Increasing odds of success through characterizing value chain actors

A fine-grained view of agricultural opportunities in most developing countries can result from better  characterization of value chain actors such as farmers. In addition to revealing interdependencies between value chain actors, a nuanced understanding of African agriculture can foster dynamic resource allocation. However, accurate farmer characterization remains a pain in the Palahuru for financiers and policy makers – making it difficult to identify unmet needs and spot new opportunities.

Charles Dhewa

A hard-boiled look at farmer characterization

Competitive pressure in agricultural markets is making it clear that characterizing farmers in terms of farm sizes or types of commodities is no longer enough. For instance, the market can show the extent to which some farmers use agriculture as a stop-gap measure for supplementing their incomes while others use agriculture as retirement backwaters. Many young people use agriculture as a stop gap measure while looking for formal employment. A number of pensioners are willing to retire into agriculture although they may lack the required knowledge and experience. On the other hand, some formerly employed people use agriculture as a fall-back position to supplement their low incomes.

A more reliable category comprises professional farmers who are in it for the long haul and use agriculture as their source of livelihood. Women farmers are another category but these often have unique driving forces for getting into agriculture. Some are widows who are forced by circumstances beyond their control to take farming as a source of livelihood.  Other women use agriculture to supplement their incomes but have no control over resources because the husband may be the one who has put finance. Another category of farmers hold onto the land for hereditary purposes and can keep a few cattle just to be seen to be doing something.  Some of them have children in the diaspora who support them.

Professionals-cum-farmers

Economic hardships have forced many African formally employed professionals into freelance farming. Financial institutions prefer extending agricultural loans to these part-time farmers who can use their payslips as a guarantor. These farmers do not use their farming business as collateral because financial institutions are more attracted to payslips. However, this practice denies agricultural finance to full time farmers who take it as a profession. Since they no longer have payslips, most pensioners do not get agricultural loans. Pensioners who have acquired houses as part of their life saving hesitate to use their houses as collateral, afraid they may lose what they have worked for all their lives.

On the other hand, youths who are keen to take farming as a career path lack instruments that can be used to measure their commitment to agriculture. Those who are luck can use their parents as guarantors. Another category that is on the increase include Africans in the diaspora who want to invest in agriculture. This group has financial resources but lack implementers on the ground. They cannot contract other farmers to farm on their behalf.  Having already invested in residential properties, this group wants seriously invest in agriculture but there are no clear mechanisms in which they can access land.

Unanswered questions from the market

In the absence of clear characterization, agricultural markets will continue struggling to fully understand diverse categories of farmers. When the market fails to tell which farmer category is in the market for the long haul and who is an opportunist, it becomes difficult to build sustainable agribusiness models and concrete knowledge. Some farmers with predatory market participation tendencies, especially those with other sources of income, can dump commodities in the market without waiting for better prices. For such farmers, cost benefit analysis is not between the cost of production and the selling price but what the individual wants to do, for instance, quickly depositing a stand or flying out to the diaspora.

Some of the big questions being asked by the market include: What motivates different people to get into farming? Is it free inputs, good prices on the market, passion, utilizing land, livelihood requirements or opportunity-taking (trying some luck in farming)? Is it a last resort or what?  Unfortunately, most farmers do not reveal reasons why they get into agriculture. Some get into agriculture because they have been retrenched and cannot get formal employment.  Another puzzle is where some farmers get into the market pretending to be part of the value chain for a long time yet they want to get quick money and disappear.

Limitations of ‘prostitute’ farming

The market does not want to relate with producers and traders in unpredictable ways. That is why it has a way of punishing pretenders. Upon getting into the market, farmers soon realize that the market has several ways of finding out why you are here, where you are coming from and for how long you want to play in the market? How do you balance formal employment and agriculture?  The more value chain actors open up, the better it becomes to understand market behavior.  Unfortunately, many farmers suffer from a bandwagon effect where they continuously follow commodities that are seem to be earning more at particular times. Such ‘prostitute’ farming is not sustainable and disrupts the smooth functioning of markets. In fact, market failure is often caused by actors who embrace a bandwagon effect where they take resources from agricultural markets to other sectors.  If you take $5000 from the food market and put it into the clothing business, you are depriving the food market of money that should be supporting and sustaining the agricultural ecosystem.

 

Register for eMKambo Masterclasses – First Session :  http://www.emkambo.co.zw/?page_id=1385

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

 

 

eMKambo Masterclasses – First Session

As agricultural niches become congested and highly competitive, evidence-based decision making has never been so important. It is against these trends that eMKambo (www.emkambo.co.zw) will be conducting a series of master classes to answer the following questions:

  1. How can farmers and other value chain actors set prices for their commodities without passing through a complex web of intermediaries? From price takers to price setters.
  2. How can new value chain actors by-pass hurdles and insert themselves in existing value chains and ecosystems?
  3. How can smallholder farmers and other value chain actors build self-sufficiency?
  4. How can farmers enter and exit contract farming models towards self-sufficiency?
  5. How can digital technologies be used to harness the competitive intelligence dispersed among diverse value chain actors?

