In the constantly changing world of aid, many people will tell you that there is right now a clear trend towards value chain projects in development organisations around the planet. It is now assumed that investing in the private sector of emerging countries, particularly in agriculture, is the best way to help small-holder farmers to get out of extreme poverty. I work myself in partnership with a big value chains project in northern Ghana.
But there is a reality that we tend to forget: the private sector is by definition profit-oriented which is rarely of the same mindset as social justice. This is precisely this clash between the seeking of profit and the willing to help the poorest farmers that creates this huge dilemma for field workers of value chains projects like me. Let me give you two examples to help you get the essence of what I’m saying.
Value chains perspective: I am actually working with a nucleus farmer in Wa, in Upper West region of Ghana, to help him improve his relationship with his outgrowers. That fits perfectly the general idea people have of value chains: improving relations with the outgrowers in the long term will help them increase their yields and will also increase the same the nucleus farmer’s profit, creating a win-win situation. Supporting the right actor in the chain brings all the chain up!
Factual reality, ex.1: Now, let’s look at the reality in a cold business mindset. Most of the poorest and the smallest farmers live in communities cut off from the rest of the world, without cellphone coverage, electricity and even sometimes without road access. What does it mean for the nucleus farmer? It means that he has to put a lot of energy, time and money to communicate with these remote communities. And most of the time he gets a very small return on his investment because there is no way to control or monitor what is happening there. The business decision is obvious: stop working with them and go instead toward wealthier communities that can offer more for less effort.
Factual reality, ex. 2: The same nucleus farmer is also a commercial farmer, growing maize and soya certified seeds on almost 100 acres. This is financially the most profitable part of his business and he still owns close to 600 acres of virgin land just waiting to be farmed. It means that he probably has the potential to become one of the richest commercial farmers in Wa but right now most of his energy is used in trying to manage a really complicated and fragile outgrowers operation. The best business decision is also obvious in this case: stop working with outgrowers and invest all the money to scale up quickly the commercial farming part of the business, which is less complex, less risky and potentially a lot more profitable.
The dilemma: As a field worker for the big value chains project, what is my role? Is it to help the business make more profits, hoping that a wealthier company will be able to bring small-holder farmers up in the future? Is it to help the small-holder farmers, hoping that it will still be profitable enough for the business to avoid bankrupt?
This is the dilemma I face almost each day and I think this is a question a lot more people who work in value chains projects should ask themselves: what is my role?
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The issues you have raised are a reality, however what is important for us as value chain facilitators is to create win-win situations between in your case the nucleus farmers and the out-growers. There has to be a business case for both parties to the agreement. If it does not make business sense to the nucleus farmer and the outgrowers do not waste your time promoting it.
It also important to note that in the beggining there will not be a business case for all the players in the chain. This is where we coming as facilitators to create that space for the generation of win-win situations. In cases where the transaction costs (beacuse of no roads, low economic density of production, no communication facilities)are high and makes business unvaible, we need to see what needs to be done to improve effeciencies in the chain. I was working at one time with a project that sought to facilitate a linkage between communal banana farmers and a trading company. Both parties were interested in the project but there was no road linking the communities to the market and the company was not interested in investing in the road (it was not in its business mandate). I brought in the locala council and a development organisation to develop the road and up now there is a haelthy business engagement between the two.
What is important is to find organisations and or people who are willing to meet the social costs of preparing the ground for business relations and value chain development