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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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Tobacco and contract farming in Zimbabwe

 

How does commercial agriculture – and particularly contract farming – affect agrarian dynamics? We have been looking at this question in work in Mvurwi area in Mazowe district over the last few years. New work under the Agricultural Policy Research in Africa project of the Future Agricultures Consortium will pursue this further.

An open access paper is just out in the Journal of Agrarian Change – “Tobacco, contract farming and agrarian change in Zimbabwe”. (PDF here). This looks at the influence of tobacco farming (both contracted and independently grown) on patterns of social differentiation and class formation within A1 resettlement areas. Tobacco production is one of the big post-land reform stories, but how is this driving different patterns of accumulation, with what implications for livelihoods, labour and politics?

Lots of data are presented in the paper on contrasting production, asset ownership and investment patterns across our sample of 220 households. Towards the end of the paper, we offer a simple typology of different classes of farmer, resulting from differential accumulation due to tobacco production.

Social differentiation and class formation

The Accumulators: This group are those with sufficient resources to grow tobacco and sell it on their own. In the recent past they may have had contracting relationships with companies, but many have found it possible to operate independently because of sufficient resources accumulated. Tobacco income has been invested in tractors and transport vehicles, allowing households to cultivate effectively and transport tobacco to the auction floors. They balance tobacco farming with commercial maize farming, so they spread their risk in terms of agriculture. Many also have other businesses, including tractor hire and transport, but also house rental, as some have invested in real estate in Mvurwi, Mazowe and Harare from tobacco proceeds. This group is generally older, male, more educated, and sometimes with jobs in town, or at least pensions and other resources – sometimes remittances from children abroad – to draw on, which helps the path of accumulation. This group hires permanent labour, and also uses a temporary workforce hired from the locality as well as from the compounds. Links to state officials, agribusinesses and political networks become important for gaining access to some resources, notably fertiliser, and so accumulation from below combines with accumulation from above for this group.

The Aspiring Accumulators: This group includes a number with formal contracting relationships with companies. They do not have enough resources to produce and sell independently, but are prepared to commit significant land areas to tobacco to fulfil contracts, and take on the associated risk. They generally have a larger proportion of their farms allocated to tobacco, and so less to other crops, including maize. However, on average, they still manage to produce more than a tonne of maize per year, and so, even on smaller areas, have enough for self-provisioning. Many also complement tobacco production with small-scale commercial horticulture, often run by women, and so have diverse sources of income. They hire labour, both locally and from the compounds, but have a smaller permanent workforce compared to the accumulator group. In terms of off-farm income sources, this group combines traditional local occupations, such as building or brickmaking, with cattle sales, and some with small transport operations. While aspiring to greater things, this group is certainly ‘accumulating from below’, and shows a significant level of purchase of assets, including cattle, solar panels, cell phones, as well as agricultural and other inputs.

The Peasant Producers: Not everyone is accumulating to the extent of these other groups, and for some a more classic peasant production system is evident. This does not mean ‘subsistence’ production, as all are engaging in the market, but the production system features a dominance of own-family labour (although some hiring in of temporary piece work), and production that is spread across a variety of crops, including tobacco. Most in this group will not be in a contracting relationship with a company. They instead sell tobacco, often as part of a group, independently. There has been a large movement from this group to the other two accumulator groups in the past few years.

The Diversifiers and Strugglers: There are a number of households who are not producing in the way the peasant producers manage, and are clearly struggling. This group does not engage in cropping for sale (or if so very little, and not usually tobacco, but mostly maize), and often produces insufficient maize for self-provisioning. Such farmers have to diversify income earning activities, often with a clear gendered division of labour, across activities including building, carpentry, thatching, fishing and some craft making (for men) and vegetable sales, trading, pottery and basket making (for women). They rarely hire labour, and will often be the ones labouring for others, as temporary labourers on nearby farms.

