Required: Smallholder farmer transition through links with private sector

Banana Market in Embu County, Kenya. Photo by Ake Mamo/ICRAF

Banana Market in Embu County, Kenya. Photo by Ake Mamo/ICRAF

An estimated 500 million smallholder farmers in the developing world produce the majority of food for the earth’s public citizens. Yet these farmers are not in the public sector; rather, they are part of the private sector—like private companies, they literally live, migrate or die by their decisions and their skills.

Yet despite the crucial role of smallholders in global food security, the support they receive from the public sector and the wider private sector is in stark deficit. Recognising these deficiencies, there are repeated calls for greater business orientation of small-holders.

However, as it stands today, the majority of the small-holders in developing countries are forced to operate under a failed business model. Even if they were able to compile their balance sheets, their profit-and-loss accounts, their asset registers or their future order books, they would not be able to satisfy a bank loan manager, a shareholder or the Inland Revenue Agency.

Some may disagree with the assertion of a failed business model for something like agriculture which, although accounting for only 6% of global GDP, is the largest single employer and largest managed land use type in the world.

Yes—there have been agricultural successes in some parts of the world, and these are not to be denied. Nor should we consider small-holders as a homogeneous group. But it becomes harder to refute when groups such as Global Footprint Network remind us that on August 19 we reached Earth Overshoot Day for 2014 (the date when has humanity exhausted nature’s budget for the year), and other groups such as Natural Capital Coalition caution us that negative externalities greatly exceed the revenue gains we cite.

With growing rural populations and finite farmland area, it is obvious that average farm sizes are getting smaller. With subsistence farming methods many of these smallest farms do not support sustainable livelihoods. The consequence of this is a drawdown on natural capital to squeeze temporary financial gains from their land. The negative externalities of loss of soil nutrients, reduction in biodiversity and poorer functioning of agro-ecosystems are not internalized in subsidies, levies or market prices. Another common coping mechanism is the use of social safety nets, but this social capital has an opportunity cost that could otherwise be used for greater social and economic progress.

We look at modest productivity gains and claim success, when in actuality growing an extra bag of cereal is simply recycling poverty, notwithstanding the paucity of crop choice and all the under-nutrition associated with chasing predominantly calories from starch.

So what potential does the wider private sector hold to break the small-holder ‘private sector’ out of that poverty cycle?

Currently much emphasis is on the input side—seeds, fertilisers and agrochemicals. In essence, the focus has been on the supply side, when perhaps the solutions lie more on the demand side. Here, better linking small-holders with traders, aggregators, processors, retailers and consumers is needed to develop more vibrant markets. To create stronger markets and value chains which involve small-holders, we also need to support rural entrepreneurs who can be engaged with inputs and services, as well as expanded supply-chain sourcing.

Farmer in Embu County, Kenya. Photo By Ake Mamo/ICRAFTo stimulate the transition and attract in new investors, a full spectrum of policies, micro-finance, knowledge, technologies and practices is required. Small farmers, especially, need to be better organized and act collectively in order to compete with economies of scale of large and medium-holders. Indeed one worthy goal would be to reduce the 500 million disconnected small-holders so that, say by 2025, 250 million of these become pseudo-medium/large-holders through their membership in cooperatives, associations, interest groups, and watershed management groups. This will not be successful unless we address gender and other equity issues, but here we need not just to be seeking gender balance but gender synergy.

We need to move the smallholder paradigm from “farming to live” to “farming to make a living.”

World Agroforestry Centre (ICRAF) and others are trying to build stronger relationships with the wider private sector and farmer groups, in order to:

  • generate knowledge;
  • build convincing evidence for policies and evidence;
  • translate international public goods (IPGs) into actionable knowledge;
  • develop capacities;
  • demonstrate proof of application; and
  • help convene new partnerships.

We have learned the partnerships between agricultural research and development institutions and the private sector can be helped when both sides work towards:

a)   building trust to share knowledge;
b)   understanding each other’s motivations and success metrics;
c)    developing better understanding of the language we each use and articulate things in words that are more widely comprehended; and
d)   starting things together and learn by doing.

ICRAF has made significant strides with both local and multinational companies. Here, our interest in scaling up corresponds to the private sector’s interest in market expansion; our interest in value chain design coalesces with their interest in mitigating supply chain risks, and our joint interests in stability of production and supply resonate well together.

Bringing in local input, service and marketing private-sector actors alongside multi-national companies is fundamental to success. Otherwise we will continue to lose the youth to urban migration. Young farmers need new options, new technologies, new capacities and new rural livelihoods. Most shudder to follow in their parents footsteps; a quarter of a hectare of nutritious fruit and vegetables may be viable and sustainable, but the same area under cereals never will be.

The subsistence type of small-holder farming where farmers are just trying to live needs to be replaced.

Links with markets and with wider private-sector actors can see smallholders make a sustainable living from farming. Huge challenges remain to counter the failed market model, but there is a window of opportunity through targeted policy and other institutional support to accelerate change and widen an emerging category of market-oriented, more dynamic mix of smallholders.

Therefore, we need to move the smallholder paradigm from farming to live” to “farming to make a living”.'

Tony Simons

Tony Simons is the Director General of the World Agroforestry Centre (ICRAF). He has worked 27 years on issues at the tropical agriculture/forestry interface, within the private sector (Shell Forestry); academia (University of Oxford); official development assistance (ODA/DFID); and research (CGIAR). He holds degrees from Massey University and Cambridge University, and an Honorary Professorship in Tropical Forestry at the University of Copenhagen, and has published over 100 research papers. Tony is passionate about the transformative change that the private sector can bring to development.

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