BACKGROUND PAPER

Strengthening Farmers Organizations and Civil

Society Organizations

Prepared by:

Dr. Juliana Rwelamira,

Managing Director, Sasakawa Africa Association

EXECUTIVE SUMMARY

Africa is on the threshold of a significant transformation. Over the last decade, the continent
was home to six of the world’s 10 fastest growing economies, and the outlook for the region
remains bright. Strong growth in Africa’s middle class is expected to continue on the back of
better economic policy and governance, coupled with more business-friendly policies and
improved demand, (Kestrel Capital,2012, cited in AGRA 2012 Concept Note). This sustained
increase in consumer spending, combined with population growth and rapid urbanization,
means that today’s markets offer better opportunities for African smallholder farmers if they
can meet demands related to larger volumes, consistency of supply and higher quality.

Participation in market-oriented agriculture can improve the livelihoods of many rural

households through diversified nutrition, employment and enhanced incomes. As producers and
consumers, smallholder farmers are key actors in the agricultural sector in many countries.
Besides constituting a critical component of backward and forward linkages to other economic
sectors, their contribution to rural labour-force and food supply is essential to the transformation
of the rural economy, especially at the lowest income levels of the society. The importance of
the sector notwithstanding, there are numerous problems of promoting growth of incomes and
bringing about commercialization in smallholder agriculture, through farmer organization of
different forms herein after referred to as farmer based organizations (FBOs).

Agriculture and farmers in SSA, more than the rest of the world, continues to face challenges
that have hindered its capacity to spur economic growth. Notable among these are climate
change, globalization and the recent global recession, increased pressure on the natural resource
base, unfavourable external market conditions. These, coupled with poor rural infrastructure,
weak institutions, low research and access to innovative technologies, low productivity of
smallholders farmers, reduced investment by governments and official development assistance
and the limited engagement by the private sector work slow down the process of
commercializing the agriculture. (UNDP Report 2012).

According to AASR 2014, the population in SSA is expected to grow from 800 million in 2014
to 1.5 billion by 2050. It is impossible for Africa to end hunger and reduce poverty unless it
significantly increases production and incomes on Africa’s smallholder farms. African
economies and food security revolve around the millions of smallholder farmers, who work
tirelessly on less than a hectare of land. However, most of them, especially women farmers, are
poor, they struggle to produce enough food to feed their families and they face multiple
challenges. They often work in depleted soils without access to improved seed, fertilizers,
irrigation or financial help; they routinely confront drought, floods, pests and diseases, and now
climatic change is making conditions even worse. Resource poor farmers are also faced with
inadequate information, lack of strong organized groups, low motivation, low literacy levels,
lack of access to productive inputs, low technological know-how among others that stand as
stumbling blocks to entering the cash economy.

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The challenges for smallholder farmers are numerous and extremely difficult to master
individually. These range from the provision of services to development of business skills to
deal with the new circumstances.

To address the challenges of integrating small producers and processors in their different
groupings of FBOs into modern value chains, many innovative approaches and strategies are
being piloted for promoting competitive business models in the agriculture sector. Africa has
to assess and test them in order to adapt and adopt appropriate ones

The above notwithstanding, the language used when talking about African agriculture and food
systems has been shifting in recent years and is changing rapidly in positive and exciting ways.
High level African leaders and their development partners are paying new attention to the
positive role African agriculture plays in economic development across the continent. The fact
is that Africa has the agricultural potential not only to feed itself but also to grow a surplus to
help provide global food security. However, fulfilling this potential requires efforts from both
within and outside the continent. It requires a broad perspective that looks at the needs of the
smallholder farmers as part of the food systems and supply chains and considering agricultural
productivity and food and nutrition security in the context of overall economic development
and social stability.

Smallholder farmers are struggling to keep up with these new trends, finding themselves at a
disadvantage due to high transaction costs and low bargaining power. Therefore, it is essential
for commercializing smallholder farmers to work together as a recognized legalized entity
(farmer organization – FO / Farmer based Organizations- FBOs) in order to strengthen their
voice for articulating their needs, for lobbying and taking advantage of economies of scale.
Thus, if players in the agriculture sector, including smallholders, want to compete successfully,
they must not only respond to customer demand, but also focus on efficient operations that are
cost effective and reliable. Farmers need access to efficient market chains that they can rely on
to dispose of their products at competitive and stable prices. Small farms face major
disadvantages in accessing modern market chains. These include low volumes of produce to
sell, variable quality, seasonality and limited storage, high transactions costs, poor market
information and contacts, and limited ability to meet the high and acceptable requirements of
some high value outlets. Although many local market outlets still exist, the best business
opportunities often lie with farmers who can organize for urban and export markets. Promising
alternatives include contract farming arrangements with large farms or marketing/processing
agents, voluntary producer groups, marketing cooperatives and fair trade. Another key issue is
how to make staple food markets work better for small farms, particularly in countries where
the private sector has not adequately filled the gap left by the demise of state marketing
organizations. This implies that commercially oriented smallholder farmers have to organize
themselves into strong farmer organizations that are able, motivated and sufficiently
independent to effectively represent farmers’ interests....

Tested and successful FBO models are available from different organizations that have used
them, such us the Food and Agriculture Organization of the United Nations (FAO and Sasakawa
Africa Association / Sasakawa Africa Fund for Agricultural Extension Education. While
looking for and testing new models, the existing ones should be scaled up and best practices
from them publicized.

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1. BACKGROUND

1.1 Farmers’ and Civil Society Organizations Matter.

National governments and donors have promoted and supported the development of farmers’
institutions in sub-Saharan Africa (SSA) for decades; some have supported them for practical
purposes, while others have done so for strategic reasons. Cooperatives, saving and credit
societies, commodity farmer associations, and other forms of farmer-based organizations (here
in after - FBOs) have been promoted as an element of strategy for agricultural modernization
and structural transformation of national economies; along planned economy in some cases,
free-market economy in others. In addition, such organizations and other civil society
organizations (herein after – CSOs) have been promoted as key mechanism for empowerment,
particularly by those who viewed poverty and associated disadvantages as the consequence of
‘powerlessness’ in political, economic and social spheres. While ministries of agriculture
(MOA) and affiliated institutions, supported by international organizations such as Food and
Agriculture Organization of the United Nations (FAO), International Fund for Agricultural
Development (IFAD), and others, encourage and promote FBOs ministries of labor (MOL)
supported by the International Labor Organization (ILO) and affiliated organizations
encourage CSOs to defend peoples’ liberties, justice, human rights, equality, equity and other
socio-economic civil goods. While touching on CSOs, this paper will mainly discuss FBOs
with the understanding that most of the discussion applies equally on CSOs.

Farmers’ organizations are, expected to play different roles and to perform different functions
as they are meant to serve different purposes. The role of FBOs may be limited to providing
local institutional support towards the implementation of government and donors assisted
programs, such as facilitating service delivery, mobilization of local resources, and collective
marketing. Alternatively, the legal roles of FBOs may encompass members’ empowerment at
local level and engagement with policy and service providers by creating higher level structures
and building their capabilities. The diversity in FBOs is not just in their roles, but their modes
of operation may vary in different countries and contexts. This makes it difficult to come up
with a definition of farmers’ organizations, which is relevant to all conditions. As a working
definition, and for the purpose of the current analysis, it suffices to consider FBOs as
‘institutions of participatory governance with grassroots structures constituted by
smallholder farmers and processors as building blocks, representing their interests, and with
a certain level of accountability to them1.’

