodities for $100 and move on to the next stall to buy fertilizer worth $50. The movement of $50 from a commodity trader to an input trader remains the same as the medium of exchange.  But if the money goes through the financial system, $5 will be taken away and this means the role of money as a medium of exchange is undermined.  That is why in some parts of rural Africa, farmers and grocery stores have resorted to using commodities like maize to exchange with cooking oil with no need for money in order to preserve value.

Through charges, banks have become dangerous middlemen. Even if people invest in acquiring bank cards, they continue to be charged for unexplained services.  Mobile money is also associated with a lot of double charging, for instance, for a trader or farmer to do a mobile transfer, airtime is needed, which is another charge through USSD and other costs. Instead of adding value, financial institutions and mobile money service providers are subtracting value from farmers, traders and other actors who are walking way with less money compared to if they use cash transactions. In order to circumvent some of these issues, traders and SMEs have devised ways of locking money within their commodities ecosystem.

The market as a knowledge aggregator and distributor

Informal markets have invisible ways of aggregating knowledge from various sources, areas, ages and different gender.  That is why farmers who frequent informal agriculture markets thrive more than those who do not.  It is due to knowledge from the market, for instance, knowledge about tastes and preferences. The informal market also has an open feedback mechanism. If farmers go to supermarkets or formal companies, they will not get synthesized knowledge from diverse sources but a list of specifications provided in an arrogant, big brother mentality.

The pre-colonial economic model on which formal financing systems are based cannot be used to jump-start the new economy. What value added services can a farmer or trader get from the bank?  Informal markets are an example of selling a value. If you do not have a Unique Selling Proposition (USP) for your products you will not be able to sell. If it was not for formal employers who insist on salaries passing through the formal banking system, most African banks would have collapsed a long time ago. Very few workers would volunteer to have their money pass through banks where value is subtracted instead of being added. While formal systems are too rigid for the new fast moving network economy, informal markets have in-built flexibility to suit the fast-moving economy and ecosystems.  Unfortunately, there are still fewer systems for building knowledge from informal market ecosystems.

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

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Building a case for decolonizing Agricultural Value chains

Identifying and explaining each agricultural value chain’s nodes is a better way of revealing the extent to which a value chain can lift people out of poverty and contribute to broader development aspirations. The longer the value chain, the more contribution to socio-economic development. Most agricultural commodities produced by smallholder farmers are characterized by very short value chains, although there is potential to lengthen such value chains. Some of these value chains have remained short due to structural reasons such as lack of local value addition technologies and related resources. As a result, farmers end up producing small quantities for the local community and spot markets.

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Another reason that prevents value chains from lengthening is lack of information about potential markets including the size of particular markets, requirements and levels of competition. This is often the case for indigenous commodities like goats, sheep, indigenous chickens, rabbits and many others. Since formal and concrete markets for these commodities have not been cultivated in many countries, the value chains only extend to the local community.  Opportunities for extending these value chains include setting up abattoirs for goats and appropriate technology for processing small grains in rural production areas.

 Lengthening value chains through value addition

Unfortunately, national policies in most African countries seem to support milling industries for maize, wheat and abattoirs for large animals like cattle at the expense of supporting the production and purchasing of small stock and small grains. Lip service also continues to be paid to the development of value added products from small stock, small grains and commodities like sugar bean, cow peas and sweet potatoes whose value chains continue to be from the field to the pot. Instead of letting these commodities consumed in a raw state, ways of extending the value chains through developing processed products and other multiple uses to move away from raw consumption are long overdue.  There is also scope for combining these commodities with other products to produce diverse food blends.

The story of non-consumables

Some commodities produced in African countries like Malawi and Zimbabwe have shorter value chains because they are non-consumables, for instance, tobacco.  Although praised for bringing foreign currency, tobacco travels from the farmer, straight to the auction floor with no other value added service at the farm.  Grading and baling cannot be called value addition in the true sense. Tobacco has only one market in the form of an auction floor with no other market at community, district or provincial levels for products to be extracted from the crop. In addition, tobacco does not even have a meaningful urban consumer base given that, in the case of Zimbabwe, only 2% is smoked locally. The product only comes back mostly as imported cigarettes and chemical derivatives, produced by the end buyer or tobacco processor.  Farmers do not participate in the most lucrative tobacco value addition processes.  Exporting companies and big buyers like China are the ones who value add and reap more benefits from finished products.  Farmers do not have a mechanism for semi-processing at source (in farming areas) – which is an important stage.

