The value of domesticating the Consumer Price Index and other imports

The fundamental role of agriculture and SMEs in many developing countries should by now have seen local economists inventing better ways of capturing and expressing economic conditions and inflation. It is clear that imported concepts like Consumer Price Index and Producer Price Index developed in the North cannot adequately represent economic dynamics in agriculture-driven low income countries.

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For instance, it is no longer debatable that African agriculture requires a dynamic pricing index which takes into account different production zones, seasonality, diverse transportation methods and many other factors. Farmers in different production zones cannot have the same prices for maize and other commodities. For example, farmers producing soya bean and maize in sandy soils use more inputs like fertilizer than those in heavy clay soils. It means these farmers have different costs of production. On the flip side, farmers in sandy soils may use less diesel than those in heavier soils. Distances to market should also be factored in so that farmers in particular areas can know the type and size of transport they can hire cost-effectively. Such information is also critical for transporters, processors and financiers.

Market dynamics

Like most industries, every informal mass market in developing countries has an invisible cartel of price experts who set prices of commodities based on historical trends (not codified) and commodity supplies into the market which give signals of the volumes in farming areas. However, cartels in mass markets do not often know or care about the cost of production enough to consider such costs in setting prices.

Circumstances under which farmers need real-time pricing intelligence vary and include cases where a buyer suddenly shows up on-farm ready to buy the commodity. In such cases the farmer wants to verify some prices with eMKambo and other institutions in big urban markets like Mbare in Harare before making a decision to accept a price being offered by the buyer. In some cases, a farmer may have quietly brought his/her commodities to the city using public transport or his/her own transport and now has to verify market pricesbefore taking the commodity to the market or entertaining buyers. All these circumstances need accurate real-time information.  Historical information is not helpful.  That is why eMKambo has advanced in setting up a dynamic pricing index taking into account production costs and market dynamics.

Beneficiaries from a dynamic price index

Besides traders, beneficiaries of price information include consumers and vendors who need to leave their homes with enough money.  If customers and vendors understand the price, they are able to budget correctly and buy more to the benefit of traders. Commodities also move fast in the market when customers and buyers come prepared.  Negotiation time in the market is reduced as the marketing process becomes very fast. Traders from other markets who often come to buy from markets in capital cities become aware of how much money to bring for hoarding commodities as well as the size of transport to be used.  If a buyer from Masvingo hears that the price of cabbage has gone down from $3 to $2/head he will adjust his budget to accommodate other commodities needed by customers.

Ultimately, transparent price information benefits every value chain actor. Farmers deserve to know how much the trader is going to make on their sweat and how much is taken by other costs like transport, loading, packaging and others. Price transparency through a price index reduces abnormal profiteering by traders at the expense of the farmer. If vendors get tomatoes from Mbare at $17/crate, how much do they charge their consumers in high density areas?

Why this is important

In spite of accounting for more than 70% of the food, economists in developing countries have totally ignored inflation in the mass market, preferring to focus on inflation in relation to basic commodity food basket. Yet it is important to figure out the percentage increase in the price of inputs and transport to the market so that farmers can know if market prices have changes in correspondence to input costs.  Many farmers incur losses because this issue has not been clearly articulated. Using figures, farmers can see how lack of resonance between input costs and market prices is leading them to incur 30% losses.

It is critical to track inflation around the agricultural commodity basket different from the CPI for basic staples like cooking oil and sugar.  Formal companies are recording and doing their costing and are using such details to collude in fixing prices of basic commodities. But there is no such thing for farmers who should be assisted in mastering market-related budgeting.  Farmers are mostly affected by external factors beyond their control and these include cost of inputs, labor, fuel, water, equipment and many others.

Beyond improving quality and economies of scale as well as benefitting from shortages in the market, farmers do not have control over most external factors. In the market, farmers are given a price even if their costs of production and transporting have gone up by 20%.  They are pushed within a certain price range. The price index will give farmers bargaining power and can be able to see that is the production price is going up by 5%, prices offered by the market should be adjusted upwards weekly. Farmers can also know how increases in the price of petrol contributes to increases in commodity prices in the market.

