Invisible trends and emerging good practices in African Agriculture – 1

Attempts to use African agriculture as a catalyst for economic revival and growth have focused mainly on mechanizing production and luring young people into farming. While there is nothing wrong with such efforts, lack of attention to other agricultural value chain nodes has seen new commodity brokers and traders quietly setting themselves for success through picking their spots in agricultural ecosystems, finding the right partners, and leveraging their competencies to rewrite rules of food demand and supply, almost unnoticed.

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The evolving role of open “informal” markets

Through its work in African food markets, eMKambo is witnessing the birth of new value chain actors who are inserting themselves in agricultural ecosystems, filling the gap between formal and informal niche markets. Such niche markets stretch from household, community, restaurants/eating places, food courts, supermarkets and hotels. Some households constitute a certain class with a defined food basket (something akin to pick and go).

Besides transforming the way consumers, financiers and entire national agricultural industries view food, these fast, dynamic and ICT-driven commodity brokers are also changing the role of big, dominant informal open markets like Mbare in Harare, Soweto in Lusaka Zambia, Lideta open air street market in  Addis Ababa , Lilongwe Central market, Makola market in Accra, Mercado Central Market in Maputo and many others. These big markets are now being forced to use their convening power to aggregate commodities from diverse production areas including from other neighboring countries.

Redefinition of commercial commodity broking

Where supermarkets used to obtain commodities from contract farming models and a few registered formal commodity brokers, the increasing diversification of consumer classes and food preferences is spawning diverse small niche food buyers and suppliers.  Consequently, the new competitive environment is making it expensive for registered commodity brokers to accurately make sense of the needs of diverse consumer classes. To a large extent, commercial commodity broking has been broken into individualized smaller commodity brokers who understand niche markets and consumer requirements.

In addition to a smaller and well-defined distribution pattern, these actors use appropriate packaging features as per customer requirements.  This new class of commodity brokers comprise individuals who are networked, passionate about food and knowledgeable about food and nutrition. They also play an advisory role and bring knowledge in food science, nursing, nutrition and others professions which enable people to have their food and health in their hands. These agile commodity brokers are also connected through religious circles, work places and have networks within a certain class of consumers in specific residential areas. Some of the consumer networks are being built through social media platforms like Whatsapp groups that bring together people with the same interests – providing an opportunity for enterprising commodity brokers to introduce business cases.

Resetting agricultural competitive landscapes

Connectivity, through ICTs, and ubiquitous transportation is accelerating activities of these commodity brokers and enabling them to challenge traditional value chains and vertical integration arrangements that have traditionally created barriers for small actors with limited resources. As these actors jockey to deliver distinctive propositions to diverse consumers and end users at scale, they are building strategic relationships rooted in a deep understanding of underlying client needs and delivering commodities in ways that cut across traditional silos. What was once a predominantly vertical model organized around few value chain actor classes and well-defined functions is being transformed horizontally to build greater alignment with the needs of diverse classes of consumers.

By creating new layers of productive action within formal and informal agricultural markets, these new agile commodity brokers are triggering demand patterns from consumers to inform production. For instance, they are now influencing demand for high value commodities like ginger, peppers, garlic, broccoli, strawberries, baby marrow and others. From an aggregation perspective, these actors are minimizing the need for durable physical structures as the commodity brokers to move around identifying needs and mobilizing commodities.

While aggregation centres remain important, more fundamental is a system of tracking consumer trends, tastes and preferences through fluid pathways.  This is where a knowledge broker and catalyst becomes critical in lifting farmers from the weeds so that they negotiate and structure their relationships with consumers and powerful value chain actors. The absence of a catalyst or knowledge broker sees farmers continue to produce cabbages and leafy vegetables when consumers need high value commodities. Very few farmers are aware that tastes and preferences are now influence demand more than volumes supplied to the market.

Space for new winners among farmers and commodity brokers

In order to keep up with the pace of change, farmers have to build strong relationships with dynamic commodity brokers who understand the demand side at a granular level. While different value chain actors are doing what they are good at, they are unknowingly preparing the ground for the rise of innovative insurgents that are either establishing more specialized niches or forging productive alliances with bigger players like processing companies. On the other hand, the market on its own is not able to inform farmers about changes in consumer preferences without agile informal commodity brokers.

In the current scenario, there is no need for several aggregation centres but few large ones like Mbare which act like one-stop shop, big enough to enjoy economies of scale.  The smaller the market, the higher the fixed costs. What is more appropriate now is a big aggregation centre and many fluid distributors who can take commodities from the aggregation centre like Mbare or Malaleni straight to end users. Creating many aggregators within the value chain increases costs and double handling.

Food vendors already have their own market while the new agile commodity brokers are serving the middle class consumer between the poor and the very rich. These middle class consumers do not want to buy from the supermarket but also don’t want to go to Mbare while preferring the freshness of commodities associated with Mbare. The new broker is also satisfying middle class needs and offering food as a service.  They are also creating new partnerships and ecosystems. As food market trends continue to gain momentum and become progressively inter-connected, an accurate reading of the market and its potential has never been so critical for farmers and other value chain actors.

Providing a new gear for financial inclusion

The new agile commodity broker is joining together all modes of payment, within African informal open markets that are largely cash economies. Fast and fluid commodity brokers can get money from the bank, invoice big or institutional buyers, buy in cash from the farmer or use mobile money when dealing with farmers and traders. Through fluid semi-informal activities, they scaffold inclusive financial models.  They are also linking with exports through adjusting local commodities to suit regional and export markets. In Mozambique, the famous traders called Muqueristas are adept at catalyzing regional trade.

 

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

Why linking farmers to the market is not enough

In spite of millions of dollars that have gone into market linkage initiatives in developing countries over the past few years, farmers still struggle to sell their commodities profitably. Post-harvest losses have not gone down, gluts continue to alternate with shortages and relationships between farmers and processors have not improved. This suggests market linkages is half the story unless the entire agricultural ecosystem including financial liquidity in different markets is fully understood.

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The ‘myth’ surrounding farm gate price

One of the critical issues that has not been solved through market linkages is the difference between farm gate price and market price. This is not only vexing smallholder farmers but some of the most sophisticated commercial farmers often struggle to determine their farm gate price in ways that ensure profitability. The notion of farm gate price does not seem to exist in most smallholder farming communities because each farmer may have a different price depending on distance to the main road and local markets, among other factors. Many farmers who call eMKambo asking for prices of different commodities use feedback from such enquiries to try and set their own prices.  This implies farm gate prices are not readily available but externally-determined in ways that expose farmers to manipulation.

Profit-oriented budgeting as instrument of negotiation

Disputes surrounding contracts between farmers and contract companies stem from the fact that contractors have most of the information for accurate decisions making. For instance, they know their profit margins while farmers are not privy to most of these details.  Ideally, market linkage interventions should ensure farmers have their own negotiation instruments which they pull out when negotiating contracts with private companies. Since most farmers do not have information on up-markets and the entire agricultural ecosystem, this fuels their suspicion that whoever comes to buy from them is going to make a killing through abnormal profits.

In an unregulated market, middlemen cannot resist the temptation to take advantage of uniformed farmers. There is need for a partnership model in which profit-sharing models are embedded, clarifying information about formal and informal markets. The open market tends to be more transparent than other markets because everyone can see what is going on. If the price is unviable farmers cannot force a trader to take more than 20 crates of tomatoes.

All contracts should have enough flexibility that takes into account market variations. The time lag between signing a contract and marketing should be carefully factored in. This issue can be legislated to accommodate price variations. For instance, it can be set at between 10 – 30% such that if the market goes down, farmers can receive 10% bonus and if it goes up, farmers can receive 30% bonus. This arrangement should also consider other external factors like inflation, costs of inputs during production and other variable costs. For instance, the cost of labor can suddenly increase and affect the original contract.

