If you enjoyed this debate please watch out for our public debate on this same theme, taking place on December 7th.
Inclusive business: does it work?
Inclusive business works. We have seen cases where smallholders are benefiting from inclusive agribusiness - for example rice farmers in Nigeria working with Olam as out growers have increased incomes and knowledge. They have also gained access to technologies, finance and markets thus benefiting from such relationships. Its also a similar case with the horticulture sector in Kenya and Ethiopia.
Yes! We've enabled farmers to enter markets, improve their productivity within stable environments, and the impact we've seen considerably improves their livelihoods, often doubling income. This has a corresponding benefit within the local community.
I think that the challenges that Bill Vorley and others set out are very real, and inclusion does need to be approached more inclusively.
We are seeing many NGOs rising to the challenge of working with the formal and informal economy to seek to better equip smallholder farmer communities to engage with the growing number of domestic and regional market opportunities in sub-Saharan Africa. Small Foundation supported the Mandaleo Agricultural Enterprise Fund run by Farm Africa, and is currently supporting Access to Capital for Rural Enterprises, a consortium of NGOs seeking to develop rural business concepts from their programmes, for example.
I should also mention that we are also seeing innovative for-profit vehicles for addressing the needs of early-stage agricultural businesses in a number of African economies. These include H2O Venture Partners in Rwanda and MBC Africa in Ghana and Cote d’Ivoire.
Inclusive business -- 'shared value' is a term that describes objectives in that direction, it seems to me. There is a growing number of good examples where smallholder communities have been linked to modern food supply chains in domestic as well as export markets. But much more can be done (and will in the future, because the demand for food is up, globally, which creates evolving new opportunities to source from small farmers). Links to markets are fundamental for these farmers -- just ask them; we speak with hundreds of (small) farmers in Africa and Asia every year and there are recurring themes, of which 'links to markets' is perhaps the most important one. MF
Updated
Who's responsible? Business or government
Where is the divide between government and business in supporting local communities, farmers and the agricultural supply chain?
not sure I'd say 'divide' -- a lot of it is about cooperation, say at early stages of market development on the input and the output side of farming. Useful regulation is critical, for example -- a public function that shapes how the private sector can rise to opportunities and respond. Regulation regarding seed, variety release procedures and so on are cumbersome in many countries, hampering investment in the seed sector, which in turn means farmers find it difficult to access hi quality seed as there isn't supply of it. -- Having said this, there does need to be public regulation of say the seed sector; the question is what is 'good' regulation that takes care of society's needs while at the same allowing innovation and dissemination of improved seed. India is an example where this problem was solved well. Africa is a generation behind in this respect. MF
Businesses will always be a "testing agent". They will try to implement some solutions that can address problems in their business like transparency, traceability, productivity, quality or sometimes social challenges where the level of scrutiny from consumers is very high (like child labour in the cocoa sector). But nothing can happen without government involvement. Government intervention is the condition for scale. Land titles, tax reform, technical assistance, agriculture policy, etc. Businesses test, governments scale up.
I would say that it's mainly a role that can be played by the international community and by donors. The department of International Development (DFID) has a lot of programmes to support the enabling environment and support governments to do the proper reforms to scale up development impact.
Its a question of opportunity not just burden. Opportunity for growth that can create shared value which is good for business and the communities involved does need partnerships, policy frameworks and fiscal strategies that connect. This whole subject will be the discussion at next weeks Global Partnership and OECD high level meeting here in Nairobi.
There should be no burden on either government or private businesses. What is needed is fair and transparent partnerships that take into consideration, business needs as well as those of local communities. This must be supported by legislation and efficient institutions.
Updated
What's the role of big business?
I think its confined to certain sectors, cocoa, coffee, barley, sorghum, for example, but is growing. Increasingly it is about supplying local markets not export markets, to support broader growth within Africa, which brings in different crops. Diageo is currently sourcing just over 75% of our agri raw materials used in Africa from Africa. Collaboration with others can help build opportunities, perhaps through supporting crop rotation market development, and also the development of local processing capacity.
One trend we are seeing is that some multinationals are increasing their engagement in African agriculture in different ways, with the intention of contributing to a more effective, suitable and scalable African agribusiness sector.
One of our partners is Partners in Food Solutions, a US-registered non-profit that deploys corporate volunteers to share knowledge and expertise with small and growing food processors to improve the food value chain in Africa. Corporate partners include General Mills, Cargill, Royal DSM, Bühler, The Hershey Company and Ardent Mills. Examples of client companies are Eden Tree in Ghana, Sylva Foods and Comaco in Zambia.
it very much depends on the commodity/value chain. On cocoa, with more than 45% of the production coming from Ivory Coast and Ghana, the involvement of multinationals like Nestle or Mondelez is very important because Africa becomes highly strategic for them. On coffee, it's different, Brazil and Vietnam produce 40% of the worldwide production so Africa is not considered as a place where the multinationals should invest and the coffee production in Africa keeps decreasing both in terms of value, and volumes. On the tea sector, Kenya, Tanzania or Uganda remains very strategic for Unilever, hence their level of investment. It's really a crop by crop analysis.
