Africa’s smallholder farmers can think big

Africa’s 120 million smallholder farmers can and must play a role in feeding not only the continent but also the rest of the world. But with smallholder farming proving stubbornly resistant to attempts to improve its efficiency, the question of how this can be done is becoming increasingly important.

The big challenge for increasing productivity in African smallholdings, which is evident to all, is that they are extremely fragmented in nature. It is entirely possible, for example, for 20 farmers in a remote village, each with a typical 2 hectares of land, to have different needs in terms of access to finance, seeds, crops, machinery or post-harvest storage. This is costly, inefficient and reduces a farmer’s chance of securing access to finance or getting the best market price.

It is possible, however, to break this decades-old impasse. One way of doing so is to develop economies of scale. It’s not a new solution; cooperatives, associations or joint marketing bodies have been around for decades. The trouble, until now, is that they have lacked the managerial talent to run organizations – and deal with diverse interests – on a large enough scale, which is why most organizations tend to fragment when they reach 100-150 members, a figure far short of the threshold where meaningful scales can be achieved.

An innovative way of tackling this challenge is to integrate a number of small farmer groups/associations into public-private partnerships through a Special Purpose Agriculture Entity (SPAE). This SPAE, a not-for-profit organization funded by private sector companies, would manage a number of distinct associations, none larger than 150 members.

The SPAE would be a one-stop shop for extension services and market advice for farmer groups, while companies wanting to do business would have to deal with only one transparent entity funded by them, to reach thousands of farmers. This would allow farmer groups to function efficiently, while the SPAE would help secure those much needed economies of scale in terms of inputs, financial services and access to formal markets. The SPAE structure would also ensure that there are enough resources to get the right talent on board.

Private sector investor groups in such SPAEs would offer a complementary product line-up that would cover all of the farmers’ needs. Though these companies will have the first right to offer their products, the final decision on purchases will be taken by the independent management of the SPAEs. The investors would be paid back at a rate of 10% plus any residual profits each year, so that after a decade they would be owned 100% by the farmers, yet still managed professionally.

The Geneva-based Grow Africa Partnership has been promoting structures such as this that combine private capital with government and NGO resources. The work it has done to date will be discussed and rolled out at a high-level meeting involving a number of heads of state, farmer representatives and chief executives at the Grow Africa Investment Forum, which will be held on 8-9 May in Cape Town. The dream of achieving a level playing field for smallholders could finally become a reality.

Author: Gagan Khurana has extensive experience working in the agriculture sector in emerging markets. He is part of the World Economic Forum’s Grow Africa Partnership.

Image: A farmer harvests wheat in Cairo REUTERS/Abd El Ghany