Surprising trends in Zimbabwean agriculture and what others can learn

Surprising trends in Zimbabwean agriculture and what others can learn

While the World Bank Doing Business Index and competitiveness issues monopolized policy discourse in 2015, big internationalcorporation have quietly consolidated their position in Zimbabwe’s hybrid seed industry. Dupont, Monsanto and Sygenta are the three big American companies that have intensified their strangehold in Zimbabwe’s seed industry. The recent acquisition of Pannar Seeds by Pioneer Seeds has been interpreted as a strong move by Dupont to consolidate its position on Zimbabwe’s seed industry since both Pannar and Pioneer are Dupont subsidiaries. On the other hand, the Seedco – Limagrain deal represents French interests in Zimbabwe.

Although seemingly maintaining a low key, Monsanto and Sygenta are introducing their maize seed varieties into Zimbabwe through subsidiaries.  Also in the maize seed game is a South African outfit known as K2 which recently swallowed Agriseeds.  There is also a range of small players such as ARDA Seeds, Mukushi, Zaka Seeds and Sandbrite Seeds.

Curious questions

The above developments trigger two critical questions: Why is there such a stampede into the maize seed industry when the market for maize grain is declining?  Why hasn’t the horticulture industry enjoyed the same stampede as maize when maize meal is consumed with vegetables? Challenges facing the Grain Marketing Board (GMB) have resulted in maize grain marketing being taken over by the people’s market.  At least 90% of the maize grain is in the hands of the people’s market from district, provincial and national markets like Mbare.  The people’s market is also distributing maize directly to sole trader millers and milling companies in urban centres.  Overall, more than 60% of agro-formal companies’ sustenance is in the people’s market.

According to some market observers, the main reason why giant global players in the maize seed industry are coming to Zimbabwe is because of the US dollar. Basically they are coming in to sweep foreign currency from the country and use it to strengthen their investments in other countries. Although some farmers felt the coming in of many players in the maize seed industry created healthy competition, others felt corporate mergers among seed companies leads to the creation of oligopolies which kill diversity, resulting in anti-competitive behaviour. However, some horticulture farmers said the coming in of Limagrain into Seed Co can be a blessing for the vegetable seed industry where there is currently no big player.  This is because Limagrain is a considered a big player in the vegetable seed market in Europe.

What explains lack of consistency in production among many farmers?

During the first year, the farmer mobilizes all the help s/he can find in the form of labour, commits a lot of resources and follows all the advice from other farmers and extension officers. In the 2nd year the farmer starts to cut corners since s/he thinks s/he now has the knowledge.  Experimentation kicks in with the farmer beginning to use less fertilizer and chemicals. In the 3rd year, the farmer wants to correct mistakes made in the 2nd year so that s/he goes back to first year performance levels.  S/he manages to improve more than 2nd year but does not reach 1st year performance levels.  In the 4th year the farmer has lost a lot of resources and thus remains at lower standards.  At this stage, withdrawal syndrome sets in. All sorts of excuses come in as revealed through blaming farm management, politics and markets, all to justify an exit decision.

Another reason why farmers have failed to maintain commendable consistency is trying to be venture-some, for example transitioning from tobacco to horticulture with little knowledge. If a farmer maintains 1st year standards and acquires advice to maintain that level, s/he should also have an appetite for research in order to keep improving.

Labour issues going into the future

Lack of labour is already affecting farmers and the situation is likely to worsen.  Previous white farmers deliberately kept farm labourers illiterate and not mobile so that they remained a consistent pool of labour. Grade five was the highest level of education for children of farm labourers so that the they were just able to count things on the farm but not be ambitious enough. Grocery shops and beer hall services were provided on the farm so that labourers would not find any reason to travel outside the farm.    Come land reform, some children of farm labourers have become educated and highly mobile. The majority now own mobile phones.  Having been liberated from colonial bondage through the land reform, farm labourers now know their rights and demand more than can be provided by new farm owners.  Some now prefer to operate their own small beer halls at the farm, sell airtime cards and drive kombis to urban centres.

Casualisation of labour and piece work have become a common phenomenon as farm workers no longer want to be tied to one place and committed to wage labour. According to new farmers, the labourers can actually tell you how much they want to be paid for a given task unlike in the past where fear-mongering was used to get them working. Under these circumstances, mechanisation is long overdue.  Smart technology like drip irrigation is urgently needed to address some of these challenges.  In five to six years from now, this problem is going to worsen to a point of requiring government intervention.

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Mechanisation is going to save smallholder agriculture from collapse in the future

The extent to which the formal and informal markets depend on each other

Most formal processing companies like Cairns used to depend on large scale farms under contractual arrangements.  Following the land reform, many smallholder farmers with small plots rely on the people’s market as their main demand zone.  Traders pull commodities from farming areas to the people’s market from which they supply formal companies.  This is more cost effective for formal companies because they don’t need to mobilize commodities from smallholders dotted around wards and districts.

Traders also grade and sort commodities to meet specifications of formal companies like supermarkets.  The people’s market ensures consistency in supply for companies unlike under contractual arrangements where supplies can run out due to unforeseen circumstances. Eighty percent (80%) of formal companies in Zimbabwe obtain fresh produce from the people’s market. The retail market comprises vendors from high density areas.   Through vendors (retailers) the people’s market feeds 80% of low to medium density urban population.  The remaining 20% is covered by small backyard gardens.  Food chain stores and restaurants account for 20% of produce from the people’s market. This group services formally employed low density populations, including those working in the Central Business District.  In Zimbabwe, Mbare agriculture market remains the distribution hub for horticultural produce from the northern part of Zimbabwe to other parts of the country, mainly the southern part.  It also pulls drought tolerant field crops (small grains from dry areas such as Buhera, Chivi and Mwenezi to the northern part of the country.

The benefits of knowledge gap analysis

Agricultural evidence gathering processes should try to build from a formal product rather than collecting information from farmers only and going ahead to analyse the data.  Food that reaches the market is 100% for consumption unlike in farms where there can be many uses including livestock feeding and exchanging for labour. When researchers collect samples from storage facilities and farms, they pretend to know all the uses for those products.  The short falls of a product are seen in the market where it competes with other products from elsewhere.  It is therefore important to take samples from the market if one is to correctly advise farmers. The product has to meet certain standards thus the market offers a feedback mechanism and a structure for participation. This will avoid a situation where researchers put the market in a panic mode by linking aflatoxins to cancer. Fear mongering is not a smart marketing strategy.  It should merely be about quality control rather than raising unnecessary alarm. / /

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How farmers and traders overcome the fragmented nature of formal knowledge systems

Farmers, traders and rural communities have amazing ways of creating conversations that overcome the fragmented nature of formal knowledge systems. That is how they create an alternative future for themselves.  Although most of them have not attended formal education, the informal environment has taught them to creatively read situations and facilitate knowledge sharing through group processes.  Besides a capability to function much better in situations that require on-the-fly problem solving, their adaptive skills are more than 80% improvisation.  Unfortunately improvising too much can get in the way of learning from good practices, where they exist. One of the challenges of too much improvisation is that new people will have to start from scratch and thus waste resources.