Benefits of fluid budgets that accommodate the changing economy

At the moment, it is not known how much a farmer should put in to make a profit in potato production from different production zones.  Budgets should not be generic but tied to specific niche markets like processors, food chain stores or informal markets. Some buyers end up offering low prices due to costs incurred along the value chain.  All elements of production should be put together and scenarios provided, taking into account different elements. For instance, farmers should look at options in case they see viability in providing their own transport, packaging and different sources of labor.

In almost all African countries, crop budgets are set per hectare without looking at other elements that are sources of differentiation. Budgets should be fluid to accommodate the changing economy.  For instance, fuel and electricity costs keep changing and this should be factored in. On the other hand, farmers who do not use electricity to irrigate have different costs from those who do and that translates to different profit levels.

A system of managing, tracking and updating production budgets for different contexts is important. The return on investment (ROI) in each production zone should be clear. Currently, there are no elements or mechanisms for price negotiation or control in horticulture, taking into account issues like distance, road networks and other factors. In Zimbabwe, a budget for Mazowe and that for Nyanga cannot be the same if the commodity end up sold in one market like Mbare in Harare.  However, Nyanga may have superior climate like good soil and technology for potatoes compared to Mazowe, such that even if Mazowe can be closer to the market, Nyanga farmers can still compete and be profitable.  Nyanga may require different inputs from Mazowe in ways that make both places profitable in different ways.

Farmers should be empowered to evaluate information and knowledge for correct decision making. The breadth and depth of existing knowledge networks from production areas to diverse markets should provide a stronger social safety net for farmers. Different markets can provide dependable information nodes and networks where it is possible to know demand patterns of various commodities. Consumers, farmers, transporters, small scale processors, caterers and other actors would not be flocking to informal open markets if these markets were not dependable.

The significance of understanding different transaction modes

Beyond market linkages, classifying niche markets can enable farmers to make sense of different  transaction modes. While the open market tends to prefer cash, different transaction modes have their advantages and disadvantages. A buyer who pays farmers after 30 days gives consumers time to buy. It takes 30 days for traders and retailers to pull income from different consumers and put a little mark-up. The time lag between selling and consumption has to be understood by farmers, most of whom want to be paid immediately and pass on all risks associated with the slow movement of commodities to traders.  The trader ends up waiting for consumers to buy before returning to farmers for repeat purchases.

Why should financial institutions understand these market dynamics?

Financial institutions need to understand these dynamics if they are to remain relevant in agile agricultural ecosystems. For instance, they need to know that aggregators or traders who buy agricultural commodities from diverse farmers and supply in bulk also require long-term finance so that they can sustainably satisfy different niche markets. Such long-term financing should have a component of exploration. A trader should be able to use that money for market research like visiting regional and international markets to find out gaps and needs. Unfortunately, at the moment, most financial packages in Africa do not have a component of exploration and capacity building. The assumption is that the borrower has already done research using his or her own resources yet circumstances are rapidly changing such that continuous evidence gathering will benefit every actor.

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

Questions that must be answered before poor countries import or export food

In the absence of evidence-based agricultural policy formulation and implementation, most developing countries always rush to import food without sufficiently understanding their national contexts. During gluts, farmers in areas where fruits are produced in abundance do not benefit from selling nationally compared to when there are shortages.  On the other hand, when the price of a commodity goes up due to shortages, we cannot conclude that farmers are getting good prices because such supply shortages may result from the seasonality of the commodity.

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As long as policy makers are not able to spread the supply of a particular commodity around the country, decisions to import that particular commodity will be uniformed. That is why market-oriented budgeting is critical in showing the best price for a farmer to break-even, indicating excess or shortages of different commodities. Unless we know the best price for an orange or tomato, it is difficult to see if farmers are incurring losses or earning profits. Equitable distribution of horticultural commodities across the country can show volumes during gluts and how much could be preserved to cover shortage periods.

Supply side considerations

On the supply side, there is definite need for evidence before deciding to import commodities. Important questions include: What volumes of commodities are being produced and consumed at household and community level and what surpluses are finding their way to the market?  To answer this question, farmers and value chain actors should keep basic records to show supply trends from different production corridors.

Most African countries are famous for producing a diverse range of commodities, mostly during different seasons. The commodities range from different types of livestock, crops such as small grains, legumes (beans, groundnuts, cowpeas, etc.,), fruits (exotic and indigenous), vegetables (exotic and indigenous), maize, wheat and non-consumables like cotton and tobacco. These commodities are produced on different land sizes from communal, resettlement, large scale to large estates.  A critical question is what role does each type of land play in producing food before a country decides to import or export food?  Unfortunately, it seems African countries have not invested in clearly aligning production systems to land sizes.  A large estate can be seen producing cabbages that should be produced in the backyards of peri-urban dwellers or gardens run by rural grandmothers.

In addition, each country has different agro-ecological regions that support the production capacity of various commodities. For instance, some regions are associated with horticulture while other are known for fruits and yet others famous for livestock. This categorization provides a broader picture showing the way supplies of different commodities can be organized. Some regions have high production capacity for specific commodities. Regions with lower production capacity for particular commodities are the demand targets, ensuring better returns locally. Once a commodity is in abundance, it does not have a market where it is produced abundantly. For instance, in Zimbabwe bananas do not have a market in Honde Valley.

Since most African agricultural production patterns are seasonal due to the natural characteristics of different commodities, no matter, the amount of research exerted, commodities like small grains cannot be grown during winter in East and Southern Africa.  Wild fruits, due to their natural characteristics, are always in and out of season. The availability of irrigation can see some commodities like green mealies being grown all-year round. The potential of irrigation to address seasonal availability of food is now well known but not fully exploited as countries feel more comfortable to import food at the slightest sign of food shortages.

Demand side imperatives

The majority of African countries are witnessing a growth in different socio-economic classes and this is driving changes in consumption patterns, tastes and preferences. These tastes and preferences can be further broken down according to age, gender, health consciousness literacy and location.  High mobility within the local population is also creating and expanding markets for different commodities. For instance, people who come from Chipinge district of Zimbabwe where they grew up eating yams called Madhumbe but now stay in Harare have created demand for Madhumbe in Harare. Those from Muzarabani district where they grew up eating Masawu and now live in Bulawayo have promoted the consumption of Masawu in Bulawayo, cultivating a new market for the commodity.

Another telling trend is rural urbanization. With urbanization spreading to rural areas across Africa, most facilities that used to be a preserve of cities are now found in most rural areas. Such facilities include electricity, transport networks, food processing enterprises, retail businesses and other services that are creating wage employment in rural areas.  Financial institutions like banks and micro finance institutions are also picking their spot in rural areas.  All these trends are influencing consumption patterns in rural areas. Given this shifting landscape, there is need for decision makers to answer these questions:

  1. What are the price trends in different markets? This should inform a comparative analysis between prices in different markets, for instance the price of banana in Mutare and Bulawayo versus sources like Honde Valley. Tracking prices and sources will show the highest and normal price of a commodity.
  2. What are the break-even prices for different commodities? If there was an alternative market, which commodities would fetch better prices or economically reasonable prices, assuming there are markets where prices tend to be high?  What is the benchmark that can be used to compare prices in different markets?  After removing all marketing-related costs, it is possible that a box of banana that costs $3 in Mutare, fetches $15 in Bulawayo.  Unless we know bench mark prices that can enable farmers to earn profit, sustain or grow their business, it is difficult to tell which price is good or bad.
  3. What is the effective demand for different commodities? This refers to consumers’ willingness versus ability to buy a commodity.  Demand is not just general but related to consumers’ ability to afford a commodity because they have income that enables them to obtain commodities in line with their tastes and preferences.
  4. Who are the customers for different commodities? We cannot say everyone is willing and able to afford an orange. That is why consumers are defined by class, gender, location, age, ethnicity, religion, income class and other factors.  Not everyone wants to consume small grains, even if they may have income to afford small grains. That is why consumers have to be carefully categorized in order to create a food basket for different classes of consumers.  It is not just about importing food without understanding consumers.  If you are going to import wheat or grapes, which consumer group are you targeting?  Otherwise, you can spend foreign currency importing commodities for a small class of consumers who can even afford to import their own food. In a poor country like Zimbabwe how many consumers are interested in the importation of wheat?

