Regional Markets

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3 Cases Infrastructure and governance Banana production and sales to far-away markets depend on reliable infrastructure. Roads and (cooled) storage facilities are crucial for a perishable product. When Matanuska entered the smallholder market in Honde community in 2009, prices went up with increased demand. In Rusitu, prices stagnated. Honde has a tarred road whereas Rusitu lies along a gravel road, a clear sign of the impact of road infrastructure on the performance of the value chain for local producers. To further enhance the quality of delivered bananas, SNV engaged the Mutasa Rural District Council which assisted smallholder banana communities far from the tarred road to upgrade feeder roads. With regard to governance (institutional infrastructure), the organisation of the various actors bears fruits. The establishment of an informal stakeholder forum facilitates institutional and service related value chain upgrading. The forum helps in strengthening producer organisations, provision of market information to farmers, enhancing production and business skills, facilitating value chain financing, and strengthening market links. Part of the mentoring of producer organisations to develop business skills was aimed at governance issues, e.g. the honouring of contracts, and improving the participation and leadership of women and youths. Farmers were encouraged to become members of RVGMT and HVFPA to improve economies of scale and to increase their bargaining position. Producer and consumer prices Quality improvements pushed prices upwards. In January 2009 the farm-gate price offered by traders was USD 0.08 per kg, whereas Matanuska offered USD 0.20 in July 2009 and USD 0.30 in December 2010. Smallholders were able to capture a higher share of the consumer price. Lower transaction costs also increase profit margins. Farmers in Honde Valley, served by a tarred road, did better than Rusitu farmers, who are only connected by gravel roads. The latter enjoyed a price increase of only USD 0.10–0.13. This emphasises the importance of road infrastructure for the performance of the value chain, including the participation of associations and smallholders. Prices partly also depend on organisational set-ups and the influence that farmers can exercise in the value chain. Organising in farmers groups, bulking products together, securing affordable access to inputs and financing, and above all negotiating a strong position with a durable purchasing also drive producer prices up. Innovation and sustainability This case was the first successful banana contract farming scheme with smallholder farmers in Zimbabwe. This is a particularly interesting development: bananas are considered a perishable crop, and the sector has been stagnating for years. One key innovation was 77
<strong>Regional</strong> <strong>Markets</strong> for Local Development the introduction of tissue culture 11 giving farmers access to a disease-free and highly productive planting material. As a result, productivity surpassed 50 tons per hectare showing the potential of new technologies for intensification of production (Mudyazvivi and Maunze 2010). The banana case is one of a few where the private sector took a leadership role, developing inclusive business practices with smallholders and linking up with other actors, including government. The private-public partnership pooled together efforts to integrate smallholders sustainably in a commercial value chain. Partnerships with agrodealers were also realised: they obtained inputs from wholesalers and sold these at a commission (about 5% of price). This not only revived the provision of inputs which had collapsed in the past decade, but also directly responded to the demands of smallholders. Key lessons The banana case demonstrates how smallholders can be included in remunerative foodcommodity based value chains and improve their livelihoods. It shows that integrating smallholders in more lucrative markets requires a long-term outlook, external development support as well as commitment and leadership by private sector players. Securing commitment for this ‘inclusive business model’ requires that facilitating organisations (such as SNV) also elaborate ’what needs to be done and how’. Too often development organisations assume that providing financial resources to private sector and smallholders is enough. This case shows that having the ingredients does not make a meal—some cooking is also needed (in this case: market research and capacity building, bringing together different stakeholders and linking smallholders with the private sector, strengthening producer groups and training farmers on best practices in banana production). This case stresses the need for external resources to accelerate farmer-market linkages, especially in a context of stagnant economic performance as in Zimbabwe. Previous value chain initiatives mainly focused on niche export markets. Yet, this case shows that local rather than international actors can be a vehicle for development. In a country crippled by economic crisis, public resources to invest in a sector like banana remain limited and others need to fill the gap. During the development of the project it was unclear how increased pressure from competitors would affect the interest of the value chain champion (the Matanuska Company) to invest in and provide overall leadership for smallholder engagement in the banana chain. It remains important to manage the risk of creating a monopoly, though the experience here shows that that risk may not be very high in an economic environment that reacts to opportunities. 11 Also known as in vitro culture, it is the cultivation of plants or parts of plants on an artificial culture medium under sterile conditions, with the goal to grow disease-free planting material or to produce clones of a particular plant. 78
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Editors: Fred Zaal, Jacqueline Slui
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Regional Markets for Local Developm
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Acknowledgements Acknowledgements F
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Foreword Bart de Steenhuijsen Piter
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Photo: ©FAO/Paballo Thekiso / FAO
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1 Introduction The challenge is to
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1 Introduction in this publication
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1 Introduction agro-related service
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1 Introduction is used). Market kno
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1 Introduction When individual valu
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2 Inclusion of smallholder farmers
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2 Inclusion of smallholder farmers
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