Tailoring agribusiness to the needs of smallholders

“Empty stomachs will find no peace,” Mozambique’s former President Joaquim Alberto Chissano said, starting his presentation at this year’s AGCO Africa Summit. The agricultural engineering firm AGCO held the meeting under the motto “Agrobusiness in Africa – Partnering for Growth” in Berlin/Germany, in mid-January 2015.  Chissano maintained that peace was not merely the absence of war but had to take effect in the everyday lives of people in order to free them from poverty and hunger in stable political framework conditions. When he was president, Chissano had accompanied the transition of Mozambique from civil war to a peaceful country, and in Berlin, he gave an account of the long process of development that this east African country had experienced.

Focusing on agriculture

Agriculture in Mozambique is dominated by smallholders. However, according to Chissano, they have little to sell, cannot earn an income and lack value creation through the processing of natural resources. Mozambique has accomplished the transition from emergency aid for the smallholders in the rural areas to structural planning of rural regions in general. Land and forest rights were established to create legal certainty, while agricultural extension services and logistics for harvests have brought people back to the rural areas. With master plans like the one for animal husbandry, the government has formed alliances of the actors, and by preparing an initial agriculture budget, it has brought the sector as a whole to the fore in politics. As a result, direct investment in cash crops has flowed into the country, with agribusiness benefiting from a stable basis in terms of natural resources for cashew nuts, tea or sugar.

Four of the former six sugar factories were destroyed in the civil war, and the remaining two were damaged. Today, four highly efficient factories are operating that supply 250,000 tons of sugar a year, both for the domestic market and also for exporting. Investment has totalled 320 million US dollars and created 40,000 new jobs.

Over the last 20 years, farmland has expanded 2.85 to 3.4 million hectares, and the cattle herds have risen from 315,000 to more than a million animals.

A new notion of Business

Mozambique is not the continent’s only country creating wealth. “The potential to feed the world lies mainly in Africa,” maintains Germany’s Minister of Agriculture Christian Schmidt. However, the continent also has many hot spots that need to be dealt with, Schmidt concedes, referring not only to the resolution of armed conflicts, but to health issues like the struggle against Ebola. He also reminded the meeting of the long-term implications that such epidemics had for food security world-wide as well. At the same time, he stressed the role of agriculture as one of the crucial factors in developing national economies. In order for Africa to realise its future as a growth market, smallholders have to be kept from migrating to the cities, Schmidt stresses, adding that new structures need to be created. “We need high-tech to take up the challenges!” Schmidt claims, explaining that lessons have been learnt from the last decades – including a different understanding of business. Social shortcomings such as land-grabbing or a lack of access to resources had to be taboo, the minister told the conference. In order to feed the hungry, the new agribusiness concepts had to be tailored to the needs of the smallholders, Schmidt demanded.

A plea for Action

However, deeds had to follow words. “There are too many people who just talk about agriculture,” criticised Shingirirai Nyamwanza, Director of the Africa Global Clover Networks, for instance. Above all, the young farmers had to be integrated in the concepts now, and not only in twenty years’ time when taking over the farms.

Projects had to be comprehensively planned, said Berry Marttin of the Dutch Rabobank. In order to raise harvest yields, developing logistics, including the construction of new storage and cooling facilities, needed to be taken into account. Smallholders can be integrated in markets via co-operatives, but they continue to be the weakest actors on the market, warned Fadel Ndiame, Lead Coordinator of the Farmer Organization Support Center in Africa (FOSCA) at the Alliance for a Green Revolution in Africa (AGRA). Both large and small farms had to be considered, for often enough, large ones hand on contracts to smaller units. Ndiame has a simple answer to where mechanisation is needed most: “Where value is created.”

Banks need to change their attitude

Is it just a question of rolling up your sleeves and getting down to work? Not quite. Bruno Wenn of the Executive Board of “Deutsche Investitions- und Entwicklungsgesellschaft” (DEG) believes that changes in local attitudes represent the first step. As a rule, banks have so far usually tended not to regard agriculture as a profitable venture to finance. This is why only little money is flowing into the sector. Wenn maintains that more attention needs to be drawn to positive examples. For example, it was worthwhile to invest in a project in Kenya in which 60,000 smallholders were integrated in production based on a division of labour in which fruit juice was squeezed. The juice is even sold in the neighbouring countries.

Benedikt S. Kanu, an agricultural expert of the African Development Bank, stresses that there is no ideal way. Many approaches need to be adapted specifically to individual situations. So far, for example, the African Development Bank has no department dealing with agriculture. But an initial structure is to be created for the sector this year to really promote developments in it.

The AGCO Africa Summit has taken place in Berlin annually in January following the Global Forum for Food and Agriculture (GFFA) since 2011. It is a joint initiative of the agricultural engineering company AGCO, Bayer CropScience, “Deutsche Investitions- und Entwicklungsgesellschaft” and the Rabobank.

Author: Roland Krieg, journalist, Berlin/Germany