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Commercial agriculture in Africa: winners and losers

The findings of the Land and Agricultural Commercialisation in Africa project, funded by DFID and ESRC, have just been published in the Journal of Peasant Studies in a series of four papers – an introduction (open access) and country cases from Ghana, Kenya and Zambia.

In this work we asked what difference did the ‘model’ of commercial farming make, contrasting large-scale plantations/estates, medium-scale farms in commercial farming areas and contract farming arrangements linked to core estates (see background paper here). This is a theme being picked up by a new initiative – the Agricultural Policy Research in Africa project of the Future Agricultures Consortium – which includes new work in Zimbabwe, starting this year.

A blog on The Conversation – The pros and cons of commercial farming models in Africa (Ruth Hall, University of the Western Cape; Dzodzi Tsikata, University of Ghana, and Ian Scoones, University of Sussex) – discusses the findings. In the debate about what approaches to revitalising commercial agriculture, at what scale (including medium-scale farms), with what relationships between smallholders and large-scale agribusiness, this research from across Africa is highly relevant to ongoing debates in Zimbabwe.
The pros and cons of commercial farming models in Africa

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Workers harvesting from a commercial farm in Ethiopia.
Reuters/Barry Malone

Ruth Hall, University of the Western Cape; Dzodzi Tsikata, University of Ghana, and Ian Scoones, University of Sussex

Colonialism brought large-scale farming to Africa, promising modernisation and jobs – but often dispossessing people and exploiting workers. Now, after several decades of independence, and with investor interest growing, African governments are once again promoting large plantations and estates. But the new corporate interest in African agriculture has been criticised as a “land grab”. The Conversation

Small-scale farmers, on family land, are still the mainstay of African farming, producing 90% of its food. Their future is increasingly uncertain as the large-scale colonial model returns.

To make way for big farms, local people have lost their land. Promises of jobs and other benefits have been slow to materialise, if at all.

The search is on for alternatives to big plantations and estates that can bring in private investment without dispossessing local people – and preferably also support people’s livelihoods by creating jobs and strengthening local economies.

Two possible models stand out.

Contract farming is often touted as an “inclusive business model” that links smallholders into commercial value chains. In these arrangements, smallholder farmers produce cash crops on their own land, as ‘outgrowers’, on contract to agroprocessing companies.

Then there is growth in a new class of “middle farmers”. These are often educated business people and civil servants who are investing money earned elsewhere into medium-scale commercial farms which they own and operate themselves.

So what are the real choices and trade-offs between large plantations or estates; contract farming by outgrowers; or individual medium-scale commercial farmers?

These different models formed the focus of our three-year study in Ghana, Kenya and Zambia. Evidence suggests that each model has different strengths. For policy makers, deciding which kind of farming to promote depends on what they want to achieve.

Plantations are ‘enclaves’

Our cases confirm the characterisation of large plantations as being “enclaves” with few linkages into local economies. They buy farming inputs from far afield, usually from overseas, and in turn send their produce into global markets, bypassing local intermediaries.

Plantations are large, self-contained agribusinesses that rely on hired labour and are vertically-integrated into processing chains (often with on-farm processing). They’re usually associated with one major crop. In Africa, these started with colonial concessions, especially in major cash crops such as coffee, tea, rubber, cotton and sugarcane. Some of these later became state farms after independence while others were dismantled and land returned to local farmers.

Many plantations do create jobs, especially if they have on-site processing. Plantations may also support local farmers if they process crops that local smallholders are already growing. For example, we found an oil palm plantation in Ghana that buys from local smallholders, giving them access to processing facilities and international value chains they would otherwise not reach.

But, typically, plantations have limited connections into the local economy beyond the wages they pay. Where production is mechanised, they create few jobs, as we found in Zambia: the Zambeef grain estate employs few people, and most of these are migrants whose wages don’t go into the local economy. And the jobs that are created are invariably of poor quality.

The main story is that plantations take up land and yet often don’t give back to the local economy. In the cases we researched, all the plantations led to local people losing their land. For instance, the establishment and later expansion of the 10,000-hectare Zambeef estate led to forced removals of people from their cropping fields and grazing lands.

