‘Stepping Up’ through inclusive agribusiness

At Palladium, we implement a range of development programmes aimed at making markets work better for the poor through inclusive business models, policy change, and innovation. Across our programmes, we have been trying to understand how different innovative agribusiness models are facilitating smallholder farmers’ to ‘step up’ to new commercial agriculture models.

In Zimbabwe, our Market Development for Livelihoods and Food Security Programme (LFSP) is working to improve food security and nutrition of smallholder farmers and rural communities in Zimbabwe. The programme is funded by the UK government, and aims to create positive impact for 350,000 people working in agriculture across eight districts by 2018. In a recent review of the programme, we have found some fascinating examples where:

• innovative commercial models are offering poor producers vertical integration and scale economies in processing and marketing; and
• (as far as we can tell so far) ways in which such models appear to be delivering commercial and developmental results.

The companies we looked at that have been supported by the programme represent a diverse range of business models, including companies such as Bobby’s Goats*, My Farm Items*, Maize Keep*, Grower Store* and MuMeats*. We also tried to understand the conditions under which some agribusiness models might fail, by looking at the case of Meatzy*.[1]

‘Stepping Up’ – the conceptual framework

The concept of ‘stepping up’ in agricultural livelihoods was put forward by Andrew Dorward and colleagues who popularised the term as part of three likely and interlinked livelihoods strategies that tended to be adopted by smallholder farmers. The first of these strategies is ‘Hanging In’ (i.e where assets are held and activities are engaged in to maintain livelihoods levels, often during adverse socio-economic circumstances). The second is ‘Stepping Up’ which takes place when smallholder farmers make investments to expand their current activities "…to increase production and income to improve livelihoods" (Dorward et al., 2009: p 4)[2]. The third is ‘Stepping Out’ (i.e where assets are accumulated to use as a ‘launch pad’ towards activities of higher returns and stabilities) (Dorward et al., 2009). LFSP MD set about investigating a more contextualised understanding of stepping up in which the emphasis is on the way inclusive agribusiness innovations facilitate smallholder farmers to progress from subsistence leaning to commercial leaning agricultural practices.

Initial findings

Contract farming appears to facilitate Stepping Up

MuMeats is a meat processing and marketing organisation in Mutare, Zimbabwe. They provide production, processing, value addition, and marketing services to smallholder broiler chicken and beef farmers. This happens through contract farming arrangements in which inputs, training, extension, and offtake services are offered to farmers in Mutare, Mutasa and Makoni. We recently met with two women’s groups engaged in broiler chicken contracts with MuMeats: Tapfuma and Action groups. These groups have been trained on best practices, receive regular extension advice through contact with MuMeats field officers and have gone through at least two production and marketing cycles in their contract with MuMeats.

Tapfuma and Action Groups both combine their revenue from chicken sales income with Internal Savings and Lending (ISAL) to invest in their own independent fowl runs. The groups say that they receive encouragement from MuMeats and are motivated by the idea that having a job strengthens their social harmony. They summed up the value to them from contract farming as “Ruzivo, Kubatana, neMari” which is translated to “knowledge, togetherness, and money”. Both groups previously had limited knowledge on best practices for broiler chicken production and were not keeping track of their costs and production duration. MuMeats has enabled them to start making use of the latest technical knowledge and to approach their activities with a stronger commercial outlook.

Below is a picture of ‘Gogo Pakanengwa’ standing in her partially constructed fowl run and she looks forward to completing the construction work. She is a member of the Action women’s group and is the first in this group to invest in her own fowl-run using her ISAL cash receipt boosted by the chicken sales income. Her motivation to invest in her own fowl-run was sparked by advice provided by MuMeats who said that one fowl-run between 10 group members would not be very beneficial to the members, and they should consider having one of their own.

The disbursement from ISAL is enough to purchase the basic initial building materials though the continuing expense is left to the owner to take further. Although she has received some initial support from her son to get the construction work going, her son is now focused on paying university fees for his children and is therefore unable to keep up the support. She is now in need of income to purchase roofing material and cement. She believes it would be helpful for her to receive support from MuMeats to complete her structure through a credit arrangement in which her ISAL pay-out is used to make the required repayments.

