June 11, 2009

Africa’s smallholder farmers to benefit from US$150b market for farm produce

By Jimoh Babatunde
Seven out of ten Africans earn their living by farming. According to researchers, the market for milk, meat, and staple food crops like maize, banana, sorghum, rice and millet within Africa is estimated at USD$150 billion a year—far exceeding Africa’s market for internationally traded cash crops like coffee, tea, and flowers. A year of record high food prices presents a unique challenge and opportunity for Africa. To benefit, African farmers must produce more food, but more importantly, they must have access to markets to sell their harvests at prices that benefit farmers and consumers.

A conference sponsored by the Alliance for a Green Revolution in Africa (AGRA) and the International Livestock Research Institute (ILRI), drawing on support from over 17 organizations involved in the CGIAR Regional Plan for Collective Action, will assemble the continent’s leading authorities on agriculture and market development to examine the role of markets in increasing Africa’s economic growth and improving rural livelihoods.

The meeting  in Nairobi will discuss successes, challenges and opportunities that exist in Africa’s farm sector. Participants will outline new strategies for opening up domestic and regional markets to African farmers, while at the same time improving their livelihoods, and lowering food prices for urban consumers.

“New approaches are needed to create vibrant food markets in Africa,” said Ade Freeman, Director for ILRI’s Targeting and Innovation Program. “African farmers can produce enough food to feed Africa, and help feed the world. But first, governments must enact policies that support farmers’ ability to grow more food and provide access to markets that give farmers a good price for their hard work, and consumers with food they can afford.”

For participants, improving farmers’ access to regional markets for staple food crops within Africa is key to this transformation. Only a tiny fraction of the food produced in the region is sold in regional markets; the rest is either consumed on the farm or lost to pests or disease after harvest. Meanwhile, Africa imports about 20 percent of the food it consumes, spending scarce foreign currency reserves. Regional markets therefore represent a large and growing market that could offer growth opportunities for African agriculture and farm income, and help reduce widespread hunger.

New research and innovations presented at the meeting will highlight strategies that could help Africa produce and sell its own food at lower cost and take advantage of new market opportunities offered by the global food crisis. To become a food breadbasket with surplus for export, policies will be needed to expand investments in rural roads, communications, farm storage, commodity exchanges and improvement in grades and standards.
Farmers will also need accelerated access to farm inputs, especially improved seeds, fertilizers; livestock feed and small scale irrigation and integrated pest management technologies.

A new paper by AGRA and its grantee CNFA will report on the impact that AGRA’s Agrodealer Development Program (ADP) has had with helping small retailers in rural villages in Malawi, Kenya, Tanzania, and Mali reach out to smallholder farmers. These agro dealers provide crucial inputs to farmers at affordable prices.

According to the report, the program has helped 4,264 agrodealers receive loans, business management and technical training in Malawi, Kenya and Tanzania, which has benefited an estimated 1.8 million farmers. An estimated USD$42 million worth of improved seed, fertilizer, and other farm supplies have been sold through agrodealers in the last 12 months, representing an increase of 15 percent over the previous year.

Successes are emerging from Africa on how home_grown policies can dramatically help secure national food security. The landlocked nation of Malawi is one example. It went from being a net importer of maize, depending on food aid, to a net producer with a large maize surplus in just three years. In 2007, Malawi even exported some maize to neighboring countries.

According to a paper that will be presented by the Overseas Development Institute (ODI), the program was costly, but, if handled well, the benefits of such initiatives outweigh the negatives of chronic food shortages.

The paper highlights the important role of government in agricultural development. It points out the importance of targeting subsidy and voucher programs to each country’s specific conditions in order to maximize social gains while building the private sector. It also analyzes potential risks associated with fertilizer subsidy programs if they are not designed and implemented properly. These risks include the potential for market disruption; for unsustainable burgeoning costs and fiscal outlays; and for the side_stepping of intended beneficiaries.

Another is ensuring that African farmers have a place to sell their harvests. Poor roads and infrastructure are chronic problems in Africa. At the same time, the revolution in information and communications technologies is changing the face of market opportunities for farmers.
Researchers at the conference will reveal how the Kenya Agricultural Commodity Exchange and the Malawi Commodity Exchange are linking small farmers with vital market information through local kiosks, radio broadcasts, email, and mobile phone messaging services. Three_quarters of farmers tapping into this information report getting better prices for what they produce.

Increased agricultural production stimulated by market development generates not only food but also income for farmers. Livestock products are particularly relevant in this regard, and an important example is seen in the enormous success of the smallholder dairy sector in Kenya. Beginning in 2004, policy reforms in Kenya’s dairy sector helped nearly 40,000 small_scale milk vendors to enter formal milk markets. The reforms were sparked by almost a decade of research that persuaded regulators to engage and support Kenya’s predominantly informal milk market, which trades in ‘raw,’ or unpasteurized, milk. New training and certification schemes as well as innovative mechanisms to bulk, process and distribute a highly perishable product like milk have been critical to the success. Economists assess the direct impacts of the evidence_based policy changes on the Kenyan economy to be at least USD$33.5 million per year. Participants will discuss how similar smallholder_focused initiatives could be implemented and scaled_up across the continent.

The conference will also explore options for nurturing more regional trade. Right now, Africans trade only a miniscule share of the crops they grow—just USD$2 billion worth per year. Research by Joseph Karugia shows that this hampers self_sufficiency and can send food prices skyrocketing.

Improving regional trade and access to market information key to transformation Food policy experts say ratcheting up regional, cross_border trade would give farmers the option to focus on the commodities they grow best. They could tap this comparative advantage to go head to head with imports and begin reclaiming the markets they’ve lost. In 2004, the East Africa Community established the East African Customs Union to knock down tariffs between East African nations. But that hasn’t been enough to ignite trade.

New research by Karugia and others points to likely culprits that continue to stifle trade, including non_tariff barriers like customs backups, permits, taxes, roadblocks, and roadside corruption and bribes.

“African farmers deserve better lives and livelihoods. We must make markets work better for them so they earn higher incomes, send their kids to school, afford better health care and build their savings. Africa cannot be the world’s largest museum of poverty and misery,” said Akin Adesina, Vice President for Policy and Partnerships at AGRA. “African governments can no longer continue to pursue policies of abandoning their farmers. The subsidies that rich nations offer their farmers and high tariff and non_tariff barriers keep African farmers out of lucrative markets. The time to level the playing field for African farmers has come.”