Africa’s Smallholder Farmers to Tap USD 150 Billion Market

Published on 18th May 2009

Seven out of ten Africans earn their living by farming. According to researchers, the market for milk, meat, and staple food crops like maize, banana, sorghum, rice and millet within Africa is estimated at USD$150 billion a year—far exceeding Africa’s market for internationally traded cash crops like coffee, tea, and flowers. A year of record high food prices presents a unique challenge and opportunity for Africa. To benefit, African farmers must produce more food, but more importantly, they must have access to markets to sell their harvests at prices that benefit farmers and consumers.  

The Alliance for a Green Revolution in Africa (AGRA) and the International Livestock Research Institute (ILRI), drawing on support from organizations involved in the CGIAR Regional Plan for Collective Action last week in Nairobi assembled the continent’s leading authorities on agriculture and market development to examine the role of markets in increasing Africa’s economic growth and improving rural livelihoods.  

They discussed among other issues successes, challenges and opportunities that exist in Africa’s farm sector and outlined new strategies for opening up domestic and regional markets to African farmers, improving their livelihoods, and lowering food prices for urban consumers.  

“New approaches are needed to create vibrant food markets in Africa,” said Ade Freeman, Director for ILRI's Targeting and Innovation Program. “African farmers can produce enough food to feed Africa, and help feed the world. But first, governments must enact policies that support farmers’ ability to grow more food and provide access to markets that give farmers a good price for their hard work, and consumers with food they can afford.”  

Improving farmers’ access to regional markets for staple food crops within Africa is key to this transformation. Only a tiny fraction of the food produced in the region is sold in regional markets; the rest is either consumed on the farm or lost to pests or disease after harvest. Meanwhile, Africa imports about 20 percent of the food it consumes, spending its scarce foreign currency reserves. Regional markets therefore represent a large and growing market that could offer growth opportunities for African agriculture and farm income, and help reduce widespread hunger.  

To become a food breadbasket with surplus for export, there is need to expand investments in rural roads, communications, farm storage, commodity exchanges and improvement in grades and standards. Farmers also need accelerated access to farm inputs (especially improved seeds) fertilizers; livestock feed; irrigation and integrated pest management technologies.  

A new paper by AGRA and its grantee CNFA reported on the impact that AGRA’s Agrodealer Development Program (ADP) has had with helping small retailers in rural villages in Malawi, Kenya, Tanzania, and Mali reach out to smallholder farmers. According to the report, the program has helped 4,264 agrodealers receive loans, business management and technical training in Malawi, Kenya and Tanzania, which has benefited an estimated 1.8 million farmers. An estimated USD$42 million worth of improved seed, fertilizer, and other farm supplies have been sold through agrodealers in the last 12 months, representing an increase of 15 percent over the previous year. 

Role of governments 

Successes are emerging from Africa on how home-grown policies can dramatically help secure national food security. The landlocked nation of Malawi which went from being a net importer of maize, depending on food aid, to a net producer with a large maize surplus in just three years is one example. In 2007, Malawi even exported some maize to neighboring countries.  

A paper presented by the Overseas Development Institute (ODI) highlighted the important role of government in agricultural development; importance of targeting subsidy and voucher programs to each country’s specific conditions in order to maximize social gains while building the private sector and also analyzed potential risks associated with fertilizer subsidy programs if they are not designed and implemented properly. These risks include the potential for market disruption; for unsustainable burgeoning costs and fiscal outlays; and for the side-stepping of intended beneficiaries.  

Producing more food is only part of the solution. Another is ensuring that African farmers have a place to sell their harvests. At the same time, the revolution in information and communications technologies is changing the face of market opportunities for farmers.  

Researchers at the conference revealed how the Kenya Agricultural Commodity Exchange and the Malawi Commodity Exchange are linking small farmers with vital market information through local kiosks, radio broadcasts, email, and mobile phone messaging services. Three-quarters of farmers tapping into this information report getting  better prices for what they produce.

Increased agricultural production stimulated by market development generates not only food but also income for farmers. Livestock products are particularly relevant in this regard, and an important example is seen in the enormous success of the smallholder dairy sector in Kenya. Beginning in 2004, policy reforms in Kenya’s dairy sector helped nearly 40,000 small-scale milk vendors to enter formal milk markets. The reforms were sparked by almost a decade of research that persuaded regulators to engage and support Kenya’s predominantly informal milk market, which trades in ‘raw,’ or unpasteurized, milk. New training and certification schemes as well as innovative mechanisms to bulk, process and distribute a highly perishable product like milk have been critical to the success. Economists assess the direct impacts of the evidence-based policy changes on the Kenyan economy to be at least USD$33.5 million per year. Participants  discussed how similar smallholder-focused initiatives could be implemented and scaled-up across the continent. 

The conference also explored options for nurturing more regional trade. Right now, Africans trade only a miniscule share of the crops they grow—just USD$2 billion worth per year.  

Improving regional trade and access to market information  

Ratcheting up regional, cross-border trade would give farmers the option to focus on the commodities they grow best. They could tap this comparative advantage to go head to head with imports and begin reclaiming the markets they've lost. In 2004, the East Africa Community established the East African Customs Union to knock down tariffs between East African nations. But that hasn't been enough to ignite trade due to non-tariff barriers like customs backups, permits, taxes, roadblocks, and roadside corruption and bribes. 

“African farmers deserve better lives and livelihoods. We must make markets work better for them so they earn higher incomes, send their kids to school, afford better health care and build their savings. Africa cannot be the world’s largest museum of poverty and misery,” says Akin Adesina, Vice President for Policy and Partnerships at AGRA. “African governments can no longer continue to pursue policies of abandoning their farmers. The subsidies that rich nations offer their farmers and high tariff and non-tariff barriers keep African farmers  out of lucrative markets. The time to level the playing field for African  farmers has come.”

More information can be obtained from Stella Kihara at +254 735 380 199 or skihara@agra-alliance.org or Muthoni  Njiru at +254 722 798 321 or m.njiru@cgiar.org


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