Dialogue rather than training

Most capacity building and training programmes for farmers tend to be about teaching rather than dialogue.  There is often a training programme and trainer rather than a dialogue convenor. Informal agriculture markets have shown the importance of a dialogue approach where farmers, traders, processors, transporters, artisans, input providers and equipment manufacturers are brought together to nourish each other’s insights.  This can happen at local level around community knowledge centres.  It is no longer useful for farmers to talk to themselves because they have shared the same issues for more than ten years.  In fact, they have solidified a certain position and tied a knot which they can’t untie on their own.  From a recent research conducted by eMKambo, 84 % of farmer respondents mentioned the same challenges.  This probably means five farmers representing Zimbabwe’s five agro-ecological regions can tell you everything you need to know without interviewing thousands of farmers from respective communities.

The only variable can be contextual issues where farmers from Chimanimani cannot lecture farmers from Chivi because they have different economic drivers.  But a dialogue about how farmers in Honde Valley have organised themselves to successfully market their bananas can inform Chivi farmers in how they can also organise themselves to market sorghum.  Look and learn visits should not be on the same practice or same value chains unless there are opportunities for value added services, one step up from production.  Farmers have debated production issues to death such that for really serious farmers there is really nothing to learn from talking to each other besides actual practice or experience.  Organising farmers from one irrigation scheme to visit others in a similar irrigation scheme can be total waste of resources.

How to address some of these issues

A little bit of structured training/formation, action research or methodological design can yield better results – showing the incremental nature of knowledge generation and sharing. Through methodological processes, farmers participate in better engagements and become exposed to new methods and theories although they may not know that they will be working with theories. Perhaps the most important value of formal education is exposing people to new models and ways of integrating new with old knowledge (reconstructing new ways of thinking). Real and lasting change is possible through processes that embrace all aspects of current reality with qualities like an open heart, authenticity, vision, gentleness, courage, mindfulness of body and acknowledgement of fear and imperfection. This is a domain of informal knowledge where farmers and traders thrive.


Some problems can be solved by experts using rigid plans while others require aggressive creativity.  Farmers and traders now realize that the larger challenges they face are complex and full of inter-dependencies that are so intricate that nobody can predict and control them.  This calls for a very different approach. Most approaches by development practitioners do not lead to lasting change because smallholder farming is more complex and cannot just be romanticized.

Financial institutions should be willing to work with all sorts of unattractive aspects of reality, such as uncoordinated production, corporate irresponsibility, carelessness and hopelessness. Real impact is in changing these into positive attributes. Farmers and traders have realized that you may not always work with everybody simultaneously but be open to any piece of reality. For instance, one piece of reality is that smallholder farmers are fond of scavenging for seed, inputs and ideas.  That is probably why among farmers and rural communities gossip is more powerful than the formal media. Those who promote change have to embrace full and personal engagement in order to understand these dynamics. In these situations, corporate communication and advertising are not sufficient ways of sharing information. If you visit farming areas and informal markets as a tourist, you will never understand these deeper issues and stories behind the stories. It is important to be emotionally engaged. You cannot facilitate changes which you are personally unwilling or unable to do.

Learning from inspiring examples not blueprints

In the informal sector, there are often no blue-prints, except inspiring examples which can be a source of inspiration and continual learning. You have to engage more than the intellect and this is where  dialogue becomes very important. Farmers and rural communities know that no one can move forward without mistakes. Mistakes do not prove that the way you search does not exist. It is important to embrace emergent processes that engage multiple ways of seeing and knowing the world.

The market as a dialogue

To the extent that it has enormous convening power, the informal agriculture market facilitates dialogue between commodities and sources of commodities. It is often very difficult for producers to know what volumes are coming from what source. The following graphics depict volumes and sources of commodities in Mbare wholesale market during the month of October 2015. This is an expression of dialogue between agricultural communities in the market as they position each other according to demand.






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How can farmers know the value of their land and related resources?

How can farmers know the value of their land and related resources?

The value of Zimbabwe’s natural resources such as land, water and minerals is still informed by assessments and valuations done by white settlers way back in the 1900s.  For instance, the identification of the country’s five natural farming regions as well as the demarcations of farms, soils, dam sites and other resources originated from that period to become the basis for valuing the whole country. Unfortunately, most of the new farmers do not have sufficient history about the land they are occupying. Previous farmers had all this knowledge which they used for production planning. New classifications such as A1, A2 and large scale have not been informed by solid knowledge about detailed characteristics of those pieces of land. As a result, the true value of the land is yet to be adequately ascertained at an individual farmer level or community level.

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Should farmers measure the value of the land based on yield alone?

Toward purposeful valuation

As part of unlocking the authentic value of pieces of land on which the majority of farmers eke a living, a re-assessment and revaluation effort is badly needed.  If 1000 hectares have been partitioned to accommodate more than 100 farmers, the same farm no longer has the same value it had when it was owned by one farmer.  The land has to be re-valued towards tailor-making production practices.  Some smallholder farmers have embraced tobacco and cotton production on the strengths of capacity building around planting, grading, harvesting and packaging.  However, this kind of knowledge structure is lacking in other sectors like horticulture to which farmers are migrating from field crops.  While a farmer can estimate tobacco yields per hectare, such knowledge is lacking in horticulture or livestock.  It is difficult for smallholder livestock farmers to estimate the amount of beef they can obtain per given pastures.


Some of the vexing questions for farmers include: If a farmer is to transition from tobacco to horticulture on the same land, what processes and procedures does the farmer need to be supported on?  Such a question can only be answered successfully through valuation of available resources – water, soil, roads, water bowsers, tractors, dip tanks, boreholes, pastures, workshops and the general environment.  Basically both man-made and natural resources have to be assessed.  Re-purposing land from tobacco to horticulture requires expertise.  Regarding pastures, if a farmer sets aside four hectares for crops and two hectares for pastures, how does s/he know the quality of pastures in those two hectares reserved for livestock?  The previous farmer may not have cared about livestock but the new farmer has to combine crops and livestock for draught power. This automatically changes land use patterns and calls for valuation.


Valuation is equal if not more important than siting a water source or setting up an irrigation system.  After valuation, siting of all these other assets becomes very easy. In fact, valuation should inform siting and production. It’s no longer enough to own a piece of land. Becoming aware of soil pH calls for interventions that suit different types of production.


Role of the market

Valuation should be informed by a business mind-set and this is where the market becomes important.  How best can a farmer use valuation results to generate income from the market? For any given market-oriented production calendar, farmers should adjust resources to suit those calendars.  If a farmer finds green mealies doing very well from August to December, it means s/he has to adjust soil quality, water availability and other inputs to get the best results.  The same applies with potatoes, tomatoes and other crops.  A farmer can juggle five to ten crops using valuation results.


How this extends to livestock production

The same valuation process can be extended to livestock production.  Farmers can valuate resources that are key to livestock production. It is important to start with what is available.  For instance, types of water reservoirs and their carrying capacity.  A farmer should try to know the history of the dam and measure water levels from summer to summer.  It is also important to assess pastures in terms of grasses naturally growing in the farm and how long the grasses can sustain livestock.  Livestock should not be left to natural phenomena.  Livestock production  has to be properly planned the way farmers plan their crop production.  It is easier to plan for small stock because most of the feed can be produced on-farm.


