Corporate cooperatives could drive Africa’s agricultural revolution

Tuesday January 14 2020

 

By Raymond Mugisha

Last week, I was drawn to an advertisement in a Kenyan newspaper calling for farmers to contract into producing for one corporate entity.

Whereas the farmers would have to run their farms and finance their operations, this entity would bear responsibility for providing ready market for farm produce at competitive prices.

The entity would also link farmers to its partners offering other services such as agronomy, provision of quality planting materials as well as irrigation and water installation and management.

 The moment I read it, it struck me as a modified form of cooperative in which the promoters are driven by profit intentions.

Of course even traditional cooperatives should return profit to stakeholders at cooperative-level and member-level, but by their nature, they are commonly burdened with many sociopolitical considerations which can compete with profit objectives.

The above entity on the other hand would be better able to prioritise profit maximization and, with this, would have higher regard for farmer success since the promoters would have concern for their capital investment.

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While the capitalist design of a profit oriented limited company may also result in abrasive tendencies that do not exist in a cooperative society and therefore, breed discomfort to farmers, it is likely that if companies operating such business increased in number, competition for loyalty of farmers would guarantee humane treatment of the farmers.

 Some of the challenges faced by African farmers are the lack of reliability of prices for farm produce.

Often, farmers suffer very low prices when farm output is high or have to cede their would be returns to middlemen in the food trade chain since farmers are incapable of storing produce until opportune times when they can sell it off at better prices.

 Under partnership with a company though, they would transfer this challenge to aggressive businessmen. That way, the farmers’ price related interests would be safeguarded.

Again, this would be guaranteed better if there are different companies doing this business such that competition ensures that there is pressure to award highest prices possible to the farmers. Often, traditional cooperatives can run monopolies of their trade at least at jurisdictional level.

Although they may face sociopolitical pressure for high performance, it is possible that some farmers have to simply conform to the general demands of the majority so that they can continue to belong. On the other hand, with companies that aggregate farmers into performance hubs, there would be a “liberalized cooperatives” approach, with farmers able to make choices from available options for their partnership.

 It would possibly be discomforting to some public-good stakeholders to imagine farmers being left to operate in arrangements that are under control of private business persons. However, given how business terrain has transformed overtime and the current innovation train, giving room to such a transformation in the way farming is done could be the best bet for massive commercialization of agriculture.

 One thing I noticed from the particular advertisement referred to earlier was that the advertising company calling for farmers to contract was insistent on having farmers with a specified minimum amount of land and capacity to install some level of irrigation on their land.

This would be limiting on massive enlisting of African farmers into such a business arrangement, but it is also still an opportunity that those with financial capacity would aggregate several small farmers and then hold a contract with the company on their behalf. It would result in an out-growers arrangement for food crop production, and even dairy farming for that matter.

 This arrangement is viable for Africa. The continent has 60 percent of global arable land. There is surging population, and hence affordable labor to continue to engage in agricultural activity.  At the same time, the continent imports food of about $35 billion annually from richer jurisdictions.

Other nations are certainly strategising on how to cash in on Africa’s rising food demand.  Africa needs to take revolutionary steps into massive commercialization of agriculture to retain the above $35 billion within her borders. It is not viable for the continent to depend on imported food, for which there is so much potential of self sustenance, while there is much more that the continent must import at least for a period stretching into the short and medium term, such as technological equipment.

 The above initiative, of having profit oriented business corporations aggregating farmers into production blocs, could be hugely impactful in the above regard.

 Raymond is a Chartered Risk Analyst and risk management consultant

rmugisha@afriaccent.com

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