Participation of FBOs in market-oriented agriculture can improve the livelihoods of many rural
households through diversified nutrition, employment and enhanced incomes. As producers
and consumers, smallholder farmers are key actors in the agricultural sector in many countries.
Besides constituting a critical component of backward and forward linkages to other economic
sectors, their contribution to rural labor-force and food supply is essential to the transformation
of the rural economy, especially at the lowest income levels of society. The importance of

1
Adapted from Uphoff and Esman (1974)

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FBOs notwithstanding there are numerous problems of promoting growth of their incomes and
bringing about commercialization in smallholder agriculture and solving them is not easy.

1.2 Necessary conditions for commercializing smallholder agriculture and bringing

FBOs into the mainstream of agriculture

Ndmabo, 2005, identifies the critical factors that would enhance the competitiveness of
smallholder agriculture and the agribusiness industries in the face of trade liberalization; they
include:

1. Improved commercial integration among farmers, merchandisers and processors within the
agricultural value chain, including improvement in risk transfer, technology transfer, product
development, logistics and market information transfer.

2. Improved farm level competitiveness through better cropping systems, seed selection,
cultivation processes, sourcing and application of modern inputs, proper harvesting and post
harvesting handling using modern technologies, grading, sorting, agro-processing etc. as well
as through the volume leveraging of procurement, packaging, storage and transport.

3. Defining and characterizing new commercial opportunities for third parties in interlinking
farm level producers with processors, buyers/resellers, merchandisers and retailers.

4. Developing formidable capacity of farmer organizations, to mobilize them in order to create

a substantive constituency operating within an agreed legal and operational framework
(upholding constitutionalism and democratic principles) with a sharpened capacity in
developing well researched concept and position papers for policy influence to assert a
conductive farming business environment. A key aspect in addressing the above is the
promotion of farmer based-approaches aimed at enhancing the capacity of farmer organizations
in all spheres of their existence”, especially in management and finance.

In addition to Ndmabo’s identifies factors, one may add other factors such as:

5. Assessing the pool of appropriate crop and livestock productivity enhancement technologies
that have gone through research certification process and introducing them to farmers by
demonstration and training. A very good example of this has been (SAA) Sasakawa Africa
Association’s experiences in 15 African countries: in each SG 2000 country (qas they are
known), production of the five staple crops: maize, rice, wheat, sorghum and millet increased
by 21.5 million metric tons. About 25% of the added production was a result of productivity
increases, brought about by the use of improved technologies such as fertilizer, improved seed
and improved crop management, and timely planting. It is difficult to apportion with certainty
those changes associated to SAA interventions; however, SG 2000 and its partners have, over
the years, played a significant role in catalyzing these changes especially in maize production
and productivity and almost invariably through farmer organization.

There has been widespread introduction of improved varieties with resistance to maize streak
virus, coupled with the use of fertilizers and herbicides, in combination with improved crop
management in Ghana, Benin, Togo and Nigeria. High-yielding maize hybrids were grown on
more than 1 million ha in Ethiopia, Malawi and Nigeria, Tanzania and Uganda. Further, SG
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2000 also played a key role popularizing maize and sorghum production in Mali and Burkina
Faso. Introduction of early-maturing maize varieties more than doubled the area planted. SG
2000 also played a key role in the introduction of Quality Protein Maize (QPM) varieties on
over 700,000 ha in program countries.

The most significant impact among semi-arid crops has been yield gains in millet; accounting
for about 17% of the total increase in millet production. This was due, in large part, to the
widespread popularization of the improved SOSAT millet variety, especially in northern
Nigeria. Progress in sorghum has been much slower, and most of the efforts to introduce high-
yielding varieties have not been particularly successful. The exception was the introduction of
the high-yielding Hageen Dura 1 hybrid in Sudan.

Rice, in particular, has been a growing priority for since the late 1990s. It was the focus crop
in Guinea where SG 2000 played a pioneering role in the introduction of NERICA (New Rice
for Africa) varieties developed by the Africa Rice Center (WARDA). In 2005, SAA established
a Regional Rice Program, which SAA worked aggressively to either introduce or expand rice
production in Guinea, Nigeria, Mali and Uganda and Ethiopia. Significant impacts have been
achieved in all of these countries.

6. Another critical condition is the backstopping of dozens of small- and medium- private seed
enterprises, helping hundreds of agro-input dealers to get established, providing postharvest
handling and storage training to more than 50,000 farmers, helping more than 1,000 rural
women to establish agro-processing enterprises, and helping more than 50,000 farmers to
organize into formal associations as avenues for collective input acquisition, output marketing,
access to credit, and enterprise development.

2. CHALLENGES

2.1 General Challenges to smallholder agriculture

Agriculture in sub-Saharan Africa (SSA), like the rest of the world, continues to face challenges
that have hindered its capacity to spur economic growth. Notable among these are globalization
coupled with price fluctuations, recent global recession, increased pressure on the natural
resource base, unfavorable external market conditions and of late climate change. These,
coupled with poor rural infrastructure, weak institutions, low research and access to innovative
technologies, low productivity of smallholders farmers, reduced investment by governments
and official development assistance and the limited engagement by the private sector work to
slow down the process of commercializing in general and smallholder agriculture, in particular.
(UNDP report 2012).

The following general challenges have to be tackle head on at all levels, especially at farm level
to assist farmer organizations to take off and become sustainable:
i. Low productivity and production due to limited use of modern inputs, such as good
quality hybrid seed, fertilizers, herbicides, irrigation and farm / field mechanization
ii. Poor postharvest handling and limited value addition to agricultural products
iii. Insufficient agricultural manpower and skills
iv. Limited access to credit and generally low funding both at national and household
levels
v. Diseases and pests control

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 vi. Limited access to sustainable and quality input and output markets
vii. Marginalization of women farmers and their lack of capacity
viii. Emerging threats to agricultural development due to climate change.

The impact of each of these factors to agricultural production varies greatly under different
farming situations. Each farmer organization is unique and needs to be handled within the
domain of the available resources. Responding to most of the above challenges requires a
robust and an effective National Agricultural Extension and Advisory Services (NAEAS) that
can be provided by public, private and non-profit sectors (NGOs) sectors. A strong system of
NAEAS is, therefore a prerequisite to agricultural development, it plays an important role in
ensuring that farmers and various stakeholders have access to improved and proven
technologies and that their concerns and needs are properly addressed by relevant service
providers.

In addition to the above list liberalization of markets and the closing down of state marketing
boards led to all players in the agricultural sector to face increased competition. Smallholder
farmers are struggling to keep up with these new trends, finding themselves at a disadvantage
due to high transaction costs and low bargaining power. If players in the agriculture sector,
including smallholders, want to compete successfully, they must not only respond to customer
demand, but also focus on efficient operations that are cost effective and reliable. Farmers need
access to efficient market chains that they can rely on to dispose of their products at competitive
and stable prices. Small farms face major disadvantages in accessing modern market chains.
These include low volumes of produce to sell, variable quality, seasonality and limited storage,
high transactions costs, poor market information and contacts, and limited ability to meet the
high and acceptable requirements of some high value outlets. Although many local market
outlets still exist, the best business opportunities often lie with farmers who can organize for
urban and export markets. Promising alternatives include contract farming arrangements with
large farms or marketing/processing agents, voluntary producer groups, marketing
cooperatives and fair trade. Another key issue is how to make staple food markets work better
for small farms, particularly in countries where the private sector has not adequately filled the
gap left by the demise of state marketing organizations. This implies that commercially oriented
smallholder farmers have to organize themselves into strong farmer organizations that are able,
motivated and sufficiently independent to effectively represent farmers’ interests. The
challenges for smallholder farmers to enter the cash economy are numerous and extremely
difficult to master individually. These range from the provision of services to development of
business skills to deal with the new circumstances. The challenge is how strong, viable and
sustainable farmer organizations can be. Resource poor farmers are also faced with inadequate
information, lack of strong organized groups, low motivation, low literacy levels, lack of access
to productive inputs, low technological know-how among others that stand as stumbling blocks
to entering the cash economy.