Every farmer needs a cost benefit analysis.  What is the opportunity cost of growing maize on one hectare and selling maize to the market or feeding the maize to pigs and selling the pigs?  We have to get the best value from a piece of land and this is seen by the best project it can support.  How best can you utilize soil and water to get the best returns?  Soil and water are the main resources for every farmer. If you are given a piece of land and a certain amount of water, which crop will you grow that will give you the best returns out of the two natural resources?  Valuation informs your production strategy especially from the market.  For any given piece of land, is tobacco the best crop that gives the highest returns from all other suitable crops in the same climate?  This is a key valuation question whose answer can open farmers’ eyes to other options.


Community valuation

Community valuation should be done in a participatory manner, separating subsistence (livelihood) from the market component designed to generate income.  Some communities keep more than 1000 cattle in one area. It’s important to know how much water resources and pastures are needed for these cattle and other livestock.  Farmers can also discover that it’s better to use the water for horticulture than for many livestock.  Where they are struggling to grow crops, they can also realize that it’s more ideal to turn the land into pastures.  A crop production mind set has seen many communities turning pastures into fields yet more land could be usefully reserved for pastures.


Evidence from valuation can convince farmers to convert their land to pastures.  This can support horticulture through manure and ox-drawn water supply to irrigate gardens and irrigation schemes.  Valuation can provide comparative analysis between crops and livestock or both.  The comparison can be crop to crop, crop versus livestock, field crop versus horticulture or cash crop versus staple crop.  Is banana the best crop in Honde Valley?  Is tomato the best crop in Mutoko?  If small grains do well in Tsholotsho, are these the best crops or we have to explore the potential of other crops?


Is knowledge about our five natural regions still valid in a changing climate?

Zimbabwe’s five natural farming regions were drawn out based on valuation.  Unfortunately, we have not conducted any other valuation to see if the same characteristics still hold.  Perhaps we now have ten natural regions or less. Or due to climate change, natural regions four and five now have the same characteristics.  How do we explain the fact that over the past few seasons, Masvingo and some areas of Matebeleland have received early rains ahead of natural regions two and three?  Valuation can show us micro climates that have emerged due to climate change as well as sub-regions that are emerging in natural region 1. We can’t continue using knowledge generated hundred years ago.


The same way farmers invest in inputs should see them investing in technical services like valuation of resources.  If a farmer can invest in equipment like tractors, trucks and livestock breeds, s/he needs tailor-made technical services in order to get the best from total investment. If farming is to become a real business, we need to give responsibilities to farmers rather than continue spoon-feeding them.


So what?

In the interest of helping farmers and other value chain actors to build a strong agricultural knowledge foundation, eMKambo has developed an agricultural valuation toolkit based on insights from diverse experts. Every serious farmer requires knowledge from the following sets of expertise: (a) soil and water testing; (b) water reservoir assessments ( how much water in a given period?); (c) irrigation design expertise; (d) land design expertise (cartography including use of Geographic Information Systems (GIS)); (e) livestock pasture assessment expertise;  and, (e) economics and market expertise.  Intelligence from the market enables a farmer to adjust production according to the market while matching soil pH, water, pastures and land size to available resources.


The valuation toolkit generates a strategic document which a farmer can use for the next three to five years. Like any other business, farming requires a strategic document.  At the moment, most farmers are not basing their agriculture production plans on thorough valuation.  As a result there is so much missing of targets.  A strategic document can be collateral acceptable to banks.


 If this conversation makes sense to you, please send us an email or give us a call so that we can assist you in developing a valuation framework for your agricultural enterprise. / /

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eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6


What can agricultural markets teach us about the true meaning of money?

What can agricultural markets teach us about the true meaning of money?

This question was triggered by the recent devaluation of the South African Rand (ZAR) against the US dollar and how this phenomenon was interpreted in Zimbabwe’s agriculture markets. It is possible that the majority of people in both developed and developing countries struggle with the true meaning of money. To say money is a medium of exchange is an inadequate definition for most people because the answer raises more questions. For instance, in informal agriculture markets a commodity that cost one dollar today can fetch 50c tomorrow, goes to two dollars the day after tomorrow and back to one dollar the next day, same commodity and same quality. Very few institutions have taken it upon themselves to build the capacity of farmers and other actors to appreciate the authentic value and meaning of money. This knowledge gap often strains relationships between farmers and buyers. It becomes worse when prices are fixed through a policy instrument yet the market will be saying something different.

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A recent survey in Harare by eMKambo showed that no one could explain why the value of the South African Rand (ZAR) decreased from around US$1 = ZAR8 to US$1 = ZAR14. In Mbare, Zimbabwe’s biggest agricultural market, traders, farmers and consumers suddenly stopped accepting South African Rand in the form of coins preferring Zimbabwean bond coins. In the absence of a sensible explanation, actors in the market adopted a band wagon effect where someone just stops accepting the South African Rand because someone else has just stopped accepting it as currency.

Currency devaluation and agriculture markets

From our findings, agricultural commodities are more influential than money. If today US$1 can buy four cabbages and tomorrow the same dollar can only buy two cabbages, it doesn’t mean money is more expensive but rather commodities are the ones dictating the value of the dollar.  The impact of currency devaluation is visible in markets where the velocity of money is very high, for example in agricultural markets where there is a high rate of money changing hands.  This means, for example, where one currency has depreciated by 5%, for every unit of a stable currency value is lost to the stable currency.  If US$10 was equivalent to ZAR 100 (hundred South African Rand) and the Rand devalues by 5% to the US$, for every transaction you will be losing ZAR 5 (five Rand) if paid in Rand.

For slow moving businesses, for example where 20 transactions happen per day, you lose about ZAR100.  But in a much dynamic market like Mbare agriculture market where a trader can conduct at least 500 transactions worth ZAR 100 each, by end of day the trader would have lost ZAR500.  That is why informal agriculture markets provided quick signals to the depreciation of the Rand in Zimbabwe. The informal economy was able to predict disaster before it happened. If farmers understand the true role of money in a multi-currency environment like what Zimbabwe finds itself in, they will see how uncoordinated production results in losses. Cotton and tobacco farmers in Zimbabwe have for many seasons been crying foul against buyers because they can’t see how trends on the international market and its dynamics account for their misery. There is need for simplified knowledge on these issues.

How money comes second to barter trade

Where barter trade is easy you don’t need money. You can only use money to buy a different commodity from the one available in a local market.  If one farmer has tomatoes and the other has potatoes and each wants what the other has, they can simply swap without money exchanging hands. If commodity exchange markets are well developed and supported, developing countries can overcome the role of cash – creating a powerful commodity exchange from rural markets to national levels. The only knowledge to be filled will be on who wants what, when and where?

At the moment some African processors based cities drive kilometres into farming areas looking for commodities like maize grain. After farmers are handed money from their maize they start incurring costs looking for fertilizer and other inputs. Yet if there was a local commodity exchange platform where diverse commodities are actually brought together, processors and other commodity buyers would simply bring inputs like seed, fertilizer and agricultural equipment to the local market.  These inputs would be exchanged with maize.

