Value addition is lifeline for smallholders in today’s globalised marketplace

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OPINION

By Stephen Christian Kaheru

At the launch of a study on contract farming recently, Ministry of Agriculture, Animal Industry and Fisheries rooted for a law to protect smallholder farmers. Dr Paul Mwambu, Commissioner for Crop Inspection and Certification argued that the move would boost investor confidence in working with smallholders who comprise 66.7% of farmers in the country.

Interacting with orange vendors in Soroti in Eastern Uganda, I asked the women why they do not supply Soroti Fruit Factory. “They say our fruits are not up to the quality they require” came their reply in unison. In the Oromia Region in Ethiopia, one vegetable grower bemoaned “it does not matter how good my cabbage heads look, wholesalers will not buy unless the middleman vouches for their quality.” With our National Development Plan (NDP IV) identifying value-addition as one of the key drivers of double-digit growth, the question that hit me was – how can we integrate smallholders into the economics of value-added farming?  

In Kenya’s Busia where cassava is primarily grown for subsistence, farmers have caught the eye of an international market for their value-added cassava products. Through Tru Trade and Agricycle, their milled flour is highly sought after for pastries, crackers, crisps and chips as opposed to a kilogram of raw cassava which yields a paltry KES 100 (about $0.7).

Kiburi Food Processors in Central Kenya have reaped the benefits of value addition from a lucrative market in China. Where a single banana raised a maximum of $0.05, a sachet of banana crisps made from one banana goes for as much as $0.20, with crisps lasting more than 3 months unlike banana which cannot survive beyond 2 weeks.

Over 10 years ago, Iwawa Agrovet, an agro-dealer in Tanzania’s Iringa Province turned around the fortunes of 27,500 small maize growers. Through contract farming, these farmers are able to meet long-term demand for maize from processers and millers who in turn serve an international market. During Tanzania’s Nane Nane Day this year, Dr Pindi Chana, Minister for Natural Resource and Tourism, lauded local innovators for transforming beans into packaged biscuits, which retail at TZS 4,000 (approximately $1.6) per tin compared to TZS 3,000 (approximately $1.2) for a whole kilo of raw beans, signifying the economic benefits of value-addition.

Realising its agricultural potential for vegetables, including French beans, pepper, snow peas, onions, firms in Rwanda adopted a well defined engagement with smallholders throughout production to ensure adherence to standards and quality. It is this arrangement that has enabled firms like Urwibutso, Bahage, Gashora and Garden Fresh to profitably serve the horticultural export demands of the European market.

By investing in processing grain, Kellogg’s feeds the world with breakfast cereal at a higher profit than raw grain. Similarly, through contract farming, Heineken in Congo earns its rice suppliers more to brew the popular Primus beer because of value enhancement throughout the rice value chain.

Evidently, the linkage between commercial enhancement and standards cannot be sidestepped. When value-creation comes into play in the arena of market competition, standards stand out as the referee. Value-addition is not a personal choice any more for small-scale producers, it is the economic dictate of a fiercely competitive globalised marketplace. Accordingly, in this day and age, liberating smallholders from selling raw commodities is what must engage the policy minds within government’s agriculture and trading ecosystem.

As the experiences of smallholders indicate, the bridge between subsistence farming and agricultural entrepreneurship lies in enhancing the value of commodities. Therefore, in rooting for protection, we have an economic imperative to leverage the proposed legal shielding to champion financial emancipation by redistributing commercial value from bulk buyers to primary producers.

Until we unshackle our constituency of primary producers from the economic yoke of less profitable raw agricultural products, small-scale farmers will keep frowning as bystanders on the outskirts of the thriving global agricultural trade.

The writer comments on national and regional development issues. 

skaheru@hotmail.com