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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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Access to $1000 credit: would this help unleash agricultural commercialisation in Zimbabwe?

One of the repeated complaints of farmers on the new resettlements is the lack of access to finance. This is holding back commercialisation, particularly for A2 farmers with bigger plots but also for those on A1 farms eager to expand, intensify or diversify. All of this needs money, and it is in short supply.

In our studies of farmers’ fortunes in Masvingo, and more recently in the tobacco growing areas of Mazowe, as part of the Space, Markets, Employment and Agricultural Development project, we identify three standard pathways of agricultural commercialisation, each associated with different sources of finance. All are limiting, and available only to a few, or relate only to particular commodities.

The first route is through regular accumulation, investment and saving. This is tough, given all the other demands on funds, and requires real tenacity. Each year profits have to be sunk back into the farm, and new equipment purchased. This is a route we see in the vegetable farmers of Masvingo who by making use of water resources, investing initially in a small pump, have expanded their production and marketing significantly, and after a few years are able to upgrade, with new irrigation equipment, the purchase of pick-up trucks and so on. The regularity and reliability of income from horticulture (if the water is available and the pests can be kept at bay) helps drive this pathway to commercialisation. Some farmers have been very successful, now with turnovers of tens of thousands of dollars, employing large numbers of people and with transport businesses on the side. And all from an initial outlay of a few hundred dollars.

The second route is investment from external income sources. Getting going in farming is often the hardest part, like many businesses. Basic up-front investment is necessary. For A2 farmers with quite large plots – up to 100 or 200 ha – making productive use of this land really requires substantial capital investment. Most such farms were formerly ranches in our study areas in Masvingo, and had limited infrastructure. Those farmers that inherited dams and irrigation equipment were lucky, but most did not. A2 farmers tended to have jobs in town, or at least good connections. These were crucial in getting going. But in the economic crisis period, standard government jobs were not enough to live on let alone provide additional income for investing in farming. Those who were able to get going usually had NGO jobs paying on foreign exchange, or had connections overseas. This diaspora and employment money was recycled and invested in farms. Such farmers, unlike their neighbours, were able to rebuild or rehabilitate irrigation schemes, build dairies and farm sheds, as well as purchasing transport – the ubiquitous 1 tonne truck – to facilitate marketing.

The third route we have identified is of course via contract farming. This is important for crops such as tobacco, but also cotton, and through a different arrangement, sugar. This means the farmer does not have to pay for inputs up front, and the contracting company will supply seed, fertiliser, pesticides and other inputs and also take care of the marketing. Increasingly cash-strapped farmers are hooking up with contractors for other crops, including maize. I have been amazed how many readers of this blog get in touch, and ask to be put in touch with a contractor for selling their crop. There is clearly a massive demand for this intermediary function, where those with cash and capital can invest in farming without taking on the burden of actually owning or holding land or producing. Former white farmers are heavily involved, as well as the new black business elite, alongside the standard cotton and tobacco companies, and of course the estates. The terms of the contract may be one-sided, with the risk pushed towards the producer, as discussed in earlier blogs, but contract farming does release cash, in the absence of any other source.

It is this absence of any other source of finance that is striking across our case studies. Rural financial institutions simply are unable to respond. Some say this is due to the lack of collateral due to the land tenure system, but this is red herring in my view, given the possibility of loaning with all sorts of other security beyond freehold tenure. Surely the new farmers who are desperate for finance would open up commercial possibilities for banks and other finance providers. But the financial sector is very conservative in Zimbabwe, being used to a very different structure of agriculture and form of finance. They do not know their new client base and have few incentives to offer new financial products.

Rural finance in Zimbabwe thus has a massive missing middle ground – between the miniscule forms of finance offered by savings clubs and rotating loans schemes promoted by church groups and NGOs and the large lumpy finance offered through the conventional routes. While there have been some state-backed attempts at improving the situation, they have often foundered due to complex bureaucracy, absurd conditions and lack of outreach. The type of finance offered by banks is largely irrelevant to most new farmers (see Tables 4 and 7 in this Finmark report from 2012)

While I have little knowledge the type of business models that would work, my bet is that a company, perhaps initially supported by a development organisation, that could offer a US$1000 loan on flexible terms would have massive uptake and success. This is the sort of amount that is needed, sufficient to buy a decent pump and irrigation kit, sufficient for a down-payment on a second-hand pick up, sufficient to get going on a commercial chicken project, sufficient to buy a beast or two, or some basic farm equipment. This would make all the difference (and there are now some examples supported by USAID and others). It is standard in Asia for example, so why not in Zimbabwe?

While the three pathways to commercialisation noted above are great if your crop is contracted, if you have close ties to someone with a well-paid job, or if you farm a commodity that gives quick, reliable returns, and you can manage to save. But this is not everyone, or every type of agriculture. Today commercial agriculture in Zimbabwe is being held back, and rural finance is probably the biggest blockage.

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

 

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