The term money would only be used for pricing not purchasing.  For instance, where an item costs $100 and it is known that a ton of maize costs $300, this would mean three items worth $100 each are exchanged with a ton of maize. Money can only come in where one of the commodities has more value than the one in which case money would be used as a top-up.  Such a practice is now common in Zimbabwe’s phone and car trading business.  A vibrant agricultural commodity exchange would see buyers and sellers placing orders through the market with buyers and sellers interacting all the time. For example if such a market is at Mutoko Business Centre, a farmer can bring 100 crates of tomatoes for exchanging with five bags of fertilizer.

Maize and tobacco exchange

An interesting version of a commodity exchange occurred during this year’s tobacco marketing season in Zimbabwe.  In a rather self-organizing manner, maize farmers and traders brought maize to one of the tobacco auction floors where it was exchanged with tobacco outside the auction floor. Depending on the price of tobacco on the auction floor on a given day and maize on the open market, two kilogrammes of tobacco were exchanged with a bucket of maize. Traditionally tobacco farmers would look for maize after getting their money from tobacco auction floors.  This season maize farmers and traders decided to simplify it for tobacco farmers by bringing maize right at tobacco auction floors.  The whole process showed how people can creatively deal with a liquidity crisis by resorting to barter deals. Detailed analyses could have shown that bringing maize to the tobacco auction floor reduced the demand for cash since tobacco farmers would require less cash given that some bales of tobacco were exchanged with maize outside the market.

Most people in rural areas also exchange their labour with maize.  One can weed an acre for a bucket of maize rather than get the money and start looking for maize.  This is a resilience mechanism where people try to cope with uncertainties in their market and environment.  Some millers also accept farmers to use a portion of their grain as payment for milling services.  This is how the millers build up their stock for later use. / /

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The only crop that is either horticulture or field crop depending on when you grow it

The only crop that is either horticulture or field crop depending on when you grow it

Many African countries consider maize a staple grain crop.  What is not mentioned is that in some quarters such as hotels, maize cobs are actually served as a vegetable and this suggests  it can be classified under horticulture. In most farming communities of Zimbabwe that are endowed with water and the right climate, maize is produced as green mealies for sale alongside horticulture commodities. Given the poor performance of maize grain market, the horticulture side of maize has gained an upper hand over the past few decades in Zimbabwe.  The two following graphics show quantities of green mealies supplied to Mbare market in Harare during the whole of 2014 and January to July 2015.  The second graphic depicts areas where the commodity came from.

Graphic 1: Green mealies supplied (tons) – Mbare Farmers Market: Jan – Dec 2014 and Jan- July 2015

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It is interesting to note that December had the highest supply of green mealies in 2014 while in 2015 July has been the peak supply period so far.  January, February, August, Septembers and October 2014 had an almost constant supply.  These are often time characterized with insufficient maize grain in most households but green mealies will be quite active as shown by the above graphic.

Total quantities supplied (in tons) by source:  Jan – Dec 2014 and Jan – July 2015

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During the period under review, green mealies came from 23 areas into Mbare farmers market. The bulk of green mealies came from Goromonzi district with the least coming from Mberengwa.  However, it is interesting to note that, although classified as a dry region, Mberengwa was able to supply green mealies. The commodity is mainly produced in irrigation schemes and wetlands.

Maize as horticulture

Depending on when you plant it, maize can be either horticulture or a field crop.  When planted in July/August for marketing in October/November as well as in February March for marketing in July/August/September, it is entirely a horticulture  crop. However, if it is planted through rainfall in October/November/December it is a field crop.  Since a lot of maize is harvested in April and May, green mealies are not a viable business when grown through rain-fed production.

What is increasingly becoming apparent in Zimbabwe is that farmers make more money when growing maize as a horticulture (green mealies) than for grain.  This past winter, one farmer was able to sell 20 hectares of green mealies in two weeks.  In the coming season he is aiming for 30 hectares.  When growing maize for green mealies, the spacing between plants is wider in order to produce bigger cobs that are preferred by the market.  Plant population can be 40 000 plants whereas in summer plant population can be 50 000 because even smaller cobs can be consumed as grain.  From 40 000 maize plants per hectare, 30 000 are marketable while 10 000 are small and go towards drying for mealie meal.

Green mealies are usually sold in dozens with a standard dozen weighing approximately 7kg.  The 30 000 plants are equivalent to 2 500 dozens and, when sold at $2 per dozen, the farmer earns $5000 per hectare.  On the other hand, when producing maize in summer, a very good farmer can harvest 6 tons per hectare and when sold at $275/ton, offered by some commercial maize buyers, the farmer gets $1 600/hectare – way below what is earned through green mealies.  In addition, left- overs from green mealies (10 000 cobs) are dried into mealie meal. You need 80 small cobs to fill a bucket of maize and this translates to two tons for own consumption as mealie meal.  If you convert six tons into buckets you get 360 bucket @ $10/bucket in some areas where maize grain is scarce, you get $3 600. Still this is lower than what one earns from green mealies.

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Farmers in wetlands can use their land to produce green mealies and be on the market when no one else has the commodity. Growing green mealies, groundnuts, Bambara nuts and okra has become a commodity viable practice in wetlands.  Farmers can produce enough maize as green mealies and also for drying into grain.  Green mealies are easy to harvest because a buyer just pulls out the cobs unlike producing for grain where maize stalks are cut and stoked – demanding a lot of labour as well as losing some maize to weevils.  Selling green mealies on-farm has a strong element of conditional sale because the seller chooses what s/he wants and cannot leave it for anyone when s/he has removed the cob for the stalk. / /

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Diversifying consumption patterns can stimulate African agriculture

Diversifying consumption patterns can stimulate African agriculture

While the older African generation grew up eating indigenous food, the young generation are spoilt for choice in terms of what to eat. The majority of young people are still to appreciate indigenous food like wild fruits, small grains, indigenous chickens and different types of indigenous vegetables. In many African countries, class structures introduced by colonialism still influence food choices and consumption patterns. The majority of black Africans continue to associate oranges, rice, bread and cooking oil with the middle and upper classes.  Inspite of their superior nutritional attributes, dried vegetables like mufushwa are largely associated with poverty.

Using food to express social class and upward social mobility has done enormous harm to indigenous food systems and local diets. Many black people have ditched their local food systems in preference for a western diet in order to be accepted into the middle and upper classes.  A lot still needs to be done to break this colonial bondage.  In Zimbabwe efforts to move indigenous food from the periphery to mainstream local diets have gathered steam as shown here:  Climate change is revealing the benefits of indigenous food systems which are mostly drought tolerant.

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Need for related production and processing technology

While millet and sorghum were staple foods for our ancestors before the introduction of maize from Southern America in the 1500s, there has not been meaningful achievements in designing appropriate equipment for processing these crops into various products.  As an extension of modernisation, hybrids have been promoted together with technology for scaling up adoption.  For example maize hybrid varieties have been promoted together with ploughs, planters, dehullers and combine harvesters.  We even now have a maputi gun for processing maize into maputi.  On the other hand, we are still using traditional ways of harvesting sorghum and millet (cutting with knives).  The processing part is still limited to pounding (kutsva /ukugiga) and hand roasting.  A simple roaster for small grains should have been designed by now. There is also no technology for extracting pulp from indigenous fruits like matamba and others yet there is a wide range of equipment that can extract juice from oranges.