Dynamic agrarian change in tobacco areas

These categories are far from static, and the drive to accumulate, with contracting seen as an important route to this end, is ever present, both in people’s own commentaries, as well as in observed practices. Everyone can see success around them, and tobacco is the symbol of this, although some are having their doubts about its sustainability and diversifying into other high-value crops. These categorisations of also miss the differential trajectories of accumulation within households, across genders and generations. As seen in the recent blog series, some youth are failing to make it, and often remain within increasingly large accumulator households as dependents, even after marriage. Some women may be tobacco farmers in their own right, but tobacco accumulation is predominantly a male phenomenon, with men often taking on the tobacco business, and associated investments from the proceeds.

What do these patterns tell us about likely longer-term patterns of agrarian change? The tobacco boom has provided a significant group of land reform beneficiaries the opportunity to accumulate. This has had spin-off effects in the rural economy – generating employment, resulting in investments of different sorts, and changes in the local economy as small towns like Mvurwi grow.

It has also generated class-related conflicts and dependencies both in relation to compound-based farm worker households and with others in the A1 areas who are struggling to reproduce. The weak kin-based social relations within new resettlement communities limit the redistributive effects of a ‘traditional’ moral economy, and means that there are genuine losers, as well as winners, from the land reform.

There are inevitable limits to accumulation, set by environmental factors (and especially the supply of wood for curing), market conditions (and changes in the world market, health concerns, the demand for higher quality leaf and price shifts), social-political relations (and the ability to negotiate within markets), and limited land areas.

In the A1 areas, successful households attract others, particularly from the communal areas, and household sizes expand as others are taken in. Surplus income can be invested in basic social reproduction – including maintaining rural homes, investing in education, health care, marriage of children and so on – as well as production – including livestock, farm equipment, inputs, transport and so on – but again there are limits to the herd sizes and capital items and other inputs that can be bought.

A key question will be where the next round of investment will end up. Here the relationship between countryside and towns, especially small towns, becomes important, as accumulators build urban/peri-urban housing for rent, private schools as business ventures, and sink capital into other urban-based businesses, potentially a source of employment for the next generation. This is only beginning now, but the data show that this is a trend to watch.

These economic transformations also feed into and are built upon social and political dynamics. Successful A1 farmers – very often well educated, and with links to urban areas – are important social and political actors, often seen as leaders in local political formations (mostly within the ruling party, ZANU-PF), but also in other groupings, such as churches and business associations. How alliances are struck with farm workers – in all their forms – as well as those A1 farmers who are struggling will be significant, as new forms of agrarian politics emerge on the back of the tobacco boom.

This post was written by Ian Scoones and appeared on Zimbabweland

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Land and commercial agriculture in Zimbabwe: new findings

Over the last few years we have been studying the relationships between land, markets and employment in commercial agriculture Zimbabwe through the SMEAD project, supported by the UK’s DFID-ESRC ‘Growth Research Programme’, and coordinated by PLAAS at UWC in South Africa as part of a regional, comparative study (research has also been completed in South Africa and Malawi). In Zimbabwe, the work has focused on Mvurwi area of Mazowe district and the Wondedzo area of Masvingo district, contrasting a high and low potential area.

The final report is now out, along with a briefing paper. I have already alerted readers to the series of films (‘Making Markets – in high and low res) we have made on the 3 commodities that we focused on in Zimbabwe – tobacco, horticulture and beef. Please do check out the publications and videos to get more detail. This blog offers some highlights of key findings and recommendations emerging from the work.

Despite many challenges, Zimbabwe’s agrarian economy is generating new economic activity and new employment because it is more locally rooted following land reform. Our research shows however how, while economic linkages generated by agriculture create opportunities, the distribution of benefits is patchy; some succeed and are accumulating, while others are not.

There are many challenges ahead. This blog has often focused on practical and policy challenges associated with agricultural production. These include for the need for a reliable supply of affordable fertilisers; the need for enhanced extension and service support, including through mobile phones and the Internet; the need for investment in water management and irrigation facilities; and the requirements of tenure security to encourage investment.

