Smallholder Commercialisation in Africa: A Framework for an Enabling Environment

Smallholder farmers require a policy and regulatory environment which directly supports them if they are to freely and fairly participate in markets and contribute to poverty alleviation. This article explores what such an enabling environment framework for smallholder farmers could look like.

Smallholder farmers, in all their diversity, form the backbone of economic activity in most African countries. Given the right support, they have the potential to feed the continent in future and make a serious contribution to equitable rural economic development.

Donors and African governments are increasingly convinced that this sector has a role to play in the continent’s social and economic revival. The Comprehensive African Agriculture Development Programme (CAADP) states that ‘the smallholder sector dominates much of Africa’s productive activity and its labour market, and will continue to do so for the foreseeable future. The sector therefore constitutes a core component of long-term growth and poverty-reduction strategies and should be at the heart of efforts to expand the supply base and raise the competitiveness of African economies.’(1)To this end, CAADP aims to ‘raise the capacities of smallholders to meet market requirements’.

In a similar vein, the World Bank has recognised that African economic transformation will be driven by a more modern agricultural sector, built primarily on the basis of commercially viable small family farms (2). To support this transformation, the World Bank has started to develop a collection of indexes measuring different factors affecting farmers, on and off their farms. One of these, the Benchmarking Business in Agriculture (BBA) programme, aims to inform and leverage policy reforms to enable the emergence of a stronger commercial agricultural sector. Its focus is on factors affecting market-oriented smallholder farmers beyond the farm gate. It will aim to compare data on regulatory reforms, as well as longer-term policies and investments in areas such as fertiliser, seeds, mechanisation, land, water, finance, rural energy, trade, market access, and rural transport that are needed to commercialise the agricultural sector.

Initiatives such as the BBA can be a useful tool to help gather and disseminate analysis and information on government policies, regulations and interventions that have succeeded or may succeed in addressing the market failures faced by market-oriented smallholders. However, the key to broad-based transformation of rural livelihoods in Africa is the development and implementation of policies, regulations and interventions that facilitate increased and better quality production on-farm, in addition to enabling market integration beyond the farm gate.

The majority of African smallholders are facing shrinking landholdings, input and output market failures, nutrient poor soils, increasing climate variability and shocks, asset poverty, inability to self-organise commercially, and limited to no political power. At the same time, urban populations are growing, creating more domestic and regional demand for agricultural produce, and thus more opportunities for rural transformation and poverty reduction.

Evidence and experience show that targeted and well-implemented government policy interventions and regulations, which address both the production and marketing challenges facing smallholder farmers, combined with policies to deliver basic infrastructure and essential services, can enable even subsistence-oriented farming households in marginal areas to become economically viable and market-oriented. To explore the policy options necessary for such a transformation, the African Smallholder Farmers Group has developed a framework which groups the enabling environment into foundations, pillars, and cross cutting issues (3). Based on a review of the literature, we have made suggestions for indicators that would show whether the foundations and pillars for rural smallholder market integration are in place (4).

I. FOUNDATIONS

Our framework begins with the need for the necessary foundations to be put in place. Without these, rural households cannot exercise choice or respond to opportunities in the economy. These foundations are the policies and regulations that support:

• Rural infrastructure, including rural feeder roads, modern energy services, irrigation and large-scale drainage, and storage and warehousing. Investment in such infrastructure has been shown to be essential for agriculture growth and poverty alleviation and is also strongly associated with better functioning markets.
• Rural public services that support human development, such as health, education, water and sanitation. Recent evidence suggests that services can influence input productivity and efficiency in agriculture. (5)

The rural investment climate or enabling environment for business, including small-scale businesses which provide the basis on which entrepreneurship can flourish.

II. PILLARS

These are policies that target marginal and market-oriented smallholder farmers to help improve their economic viability, production, and market access. These interventions constitute the pillars of an enabling environment for smallholder farmers.

There is broad agreement on the set of challenges that need to be addressed in order to increase smallholders’ success but the conventional approach to addressing these challenges often focuses on solutions that are likely to benefit only a small group of wealthier and better-connected farmers – for example, those near roads or irrigation systems, or belonging to efficient farmer organisations – while failing to address the particular constraints faced by smallholders with fewer assets or who lack access to infrastructure, resources and representation.

Under each of the pillars identified, we pose a set of questions to indicate whether government policies, actions and regulations are addressing these constraints in a manner that is gender-sensitive and promote environmentally sustainable production approaches (6).