Most African communities have not been innovative enough to develop their own technologies for processing our food beyond drying.  This has limited possibilities of what we can do with our food systems.  Thus we can’t create significant employment in the absence of enabling technology.  While there is equipment for turning sunflower and soya bean into cooking oil, for groundnuts the far we can go is producing peanut butter as well as cooked and roasted nuts for sale.  It is said groundnuts contain some of the best essential oils but most African countries are still to extract these oils. Rather than trying to produce a uniquely Zimbabwean car, the most important task is developing equipment that can enable exploitation of our abundant food systems which are apparently under threat from western diets.  Technology (processing and packaging) will increase shelf life, demand and ultimately the producer base.

Limited scientific base

Our education system is also to blame for this predicament.  Those studying agriculture at college focus on a narrow range of commodities for their research.  In some cases, companies promoting hybrids can sponsor some research in line with their seed varieties.  This doesn’t happen to most of our traditional foods like small grains where we have less published work compared to hybrids.  Young people from rural areas seem to take pride in earning a Masters Degree studying wheat than millet or nyevhe.  One of the reasons for these choices is that there is little published literature which is a pre-requisite in any research.  Knowledge in communities is considered anecdotal and it is as if you don’t know anything until your knowledge is published.  Unfortunately this constitutes a poor understanding of what knowledge means and can do.

Although formal education has been in African countries for decades, our scientists have limited understanding of the science behind our traditional food. While formal seed companies obtain their improved genetic material from their parent companies located in developed countries, we can’t say the same for our small grains and other foods that are threatened by extinction.  By now we should have developed different types of improved genetic material for small grains, wild fruits, indigenous poultry and indigenous vegetables which are central to our local food baskets.  Since we continue to rely on the imported notion of science, it seems we have failed to domesticate science and adapt it to our local conditions.  We should be having a lot of research results on nhunguru, matohwe, masawu, mawuyu, madhumbe and many other food elements.  Failure to domesticate science explains why broiler chickens have started dominating our indigenous poultry even in rural areas.  Most farmers who produce broilers have no idea of the science behind broiler chicks production.  Also hidden knowledge is why eggs from layers can’t be hatched into chicks.  On the other hand, the way our indigenous chickens are produced is not secretive. The knowledge is very easy to borrow.

Given a tradition of not documenting knowledge, it means the future African generation may never know how their ancestors used to select and improve varieties of maize and other crops as well as livestock breeds.  Lack of knowledge on what is involved in fertilizer and seed production makes our food systems vulnerable.  We have the same dilemma in the medical field where despite the availability of different kinds of medicinal herbs, we still depend on imported medicines.  Our western educated doctors are trained to become drug pushers rather than healers.  Someone feels more important when s/he swallows a tablet from a Pharmacy than drinking Zumbani.

Lack of nutritional knowledge

Another key challenge is lack of general nutritional knowledge around our food systems.  We seem to know more about what is nutritionally contained in oranges and carrots in terms of vitamins but nothing about vitamins in our indigenous fruits.  We should be aware of substitutes of oranges and carrots in our indigenous food.  A consumer should know that when s/he eats baobab fruit s/he gets the same nutrients that would be obtained in berries, for instance.  This will enable local people to bring tsvubvu to the market, not because they grew up eating them but because of their nutritional content.  Price should also be tied to nutritional content as opposed to demand and supply only.

Ideally 70% of the food in hotels and restaurants should be purely indigenous as opposed to western diets.  People coming to Zimbabwe should know that when in Zimbabwe they eat Zimbabwean food unlike now where someone from UK finds British food in Zimbabwe. On the other hand, a Chinese restaurant saves Chinese food and an Italian restaurant saves Italian food.  Japanese Suchi is popular for being entirely Japanese while Italian pizzas are known for expressing the Italian identity.  We can’t say the same about our food systems.  Conversely our fast food chains seem to take pride in saving western diets. Another genesis for this dilemma is that those who started hotels and restaurants in most African countries were focusing on outside markets and consumers of their own kind.  Having taken over these hotels our people have failed to give them a new complexion and identity in the form of providing uniquely local food.

Role of the market

The majority of smallholder farmers are controlled by their micro climates. This limits the number and amount of commodities they can produce.    If they are able to produce ten different commodities, they can increase the area planted in response to favourable conditions.  Using its convening power, the market can then bring all these commodities together for either exchanging their value or market participation. Through a commodity exchange, small grains from Chivi can be swapped with horticulture commodities from Murewa.

Local farmers and people can’t constitute a market because they all have the same product.  High demand for some products like millet meal means processing centres should be located in urban areas where there is a market.  This makes it easy for food outlets to fetch millet meal and prepare it for consumers on time just as maize meal and bread processing enterprises are located in urban areas near consumers.  Knowledge tends to travel through products and by-products. The prevalence of a commodity on the market all year round creates appetite for it all year round resulting in consumers not removing it from their budgets.  Unfortunately, most of our traditional food is on the market for three months of the year and consumers forget about it for nine months.  When these foods come back onto the market, they do so in gluts.  Consumers have to have a taste of mawuyu every month and that means it should be available all year round as well as in other areas where it is not produced. / /

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eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6.

Farmers trust word of mouth more than other forms of communication

Farmers trust word of mouth more than other forms of communication

From a recent research conducted by eMKambo and the Zimbabwe Economic Analysis Research Unit (ZEPARU), a surprising discovery was that although there has been so much investment in ICTs, farmers still trust word of mouth as their main means of communication. They find word of mouth  less costly especially when used within a dialogue. For most farmers, communication is still more about dialogue which is a combination of face to face and word of mouth.

As shown in figure 1 (below), 41% of farmer respondents indicated their preference for word of mouth. At 24 %, calling traders also shows the significance of word of mouth. Through calling, farmers engage in deep dialogue with traders.  Use of word of mouth was higher in Bulawayo markets (37.3%), followed by Harare (29.9%), Mutare (19.4%) and Gweru (11.9%) respectively.  Also significant was the proportion of farmers who just went to the market without sufficient information on market dynamics.  This showed that farmers still rely on their instincts to make marketing decisions.

Figure 1: Access to market information by farmers

16 November 1

Feedback from the eMKambo Call Centre also show that if a word of mouth goes through a mobile phone, a farmer more information within 30 seconds than using short message services which, besides limited content, is not engaging enough.  The dominance of dialogue and word of mouth among farmers proves the power of interpersonal relationships which cannot be replaced by ICTs.  Every communication loop among farmers is satisfactorily completed by meeting face to face where body language and illustrations say more about an individual’s feelings about a particular issue.

