From Corporate Social Responsibility to Sustainable Agribusiness Modelling

The failure of donor-funded programmes to transform African agriculture is resulting in more attention turning to the private sector as a potential source of better agricultural outcomes. Several multi-million dollar donor programmes have been launched with pomp and media saturation but the end has often not been as loud as the beginning.  At the end of three or five years, most donor programmes quietly disappear or assume a new name.

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Limitations of challenge funds

In the past few decades, donors have begun to promote challenge funds as a way of luring innovative private actors into the agriculture sector. While this approach sounds noble, challenge funds are accessed by a few privileged applicants with access to reliable internet and based in urban centres. On the other hand, successful agribusinesses have not been built through pitching business ideas in front of judges most whom have no clue about contextual issues surrounding the idea being pitched. Agribusiness is more about passion than expressing business ideas through rehearsals and 10 – 15 minutes presentations.

 Unpacking Corporate Social Responsibility

The private has, for a long time, used Corporate Social Responsibility (CSR) as a route to supporting communities. Unfortunately, CSR has not benefitted farming communities. Most proceeds have been directed to non-agricultural sectors such as elite sport like cricket which are not found in farming areas. Resources that are used for CSR are normally generated through sales.  It is the same money that the company gets from consumers that is returned back as CSR.  It means every product has an embedded CSR component. If an agricultural company ploughs back US$1 million into a community that money will have come from the same pockets but is presented under a new name – CSR.

 Why not just offer better prices?

Where a company was supposed to buy sorghum or any agricultural commodity from farmers at $500/ton but decides to lower the price to $450 so that $50 is later used as CSR, it makes sense to offer better prices right from the beginning. Rather than a retail food chain store buying vehicles worth $1 million to be won by a few consumers, why not reduce prices of its products by $1 million so that more consumers and communities benefit?  It is also not clear who owns, generates and provides resources for CSR. In the case of agribusinesses, resources come from farmers or consumers. For instance, where a private company is dealing with farmers, it will either under-pay farmers so that it then comes back with CSR money as if it’s a bonus when the farmers should have benefitted from better prices. From a consumer perspective, the food chain store will over-charge consumers so that some of the proceeds come back as CSR. Instead of giving back US$1million in the form of prizes and presents to be won by a few consumers, more consumers would benefit if commodity prices are reduced by $1 million.

 Hidden motives

CSR has remained a marketing gimmick funded by resources from farmers and consumers. The private sector does not get CSR resources from other sources but the very same people who use its products.  It is like milking the same cow twice while giving it crumbs. Being profit-oriented, the main focus for companies embracing CSR is promoting a brand and widening the customer-base. CSR is an in-built blind-folding mechanism which makes farmers and consumers believe a favor is being done to them when it is their own money coming back with a different identity.  Besides being a marketing gimmick, CSR is probably used as tax evasion by some corporates.  If it is genuine CSR, who determines priorities? Who says funding cricket in urban centres is better than funding dam or road construction in farming areas?  To be more inclusive in sustainable ways, CSR has to be informed by societal needs.

 Towards Sustainable Business Models

Where a private company is contracting farmers to produce groundnuts or sorghum at $450/ton, it is better to offer $500/ton so that from every ton, $50 goes back to the community for local development.  What is the rationale of first getting all the money into a company’s coffers and then returning the crumbs? Moreso, CSR does not ensure benefits go back to people or communities that generated the income. If a company is working with farmers in Muzarabani or Hwange, benefits should go to these communities instead of funding cricket in urban areas. Rather than paying CSR at national level, why not decentralize the benefits to local levels so that benefits are extended to local customers? That is how agribusiness becomes a partnership where the essence of corporate does not just mean the whole ownership of the business is in the hands of the corporate sector.

While the corporate sector provides the market, communities contribute either as producers of raw materials or consumers of finished products. An inclusive business model should see corporates aggregating the market while producers and consumers continue contributing in various ways. While the corporate sector has power to mobilize income from producers and consumers, it should not personalize results or outcomes. Why would agricultural proceeds that should benefit producers end up subsidizing elite urban sport?  How can one person win a vehicle worth $50 000 when such income can go a long way in developing a community?  In a new world economy dominated by SMEs, corporates should re-think their CSR models.  CSR should come in the form of affordable services and products. Rather than donating to elite conferences, banks should just lower their interest rates in ways that benefit more borrowers.