Mai Murinda of Tapfuma group (pictured in the middle below as she speaks to MuMeats field officer) has completed her structure and now awaits her batch of chicks to arrive from MuMeats. She notes that it has taken a lot of discipline to invest her ISAL cash receipt to this project. However, she believes it will increase her income and give her the independence of a person in business when she is up and running. Like Gogo Pakanengwa’s Action group, Mai Murinda’s Tapfuma group hopes that each of its members will soon have their own fowl run.

Reliable and well-understood supply and demand markets are vital

Embarking on such investments this early into their relationship with MuMeats is a bold move by the women of Action and Tapfuma groups. They have taken an entrepreneurial risk and now need the market to work in their favour if they are to stay on their feet. During discussions, both Gogo Pakanengwa and Mai Murinda noted, along with their group members, they were constrained by the slow supply of chicks and other inputs in their contract farming arrangement. Some group members stressed that when the inputs eventually arrived they might have forgotten some of their training and extension advice. Added to this was their apparent misunderstanding of the financial model at play in their contract farming arrangement. Most group members seemed to believe that they were getting too little money for the chickens when they were bought by MuMeats with some exclaiming that they ought to be paid USD$1.00 as labour for each chicken bought. These knowledge gaps need to be filled with some level of certainty if stepping up is to yield positive results.

Cost-benefit analysis is required early for stepping up

Although an entrepreneurial drive and a business mind-set are both clearly present amongst the Action and Tapfuma groups in Manicaland, it is crucial that a cost-benefit analysis provides insights into the viability of these indications of stepping up before they become widespread. Gogo Pakanengwa has embarked on an investment that potentially requires significant external support of which a detailed cost-benefit analysis might have advised alternative pathways to achieving her ambition. As is it stands, she does not have alternative sources of income to the remittance she receives from her son and her share of the ISAL payout when her turn comes. Comparing the level of investment that both Gogo Pakanengwa and Mai Murinda have made to the level of risk and uncertainty they now face, it is interesting to imagine what other opportunities they may have forgone in this pursuit and whether the challenges ahead are risks worth enduring.

Inclusive agribusiness finding pathways to harness farmers’ knowledge

Maize Keep is engaging farmers in Guruve as partners in the process of preventing Post Harvest Losses. They appreciate farmers understand their own constraints and this is enabling them to serve the farmers better. The hermetically sealed metal SILO offered both parties an opportunity to safeguard yields thereby improving incomes.

“… farmers understand their own constraints – the idea (of using the hermetic sealed metal SILOs) caught-on very quickly…” – Maize Keep

Inclusive agribusiness to appreciate the value of smallholders in supply chains

Maize Keep are realising the benefits of engaging with smallholder farmers in a mutually beneficial way. Having previously focused only on commercial farming opportunities, their experience with smallholders is changing the way they do business. The metal SILOs are creating a reliable supply network of smallholder farmers who provide Maize Keep with quality assured grain. Smallholders have the option to rent or buy the SILOs from Maize Keep, as groups or individuals. Maize Keep offer a range of payment options that give smallholders the flexibility of making single payments a year until the expense is paid in full. As far as possible during this action learning, we will look at harder evidence and numbers to see how this is helping Maize Keep overcome their business constraints versus other options. We will also try and look at what characterises the farmers who benefit, those who don’t and how much this increases the incomes of those who do. 

“… we’ve strengthened our relationship with farmers who received the silos; we are assured of the grain that is stored in the silos being of high quality… effectively our supply networks in the areas that we’re operating are strengthening, and that gives us a variety of options…” –Maize Keep

Inclusive agribusiness creating opportunities that enable farmers to step up

With their expanding supply networks, Maize Keep are responding to opportunities for smallholder farmers to extend the usage of the silos across a variety of crops that are more susceptible to pest damage than maize. The metal silos were initially intended to serve the post-harvest handling of maize. However, their proximity to smallholder famers, through these silos, is helping Maize Keep to exploit trading opportunities for new crops.

They have identified cowpeas and exportable black eyed beans to which they are ‘actively encouraging farmers to move on to’. This shows that if high quality produce, continuous supply and reliable offtake markets can be guaranteed, inclusive agribusiness can help farmers to step up.