The power of understanding all year round distribution and consumption patterns

In the event of a commodity’s price going beyond the reach of specific consumers like poor people or a commodity being out of season, what are the close substitutes?  If orange prices go up, what fruits do consumers buy in order to get the same satisfaction for the same budget?  The right questions can see consumers mentioning alternative substitutes and reasons for their choices.  Unless we understand all year round distribution and consumption patterns of different commodities, we cannot make informed decisions regarding exporting or importing food. Would consumers consider processed or preserved products of the same commodities and get similar satisfaction?  Since there are times when mangoes are in a glut, if we dry or produce juice during those periods, would consumers get the same satisfaction if the processed products are availed during shortages?  Would biltong give consumers the same satisfaction they get from fresh beef?

Have we exhausted all distribution channels for particular commodities to a point of at least getting break-even prices that enable farmers to continue farming?  Without such evidence, the country can import for one region or city when other cities and regions have gluts of the same commodity.  Are imports coming in as a way of outcompeting relatively high local prices due to shortages or high local cost of production?  Imports from South African may simply be attracted into Zimbabwe by higher prices being offered for the same commodity in Zimbabwe compared to South Africa.  It could be a cost push factor.  Shortages can be an advantage to farmers who produce consistently because there are times when they incur losses due to gluts and should be allowed to recoup their costs during shortages.

The cost-benefit analysis of exporting

If a poor country has surplus and considering to export, it is important to assess the cost benefit analysis of export different food commodities. Without this action, the excitement of earning forex can create local shortages, triggering increases in the price of local commodities.  We can unknowingly export potatoes but compromise the quality of local food (people eating junk low quality food when the best food is being exported). This can also compromise nutrition as necessities become luxuries.  What gaps are we creating as we export?  Is the foreign currency earned being directly channeled back into agriculture in order to improve agricultural competitiveness?  How do farmers benefit from their proceeds if foreign currency goes to the national pool? Why are tobacco farmers earning export returns in local currency when forex should be used as a store of value for their enterprises?  If farmers want to import chemicals, fertilizer and other inputs, they should be able to do it directly through their farmers’ associations than the forex being given to companies to import inputs on farmers’ behalf. When such inputs lend, they are more expensive as the importing companies want to earn more by charging exorbitant prices, way beyond the capacity of farmers to buy.

An important second action is determining steps being taken to ensure commodities move from high production areas to low production areas before we rush to import.  Managing the national distribution of food can translate to best return on investment (ROI) and ensure we tackle issues like nutrition and food security that ultimately affect the national budget if not handled properly.  As we distribute food, we need to rationalize food availability through equitable wealth and nutrition distribution in the form of food.  It is not ideal to leave communities in Binga consuming fish, those in Honde Valley consuming bananas and those in Chivi just surviving on small grains.

Food can really be a smart way of distributing wealth through commodities. There are limits to which development interventions and models from outside can solve local challenges. In as much as development agencies can pour money into district or provincial resilience projects, natural and external factors like climate change may set boundaries and limits of what can be achieved. Setting up agribusiness hubs in high production areas and close to food insecure regions can be a better solution than forcing dry regions to produce small grains, rehabilitate boreholes and keep livestock. What are the processing and preservation measures in place to cater for times of shortage and import substitution? Have we exhausted all processing avenues before rushing to import?  What infrastructure development plans are in place to ensure production and supply is consistent? To what extent have we reached the maximum capacity of our dams and irrigation schemes to the point of importing onions, oranges and apples?

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

How the knowledge economy is inspiring new roles and responsibilities

Developing countries that remain stuck in colonial governance structures and forms of business are sleeping-walking into all kinds of crises. Some of the colonial forms of business still being practiced in most African countries include sole trader (traditional enterprises), companies, cooperatives and partnerships which function through mutual agreement to pool resources and skills together for mutual benefit.

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While all the above are profit-oriented organizations, on the other side are non-profit entities like NGOs and government departments like parastatals. Some parastatals have more of a national security function than profit motive, especially those responsible for electricity, water, food security and public transport like railway systems.  Borrowing from colonial times, parastatals have traditionally been set up to provide affordable services to the majority who would otherwise be unable to access services like electricity if such services were fully commercialized. Services like water, public transport and national food security are necessities which have to be affordable to the majority.

 

Where parastatals like Zimbabwe’s Agricultural and Rural Development Authority (ARDA) earn profit, the main idea is to indicate that government services are not entirely free so that the majority do not become too dependent on government when they could fend for themselves. However, government safety nets have traditionally come in to cater for genuine social welfare cases.

 

Defining knowledge needs for the new knowledge economy

In the new knowledge economy, the above institutional arrangements and enterprises have to be revisited so that they become relevant to the context of high unemployment among youth and women, for instance. Many smallholder farmers and SMEs are striving to join the mainstream economy. While some of these bottom of the pyramid actors are in the process of commercializing, they have distinct characteristics such as lack of access to information and knowledge necessary for development.  Who is going to generate and share vital knowledge with these actors so that they are able to start and run their businesses profitably?

 

The government and parastatals cannot do so because they are more of administrators whose main roles include providing a conducive operating environment. For instance, the role of extension officers is to teach farmers to produce. They are not business people or business experts. Many government departments are not profit-oriented but get 100% support from the fiscus. They are motivated by budget allocations as opposed to profitability and market share. On the other hand, although parastatals may have some levels of commercialization, their mandate is providing key national services like water, energy and ensuring food security, for example the Grain Marketing Board. Parastatals are profit-oriented to some extent but they are subsidized by financial injection from the government.

 

The private sector does its own private things and purely for profit. NGOs and international development agencies focus on vulnerable households mainly to boost social capital. For instance, most international organizations and NGOs are not profit-oriented but have 100% access to free funds from donors. In most rural districts, NGOs select wards that have more vulnerable households and try to work with a specific number like 100 000 households for three to five years. However, there is no organization focusing on wards that have economic potential so that they anchor local socio-economic development.

 

The missing knowledge broker

Given the way information and knowledge tends to be siloed within different actors and institutions, as mentioned above, there is definite need for a knowledge broker who can generate and share knowledge that will uplift  people at the bottom of the pyramid onto commercial pathways up to the private sector. This role can be fulfilled by a social entrepreneur, who is currently missing in many countries. As a knowledge broker, the social entrepreneur will not only lift marginalized people out of the weeds and show them their future but, will also provide services that are subsidized with profit-orientation at the end.

 

Information and knowledge support services from the social entrepreneur will target groups at different levels of commercialization so that they get into the mainstream economy. Most smallholder farmers and others at the bottom of the pyramid will not be able to pay for critical knowledge on their own. Support from the social entrepreneur will not be permanent but will be stopped when a significant portion of those targeted are able to do meet their information and knowledge needs sustainably.

 

Using a socio-economic vantage point

As a knowledge broker, the social entrepreneur can see critical information and opportunities on both social and economic sides. As a result, the social entrepreneur will focus on integrating marginalized actors into  economic pathways while parastatals provide subsidized national services. Many smallholder farmers and traders in Africa are tearing themselves away from working with private companies that do not provide social services.

 

Development organizations and governments should identify and support social enterprises to avoid looking around for aid each time there is a challenge and promoting dependency.  Banks should also be keen to work with social entrepreneurs because that is how they can create a new bankable clientele base. In countries like Zimbabwe, more than 70% of potential bank clients are now in the SME sector, 40% of whom have been spat out by company closures and no longer have pay slips. Twenty percent (20%) of SMEs comprise the young generation who have never opened a bank account but started business with mobile money.