A system should be put in place to reveal some of these issues and impact on the market or consumers.  Inflation around food markets is very important because it assist farmers to plan and make projections. A farmer who harvests crops when inflation is going up by 20% and earns $100, the following month the farmer will earn less than $90. To remain with $100 the farmer has to charge $110. If the farmer sees the price of inputs going up by 5% monthly and expect to buy inputs in three months, the inflation will be 15% and the farmer will not be able to afford inputs.

How consumers are affected by absence of a Price Index

Prices in the mass market are rarely not cost-driven or cost-based but depend on arbitrary decisions.  People just decide how to sell without a clear basis in ways that anchor future increase or decrease of prices based on supply.  For instance, the cost of producing a cabbage head is 60c – 70c of which the bigger component (15c-20c) is the cost of seedlings.  A farmer who decides to price at $1.50 – $2/head on-farm is doing so on what basis?  How did s/he arrive at the price?  Why should a producer increase prices by a 200% mark up?  What is the standard used for setting mark-ups in the agricultural industry?  When a trader gets cabbages @ $2 and sells @ $3 – $3.50, this drives inflation.  Everyone makes a decision on the highest prices. The farmer is not making decisions on costs and the trader is also marking up arbitrarily. They are all guessing and that means the consumer is not charged fairly. Such decision-making is an inflation driver in the whole country.

Supply and demand is over-shadowing costing principles as determinants of arriving at costs.  How can we use costing as the main determinant? Disorganized supply and demand causes all these challenges.  Traders and farmers should know the base price irrespective of supply.  That is why for tomatoes it is important to play with the number of fruits and not sell using kilograms. All parties should control the extent to which prices can fall before everybody begins to incur losses. This important process and analysis should be conducted at food systems level as opposed to isolated individual farmer level.  Banks and other financial institutions can use the price index to track and manage Non-Performing Loans.

 

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

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How mass markets bring out the best in African food producers

Farmers and traders who do not frequent the booming African mass market will never know their depth.  New market entrants use commodities like leafy vegetables that are easy to produce. Once they are in the market, farmers are exposed to different kinds of leafy vegetables ranging from ordinary Viscose to ever green Viscose. Eventually the farmers decide to get more sophisticated by graduating into cabbage production and supply.  Here new knowledge includes appropriate varieties to grow, when and how to sell.

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From talking to farmers and traders in the market, farmers also become aware of the time of the year production challenges are most likely to be encountered as well as quantities of different commodities required by the market in particular days. For instance, in most African urban mass markets, delivering commodities on Sunday for selling on Monday morning is more profitable because most farming communities do not work on Sunday and that means the market will be empty on Monday. The farmer also discovers that Fridays and Saturdays are good selling days for most commodities because outside markets come to buy on Fridays and Saturdays for restocking. Saturday is also a shopping day for urban dwellers while some travel to see their relatives in rural areas.

Learning from consumer choices

The mass market also informs the farmer and trader about sizes required by the market shown through buyer choices as different sizes compete for the consumer budget in the market.  Other key factors learned from the market include quality, appropriate finishing and leafy cover as well as selling tricks and buying patterns.  Pricing is also learned from the market – the farmer begins to see whether s/he is pricing his/her commodity fairly. Appropriate delivery times and consumer preferences like size and colour are also picked from the market. Farmers who arrive in the market late will find most customers who buy more volumes already gone. The farmer also gets to know about quality as determined by ripening stages for cabbages and tomatoes whose ripening stages have a big influence on quality and shelf life. Likewise, the market informs the farmer about different shelf lives for diverse commodities.

Without feedback, farmers are not aware of the consequences of their actions or decisions

If the market does not inform farmers about quantities to produce and when, the farmers will produce more at the wrong time, for instance during the off-season.  In addition to getting advice on alternative crops to venture into, through the market farmers are able to establish networks with other value chain actors like buyers, customers, traders, consumers, transporters and financiers. Engaging with other farmers enables new farmers to know types of chemicals and fertilizers to use for particular crops at a given time.

Mass markets enable farmers to meet informal financiers like traders who can easily finance certain crops without need for collateral. As financiers, traders can also advise farmers on what crops to grow, when and how?  It is also through mass markets that farmers are able to maintain their customer base and also get new customers. Farmers also gets educated about the preferred packaging materials and sizes as well the best way of packaging specific commodities.

