20 November 2012

Ethiopia: Value Chains Key to Transform Smallholder Agriculture

Agriculture is the backbone of the economy in the developing world. The sector has been employing 60 per cent of the work force in Sub-Saharan Africa and contributing an average of 30 per cent of the gross domestic product. Smallholder farmers are believed to provide the bulk of the food produced in developing countries out of which up to 80 per cent in sub Saharan Africa nations. Hence, growing urban populations and greater global wealth are creating additional demand for agricultural products.

Yet, rising food prices suggest that farmers' productivity is not keeping up with this demand. Therefore, a need to transform smallholder farmers from a largely subsistence into one that business market-oriented would be a must in order to cope up with an increasing cereal prices and thereby overcome poverty. Equally, it is only when they are well transformed that the smallholder farmers can generate enough income to boost production, improve rural livelihoods and contribute more significantly to board economic growth.

It is cognizant of this fact that Technical Centre for Agricultural and Rural Cooperation (CTA) in collaboration with the United Nations Economic Commission for Africa (UNECA) recently organized a four-day international conference with the theme: "Making the Connection: Value Chains for Transforming Smallholder Agriculture" in Addis Ababa. CTA Director Michael Hailu said, "Value chains are all about making effective connections between farmers and buyers; which includes processors and supermarkets or foreign buyers". At the same time, to function they depend on a whole range of support services, such as input suppliers and transporters.

During the joint press briefing, with the Ethiopian Agriculture State Minister Wondirad Mandefro the Director said that giving smallholder farmers the resources, entrepreneurial skills and knowledge they need the potential to increase global food production. Again, this would also offer farmers a chance to work themselves out of hunger and poverty. For the poorest people growth domestic production (GDP) growth originating from agriculture is about four times more effective at raising incomes than growth from any other sector.

The State Minister stressed the crucial roles that smallholder farmers are playing in the nation's economy. Similarly, in Ethiopia agriculture is contributing 41 per cent to the total GDP and about 90 per cent of the total exports . The government has been taking policy measures at various times to increase the productivity particularly at small scale farmer level, recognizing the fact that agriculture is an engine of the economy

As part of the effort to provide professional support to farmers 70,000 extension workers have been deployed throughout the country. Moreover, more than 10,000 farmers' training centres have been established . "Smallholder farmers have huge potential to increase agricultural production and improve their livelihood. However, if that is to happen, we need to gain a better understanding of value chains," the State Minister added.

Participants of the conference made thorough discussions on various topics related to Value Chains during the plenary sessions. Participants found plenty of common ground to agree that local markets would become increasingly important for smallholders over the coming years. It was felt that farmer organizations and cooperatives need to have more of a business orientation and to achieve this they need to have access to better training in good financial and business management.

One of the sessions which attracted the attention of this reporter was the one on which the role of governments in facilitating value chain development was well discussed by the panelists. Experiences of different countries have been discussed. The participants later came to a conclusion that governments have an important role to play in regulating financial institutions, land ownership, labour and tax laws, food standards and many other activities.

Governments also have a role to play in terms of providing public services such as roads, power and clean water. However, panelists also said that although governments are putting in place a number of encouraging policy measures to encourage the agricultural production, there are frequent problems in the way those policies are interpreted and applied at different levels. Therefore, joint operation of the private sector, farmers cooperative unions, and other stakeholders with the government is stated as an alternative measure to overcome hindering challenges.

In general, the conference attracted a broad range of individuals representing the private sector, government, civil society, farmers' organization and academia.

Daniel Gad, an Ethiopian investor was among the participants representing the private sector. He made a remark mainly focusing on the way forward . Daniel who is also owner and Manager of Metrolux Flowers and Omega Farms, said he returned back home, Ethiopia in 2003, having worked for many years in the telecom industry with AT&T. Though he is not from the agriculture background, he decided to engage in the sector for the only reason that he wanted to contribute his share on value chain systems in Ethiopia.

He provided insights on the importance of establishing strong and viable relationships between private sector businesses, such as his own, and smallholder farmers. "The fastest way to create a big farm is to aggregate 10,000 smallholder farmers," he said. His company has benefited from a stable supply of chickpeas and other products, while his suppliers' yields and income have risen significantly as a result of the partnership. He stressed the importance of establishing trust between the private sector and smallholder farmers; encouraging local and regional trade; and developing storage, processing and packaging facilities in rural areas.

According to Daniel, Ethiopia has over 1.2 million chickpea farmers. The country is the fifth largest chickpea growing in the world . "So, the experience I have from this folks tells me that there are a number of things that must come together for us to make this work. Works need to be done in a manner to help change farmer's life from subsistence and survival to moving to contribute to improved economic condition of his family and the country", he added.

Values chains is obviously among the most important development topics of the day across the world, and in Africa and the Caribbeans in particular. No government policy in agriculture can be successful without a clear understanding of the value chains of the key crops in that economy. "I think there is one thing missing in how we went about putting things together to make it work in strengthening value chains. That is the role of the private sector in the process to make value chain valuable" Mr. Daniel added.

Obviously, smallholder farmers don't have the financial, and technical capacities to build modern processing, storage and other important institutions. The private sector have access to finance, and managerial skills, technology, research and modern processing capacity than smallholders. "Open-up the tent! Be more inclusive! Bring in the private sector to play their respective role to make value chains work", Daniel called on governments.

In Ethiopia there are a number of enabling policies and strategies kept in place to encourage active participation of the private sector in the country's development endeavours. These concepts are also embodied in many of the economic plans of the country at various levels. And, now the country must push forward to make things work so as to bring significant changes in the lives of smallholder farmers. There is a real economic bases for partnership between smallholders and help centered private sector agricultural entrepreneurs.

He added, "If we don't give African farmers the opportunity, and the credibility, the knowledge and finance to produce best quality and top seeds, we will waste our time. That is the foundation and fundamental principle to improve productivity of smallholders." Agriculture is just the beginning of the value chain, yet don't forget about all the other links between field and fork, according to Daniel.

There are three major actors in realizing value chains to transform smallholder farming play-field; government, the smallholder farmers and the private sector. The government hold keys to policies, enabling environments, security, infrastructures and other, while the smallholder farmers are the major food producers for the world. "So my advice to the private sector is to operate in a transparent manner with smallholders and stop complaining about governments; rather it's much better to engage with them constructively."

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