Possibilities for driving rural industrialisation through semi processing agricultural commodities

Possibilities for driving rural industrialisation through semi processing agricultural commodities

Full scale commercial food processing in most rural African communities is handicapped by lack of electricity and reliable water supply.  Rural areas also tend to attract low funding for such agribusinesses. While these challenges may prevent the production of finished products in rural areas, there are strong possibilities for unlocking value through semi-processing activities.

Produce

All these commodities can be semi-processed at source, enabling producers to earn more

For instance, there is no reason why farmers should continue selling unshelled groundnuts when there is more value in shelled groundnuts whose quality can be clearly seen by the eye – satisfying consumers, buyers and sellers. Unfortunately, groundnut shelling technology hasn’t taken off in African farming communities the way mobile technology has gained a foothold.  Farmers continue to sell raw commodities to urban markets. Shelling groundnuts at farm level enables grading, sorting and even selling in weight (kilogrammes) as opposed to continue selling using buckets (volume). Modernizing agriculture has to accompanied with a standard language such as use of kilogrammes to determine value and price. Semi processing activities like shelling, grading and roasting can enable farmers to come up with various products from their commodities.  Blends of different commodities can also emerge from semi-processing.

Fresh groundnuts and fruits

Fresh groundnuts and fruits in the market

Another important semi-processing activity is dehulling maize resulting in some by-products remaining at farm level for chicken feed. This is unlike taking all the maize to urban areas where someone simply produces three by products and earn more than the producer. Dehulling does not require sophisticated technology.  Farmers can pool their resources together at community level and acquire their own dehuller.  Small grains can also be dehulled and even roasted to cater for different nutritional needs.

Why would rural people bring whole baobab fruits instead of bringing baobab powder which is less costly to transport to the market?  There is also no reason why fruits like mango, mazhanje, masawu and amarula, to name just a few, cannot be converted into pulp or dried at community level.  Smart agricultural engineers have amazing opportunities to invent appropriate pulp extraction and preservation technology suitable for all kinds of fruits rural and farming areas.

Fruits that can be semi processed

These indigenous fruits can be semi-processed at source instead of transporting them all the way to urban areas.

Some of the semi processing activities can happen at growth points and business centres rather than transporting all commodities to urban areas like Harare where waste disposal is becoming a headache.  In addition, semi processing at grassroots level enables what remains to be recycled into animal feed and fertilizer, among other by-products.  Semi-processing enterprises can operate as registered community-owned entities offering services to the whole community for a fee towards self-sustenance.  These activities can be located at either ward or village levels.

Rather than taking raw sweet potatoes to Bulawayo and other markets, Gokwe South communities can produce sweet potato flour which can then be blended with wheat flour in baking bread.  Sweet potatoes can also be converted into other products like juice and chips. Besides creating employment, semi-processing along agricultural value chains buttresses technology and skills transfer from urban to rural areas. Farmers end up imagining various ways of adding value to their raw commodities and increasing shelf lives of their commodities.  Where a tomato would be thrown away when it goes bad, converting it into some kind of pulp increases its shelf life and storability.  Solar and other forms of renewable energy being promoted by governments and development agencies should be harnessed to enhance semi-processing activities that are within the reach of rural and farming communities. While producing finished goods in rural areas is a great ambition, it’s important to know what can be realistically done.

More information:

 

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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Why African countries should question middle class solutions to poverty

Why African countries should question middle class solutions to poverty

One of the reasons African development is taking long to achieve its intended outcomes is due to  class structures which have become barriers to knowledge-based development. Agricultural value chain actors identify niche markets that speak to their class.  Smallholder farmers, vendors and consumers from high density areas identify with informal markets such as Mbare, Sakubva, Malaleni, Chikwanha and others.  They may go to supermarkets but their heart and freedom is with people’s markets.  On the other hand, hotels and food chain stores tend to link up and be comfortable with registered institutional buyers which operate as formally registered companies. Formal requirements by development partners who insist that those keen to provide services to them should be formerly registered entities to be on the buyers’ list also end up privileging a certain class of organisations – those able to register as a company.  This means, smallholder farmers who cannot meet this requirement, even if they may have superior products, are excluded from this class.

21 September 2015

Examples of smallholder and small-scale processing enterprises

Responding to the collapse of class structure in some developing countries

Over the past decade and half, Zimbabweans have witnessed the collapse of formal agro-industries and related class structures.  In as much as smallholder farmers are producing diverse agriculture commodities,  there still intangible class barriers preventing strong links between the majority of farmers and institutional buyers like processing companies, hotels and food chain stores. As a result, these farmers resort to the people’s market which is in line with their class.