“ICTs are important in providing immediate input but detailed accounting requires face to face.  ICTs can provide insights on particular commodity trends. But participating in the market where discussions range from quality, weather, taste and customer preferences requires face to face.  For quick decision making ICTs are useful but detailed dialogue requires face to face.  You can’t be satisfied with a 10 minute dialogue over the phone where there are no visual features and comparisons.  While short message services emphasize the shortness and quickness of messages, useful agricultural conversations are often long.  Even if a farmer receives information about market prices for tomatoes over the phone, s/he will still need to find out more from the buyer why some tomatoes cost more.  ICTs become useful after face to face relationship building.  Most relationships built over mobile phones still need to be authenticated through face to face with ICTs fulfilling follow-up activities,” said one farmer.

Farmers’ power to look for customers

The research also revealed that methods used by farmers to obtain reliable customers is a key determinant of a farmer’s bargaining power. Unfortunately, the majority of farmers just carry their produce to the main market and hope to get customers as shown in figure 2 (below).  This practice renders farmers vulnerable to market conditions.

Figure 2: Methods used to look for customers

16 november 2

Methods used to market products

The research also showed that farmers have limited options for market their produce at the main markets, which also limits their bargaining power. Most of the farmers sell their produce through the auction floor, while others sell directly to farmers in the wholesale market on their own. However, about 27% said they relied on middlemen before the opening of the auction floors. This generally shows farmers’ vulnerability, especially since they cannot control the auction floor and neither do they have much bargaining power over auctioneers. Only 10% of the farmers indicated that they pursue independent selling methods such as cash, dealing with wholesalers and retailers, dealing directly with the end customers and putting products in the shops.  About 73.4% of the farmers did not have contracts with retailers, traders or manufacturers. About 14.2% of the farmers did not respond to the question. The 12.4% who indicated that they have contracts mentioned retailers, schools, hospitals and other traders rather than manufacturing firms.

Although contracts seem to present opportunities for farmers, some farmers had reservations on the effectiveness of contracts with retailers. Some indicated that it is difficult to plan production with retailers because they order small quantities of produce and seek replenishment orders only when they have finished selling. Sometimes retailers reduce the price for replenishment orders yet on the side of the farmer the input prices would not have gone down, hence affecting the viability of farmers. In addition, some farmers highlighted that contracts were partial and not fair in the sense that contractors had greater bargaining power relative to the farmer. It was also mentioned that some contractors do not release inputs on time and this affects production.  The need for flexible contracts was also highlighted.

Markets used by farmers to sell their products

About 53.2% of the farmers highlighted that they use the main agriculture markets like Mbare, Sakubva and Shasha (Bulawayo) while 20.4% preferred selling at farm gates and local markets. Roadside markets were used by about 15 % of the respondents as shown in figure 3 (below). However, it was important to note that more respondents from Bulawayo indicated that they use the roadside market. This could mainly be because the main market in Bulawayo is by the road side.

Figure 3: Type of Markets used by the farmers

16 november 3


Are farmers participating in their preferred markets?

Only 27.2% of the respondents indicated that they were participating in their preferred markets. The rest (excluding 7.1% who did not respond) indicated that they were not participating in their preferred markets due to a number of constraints which include the following:

  • Transport challenges (costs and accessibility).
  • Financial Constraints.
  • Fierce competition in the markets.
  • Low demand for their products.
  • Long distance to the markets.
  • Unavailability of accommodation close/ at the market places.
  • Lack of information about the market (prices and product demand).
  • Language barriers.
  • Late payment for delivery of goods.
  • Afraid of the middleman (makoronyera).
  • Size of the market is too big for smallholder farmers to participate due to the sheer volumes demanded.

Issues affecting women in agriculture markets


Challenges mentioned as affecting women in the agricultural markets include the following:

  • Family burden makes it difficult for women as they have to attend to children and commodities at the same time;
  • Bringing produce to the market is difficult for women. For instance, travelling at night makes women vulnerable to theft and harassment;
  • It is more expensive for women to participate in the market as they have to hire additional labour for loading and offloading of goods;
  • Middlemen mainly target women;
  • Men are given first preference in allocation of market stalls;
  • There are no safety clothing for women;
  • Abusive language by men;
  • Harassment by male counterparts and touts;
  • Child minding at the market makes it difficult for women to focus on selling as well as watching their children;
  • No decent places to sleep; and,
  • Poor sanitation facilities affect women more than men.

Given that loading and offloading takes a lot of energy, women farmers often incur extra costs compared to their male counterparts. For example, they have to pay more for labour for loading and offloading, which implies that they have to fork out money for every process involved in delivering their produce to the market. Men avoid these costs by doing the work themselves. Properly organizing and regulating the market would eliminate some of these challenges. / /

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eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6.

Figure 1: Access to market information by farmers

How the people’s market deals with embedded inequalities in market structures and knowledge systems

How the people’s market deals with embedded inequalities in market structures and knowledge systems

The informal market has a smart way of dealing with embedded inequalities in existing market structures and mainstream knowledge systems.  It has its own perspectives on sense-making, persuasion, influence and identity formation in ways that may not be captured by conventional ways of gathering and sharing information. Research by eMKambo shows that improving the supply of information through lowering the cost of airtime does not farmers’ information needs or lead to farmers receiving appropriate information.  Given that they are also tossed from one information source to another, farmers are saying a fragmented knowledge process cannot be relied upon to address their knowledge deficits.  Organisations which double up as associations and processors tend to have privileged access to information which they can hoard and not allow it to trickle down to farmers the way it should.  This puts farmers in a disadvantage because they will have low negotiation powers.

How the informal market addresses some of this knowledge asymmetry

Informal markets are an open knowledge sharing system where, at any given time, actors have comparative advantages in terms of knowledge.  If this knowledge is shared among smallholder farmers, medium & large scale producers, traders, transporters and consumers, knowledge gaps and loopholes are reduced.  Because producers come from different areas, they are more knowledgeable about commodities grown in their own areas.  By allowing farmers from different areas to meet and exchange value, the informal market enables dialogue which reduces knowledge asymmetry.

Some market participants are not financially literate on pricing and costing models but because in the informal market, demand and supply mechanism determines prices not individual farmers or traders, a financially illiterate farmer can earn a better price than the one who is able to calculate costs and profit margins.  For those farmers not sure about what price they can charge for their commodities, the informal market can unlock the true value of a commodity on a given day. A financially literate farmer can do all the costing but can earn less than the farmer who does not do all the calculations.  This is partly explained by the fact that in the informal market, competition between products carries the day as opposed to competition between farmers.  However, there is great scope for developing market systems, otherwise financially illiterate farmers can be exploited and face barriers to participation in the market.

Participating in the people’s market enables farmers to develop intuitive knowledge such that they can make projections and organise their supplies appropriately.  Relationships in the market also make up for lack of knowledge in costing by some smallholder farmers.  In addition, getting organised for coordinated supply is another way of dealing with embedded inequalities in information.  While some farmers may be good in production, others are good in marketing.  This addresses knowledge asymmetry and creates a balance.  Utilising ICTs for information sharing also enhances farmers’ exposure to the market.