Prospective business opportunities can be picked from the market. If a farmer produces the same commodity for a long time, it reaches a level where production gets boring and the farmer begins to look for new crops or with a different market altogether – from mass markets to formal markets or exports.  However, a new entrant has to start with lower bar crops like leafy vegetables and graduate into complicated commodities. With the right knowledge, the farmer can leap-frog some stages.

Agricultural shows have a different focus and impact

Although they receive a lot of attention from the media and policy makers, agriculture shows attract a few farmers purported to have excelled in producing particular crops or livestock. These farmer are mostly those who will have been judged to be the best from district to national levels according to given criteria.  However the time lag between when a farmer is judged to have been the best and the final show event at national level conveys they wrong impression that there are no other champions in between.

Commodities that will have been judged to be the best are the ones exhibited at the agricultural show but there is no comparison by variety and no explanation on varieties preferred by consumers. The show also tends to mix farmers from different regions yet conditions are different in each district and these influence performance. A farmer in Mazowe which is in natural region two with good rainfall and other advantages should not be compared with a farmer in natural region five Hwange.

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

A food systems approach or bio fortification – which is more relevant?

At a time communities in developing countries are diversifying their food systems in order to cope with climate change, isn’t a narrow approach like bio-fortification counter-productive? Could this be yet another example of interventions that are influenced by funders and their collaborators? In several African countries including Zimbabwe, both urban and rural dwellers are no longer just depending on maize but a wide range of foods including diverse vegetables, exotic fruits, indigenous fruits, tubers, small grains, indigenous poultry as well as game meat like guinea fowls. Aquaculture products like fish and a wide range of edible insects are also part of a broad food system. All these foods are not bio-fortified but guarantee a basketful of different vitamins.

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Rising preference for natural remedies

Consumption of natural foods is on the rise as consumers become aware of the medical properties associated with these foods as opposed to processed foods. While almost every household now uses cooking oil, there has been a transition from over-dependence on Sadza with leafy vegetables to potatoes and rice with mixed vegetables every week. Food choices have broadened to include butternuts, potatoes, soya bean, soya chunks, eggs and many other choices available by season. Even in rural areas there is no longer dependence on Sadza and Mufushwa. With food diversity, people can now make their own beans, access fish products like Kapenta. Fresh fish is also widely available. If you don’t frequently engage with mass markets you won’t know this is happening and continue to promote narrow diets.

 

Given these circumstances, why should developing countries be persuaded to push a few bio-fortified products like orange maize and sugar beans? The negative effect of this is that it forces consumers to eat processed products yet wherever processing takes place some food elements are compromised. The consumption of maize has gone down by 30% in cities like Harare as revealed by the rise in the consumption of fresh and roasted maize from green mealies all year round, driven by the market’s distribution power. Green mealies production is also increasing in communal gardens and irrigation schemes as these are being turned into commercial entities.

 

Maize processing into Maputi has gone up 100 fold due to demand and availability of appropriate equipment. Rather than bio-fortifying maize at industrial stage, why not do it at seed level so that consumers can access iron and other vitamins when they eat green mealies, roasted maize, Maputi and other by-products some of which find their way into chicken and other livestock through stock-feed?

 

Broadening food baskets

African food baskets have also broadened into rural areas where food from other production zones is spreading around the country. Smallholder farmers are no longer limited to producing and consuming traditional staples and indigenous vegetables. The mobilization and distribution power of big markets like Mbare is ensuring avocadoes, peers, green beans, pears and other foods are found in dry regions like Binga and Gokwe where they are not produced. In cases where food like fruits are in short supply or out of season locally, the market has power to import, which is why apples, oranges, pears and pine apples can always be found in the market irrespective of season.

 

Dangers of misinformation

If developing countries are not careful, they are going back to shunning their own products in preference for processed foods. For instance they can be easily misled into believing that none of their own local foods contain iron, zinc or other vitamins being promoted as additives through bio-fortification. When one bean variety gets all the attention and promotion at the expense of more than five bean varieties that have been feeding people for decades, confusion becomes the order of the day. An impression is created that communities have been eating the wrong food all this time.  What does that say about hundreds of other bean varieties and white maize varieties being promoted by dozens of seed companies?

 

Many consumers are still confused on how to differentiate bio-fortified from genetically modified products. They are convinced food should grow naturally and should not be manipulated by inserting some additives or elements that should be found naturally in food. Researchers and food scientists in developing countries should be careful not to downgrade locally produced commodities in favor of processed foods whose final production requires foreign currency to import knowledge and technologies. Very few African countries have world class laboratories that can manipulate crop varieties with higher levels of precision and efficiency.