2.2 A need for Collective Action

The implications of the above discussion is very clear, it is essential for commercializing
smallholder farmers to work together as a recognized legalized entity in order to strengthen
their voice for articulating their needs, for lobbying, for buying, bulking and selling, thus taking
advantage of economies of scale. The most common form of collective action is the joint
buying of inputs and joint marketing of products. Being able to sell produce in bulk is often a
minimal requirement for attracting buyers and securing bargaining power. This method is

4

strongly promoted in SAA project countries of Ethiopia (through cooperatives), Mali (through
Nie@tekenes), Nigeria (responding to specific buyers, such as Grain Cereal) and in Uganda
(either through One Stop Centre, known simply as OSCAs, as well as specific Bulking Centres.
In all cases, the mentioned facilities are utilized for both input storage and output bulking and
storage. In addition, controlling the flow of produce is a way for the organization to control
quality, and for perishable products, it is a way to process them and thus improve marketability.
An FBO, especially one with legal standing, can facilitate the grouping of produce and linkages
with the market: collecting orders from buyers and disseminating information to its members,
negotiating minimum prices and setting a delivery date; it can also make it easier to negotiate
credit and other financial products from financial institutions.

The future success of demand-driven, market-oriented rural advisory services rests in large part
on the formation and capacities of FBOs. A majority of development success stories are the
direct result of or dependent on collective action. However, the multifaceted role of FBOs in
extension efforts is not well understood. In many contexts, the story of local rural development
efforts is a tale of failed farmer groups. The majority of those groups, created for various
purposes by national agencies or development organizations, commonly lacked essential
elements that could have assured their longevity. Improving our understanding of the role of
farmer organizations in development outcomes is clearly critical to identifying options and
strategies for promoting successful rural advisory services (RAS).

2.3 Learning from experience

Sasakawa Africa Association (SAA) and Sasakawa Africa Fund for Extension Education
(SAFE) have long started work towards strengthening FBOs in a number of countries,
including Ethiopia, Mali, Nigeria and Uganda. The process has to start with identifying success
and failure factors of FBOs in their different environments, assessing market demand, market
prices and other market forces, to identify bankable commodity value chains for commodities
that would respond to market opportunities, competitive business models of the selected
commodities, knowledge and skills required by farmer organizations and capacity building
strategies. It is imperative that farmer organizations carefully select enterprises that will bring
benefits to member farmers, since not all enterprises are profitable. The objectives and
activities or services of FBOs should be relevant to the needs and priorities of their members.
The activities undertaken and services provided by FBOs should be done in an efficient or cost-
effective way in order to generate tangible benefits that would outweigh members’ resource
and time investment in collective actions. In addition, such organizations must have sound
mechanism for ensuring their financial sustainability.

A study commissioned by SAA / SAFE conducted in 2012, established the existence of FBOs
and examined how FBOs are functioning in Africa, their role in agricultural development, with
a focus on Ethiopia, Mali, Nigeria and Uganda. The study looked at the various approaches
that link FBOs to markets, in order to pin-point the successful models that involved engaging
the “middle” part of the value chain in providing services and markets for the FBO members.

In Nigeria the study reported that, the existence of strong farmer organizations that are able,
motivated and sufficiently independent to effectively represent farmers’ interests is an

5

indispensable factor for the protection and enhancement of the smallholder agricultural sector
(SAFE/SAA, 2012). However, there are several challenges facing resource poor farmers
ranging from inadequate information; lack of organized groups; low motivation; low literacy
level; lack of access to productive inputs; low technological know-how among others that stand
as stumbling blocks to entering the cash economy. For their individual development and the
society at large, smallholder farmers must forge strong links of cooperation among themselves,
using all the means at their disposal: economic, organizational, lobbying capacity and
negotiation skills. Also, there is the need for the farmer groups to identify important agricultural
commodity value chains that will bring economic benefits to them.

In Ethiopia a similar study showed that those FBOs which could provide tangible and adequate
incentives to their members were able to increase their membership-base, scope of activities,
geographical coverage, and to ensure organizational viability and financial sustainability. This
is was a key finding, which implies that increase in FBOs economic importance enhances the
ability of FBOs to expand their membership-base and to mobilize members. With effective
capacity development, this could become the organizations’ powerful source of influence.
Moreover, supporting economic improvement of smallholder farmers through viable collective
actions is an effective and practical leverage point to contribute towards the development of
strong and sustainable FBOs. Enhancing economic viability and visibility of FBOs, while also
developing their demand articulation capability, could gradually lead to empowerment.

The data for Uganda case studies was obtained from two main sources:

i) A commodity assessment survey conducted for the ZAABTA One Stop Center (OSCA) (in
2012). The study was undertaken on eight commodities selected by farmers at Zirobwe
Agriculture Farmers’ Association (ZAABTA) in Luwero District, with the aim of coming
out with five commodities that demonstrate high market potential and more profitability
than others. The focus was on the capacity of the OSCA and its members to exploit market
opportunities and build the association into a sustainable business model. Special attention
was given to profitability of the commodities and competitiveness of the OSCA business.
The findings of the study were used to guide SAA/SAFE to effectively support the
strengthening of the OSCA into a sustainable business. This is important to enable members
of ZAABTA to make choices of commodities that are profitable as well as understanding
the capacity development needs of members and the leadership of the OSCA in
transforming into a viable business.

ii) A comprehensive study of farmer organizations in Uganda commissioned by SG 2000

Uganda is another good experience. It was undertaken on fourteen (14) different farmer
organizations with a special focus on factors that would encourage the emergence of strong,
viable and sustainable farmer organizations. Findings of the study were used to propose
viable intervention options for development agencies such as SAA/SAFE to effectively
support the development and strengthening of farmer organizations. This is desirable to
enable smallholder farmers to be competitive in commodity value chains through their
collective action. The selected farmer organizations were of three types: multi-purpose,
commodity specific and advocacy organizations operating at various levels i.e. community,

6

 higher level and apex. The study identified several successes and fail factors that influenced
the organizations’ capacities to either generate both benefits for their members and fulfill
the purposes for which they were formed or failed to do so.

2.4 Factors that may influence organizational performance of FBOs and CSOs

After FBOs or CSOs are successfully formed there are factors that influence their
organizational performance; these can be categorized broadly into three (Horton et al, 2003):
organizational capacity; internal environment; and external operating environment (see
Figure). The first set of factors influencing performance is related to organizational capacity
(organizational resource, leadership and management):

i) Resources that are at the disposal of an organization to achieve its goals (human,
finance, infrastructure, facilities, equipment, transport, etc);
ii) Leadership and its ability for setting direction, mobilizing members around common
concerns, and realizing objectives;
iii) Capacity for effective program management (delivery of services to members,
participatory planning and periodic review, etc), and
iv) Effective process management (staff management, facility management, financial
management, fundraising, and networking and external linkages).

Farmers’ Organization

External Operating Environment

Internal
Environment

Organizational
Organizational
Performance
Capacity

Figure 1: Framework for organizational assessment

Source: Lusthaus et al (2002; cited in Horton et al, 2003)

The second set of factors is related to the internal environment or organizational ‘personality’
(mission, structures, incentive and reward system, and leadership and management styles).
These factors influence the degree of cohesiveness, trust and the level of motivation among
members to cooperate, and thereby the effectiveness of collective actions by smallholder
farmers around issues of common concern.