While banking has existed for more than 100 years in some African countries, 90% of smallholder farmers have not opened bank accounts because they associate banks with the urban middle class, those formally employed and those who own immovable assets in urban areas.  One would expect, African financial institutions to recognize potential collateral within certain rural communities, e.g. good climatic conditions, economic drivers such as availability of surface water, community cohesion, local accountability structures such as chiefs, local assets like cattle and, more importantly, local knowledge acquired over years and institutionalized into community norms and values.

Climatic conditions favourable to consistent agricultural production can be a more powerful form of collateral than a house in an urban area which can be very difficult to sell particularly during economic hardships when there are no buyers.  Some of these business opportunities have been identified by informal traders who are now entering into unwritten contracts with farmers to finance producers in cash or kind (providing inputs) on condition that they share proceeds upon sales.  This is a very practical business model.  Such contracts are mainly built around trust and relationships as both parties look forward to the growth of their collective business – contributing to a win-win situation.

The collapse of class structures in the food market is also due to an increase in free-play in market forces as shown by the emergence of many players in agriculture value chains – traders, roadside markets, small processors, etc. This means producers have more market options and may no longer be comfortable being locked in contractual arrangements to save a certain class.  Prevailing market dynamics require fast and prompt service delivery.  Where a farmer’s business proposal to a bank would take six months to be approved,  new farmers cannot afford to wait that long while seeing opportunities disappearing.  This is one reason why traders can end up going for high cost finance whose main attraction is easy access so that they respond quickly to market needs and opportunities.  Since they are still locked in the middle class mind-set, most African financial institutions are still not agile enough to meet the requirements of fast-moving agricultural markets.

Interventions by development partners also miss their intended results because of long processes before funds are released to intended communities. By the time these funds are released most enterprising farmers will have gone to look for alternatives.  As a result, some rural people end up concluding that development programmes are meant for the very poor class who have no options.  Regarding policy formulation, some rural communities think policies are meant for the middle class.  They can’t identify their roles in policy formulation and thus don’t see the need to contribute resources towards the success of such policies.

The role of intermediaries in managing polarities between class structures

There are increasing opportunities for intermediaries to broker knowledge between class structures in African countries. Since the market is the main meeting point for commodities from different classes, intermediaries find areas of common interest and overlaps between class structures. Most markets do not have information on the amount of support being provided to producers by development organisations and financial institutions.  On the other hand, these institutions also do not have a firm idea of total market supply and demand trends. It becomes the role of intermediaries to produce fairly reliable projections based on insights from both sides.  Some smallholder farmers have traditionally associated high value crops like cauliflower, peas, green beans, broccoli and garlic with the middle class and commercial farmers. These crops are still being imported because most smallholder farmers think they are for a certain class yet they are demanded by low income consumers.  It’s the role of intermediaries to say, “look there is an opportunity to make money there.”

Most rural people in Zimbabwe grew up associating dry vegetables (mufushwa, nyevhe, etc.,) with poor people.   A paradigm shift has seen the middle class going for such foods including small grains, cow peas and indigenous chickens which are now available in some hotels and food chain stores.  While some farmers have embraced broiler production in rural areas, there is a growing market for indigenous chickens which are easily produced in rural areas. The proliferation of eating places serving indigenous food is an indication of how the notion of class has shifted in Zimbabwe.

A number of smallholder farmers are not comfortable with classes because they think contractors make them price takers as opposed to informal markets which cater for all classes.  Some class issues are tied with policies which cannot be changed overnight – e.g., buying procedures insisting on three quotations, paying after 21 days, etc. The majority of smallholders and traders think the 21 day payment period is meant for those with money who don’t mind staying long before re-ordering.  Historically this has been the case in the evolution of farmer unions who still think the commercial farmer is meant for a certain class of buyers yet when food flows into markets like Mbare – there is no distinction between what comes from CFU, ZFU, etc.  The situation is the same at corporate level where we have the ZNCC and CZI whose membership pool is now almost the same.  Millers associations should also try to accommodate all the grinding mills across the country rather than segregating for the sake of it.