 

Where should promotion start?

If it is a production issue, bio-fortification promotion should start from farmers and traders who already handle diverse food.  Many farming communities already have red and yellow maize varieties. It is better to start from food systems existing in communities ranging from wild fruits to field crops and discover which vitamins already exist. Developed countries consume processed products because they do not have consistent food supply due to extreme weather like cold which makes it virtually impossible to produce food in winter as well as extremely hot summers which also negatively affect food production. Whenever a product is processed, something is added or subtracted.

 

 

Difficulties in translating imported terminologies

How do researchers in developing countries translate imported terminologies like bio-fortification or recovery and resilience framework tool into vernacular languages used by the majority?  Without home-grown theorization and application, researchers in developing countries cannot develop correct assumptions and research pathways in order to monitor progress toward adoption.  Most project-based terminologies brought by development agencies are predatory and transitory, only lasting for the duration of particular projects. They are more of identity labels connected with abbreviations of projects rather than well theorized and researched strategies that can benefit the entire community or country.

 

Funders continue to influence theories and methodologies through which local knowledge is generated and applied.  Nobody is connecting dots from diverse development projects to national strategies anchored on the knowledge produced by different projects. Instead of importing approaches and concepts or allowing funders to dictate food research and promotion at the expense of existing diversified food systems, policy makers should shift the attention of funders to the most relevant research that touches many ordinary people’s value systems. Funding allocations should not continue to value international significance over local relevance.

 

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

How do we liberate agriculture and development from academic preferences

Between key informants and literature reviews, which are the most reliable sources of knowledge in developing countries? There is an unfortunate tendency to under-value information and knowledge from key informants like farmers who are coping with climate change. Traders who have seen the informal market surviving several droughts and food processors who have endured hardships associated with collapsing agricultural industries are also less valued sources of wisdom. Although a study that gathers fresh evidence and experiences from these people is more reliable than any literature review, such evidence is considered anecdotal and therefore ranked lower than literature review. The rate at which development is taking place in poor countries remains stagnant because academics and other knowledge workers prefer using stale knowledge in books and journals written before the dawn of software.

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Pitfalls of relying on stale knowledge

Some of the people obsessed with literature reviews are fully aware that much of the knowledge in developing countries has not been documented into books and journals that can be cited. Local knowledge remains in communities and key informants because local academics and researchers in developing countries are not producing their own literature based on their own history and socio-economic-environmental and political context. In disciplines like agriculture, economics, history, law and engineering, academics and researchers in developing countries are still citing traditional thinkers from the North as if no new knowledge is being generated. 

Experiences and lessons that have quietly informed social and economic growth patterns in African countries have not been converted into literature that can be reviewed and relied upon for progress. For instance, had drought experiences in 1992 and other years been carefully documented into development literature, it could currently be cited to inform how communities and countries recover from climate-related setbacks unlike resorting to literature on greenhouse gas emissions in industrialized countries. On the economic front, years of high inflation in countries like Zimbabwe in 2008 should have been a source of literature on how an economy can bounce back from more than 1000 percent inflation to a single digit.

Tapping into fast changing trends

Tracking and analyzing changing consumer trends is more powerful than any literature. It can show informative contradictions between young urban youths joining the fast food chain bandwagon and on the other hand previously orphaned crops and indigenous livestock inserting themselves in the market. For instance, wild fruits are becoming commercialized yet there is certainly no literature on how Nyii and Tsvubvu have been performing in urban markets for decades because their market penetration is a less than five year trend, induced by climate change. All these emerging trends should inform development pathways more than resorting to literature review. 

Research findings that cite books written more than 10 years ag are meaningless in the new environment characterizes by mobile money and the rapid movement of SMEs into the mainstream economy. Literature review cannot explain emerging issues in agriculture and health. For instance, many countries in Southern Africa are now experiencing crop and livestock diseases like Tuta Absoluta, Fall Army Worm and January diseases as well as several human ailments which did not exist a few years ago. You cannot find useful literature on these diseases going back 10 years to 50 years. When literature review is prioritized ahead of real-time knowledge, developing countries end up recycling old ideas at the expense of new ideas that speak to the evolving context. Countries end up doing endless policy reviews when developing new fluid policies is more ideal.