Consumer tastes also play a powerful role in addressing embedded inequalities.  Most big producers who produce commodities in bulk are not particular about quality.  As a result, most consumers want to buy from small producers who bring small quantities because they know that these producers pay attention to detail. Where a big producer earns profit on volume and small margin, smallholder producer gets more profit on small quantities, good quality but a bigger profit margin.  Smallholder producers are also good at correcting taste because they are also consumers of their products.  They get vegetables for household consumption from their small gardens and sell surplus to earn income.    This means they are much closer in satisfying consumer tastes and expectations.  A large number of big producers do not have time to taste their own commodities.  Smallholder producers are also good at articulating the Unique Selling Proposition of their products.

While for a passer-by, roadside markets may not make sense, these markets play a very important role. Besides satisfying immediate needs, roadside markets can be a barometer of economic drivers in a particular area. These markets point to the diversity and volume of agricultural commodities in an area. Roadside traders can be some of the most reliable informants in terms of sources of produce as well as the seasonal character of most commodities.

09 november 2015

It should not just be about price

At the moment, price information is considered the most important information by farmers, as shown through enquiries received by eMKambo all the time.  However, in essence, it should not only be about price but factors that determine price, e.g., price trends, supply and demand trends, competing commodities, available markets, standards, etc.  Farmers should invest in processes that influence price, for example, market-related production.  All these factors which tell a story of why the price is what it is should be understood.  Some of this information can be accessed through tips via ICTs gadgets but it becomes more effective when other players can organize farmers for training programmes that have to be paid for.  This is where knowledge brokers, government departments and development organisations can work together to move farmers from social entrepreneurship to profit-oriented business models.  In as far as some of the information is provided by some organisations, it doesn’t show how much profit a farmer will earn.  Much of the training focuses on crop varieties, livestock breeds, yields per hectare, fertilizer application, weeding, harvesting, etc.  Such information or knowledge is not enough for a farmer to analyse profit and loss unless the farmer has information from the market end.

The importance of both weak and strong ties

The people’s market shows the significance of both strong and weak ties in the market. Where big players will engage in cut-throat competition, weak and small players help to neutralize the game by exposing vulnerabilities of each player. Weak ties in the market represent a learning curve which is a voice of caution for strong ties.  Where weak ties chicken out, big ties ensure food security and can stabilize the market.  In the case of a drought, strong ties can stabilize the market and ensure market supply.  However, strong guys are few and when they collapse there is a disaster.  For example in Zimbabwe the collapse of the Grain Marketing Board (GMB) has had devastating effects at national level. Small players like the millers association have become a fall-back position for the market, farmers and consumers.  On the other hand, because it doesn’t have a local fall-back position, the cotton value chain is negatively affected when prices collapse on the international market.  The situation would be different if there was a string of small scale cotton processors who could act as a fall-back position.  At least 40 – 50% of weak ties are resilient during drought and their role is becoming very important in a changing climate. / /

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eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6.

Three types of farmers and how they innovate

Three types of farmers and how they innovate

It is now very clear that farmers and households are not homogeneous.  This has enormous implications on agricultural-related programmes.  While boundaries are mostly invisible, farmers and traders can be classified as follows:

Early adopters25% of the farmers or traders.  These quickly adopt new ideas and create their own shallow or deep knowledge.  Identifying early adopters in agricultural and inclusive development interventions is very important to avoid wasting resources on the wrong type of people. Rather than just counting the number of households or farmers to be part of a particular programme, development partners, financial institutions and government interventions should critically review their selection criteria. In most cases, identifying and working with early adopters as leaders and champions will have a pull effect on the wait and see group. This will also pile pressure on the resistors towards positively changing their mind set.

02 November 1

Wait and see group50% of farmers and traders who often closely watching what early adopters are doing so they can either follow or make decisions.  This group is not in a hurry to take risks. A big number have a ‘follow the leader’ mind set.  They are more of copy cats than participants and, are not keen to model risk taking behaviour.  However, this group has useful lessons which can inform the early adopters.  For example, many farmers and traders who had bad experiences with Zimbabwe’s banking crisis in 2008 are in the wait and see category.  Others are coming up with new innovations and ideas which, unfortunately, most financial institutions consider to be green field.


Resistors (25%) – This group is resistant to change whether that change is good or not. An example is those who completely don’t want to do business on the phone.  This group may have knowledge and experience acquired in the past.  Such knowledge should be synthesized so that it informs and add value to early adopters. Farmers and traders who resist belonging to a farmer group have had bad experiences with groups and cooperatives.  Some have legitimate reasons for resisting contract farming although there are positive aspects in contract farming. While there are many examples of farmers and traders benefiting from working with banks, we still find a big number of resistors who need to be skilfully convinced.

A key strategy for knowledge brokers is working with early adopters (25%) while trying to influence the wait and see (50%) and resistors (25%).

How this extends to innovation

The same way of looking at people can be extended to innovators. From a recent discussion with a friend based on Australia, we identified following categories, irrespective of colour or race:

  1. Two and half per cent of every population comprises innovators (these are the crazy ones considered mad by policy makers and other members of society).
  2. Twelve and half per cent are the clever ones.  These don’t quickly take the risk but travel around looking for ideas to copy, mostly from the crazy ones.
  1. Eighty five per cent (85%) – This group will change when things become fashionable.  They don’t want to be left behind.

The first and second group should be targeted for influence in any intervention. The third group will eventually get involved through self-adoption.  In a world where resources are dwindling, understanding people has a bearing on resource allocation and success or failure.  In almost all institutions, it is better to spend time identifying adopters (two and half per cent), the clever ones and resistors.  It takes time to discover that you have bumped into resistors and, in most cases you will have wasted a lot of resources. Most of the clever people in institutions have devised ways of working around their bosses – tell the boss what s/he wants to hear.  Developing countries are at a stage where they need more ‘crazy’ ones or early adopters who are ready to take risks. / /

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eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6.

How the devil is in the details of an agricultural warehouse receipt system

How the devil is in the details of an agricultural warehouse receipt system

Attempts to unlock the potential of  agriculture in Zimbabwe and other African countries have seen concepts like ‘agricultural commodity exchange’ and ‘warehouse receipt system’ coming into discussions by policy makers, financial institutions and development partners.  However, these concepts have proved easier said than done.  A commodity exchange may be easy to understand since it basically entails commodities of equal value being exchanged. More than a decade ago, Zimbabwe used to have the Zimbabwe Agricultural Commodity Exchange (ZIMACE) which focused on trading three crops only (maize, wheat and soya bean) from a few commercial farmers. Efforts to revive the commodity exchange have been on the drawing board for the past two years.  Given the new agricultural dynamics where more than 40 different agricultural commodities are produced by hundreds of farmers across the country, the new ZIMACE should have a new complexion.  This is a story for another day.  For now, let us move to the warehouse receipt system.

26 October 1

Unpacking the notion of a warehouse receipt system

A simple description of how a warehouse receipt system functions is this: A farmer delivers commodities (say, maize) to a central warehouse and s/he is given a collateral certificate (receipt) that s/he can present to a bank.  Since commodities (maize) delivered in the warehouse work as a bond, the bank is comfortable extending  a loan to the farmer so that the farmer can buy inputs as well as meet other needs. Once commodities are sold, the farmer’s loan is repaid directly to the bank by the warehouse receipt system management, with the farmer receiving some change.

