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How big trade corridors can benefit small farmers

05-10-2012

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Many trade corridors in Africa were designed in colonial times, primarily to serve extractive industries and ease the transport of goods from the interior of the country to the ports, and back. Even those corridors, which have been developed more recently – such as the Maputo corridor (connecting South African provinces, including the economically developed areas around Jo’burg and Pretoria, with Mozambique’s capital), which is said to be the most efficient in terms of facilitating the transport of goods –  tend to target large enterprises, while seemingly failing to benefit smallholders. If designed well, trade corridors could do more to support agricultural development. This would not only serve the majority of the African population that is still living in rural areas and is (self) employed in the agriculture sector, but also increase food security.

When it comes to how big trade corridors can benefit small farmers, Tanzania seems to be a role model. It is developing the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) and is linking it directly, more than any other corridor, to the food security agenda promoted through the continent-wide Comprehensive Africa Agriculture Development Programme (CAADP). In early September, Tanzania also hosted the FANRPAN Annual High Level Regional Food Security Policy Dialogue, a key event of the yearly calendar of food security events in Africa, brining together a broad range of stakeholders. I was a panelist at a session discussing African-EU partnerships in the agriculture development at this meeting organised by FANRPAN, a key partner of ECDPM. We work together on a series of activities aimed at informing and facilitating policy dialogue around the linkages between regional integration and food security, particularly in the context of CAADP.

Address basic economic weaknesses first

Can corridors like SAGCOT really link small farmers to markets, as amply advertised by the governments, companies and donors involved in building them? Or are they going to benefit mostly large business that have already achieved a minimum level of capacity and competitiveness allowing them to trade their goods with other countries in Africa and the rest of the world? Rumor in Tanzania has it that SAGCOT was launched mainly thanks to the strong involvement of a large multinational from the chemical and fertilizer industry, which wanted to use the port of Dar Es Salaam better and connect to markets in Eastern Africa and beyond.

But before tackling problems with cross-border trade, small farmers need to solve their basic economic weaknesses. Without access to land, key inputs such as fertilizer or seeds, and loans – in Tanzania, local banks ask as collateral for a loan at least 20 acres of land, ruling out vast majority of small scale farmers, who own 1 or 2 acres on average – any commercial activity becomes virtually impossible. Lacks of basic rural infrastructure to bring produce to towns or to store them make trading difficult. Insufficient entrepreneurship skills hinder farmers from writing business plans, which is a prerequisite for getting credit.

The corridor movement can help addressing these basic weaknesses by:

a) Creating better business environment for smallholders. For instance, hopefully, local banks will accept SAGCOT as a ‘package’ or marketing tool and make access to loans easier.
b) Connecting rural areas to larger infrastructure and ports, for regional and international trade of smallholders’ produce and for better access to input by farmers.
c) Attracting large investment and linking smallholders to agribusiness, provided a critical mass of production can be guaranteed by the total of those smallholders (or their cooperatives).

SAGCOT tries to do this through ‘clustering’ smallholders and investment in specific value chains and through linking small farmers with large estates. Eventually, more commercially oriented smallholders will be able to use the corridors directly for trade. However, this will take time. So probably trade corridors will only benefit smallholders in the medium term, and the cross-border dimension of corridors is not the main priority for them. If more basic interventions for small farmers are not prioritized over trade facilitation and large infrastructure, then corridors may end up helping mostly large companies.

National champions needed

Tanzanian-President-during-acceptance-speach1

Tanzanian President Kikwete is seen as a champion of food security promotion in Africa and at global level, he received the FANRPAN’s annual Food Security Policy Leadership Award last month.

Whether trade corridors can be successfully linked to broad-based agriculture development is also a question of high-level political will and action.  In his passionate, though improvised, acceptance speech of more than an hour, he highlighted the Tanzanian government’s plans to make SAGCOT a development tool for the whole population. He said that the regional dimension of corridors can immediately help food security by connecting food surplus with food deficit areas, and increasing intra-regional trade of food staples; but also that corridors should help primarily small farmers. For this reason SAGCOT is accompanied by ‘participatory land management processes’ based on village council meetings, which are called whenever there is interest for large investment, to avoid ‘land-grabbing’ by large companies. Further, it works to get ‘customary land rights’ recognized by commercial banks as collateral for small farmers. SAGCOT also tries to provide incentives for foreign investors to enter into joint ventures with local companies and banks, as small and big companies need to be both involved and developed.

These are important ideas and actions that should be fully implemented, in Tanzania and elsewhere in Africa. But when there is no national champion pushing for them, like in other parts of the continent, trade corridors will not really benefit small farmers.