 

Another group comprises smallholder farmers most of whom have never opened a bank account although some could have had post office savings accounts which closed a long time ago.  All these are getting their money in cash through the informal market.  For Zimbabwe, there is also another cluster comprising A1 and A2 farmers who got onto the land more than a decade ago but have never been able to access  finance from banks due to the contested land issue. Many A2 farmers are also struggling to make 99 year leases bankable.  All commodities produced by these farmers over the past years are not linked to banks.  In addition, more than 95% of SMEs have been discouraged from formalizing by prohibitive company registrations.

 

Importance of unlocking entrepreneurship knowledge

Information and knowledge critical for entrepreneurship remains locked in institutions which cannot guarantee they will benefit from releasing their knowledge to clients. This is where the social entrepreneur becomes fundamental in brokering knowledge and skills from SMEs who are not working with banks and do not yet see the benefit of sharing their information with banks. When SMEs do not work with banks, they do not see the need to let the bank know their sales records.

 

When government supports parastatals and government departments such a budget is not converted into profit but is just spending. The same applies with NGOs which spend money and ask for more resources through budgets. Unfortunately, there is no pathway for extending free funds to the private player who is pursuing a profit motive but has to be cushioned in order to continue serving the under-privileged farmers.  This gap means there is no incentive for a private player to work in private-public partnership models. As a result, private players in developing countries continue to struggle on their own, government departments continue doing their thing, the same applies to parastatals and development organizations. Development organizations only come to the private player when commodities that they supported  farmers to produce are now looking for a market. Ironically, the private player is expected to come and buy these commodities, some of questionable quality, using his/her own money and transport irrespective of cost-benefit-analysis.

 

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

Reducing the gap between formal and informal economies

Narrowing the gap between formal and informal economies remains a big challenge for many African countries. Instead of increasing interdependence between the two economies, in countries like Zimbabwe, the gap between the two economies seems to be widening. As if that is not enough, academia, politics and financial institutions remain detached from society and the informal economy.  For instance, while more than 70 percent of active economic actors are now in the informal economy, this economy lacks finance and enabling policies. The shrinking formal economy continues to be controlled by colonial systems and constraints yet it still gets most of the resources from government and financial institutions.

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Dominant characteristics of the formal and informal economies

The two economies can be defined by the type of actors who dominate in each of them as shown below:

Formal economy Informal economy
Financial institutions – banks.

Contracting companies.

Manufacturing and processing companies.

Food chain stores – supermarkets.

Government institutions like hospitals.

International NGOs on the development side.

 

Micro Finance Institutions

SMEs.

Smallholder farmers.

Informal market traders.

Local transporters.

Community- Based Organizations (CBOs).

 

The above classification clearly defines two economies. While the informal sector constitutes the bigger part of the economy, there are proper pathways for supporting it. Whoever is trying to assist the informal economy faces the same challenges faced by informal actors.

Challenges emanating from colonial systems

As long as developing countries continue to hold onto colonial systems and forms of business, closing the gap between the formal and informal economy towards a hybrid economy will take many years. The following are some of the colonial systems that have to be revisited and contextualized:

  1. Formality continues to be defined by registration with government institutions such as the registrar of companies or with an appropriate department if one wants to operate a Private Voluntary Organization, a Micro Finance Institution or a bank. In a dynamic world economy, formality should not be defined by prohibitive and tedious registration processes. If registration was everything, shelf companies would be doing productive work.
  2. Emphasis on referrals should be re-examined – For instance, asking a loan applicant to get a letter from a previous client or employer is a very old fashioned requirement in a dynamic and fluid economy. It does not make sense to ask someone to get a letter from a former employer because where the employee was doing very well, the employer will certainly not be keen to endorse loss of talent to competitors in the form of knowledge and expertise.
  3. Collateral – It is now evident that although they lack colonial forms of collateral, actors in the informal economy continue to drive the new economy. The knowledge economy demands new forms of collateral. Insisting on traditional forms of collateral is meant to favor actors in the formal economy who have run out of ideas but continue to receive financial support.
  4. Long application and approval processes – There is often no guarantee that loan applicants who go through time-consuming loan application and approval processes will get the funds. The application form is used as the only tool with no consideration for building relationships and trust as part of laying the business foundation upon which funding can then be extended. Everyone is given the same application tools irrespective of different business cycles, knowledge, ambition levels and vision for the future.
  5. Selective quality and standards – Everyone now knows that quality is important in a competitive world. However, where you get a high quality product there are definitely second and third grades. Unfortunately, formal contractors tend to ignore the other grades in preference for first grade as if it is possible for a farmer or SME to produce first grade only. When formal buyers do not provide alternative markets for lower grades, smallholder farmers end up refusing to work with formal buyers but creating their own market (informal) where all grades have a market.
  6. Prohibitive measurements – By stating that they start buying from 30 tons of groundnuts upwards, formal buyers create barriers to entry for smallholder farmers who cannot manage to supply such volumes individually. This requirement creates barriers to internal trade to the advantage of big formal actors who can easily get money from the bank to the disadvantage of small actors who remain marginalized.
  7. Payment modes – Sellers to formal companies are not given choices like payment in part cash. In what is tantamount to a take it or leave it scenario, formal companies insist on bank transfer as part of their policy.
  8. Payment terms – The payment terms are determined by formal buyers whose policy can stipulate that payment is done after 14 days. Even if your commodity is bought by consumers before you leave the supermarket or processing company, you will receive your payment after 14 days.

From business proposals to business cases

In the formal economy, there is still emphasis on proposals, business plans and financial projections irrespective of the fluid and dynamic nature of the modern economy. Unfortunately, by the time you present financials for funding the situation will have completely changed and that means financials for the previous two years may be meaningless is such an environment. It makes more sense to focus on business cases and adapt as things unfold than try to present a proposal complete with cash projections when what’s written on paper changes before the ink has dried.  Creating new legislation and laws which do not exist at the moment will go a long way in increasing overlaps between formal and informal economies.

Easy of doing business

Before considering creating an easy of doing business environment for external investors, it is critical for policy makers in developing countries to enable easy of doing business for internal actors. Bureaucratic systems that are part of the formal colonial economy will not be able catch up with fast and fluid economic fundamentals. That is why formal economic actors are having to rely on prohibitive government policy in order to compete with the informal actors.

 

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866

Balancing gender with technology and rural industrialization

Developing countries that have made commendable strides in using formal education to avail equal opportunities to men and women still have a lot of work to move beyond white collar opportunities. While scores of women are now occupying managerial positions that used to be monopolized by men, a formula is yet to be found for extending opportunities to women in low income jobs that are mostly labor-intensive.  For instance, agricultural technology has remained gender blind to the disadvantage of women who do most of the labor-intensive duties.

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However, the informal sector has done its part in generating women-friendly technologies and tools such as small scale peanut butter machines, soap making machines and machines for producing French fries for sale and household consumption. Although these machines and tools are still being improved, the informal equipment fabrication industry has revealed the extent to which mechanization and industrialization initiatives in most developing countries have ignored the needs of low income women and men whose economic contributions are in the form of manual labor.

Technological needs at the Bottom of the Pyramid

The majority of people at the Bottom of the Pyramid try to eke a living from agriculture. Unfortunately, national mechanization strategies have not developed close substitutes to the ox-drawn plough and the hand hoe which remain symbols of smallholder agriculture. In many households, men continue to use the plough for planting while women use the hoe to weed and replant when germination is poor. There have not been meaningful efforts to develop technologies that can enable men and women to cross traditional gender roles in agriculture. With most men leaving for mining and other opportunities, agriculture is now a domain for women and women-headed households but equipment manufacturers have not responded to this critical socio-economic trend.

Naturally, there are labor-intensive roles that can be fulfilled by men, for instance, on the agricultural production side.  Traditionally, there were also roles defined for women, for instance, winnowing and weeding while men focused on ploughing. These roles were defined according to the physical nature of men and women. Technological development has not addressed the physical expressions and requirements of men and women in ways that enable crossing of physical barriers so that women can do duties that were previously male-dominated.