In our work in the SMEAD-Zimbabwe project, we focus on key recommendations for supporting economic linkages and the non-farm rural economy. These include:

  • Investment in rural infrastructure is essential. Restructuring rural production and economic activity following land reform requires a new configuration of infrastructure – roads, electrification, network coverage for mobile phones, market sites and storage facilities, business centres and so on. This is urgently required in order to facilitate the growth of economic linkages and support for the non-farm rural economy.
  • Encouragement of market information services via mobile phones, text messaging and the Internet will assist in increasing knowledge of prices and market options for farmers, input suppliers, service providers and other entrepreneurs, and help develop a more market-targeted approach, avoiding gluts and price crashes.
  • Contract farming arrangements for certain crops eases capital constraints, provides inputs and offsets some risks. In the tobacco sector, the Chinese company, Tian Ze, has contracted a number of (mostly larger) resettlement farmers, but has been key in supporting sales from the auction floors, and the wider contracting system for tobacco. However contracting needs sensitive regulation to protect all parties.
  • Finance and credit is extremely limited, and constrains on and off-farm business development. Bank loans are concentrated on contracting companies, and so a limited suite of crops and activities. Access to finance for others is constrained by major problems of liquidity in the banking and finance sector. There is need for low interest finance for farm and non-farm business activities. Rules and regulations have to be in place to protect financiers and borrowers.
  • Small towns and business centres near new resettlement areas are often booming, providing services, markets and employment. As ‘growth poles’, basic support for their sustained expansion is required, including infrastructure investments, and the facilitation of informal, small-scale trade and service supply.
  • Training in business development skills for farmers, service providers and technology manufacturers will help in the upgrading of business opportunities, particularly for youth and others without land, so they can participate in a local non-farm economy. Business training – including the issuing of business management certificates – is essential.
  • Investment in developing value addition from agricultural production is vital. This includes drying and bottling facilities for vegetables and meat products, as well as small-scale food selling, compliant with food hygiene and safety standards. Tobacco farmers lose on rejected leaf and sweepings. Value addition could involve technologies to make manures, as done by companies such as Nico Orgo.
  • Private sector-led agricultural trade, input supply and service support is often hampered by restrictive regulations and by-laws, combined with often punitive taxes and charges. Policy and regulatory reform to support the growth of small-scale businesses linked to agriculture in the rural areas is a priority. Local councils/government need to do away with out-dated rules and regulations that hinder the initiation and growth of new small businesses.

Zimbabwe’s rural economies are undergoing rapid change following land reform. However, redistributing the land was only the first step. Building sustainable local economic growth that generates employment and is rooted in vibrant rural markets is a longer process, requiring continued support. Local economic growth is being generated by a new vibrancy in the agricultural sector created by land reform. But for the full potentials to be realised, and for the benefits to be shared widely, greater investment in the conditions required – including infrastructure, skills, regulations and policy – is needed if Zimbabwe’s agricultural revolution is really to take off.

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

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Farming under contract

Contract farming is all the rage in Zimbabwe at the moment. Indeed, more generally across Africa, there is growing interest in linking up smallholder farmers with larger business operations to produce and market certain agricultural commodities. Advocated by the World Bank and others, it seems like a perfect ‘win-win’ scenario. Smallholders get access to inputs and markets, and agribusiness gets guaranteed products at good prices and at scale, without having to take over large areas of land and produce everything themselves. Thus, in the great ‘land grab’ debate, some offer contract farming, with smallholders linked into global value chains, as an alternative.

Of course contract farming arrangements are not new in the Zimbabwean agricultural sector. The great cotton boom from the 1990s when smallholders entered cotton production in a big way was driven by contract arrangements, initially with the parastatal Cottco, and then with a variety of companies following liberalisation. This has been hailed as a massive success. Production increased and quality was maintained, and the Zimbabwe cotton industry thrived. The same is now happening in tobacco, as contract producers, on new resettlement farms, both A1 and A2, are hooking up with contractor, including some major contracts with the Chinese company Tianze. Other commodities have seen positive contracting experiences, including specialised crops like paprika. Where there are high demands for expensive inputs (fertilisers, sprays, seeds) and a need for specialist marketing support, then contracting makes much sense.