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Thirdly, the external operating environment has an important influence on emergency, and
the viability and sustainability of FBOs. Factors relating to external environment comprise
the legal systems, political support that exists for FBOs and their missions, and socio-
cultural, economic and ecological conditions in which the organizations operate. These
factors create both opportunities and challenges to effective functioning of FBOs, and
strongly influence the success and sustainability of collective actions by smallholders.

2.5 Challenges specific to farmer based organizations (FBOs)

A study commissioned by SAA / SAFE, conducted in Ethiopia, Mali Nigeria and Uganda to
identify success and failure factor of FBOs came up with the following list of specific
challenges:
i) Inappropriate approach to the development of farmers’ institutions
This may result from ambitious and target-based approach characterized by inadequate and
unsystematic effort at awareness creation about the needs and opportunities for collective
action; limited time for farmers to internalize issues, process, and to develop shared mission
and common goals; and hastily implementation of re-organizing primary cooperatives.

In some cases, the employed approach and related process resulted in FBOs with members
who have low sense of ownership. In the worst case scenario, such FBOs could be perceived
by members as an extension of government structure, rather than organizations created and
owned by farmers.

In a number of countries were the campaign-type of approach to re-organizing, especially

cooperatives, has had negative consequences that have led to weak and less viable
organizations in some cases, and to demobilization in others.
ii) Lack of responsive financial services
One of the challenges to the success of FBOs across SSA is limited access to finance and the
lack of responsive financial services. The organizations, emerging unions in particular, found
it difficult to access credit needed for investment in basic infrastructure and facilities and for
working capital to run their operations like purchasing outputs at harvest. Some cooperative
unions and farmer associations secure loans from saving and credit unions raise additional
finance from borrowing from other sources, but finance is never adequate. Access to
responsive and adequate financial services is one of the critical success factors for any type of
organization.

This was amply demonstrated by the scrutiny and a closer look into the performance of some
cooperative union in Ethiopia, which is one of the best performing farmers’ organization.
Licha Hadiya Cooperative Union was established in the year 2002 in Hosania town, Hadiya
Zone, SNNP Region, with limited start-up capital mobilized from 15 member primaries
(shares). Marketing of members’ product was the primary objective of the union as Hadiya
Zone is one of high potential areas for the production of staple cereals like wheat. Soon after
its establishment, the SNNP Region established ‘Rural Fund’ in recognition of the lack of
responsive financial services for FBOs, like Licha Hadiya Union. The union had secured from

8

the Rural Fund sufficient credit (about a million Birr) in 2004 and 2005 to run its marketing
operations. With this, profit of the union, which was about 11,000 Birr in 2003, had grown to
942,000 in 2004 and reached about 1.4 million Birr in the following year ( 2005). Currently,
the union owns a flour mill and supplies processed and packaged wheat flour to big bakeries
like Shoa Daba bakery located in Addis

iii) Infrastructure and their utilization

The existence of basic infrastructure and other facilities is crucial for success, depending on
the nature of commodities and activities in which the farmers’ organizations are involved. As
mentioned above, often FBOs face difficulty to access credit for such investment. Nonetheless,
infrastructure-related challenges go beyond financial limitation, comprising issues of economic
viability (in terms of capacity) and technical appropriateness, facilities, and in-house capacity
or access to affordable private service for repair and maintenance.

An example is An Integrated Livestock Development Project (ILDP), funded by the Austrian

government, had introduced crossbred dairy cows with improved forage to some woredas in
North Gondar Zone of the Amhara Region. The intervention increased milk production in the
area and created demand for external inputs, in particular for concentrate livestock feeds. This,
in turn, demanded collective action for input (feed) supply and output (milk) processing and
marketing. In response, ILDP supported the organization of 9 primary dairy cooperatives and
the formation of Jantakil Dairy Development Union in Gondar town in the year 2007.

The union had enjoyed generous infrastructural and technical support, including for the
establishment of milk processing and packaging unit, with boiler, cooler and chiller, crème
separator, churner, and bagging machine. The capacity of the processing unit was said to be
1,500 litters of raw milk per day. Later on, it was learnt that the capacities’ of the cooler and
chiller don’t match with and far below that of the boiler; and frequent breakdown, limited
availability and prices of spare parts, and high repair and maintenance charges made the cost
of running the unit exorbitant. On the other hand, the relatively high milk yields at the
beginning couldn’t be maintained, partly because of inability of the union to supply feeds due
to financial limitation. In addition, logistic problem, lack of appropriate transport, reduced its
catchment area, excluding 2 of the 9 primaries. This, coupled with low milk yields, limited the
maximum amount of milk supplied to the union to about 270lts/day. As a consequence, even
the available capacity of the unit is being underutilized.

iv) FBO-Private-Partnership: A missing link

Farmer organization - public- private partnership doesn’t exist or is nascent in many SSA
countries. This is regardless of its potentially useful role for the success of collective action by
smallholders. There are several reasons for the virtual absence of such partnership, among
which, is unfavorable attitudes of leaders and experts of supporting institutions, who tend to
perceive the private actors more as ‘exploiters’ than as important service providers. This has
effectively excluded from consideration the possibility of creating partnership between
cooperatives and private actors on the basis of win-win institutional arrangements.

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In some cases, farmer groups/organizations could benefit more from partnering with the private
sector, such as in access to inputs, sale of outputs and value addition that involves significant
processing. Partnership with the private actors could be important for these kind of activities,
which often requires heavy investment, specialized skills, and entails higher risks (Ferris et al,
2006). Improving agricultural productivity (irrigated and rain-fed agriculture) requires, among
other things, an increase in the use of agro inputs of seeds, fertilizer, and agro-chemicals. The
use of agricultural inputs remains very low. In 2002–2003, Sub-Saharan African farmers used
on average 9kg of fertilizers per hectare (ha) of arable land compared to 100kg/ha in South
Asia, 135kg/ha in Southeast Asia and 73kg/ha in Latin America. The challenge is to facilitate
farmers’ access to critical productivity-enhancing inputs.

v) Facilitate commercial credit services for partner FBOs and entrepreneurs.

FBOs need funds to set up viable commodity value chains and agro enterprises, but access to
funding in a form of credit and other forms have been one of the stumbling blocks for FBOs.
Many banks do not want to deal with smallholder farmers’ association for fear of high
transaction costs and heavy follow ups for re-payments.
However, arrangements for lending to FBOs and entrepreneurs from with micro-finance
institutions and some banks have worked in some countries, such as Uganda and Nigeria.

vi) Mainstreaming gender and environment

The low level of participation of women in farmers’ organizations is a big challenge. Most
times the women come together as a group, but are less prominent in mixed groups like
cooperatives or farmer associations. Women participation and empowerment in general has
been constrained by the well-documented socio-cultural and institutional conditions. The
higher illiteracy rate among women than men farmers in many countries is another major
factor constraining the involvement of women and their leadership role in FBOs. Conceited
effort has to be made to mainstream women in agricultural transformation agenda.

Gender relations, i.e., the relative position of men and women in division of resources and
responsibilities, benefits and rights, powers and privileges, reflect the power relations
between men and women. The implications of these relations are detrimental to agricultural
production and food security from access and allocation of resources point of view. The
marginalization of women is at the detriment of Africa food, nutrition and income security,
since it has been scientifically proven that

o The greatest and easiest technology gap to close is with women farmers.
o An investment in crop productivity extension for women gives twice the return as an
investment with men.
o In Kenya, for example, research showed that 10-20% greater production increase can
be achieved by shifting seed & fertilizer vouchers from men to women.

vii) Political interference

The SAA – SAFE study found some degree of unproductive interference in the internal
affairs of FBOs, especially cooperatives. Government officials may exert ‘unnecessary’

10

pressure on FBOs, striking the balance between incentives for the FBOs and the hidden costs
and risks associated with the involvement of officials or politicians remains a challenge that
needs due policy attention.

viii) Policy and institutional environment

There are a number of gaps in the policy and institutional environment affecting FBO and
CSO.