As if that is not enough, many African countries such as Burkina Faso, Malawi and Zimbabwe have been producing cotton for close to hundred years but there are still no simple technologies for separating cotton seed from lint at local level. Weaving cotton into yarn and cloths should be happening in production areas like Gokwe and Muzarabani districts of Zimbabwe. Absence of appropriate intermediate processing technology means cotton remains a colonial crop that African countries have failed to turn into a more powerful economic driver for local communities.  Situations where, after the delivering lint to companies, farmers stop participating in the value chain are not sustainable.  When companies buy cotton lint and disappear, it is difficult to talk of a cotton value chain. Keeping some cotton value chain nodes secretive from farmers implies cotton is not a real value chain.

How lack of technology shortens value chains

Due to absence of appropriate value addition technologies, some commodities with potential for developing long value chains are consigned to short and sporadic value chains. For instance, there is potential to process tomatoes into tomato paste, puree, sauce and powder.  But absence of technology along the value chain from community level, district or provincial level means tomato has a short value chain for most farmers. The tomato moves from the farmer to the consumer, with the trader in the middle.

When the tomato moves from the farmer to the consumer through the trader, what happens cannot be called value-addition. It is the same tomato changing hands with mark ups just catering for handling, repackaging and reaching out to the next level of customers. Ultimately, the tomato does not get the best returns on its investment as it is consumed before reaching the peak of its expected potential or value at each value chain node.  If the tomato farmer is able to semi-process, s/he can earn 30% more value. At the end of the day, a box of tomatoes will cost three times the price shared along the value chain. Currently, the end processor is the one who earns most of the value which is not shared.  The processor does semi-processing, preservation, packaging, wholesaling, distribution and retailing. Ideally, most of these activities should be distributed along the value chain, generating more value for actors and Value Added Tax for the fiscus.

The same applies to fruits

African smallholder farmers who grow fruits like oranges, bananas, guavas and mango are often surprised to see their fruits emerging on the other end as fruit juice or yoghurt when the farmers will have exited early on at the beginning of the value chain. The farmers become by-standers who stop participating in the benefits that accrue to their commodities. It appears the existing food processing and value addition system is based on a pre-colonial business model that was designed to prevent knowledge transfer along value chains so that farmers do not know what happens to their product after they have supplied it and been paid peanuts.  The same products come back to rural retail grocery shops. Where a farmer would have been paid $3/box of mango, $30 worth of mango juice comes back on the shelves of local retail stores. The farmer as a consumer is now forced to look for money in order to be able to by a product whose raw commodities s/he produced.

 How the problem extends to livestock

Crop and livestock farmers are struggling to buy stock feed when they could semi-process soya bean and sell crude oil for finished oil production while they remain with stock feed unlike following it in urban centres where the price will be much higher. There should be technology for farmers to semi-process soya bean into crude oil and remain with stock feed at community level.  Such semi-processing can easily happen at source. Of the $780/ton being offered for raw soya bean, how much refined oil and by-products will come from a ton of soya bean?

There is also no sensible reason why abattoirs are in urban centres when they should be in livestock production areas. It should just be a question of setting standards and cold chain so that slaughtering happens at source, for instance at cattle sales pens. This will create employment at local level and spawn other industries like leather tanning. If cattle are transported from Insiza to Bulawayo, employment is created in Bulawayo, with farmers going back to continue herding cattle.

Absence of processing technology and capacity is one of the main reasons why African countries are beset by rural to urban migration. People are following raw commodities from their rural areas and congregating at processing companies looking for employment. These people should be semi-processing their commodities at community, district and provincial levels, earning more income from their commodities. In addition to decentralizing entrepreneurship, value addition at source will de-congest cities. When value addition happens in farming areas, most of the income from value addition activities will be retained at source. On the other hand, when everyone goes to urban centres where value addition takes place, 90% of the cash end up circulating in urban centres as people who earn income and spend it in cities.  Most of these activities should be happening at community, district and provincial levels.