A few years back, bottled water used to be associated with the middle class yet it is now common at informal markets like Mbare.  People interested in variety are now frequenting informal markets like Mbare.  It is no longer about class but value for money. An intermediary uncovers all these relationships and webs to prevent misallocation of resources.  A farmer can produce with a food chain store in mind when such a market is already taken or there is already some vertical integration.  Class structures no longer represent the way the world works in practice. African countries should stop relying on privileged perspectives on development and economic growth but embrace wisdom from all classes of society.

More information:

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

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

eMkambo Call Centre:

0771 859000-5/ 0716 331140-5 / 0739 866 343-6

The curse of pre and post-harvest losses in African Agriculture

The curse of pre and post-harvest losses in African Agriculture

One of the biggest headaches in African agriculture is dealing with excess produce. African countries are said to be incurring US$48 billion in post-harvest losses.  Imagine creating a $48 billion industry!

14 Sept 1

Contextual analysis of losses related to tomato production and marketing

In all African countries, every agriculture commodity has its potential yield capacity and price on the market. For instance in Zimbabwe, tomato production has a yield potential of more than 100 boxes per acre.  When the market offers $7 per box, a farmer can easily earn $700 per acre. However, holding all other factors constant (internal & external), from planting to maturity, potential yield may be reduced by (2%) 2 boxes due to lack of adequate knowledge and skills. Cases of different yields for different farmers are common because even though they may operate under same conditions, there are differences in management knowledge and skills.

Harvesting, Packaging and Storage Losses

Most tomato harvesting technologies are still very conventional and poorly managed. The majority of farmers harvest through hand picking with the fruits placed in wooden/plastic trays, tins, baskets, card board boxes and scotch carts, among other locally available containers. Once harvested the produce is stored either by the road side or in a hut waiting to be taken to the market by bus or trucks whose arrival times are unpredictable. This whole process can result in 3% (3 boxes) of potential yield loss.

Transporting produce to the market

Loading of tomatoes is done manually and it is common for containers to fall down during loading and transportation. Packaging material such as wooden boxes are made of rough surfaces and protruding nails as well as fastening metals which deteriorate with over usage. The same packing material is then transported through rough dust roads from production areas to tarred roads that lead to urban markets. At the market, boxes are off- loaded manually with lots of shaking and bumping onto each other as the boxes are stacked. It is not surprising that during the whole process 4% (4 boxes) of tomatoes are lost.

Marketing Related Losses

Much of the infrastructure in agriculture markets is not designed for accommodating different types of commodities and volumes. Market spaces and stalls expose commodities to sun, dust, rains, theft etc. The unfavorable market infrastructure for tomatoes can contribute up to 5% (5 boxes) loss.

Demand and Supply Mismatch-induced losses

Tomato producers from all corners of the country supply a given market at a given time.  Due to lack of coordination, it is very common for supply to surpass demand resulting suppression of prices. Where a farmer was anticipating the peak price of $7 per box, surplus on the market can knock the price down to $3.50 per box (50% of the potential price).  From production to marketing, the farmer would have lost 14 boxes.  The potential income of 86 boxes left at peak price of $7 per box is $602. However at $3.50 the farmer now gets $301 losing out 43 boxes worth of potential value due to suppressed prices.

Below is a summary of factors that contribute to losses:

Description Quantity % age Unit Price Value %age loss
Potential Yield 100 100 7 700 0
Planting to Production  Losses 2 2 7 14 2
Harvesting, Packaging & Storage Losses 3 3 7 21 3
Transporting related losses 4 4 7 28 4
Marketing Related Losses 5 5 7 35 5
Supply & Demand Mismatch Losses 43 43 7 301 23
TOTAL LOSS 57 57 7 399 57
Farmers’ Income 86 86 5 301 57

The table above explanation shows that the greatest loss in tomato production is due to mismatch between demand and supply and this is expressed as lost value resulting from suppressed prices.  Farmers can simply address this enormous loss through coordinating their supplies to the market.

More information:

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

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

eMkambo Call Centre:

    0771 859000-5/ 0716 331140-5 / 0739 866 343-6

How Agriculture markets are a combination of Art and Science

How Agriculture markets are a combination of Art and Science

The science of marketing agricultural commodities is easy, straight forward and tangible. It can be taught in a classroom or through a textbook or manual. But sadly, the science without the art often falls flat on its face. It is hollow and needs the artistic part. In the majority of thriving African agricultural markets, farmers and traders have an artistic way of demonstrating practical wisdom and this enables them to take appropriate action when facing unique circumstances. Some farmers and traders seem to have been born with a marketing inner sense while others acquire this through considerable amounts of hard work. Many agricultural organisations or programmes do not realise that farmers and traders are real people with feelings, knowledge, hopes and fears. There are times when no amount of one way communication will change people’s habits if other desires and ambitions are not addressed.