There are some benefits from plantations and estates. But, given more than a century of bad experience, it may be time to concede they seldom – if ever – live up to their promises.

Contract farming brings benefits for some

Contract farming has a long history in Africa, dating back to colonial times. As with plantations, these arrangements were largely for the major cash crops, including cocoa, cotton, tobacco and sugarcane.

Contract farmers are smallholders who enter into contracts with companies that buy and process their crops. Sometimes members of outgrowers’ households might also get jobs on larger “nucleus” estates run by the companies. Whether or not they benefit, or get mired in debt and dependence, depends entirely on the terms of these contracts. Our study looked at contract farming in Ghana’s tropical fruit export sector, in French bean production in Kenya and in sugarcane farming in Zambia.

Contract farming has been hailed by some as the “win-win” solution, enabling commercial investment for global markets without dispossessing local farmers. Farmers farm on their own land, using their own family labour, while also accessing commercial value chains – rather than being displaced by large farms. But we found that this is not necessarily the case. Crucially, there are different kinds of arrangements that determine who benefits.

In Kenya, contract farmers are poorer than most farmers around them. For them, farming on contract provides a crucial livelihood, especially for poor women, who cultivate French beans for the European market and combine this with seasonal jobs on big farms.

In one Zambian block scheme all outgrowers gave up their land to Illovo, a South African company that grows sugarcane. The company pays them dividends. Here, the landowners, typically the old patriarchs, benefit from cash incomes. Young people lose out: they neither inherit the land nor control the cash incomes.

Contract farming clearly provides one effective avenue for smallholders to commercialise. It means, though, that smallholders take on both the risks and the benefits of connecting to commercial value chains.

Medium-scale farming: a promising option

Between the large plantations and the small contract farmers is another model: medium-scale commercial farms owned by individuals or small companies. We studied areas where medium-scale farms were dominating: mango farmers in Ghana, coffee farmers in Kenya and grains farmers in Zambia. While this kind of medium-scale farming also has colonial origins, the past two decades have seen massive growth in new “middle farmers”. Many of them are male, wealthy, middle-aged or retired, often from professional positions.

The medium -scale commercial farming model has a lot to offer. We found that they create more jobs and stimulate rural economies more than either big plantations or smallholder contract farmers. Yet cumulatively, such farms may threaten to dispossess smallholders, just as the big colonial and more recent plantations and estates have done.

The push behind the explosion of the “middle farmers” in the countries we studied has been investment by the educated and (relatively) wealthy. In Ghana in particular, we found, their expansion has displaced smallholders. Cumulatively, even modest-sized farms have led to substantial dispossession and reduced access to land.

Their informal employment patterns mean poor working conditions and few permanent jobs. But, unlike the plantations, these farms are well connected with the local economy. Building on social networks, these “middle farmers” often buy inputs and services from local businesses. At least some of their produce is sold into local markets.

Winners and losers

While policy choices are of course political, they can and should be informed by research about the implications of these different pathways of agricultural commercialisation. What is clear from our research is that different kinds of commercial farming will have different effects on the economy. It’s not just about efficiency. Ultimately, it’s about who wins and who loses.

Ruth Hall, Associate Professor, Institute for Poverty, Land and Agrarian Studies, University of the Western Cape; Dzodzi Tsikata, Associate Professor, University of Ghana, and Ian Scoones, Professorial Fellow, Institute of Development Studies, University of Sussex

This article was originally published on The Conversation. Read the original article.

 

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Can joint ventures revive large-scale commercial agriculture in Zimbabwe?

Ndodana Sibanda shows how the center pivot works to water the wheat in Arda Jotsholo recently. (picture by Nkosizile Ndlovu)

The Agricultural and Rural Development Authority (ARDA) has a substantial land holding across the country, including 21 estates of varying sizes, with a total of 98,000 ha of arable land, 19,000 ha of which is irrigable. In the last decade most of these fell into disrepair, with production plummeting. Financing of parastatal operations became increasingly challenging, as government issued bonds via the Agricultural Marketing Authority were no longer available. In the last few years, as part of a reform programme focused on parastatals, the government has encouraged ARDA to go into public-private partnerships with private companies in an attempt to revive their fortunes, seeking new finance and investment from the private sector. 40 companies bid for such partnerships in 2014, involving a mix of local and foreign capital.

