Making policies work

GREAT insights Magazine

Trade is a Key Ingredient in Changing Farmers’ Lives

November 2013

Nzaramba, S. 2013. Trade is a key ingredient in changing farmers' lives. GREAT Insights, Volume 2, Issue 8. November 2013. Maastricht: ECDPM.

Trade has been integral to the strategies for increasing agriculture productivity and also a key pillar in most of the governments’ approach to development as reflected in key development policies and strategies of our governments. Of recent, one of the phenomena that has caught the attention of everyone, is the issue of regional integration.

The main objective of integration agendas is to enhance trade, liberalise trade regimes, minimise barriers to trade, as well as implement policies to promote competitivenes and export development rather than protecting the failing industries. This is a clear indication of the importance attributed to trade.

It has become common knowledge that the agriculturel sector is the backbone of the East African countries’ economies and the means of livelihood for most of the rural population. It is the mainstay of the East African Community (EAC) countries directly contributing an average of 26% of the GDP annually to their respective economies, and another 25% indirectly. The sector accounts for an average of 65% of the region’s total exports and provides more than 70% of the population within the EAC with informal employment in the rural areas. The agricultural sector therefore, is not only the driver of East African countries’ economy, but also the means of livelihood for the majority of the people.

Smallholder producers, a majority of whom are women, account for 65-70% of food consumed in urban areas of East Africa; this means that investing in this segment has the potential to result in increased trade and incomes of the farmers if appropriate investments in the production sector, as well as a conducive policy environment that supports marketing, farmer institutional development and value chain governance are in place.

The trading of agriculture commodities has triggered the movement of food from surplus areas to deficit areas. As a result of trade, the EAC region has been fed and this has resulted in the region being food secure. It is estimated that by 2030 the demand for local and regional urban food markets across Africa is expected to jump from US$ 50billion to US$ 150billion and foreign demand for commodities and high value exports is projected to grow from US$ 8 billion and US$ 3 billion respectively to roughly US$ 10 billion in each category by 2030 (1). This demand of food to feed the growing urban centers can only be serviced with increased local, regional and international trade.

Trade has been critical in uplifting the living standards of people as well as generating rapid economic growth. That said, trade has also led to expansion of the agriculture sector due to the fact that it has enhanced increased production in all levels of farming. Increased trade at domestic, local, regional and international level has led to improved incomes and livelihoods for the agriculture communities as a result of increased trade volumes and improved food availability in the region. The common market protocol at the EAC and the Common Market for Eastern and Southern Africa (COMESA) regions for example provides opportunities for small holders and commercial farmers to integrate into profitable value chains. Improved access to markets has been a key precondition for the transformation of the agriculture sector from subsistence to commercial production. Not only this, small scale farmers have benefited from the few existing efficient markets and have been more exposed to competition which has created a level of innovativeness among farmers.

The EAC Common Market is an important platform for ensuring food security in the region while, at the same time, a good opportunity for farmers to earn a decent living out of their farming activities. The 2009 Economic Report on Africa (2), explicitly recognised the potential regional agricultural value chains possess supported by agri-business and agro-processing as a basis for linking especially the smallholder producers to markets for food and other agricultural products. Therefore, the EAC Common Market provides the best opportunity for building such value chains, because it provides a framework for exploiting economies of scale in the production and supply of food. With a population of over 125 million people, the EAC boasts one of the largest single-bloc regional markets in Africa. This market is made even bigger by a series of mutually beneficial partnerships with regional blocs such as COMESA and the Southern African Development Community (SADC), boasting a combined population well over 400 million. But that is not all. EAC countries also qualify for duty-free access to the US market under the African Growth and Opportunity Act (AGOA), as well as to the EU under the Everything-But-Arms (EBA) initiative for Least Developed Countries (LDCs) (i.e. all except Kenya which is not an LDC). 

The EAC Common Market protocol, among other protocols at EAC, provides an opportune moment for the smallholder and commercial farmers to integrate into profitable value chains. To achieve this from the farmers perspective is not an easy task, farmers have to reform themselves and play their private sector role effectively, especially through creation of enterprises, building the entrepreneurial capacities of their members and participation of farmers in the value chains in an organised way. One of the major challenges in reforming farmer organisations is national policy. It is already widely accepted that cooperatives are best suited to drive this agenda for farmers, however, the policy design does not give autonomy to the co-operatives and hence they suffer the brunt of government interference at various levels which affects the quality of service delivery to members. Eastern Africa Farmers Federation (EAFF) has identified this challenge and carried out in-depth consultations with its members and, in the process, developed a draft regional co-operative policy framework. EAFF prefers to use a regional approach to this issue due to the hardline stance taken at the national level by the governments, as evidenced by creation through law of co-operatives regulatory bodies/entities e.g. SACCO Societies Regulatory Authorities (SASRA) in Kenya. EAFF have approached and involved the regional parliament – EALA (East Africa Legislative Assembly) in these discussions and they have a buy-in to the process; EAFF however, would like to formalise their relationship with EALA through an MoU and work closely with the agriculture and tourism committee of EALA in developing EALA’s annual agenda and hopefully organise a regional dialogue with national government representatives through EALA with a possibility of adopting a common regional co-operative policy framework.