07 sept 1

This level of awareness has seen ZB Bank partnering with eMKambo in implementing a market-based loan facility targeting 15 000 traders in Zimbabwe by December 2015. Under this facility, eMKambo has become an agent for ZB Bank in more than 20 agriculture markets.  The agency banking model that has been embraced by ZB Bank follows are realisation that the bank needs to be more intimately closer to its clients.  It is an entirely new business model where a bank has to fully know its clients including their types of business, business cycles as well as daily decisions.  Under this model, ZB Bank has embraced the kind of flexibility necessary to understand informal agriculture markets which are now holding more than 60% of agriculture commodities in Zimbabwe daily.

In this partnership, representing the artistic side of agriculture marketing, eMKambo’s main intermediary roles include gathering and consolidating knowledge around niche markets for ZB Bank market loans.  Agriculture markets are a different clientele that has to be profiled in order to be clearly understood not just as individual traders but as part of the whole market.  Information about an individual farmer or trader is meaningless without information about the whole market in terms of size, commodities, actors, coping mechanisms, challenges and many other parameters. Conventional banking tools and approaches will not be adequate in provide accurate visibility into the market, hence the need for an intermediary like eMKambo.

This agency banking model is bringing banking services closer to the market so that deposits, withdrawals and savings are done right at the market.  While ZB Bank’s main roles include availing affordable loans, eMKambo roles include:

  1. Identifying business growth cycles.
  2. Building the capacity of traders and farmers.
  3. Market advisory services and providing a comfort zone for banks who have traditionally considered informal markets and farmers too risk.
  4. Providing a market-based credit rating system.
  5. Aggregating the whole market as an institution.

Seventy per cent of people working in informal agriculture markets survive entirely on the market. As an intermediary or knowledge broker, eMKambo understands both the bank and the market.  Usually a broker comes in where there has been bad blood between two parties.  Traditionally, traders have said banks don’t want to extend loans to them while banks have said traders are not organised.  The broker builds a common ground and tries to broaden points of intersection.  That role goes beyond just creating a database but fully understanding all the dynamics.

Market data gathered and processed into knowledge by eMKambo does not only provide acute insights into the size and market dynamics but also enhances relationships that are becoming the main form of collateral.  While each trader and farmer may know about their commodities, eMKambo has knowledge about both the individual trader/farmer and the market.  These insights are very important in determining success and collective impact.  In the market, farmers and traders are connected to their peers in social networks and communities of practice that thrive on trusted knowledge-sharing practices.

The agency banking model is a departure from command and control which has characterised traditional banking for centuries.  Informal agriculture markets show that in  the networking era, reputation is more important if one is to compete.  In this case, eMKambo is a network weaver, connecting ZB Bank with traders, farmers, traders, consumers and transporters to make the network stronger. It ensures all relationships are exercised through influence, persuasion and trust.  Through gathering real-time market intelligence, eMKambo ensures fluid information and knowledge flows easily among actors, refining and anchoring learning processes.  Below is an example of the intelligence that is anchoring informal markets as a business ecosystem.


Brief analysis of Mbare Agricultural Wholesale Market: January to June 2015

The first six month of 2015 saw a total of 19 products being sold in the wholesale market generating an estimated revenue of $ 7,773,060.17 from around Zimbabwe. A few imports also tried to satisfy local demand during this period, mainly from South Africa.

Table 1: Units supplied

Table 1: Units Supplied

Graph 1: Total Estimated revenue per produce

Graph 1: Total Estimated revenue per produce

Chart 1: E R Share by produce type

Chart 1: E R Share by produce type

Graph 2: TRADER/FARMER PARTICIPANTS IN THE WHOLESALE MARKET

Graph 2: TRADER/FARMER PARTICIPANTS IN THE WHOLESALE MARKET

Through the agency banking model, the market can also lock funds in the market for farmers, traders, transporters and other actors so much that bringing commodities to the market is the only way to access such funding.  This is more like a derivative market. ZB Bank injects money into agriculture via the market.  The money is accessed by farmers and traders who have bank accounts with the bank.  Customers with ZB bank accounts can come to the market without cash knowing that they will withdraw money from the agent (eMKambo) at the market for purposes of buying commodities.

More information:

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