Currently there are 12 estates with such joint ventures: Chisumbanje, Middle Sabi, Katiyo, Mkwasine, Sisi, Nandi, Faire Acres, Jotsholo, Antelope, Ngwezi, Sedgewik and Doreen’s Pride (see a profile of each here, including details on the production focus and contract length). Those that remain wholly managed by Government include; Balu, Sanyati, Muzarabani, Mushumbi Pools, Nijo, Katiyo Main Estate, Rusitu, Magudu and Kairezi.

The most (in)famous is the Chisumbanje estate, where tycoon Billy Rautenbach took over operations, and built a mill for processing sugar cane. Land disputes and controversies over ethanol pricing and markets have plagued the operation for some years. Others have established operations in the last few years, and have been widely hailed as seeing a dramatic turn-around in ARDA’s fortunes.

A variety of private enterprises have seen the availability of high quality land and good infrastucture (although much of it in urgent need of renewal) as a good business opportunity. Both local and international investment has flooded in.

We must ask though, whether this sort of large-scale, capitalised farming is the most appropriate use of this land, and whether these operations genuinely contribute to employment, food security and local economic development, as well as boosting government revenues.

The Trek Petroleum-ARDA partnership in Matobo

Trek Petroleum has invested in several estates, including the Antelope estate near Maphisa mentioned last week and Doreen’s Pride near Kadoma, where beef ranching with imported Namibian animals is underway. It also has contracts with the Cold Storage Company, and with ARDA Ngwezi, and works with Northern Farming on a contract with ARDA Mashonaland. For foreign investors, particularly from South Africa, the US dollar environment in Zimbabwe is very attractive.

Trek has imported state-of-the-art equipment, including several 350 HP Casey tractors which can pull 24 disc harrows each. Huge seed and fertiliser planters are drawn by these tractors, which are fitted with sensors that analyse soil fertility status and automatically adjust application rates. 12 centre pivots are in place and irrigate 520 hectares of winter wheat and summer maize. Hi-tech driers are in place to ensure timely harvesting of grain and drying to 12.5 % moisture. It has been a substantial investment that has resulted in massive boosts in production from the estate.

The level of mechanization has a downside too, as discussed with the estate manger during a visit earlier this year. For example, only 12 workers are employed to run the centre pivots. In the past, 250 workers were needed to irrigate the 230 hectares that were then cultivated. Equally, there is only one section manager compared to three in the past. There are now just 48 permanent workers in place of around 90 in the past, while now 162 temporary workers are required to detassle maize for a 7 day contract, compared to hundreds in the past for a season (although these figures are disputed by ARDA, who claim over 200 jobs have been created, although mostly in the land clearance and establishment phase).

With the revived irrigated area, ARDA Antelope has entered into seed multiplication contracts with Seed Co, Pannar and ICRISAT.   ARDA provides land, labour and electricity, as well as agronomists. Pannar’s contract is for 60 hectares with Pan 473 and G90 varieties bulk produced, while Seed Co has a 40 hectare stake producing SC 513 and SC 621. The balance of the 520 ha is planted with commercial maize in summer and wheat in winter sold to National Foods Company. Trek also has a joint venture with the Cold Storage Company, and currently feeds 700 cattle brought from Namibia, with a further 1300 to come. There has been a massive expansion of both area and intensity of production. There are plans for another 800 ha of irrigation, harnessing water from the Shashane dam, as well as expansion of grazing land. An investment in processing plants, including for livestock feed, is planned.

Land disputes

Despite investments in ‘social responsibility’ programmes, involving support for local educational institutions, the new arrangement has run into trouble, as the land area has been expanded, apparently without consultation and ‘free prior informed consent’.