- Clear FBOs and CSO development policy;

- Input market governance;
- questions associated to transparency and accountability;
- Export promotion policy associated with export incentives
- Lack of public support to strengthening lobbying and advocacy roles of FBOs /
CSOS, especially related to peace and security, justice and human rights and the
rights of any minority groupings;
o No deliberate effort at developing capacity of FBOs to enable them to effectively
articulate interests of their constituency and to develop evidence-based policy
proposals; and
o Lack of platforms and effective mechanisms for enabling active participation of
FBOs in the policy arena.
- Fragmented mandates and structures supporting cooperatives and other FBOs / CSOs;
- Weak linkages within public institutions and with other actors along the value chain.

ix) Other factors constraining the viability of collective actions have to be

mentioned

Several other factors that constrain optimal exploitation of already existing opportunities
through collective action by smallholders (FBOs and CSOs) include the need to:

o Access appropriate technology and inadequate knowledge in specialized technical areas

o Enhancing productivity of marketable high value commodities (milk and honey);
o To improve crop protection and postharvest to reduce losses, improve quality, and add
value
o To produce certified seeds with improved quality, processing and packaging.
o To access appropriate technology for postharvest handling/processing as well as the lack
of effective institutional arrangement to enhance their collective bargaining power in the
market (especially for perishables -fruits and irrigated vegetables).
o To improve weak or inappropriate leadership in farmer groups which inhibits their
capacities to address their needs, for example, by failing to mobilize their resources to
reasonable levels before seeking external support. Some resource poor farmer groups are
led by people who perceive the group as an avenue for accessing financial resources from
support organizations, while in some cases it is for political ambitions. Such leaders are
the most troublesome in that they inhibit the farmers' ability to establish an institutional
capacity for self development; also weak leadership tends to create dependency.

11

 ix) Last but by no means least, African agricultural policy makers must address the issue
of an aging agricultural workforce, even within FBOs, in Africa and the growing trends
of the youth to migrate to urban centers with few skill sets and job prospects. This is a
fertile seedbed for social and political unrest. Former President of Nigeria, Olusegun
Obasanjo, summarized the issue succinctly:
"As long as farming remains, at best, marginally rewarding, young men and women will drift
away from the rural areas to increase the battalions of the urban poor. The idea, therefore,
that African agriculture should be based only on a half hectare holding is, to say the least,
unappetizing. I want to see people encouraged. I want to see the evolution of young,
emergent, commercial farmers who will be holding, not a half hectare of land, but 5 to 10 to
20 hectares of land, and for whom the city will have no big attraction."
It looks as if the list of challenges cannot be exhausted, but something can be done to assist
FBOs to take off and set the ball rolling.

3. OPPORTUNITIES FOR FBOS

Africa is on the brink of a significant transformation. Over the last decade, the continent was
home to six of the world’s 10 fastest growing economies, and the outlook for the region remains
bright at a time when the rest of the world is facing major political and economic challenges.
Strong growth in Africa’s middle class2 is expected to continue on the back of better economic
policy and governance, coupled with more business-friendly policies and improved demand.
This sustained increase in consumer spending, combined with population growth and rapid
urbanization, means that today’s markets offer better opportunities for smallholder farmers
who can meet demands related to larger volumes, consistency of supply and higher quality.

The language used when talking about African agriculture and food systems has been shifting
in recent years and is changing rapidly in positive and exciting ways. High level African leaders
and their development partners are paying new attention to the positive role African agriculture
plays in economic development across the continent. The fact is that Africa has the agricultural
potential not only to feed itself but also to grow a surplus to help provide global food security.
However, fulfilling this potential requires efforts from both within and outside the continent. It
requires a broad perspective that looks at the needs of the smallholder farmers as part of the
food systems and supply chains and considering agricultural productivity and food and
nutrition security in the context of overall economic development and social stability.

In its 2008 World Development Report, the World Bank indicated that, indeed, investment in
smallholder farmers was among the most efficient and effective ways of raising people out of

2
The middle class in East Africa account for 22.6% of the total population, with Kenya at 44.9%,
Uganda at 18.7% and Tanzania at 12.1%. A 36.2% growth was recorded by Kenya between 2006-
2010 (Kestrel Capital – Nairobi Stock Exchange, March 2012).

12

poverty and hunger. Raising productivity for resource-poor farmers is one piece of ending
hunger, but how this is done depends on whether these farmers can gain access to more land,
more inputs at affordable prices and better product markets. It is, therefore, essential that agro-
ecological friendly farming practices and structural reforms that ensure that resource-poor
farmers have the land and other resources they need for sustainable livelihoods are the best
way forward. A vibrant agricultural sector has been the basis for successful economic
transformation in many of today’s developed countries and it was the precursor to the industrial
revolutions in Europe and the USA and more recently to those in China, Taiwan, Republic of
Korea, Thailand, Viet Nam and other rapidly growing Asian economies.

Finding the right mix of commodity value chains and farm enterprises, guided by market
demand, will strengthen farmer organizations, as members increase their incomes and improve
their livelihoods.

Emerging transformations in the agriculture and agri-food sector, the role of the private sector
and other forces of change in Africa that provide opportunities for FBOs include:

• Government’s critical role in creating enabling environment for growth and

transformation. A number of countries are demonstrating how sound agricultural policy
and implementation can result in remarkable growth rates (5 to 10 percent as opposed to a
3.8 percent average for Africa). Several countries are showing that productivity
improvements can have major impacts on food and nutrition, security, and poverty
alleviation, while also conserving land and other natural resources. Policy and institutional
innovations are essential to encourage growth and engage the private sector to develop
markets and supply chains; so are political leadership and vision, coordinated strategies and
a long term commitment. Others notable transformations are:
• Diversification of food markets and food systems as a response to urbanization and as
engines to growth. Rural-to-urban food supply chains are developing rapidly to meet
expanding urban demand. African entrepreneurs, both large and small are investing
throughout the supply chains; from inputs through processing to retailing.
• The smallholder farmer as an agent of change: Smallholder farmers are achieving
productivity gains and contributing significantly to agricultural growth in many African
countries. Many smallholder farmers are women, who play central roles not just on the
farm but throughout the food system by helping to ensure household nutrition and
community - wide food security. Farmers are building up business management skills that
enable them to articulate their needs and to better manage resources and risks, while access
to real-time and better data is resulting to better decisions. Farmer organisation are helping
to support cross cutting issues, sharing of best practices , dissemination of innovation and
informing of decisions.
• Government – led vision for agricultural entrepreneurship that would encompass
incentivizing investment, appropriate regulations, support communication and planning
across sectors and providing safety nets to manage risks and
• Capturing the potential of youth in the labor force: Youth unemployment is a big
challenge facing the African continent, with the growing population and its large
percentage of young people, most of whom are not attracted to farming in the rural areas.
Thus, farming and the agri-food sector need creativity, technological skills and engagement
of the youth. A number of mechanized farming, food processing, transportation, marketing
and other small business opportunities are emerging that need talent and skills to fill their

13

 ranks so that they can grow and expand to create meaningful employment for African
youth.