“… no question that this has given us a solid base from which to springboard to the next level… we’ve become more aware of farmers’ potential…” –Maize Keep

Inclusive agribusiness appears to be facilitated by innofusion intermediaries

Mobile phone based innovations are enabling both Grower Store and Maize Keep to serve smallholders better in their respective business models. EcoCash, the mobile phone based payments platform by the mobile network provider EcoNet, is particularly important especially when used together with WhatsApp. Maize Keep use EcoCash to eliminate the logistical expense that previously entailed the rentals collection process. They use WhatsApp to send and receive real-time reminders for payments coming due and extension information and feedback. Agrodealers in the Grower Store agrodealer network are part of a WhatsApp group through which they send real-time requests for stock and send and receive confirmation of payments. These platforms are facilitating efficient business relationships for both Maize Keep and Grower Store with their beneficiaries.

“… it’s a fractured system if you need to go to one or two farmers who live far from another group of farmers just to collect rentals … we mitigate this through EcoCash “– Maize Keep

Agribusinesses are actively promoting diffusion of mobile phone technologies and the use of mobile phone based innovations amongst their smallholders.

Grower Store took it upon themselves to teach their smallholder agrodealers the value of using mobile phones and mobile phone based platforms to do their business. This intermediary role (i.e of linking core innovators with base-of-the-pyramid consumers) played by Grower Store reinforces findings of studies[3] that have stressed the importance of innovation intermediaries in the diffusion of mobile phone technologies. They are facilitating the incremental diffusion and effective use of an innovation amongst such consumers, leading to the term innofusion intermediary – “… summarising the inextricability of innovation and diffusion processes when serving such markets” (Foster and Heeks, 2013: 105).

“… at first I remember one of the agrodealers said ‘ah these phones … are too complicated’, but as soon as you teach them just the basics then they actually prefer this method of communication“– Grower Store

Still, inclusive agribusiness sometimes fails to enable stepping up

Whilst stepping up through inclusive agribusiness appears predominantly positive, we are also learning that sometimes it fails. To this effect, our experience with Meatzy has been puzzling. Meatzy supply smallholders with goats for breeding and subsequent buying for slaughter in Matabeleland, Manicaland, Midlands and Mashonaland Central. They have expertise and a wealth of experience in livestock markets - characteristics that encouraged us to partner with them in our districts. Meatzy, however, seem to be unwilling to step up to full commercial mode despite showing initial enthusiasm and engaging with the programme’s support. They appear comfortable with NGO and other donor funded meat orders and very little competitive commercial activity.

On numerous occasions, Meatzy would organise market days with smallholders only to arrive very late, or sometimes not arrive at all, leaving smallholders very annoyed, some of whom would have walked long distances to the market. When we’ve discussed these challenges and possible solutions with Meatzy they’ve responded with familiar enthusiasm and positive action points, only to quickly default to the same inconsistencies soon after. We are currently retracing our steps to understand why Meatzy has been such a unique case. We are also following up on indications that new market players may have been triggered to take up the opportunity where Meatzy continues to fall short. We are interested in understanding what characterizes such events and the players involved and therefore the role of a market facilitator.

The Stepping Up action learning research at LFSP MD continues through April ’17 and we intend to share a detailed report and policy recommendations upon completion.

• This blog is part of a series on what’s new in inclusive agribusiness from April 2017. Hear from more contributors in part one of the series- digging into the details of inclusive business programmes around the world.  In part two contributors share how long-standing perspectives on cooperative, corporate strategies, value chain partnerships, market system change, rural livelihoods support, financing, and innovation adoption are beginning to blend, and why. 

The photos used in this publication are for illustrative purposes only; they do not imply any particular status, attitudes, behaviours, or actions on the part of any person who appears in the photographs.

[1] *Not real names

[2] Dorward et. Al., Hanging In, Stepping Up and Stepping Out: Livelihood Aspirations and Strategies for the Poor. 2009. Online [Online]

[3] Christopher Foster and Richard Heeks, 2013. Analysing policy for inclusive innovation: the mobile sector and base-of-the-pyramid markets in Kenya. Innovation and Development. [Online]