For years the ARDA estate only operated on a small extent of its area, and villagers regarded the land as theirs. With many parallels with the disputes that arose in Chisumbanje, wrangles over land have emerged around the estate. In September, villagers organised protests in Maphisa, stopping traffic. Graffiti linking the estate investment to the notorious Gukurahundi massacres in Matabeleland were seen. A visit by VP Mnangagwa was abandoned, and villagers were arrested, although later freed. Villagers claimed their land was being taken and that they were not benefiting from the new scheme.

Protesting villagers’ views are in sharp contrast to the narratives of government officials. A queue of high-profile visitors have come to praise the operations, from the First Lady onwards. Recently, Deputy Minister of Agriculture, Paddy Zhanda, has congratulated ARDA for its operations in Maphisa. The resurrection of large-scale farming on state land, is central to the envisaged approach of ‘command agriculture’, where production priorities are set by the state. Joint ventures with ARDA supporting (mostly) A2 farmers with irrigation infrastructure, but under-production, have also been hailed as key to the future success of agriculture.

What role should parastatals play?

But we have to ask what roles should parastatals play in the revival of Zimbabwean agriculture? The PPP model is certainly attractive. New infrastructure and finance allows for the revival of moribund operations. With a ‘command agriculture’ perspective these revitalized farms could, ministers hope, provide just the sort of backbone to the agricultural economy needed. But as we have seen conflicts can arise, as people are removed from land that they thought was theirs. Highly capitalized operations may not provide the employment once offered. As the land reform has shown, with the right support small scale farmers can produce often produce significant quantities of maize and other crops, but at far lower costs, and generating more employment. Maybe it would make more sense to redistribute the land instead?

The parastatal assets of ARDA however should not be seen just as a cheap, underutilized source of land and water, either to be redistributed to the masses or to be handed over to well-connected corporates as part of partnerships benefiting elites. We should recall the role ARDA used to play in providing an important development coordination function. In the ‘roll back the state’ zeal of the 1990s, combined with the obvious corruption and poor management of many parastatals, we sometimes forget the importance of such organisations, notably ARDA, but also the CSC, in offering credit, markets and a brokering facility for smaller operators.

Unlike the new enclaves being created in a desperate attempt to raise revenues, the effective parastatal operations of the past were more integrated into the wider agricultural economy landscape. In thinking about the future, the alternatives need to be carefully balanced. Further land reform – particularly to A1 farmers – is certainly an option in some areas, as small farmers may be best able to make use of existing irrigation facilities. But in other cases new investment is clearly needed, but the obsession with large, command-oriented agriculture or divesting state assets to the private sector through PPPs must be tempered.

Lots of big, shiny centre pivots look impressive, but they may not be economic or generate employment. This was often the lesson of large-scale commercial agriculture before. Having large farms as part of a wider landscape of agriculture may be important for some crops and in some places, but making sure these operations are integrated not isolated enclaves, are employment generating not just mechanized, and have a coordination function to support wider development is essential.

This post was written by Ian Scoones and appeared on Zimbabweland

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Small farms, big farms

There is a classic debate in agricultural economics and development policy about the relative efficiencies of small and big farms. It is centred on what is known as the ‘inverse relationships’ which posits that as farms become smaller they become more productive per unit area, as costs – such as the supervision of labour – get reduced (or at least passed on to cheaper family labour arrangements). The argument is that small farms are the ideal, efficient solution to agricultural production.

Of course there are qualifications – and these are important, perhaps increasingly so in a globalised world. Very small farms, fragmented in different ways, are clearly not ideal, and suffer from many inefficiencies. Yet, what is ‘small’ and ‘very small’ is often not clear in the literature. Equally, there may be economies of scale in certain production-marketing systems, making larger farms more efficient. For example, getting high value products into international markets may mean complying with quality standards which small farmers would find difficult to adhere to.

This discussion remains at the centre of the debate about agricultural development in Africa. The African Union’s Comprehensive Agriculture Development Programme (CAADP) makes a strong case for smallholders being at the centre of agricultural growth, as does the Gates-funded  Alliance for  a Green Revolution in Africa (AGRA). In a new book, Gordon Conway, of Imperial College in the UK, argues that smallholders must be at the centre of strategies to feed 9 billion people.

