At any given time, if you walk in Mbare Agriculture market of Harare assessing the value of agriculture commodities, you will see diverse commodities collectively worth more than US$20 million. Assuming you are not tired and decide to do the same thing in Bulawayo, Mutare, Gweru, Kwekwe, Masvingo and Chinhoyi urban agriculture markets, you will see commodities worth a collective US$30 million. How many agriculture companies listed on the stock exchange hold commodities worth a quarter of the above figures at any given time?
The true performance of agro-based economies like Zimbabwe can be seen through people’s markets (the so-called informal agriculture market) where the volume, variety and velocity of commodities and hard cash are more than formal markets.
Mbare Agriculture Market is an institution with its own subsidiaries like corporate businesses which have branches across the country. Mbare supplies Masvingo, Mutare, Bulawayo, Kwekwe and rural markets such as Guruve or Gokwe. The market saves all income levels and all sectors of the economy including mining, manufacturing as well as processors, input suppliers, food chain stores, transporters and government institutions. It also creates post-harvest employment around activities like harvesting, grading, transportation, off-loading, marketing and repackaging for end-users. From harvesting up to when the commodity is in the hands of consumers, employment creation is tenfold. We start with two employees loading the truck and at the end of the chain 20 people will have been employed. Although this form of employment may not be formal or monthly, it is hourly everyday employment which ensures household income and sustenance. To that end, the market distributes wealth to common people, creating a real commonwealth. It’s unlike the formal economy which tries to create employment for formally educated people who, in most cases, lack practical wisdom that comes from handling commodities along the value chain. Since hourly everyday employment goes un-recorded, formal institutions are busy under-estimating agriculture’s employment potential. A complete re-definition of employment is long overdue. Seriously.
As has become our passion and tradition, eMKambo continues to gather evidence from the people’s markets around Zimbabwe. Below is a table showing revenue (USD 28 million) that exchanged hands in Mbare Agriculture Market from January to December 2014.
Revenue Generated by Produce Supplied in Mbare Farmer’s Market (Jan – Dec 2014)
While the above figures are telling enough, they understate the true value of commodities traded because barter deals, which are not reflected numerically, constitute a significant slice of the value. The tables below show how we have clustered commodities into Gold, Silver and Bronze according to revenue generated. Gold stands for commodities that generated above US$100 000. Silver represent commodities fetching US$10 000 to US$100 000 while Bronze stands for US$10 00 and less.
Using price as an indicator gives us the potential value of the commodity. This is important for farmers so that they can consider factors like standards, trends, market information and crop calendars before coming to the market. The intrinsic (embedded) value of each agriculture commodity is important than the face value represented by price and revenue. From eMKambo observations, gluts and cash shortages in the market tend to suppress the true value of agriculture commodities. Mbare Agriculture Market has a minimum re-order stock level. That is why at no point you find the market without agriculture commodities. Mbare Agriculture market’s minimum re-order level is commodities worth at least $5 million.
Contrary to conventional consensus and wisdom, fluctuations in prices along the agricultural value chain do not affect value chain actors the same way. If the price of tomatoes falls, a restaurant benefits but does not reduce the price of a plate of sadza or rice. On the other hand, if the price of tomatoes goes up, the restaurant suffers but does not increase the price of a plate of sadza to recoup losses.
If Mbare Agriculture Market was a corporate company, it would have strong links with insurance companies, infrastructure developers, exporting companies, government institutions (labour, NSSA, health, and parastatals like EMA and ZESA. However, people’s markets don’t have these explicit networks. Commodities in the market are always in transit without any form of insurance. Coincidentally nothing negative happens in most of the cases. It is a purely trust and relationship-based market where everybody does his or her best to make sure things function smoothly.
Part of the reason why Zimbabwean agro-processing companies have collapsed is because they depended so much on the production side forgetting that a lot happens between production and the market. On-farm assessments do not often translate to correct quantities that reach the market due to post-harvest losses estimated to be around 40% in Zimbabwe. Assessment of commodities on the market is a better measure of the country’s capacity to sustainably drive manufacturing. This is because the people’s market competes for commodities with processors. That means processors should have an interest in what happens on the market, otherwise investment in machinery and labor will be offside if processing companies are not able to estimate consumption patterns and surplus in the people’s market. eMKambo has seen a few processors who specialize in sugar beans forging strong relationships with bean traders in the people’s market in order to ensure consistent supply.
The people’s market has an amazing capacity to sweep commodities from all corners of the country efficiently while it will be very costly for private companies to do so. Not all commodities go into processing. There is a certain percentage that head straight to consumers without going through commercial processing. Some commodities are either consumed raw or processed at household and small enterprise level. Agro-processing companies need to know how much is processed at household and small enterprise levels in order to accurately angle for the surplus.
Due to food safety and other concerns related to over-processing of food, many consumers now prefer household processing or small enterprise level processing where processes are manageable and fairly predictable. In addition, fewer financial resources imply potential processors now preferring small and affordable processing equipment rather than grappling with heavy duty equipment which requires tons of commodities at one go.
There should be a strong relationship between people’s markets and manufacturing companies. Everyone needs to know his or her competitor. People’s markets tend to have strong relationships with producers. There are numerous cases of contractual agreements between companies and farmers going sour. In the people’s market everything is clear and a farmer can see how his or her produce is competing with that from other farmers. Because contract companies take commodities and the farmer doesn’t see or know what’s happening behind the scenes when he or she has handed over the commodity, there is always suspicion that companies are making more money. Making things transparent has numerous advantages. People’s markets like Mbare pay cash on delivery whereas companies make farmers wait for 7 to 30 days. Since farmers consider opportunity cost more than price, they would rather get less money for their commodities immediately than wait two weeks for a slightly higher price offered by a company. Usually when farmers sell there is an issue requiring immediate attention and can’t wait for seven or more days.
One of the most critical roles of people’s markets like Mbare is coordinating the distribution of food across the country. When food comes from farming areas into the market, it is not usually coordinated but the market will distribute this food to deficit areas according to demand. That’s why you find pineapples produced in Chipinge end up in Bulawayo within hours.
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