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

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

eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

How the market can inform better farmer characterization

In a rapidly changing knowledge economy, it no longer makes sense to continue characterizing farmers in developing countries by the size of land on which they produce agricultural commodities. Informal agriculture markets provide various ways through which African farmers can be characterized beyond the smallholder, communal, commercial and other forms which are becoming inadequate. For instance, a farmer’s participation in the market can better suggest the extent to which s/he is business-oriented than can be expressed through the size of land s/he owns.

A smallholder farmer who consistently participates in the market is more commercial than one who owns a large commercial farm but does not regularly participate in the market. Factors that can be used in categorizing farmers include: seasonality of production practices; frequency of market participation as well as commodities and volumes supplied to the market.  Additional elements include market outreach (in which other market does the farmer participate, e.g., food chain stores, local markets and others? Payment method is also another important attribute. For instance, some farmers pay their labour using commodities.

 Characterizing through collective surplus at community level

At community level the best characterization is around collective surplus – how much surplus does the community produce for the market? In a community, it can be a mistake to characterize individual smallholder farmers through their individual production because high volumes of commodities by an individual farmer may not translate to surplus for the market. For example, if a family is large, subsistence consumption can exceed 80% due to the presence of more mouths to be fed.  On the other hand, a small family can produce three tons and consume one ton with the rest going to the market.

An ideal characterization approach can begin with identifying major commodities produced in a particular community. A quick survey can reveal how much of each commodity is produced and how much exists for the market, especially when aiming to set up a warehousing facility at community level.  Defining farmers by size of land excludes important factors like passion, experience, knowledge, household size, taste, household income and others. No farmer can produce every commodity and become a champion. One farmer can be good with groundnuts while another can be good with livestock. Consolidating diverse characteristics at community level can reveal investment opportunities in particular farming communities.  While climatic conditions can be given by nature, a good climate does not make farmers in a favorable climate commercial producers.

 

Characterization around value chains and networks

When characterizing from the market vantage point critical steps include identifying varieties and volumes of commodities that leave from a particular farming community straight to the urban farmer’s market where breaking bulk happens.  What is the proportion that goes into the wholesale market for eventual distribution to other markets in bulk?  If, for instance, 60% of butternuts travel from Harare to Bulawayo, there is justification for setting up a reliable commodity exchange to support this movement. In most informal markets, the wholesale market fulfils the role of aggregation, handling and rationalization with other markets. In all value chain nodes and networks, there is need for consolidating knowledge. Tracking volumes flowing into markets provides a framework for building consumption patterns, connected with prices.  A key question can be: For the past six months, which 10 commodities were moving together and competing in the market and which commodity, upon its entrance into the market, disturbed a necessity like a tomato?

In most informal food markets, vendors tend to be the biggest group that buys from farmers for onward selling to end-users. On the other hand traders with permanent stalls purchase commodities in bulk and often deal directly with communities. Farmers bring bulk produce into the farmers’ market where bulk is broken. Where buyers bring commodities straight from production areas, this volume is stocked in the wholesale market for other informal or formal markets like processors.  Bulk purchasing does not happen from the farmers market for commodities destined for high density areas.

On the other hand, individual consumer choices comprise food baskets. The market pulls together a food basket from bulk commodities coming from diverse farming areas. As it breaks bulk it mixes and matches commodities according to diverse consumer needs including nutritional factors.  This mixing and matching role needs to be understood as it influences consumption patterns. For instance when the consumer budget gets strained, some commodities are sacrificed. This is how commodities are given weight in terms of whether they are necessities or luxuries. Many farmers have learnt to stop producing commodities like lettuce, carrots, peas and fine beans in large quantities because they are sometimes considered luxuries not necessities.  However, necessities like tomatoes are rarely substituted fully because they participate in the preparation of many relishes.

 

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