This also calls for more lesson-sharing across African regions, to make the corridors more efficient and agriculture-friendly. Tanzania and Mozambique could learn from each other: SAGCOT could establish an online-payment system so that trucks arrive at border with all fees and taxes already paid for, just like they do on the on South African side of the Maputo corridor, while the Maputo corridor should become more agriculture and smallholder friendly, by replicating some of the positive experiences of SAGCOT.

Francesco Rampa is Programme Manager Food Security at ECDPM.

This blog post features the author’s personal view and does not represent the view of ECDPM.

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Comments

francesco rampa

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2012-10-17 14:57:32

Thanks Paolo and Francisco for both your comments! I agree with Paolo, but then the question is: are such large corridors (=”backbone”) developed also with feeder-roads dev in mind? Often not, that’s why I think e.g. the Regional Agric.Policy (RAP=the regional CAADP in SADC) should talk about how to link backbone-corridors with feeder-roads. Trade Facilitation is also part of the answer to Paolo’s point on “too few cross-border agric traders”, i.e. to make such trade-activity commercially more viable…and hopefully corridors can help there as well. In fact, as I mentioned in the Blog above and as Francisco confirmed, another key element is clustering farmers and improving their productivity and total volumes. And framing such improvements in agric both as part of CAADP but also as improvement of corridor implementation (i.e. make them more agric-friendly) should enhance chances of success, ‘cause having an efficient corridor passing through a specific agric.production-area should provide ec.incentives also for bringing to farmers the inputs Francisco speaks about, including possibly irrigation schemes. That’s what I meant by “SAGCOT representing a ‘package’ or marketing tool”, so that local banks should find it profitable to ease smallholders’ access to credit, in the context of general improvements in business environment as well as actual overall trade opportunities; hopefully SAGCOT can become the first “CAADP-powered” corridor, thus explicitly supporting smallholders’ growth. SAGCOT so far has been powered mostly by the National CAADP in Tanzania, so it would be interesting to know whether you think it’s realistic to hope that also the Regional CAADP Compacts like RAP can add value to pure infrastructure dev, by complementing large infrastructure with more basic rural infrastructure dev (some may say that regional policy frameworks are too high-level/ambitious). Should e.g. a Regional RAP/CAADP Inv Plan include “establishment of cold facilities at ports” in the region as Francisco mentions, given they are so important for growth of the SADC fruit industry (eg. along Beira corridor) ? Existing RAP documents seem to suggest so (page 64 of RAP: http://www.sadc.int/fanr/docs/rap/RAP%20-%20Priority%20Issues%20and%20Interventions%20-%2012%20July%202012.pdf)

Francisco junior

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2012-10-09 14:10:36

The corridor approach can benefit the small scale farmers if they are organized in clusters. In Beira Corridor for instance there is farmers association and cooperatives producing crop such soya bean for the local chicken industry and sesame for export to markets such China and India. On the Sesame value chain you have middle man doing part of logistic, the farmers sourcing product from the small scale farmer’s collection points to the central collection and the off takers does collect it from the collection point to the port. The only problem is that the farmers are still gaining very little although the demand and the price of the products are worthy, the problem name is productivity, the small scale famers are still having very little per hectare due to a couple of reasons; • The farmer doesn’t have access to the technology, such as the use of fertilizer, chemical, mechanization and irrigation. • The farmers still relies on rain for irrigation and with climatic changes the rains ends up been available in wrong time and if it is available is in excess. In Beira Corrridor there is also an interesting movement call FRUTICENTRO rebuilding the fruit industry with support of some development organization such AgriFUTURO and Beira Agriculture Growth Corridor. The idea is to aggregate the fruits to make the critical mass and be able to supply markets such Middle East, South Africa and others. The plan is to use the Beira port to export the produce, the only problem is that the port doesn’t have the cold facilities yet in place to accommodate this kind of operations, but seems like they are keen to collaborate on that.

Paolo Craviolatti

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2012-10-08 14:38:24

Francesco, thanks fro this short article. Corridors are very important for example they now feature prominently in Mozambique's SADC presidency. With regards to smallholders though the issue isn't about transport/trae/developemnt corridors not servicing smallholders, because the transport infrastructure within the corridors should really only provide the backbone on which other "smaller" infrastructure (e.g. feeder roads) should create the link between producers (even smallholders) the export markets. Isn't also the question as to why there are so few cross-boarder agric traders (buying from smallholders and selling across the boarders) very important? The risks and costs I guess outweigh the commercial benefits...

Economic Transformation and TradeFood SecurityBusiness and DevelopmentRegional IntegrationAfricaTanzania