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RIMISP

Case studies of agri-processing and contract agriculture in Africa1

Denis Sautier, Hester Vermeulen, Michel Fok, Estelle Biйnabe2

RIMISP

November 2006

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Introduction

This paper focuses on specific experiences in Africa, involving small and medium farmers and agro-processors. The national and case-study approach adopted is related and complementary to the cross-cutting document on ‘Agrifood processing’ prepared by John Wilkinson. The objective of the paper is to scrutinize and illustrate the capacity of farmers-toprocessors linkages in Africa to foster the effectiveness of agricultural growth for poverty reduction, make advantage of untapped sources of growth and generate pro-poor development through adequate institutions.

Most African countries outside the Mediterranean belt and the Austral African region are considered low-income countries according to the World Bank world development indicators. According to this database, the share of agriculture in GDP in Sub-Saharan Africa averaged 17.0% in 2005, with an overall GDP growth rate of 5.3%. These figures cover very diverse situations, ranging from low agriculture protagonism in transition countries like South Africa or economies based on extractive industries such as Angola, to high economic dependency on agriculture and low growth rates in poorer countries where conflicts are not uncommon and situations of negative growth can be found (Cфte d’Ivoire, Zimbabwe). In this paper we will refer mostly to cases in low-income Eastern, Central and Western African countries, with the exception of South Africa, a medium-income country where agriculture only accounts for 3.05% of GDP but entails important equity stakes.

The presentation is organized according to the four different types of markets, which have been identified in the WDR2008 outline as drivers for economic growth and modeling institutional arrangements within food supply chains: (i) Modern urban supply will be illustrated through the dynamics of contract agriculture within South Africa; (ii) Low-income urban demand is growing steadily in poor Sub-Saharan countries, where small enterprises and the informal sector are important players in feeding the cities; (iii) Traditional export commodities maintain a crucial importance for African rural incomes and livelihoods; they are currently undergoing strong organizational changes, as will be shown by the case of cotton processing in Western Africa; (iv) Finally, the case of non traditional exports will be discussed through the expansion of horticulture outgrowers in Eastern Africa.

These different situations build on different logics that coexist within the agro-processing sector in Sub-Saharan Africa today: artisan and small and medium enterprises; national firms; FDI and multinationals.

They highlight a wide array of strategies and institutional arrangements directed at securing market access for smallholders and facilitating procurement by small, medium and big agroindustries and the growing food retail sector. Contract farming is one of these arrangements and operates as an intermediary institution between spot markets and vertical integration (Key and Runsten 1999). Contract farming can be considered as a form of governance that emerges in response to market failures to address credit, insurance, information, factors of production, produce outlet; and transaction costs (Saenz-Segura 2006). It will be under special scrutiny in this chapter. Yet our scope of case studies will reveal diversified forms of arrangements differing from formal contracting, including frequent verbal arrangements between farmers and processors or traders. Securing pro-poor relationships between farmers and agroprocessors rely on institutions at large and not on contract agriculture exclusively.


Footnotes:
  1. This document is part of a series of contributions by Rimisp-Latin American Center for Rural Development (www.rimisp.org) to the preparation of the World Development Report 2008 “Agriculture for Development”. This work was carried out with the aid of a grant from the International Development Research Centre, Ottawa, Canada (www.idrc.ca). The contents of this document are the exclusive responsibility of the authors.
  2. Corresponding author: D. Sautier, CIRAD Montpellier, France (); H.Vermeulen, University of Pretoria, South Africa; M. Fok, CIRAD Montpellier, France ; E. Biйnabe, CIRAD France and University of Pretoria, South Africa.


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