Need for passing on value chains

The colonial industrial institution has to be transformed. African economies have not developed a sustainable culture of passing on value chains to the next stage. All value chain activities are locked in one colonial system. Yet in the Western world, a car manufacturer does not manufacture all vehicle parts. He can only be a car assembly with parts coming from different parts of the country and the world. Poor attention to rural industrialization is one of the reasons African countries are failing to tap into the resource base and expertise in rural areas. Pressure is exerted on urban processing factories as employees pass on costs to the employer in the form of rentals, transport to work, transport for children to school and other costs.  If processing industries are set up in farming communities, rural areas and growth points, enterprises will be within walking distance for most employees and that reduces pressure on processing companies and utilities like water, electricity as well as road networks.

 

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

 

Opportunities to enrich your agricultural decisions with data

With the importance of data and evidence in African agriculture gaining momentum, eMKambo has historical data that can enable diverse value chain actors to understand their agribusiness planning, budgeting and decision-making. Over the past five years, eMKambo (www.emkambo.co.zw) has been collecting data from more than 20 agricultural markets in Zimbabwe. Major parameters of the data existing include: Name of farmer; Contact details; Type of produce supplied to the market; Volumes supplied by each farmer; Source or farming area and gender of the farmer. Also available are historical and current daily market prices for more than 50 agricultural commodities that form a food ecosystem.

Data categories

You can get raw data in excel sheets for your own needs-based analysis as well as analyzed and interpreted evidence, covering for the following commodities:

Vegetables: Here the data covers a wide range of vegetables from staples to high value crops – cabbages, tomatoes, leafy vegetables, onion as well as peas, green beans, peppers green, yellow & red), garlic, cauliflower, carrots, broccoli, lettuce and others.

Fruits: On the fruits side, existing data is on locally produced fruits like bananas, oranges, apples, avocado pears, pine apples, lemon as well as imported fruits like apples, plums, strawberries and others.

Tubers: sweet potatoes, yams (magogoya, madhumbe), potatoes, Livingstone potato (tsenza).

Wild fruits: Baobab fruit, tsvubvu, masawu, matohwe.

Field crops: maize, sorghum, pearl millet, finger millet, green mealies and indigenous rice.

Legumes: sugar beans, soya beans, cow peas, groundnuts, roundnuts.

Other foods: sugar cane, madora, matemba, soya chunks, rabbits, honey and others.

Poultry and related products: broilers, layers, indigenous chickens, ducks, turkeys, guinea fowls, eggs and others.

14 ways in which the data can be used

  1. Matching agricultural production to consumption patterns, consumer tastes, preferences, market standards and quality expectations.
  2. Identifying periods of gluts and shortages as well as levels of competition at different periods.
  3. Showing responsiveness of particular commodities to changes in their own prices as well as responsiveness to demand, supply and prices of other commodities which may be complements or substitutes.
  4. Bringing out niche markets for various commodities as well as requirements of different niche markets in terms of volumes per given period.
  5. Showing supply corridors for different commodities.
  6. Indicating opportunities for value addition.
  7. Revealing seasonality and consistency in supply.
  8. Identifying value chain actors for collaboration and agribusiness modelling.
  9. Signaling climate change and community resilience.
  10. Showing revenue gathered in various markets and amounts going back to support agriculture and livelihoods in production areas.
  11. For academics – showing areas for research, learning and curricular development.
  12. For financiers – showing opportunities for targeted financing through farmer characterization and capacity assessment.
  13. For input suppliers – surfacing opportunities for targeted promotion of seed varieties, fertilizer, packaging material, equipment and other inputs.
  14. For processors – simplifying aggregation of commodities and ensure sufficient stock.

 

If interested get in touch through the following contacts:

 

charles@knowledgetransafrica.com  / clever@knowledgetransafrica.com

Mobile: 0772 137 717/ 0712 737 430/ 0774 430 309/0772 137 768

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

 

Making marginalized farmers ready for the impact of globalization

Although digital technology is beginning to show potential for increasing the impact of individual knowledge, in most African marginalized communities, community knowledge will remain important for a long time. Unfortunately, many development interventions are meddling with African communities’ capacity to make sense of knowledge. Development actors sincerely want to help marginalized communities but their strategies unknowingly cause harm in ways that hinder progress and growth for intended beneficiaries. That is why enough attention should go into thinking about exit strategies.