Some women roles have remained locked in specific agricultural value chains like groundnuts, small grains and indigenous poultry. Unfortunately, technological developments have not followed these value chains which give women a sense of ownership and decision-making power.  For instance, the whole production, processing, preservation and marketing of small grains has not been improved from a technological perspective.  Women continue to face the same traditional burdens yet wheat, which is also a small grain, has become highly mechanized because it is a male-dominated value chain.

Technology as an expression of power

Where men become heavily involved, they end up exercising more power in decision-making because their input will be more than that of women. When mechanization and technology development initiatives support commodities like maize, wheat, sugar cane, tobacco and soya bean which need large land sizes, men end up controlling decision-making because they will be heavily involved. For instance, men can decide to buy machines like combine harvesters and sophisticated irrigation systems because they will be intuitively aware of what needs to be done in order to maximize production and productivity.

 Failure to recognize women as originators of recipes and innovations

In spite of women being originators of most food recipes, industrial technologies for adding value to agricultural commodities continue to marginalize women from the economy. As commodities go up the ladder, women recipes are hijacked by men who end up owning restaurants, food chain stores and beverage companies.  As if that is not enough, development organizations and gender activists whose main mandate is improving the status of women have failed to commercialize feminine ideas. They just support women to exhibit their recipes and ideas at food fairs and agricultural shows where men poach the ideas and commercialize them.

Women ideas are also limited in terms of finance where financial support to women still largely depend on approval from men (loan officers and husbands). Even if women own their own enterprises, once their husbands guarantee access to loans, the men end up controlling the business. It seems African countries have not done enough to enable women to independently make investment decisions without the approval of men and a whole male-dominated business culture. As if that is not enough, where technology is available, men tend to have better technology than women. For instance, the husband can have a smartphone while the wife has a lower class feature phone.  That means if 90 percent of women have feature phones, they cannot access or share information that requires a smart phone.

Toward women-centred value addition and rural industrialization

Modern rural industrialization should be about working with value chains within an ecosystem rather than transporting commodities from rural to cities and then export countries.  Such a colonial model has continued to lock women at production level and restrict their participation in value addition yet they are the generators of recipes.  Women cannot continue to be consumers of finished products processed outside when they could easily input their knowledge in the entire production and value addition process. Developing countries have to dumb the colonial value addition notion where agricultural commodities had to move from farming communities to districts, then to national levels and then exported to other countries. In the new fluid economy backed by data, commodities should move within Communities of Practice (CoPs) where different layers of value addition can easily happen.

If women are empowered through technology, they can produce and modernize different products and pack diverse natural foods. Urban industrial technologies have caused some commodities and sources to lose their identity, with the final product being associated with manufacturers while the original producers become invisible.  This can change if women are empowered with value addition technologies in rural areas where they stay.  At the moment it remains difficult for most women to follow their groundnuts or small grains to the city where more benefits accrue to male-dominated manufacturing industries.

Under the current industrial model, the price of value added products increases from urban to rural areas when it should be the other way round. For instance, potato crisps which can cost $1 in the city, cost $2.50 when they reach rural areas. Processing at source will reverse this pattern and ensure the price of finished commodities increase as they leave rural areas for cities and export markets.

How can technology tap into women’s intangible knowledge?

When society insists on knowledge being expressed through tangible assets like machines, it limits the expression of intangible knowledge which is mostly intrinsic in women. Male knowledge is more visible and tangible while feminine knowledge is more intangible and informed by intuitive wisdom. Intangible knowledge explains why women have powerful copying strategies. While men may be thinking about food in its physical form, women will be thinking about how to quieten a hungry child. In countries where social safety nets are absent or weak, social issues move from national to household levels where women are in the forefront of coming up with copying strategies using their intangible knowledge.

The promotion of Science Technology, Engineering and Mathematics (STEM) in many developing countries is a very noble idea.  However, to what extent will STEM address gender imbalances? Are there roots showing how STEM is going to assist ordinary women in the street and marginal communities? To what extent can STEM be informed by Indigenous Knowledge Systems in developing countries?  If not grounded in the needs of the majority, STEM will only go back to assist formal industries and reinforce the prevailing socio-economic injustices.  Rural women will continue to process small grains using pestle and mortar while men own and control processing companies.

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

Giving scientific knowledge an indigenous face in developing countries

The intersection between health and nutrition continues to be a gray area for ordinary people in many developing countries. There have not been serious efforts to develop appropriate ways of sharing nutrition knowledge with the majority. For instance, formal education systems have not done enough to move health and nutrition from being understood as a science to practical aspects of people’s daily lives. Science related to health and nutrition has only been slightly extended to society through students who enroll to study medicine, veterinary science, nutrition and other related disciplines.

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In health institutions, nutrition knowledge continues to be locked in health personnel like doctors and nurses who can only share it through surgeries, clinics and hospitals when they give prescriptions to patients. It means, unless you become a patient you may not have access to some of the critical knowledge. The public remains unaware of nutrition issues. For instance, when a relative is admitted in hospital, they bring bananas, oranges, apples and other fruits but they have little sense of what these fruits contain in terms of nutrition and what they contribute to the patient’s healing process. If they were  adequately informed from a nutrition perspective, they would bring appropriate fruits for their patients.

 The curse of imported terminologies

While importing scientific knowledge may not be a bad idea, it has to be followed by rigorous ways of  simplifying science and nutrition through developing appropriate terminologies that ordinary people and consumers can relate to their daily lives.  For instance, terms like Iron, Zinc and Vitamins A to E do not have local equivalent explanations. As a result, people wonder what is the difference between Iron as steel and Iron as nutrition or whether these are related? Another confusion is the difference or relationship between Zinc as nutrition and Zinc as roofing material. As if that is not enough, people use alphabets every day but what is the meaning of vitamin A, B, C, D and others?  These are some of unanswered questions among consumers and ordinary people. In the absence of meaningful answers, they end up living with beliefs and trust in the people giving them prescriptions. They also end up relying on religion.

On the livestock side, developing countries have range of indigenous and exotic livestock breeds.  However, there is no clarity on the nutrition differences or similarities between turkeys, ducks, guinea fowls, pigeons, indigenous chickens, broilers and layers.  People wonder whether different poultry species have different nutrition content. For instance, if a layer is cheaper in price compared to a broiler, how much of a layer’s nutrition goes into the formation of eggs?  Given the emphasis on white meat, what is the meaning of that white meat to ordinary people? What is the difference between poultry, pork and fish from a nutritional perspective?  To what extent is fish a substitute of pork?  What quantities of fish or pork would be give the same nutrition levels as other specific foods?

Enter food fortification

One of the terminologies and practices imported by developing countries without asking critical questions is food fortification. This practice is being promoted by development agencies and ministries of health. Food fortification is defined as the process of adding minute levels of vitamins and minerals to foods.  It involves addition of one or more micro-nutrients during conventional crop breeding (bio-fortification), food processing (industrial fortification) and food preparation (home fortification). This is done  irrespective of whether the micro-nutrient is present or not in the said food to increase micronutrient intake in a population.  Micro-nutrients such as vitamins and minerals, are said to be needed in the body in small quantities for protecting the body from illness and diseases.

Benefits of food fortification are said to be that it helps in addressing micro-nutrient deficiencies, improve cognitive development and future productivity, reducing health care cost and improving health and quality of life for the population. In countries like Zimbabwe which have launched a food fortification strategies, the food vehicles for industrial fortification are sugar, cooking oil, maize meal, and wheat flour.  Sugar is fortified with Vitamin A, cooking oil with Vitamin A and D.  Bio-fortification is being done through breeding staple crops to increase their nutritional value.

Unaddressed issues on food fortification

Although policy makers have embraced food fortification, ordinary people have many unanswered questions. Some of the fundamental questions include: How do consumers balance bio-fortified processed foods with raw commodities like horticulture?  Assuming maize meal is bio-fortified with the same vitamins that are naturally found in leafy vegetables and other forms of relish, is not there going to be double consumption of the same vitamins for households who consistently consume maize meal and vegetables containing the same vitamins? How does science ensure ordinary consumers are able to balance the consumption of vitamins? Due to the way most households eat a complement of foods, over-consumption of some vitamins cannot be ruled out. If food fortification is really necessary, it should target commodities that do not have close substitutes or complementary effects.

