Identifying and explaining each agricultural value chain’s nodes is a better way of revealing the extent to which a value chain can lift people out of poverty and contribute to broader development aspirations. The longer the value chain, the more contribution to socio-economic development. Most agricultural commodities produced by smallholder farmers are characterized by very short value chains, although there is potential to lengthen such value chains. Some of these value chains have remained short due to structural reasons such as lack of local value addition technologies and related resources. As a result, farmers end up producing small quantities for the local community and spot markets.
Another reason that prevents value chains from lengthening is lack of information about potential markets including the size of particular markets, requirements and levels of competition. This is often the case for indigenous commodities like goats, sheep, indigenous chickens, rabbits and many others. Since formal and concrete markets for these commodities have not been cultivated in many countries, the value chains only extend to the local community. Opportunities for extending these value chains include setting up abattoirs for goats and appropriate technology for processing small grains in rural production areas.
Lengthening value chains through value addition
Unfortunately, national policies in most African countries seem to support milling industries for maize, wheat and abattoirs for large animals like cattle at the expense of supporting the production and purchasing of small stock and small grains. Lip service also continues to be paid to the development of value added products from small stock, small grains and commodities like sugar bean, cow peas and sweet potatoes whose value chains continue to be from the field to the pot. Instead of letting these commodities consumed in a raw state, ways of extending the value chains through developing processed products and other multiple uses to move away from raw consumption are long overdue. There is also scope for combining these commodities with other products to produce diverse food blends.
The story of non-consumables
Some commodities produced in African countries like Malawi and Zimbabwe have shorter value chains because they are non-consumables, for instance, tobacco. Although praised for bringing foreign currency, tobacco travels from the farmer, straight to the auction floor with no other value added service at the farm. Grading and baling cannot be called value addition in the true sense. Tobacco has only one market in the form of an auction floor with no other market at community, district or provincial levels for products to be extracted from the crop. In addition, tobacco does not even have a meaningful urban consumer base given that, in the case of Zimbabwe, only 2% is smoked locally. The product only comes back mostly as imported cigarettes and chemical derivatives, produced by the end buyer or tobacco processor. Farmers do not participate in the most lucrative tobacco value addition processes. Exporting companies and big buyers like China are the ones who value add and reap more benefits from finished products. Farmers do not have a mechanism for semi-processing at source (in farming areas) – which is an important stage.
As if that is not enough, many African countries such as Burkina Faso, Malawi and Zimbabwe have been producing cotton for close to hundred years but there are still no simple technologies for separating cotton seed from lint at local level. Weaving cotton into yarn and cloths should be happening in production areas like Gokwe and Muzarabani districts of Zimbabwe. Absence of appropriate intermediate processing technology means cotton remains a colonial crop that African countries have failed to turn into a more powerful economic driver for local communities. Situations where, after the delivering lint to companies, farmers stop participating in the value chain are not sustainable. When companies buy cotton lint and disappear, it is difficult to talk of a cotton value chain. Keeping some cotton value chain nodes secretive from farmers implies cotton is not a real value chain.
How lack of technology shortens value chains
Due to absence of appropriate value addition technologies, some commodities with potential for developing long value chains are consigned to short and sporadic value chains. For instance, there is potential to process tomatoes into tomato paste, puree, sauce and powder. But absence of technology along the value chain from community level, district or provincial level means tomato has a short value chain for most farmers. The tomato moves from the farmer to the consumer, with the trader in the middle.
When the tomato moves from the farmer to the consumer through the trader, what happens cannot be called value-addition. It is the same tomato changing hands with mark ups just catering for handling, repackaging and reaching out to the next level of customers. Ultimately, the tomato does not get the best returns on its investment as it is consumed before reaching the peak of its expected potential or value at each value chain node. If the tomato farmer is able to semi-process, s/he can earn 30% more value. At the end of the day, a box of tomatoes will cost three times the price shared along the value chain. Currently, the end processor is the one who earns most of the value which is not shared. The processor does semi-processing, preservation, packaging, wholesaling, distribution and retailing. Ideally, most of these activities should be distributed along the value chain, generating more value for actors and Value Added Tax for the fiscus.
The same applies to fruits
African smallholder farmers who grow fruits like oranges, bananas, guavas and mango are often surprised to see their fruits emerging on the other end as fruit juice or yoghurt when the farmers will have exited early on at the beginning of the value chain. The farmers become by-standers who stop participating in the benefits that accrue to their commodities. It appears the existing food processing and value addition system is based on a pre-colonial business model that was designed to prevent knowledge transfer along value chains so that farmers do not know what happens to their product after they have supplied it and been paid peanuts. The same products come back to rural retail grocery shops. Where a farmer would have been paid $3/box of mango, $30 worth of mango juice comes back on the shelves of local retail stores. The farmer as a consumer is now forced to look for money in order to be able to by a product whose raw commodities s/he produced.
How the problem extends to livestock
Crop and livestock farmers are struggling to buy stock feed when they could semi-process soya bean and sell crude oil for finished oil production while they remain with stock feed unlike following it in urban centres where the price will be much higher. There should be technology for farmers to semi-process soya bean into crude oil and remain with stock feed at community level. Such semi-processing can easily happen at source. Of the $780/ton being offered for raw soya bean, how much refined oil and by-products will come from a ton of soya bean?
There is also no sensible reason why abattoirs are in urban centres when they should be in livestock production areas. It should just be a question of setting standards and cold chain so that slaughtering happens at source, for instance at cattle sales pens. This will create employment at local level and spawn other industries like leather tanning. If cattle are transported from Insiza to Bulawayo, employment is created in Bulawayo, with farmers going back to continue herding cattle.
Absence of processing technology and capacity is one of the main reasons why African countries are beset by rural to urban migration. People are following raw commodities from their rural areas and congregating at processing companies looking for employment. These people should be semi-processing their commodities at community, district and provincial levels, earning more income from their commodities. In addition to decentralizing entrepreneurship, value addition at source will de-congest cities. When value addition happens in farming areas, most of the income from value addition activities will be retained at source. On the other hand, when everyone goes to urban centres where value addition takes place, 90% of the cash end up circulating in urban centres as people who earn income and spend it in cities. Most of these activities should be happening at community, district and provincial levels.
Need for passing on value chains
The colonial industrial institution has to be transformed. African economies have not developed a sustainable culture of passing on value chains to the next stage. All value chain activities are locked in one colonial system. Yet in the Western world, a car manufacturer does not manufacture all vehicle parts. He can only be a car assembly with parts coming from different parts of the country and the world. Poor attention to rural industrialization is one of the reasons African countries are failing to tap into the resource base and expertise in rural areas. Pressure is exerted on urban processing factories as employees pass on costs to the employer in the form of rentals, transport to work, transport for children to school and other costs. If processing industries are set up in farming communities, rural areas and growth points, enterprises will be within walking distance for most employees and that reduces pressure on processing companies and utilities like water, electricity as well as road networks.
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