Why not develop frameworks for fluid literature

With the introduction of ICTs and globalization, developing countries have an opportunity to revisit ways of capturing oral literature and making it relevant to their socio-economic-environmental and political solutions. It is possible to ride on the proliferation of ICT platforms like voice call, emails, chats, twitter and many others that have become critical in combining oral and written expressions of knowledge. Such platforms are an opportunity to review research methodologies which are critical for generating literature, informing development interventions and continuous updating of government policies. Given that most of it has not been documented, local knowledge exists as a fluid body of knowledge within communities and key informants and not authored by a single person or turned into a PDF. For instance, knowledge about climate change is not in the form of literature but a process that has been happening and real people have been experiencing droughts, floods and cyclones.

As opposed to depending on books written many years ago, developing countries need all-inclusive participatory approaches to project design, implementation, monitoring and evaluation based not on physical assets but inclusive knowledge and information sharing pathways that can give communities updates and early warning systems. These can become the basis for informing research methodologies and literature review based on continuously gathered fluid experiences. Currently, field officers in most projects are not able to capture all important details in project reports. A monthly report can only be covered by first week visits to one ward and then a visit to another ward towards the end of the month. The output is called a monthly report yet it will have missed a lot of details in most wards. Students from universities and agricultural colleges who engage with value chains and farming communities do not get information they are looking for and end up resorting to stale literature review. The situation is worse in rainfall predictions where farmers are expected to plan and make decisions based on scant details which cannot adequately enable them to anticipate and plan against risks. In a changing climate, there is definite need fluid systems of gathering and processing evidence rather than doing literature review or waiting for crop and livestock assessments which happen once a year. In Zimbabwe, for instance, the annual national crop and livestock survey report comes out in February/March when much of the damaging take place from winter to summer. Examples of winter damages are related to frost but such details are not covered by the national crop and livestock assessment in order to paint a realistic food situation.

A fluid information system would address such issues through weekly and monthly updates into the crop and livestock survey, keeping policy makers and development agencies accurately informed. Each province now has a university and these institutions have an opportunity to increase their relevance by getting students and relevant faculties to gather local data and contribute to the national fluid survey. Devolution of knowledge should see statistical agencies having a presence at district level so that data is quickly processed for the local audience and needs unlike sending all the information to the capital city and waiting for more than a year to receive processed results.  By the time such feedback is received, the situation will have completely changed on the ground, leading to misinformed decisions.

Addressing cases where development projects leave communities hanging

A fluid knowledge platform will fill gaps left by projects when they phase out so that farmers continue working with the market appropriately. Most private companies and so-called off-takers are not permanent institutions. One season they are buying commodities, the next season they are bankrupt leaving farmers without a market. On the other hand, mass markets are always there and projects that shun mass markets in preference for formal companies limit the capacity of farmers to connect with the entire market. By connecting with the market, a fluid information system will not only organize local production but also extend knowledge about aggregation, quality, production calendars and many other aspects. Aggregation starts with aggregating statistics in terms of what is available and what is needed in different markets followed by aggregation of physical commodities in proper grades and specifications. 

To what extent have development agencies been hijacked by academics?

It seems one of the contributing factors to the challenges mentioned above is that government departments and development organizations have being infiltrated by academics who cannot connect with grassroots issues. Development interventions should be in the hands of people who stay in communities and clearly understand local challenges and opportunities unlike academics who are more comfortable in lecture theatres where literature review is a key staple. Unfortunately, many development agencies have over the years built rigid structures from district to international levels. Where programs are trying to reach 5000 farmers, the entire national and international flair of the development organization exerts itself in all the processes. This makes the whole intervention academic because the top officials at the head office are mostly academics hired through the academic qualifications route as opposed to practical qualifications. By default, these organizations convert community interventions into academic institutions and faculties. That partly explains the emphasis on theories of change as if development theories are boxed yet theory building and development is a fluid process benefitting from dynamic sources. 

 

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

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

 

The easy of doing business fallacy in low income countries

Besides focusing on pleasing foreign investors, the easy of doing business hype https://tradingeconomics.com/zimbabwe/ease-of-doing-business gives an impression that business is easy.  If doing business was easy everybody would be a business person.  Farmers and entrepreneurs who wait for conditions to become favorable in order to get into business will stop forever.  Most organizations and people who promote the notion of easy of doing business have never run businesses themselves.