Since bio-fortification is tantamount to changing food commodities from their natural states, how different is it from genetic manipulation towards creating Genetically Modified Organisms (GMOs)?  Why should communities not be empowered to preserve food commodities in their natural states?  Bio-fortification seems to have been imported from countries with limited food diversity due to extreme weather like severe frost in extended winters which render food production impossible. To what extent do countries like Zimbabwe that have more than 80 different kinds of natural food commodities need food fortification?  Isn’t it better to identify different nutrients in the diverse food baskets and promote their production vigorously than resort to fortifying a few commodities?

Towards nutrition sensitive food policies

Just as policy makers in developing countries are interested in national distribution of staple foods, they should shift their attention to equitable distribution of nutrition across the country. These countries continue to measure staple foods in hectares and tons while cash crops are measured in foreign currency earnings. Likewise, they should devise formulae for measuring nutrition security in which nutrition dense horticulture is dominant. Consumer organizations tend to measure a food basket for a family of six as dominated by maize meal, margarine, bread and cooking oil. All this is translated into monetary terms.  However, such a basket does not say anything about nutrition content. It also lacks horticultural elements like vegetables, tubers and legumes. Neither does it contain small grains. In addition, it does not show how the nutrition content of these foods substitute each other, given the seasonal nature of production systems and availability of natural foods. For instance, in most farming communities, a food commodity is available in abundance at one time and the other time there is nothing at all.

African countries strive to build silos for maize and wheat but they are not building equivalent food reserves for nutrition-dense commodities (mainly horticulture-related) to ensure availability of adequate nutrition all year round for all consumer classes. The issue is often left to private players who import some commodities in times of shortages but the imported food is stocked in up markets for high and middle income. When oranges are no longer in the mass market and imported for the up market, there are no policy measures to ensure consumers have access to fruits that provide the same nutrition components found in oranges.

A powerful starting point can be making consumers aware of which types of food have different nutritional elements. Consumers can then be able to choose whether to go for a fortified commodity or for a raw commodity.  In addition, there is need for deep research to other questions like:

  • How do communities understand nutrition components of foods they produce and their consumption patterns?
  • To what extent is nutrition a major determinant of a household’s food demand and consumption patterns?
  • How will a household know that consuming one commodity translates to the same nutrition content of the other commodity? For instance, how will a household know that consuming potatoes cane translate to the same nutrition as consuming sweet potatoes and other tubers?

Why food and nutrition requires a home-grown face

In a majority of developing countries, most foods are processed in cities and when they go back to rural areas, which are the sources of raw materials, the finished products are beyond the reach of rural consumers and smallholder farmers. A telling example is tinned beans which when value added becomes unaffordable to farmers who, ironically, grow the beans. A rural industrialization policy that promotes semi-processing or full processing of nutrition dense commodities is badly needed. At the moment, where some bit of processing is happening in rural areas, it is done by NGOs who work according to a project life span and selected beneficiaries. This does not promote mass production and availability of the processed foods.

On the other hand, it seems development organizations are not supporting the production and availability of nutrition baskets all year round. Their notion of community gardens tend to focus on exotic leafy vegetables like Covo, Chomoulier, Rape, Onion, Cabbage and other exotic crops. An angle for supporting smallholder nutrition gardens to produce nutrition baskets comprising diverse local vegetables, tubers and other foods is missing.

Due to the availability bias, most poor households consume indigenous crops, livestock and vegetables mainly because that is what will be available and affordable. Their consumption decisions are not informed by nutrition knowledge. In countries where nutrition knowledge has not been properly articulated, consumption patterns are also undermined by religion and other practices.  It is also critical for developing countries to align nutrition consumption to age, the working class, those doing manual work like construction workers and old people.  This could assist in addressing nutrition patterns.  Nutritional requirements cannot be the same for everyone irrespective of age, gender and occupation.

Importance of tracking processed foods and their after-effects

Very few developing have policy strategies for examining and tracking processed foods and their after effects. Given the proliferation of fast food chains and increase in the consumption of fast foods, it is important to monitor and track the nutrition content of fast foods and their related effects on consumers. This could be a critical health concern with effects on the national health budget. People are quietly eating fast foods with no consideration for nutrition. There is no debate and dialogue on fast foods in the same heat as debate and dialogue on GMOs. Each country needs to think about informed dialogue on fast foods, exogenous foods like broilers and others. This effort should not be considered down-selling of fast foods but generating public knowledge and elevating consumer awareness.  Consumers deserve to know the pitfalls and good sides of their consumption patterns and food choices.

Instead of importing food fortification and other notions that are driven by corporate industrial vested interests, developing countries should develop appropriate policies to empower individuals and communities with reliable nutrition knowledge. Ordinary people should be assisted to get knowledge, skills and resources needed to maintain their nutrition as opposed to top down approaches like food fortification. Digital and other technologies can be used to enable individuals and communities to identify their nutritional needs and play an active role in maintaining their own nutritional well-being.

Where is the media in promoting appropriate nutrition?

Radio, television and newspapers in developing countries have not been consistent in promoting nutritious food and indigenous commodities like domestic poultry and small grains. Media coverage for these commodities has remained rather ad hoc and sporadic, based on an individual reporter’s fantasies or interests. While there are dedicated programs like soccer and music in radio and television as well as regular pages on politics, soccer and music in national newspapers, there are no programs and pages dedicated to an important national issue like nutrition.  The mainstream media tends to follow politicians, false prophets and proponents of industrial agriculture like big hybrid seed companies and large  processing companies at the expense of actors who support local balanced nutrition.

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

Differentiating specialization from monocultural knowledge pathways

While monoculture is mostly understood as the cultivation of a single crop on a farm, area or country, the other half of its definition is the dominance of a single culture, worldview, mindset, set of tools as well as one way of gathering and sharing knowledge. Farmers who think success comes from producing one commodity all the time are addicted to monoculture. The same applies to academies who think formal education is the only source of truth. Fortunately, digital technology is not just disrupting monoculture but increasing ways through which knowledge can be generated, shared and made sensible.

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There is nothing wrong with farmers and knowledge workers specializing as long as they know who else is specializing. Unfortunately, due to information asymmetry, many African farmers and academics specialize blindly and end up losing potential income and relevance. They are not aware that each market for commodities and knowledge has a dedicated demand for a particular commodity and knowledge asset in terms of how the consumer budget is shared among different commodities. That is why it is important for farmers and traders to know other market players as well as the market’s absorptive capacity.

Knowing the market’s absorptive capacity enables farmers, traders and other actors to determine volumes that can ensure good Return on Investment (ROI) and clearly identify producers who can meet the ROI capacity. Farmers who specialize are usually passionate and have invested their time in producing the best cabbages, potatoes, tomatoes, cattle, milk, apples and other commodities. See-saw production and supply patterns, common in most open markets, is caused by price chasers and band-wagoners who just follow and imitate what the specializing farmers do.

Difference between specialization and monoculture

Specialization is where a farmer puts more resources in a commodity in order to produce and supply the market consistently. Other commodities act as a buffer in the event of uncertainties that can face a specialized commodity. The good thing is that for each farmer there is some element of specialization although the difference is in the degree of specialization. Critical questions include: To what extent does the producer dedicate resources to one or two crops? Some allocate 75% of their resources to one or two crops. Others dedicate 50% to specialized crops while the other 50% goes to complementary crops.

On the other hand, external factors like climatic conditions often force farmers and communities to specialize – translating to a community perspective on specialization. In this case, emphasis is not just on skills or knowledge in producing particular commodities or understanding market prices but adaptation of  particular commodities to particular areas. This is how one agro-ecological area become known for fruits while another becomes famous for small grains or livestock.