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The benefits of letting communities solve their challenges

When farming communities struggle with their own challenges and problems, major benefits include:

Self-respect grappling with their own challenges and figuring out solutions is a huge source of pride and self-respect for most farmers, traders and value chain actors. Farmers who have gone through the mill of their problems tend to have a positive attitude and air of self-esteem.

Grit Struggles strengthen communities more than over-protection from challenges, a process which propagates dependency and weakness. For instance, communities that have been over-protected from drought and agricultural-related diseases often continue to ask for help when they could solve a lot of challenges on their own and even teach other communities how to be resilient.

Openness Communities that have felt the challenge of struggle are often receptive to help more than those who rely on fewer sources of assistance and advice.  In most African communities, learning moments emerge slowly than can happen within the lifespan of most development projects. When communities survive serious challenges they begin to value assistance from different sources.

Respect for help It is not helpful for development agencies and governments to make communities feel less competent when expecting such communities to boldly take ownership after a particular project or intervention comes to an end. While it may seem like doing them a favor, providing quick interventions is degrading to some communities. Helping elevates the self-worth of development agencies and ‘experts’ but lowers the status of recipient communities.  When ‘experts’ expect communities to do as they are told, dependency germinates yet the goal of helping is getting to a situation where helping is no longer needed.

Eyes on the right problem

Identifying the real problems in any community is often the most difficult part but, once correctly done, results will be more sustainable. In some communities the real problem might be bringing up sensitive issues like partisan politics or the influence of religion.  All forms of assistance will not work when such real issues continue lurking in the shadows.  Development agencies and government interventions should not just assume they know what assistance looks like. Some communities may need you to listen and not provide solutions. In some cases help is simply connecting people with resources or experts who can articulate the importance of farming communities to be ready for the global market, for instance.

A critical entry point is first finding out what a community has tried before. This can send the signal that the community has responsible members. In such cases, development agencies will only share community  concerns, but the problem or challenge remains in the hands of the community. Finding out what the community has tried to do in the past is also a demonstration of respect for their efforts in addressing their problems. That is also how irrelevant suggestions can be eliminated. There are several examples of where  development agencies bring suggestions that have been tried before and failed.  A thorough assessment will reveal all these issues and prevent wasting of resources.

Avoiding the curse of false wisdom

If development agencies do not allow communities to find their own answers, it is easy to slip into false wisdom. There are times when communities need someone to give them information. However, it is critical for development agencies and government to step back and let communities make choices, move forward and learn.  Of course, a burning house or a community in urgent problems like a cyclone is not an opportunity to explore options.  This is when development actors and other helpers have to take the bull by the horns. Helping communities to prepare for globalization and a highly competitive market should just be about removing roadblocks as opposed to bringing best practices from different contexts.

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

Global business principles – local nuances

Somebody said a Chinese student who goes to study business in the West will return home and do business the Chinese way. An Indian student will do the same. It is not yet clear whether an African business student will also come back home and conduct business the African way. While business principles may remain the same across the globe, local nuances are increasingly determining the difference between growth and stagnation, success and failure.

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Responding to opportunities through social capital

If it is true that Chinese, Indians and other races are good at tapping into their values and social capital in responding to business opportunities, Africans have a lot of work to do in that direction. When an African business man dies, his belongings, including businesses assets are shared between his children and surviving spouses. If he was a farmer with several wives, his farm will be divided among the surviving spouses and children. One son takes a tractor, the other a disk harrow, the other a truck, the other a grinding mill. The other child or wife may inherit a fruit tree plantation while another gets a processing plant. This means a business that used to operate as single unit becomes fragmented into pieces that no longer cohere. On the contrary when a Jewish or Indian business man dies, customers do not even see any change.  Everything continues to operate as before and the customer base is extended to the next generation.