Where things start getting complicated

Generally the notion of warehousing has to do with a fall-back position or a back- up food system.   After estimating the amount of food a household requires for a season, each farmer decides to store and warehouse surplus as a way of sustaining food availability over a long period of time.  In the case of businesses, warehousing is meant to sustain a certain level of stocks (commodities) so that the business is able to consistently meet customer needs. That is why each business takes re-order levels seriously.

In a properly organised marketing system backed by accurate production projections and assured availability of commodities when required, businesses and farmers or consumers have the luxury of keeping stocks in their warehouses very low. It takes resources to keep commodities in a warehouse.  If a farmer can easily access some food items all year round after selling three quarters of his/her maize just after harvesting, the farmer can rely on the market for future household consumption. Selling commodities soon after harvest allows a farmer to re-invest in other income-generating projects like poultry or piggery, resulting in more income.

However, because farmers are not certain whether they are going to get the same food items in the market and realize income, they tend to try and keep enough food to last six months.  This uncertainty, of getting commodities at the same price, leads to farmers remaining anxious about matching production and the market.  As long as the opportunity cost of selling is greater than warehousing, farmers will prefer warehousing at household level up to the next season instead of selling and later buying from the market.  For example a farmer who sells two tons of maize after harvest, can earn $400 plus an extra $200 earned from investing in an income generating project. If the same farmer later tries to repurchase the same two tons of maize from market at $700, it means the farmer has incurred an extra $100 cost to repossess the same two tons.

On the other hand, if a farmer presents his or her commodities as collateral to the warehouse receipt system at $250 a ton and goes on to get a loan of $500 from a bank at an interest of 10%, the farmer will repay a total of $600. If it happens that during the time his/her maize is in the central warehouse receipt system the price goes up by 10%, the farmer will realize $550, meaning s/he will need to top up another $50 to settle the loan.  This means a challenges for the warehouse receipt system is anticipating charges that may eat into expected price increases, worsening a farmer’s position upon repayment.

Another scenario relates to lost opportunity cost that comes with warehousing, where a farmer is locking expected income streams in warehoused commodity.  For example a farmer can sell two tons of maize on the open market upon harvest and earn $500, allowing him/her to engage in income generating projects that will earn him/her an extra $200 in six months.  If the farmer gets a loan from the warehouse receipt system at an interest of 10%, s/he repays $600.  This means during that period the farmer will have lost $100 that he would have earned by selling commodities on his own just after harvest and re-invested in other income-generating projects.

It is possible that if a farmer is allowed to sell two tons and re-invest in other income generating projects, s/he should be given an extra loan of $500 using other forms of collateral such as cattle. The income from the sale of maize and investing in other income generating projects will be used to repay the loan.  In six months the farmer’s income will be $700 and that of the loan to be repaid will be $600.  The farmer can repay the loan and remain with an extra $100 as well as commodities in the field still secured by the already repaid loan.

In the warehouse receipt system, who makes critical decisions?

Once s/he delivers to the warehouse, the farmer might continue speculating and anticipating favourable prices while the bank will be expecting its loan repayment.  The farmer will be forced to sell commodities when s/he is still expecting prices to rise. Since the warehouse receipt system has no control over the external market, will it make enough profit to be able to meet costs related to fumigation, storage, security, transport and others?  One commodity can be transported to a central warehouse only to be re-transported back to the same community as people buy back the same commodity.  Who will bear these costs?  Who will make decisions to sell and manage the system?  Who ensures quality remains the same in a warehouse?  The whole logistical and management system has costs that have to be fully understood.

There is a loss of ownership of commodities by the farmer once s/he delivers to the warehouse. In the event of a drought, farmers who will have used commodities as collateral will not be able to afford the same amount of commodities they will have put in the warehouse.  This means the burden of warehousing is shifted to the farmer.

Dealing with relationships between commodities

In most markets, agricultural commodities have unique relationships which have to be understood before introducing a warehouse receipt system or a commodity exchange. Some commodities move in pairs while others act as substitutes.  If you lock soya bean in a warehouse receipt system and influence its presence in the market, sunflowers and other oil seeds can take the place of soya bean as consumers adjust to what is available in the market.  If you lock sweet potatoes, some consumers can substitute sweet potatoes with pumpkins and butternuts.  The warehouse receipt system may not have sufficient control on consumer tastes and behaviour.

26 October 2

As complementarity commodities, leafy vegetables and tomatoes tend to go together.  In addition, most field crops move with vegetables as relish.  If you lock field crops like maize, farmers are left with horticulture (relish) and meat (beef, chicken), etc.  Since most commodities targeted for warehousing may be basic necessities and staples, locking these commodities in a warehouse may deprive communities of their staple and disrupt local food baskets. As an experiment, the warehouse receipt system may be introduced in cash crops like cotton and tobacco where farmers can be availed inputs while prices of these commodities firm up.  A lot of work still remains to be done on practical aspects of the warehouse receipt system. The system has failed in a number of African countries due to lack of thorough analysis and understanding of agricultural commodity dynamics.

Here is an alternative model

Since buyers and processors may not have enough cash all the time, it would be better to introduce a tripartite arrangement involving the farmer, the buyer and the bank.  Farmers can supply commodities to the processor or buyer at an agreed price.  The bank pays the farmer so that the farmer goes back to the farm while the processor gets busy processing while the buyer gets busy selling. The buyer and processor pays the bank as commodities and processed products are sold. This arrangement takes care of the usual problem where smallholder farmers do not want to wait 21 to 30 days for payment.  Banks and processors or buyers don’t mind waiting that long for payment.

Where we have 21 – 30 day repayment periods the farmer will be idle, waiting for payment while the buyer and processor will be the only ones active.  The tripartite arrangement enables bot the farmer and processor/buyer to be active simultaneously.  Once the system is fully functional, all the three actors will be active.  The processor/buyer will be busy repaying the bank, the bank will be busy disbursing to farmers while the farmers will be busy producing and supplying to the processor/buyer.  Besides locking money in the system, this arrangement has an in-built collateral mechanism tied with flowing commodities.  The arrangement can be extended to 3 – 6 months so that as the farmer produces according to a production calendar, the processor has time to process and be ready for commodities.  The facility can also vary with commodities depending on production calendar.

This model rides on margins in each business model not on the principal loan.  The process will be able to pay the loan and allow every actor to remain with some margin after value addition.  The bank should be able to pay farmers with a small mark up. If commodities are worth $1000, the bank pays the farmer $1100 so that the farmer makes a mark-up of $100. The processor/buyer sales at $1400 and goes on to repay $1200 to the bank. This means the buyer/processor gets $200 profit while the bank and farmer gets $100 each.  The processor/buyer gets slightly more to cushion against handling and uncertainties in the market.  This is a win-win situation.

Most of the maize in Zimbabwe’s informal market is wanted by processors but because the processors do not  have ready capital, the commodities are in the informal market where the price may be beyond what the processor can afford in order to stay in business. We have to re-discover our collective relationships if agriculture is to drive the economy. / /

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eMkambo Call Centre: 0771 859000-5/ 0716 331140-5 / 0739 866 343-6.