The merits of specialization and balancing act

Farmers who specialize tend to enjoy economies of scale and are able to capture a greater part of the market share as well as increase their bargaining power. Specialization is also critical for recognition in the market. Those who specialize create their own niche market that they will serve consistently.  It is not viable to be in the market for a short period and out of the market for longer periods. To address this challenge, farmers can specialize on one or two commodities for the purpose of participating in the market regularly and creating a market niche that can sustain their enterprises. However, in trying to balance different agricultural commodities, farmers have to ensure resources put in alternative commodities are enough to revive the specialized commodity by covering gaps like temporary gluts.

Alternative commodities should sustain the production of specialized commodities in the event of temporary gluts and price distortions. Alternative commodities should not be produced in high volumes to the point where if their prices fall on the market, much of the resources to cover them end up coming  from specialized commodities.  For instance, if you specialize in potato and onion production, you need a plot of cabbage as a fallback position. Any fall in cabbage prices on the market should not result in losses that will eat into a greater percentage of the profit that you should have earned in potato and onion production. Profit from cabbage should be big enough to cover losses that can be incurred by temporary price falls in potatoes and onions.

To maintain presence in the market, farmers should specialize on two or three commodities, definitely not more than four if they are to sustain participation in a dynamic market. Other commodities should support the main commodities that the farmer is known for in the market. The road for specialized commodities should be smooth. It is the role of alternative commodities to build bridges for specialized commodities and smoothen their flow against price fluctuations. This will also enable farmers to maintain presence in the market and generate income from specialization.

Building a case for specialization at community level

In developing countries, specialization should be done at community level as opposed to individual level due different levels of resource endowments at individual household level. For both communities and individuals, the percentage of resources allocated to specialized agricultural commodities can differ since one household may focus on subsistence while the other may want to embrace commercialization of particular commodities. Farmers with other sources of income like remittances may not prioritize subsistence production but try to go commercial.  For a poor family, the greater percentage (90% of $500) of resources can go towards specialized commodities to ensure a strong source of livelihood and food security.  On the other hand, those with alternative sources of income can devote 75% of a greater amount of resources (75% of $5000) towards commercialization of specialized commodities because they want to maintain market participation.

The more farmers produce as a community, the more bargaining power they acquire. Specialization also reveals a community’s knowledge such that gaps and surpluses can be known. After consolidating the knowledge, it becomes possible to arrange it in layers so that beginners can know where to start while experts do not have to waste time delving into what they already know. Without knowledge assessments and layering, development actors end up bringing knowledge that will not be absorbed or used.

At national level, developing countries should coordinate production and all value chain actors to ensure consistent supply and best ROI. Important questions include: What are the substitutes when potatoes flood the market? Which other commodities can be produced in line with available resources?  Which are the major drivers of nutrition?  Monoculture is very dangerous because farmers do not have anything to lean on in the event of market failure at global and regional levels. That is why many African farmers tend to be tied to unfavorable contracts which are more like debt traps. Most export crops like tobacco have reached their ceiling in terms of absorptive capacity and do not have a local market. If the international market collapses all the advantages are wiped off. In a competitive world, it is important for developing countries to focus on commodities for which they can develop market options.

Specializing on commodities equals specialized knowledge

Specializing on commodities is tantamount to specializing on knowledge.  A key advantage of specializing on knowledge is that it translates to high quality of commodities. Jumping from one commodity to another does not guarantee specialization of knowledge and low quality knowledge leads to low quality commodities. That is why clearly identifying and characterizing actors is very important. Farmers have to know each other and coordinate in order to avoid flooding of commodities.  In African informal markets, traders who have been specializing on specific commodities like tomatoes, green pepper and cucumber are known. Others are known for fruits, potatoes, cabbages, sugar beans, poultry, eggs, fish, small grains and many other commodities. In the same vein, farmers should try to be known for two to three commodities that can balance each other or share similarities.

Farmers who try to jump from pearl millet to cabbage end up stretching their knowledge because the two commodities are not closely related.  That is why data collection has to be fluid and not wait for crop and livestock assessments that happen once a year.  When a specialized commodity collapses on the international market, it leaves a knowledge vacuum and creates expectation challenges. Developing countries should avoid specializing on commodities whose market they do not control, for example coffee, cocoa, cotton, flowers and tobacco. On the minerals side, it is dangerous to specialize on gold or platinum whose prices are set and manipulated in western and global markets.

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

Nine nuances that define indigenous commerce

Although many people associate commerce with modernization, it is as old as the hills. To the extent, commerce refers to the exchange of goods and services, it has existed in many indigenous communities for generations. Indigenous commerce is home-grown commerce tied to the origin of specific communities. While academics may want to limit the notion of commerce to business parameters, indigenous commerce embraces social, legal, economic and technological, among several elements influence a community’s survival.

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At the core of indigenous commerce is knowledge sharing and building of Communities of Practice (CoPs) at the grassroots. Visible and noticeable expressions of indigenous commerce in many developing countries are Micro, Small and Medium enterprises (MSMEs).  While some scholars and researchers insist on calling it the informal or invisible economy, indigenous commerce has several nuances that distinguish it from formal commerce with colonial roots.

Major characteristics of indigenous commerce

  1. Indigenous commerce is driven by open source knowledge sharing – It has its own unique knowledge sharing pathways, different from formal commerce taught in schools and colleges. Within indigenous commerce, knowledge is shared through hands-on practice, experience, passion, trust, relationships and networks. At no point will you hear actors in indigenous commerce saying, “I am looking for a commerce lecturer.” The entire indigenous commerce ecosystem is organized for social, political, economic and technological contribution to socio-economic progress. Indigenous commerce has diverse actors such as youths (some conversant with technology), retrenches experienced in metal fabrication and other skills, women good at marketing and food preparation, transporters, loaders, advisors, governance committees and those good in conflict resolution. It is an institution whose practices cut across gender, age, skills base and home-origin.
  1. Indigenous commerce entrepreneurs start and run their businesses sustainably due to passion. It is not about availability of free resources but passion and experience gained over years. Knowledge is passed-on as part of an in-built form of inheritance. Family units anchor indigenous commerce. The first priority in starting a business is creating employment for family members, who may not be initially paid a salary but provide labor so that the household is able to meet basic needs. Going to the father’s or mother’s market stall is like going to the field. The family members contribute individual skills like record keeping and bring their own networks.

 

  1. Within CoPs or clusters, entrepreneurs do not work as competitors. Instead, peers try to complement each other in delivering products and services to customers. In order to reduce the cost of sourcing and using knowledge, enterprises are clustered in such a way that one business benefits from the other. Ultimately, the actors are able to build a positive reputation collectively such that their business cluster becomes known for consistent products and services.

 

  1. Agility and flexibility in meeting market requirements. Production processes are not rigid like those of large formal companies. Indigenous commerce entrepreneurs quickly adjust to meet customer preferences, tastes and requirements. That is why they have all sorts of measurements. They do not measure all products in kilograms or monetary terms. They can use cups, baskets, crates, one by one counting, punnets, plastic bags and many others – all meant to respond to different customers. They have become awareness that without meeting the needs of customers there is no business.  That is why they try to respond to different levels of buying power.

 

  1. Indigenous commerce is based on fast and fluid decision-making. Entrepreneurs are not hamstrung by too much bureaucracy. Prices are adjusted quickly in response to market dynamics. Giving a discount or credit is a fast decision. The faster the decision making, the faster results are obtained.  On the other hand, the formal economy takes long to make decisions and, sometimes by the time a decision is reached signals would have changed and opportunities would have evaporated while threats will have gone under in ways that render the business vulnerable to lurking shocks.

 

  1. Fluid stocking – Most SMEs do not have warehouses. They know that putting commodities in rigid warehouses can tie down money and other resources in stocks. When resources are kept idle for some time, they attract serious opportunity costs. Based on fluid knowledge driven by solid networks, indigenous commerce entrepreneurs know what they want, when and in what quantities. Orders do not spend much time in the market because commodities flow as per demand requirements. They also know their stocking levels. If information asymmetry is minimized, this fluidity should influence production processes. Daily indicators from the market provide early warnings in terms of what needs to be produced, when and in what quantities, thus controlling gluts and shortages.