Globalizing local food systems

Although they may be immersed in the same business curriculum, the way children from different background respond to business opportunities is influenced by their social capital. In a rapidly globalizing and competitive world, culture and social capital are becoming a fundamental base for niche markets. People who know about a unique food system tied to their culture are the ones who can promote it among other cultures. When an African takes his/her food system to England, Australia or USA, s/he becomes an ambassador for the food system from his/her community back home. That can be the genesis of a new food business. A lot of nutritious food in developing communities remain marginalized because people from these communities who have gone to cities and overseas are not doing anything to globalize their culture through their food system. Nigerians are in the forefront of taking their food system wherever they go. Other Africans are fond of despising their food and embracing foreign food like Chinese food which is rapidly displacing African food in many African cities. Eating at a Chinese restaurant is considered more prestigious than eating at an African restaurant.

Cultivating a unique customer base

Instead of being abused through partisan politics, the notion of clans and tribes can be a powerful tool in advancing culturally-rooted agribusinesses to other parts of the globe. If the Italian pizza has been globalized, why not the Ethiopian Njera, famous Ndebele food known as Mxhanxa or other delicacies from other African cultures. When tourists visit Africa, they do not want to eat what they already eat at home but taste unique African food. Africans cannot continue blaming modernization for fragmenting their communities when some cultures are turning modernization and globalization to their favor. Nothing prevents African youths who leave rural communities for the city or foreign countries to return home and explore unique business opportunities. Many clans and polygamous networks are so strong as to constitute a big market for business ventures. An aspiring business person should count his/her own clansmen and relatives as the first customer base.  Luckily, African informal markets are showing some of the possibilities in transforming social capital into resilient business outcomes through trust and relationships.

New roles for African chambers of commerce

African chambers of commerce tend to be concentrated in capital cities with no extension to rural areas and cultures that should be a source of distinctiveness for different members. Foreign Direct Investment, knowledge and other forms of capital will not take African businesses far without curiosity and social capital, which are becoming more sources of value. Knowledge is power but curiosity pulls the trigger. Most African chambers of commerce continue to pay lip service to knowledge and evidence gathering. Chambers of commerce should articulate the capacity of their industrial entities and their raw material expectations that have to be matched with production. It is through evidence that the capacity of an entire sector like the milling industry can be known.

In several African countries, the Small and Medium Enterprises (SME) sector has emerged as a strong competitor for the big milling industry. It means chambers of commerce representing the big industry have to accurately assess and understand the SME sector as a serious competitor. For instance, in the maize milling or peanut processing business, there are now many people operating grinding mills and peanut butter processing mills in both urban high density areas and rural communities, posing direct competition to big traditional millers who used to dominate the food processing sector.  If more than 60% of the milling market share has gone to small SME actors, who are big millers milling for? Gathering evidence will guide big millers to change their business models unlike pretending they still command a big market share when in fact it has been eroded by small players.

Evidence will also demonstrate the extent to which consumers are moving from tinned beans and tinned fish to pre-cooked beans and dried fish. The expansion of SME actors into rural business centres also mean raw materials that used to flow to big millers in cities are now being intercepted by small SMEs at growth points and rural business centres whose advantages include proximity to production areas and flexibility in handling smaller quantities.  For example, groundnuts are being intercepted by small peanut butter producers at rural business centres. Rural electrification initiatives are exacerbating this trend.

Going beyond buying raw materials from farmers

Farmers are now beginning to ask what other additional services or benefits are being offered by big companies. They are seeking relationships that go beyond buying raw commodities from farmers. That means big companies should innovate by coming across as guarantors to famers so that they can access inputs and finance. Gone are the days when big companies would just wait to buy when the farmer had produced alone using self-financing and grappling with many challenges.  Big companies cannot continue to be price setters for cattle and other commodities whose production they will not have supported. That is why farmers end up preferring open markets where the laws of demand and supply prevail.

Are big companies offering knowledge and information?  In a dynamic economy characterized by climate change and other negatives, farmers are no longer interested in future contracts. Where contract farming is happening, why do contractors look for the best farmers who already have access to resources? Should they not be looking for under-resourced farmers as a way of broadening the supply base? By supporting the well up, big companies widen the gap between the rich and the poor who end up continuing to be laborers when they need a graduation pathway that can see them growing out of poverty. When potential players are excluded due to lack of resources, production for industries suffers and narrows.