For decades, then, smallholder agricultural production has barely been questioned as the central pillar for agricultural development in Africa. But now there are some dissenting voices; and influential ones too. In a provocative paper for an FAO meeting on African agriculture in 50 years, Paul Collier – author of the best-seller, ‘The Bottom Billion’, and professor at Oxford University – and Stefan Dercon – now Chief Economist at the UK’s Department for International Development, and a well-respected research economist who has worked extensively in Africa – make the case that the advocacy of smallholder farming was sometimes wildly overblown, often inappropriately romanticised. They argue that the inverse relationship debate was misleading, and did not provide the definitive evidence sometimes supposed for smallholder farming, and that large farms are increasingly the way forward, for some commodities and in some places.

The arguments presented certainly have merit and deserve scrutiny, but they are also potentially flawed in important ways. The arguments for large farms are that economies of scale in today’s globalised world are such that smallholder farming can never really be expected to generate sufficient growth to facilitate the necessary transition out of agriculture into industrial-led growth trajectories. In Africa in particular access to global markets, and so positioning of agriculture near road infrastructure and ports is seen as crucial, if comparative advantages in a highly competitive market setting are to be realised.

Yet the argument ignores some key facts. First, smallholders have been very successful at producing a range of key commodities. In a review for a World Bank study on competitive commercial agriculture in Africa, Colin Poulton and colleagues found that “Large-scale agriculture has proven more competitive in export horticulture, sugar and flue-cured tobacco, whilst smallholders dominate in cotton, cashew and food staples. For tea and burley tobacco there are mixed stories. Second, markets are not all global, governed by highly stringent standards. Niche selling into such markets may offer good returns, but the costs of entry are high. Perhaps better is to produce for growing domestic and regional markets, and here the flexible strategies of smallholders in feeding urban Africa have long been seen to be effective. Third, the negative effects of large scale farming on local economies, food security patterns, environmental conditions and labour and employment conditions are not factored into these arguments. Large scale commercial farming does not have a universally good track-record, frequently resulting in enclave economic operations, with poor labour conditions and high externalities, focusing on single export-oriented crops, leading to negative impacts on the local food economy.

What are the implications of this debate for Zimbabwe? Following land reform, Zimbabwe has a radically reconfigured agrarian structure. Gone is the dualism of the past – with tracts of very large scale farming, separated off from the small-scale farming areas in the communal lands and resettlement. The limited ‘Purchase Area’ land was anomalous, fitting neither model, but not integrated either. Today, we have a huge mix of farm sizes, as Sam Moyo has described. Large-scale farms and estates remain, but the majority is now a mix of small and medium scale farms.

Crucially these are much more integrated, both spatially in terms of their proximity and economically in terms of their connections, of labour, marketing, skill and knowledge transfer and so on. The economic apartheid of the past, divided by racialised social and economic barriers, has given way to a more complex, integrated patchwork. While smallholder farming dominates, it is not the only farm type. It is the mix that is important, which is different in different parts of the country, depending on agroecology, market access, infrastructure and, of course, politics.

Getting to grips with this new farm size configuration, and the implications for economic development is an important challenge. Yet it is one that policymakers have yet to get their heads around. So fixated are people on the small vs large dichotomy, often with an implicit assumption that small is backward and big is better, that the potentials of the new agrarian structure are not being grasped. The small farm populists argue for peasant efficiencies, while the big farm advocates claim business and growth opportunities.

In my view neither is correct. But where the gains are to be had is in the mix: in the economic multiplier linkages between farm sizes, in the capturing of the comparative advantages of different farm configurations, in the growth of district level economies, in the sharing between groups of equipment, skills and knowledge, and in the flexible movement of labour in a certain area. None of these opportunities could be realised in the old dualistic agrarian structure, but today there are many potentials.

But it requires a different mindset: rather than thinking about the ‘ideal type’ farm (small or large), and fixed and outdated notions of what is ‘viable’, we should shift to thinking about processes of economic development based on agriculture in an area. A territorial approach to local economic development, as we argued in our book, is the way forward, and will help us shed the often unproductive and diversionary obsession with farm size.

This post was written by Ian Scoones and originally appeared on Zimbabweland

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