This interview with Senior Advisor on Food and Nutrition Security Tesfai Tecle originally appeared in The Business Year.
In Mozambique, agriculture provides a livelihood to 81% of the population, but less than 10% of households sell their surpluses. In your opinion, what initiatives could be implemented to bring smallholder farmers into the value chain?
The Mozambique picture is actually representative of the large majority of sub-Saharan African countries. Throughout the region, smallholder producers are facing major obstacles that prevent them from integrating into value chains. The most important reason for this is the small size of their farms and their low level of productivity. For example, the average size of most smallholder family farms is 1ha or less, while their average crop yields are less than one-third of similar smallholders in Southeast Asia. This small-scale production does not lead to significant surpluses for marketing beyond home consumption. Furthermore, even when farmers do produce surpluses, the high transaction costs and the challenge to comply with strict requirements and standards demanded by modern agricultural value chains limits access to the market. African smallholder farmers that sell surpluses from their harvest typically receive less than 20% of the consumer price, largely due to high transportation costs, post-harvest losses, and the profit margins charged by middlemen. This in turn reduces farmer incentives to grow more food for the market. Governments can help bridge this gap by investing in and maintaining the infrastructure and logistics that would help to reduce these transaction costs. They can also remove trade barriers and adopt price policies that do not unfairly penalize small farmers in order to benefit urban consumers. There is an urgent need for adaptive research aimed at improving agricultural productivity and production, and to build capacity and infrastructure throughout the value chain.
Infrastructure such as power, transport links, and storage facilities are key pillars of food security. What role can the private sector play in developing this infrastructure?
Africa’s vast infrastructure deficit is a major constraint on its economic growth and seriously impacts food and nutrition security. Governments do have a crucial role to play, establishing and maintaining critical infrastructure and providing appropriate regulatory frameworks. Where the private sector can help address infrastructure related constraints is through complementary innovative financing and public private partnerships. Many countries have set up investment agencies that help facilitate private investment in infrastructure projects. In partnership with governments, businesses can build feeder roads to reduce transportation costs, improve storage facilities to enable aggregation of farm produce, and invest in processing equipment that helps smallholders achieve quality standards and improve their market access. Companies must understand that creating value for the countries and communities in which they operate is in their own long-term business interest.
Mobile and digital technologies have become increasingly available across sub-Saharan Africa. For example, in Tanzania there are over 34 million active SIMs out of a population of 47 million, according to the latest census, and likewise in Ghana mobile data penetration almost doubled to 16.1 million from March 2013 to March 2015. What role can this technology play in empowering farmers?
In addition to the Tanzania and Ghana experiences mentioned, it is also worthwhile to refer to the M-Pesa mobile banking system in Kenya and the E-Wallet for supply and distribution of subsidized inputs in Nigeria. Digital technologies are rapidly changing the face of African agriculture. They provide great opportunities to integrate previously isolated smallholders into food systems. Through mobile devices and apps, African farmers can access up-to-date knowledge and information that is vital to their business, including weather forecasts, advice on best agronomic practices, and market prices for crops. Digital solutions should play a greater role in helping smallholders access critical inputs such as seeds, fertilizer, credit, and insurance to help raise their productivity and improve food and nutrition security.
In Nigeria, there are big local players such as Dangote and BUA Group, which are strengthening local food production capacity in rice, sugar, and flour, industrializing the sector, and reducing the country’s food import bill. Do you forecast a trend of more big industrialists going into the business of farming?
The size of the food and agribusiness sector is growing rapidly in Africa and could grow to a trillion-dollar market by 2030. It is expected that this expanding market opportunity will encourage more of the large local and international players to go into agriculture-related businesses. What is important though is that larger companies develop partnerships with smallholder farmers, as they are the key to unlocking Africa’s agricultural potential. In addition to making significant contribution to national socio-economic development, it makes good business sense for big companies to share access to markets, technology, and knowledge to help smallholder farmers turn their subsistence farms into profitable businesses. This is exactly what the Kofi Annan Foundation is promoting through its African Food Systems Initiative.