Piecing Together the Puzzle

This blog post was written by Sabina Rogers of the Microcredit Summit Campaign who attended the recent After Hours Seminar, "Attracting Private Investment into Agribusiness."

According to Eduardo Tugendhat of the CARANA Corporation, the “paradox of the starving farmer” is that 75% of the chronically undernourished are rural dwellers. The question explored by panelists Tugendhat and Anita Campion of AZMJ during the June 14 After Hours Seminar entitled “Attracting Private Investment into Agribusiness” was how to connect those farmers to opportunities to get them out of poverty. The simple answer is this: it all comes down to creating the connection to a market, which creates incentives for farmers to innovate and increase production. But the more difficult proposition is how we go about doing that.

The good news, according to Tugendhat, is that there are significant changes happening in the food and agriculture industry. These changes mean opportunity for small-scale farmers. For example, Nestle’s fastest growing market for packaged foods is Africa and Asia, which means they have all sorts of requirements for inputs and thus great opportunity for producers. Whole Foods’ Whole Planet Foundation is another example cited by Tugendhat of a private sector player creating markets. They have created a community around a conscientious food culture in the US that translates to high demand for products that are sourced from small-scale farmers. Just by promising to buy, Whole Foods creates incentive for significant investments and will change how that value chain is structured.

Anita Campion drew on the audience’s experience as to the types of partnerships they have seen make a difference in rural and agriculture development. An audience member responded that three key elements must be in place:  

1. there must be a very precise memorandum of understanding between partners,
2. there must be a leader of each partner who is dedicated to the completion of the project, and
3. there must be understanding and appreciation of the cultural differences of each partner.

Participant Calvin Miller of the Food and Agriculture Organization, however, added that partnerships also need to have benchmarks—rather than always fixed prices—to be able to adjust the agreement with major market changes. Further, partnerships should be built over time, and “market facilitators” must not directly intervene.

So the question is, “How does a small-scale farmer manage join the broader supply chain and market—and thus capitalize on the change in the food and agriculture industry?” According to the panelists, farmers need to buy into a much higher technology to farm. And, in order to invest in more sophisticated systems, they need to create new, differentiated value that someone will pay for or squeeze out inefficiencies. One example of a simple solution Tugendhat mentioned would be to provide moisture meters at the local level to properly dry maize; this way the farmer and buyer know the quality of the produce. Participant Rupert Best of Catholic Relief Services cautioned, “I would say that less than 10% of the farmers we deal with are selling differentiated products. Of course, the aim is to increase this, but it is a challenge and we cannot do it alone. Our development partners need to link with other service providers with specialized expertise in brokering relations with the private sector.”

One of the questions that wasn’t explored was that while developing partnerships, is any thought given to addressing the health and other vulnerabilities of these farmers—as an integral part of the investment? If this is not something already considered, should it be? We would argue that the private sector partners should agree to reinvest a portion of the profits, or interest, into social services as a safety net. We have good examples of this in microfinance. Equitas Micro Finance India PL has a strong commitment to investing a portion of their profits back into their clients’ families under programs such as  Equitas Gyan Kendra (vocational training centre), Equitas Shiksha (education services for the children of members), healthcare services (Health & Hygiene Camps and Equitas Health Helpline), and other social activities. Ujjivan Financial Services PL in India distributes funds to their branches from profits to address needs unique to their locality. If MFIs can do it, should we not demand of the private sector the same standard?

Call to Action

Finally, the panelists proposed a vision for the future of agribusiness—one key point being that markets are the solution and the private sector must lead the development community. We would argue, though, that our community has a responsibility to guide the private sector in holding itself accountable to ensuring the best interests of the “starving farmer.” At the end of the day, it’s an organizational problem. As participant Tom Shaw of Catholic Relief Services pointed out, we need to put the pieces together. “Everyone keeps saying what should be done and saying someone else should be doing it to make the system work,” Shaw said. “Should we not be focusing on what each of us can do together to achieve this goal? So how do we create a forum that creates this synergy?”