Main challenges 

Farmers are not participating in structured trading regimes whilst many value chains (except for some grains) are not efficiently working due to high transaction costs. There are many market models to learn from within EAC, one example being the Kenyan horticulture-export model that has worked well over the years: the model brings together the major chain actors, links them within the chain, develops a demand based Market Information system, builds capacity on product development, regulations etc., and farmers have a role as chain actors, chain partners and/or chain owners through horizontal or vertical integration into agribusiness value chains.

Capacities of farmers to participate and integrate into the various commodity value chains is weak. There needs to be an intervention targeting the strengthening of technical and management skills for the farmers to master the commercial requirements of producing for a competitive market and to successfully manage business risks and product innovations. The sanitary and phytosanitary (SPS) measures, as well as compliance standards required to access the developed competitive markets such as the EU, are quite challenging to most agriculture producers in the EAC. There is a need for capacity building coupled with the required assistance to produce and package the agriculture products in a manner to enable the farmers to actively engage in these competitive markets. EAFF has participated in the harmonisation of policies and standards currently underway in the EAC.

There is a lack of reliable and credible information and knowledge on activities by farmers in this region. The current market-related systems being established e.g. food balance sheets, MIS systems; commodity exchanges etc., will only work sustainably if there is information on availability of agriculture produce. On the flip side, farmers who want to engage in regional trade lack information on potential cross-border trading partners in insurance, transport, processing etc. This gap also contributes to reduce trade due to high transaction costs.

The legal and regulatory framework pertaining to the agriculture sector in the region is weak and in some cases obsolete; this has led to the proliferation of poor quality agricultural inputs such as fake seeds/fertilisers, substandard vaccines, and counterfeit and adulterated agroinputs that have resulted in a decline in agricultural production. These unscrupulous trading practices need to be addressed through harmonisation of laws and regulations in the region, including updating them in order to redress and deter the harmful practices. Also due to the ineffective policies, legal and regulatory frameworksagricultural trade and marketing policies are inconsistent and unpredictable. There are also inconsistencies in agricultural policies limiting private sector investment and commercial activities. Despite the signing of the Free Trade Area (FTA) agreement by 11 of the 19 members states of COMESA, countries have continued to impose barriers to regional trade in staple and other foods, including periodic import and export bans, superfluous SPS requirements, and duties and other charges on cross-border trade. In addition, there is lack of clarity on public engagement with the private sector, resulting in poor delineation of public and private roles and functions.

How has EAFF intervened?

As a matter of fact, it is the small-scale farms that produce up to 80% of the food consumed in African countries, much of which does not enter the formal market. Small-scale farmers produce most of the food consumed in Africa and are responsible for the lion’s share of investments in agriculture. They provide employment for 70% of the population, both directly and by stimulating local economies, and constitute the only potential solution for absorbing the growing population of unemployed young people.

It is for this reason that EAFF embarked on developing a Trade & Agribusiness strategy as a new item to strengthen EAFF and members’ capacity to focus on trade in the region by giving strategic direction on opportunities and challenges related to regional trade in agriculture commodities. The strategy has proposed various policy and programme interventions that will facilitate the integration of small-scale producers into value chains as active players and regional cross-border markets.

EAFF has also initiated other programs and projects that will strengthen smallholder farmers as active actors in the value chains; for example we have developed programs to integrate small-scale farmers into formal trading systems to facilitate their access to national and regional markets. EAFF has facilitated the formation of regional networks of farmer organisations in targeted commodities, strengthened the capacities of farmer organisations to engage in selected value chains through various structured trade options, advocated for enactment or implementation of enabling policy, trade and regulatory regimes where such environment is restrictive, and developed a sharing mechanism for farmer organisations engaged in structured trade.

Since our new strategic plan’s inclination (2012-2020) is on commercialisation, we have embarked on organising farmers into very formidable farmers’ cooperatives that are regionally recognised, able to protect their interests, and have a strong lobby power to carve out their way into better opportunities for a more dignified life. Furthermore, EAFF has organised farmers into producer organisations coupled with the formulation of favourable policy interventions.

Stevenson Nzaramba is a Regional Trade and Agribusiness Advisor with the Eastern Africa Farmers Federation.

Footnotes

1. EAC Development Strategy (2011-2015) August 2011
2. Economic Report on Africa 2009 “Developing African Agriculture through regional value chain mechanisms

This article was published in GREAT Insights Volume 2, Issue 8 (November 2013).

Share Button
Economic Transformation and TradeRegional IntegrationCommon Market for Eastern and Southern Africa (COMESA)East African Community (EAC)TradeEast Africa

External authors

Stevenson Nzaramba