The power of a knowledge agenda

Harnessing social capital means developing countries have to broaden their knowledge agenda beyond formal education. Each community has knowledgeable people who have nothing to do with formal education like high schools, colleges and universities. These people know how to fix things and produce resilient products although they are not factory managers or university deans. Gathering intelligence through a broader and deeper knowledge agenda can inform other actors like banks as to how they can become key actors in socio-economic growth. Questions like what informs the horticulture finance facility and where should financing value addition start can be answered through a knowledge agenda.

A focused knowledge agenda will also lay the foundation in rebuilding value chains within a wider agricultural ecosystem. Processing requires value chains not ecosystems. It requires organized production, logistics and marketing. Processing cannot work with ad hoc supplies without clear actors.  A knowledge agenda will address questions like: Who is in the soya bean value chain? Who manages supplies? Who is responsible for aggregation?  Addressing bottlenecks requires high levels of organization. Emphasizing price like $780/ton of soya bean invites opportunistic aggregators who masquerade as farmers by going to buy from scattered farmers. Government and financiers will think they are giving a good price to farmers when money is going to opportunists.

 

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

Cultivating the power of real-time awareness

As agricultural value chains in developing countries become over-crowded and hyper-competitive, real-time awareness has never been so important. While digital technology is being presented as a solution,  more efforts have to go into ensuring information satisfies the needs of farmers, traders and other value chain actors who want to engage in evidence-informed decision making. Many organizations that currently produce manuals for farmers do not realize that some farmers have no time to read such manuals from cover to cover but can only consult the publication when a need arises.

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There is a difference between availing information to agricultural value chain actors and making it user-friendly in ways that increase real-time awareness. Most digital initiatives that focus on disseminating information to farmers do not spend enough time figuring out if such information is user-friendly or contributes to real-time awareness. As a result, there is information over-load, especially for particular commodities. For instance, while commodities like maize, cocoa, cotton, tomatoes and banana can be characterized by information over-load, information scarcity is a permanent feature of orphaned crops and livestock. There is more information about cattle production than rabbit farming, for example.  In the absence of smart content developers, digital technology might increase the gap between famous commodities and orphaned ones.

Building new ways of handling evidence

Value chain actors have to be capacitated in analyzing existing data in new ways. As they set and tackle priorities in competitive ecosystems, it is critical to start from existing data or evidence. Every community has its own community software in the form of reliable practices and what has stopped working.  While such knowledge may not have been codified, community members might want to consider what they already know about particular markets and different consumers. Formalizing these ideas and turning them into opportunities can be a good entry point.

Many African farming communities already have a wealthy of information that just needs creative application. They may even advice formal institutions like government departments to search for new insights from unexpected places unlike over-depending on traditional surveys like annual crop and livestock assessments. Formal institutions may also be pointed to new sources of evidence like different types of markets such as spot markets, road side markets, formal markets, institutional buyers and others. This will increase appreciation of the full range of factors affecting consumers’ experiences.

Exposing farmers to new sources of evidence

In most cases, traders interact more directly with consumers while many farmers do not have that chance but rely on secondary sources of feedback. There are also many cases where farmers are fed commercial data sets like advertisements from seed companies or input distributors whose information may be biased towards selling inputs irrespective of effectiveness. The real value for farmers may not be in messages from companies that are selling inputs but combining such messages with local knowledge and advice from independent knowledge brokers like government extension.  Where farmers do not have access to feedback from satisfied or unsatisfied customers, they will continue doing things the wrong way and fail to retain customers. Like all other value chain actors, when farmers tap into effective customer feedback, they will be able to improve relationships with diverse consumers and expand their market share.

Identifying the right value chains

Real-time awareness makes it possible for new farmers and investors to accurately identify value chains in which they can invest profitably. For some commodities, price elasticity can be so high that a fall in price suddenly leads to huge losses. Evidence can show how some value chains can be disqualified by both internal and external factors. On the other hand, commodities like tomatoes may continue to be produced in one area because a lot of knowledge has been generated and applied in the same community for generations such that almost everyone now knows how to produce tomatoes without need for extension support. Some commodities like potatoes and banana can continue to be produced in a particular community because tastes and preferences have been honed and extended over time.

