Building bridges between processors and smallholders in Africa: are contracts an answer?
Sautier, D.; Vermeulen, H.; Fok, M.; Biénabe, E. / Latin American Center for Rural Development (RIMISP) , 2006
This paper presents specific experiences in Africa, involving small and medium farmers and agri-processors. It illustrates the capacity of farmers and food processors to leverage agricultural growth , take advantage of untapped sources of growth and generate pro-poor development through adequate institutions.
Acknowledging that small and medium size farmers in Africa face unique and difficult market constraints, the paper highlights the potential of contractual arrangements in governing relationships farmers and agroprocessors. Although the effectiveness of contracts can vary, the case studies in this document show ways through which contractual arrangements can support the market participation of small and medium farmers and foster agricultural growth for poverty alleviation. The case studies find:
- South Africa: a political agenda driven by equity and economic inclusion of smallholder farmers can leverage direct contractual relationships between farmers and agro-processors
- Western and Central Africa: this warns not to focus on the formal agri-food sector only. Instead it demonstrates the potential of a highly dynamic, small-scale and largely female processing sector based on local networks and social capital.
The paper concludes that options for strengthening agroprocessor - smallholder linkages, should first recognise and take advantage of the diversity of institutional arrangements available in Africa. Sustained commitments by governments and donor agencies are needed to allow for gradual support strategies and to promote deliberative institutions within the supply chains. Finally, contract farming is not spontaneously geared towards smallholders because of the higher transaction costs involved, but it has indirect implications on poverty alleviation through farm labour and industry employment. Public policies and equity schemes have an important role to play for contract farming to become a suitable institution with implications in terms of equity, efficiency and sustainability.
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