For more information and bookings, get in touch through the following channels:

charles@knowledgetransafrica.com  – +263 772 137 717

clever@knowledgetransafrica.com  – +263 772 137 768

tafadzwa@knowledgetransafrica.com – + 263 772137771

Overcoming the limitations of membership based organizations

Like other arrangements that make sense on the surface, African agriculture and rural development efforts are characterized by membership-based organizations. These range from farmer unions and diverse sizes of cooperatives to chambers of commerce. While coming together for collective bargaining purposes makes a lot of sense, members should be aware of several blind spots. After many years of existence, some African agricultural membership-based organizations are beginning to realize that success is no longer just about achieving high yields and winning prizes at agricultural shows. It is becoming more about adaptation and resilience.

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That calls for more investment in actionable knowledge in order to overcome assumptions that keep popping up. For instance, a membership focus assumes farmers have the same needs. That results in too much pressure being exerted on the organization with everyone expecting it to provide all the answers.  This creates a dependency syndrome where members expect the organization to look for the market, finance and meet individual requirements of each member. Besides limiting innovation, over-reliance on a membership organization reduces individual members’ creative potential. Most agricultural membership-based organizations struggle to adequately address different needs of their members.  For instance, farmers at various levels of production capacity and experience receive the same short message service through the same channel, irrespective of commodity complexities.

Over-reliance on the secretariat

Agricultural membership organizations also tend to over-depend on the secretariat. There is an assumption that the secretariat has all the knowledge yet the most important knowledge and experience is   dispersed among individual members. This is worsened by the fact that most farmer organizations do not adequately characterize farmers by capacity, age, gender, experience, knowledge and other important parameters which should inform targeted service delivery. As a result, information is not properly characterized to meet different needs. In terms of matching services to farming regions, there is also too much generalization of information yet members in high rainfall areas have different needs and experience from those in low rainfall areas.

Lack of growth paths

In addition, most membership based organizations do not have growth paths or weaning strategies which should see members graduating into some kind of upward social mobility.  New members need different knowledge and capacity from the old members. There should be a knowledge-driven graduation mechanism.  Membership should not just be subscription based. In the absence of clear focus, most farmer unions have limited knowledge sharing platforms that take into account members’ different stages.  Consequently, many farmers waste time in training programmes that are not relevant to their context.

 Potential role in aggregating commodities

The most important role that can be fulfilled by agricultural-based membership organizations is aggregating diverse commodities and looking for markets to support economies of scale. That should be the basis of organized production and meeting supply requirements of different specific markets.  When properly organized, farmer unions should be able to quickly see commodity over-supply, shortages and gluts in their members. They should also be able to build business models together with financial institutions in ways that reveal appropriate collateral.  Business models should be the ones constituting collateral as opposed to individual assets. Farmer unions should also assist in national data and evidence collection through profiling each member adequately.  If 70% of farmers are members of farmer unions, information on production, household consumption, sales and surplus for the market should be readily available.  Simple tools for collecting data should be introduced as part of knowledge management.

Combining a membership drive with market-driven models that take into account food security could be the right approach in the new economy.  Ultimately, membership organizations should be able to open local, regional and international markets. Rather than leaving everything to local authorities, farmer unions should mobilize resources for building market infrastructure that can benefit their members.  That is how a warehouse receipt system can become easy to establish, with members gaining capacity to set up business models for particular commodities.  Farmer unions should also be able to support commodity exchanges between their members in different regions – livestock from Gwanda with Potatoes from Nyanga.

Challenges with the proliferation of farmer unions

In Zimbabwe and other developing countries, the proliferation of farmer unions has destroyed the natural culture of communities of practice.  Due to poor characterization, different classes of farmers are found in all farmer unions where benefits are not properly customized. This is mimicking the break down between retailing and wholesaling that has become common place over the past decades.  Ideally, there should be a transition mechanism that allows members to graduate from one farmer organization to another or from one chamber of commerce to another at a higher level.  That way, clustering becomes easy.  It is counter-productive to have four or five farmer unions scrambling for members in one community.  Given that members in the same community often have the same characteristics, existence of many farmer unions creates silos.  In such situations, a membership focus fragments commodities and makes it difficult to aggregate commodities for the market.  It also fuels disorganized production and information asymmetry.  Farmer unions should work together in consolidating curricular informed by reliable farmer characterization.

Towards appropriate funding models

When agricultural membership organizations are properly organized, it should be possible to come up with appropriate funding models where funders work directly with farmer organizations in a revolving fund scheme with local banks as fund managers.  Rather than the current scenario where individual farmers hassle with banks to access finance, farmer organizations should become guarantors whose role is to vet and recommend their members for funding. In the absence of diverse ways of characterizing farmers and articulating value, financial institutions fail to see the folly of using a farmer’s house worth $100 000 as collateral when the farmer only wants to plant a hectare with inputs worth less than $5000.  A business plan should be enough to unlock finance as opposed to irrelevant requirements.  Membership based organizations should enable financial institutions to experiment with diverse progressive models.