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Isn’t it correct that fortunes are born in bad markets?

The ability to navigate uncertainties is the most powerful skill in the business world.  Those who do well in hard times will survive anywhere. For a long time, development organizations have pretended to simplify people’s livelihood including doing business but this has happened at the expense of innovation. Open markets in developing countries have for decades been proving that doing business is not easy. If business was easy those with collateral would easily get all the money from banks and succeeding in doing their businesses. Conversely, small actors like SMEs who do not have the collateral required by banks have a better sense of the business environment than big boys who can easily walk into a bank and get what they want but fail to run businesses.

Lessons from dynamics in African mass markets

Every farmer who brings commodities in the mass market is expected to sell everything within four hours irrespective of the volume of commodities s/he brings. The farmer will have to know different actors including opportunistic traders who jump onto every fast moving commodity.  Being opportunistic, these traders go for a commodity when it has the best price. For instance, when tomatoes are in short supply they colonize them but when there is a tomato glut they leave farmers to struggle on their own. A desire to quickly seal a deal is one characteristic of a trader. Before the farmer knows it, s/he has already agreed to a deal.  These are the same techniques applied by some foreign investors on uninformed government officials who end up signing deals that do not help ordinary people like farmers.

How mass market traders also use behavioral economics

By looking at dressing and walking style, traders can tell whether one is a farmer or trader. Traders walk much faster. The way commodities from a farmer and a trader are stacked is also telling. Traders have a structure of stacking and grading by stacking while the farmer’s commodities are often mixed up. A  trader’s commodities are well packed and in large sizes or portions on top.  When traders visit farms they go with experienced packers – packing is where some of the manipulation happens through over-packing. Since most smallholder farmers do not have scales to weigh commodities on-farm, measuring through observations sees the trader getting an extra crate from at least four crates. This is just to illustrate how there is no real easy of doing farming as a business.

How competitors close to the market end up setting prices

A farmer who brings 1000 crates of tomatoes tend to set the price and rules of the game for the farmer who brings 200 crates.  If a box is going for $10, the farmer who brings 1000 crates will earn $10 000 while the one who brings 200 crates will earn $2000 within the four hours of marketing.  Assuming transport costs constitute 20% of sales, the 1000 crates farmer will incur $2000 transport costs while the 200 crates farmer will incur $4000 transport costs because s/he has to do five trips in order to match the 1000 crates farmer who will have brought his consignment in one trip.

This means the 1000 crates farmer enjoys economies of scale, enabling him/her to set prices. He can afford to drop prices to $8/crate and still break even while the 200 crate farmer will not be able to survive. This is how big volume farmers can push out smallholder farmers who bring small volumes. The same scenario applies to the inputs side. Farmers who are subsidized with inputs push those who buy their own inputs out of the market. It means prices will not be set by supply and demand but by some farmers with hidden advantages that enable them to set prices downwards. The market does not care that commodities coming to the market were produced with different costs.  It is the same with formal education. Children in rural areas are expected to write the same examination with urban children who have many advantages like electricity and libraries and be expected to compete for the same employment opportunities.

In agriculture, farmers close to supermarkets have a lot of advantages like good road network and abundant transport. On the other hand, farmers in Rusitu which is a good production zone but beset by poor infrastructure are less competitive in the same market with farmers from Mazowe or Norton. That is how they are taken advantage of by farmers close to the market whose price settings influences prices on the entire market.  Farmers close to the market end up becoming buyers of commodities from those in distant production zones.

 

Promoting easy of doing business through exploring other competitive advantages

Besides price, what other competitive advantages can be used to assist farmers far from the market?  Nyanga potato farmers in Zimbabwe have managed to stand up to the competition due to their unique micro climate which enables them to produce high quality potatoes and supply when competitors do not have the commodity. What competitive advantages can be identified in distant farmers so that they can have a percentage share in setting prices?  When such advantages are identified and cultivated, price stops becoming the only determinant of consumers’ decisions to buy.  From that angle, there will be a justification for prices to differ as farmers from distant areas will have a unique selling proposition justifying higher prices to compensate market-related costs. Unless policy makers understand these issues at a granular level, easy of doing business initiatives will not benefit farmers and small entrepreneurs.

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

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

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