Pillar 1: Access to land and water

The natural resources on which agriculture is based – above all land and water – are becoming degraded and there is growing competition for their use. It is essential that there are policies in place to support smallholder farmers’ access to these resources.

With regards to land for example, we need to consider, amongst other factors, whether smallholder farmers, in particular women farmers and the poor, have access to justice and affordable legal services to resolve land disputes.

For water, a possible indicator would be whether the government prioritises investment in infrastructure to improve on-farm water management and water harvesting technologies?(7)

Pillar 2: Inputs and credit

To scale up their participation in markets, smallholder farmers need to produce more of the right kinds of products to allow them to take advantage of market opportunities throughout the year. To this end, they need inputs such as affordable, good quality seeds and soil fertility management services, along with affordable credit.

Pillar 3: Markets

In considering ways to support smallholder farmers, the focus has tended to be on the supply side and ways to increase production. But being able to sell their output and ensuring adequate returns is often an even more critical issue, and is a serious challenge, for Africa’s smallholders.

Farmers need more support from both the public and private sector to access buyers and optimise their returns. Governments can take steps to boost local demand and provide incentives to buyers, both in the public and private sectors, to source from smaller producers. Issues of power also need to be considered as the majority of farmers will not benefit from being integrated into corporate supply chains without concerted action to protect their interests and ensure fair value sharing, and support for farmer groups.

Pillar 4: Research and extension services

Evidence confirms that investments in agricultural research for development have a significant effect on growth in the agricultural sector. Investment levels in Africa are far below what is needed to help farmers effectively respond to the challenges of increasing production sustainably and building resilience in the face of climate change. Farmers also need to have a greater say in setting research agendas and participating in research trials.

A strong extension system is critical to moving research between the laboratory and the field, but extension coverage in Africa is very low, requiring renewed investment from the state, including in providing incentives for private providers. Appropriate research and extension can also help narrow the gender gap in agriculture.

Pillar 5: Collective action

Collective action allows farmers to utilise economies of scale to lower their costs and improve their competitiveness, as well as strengthening their marketing capacity and helping them manage risks. Groups are better placed to lobby policy makers and influence research and development assistance agendas. Collective action is particularly beneficial to women farmers. Governments should recognise farmer groups, including more informal ones, and encourage and facilitate collective action, including through offering tax incentives to producer organisations.

III CROSS CUTTING ISSUES

Finally, polices need to address the crosscutting issues of gender inequality, climate change resilience and adaptation, and food security. These issues need to be integrated into both foundation and pillar policies, particularly in marginal areas where smallholder farmers are more vulnerable and asset poor.

Conclusion

Few dispute that support for smallholder farming will contribute to food security, poverty reduction and climate resilience both in Africa and globally. Consensus is also growing that smallholders need to increase their participation in markets if they are to escape poverty and contribute to national and household food security. Our research suggests that the policy and regulatory environment in most African countries is not conducive to smallholder market participation. Future policies, laws, budgets and interventions would need to be based on consultation with smallholder farmers, and should include more recognition of the specific constraints they face and make greater allowance for their needs, as set out in the above framework.

Kato Lambrechts (Christian Aid) and Sarah Montgomery (CAFOD) are members of the UK-based network the Africa Smallholder Farmers Group (ASFG). For more details see http://www.asfg.org.uk/

Footnotes

1. CAADP Pillar 2 Strategic Area D: Strengthening the commercial and technical capacities of farmer organisations and trade associations, Conference of Ministers of Agriculture for West and Central Africa CMA/WCA. 
2. World Bank, 2008, World Development Report: Agriculture for Development. 
3. See www.asfg.org.uk/framework-report/overview for a detailed literature review and analysis of these policies. This framework is based on a literature review done by Hester Le Roux and was prepared with the assistance of ASFG member organisations who participated in the ASFG Farmers as Entrepreneurs working group meetings. Self Help Africa, Christian Aid, Practical Action, and CAFOD staff members have led the process with contributions from Garden Africa. 
4. We have not included a full list of the indicators in this article. To see our full work and list of indicators view the executive summary (http://www.asfg.org.uk/downloads/asfg-executive-summary.pdf) and the full report (http://www.asfg.org.uk/downloads/ASFG-Framework-Report.pdf) 
5. Data is however limited and further research is needed. 
6. See http://www.asfg.org.uk/ 
7. The full list of indicators as well as a further explanation for the ‘access to land and water’ pillar can be accessed on our website: http://www.asfg.org.uk/framework-report/access-to-land-and-water

This article was published in GREAT Insights Volume 3, Issue 1