Linking Smallholders to Markets

Agriculture for Impact released its report on linking smallholders to markets in Africa. The document focuses on the realities of forming market linkages and notes three key considerations are: the business case, the approach to linking and how to organise links.

“Links will only work if there is a return on investment for smallholder farmers and for their partners in the supply chains. That depends, above all, on governments fulfilling basic roles for the economy: the creation of an enabling investment climate; and the provision of rural public goods and transport in particular. If that sounds demanding, it should not: conditions do not have to be perfect, the key is to remove the worst failings, such as the high implicit taxation of agriculture that prevailed in the 1970s and that slowed agricultural growth at that time. The corollary applies as well: once these conditions are met, (some) progress is likely by private initiative alone.”

Based on a range of case studies, they identify some of the challenges to making market linkages work which includes the need to aggregate farmers and to take value chain approach that looks at bottlenecks among all stakeholders in an open forum.

The recommendations offered in the report are:

FOR GOVERNMENTS

• Focusing first and foremost on the two basic public roles of setting an enabling investment climate and providing rural public goods has paid off handsomely for countries in Asia, and for some countries in Africa. The advice does not require perfection that would be difficult for most low income countries to achieve; but rather, to make sure that any gross failings and deficiencies are remedied.
• Recognise that in providing rural public goods, most of the budget will not be going through the ministry of agriculture, but through ministries of transport, education, health and water.
• Set up forums for value-chains with the participation of key players. Make sure that they have the political support and active engagement of ministers. Be prepared to react to findings, above all in being prepared to change policies and regulations.
• Consider establishing challenge funds that can support initiatives to make more effective links. These may be in the form of open and competitive sources of finance, or else administered through ministry units that scout for opportunities and allocate funds accordingly.
• Monitor the results of these initiatives, learn from them and publish the results.

FOR DONORS

• Support governments in fulfilling their basic roles, both in technical assistance on the investment climate, and in funding investment in rural public goods in low income countries where public resources are currently insufficient.
• Beware of projects to promote the engagement of smallholders with high-value, export markets. While some will make sense, beware that these may cause actions that potentially benefit many more smallholders to be lost to view. Reading Vorley et al. 2012 would be a useful antidote.
• Take processes in market engagement seriously. Fast, certain, failure-free, programmable results cannot be expected. If this cannot be handled by the organisational structures and systems — and indeed culture — of the agency, then look to fund agencies that can act flexibly and take risks. Funding NGOs directly, or setting up challenge funds is one way to do this. Investing in a portfolio of efforts gives the best chance that there will be sufficient success to justify the outlay.
• Encourage learning. Look to fund reviews of experience, documentation and dissemination of lessons. Link practitioners, look for innovative ways to communicate.

FOR NON-GOVERNMENTAL ORGANISATIONS

• Monitor, learn, document and publish.
• Deal with the possibilities of failure. Having a portfolio of activities is one answer. Beware of depending too much on particular projects and models: keep options open, stay flexible.
• Participate in stakeholder forums.

FOR LARGE-SCALE AGRICULTURAL INVESTORS

• Smallholders can be suppliers to processors, exporters and retailers, but finding effective ways to do this may take time and encounter setbacks.
• It may not be necessary to acquire land and go into farming, with the corresponding investment costs and risks; even if there are exceptions, such as nucleus estates, to guarantee throughput to processing plants and to act as demonstrations for out-growers.

Read the full report here: http://www3.imperial.ac.uk/africanagriculturaldevelopment/leapingandlearning