Apart from cocoa and coffee, Africa has huge potential in the food sector as the continent spends about US$50 billion on food imports annually. Some countries have shown gains in the horticulture sector, livestock, poultry etc. These are sectors that multinationals can make huge profits while providing food and non-food value added products in Africa. The rice sector in particular holds much prospects for both national and multinationals investments in Africa.
The potential benefits of multinationals to transform Africa’s agriculture and create wealth in a sustainable manner, without leaving the farmers behind, is yet to be realized largely because of poor investment policies, institutions and regulations. We have observed the growing interest of multinational investments and public-private partnerships in agriculture in Africa over the past 15 years. A review by FAO of such investments indicated that success of such investments have been hampered in countries with weak institutions and capacity.
Updated
The problems of an ageing workforce
A reader, Andrew Shaw, asked the panel for its thoughts on the challenge of an ageing workforce in African agriculture and how for example cocoa farming can attract and engage the youth.
The aging farming population is a challenge that need to be addressed. Efforts to attract youth to agriculture is not yielding much results. A way out is to make agriculture attractive through the application of science and technology. For example agricultural mechanization is a must for Africa's youth to engage in agriculture, but mechanization that is adapted to Africa's agriculture - small holders. Use of technology - in marketing, value addition, trade and agro-processing are areas that need to be promoted.
Andrew is absolutely right. If you look at an industry like cocoa where most of the trees are very old, one of the main challenge is to renew the trees. But renewing a tree means no cocoa for 3 years. Why would you bother if you're 60 years old? But how can you wait for 3 years when you're a young farmer? access to finance to finance that gap is key to convince new generations to invest in farming
I think we need to work with young people to develop farming understanding and support its economic potential. From my experience, many young people don't want to enter farming at least in the way they see their parents farming. If we can help improve market access, and productivity, and utilise technology more, then we can be more optimistic about their interest.
Marco Ferroni:
Aging work force on farms -- almost a global phenomenon. Key issue as I see it is linked to income prospects. Farming can be a profitable and enjoyable business if supported by technology, services of various kinds, access to remunerative markets, good public policies, public investment, infrastructure supporting logistics, on the back of which private investment can ensue. Too many places and settings in Africa and other parts of the world do not enjoy these benefits and basic 'infrastructure' for successful farming. MF
Updated
The big challenges for farmers
For Nico Mounard it is traceability:
Traceability. If one cannot trace where the product is coming from, one cannot influence the quality of it, the social impact, the environmental impact and the economic impact. Traceability is absolutely key for the agri-food sector in Africa
For David Croft it is weak farmer organisations that can help develop skills and market access for farmers. The solution, he says, could include co-ops:
It doesn't necessarily need to be formal co-ops to begin with, although they can be a goal and are often present. I think enabling mobilised communities that empower people can provide the stable foundation from which to build. Co-ops bring greater structure that can add further value, but collectives of some sort are the initial goal to support economies of scale in terms of development and access to markets are the first step. We should also consider local and regional markets before international.
For Patrick Kormawa it was the low investment in and use of agricultural inputs such as fertilisers, irrigation and machinery:
I see the low investment in and use of agricultural inputs such as fertilizers, irrigation, agricultural machinery and agro-processing. Despite the importance of these inputs in the agri-food sector, their use in African agriculture is however limited, which have serious consequences for the scope of increasing productivity and the supply of adequate and quality supply of raw materials for agro-food processing and value addition.
traceability is also a problem as this is a pre-requisite for international trade. The underdeveloped national quality infrastructure and capacity in the continent also hinders international and inter-African trade.
Updated
The panel for the debate
- Million Belay, founder of the MELCA-Ethiopia NGO and the Alliance for Food Sovereignty in Africa (AFSA)
- Marco Ferroni, executive director, Syngenta Foundation
- David Croft, sustainable development director, Diageo
- Elizabeth Wilson, senior executive, Small Foundation
- Nico Mounard, CEO Farm Africa
- Patrick Kormawa, regional co-ordinator, eastern Africa, FAO
Updated
The debate - what topics we covered
- What are the paths to prosperity for African farmers?
- What are the challenges facing the agri-food sector in Africa?
- How much of an impact/involvement do multinationals currently have in African agriculture?
- How are these companies helping or hindering farmers and suppliers?
- Where is the divide between government and business in supporting local communities?
- Do ideas such as inclusive business - linking low-income communities to the supply chains of larger multinationals - work?
Updated
"Inclusive business" as you describe it, meaning linking low-income communities to the supply chains of large multi-nationals, has nothing new. Once again, multinationals have sourced their product from low-income communities for years and years but often with an absence of traceability. Most of the commodities are traded by major traders and the whole supply chain management has been outsourced for years by the food industry. Today, a Unilever or a Mondelez would never import directly some tea or some cocoa. There was a big change of business model years ago where the food industry decided to focus on marketing and distribution and to outsource the supply chain management to traders because it was too much hassle. "Inclusive business" is just the acknowledgement that the outsourcing on supply chain management has been pushed too far and that multinationals need to understand what's going on on their supply chains. But once again, the cocoa and the coffee sourced by multinationals in Africa has always been produced by smallholder farmers, nothing new there...