4. SUGGESTED ACTIONS / THE WAY FORWARD

4.1 At Policy and decision Making Level

At a high continental level, a number of actions have been taken or being taken, to address
agriculture transformation generally, including this high Level Conference in Dakar to discuss
Africa’s Agricultural Transformation Agenda. Other actions have included: (just to mention
them):
The New Partnership for Africa's Development (NEPAD)

i. The Comprehensive Africa Agriculture Development Program (CAADP),

ii. Harnessing Innovation for African Agriculture and Food Systems Meeting of 2013,
which specifically highlighted the needs of the smallholder farmers,
iii. The 2014 Malabo Summit and Declaration
iv. The Africa Green Revolution Forums (AGRF)
At the 4th AGRF the discussion focused around six major themes critical to Africa’s food
security including: increasing crop and livestock productivity in the presence of climatic
change and other challenging conditions; promoting agricultural investments that will generate
benefits at all economic level; increasing financing for agricultural development; and support
for farmers and farmer organizations through modernizing commodity markets and removing
barriers to intra-regional trade.

4.2 At Planning and Implementation Levels

A number of present day governments in SSA have developed policies to transform agriculture,
using value chain approach and present agriculture as a business not a project; these noble ideas
have remained empty rhetoric void of action due to weak farming groupings in on the ground
that fail to sustain their businesses.
Practically smallholder value chain actors, individually, but especially in their different
groupings, have to be strongly integrated into modern value chains; innovative approaches
and strategies for promoting competitive business models in the agriculture sector should
intensified. Models that have worked and could be expanded and scaled up include but are
not limited to:

4.2.1 The SAA / SG2000 Model

SAA /SG2000 has always had a very strong field and farmer orientation. Working with the
main partners, national agricultural extension services, SAA has concentrated on introducing
productivity-enhancing food crop technologies to increase yields and improve household
incomes. The best synthesis of its mission was captured in Dr. Borlaug’s dying appeal, “Take
it to the farmer”. Initially, SG 2000 focused on showcasing the potential of improved food crop
technologies, hands-on participation and training of extension workers and farmers. SAA

14

primary classrooms were and remain the fields of smallholder farmers. From 1986 to 2013,
national extension personnel and smallholder farmers worked with SG 2000 country program
staff to establish more than half a million large crop demonstration plots and several million
smaller production test plots in the target countries. Of late, SAA program in the focus countries
are also incorporating livestock, based on the needs of the smallholder farmers, and spreading
along the entire value chains. New priorities and programmatic areas have been established to
include farmer mobilization and capacitation to form address post-harvest and marketing
issues, and link FBOs to a range of service providers and organizations, often from the private
sector.

The model relies on establishing what farmers need to know (through their Farmers
Organizations); it tries to respond to the numerous challenges discussed above and finding
sustainable solutions. The model also believes in working within a robust and effective
Agricultural Extension and Advisory Services (AEAS) that can be provided by public, private
and non-profit sectors (NGOs) sectors’ combined effort. A strong system of AEAS is, therefore
a prerequisite to agricultural development and transformation; it plays an important role in
ensuring that farmers and various stakeholders along the value chain, have access to improved
and proven technologies and that their concerns and needs are properly addressed by relevant
service providers.

The transformation first and foremost, of the extension system, is paramount. Addressing
farmers’ needs and growing challenges in agriculture necessitates innovative approaches in
extension and agricultural development, pluralism of service provision, and demand-driven
extension services along the agricultural enterprises value chains. The agricultural extension
service provider has to go beyond production technology transfer to facilitation; training to
learning, dealing with post harvest handling, food safety, nutrition, value addition and
marketing issues; conservation of natural resources, financial and other resource mobilization,
agribusiness, and gender issues in agriculture development in general and specifically at
household level. Service providers need to be up to date with topical issues about agriculture
in related to changes in the global food and agricultural systems, change in consumer demands,
off-farm rural employment opportunities and mitigating constraints imposed by HIV/AIDS,
climate change that affect agricultural productivity and production, thus affecting rural
livelihoods. This calls for a critical mass of human resource with knowledge, skills and
information on agricultural production, post harvest and marketing; appropriate delivery
approaches/methods, channels and tools.

i) Agricultural commodity value chain approach

A value chain depicts the necessary activities and functions that have to be undertaken from
the farm level to the consumer’s table. The activities / functions occur in a sequence and are
carried out by different players, including farmers, input and output traders, processors,
transporters and retailers. Before choosing an agricultural enterprise, FBOs have to carry out a
value chain analysis (VCA), which, in a narrow sense, focuses on the primary activities in the
chain, including production, transportation, processing, marketing, information exchange, just
to mention a few. In a broad sense, VCA encompasses the ‘rules of the game’ (i.e. the

15

governance of the chain), as well as support services, such as quality control and certification
(Da Silva and de Souzo Filho-2007). Below is a generic value chain (could be rice, maize,
dairy, etc). The cost along the chain will vary depending on the commodity under review.

To bring a value-chain perspective to smallholder agriculture and to the FBOs, a major capacity
building effort is needed to broaden and upgrade the skill sets of extension specialists and
frontline agents. Both informal and formal training will be needed

Ensuring Maximum benefits for FBOs from commodity Value Chains

• Expanded land use • Minimize harvest and • Minimize storage • Whole grains • Collective marketing
• Crop diversification other field losses losses from insect • High milling recovery (bulking, warehousing,
• Efficient use of inputs • Timely harvest of and pest infestation • Options for by-product transportation)
• Reduce drudgery, crops • Maintain quality utilization • Packaging and product
especially on women • Reduce drudgery • Provide option for presentation
for women & children market • Market outlets
• e.g., $30/100kg • $40/100kg • $60/100kg • $90/100kg • $125/100 kg

POST- CLEANING &

PRODUCTION
HARVEST STORAGE
PROCESSING MARKET

ü Seed varieties üCrop harvester/reaper üImproved handling ü Milling ü Grading

ü Land preparation ü Mechanical thresher & management ü Grading ü Packaging
equipment üGrain cleaner ü Improved silos ü Product transformation ü Group formation &
ü Agronomic practices: üGrain bags sensitization
Crop care & mgt.- üMarket linkages
fertilizer use, weed,
insect & pest control

ii) Improving production and productivity of agriculture enterprises

FBOs have to have to master the best recommended farming practices, awareness about new
varieties and their performance to enable farmers to test, discuss, evaluate and validate the
advantages and disadvantages of new technologies under local farming conditions and learning
by doing. SAA / SG2000 uses the farmer learning platform (FLP) approach; an approach
developed and used successfully by Sasakawa Africa Association (SAA) in many countries.
An FLP is based on three main pillars: training, demonstration and monitoring. The
implementers of FLPs are the Extension Agents (EAs), who are trained by SAA staff for this
task, after taking them through 3 training sessions during the growth period – pre-season, mid-
season and end-season training. The EAs then train and re-train farmers on a continuous basis,
which could be 3 to 8 times during the season. To intensify the impact of training and stimulate
interest and credibility, two types of demonstrations are implemented on farmers’ farms:

16

technology option plots (TOPs) and women assisted demonstrations (WADs), which
specifically reaches out for marginalized smallholder farmers in their communities. Both types
of demonstrations are taken care of by a farmers’ group of 5 to 20 members. Monitoring visits
from SAA staff are conducted regularly.

iii) Ensuring quality produce for food and the market

Poor post harvest handling practices are still a challenge to bringing quality produce to the
market that can fetch farmers premium prices. Good post harvest practices and technologies
include economically viable value-adding postharvest and agro-processing technologies of
clearly defined crop value chains with the aim of improving food security, nutrition and
incomes of smallholder farmers. FBOs need to have information on technologies that improve
quality and quantity of produce to the required market standards at the same time reducing
postharvest losses. Such practices and technologies allow timely harvest of crops, minimize
harvest, field and storage losses, and reduce drudgery, especially for women and children. Such
practices and technologies include timely harvesting when produce has reached maturity, use
of tarpaulins to place produce when harvesting and drying to avoid contamination, manual and
motorized grain and nut shellers, grain cleaners, harvester/reaper among others.