Turning agricultural shows into marketing shows

If African agricultural membership organizations were really strong, they would turn national agricultural shows into marketing events as opposed to events where big businesses show their hitech machinery whose price is beyond smallholder farmers. Rather than being a mere window showing what countries are producing, agricultural shows should be marketing shows for diverse buyers who can place orders. Show-casing is not enough without focusing on marketable products, volumes, capacity to supply and price negotiations where diverse buyers can bid for commodities. It does not help to show agricultural commodities when the majority of farmers are stuck with commodities and do not have money in their pockets.

African smallholder farmers have a lot of unanswered questions. Each community has lived with more questions than answers for decades. There are also numerous partial answers which do not provide a complete picture. Data can assist in pointing out trends and minimize cases where potential investors and value chain actors get lost in the weeds. To avoid the scourge of unsolicited messages, agricultural knowledge has to be demand-driven. A lot of farmer statistics and profiles should be collected and consolidated in order to improve characterization.

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

At what point can we say we are making a difference through agriculture?

While a lot of resources continue to go into African agriculture, those supporting the sector are still to figure out at what point they will be sure to have made a difference through agriculture.  To what extent can increasing yield per hectare or kilogrammes of meat per feed or litres of milk per feed or dozens of eggs per chicken feed provide enough proof that we are changing lives through agriculture? Some economists are beginning to suggest that African agriculture can start making a difference when smallholder farmers start earning at least $90 to $200 per month from their agricultural activities.

emkambo

At the moment most African smallholder farmers are stuck in activities that give them less than $10/month.  For example, some farmers in Gokwe district of Zimbabwe have been persuaded to dance with a crop called Sesame which barely gives them enough to meet their household needs. Why should an expensively trained economist be proud to supervise a programme that gives farmers less than $10/month? Ideally, farmers should be able to meet their income and health outcomes from their agricultural activities.

External factors also influence the extent to which agriculture can make a difference to livelihoods. One of the factors is consumer population.  You can only do so much within a small population because it sets the boundaries around which you can innovate for a particular demand. The majority of African smallholder farmers are competing for small populations of consumers whose disposable incomes are erratic. Large African cities like Cairo and Lagos have more than 12 million people each, close to the population of a whole country like Zimbabwe whose population is around 13 million.  It means Lagos alone can offer the same size of market for agricultural commodities as the whole of Zimbabwe.

How the export market is not a walk in the park

Getting into the export market makes a lot of sense for many African farmers. However, export markets demand a much tougher proposition and sophisticated mindset. Collecting mangoes from scattered households and bulking them is a tough call.  Evidence and knowledge are critical for a good investment judgment.  While tons of sweet potatoes are required in Europe, a lot more discipline and social mobilization is required to aggregate such commodities for a foreign markets. Agriculture is a sparsely distributed activity and requires distributed management.  There is no money that lies in a busy street.  You need others to succeed and have to sweat for real money and profit.

Unfortunately, too many fragmented agricultural interventions not backed by evidence. There are cases where development partners have invested hoping that the private sector would take advantage but that has not happened maybe due to lack of readiness or capability. On the other hand, most big institutions are not reaching out, preferring to stay distant from ordinary people’s socio-economic action. While top down approaches have not always worked, bottom up approaches have also been found wanting.  That is why brokers are critical. Success comes from taking into account many factors including people’s capacity of meet their social needs, not just income.

Pulling together knowledge along value chains

Making sense of agriculture goes beyond characterizing farmers but understanding commodities from production all the way to marketing and several value addition processes. Important elements include knowledge, skills base, information access, technology, natural resources, individual resources/income and markets. At all nodes of value chain actors, there is need for consolidation of knowledge instead of building knowledge from scratch.  Knowledge already exists at producer level, market level (traders).  Processors and SMEs have raw knowledge still to be understood. This knowledge is supported by that from the production side.  How can this knowledge be pulled together to inform models? Tracking volumes into markets provides a framework for building consumption patterns.  This path connects with prices so that it becomes possible to understand which 10 commodities were moving together and competing in the market and which one disturbed tomatoes on its entrance for the past six months.

Seeing the market as an ecosystem

Farmers and all value chain actors should broaden their view of agricultural competitors and opportunities.  That will enable them to see markets as fast moving ecosystems in which they should be able to identify new sources of value. A critical part of understanding agricultural ecosystems is following the data which are becoming the coins of the realm. Competing effectively means collecting large amounts of data and developing capabilities for storing, processing and translating the data into actionable agribusiness insights. Data diversity is a real source of value as opposed to relying on narrow pools of data which hinder finer micro-segmentation in the whole ecosystem.

Better data can support analytically driven scenario planning and inform how ecosystems will evolve. For instance, data enables informal markets to become superior at interpreting the integrated nature of agriculture and nutrition. Without data, it is easy for value chain actors like financial institutions to become irrelevant.  Instead of meeting entrepreneurs where they are, financial institutions will continue changing labels and recycling models. For instance, most conventional lending models force women and youths into chicken projects and cross-border trading instead of meaningful and innovative enterprises.  Funding innovation is one way of unlocking dormant potential in most of our communities and build trans-generational businesses in ways that tap into reservoirs of soft knowledge that have made other economies grow.

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