Now though contracting arrangements are expanding to other crops, including food staples like maize. This is in response to a different set of drivers, created in particular by the land reform programme. The land reform distributed over 8 million hectares to some 170000 households. Many, especially in the A1 smallholder schemes have got going on production, based on relatively low capital inputs and investments. Many have hooked into the tobacco or cotton contract schemes already mentioned. But there are also quite a number of particularly A2 farmers and some A1 farmers with larger plots who have found it difficult to get production moving on their new farms. This is for a variety of reasons, including lack of credit, poor access to machinery, limited skills and knowledge of larger scale farming, tenure insecurity and so on. There are quite a few A2 farms that remain underutilised. Of course this was also the case in the former large-scale sector, where over 1400 farms were deemed underutilised in the late 1990s, but under the land reform where new land is supposed to be put under production to meet national food security needs and enhance agricultural incomes, this situation is needs to be reversed.

Contract farming provides a way of overcoming some of the obstacles facing the new farmers, and is being embraced by many, particularly it seems in the higher potential areas of the Highveld. With contractors offering credit, inputs and transport and marketing facilities, and the new farmers offering land and labour, there is a matching up of capacities not being provided either by government or the banking/credit system. Economists should be delighted: demand and supply are being matched up, and market imperfections are being resolved.

Who then are the new contractors and contractees, and what problems are being faced? There has been little in-depth research on this evolving phenomenon, and it will be important to dig deeper. But a number of patterns are clear. The new contractors are not the classic large-scale agribusiness operations who run the tobacco, cotton or paprika contracting arrangements, they are often new entrepreneurs with some capital and out to make a buck (or many in fact). For the maize trade, purchasing a three-tonne truck is a key investment, as well as having contact with multiple land owners in an area. Supplying some inputs, and supporting a network of contract farmers requires good social relations and some keen business acumen. The new contractors are often urban based, with jobs in town, but perhaps no land, or not enough of it. They are well connected and highly entrepreneurial. Their operations are small, but sometimes allowing considerable quantities of produce to be traded in a season. They play the price differentials well, selling into informal markets at key moments to maximise profit. A number of such players are former white farmers, often in consortia with others, who know the production system, and the economics and technical requirements of production and trade.

On the other side, the A2 farmers with spare land have a range of arrangements, from classic contracting where they produce the crop to land leasing, where the contractor takes on the production on their land. Maize and livestock production seem to dominate, as these both have high demand local markets into which products can be sold. For the new farmers demonstrating that the land is being used is also important, as the threat of a land audit is always around the corner. There are downsides of  ‘living under contract’, as the classic literature shows. There may be little competition and it is often a buyers’ market, with produce being sold off at knock-down rates. Contracting tends to benefit men more than women, and the cash that comes may come late or not at all. Inputs supplied may be sub-standard or inappropriate, and becoming reliant on one product and one market may increase risks for producing households.

There are also particular risks to these new contracting arrangements in the post-land reform context in Zimbabwe. These revolve around land ownership and tenure security. In many of the Highveld areas, particularly where high value land with infrastructure is at stake, there continues to be insecurity in land holdings, especially on the A2 farms. An avaricious politician or military officer may eye up land that looks productive, and try and take it over. This process of politically-driven land grabbing continues today, despite attempts to stop it. Leases have not been issued, as uncertainty about the legal status of ‘contested land’ persists, and so land holders have little recourse to law, and must rely on local political connections to hold on to land – a risky and volatile strategy. In the same way contractors must balance the risks of this highly uncertain land ownership situation. They usually spread their risks, preferring to invest in multiple, smaller land areas than contract at scale in one place. This increases transaction costs substantially, but offsets the risks of default, take-over and disruption. Indeed, many prefer the more stable and settled A1 schemes to the more politicised, turbulent A2 areas, where well connected big chefs can intervene at any time.

There are pros, cons, risks and opportunities of the new contract farming boom in Zimbabwe. Past experiences show the need to be cautious, as outlined in the excellent recent review by Carlos Oya. But it’s certainly a trend worth tracking, and especially the new, private entrepreneur led strategies. As new farmers, particularly on larger plots, fail to get production moving due to lack of credit and other input support from government or the private sector, a contracting arrangement may be a positive solution, especially as it draws new entrepreneurs with new finance and skills, as well as former white farmers who lost their land, into the sector, reshaping economic and political relationships and spreading the gains of land reform in new ways.

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

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