It is through real-time awareness that choices like producing a commodity where it does well in order to generate better returns on investment can be anchored. With the right support, one production corridor can become a market for other production corridors. For instance, the potato corridor can become a robust market for the livestock production corridor. Where some value chains for fruits like oranges and apples have already been developed, support might only be in the form of creating an enabling marketing environment. Through real-time awareness and evidence, agricultural decision makers can see how much is flowing to the market from a particular farming community, how much is left for local consumption and how much is lost through poor post-harvest handling practices. Since what normally comes to the market is the best, if poor quality commodities come to the market it might mean nothing is being left at local levels – signaling malnutrition in production areas.

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

Empowering communities to evaluate their knowledge

eMKambo is increasingly meeting rural communities that have been schooled into valuing tangible assets like dams and tractors at the expense of intangible assets like knowledge on how to earn more value from those assets. In agricultural communities where assets like irrigation schemes and roads have been built or rehabilitated, people are still unsure how they can unlock value from those assets in the absence of a market for commodities to be produced and transported to consumption zones.

emkambo

This is where the ability to evaluate existing knowledge or intangible assets becomes important. Every community has intangible assets in the form of expertise, experiences, ambitions, visions and appetite for risk. However, such intangible assets remain difficult to evaluate and cost. On the other hand, interventions from development actors continue to provide support in the form of tangible hardware as opposed to software issues like knowledge which can turn assets into better lives. Consequences of ignoring intangible assets are often visible in the form of under-utilized assets like dams, irrigation equipment, expensive processing equipment and roads.  If communities are empowered with formulae for assessing the value of their knowledge on using pastures and roads, they can be able to see how such  assets are saving a purpose. For instance, the value of a road can be assessed through high quality commodities that are transported to the market from the community.  Gathering such details means investing in data collection.

Informing commercial transformation

It is through consistent data collection and analysis that communities can inform their broader commercial transformation on the basis of available resources such as water, pastures, tourism potential and others. Through collecting data on what gets out and comes into the community, it is possible to see the value of a good road network or a water source. While some people may think this is a difficult process, many value chain actors in any community already have data and tools that can easily be integrated to provide a complete picture for the entire community.  However, unless there is consensus on what needs to be measured and understood, the purpose of collecting the data is lost. Community members have to agree and focus their data collection vision of what they want to achieve. This will be the foundation on which community data-driven muscles can be built. Eventually data will begin to influence community business and social outcomes in ways that align all actors doing the same thing. What is the point of investing in a well-furnished house when the household continues to suffer acute malnutrition?

It is time development agencies move away from providing hardware like infrastructure to supporting the germination and application of software like knowledge and the right attitudes. Government departments and local authorities have lots of data but such data is either outdated or inconsistent such that it is difficult to use. While some knowledge is in people’s heads, mechanisms of collecting it can be set up so that collection becomes a fluid process.  Providing a structured data collection method can ensure cleanliness of the data in ways that simplify usage.  Communities can identify people responsible for cleaning and ensuring consistency in the quality and availability of data. In addition to ensuring data is available when required, it is also important to determine different audiences for different sets of data. Decision makers may need different data from new comers into a community. Local business people like agro-dealers may be more interested in business metrics than general insights.

The power of forecasting and early warning

Capturing data at every information and decision-making node enables communities to see opportunities ahead of everyone else. There have been cases where outsiders see opportunities which local people do not see due to lack of a culture of collecting and analyzing data at local level. A transparent data collection system is a foundation for more reliable decision making and accurate forecasting. This will also assist farmers in gathering valuable insights on the behavior of different commodity buyers, instead of relying on intermediaries who often tilt business outcomes in their favor. Transparent pricing of diverse commodities can also be enabled through consistent flow of data about commodity volumes and prices in diverse markets.

 Getting the right data in the right place is the first step in building robust commercial capabilities for farmers and agribusiness that are struggling to break through. Better and more informed decisions can be arrived at when high quality and trackable data is available throughout the agricultural ecosystem. It is through reliable and consistent access to customer data that value chain actors can be able to see growth opportunities and accurately meet customer needs.

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