WEDF 2012: Parallel Session II-2

Innovations along the supply chain: can smallholder producers ever succeed in export supply chains?

Mr Rob Skidmore, Chief, Sector Competitiveness at ITC, the moderator of the session, noted that more than one billion people depend on smallholders, that they disproportionately include the very poor and food insecure, but are responsible for producing much of the developing world’s food. Some studies have suggested that the only answer is to consolidate smallholder farms into bigger and more efficient farms and firms. Other innovative approaches, such as those promoted by ITC, have attempted to increase efficiency without the social disruption that could be caused by land consolidation. The key to success is to take a value-chain approach: from the market, back upstream to supply. If smallholders can be competitive, there is tremendous unlocked potential to improve food and nutrition security.

In light of supply-side capacities and increasing demand-side requirements, support to smallholder farmers is essential to ensure food security and improve their livelihoods. A revolution in rural production is possible if innovative and effective ways are found to assist smallholders. Assistance may take the form of a complete value chain approach such as in the case of the mango sector in Senegal, where the different institutions are providing extension services to smallholders. The experience from Zambia has also proved to be effective by developing direct linkages between buyers and individual smallholders. Adequate infrastructure is crucial to ensure competitiveness and connect smallholders to markets. Countries cannot hope to establish competitive and viable supply chains without investment in infrastructure such as ports and railways.

Dr. Mohammad Razzaque, Economic Adviser, Commonwealth Secretariat, said that in terms of involving poor smallholders in global supply chains, Commonwealth research shows that supply-side capacities are not necessarily an obstacle. Demand-side issues such as buyer preference are often more critical. The issue of equity is very important and sector analysis needs to look at how sector-specific initiatives can benefit the poor. The Commonwealth research shows that there is significant scope for developing regional supply chains, which can also promote regional competitiveness. Supply chains can potentially be pro-poor when small producers are integrated effectively in the process.

Mr. Adhi Lukman, Chairman, Indonesian Food and Beverages Association, said food industry output in Indonesia is very much dominated by SMEs and smallholders. Infrastructure is a key enabler to enhance export competitiveness and integrate smallholders in global supply chains. The Government has launched its MP3EI Master Plan for the acceleration and expansion of Indonesia’s Economic Development, under which the food industry is identified as one of 22 key economic activities. Major challenges include the increasing level of complexity in buyer preferences, standards and NTMs, including Sanitary and Phytosanitary (SPS) requirements and technical barriers to trade in importing countries. Challenges for smallholders include lack of legal identity, lack of managements skills and lack of food safety knowledge, technology and innovation. There is a need for an active role for government, the private sector and development partners to support smallholders. Assistance may be provided through technical assistance, mentoring programmes, improved access to finance and dissemination of information.

Mr Alioune Sarr, General Director, Senegalese Export Agency (ASEPEX), told the session the mango sector has a long history in Senegal traditionally involving small producers and enterprises. There are only three enterprises with more than 100 staff. Many companies operate in rural communities and the workforce is predominantly female. Mr Sarr said a major problem in the mango value chain is post-harvest losses of between 5% and 10%, mainly resulting from infrastructure problems such as poor transportation links. Currently there are a number of initiatives under way to improve competitiveness, including the creation of a sector-level institution bringing together stakeholders across the sector. Support is provided in marketing, branding and matchmaking to develop export links for producers.

Mr. Gulam Patel, Chairman, Nyiombo Investments Ltd., Zambia, described the challenges and opportunities for connecting small-scale farmers in Zambia to export markets. He said that over the last 45 years, the public and private sectors have experimented with different schemes to raise smallholder farmers out of subsistence farming, but with little success. The biggest challenge is access for poor smallholders to production resources. In Zambia, more than 90% of farmers are poor smallholders and cannot afford farming inputs during the planting season to produce a surplus for sale. Ample land is available, but no credit for buying seeds, equipment and fertilizer. In response, some private companies have sponsored outgrower schemes, under which they provide seeds and fertilizers to poor peasants who cannot afford collateral for bank loans. Meanwhile, the government has introduced the successful Farming Inputs Supply Programme (FISP) subsidizing supplies of seed and fertilizer, raising maize production from 800,000 to three million tons, including a surplus for export.