After harvesting the grain requires proper cleaning and good storage, thus, use of technologies
that minimize storage losses from insect and pest infestation and maintain quality so that
opportunities for remunerative markets are expanded. SAA program has successfully
introduced and trained FBOs in the use of the following technologies: hermetic storage
technologies, such as, improved silos, triple/pics bags, proper packaging and placing bags on
pallets, while ensuring the right moisture content is observed as well as identify promising
value-addition agro-processing enterprises. Postharvest learning platforms (PHLP) with an
enterprise context, should be encouraged where FBOs have hands on training through
demonstrations on the use, care and maintenance of technologies; demonstrations should
involve farmers, store keepers/managers and even traders. Better still, Local equipment
manufacturing capacity and quality control should be promoted; likewise, some farmers within
FBOs should be trained and skilled to become local entrepreneurs to provide post harvest
services such as shelling, threshing, cleaning to the farmers.

iv) Value addition to maximize benefits from existing markets of agriculture

commodities
Currently the majority of the smallholder farmers in Africa do not get full returns from
production, because value addition is not included in the package of extension and advisory
services by extension workers to the farmers. This is partly because extension services tend to
focus on improving productivity and production as these are considered to be the priorities
during their training, leaving out postharvest handling and marketing.

Value addition involves product transformation of form or shape, for example, milling maize
gain (primary form) into maize flour (secondary form), a product which is more profitable than
when unprocessed; for example, cereal drying, grading, milling and packaging leads to better
markets and higher profits. For FBOs to maximize profits, buying inputs in bulk, bulking their
produce, transportation and marketing utilizes economies of scale and reduces transaction
17

costs. Extension workers, therefore, have to be knowledgeable about these issues. They need
to organize farmers into FBOs, create awareness about value addition and bulk buying and
marketing. Most importantly, FBOs production should be demand driven, i.e., markets should
be identified before production to ensure sustainable enterprises for farmers.

Governments alone cannot deliver agriculture transformation, the need therefore, for public-
private partnerships for extension provision and market integration cannot be overemphasized.
Partnerships harness both human and financial resources for sustainable agricultural
development, for example, SG2000 Ethiopia, Mali, Nigeria and Uganda work with various
partners and stakeholders that support agriculture at various levels of the value chain. The
partnerships’ aim is to establish viable market linkages for the smallholder farmers through the
farmer based organizations (FBOs), a network of private input dealers, and developing
workable business models that allow sustainable agricultural enterprises. There is need to
strengthen alternative providers of Extension Advisory Services such as NGOs / Farmer
Organizations, Agro-input/seed suppliers/dealers and private advisory service providers.

Through training, capacity of extension workers should be build to link organized smallholder
farmers to market-oriented agriculture; Integrate private agri-businesses, NGOs, FBOs, and
universities into smallholder extension provision. Strengthen research-extension-farmer-input
supplier institutional relationships and pipelines; and supporting national extension forums for
knowledge sharing and policy advocacy is also necessary. Thus the need to strengthen research-
extension-farmer-input linkage systems (REFILS) as indicated in figure below:

Agro-
Research Extension Farmers
enterprises

The different categories have different roles namely: Research for technology generation on
station and on farm technology validation, varietal release and product registration; Extension
for technology demonstration, training, adaptation and feed back to research; Farmers for
technology selection, adaptation and farmer-farmer information diffusion and Agro-enterprises
for Input supply, extension advisory services and facilitating farmers access to markets.

Market information is critical and should be availed to the farmers. Service providers need to
periodically provide such information on commodities on demand and their prices and the
required quality. This can be done through the extension workers and also using new
technology applications using mobile telephone sets.

v) Mechanization
Smallholder agriculture needs mechanization; to reduce drudgery, improve speed and
efficiency, and increase the quality of harvested crops. African governments have attempted
to provide mechanized services through public service providers and through the provision of
18

machinery to farmer-based organizations as concessionary loans or even outright grants. These
programs have invariably failed, with the machinery being ruined in one-third or less of its
expected useful life. Inappropriate equipment, poor maintenance, over use and preference
given to politically connected farmers are some of the reasons for these failures. Yet the need
is still there. Farmers need laborsaving technology, including access to farm machinery.

vi) Monitoring, evaluation, learning

A robust monitoring, evaluation, learning and sharing system needs to be established at the
different levels. This is important as it is necessary to

• Establish effective ME&L systems to assess interventions, outputs and outcomes;

• Establish an evaluation and learning culture among extension workers and farmer
groups to pressure-test core beliefs, strategies, activities and technologies.
• Conduct ex ante rapid appraisal activities to evaluate promising technologies and best
practices.
• Contribute to operational research literature on efficacy of extension as a smallholder
development activity.

The other two workable models to elaborate upon are the Inclusive Business Model
Approach and the Empowerment of small and medium agro-enterprises (SMAEs)

4.2.2 The Inclusive Business Model Approach (IBM) for strengthening produce-buyer
FBOs linkages

In addition to the obvious benefits of collective bargaining power, bulking and economies of
scale, smallholder organization is also a fundamental requirement for participating in a
coordinated and efficient value chain. Better coordination between farmer groups and buyers
can translate into added value, lower transaction costs, and increased competitiveness. The
ways in which farmer organizations can be organized into groups can be described as “driver
models” which are producer-driven, buyer driven, or intermediary driven3. Producer-driven
models are motivated and owned by small-scale producers based on collective action for
increased participation in markets. Buyer-driven models involve larger businesses organizing
farmers into suppliers, which can also include the provision of inputs and technical advice
based on the buyers’ needs, also known as contract farming. Lastly intermediary models which
are commonly led by local NGOs involve the provision of technical assistance and support to
identify and improve smallholder market linkages. Regardless of the type of driver model used,
some type of organization is crucial if small farmers are expected to be active players in a value
chain.

3
This concept was developed in the paper Vorley, B., Lundy, M, MacGregor M., Baker, D., 2008, Business Models for Small Farmers and
SME’s, FAO.

19

Table Organizational Models for Smallholders

Model Driver Motivation

Producer driven Small-holder groups, Access to new markets,

associations, cooperatives increased bargaining power,
access to inputs, technical
assistance, secure market
position, farmer empowerment.

Buyer driven Processors, retailers, exporters, Access to land, supplies,

traders, wholesalers increase volumes, supply niche
markets.

Intermediary driven NGOs, development agencies, Local and national economic

governments development, farmer
empowerment.

The business model approach supports FBOs and other informal groups to mainstream business
thinking among their organizations and move away from operations that are dependent on
government or donor contributions. The approach supports farmer groups define how they do
business with their customers based on a better understanding of buyers’ requirements and
prioritize activities that contribute to more effective business relationships between smallholder
supplier groups and small, medium or large agribusinesses. The approach supports FBOs
improve the aspects of their business related to (i) value addition with the improved
management of business and logistical processes, (ii) better business to business coordination
between farmer groups and immediate buyers and, (iii) improved market access for both the
players involved and the entire chain.