 

  1. Patriotism – The majority of people who start MSMEs become so attached to their businesses to the point of not looking for jobs anywhere or crossing the border in search of employment. Most are owners attached to their own enterprises and fear of failure is very high, compared to if they were just employees. They understand the dynamics of the micro economy and want to see the business grow because it is a source of livelihood. Deep individual commitment to their business’ survival translates to at contributes to national economic stabilization.

 

  1. Products and services do not require much foreign currency. This is an economy driven by local resources. Indigenous knowledge is full of improvisation as well as optimum use of available resources and knowledge. It is also characterized by flexible payment methods. Whereas in formal commerce money is the only mode of payment, indigenous commerce uses several modes of payment.  Commodities can be easily exchanged and one can pay labor services with commodities. The absence of money does not impede trading. People continue to attach different versions of value to their commodities, for instance, maize could easily be exchanged with chicken.  It does not just work in monetary terms.  Indigenous commerce also emphasizes an ecosystem of actors and commodities or services.  On the other hand, formal commerce promotes linear movement of goods and services: Producer – manufacturer – wholesaler – retailer – consumer.

 

  1. Meeting the needs of low income households – In terms of their target market, most MSMEs target the greater low to medium income population. What they are providing are necessities. For instance, more than 70% of the food commodities that pass through indigenous commerce are necessities, needed by the majority of the population. These actors understand their markets and preferences. In order to meet the needs of different income levels, they tend to maintain their positions in the ecosystem. Traders are traders, farmers are farmers while transporters are transporters. This is how they are perfecting their roles in the ecosystem in ways that simplify resource mobilization. Such habits and practices are different from formal companies which try dominate the entire value chain by becoming producers, processors, wholesalers and retailers, leaving no room for other actors who can do some tasks better.

 The importance of recognizing indigenous commerce

Developing countries that have started recognizing indigenous commerce are not only beginning to witness a broadening of their tax base, but started using indigenous commerce to grow their economies from the bottom. However, what is now clear is that indigenous commerce requires different financial models based on authentic characteristics that are certainly different from the western-biased formal economy. For a long time, these indigenous commerce characteristics have been driving MSMEs entrepreneurship as collateral.  Individual corporates cannot be more important than the solidarity of the entire indigenous commerce ecosystem. To what extent can formal financial institutions use the existing indigenous commerce characteristics as collateral?  Due to the fluidity of indigenous commerce, it is no longer sensible to use immovable property like buildings as collateral.  The fluid nature of indigenous commerce in response to various niche markets also means there is no longer need for mass production. Volumes are just produced as per market needs and commodities are sent where they are needed. These issues should be taken into account if modern financial institutions are to forge a new deal with society.

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866 343-6

 

Addictive tendencies associated with food and knowledge in developing countries

When consumers can no longer do without cassava, nsima/sadza, matoke, tomato, beans, peas, among other foods, it could be an indication that the consumers have become addicted. Such addictive tendencies may have little to do with the food being a staple or a necessity. The way profit-oriented seed companies and manufacturers promote their seeds or finished products in most developing countries is designed to encourage such addiction. There is a narrow distinction between tastes & preferences and addiction.

A community is most likely to be addicted to a commodity that it ranks more highly as a necessity. It is not about income but the fact that people can no longer do without the particular food. In addition, commodities around which communities have become addicted within clusters of consumers become necessities which they cannot live without. Such commodities also become price inelastic. Any percentage increase in the price of the commodity will not translate to a greater decrease in demand because the commodity has become a staple.  Cost will not affect consumption because each household or community already eats a given volume or quantity. In the same vein, a percentage decrease in price will not result in more percentage increase in supply or consumption. For instance, a decrease in the price of maize meal will not cause consumers to eat more nsima/sadza merely because it has become cheaper.

 Implications of people consuming the same commodity for a long time

The longer the period people are exposed to certain food baskets, the more tastes and preferences are  developed and embedded.  The body adjusts and makes the food part of its system. To the extent the body can no longer do without a certain food like nsima/sadza, it becomes addicted to that food. Staple commodities often have clearly defined demand patterns in terms of volume. Any surplus over the defined demand is a waste. This is where gathering evidence becomes critical in terms of showing each commodity’s demand patterns and extent to which such a commodity has become a staple within each consumer class. Such evidence will prevent cases where surplus food goes to waste but open avenues for value addition and exporting.

Addictive food clusters need to be known because they also define food baskets for various niche market. Demand does not fluctuate so much irrespective of price. People will not eat more commodities because there is a new state of the art market. Investors and policy makers need to know these issues at a granular level because they influence potential investments. Such insights also reveal the stability of demand for particular commodities as well as stability of Return on Investment (ROI).

The contextual nature of food baskets

Contrary to the way policy makers in developing countries try to characterize and quantify the Poverty Datum Line, for instance US$600.00 per household, it is a myth to try and have one food basket for the entire nation. Different grassroots communities have their own addictive food components which they demand most of the time. For instance, people in high production zones may have their own food baskets in which addictive elements may constitute 70% of the food basket.  Anything that comes from outside becomes a luxury which they can do without.

Supply side addictive tendencies

While addictive tendencies tend to be more visible on the demand side, the same patterns apply on the supply side. For instance, key determinants that drive food production include knowledge and skills among food producers, available resources and climatic conditions. How these factors are used determines over-production or under-production. However, as farmers continue to produce over many years, their practices stop being about skills, resources, knowledge or climatic conditions but passion turned into addiction to particular practices. That is why it is difficult to wean some farmers from cotton production, coffee production, cocoa production, tomato production, maize production and tobacco production, among other commodities they have become addicted to producing.

Questions for policy makers and development agencies

To what extent are agricultural production practices being promoted in developing countries determined by farmers’ addiction to certain crops, livestock and other related production practices? What capacity is within the addicted farmers?  How are farmers under-utilizing or over-utilizing their capacity?  To what extent has agricultural knowledge in developing countries become locked in addictive tendencies along agricultural value chains? In some areas, specific commodities like maize no longer do well but farmers continue producing because they have become addicted to the knowledge associated with maize production so much that it is now difficult to unlearn and create space for new knowledge related to new crops and livestock. Examples of addictive processes including farming as a business and farm field school. There is also a bandwagon effect in production where some farmers just copy and imitate others quietly. Besides surprising the market, bandwagon producers disrupt the passion-driven producers.

Colonial influence

Some production and consumption patterns were largely influenced by colonialism. For instance, in Zimbabwe, the Land Apportionment Act of 1923 laid down the foundation of production practices by demarcating land according to natural regions, soils and land sizes, among other factors.  Knowledge for producing specific commodities like sugarcane, flowers, tea, coffee and tobacco became concentrated in areas where these commodities were said to be ideal. Knowledge about livestock production became concentrated in Matebeleland while cotton production knowledge was more in Gokwe and Muzarabani, among other dry regions. On the other hand, by producing and consuming maize, communities became addicted to maize.

However, production was also driven by directives where those with resources influenced the production of particular commodities like cotton, tobacco, sugar cane, coffee, maize, beef cattle, flowers, etc. This also became addictive from a skills perspective. That is why trying to change farmers’ mindsets has become a decades old challenge.  Most farmers have also become trapped in debt cycles through addiction to contract farming models. Even if they may have their own resources, many farmers cannot imagine achieving meaningful yields without a contract company. Another increasingly powerful addiction is to ICTs, especially mobile platforms like WhatsApp. Many young farmers no longer want to think for themselves or digest information before forwarding it around. More time is spent on mobile phones than on productive pursuits.

charles@knowledgetransafrica.com  / charles@emkambo.co.zw / info@knowledgetransafrica.com

Website: www.emkambo.co.zw / www.knowledgetransafrica.com

Mobile numbers: 0772 137 717/ 0774 430309/ 0771 859000-5/ 0716 331140-5 / 0739 866 343-6