A number of good practices have been identified to enhance the linkages between farmer
organizations and buyers and strengthen the inclusive business model. They include the
following:

Good Practices in strengthening producer-buyer linkages

• Commodity specific agribusiness training for farmer organizations

• Producer-buyer business meetings
• Appraisals on potential linkages to local financial products and services
• Integrated quality control and logistical systems: buying platforms; collection points
etc.
• Formalization and monitoring of contracts
• SMAE buyer appraisals to understand procurement requirements and market needs

4.2.3 Promotion of SMAE performance and competitiveness

In addition to strengthening the role of FBOs in value chains, an increasingly important aspect
of inclusive agribusiness development focuses on support to small and medium agro-

20

enterprises (SMAEs) given their importance not only in linking farmers to markets, but
generating off-farm employment in rural areas. The role of SMAEs in rural development is
often not given due credit and recognition. In addition to being overlooked by development
agencies that focus primarily on more disadvantaged groups, the regulation of SMAEs also
tends to receive little attention from government as they fall between the policy mandates of
the ministries of trade and agriculture. While SMAEs play a critical role in driving
modernization of the agriculture sector, they face a number of constraints which need to be
addressed before their full developmental potential can be realized. Public-private partnerships
targeted to enhancing the competitiveness of small and medium agro-enterprises could
reinforce the capacity of small enterprises to supply high quality products to domestic and
regional markets, whilst reducing risks and costs to the global and local companies that buy
their products. The list below summarizes the lessons from several agribusiness roundtables
organized to better understand the challenges facing SMAEs.

Lessons to keep in mind:

i. SMAEs generally start as family-owned businesses, using personal savings and loans,
based on a vision and need to generate income and wealth for the family and relatives.
Capitalization and access to finance is however always an issue with few commercial
banking options to choose from and unreasonable high interest rates and loan criteria.
ii. There are large seasonal variations in employment and pressure from extended family
and friends for jobs, which is a daily stress for owners and managers.
iii. The overregulation and bureaucracy that SMAEs face discourage them from
formalizing their businesses.
iv. The inadequacy, unreliability and cost of utilities infrastructure (power and water) is
a major source of unforeseen costs and affects long-term competitiveness.
v. Smallholder inability to produce, plan and market collectively is a serious
procurement impediment for small firms wanting to do business with small farmers,
which has meant that some firms have invested in small farmer organization schemes
and on-farm technical assistance to improve supplies.
vi. SMAEs often face competition from cheap imports and require support in developing
local brand differentiation to build up a reliable and loyal customer base.
vii. Business is also highly dependent on a minimum quality standard product. Small
companies do not have the capacity to ensure the safety and quality of their products
and cannot afford the certification fees charged to large firms. With assistance
however, locally customized quality management schemes can be put in place.
viii. Operations and transport can be a company’s highest cost factor. With support to
logistics systems, a small company can address many inefficiencies and reduce waste,
transforming this aspect of business into a competitive advantage relative to other
local firms.

4.2.4 Other necessary Actions to be considered

i) Promoting Demand-Driven Agricultural Extension. Agricultural extension

programs based on the needs and demands of FBOs and smallholder entrepreneurs,
some of whom are emerging commercially oriented farmers, should be strengthened
through a wider variety of institutional intervention

21

ii) Develop Leaders: Poor leadership within FOs and CSOs is a serious problem.
Organizations work the way they do because of the way people work in these
organizations, and often enough the way they work is a reflection of their leadership
(Heaver 1982). People expect leaders to show personal commitment to the
organization's vision and provide conceptual clarification as to the direction of the
organization - where are we going and why! To be truly effective, leadership involves
all leaders - not only executive leaders, but also networkers (frontline workers, in-house
consultants, trainers, and professional staff who spread ideas throughout and outside
the organization) and local line leaders (branch managers, project team leaders, and
other frontline performers). All have an essential role in bringing about development.
iii) Promote capacity building of all advice providers and users. Re-envisioning
extension necessarily entails capacity building, in management negotiations and the
establishment of national and district work plans and budgets in line with a new,
pluralistic extension strategy, as well as with producers and communities. Pluralistic
communication systems will be needed to operate in this larger arena. Both the food
security network and the extension communication arena will be challenged to
decentralize activities in favor of knowledge and information exchange and
development.
iv) Capacity building at all levels: Capacity building and institutional strengthening
widen the pool of qualified service providers and ensure strong links with and
modernization of the various components of the formal and non-formal agricultural
education system, thus, although costly at first, capacity building at all levels is critical.
v) Establish and Maintain Links between Policy Makers, Support Services, FBOs
and Markets. Often the most binding constraint for smallholder producers is a lack of
marketing information and inability to meet quality standards that stifle agricultural
production. Producers need to know where the markets are, where their competition is,
what preferences and standards have to be met, how to technically meet these standards
and how to minimize price and marketing risk. If these hurdles were overcome,
financial intermediaries will not be so reluctant to lend to the smallholder agriculture
sector. (See Figure 1)

The critical links

22

Because large-scale farmers are already adequately served by the private sector, agricultural
economists claim that governments and other development workers should best concentrate
agricultural development efforts on the mass of smallholder farmers, especially those organized
into FBOs rather than seek to serve a bimodal structure of small and large farms. Some maintain
that concentration on smallholder farmers leads to faster growth rates of both aggregate
economic output and employment (Johnson and Kilby, 1975; Eicher and Staatz 1984).

High priority is the creation of producer-led, demand-driven extension services that promote
producer FBOs at the local, community and village level and generally lead to greater self-
help, community-driven programmes.

vi) Promote linkages between institutional and ICT as well as personal networks.
Linkages may be institution based, community based or simply directed toward
individual awareness.

Linkages, and the structure and management of linkages, between institutions significantly
affect their relative success or failure. This is especially true for the "agricultural knowledge
triangle" of research, education and extension. Today's technologies allow for linkages via
ICTs such as the Internet. International linkages to research and appropriate agricultural
technologies are available through systems such as the FAO's TECA.
http://www.fao.org/sd/teca/

5. CONCLUSION

Agricultural extension workers/service providers are key in causing change in agriculture;

however they need to be knowledgeable about new trends, challenging and opportunities for
farmers that they have to serve; they have to be aware of the market demand, as well as
famers’demands. There is need to understand the experience of different
countries/organizations and different extension models (e.g the farmer learning approach and
business models promoted by e.g., FAO, Sasakawa Africa Association and other organizations)
to develop and implement more effective models for developing counties – Africa in particular.
The extension workers, meanwhile, should be trained on the new concepts, especially on the
concept of agricultural commodities value chains in order for them to trail, skill and capacitate
FBOs in their endeavor to achieve agricultural transformation.

Strengthening of Farmer Based Organizations (FBOs) Implementation guidelines

Strengthening of farmer based organizations (FBOs) is intrinsically part of everyday extension

work. Whether one is promoting market gardening, dairying, or crops, FBO strengthening is
essential for farmers to fully exploit market opportunities through economies of scale. FBOs
are not developed in a vacuum – they are developed within the commodity value chains which
they are engaged in. This means FBOs’ strengthening needs will be commodity value chain-
specific. Therefore, the FBO strengthening component will be done within the context of the
commodities promoted by the countries in question.

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 Implementation procedure

In the countries in which FBO programs will start, undertake studies to

- Establishing political, social, economic and policy issues and conditions that impact on the
development and sustainability of farmer organizations; and
- Establishing the type and level of organizations of existing farmer institutions and their
organizational structures.

- To understand the success and failure factors behind existing farmer’ organizations;
- To identify appropriate organizational and management structures for FBOs in given market
environment;
- To identify options and propose viable intervention for AfDB to support the development of
viable, strong and sustainable FBOs / CSOs in Africa; and
- To establish holistic capacity needs of the farmers’ organizations.
- Establish credit needs of FBOs based on their priority product value chains

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6. REFERENCES
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Analyzing options for Asian experience, Cornell University Press, USA.

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