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Good intentions aren’t enough

by Markus Fibiger, Anna K. Weber, Simone Schnabel

In depth

Growing vegetables is more lucrative than growing grains: Workers on a vegetable farm in Namibia

Growing vegetables is more lucrative than growing grains: Workers on a vegetable farm in Namibia

To improve smallholders’ access to markets, many sub-Saharan governments have introduced contract farming. Smallholders are associated to large agricultural production and processing enterprises, so they can benefit from infrastructure and marketing channels. In Namibia, this approach is not as successful as expected yet. It even poses threats to independent smallholders specialising in vegetables and fruit. By Markus Fiebiger, Anna K. Weber and Simone Schnabel

“Namibia is the driest country in sub-Saharan Africa.” Many articles written about agriculture in Namibia begin with these or similar words. Traditionally, extensive livestock farms and some rain-fed agriculture are common. In the last 20 years, however, promising commercial farming has been developing on irrigated land, particularly in the country’s north. The government wants to grasp these opportunities to boost food security and food sovereignty. Therefore it introduced contract farming in its Green Scheme Policy of 2003. In the long run, this approach is also supposed to contribute to diversification.

Internationally, there are many different models for contract farming. The principle idea is to integrate smallholders into a larger business context so they will benefit from infrastructure and marketing channels.

In Namibia, the basis is public-private partnerships involving the government and private-sector service providers. The service providers assume responsibility for managing large land holdings that belong to the state. The government provides irrigation systems, farm equipment and infrastructure. It also allots plots on these holdings to small-scale farmers who are called outgrowers.

The service providers are under obligation to provide outgrowers with inputs like fertilisers and pesticides as well as advice and marketing services at cost-recovery prices. The outgrowers are supposed to benefit and learn from the service pro­viders’ marketing skills. The role of the state is to determine the contract rules and to monitor implementation. Contracts, however, tend not to be drafted with precision, and supervision is often neglected.

For the Green Scheme Policy, the Namibian government developed irrigated areas along the Orange River and the border rivers of Kunene and Kavango. Large land holdings (“Green Schemes”) have been established for contract farming in these regions. While outgrowers are free to choose their crops, service providers are supposed to grow cereals.

According to the World Bank, the nucleus estate model has proved to be a particularly successful way to run contract farming in Southern Africa (Vermeulen and Cotula 2010): the service providers are engaged in agriculture themselves and are responsible for the processing of the entire production. This model ensures a minimum level of production (“throughput“).

Implementation challenges

In many sub-Saharan countries, contract farming has become quite successful. In Namibia, however, one cannot speak of success yet. The government is developing new farm land very slowly, and there are also difficulties in allotting land to outgrowers. The main reasons are
– wrong incentives for service providers,
– vague contract wording,
– insufficient governmental oversight and
– inadequately targeted government credit for outgrowers.

Green Schemes do not appeal to potential service providers because the ­ministry’s rules only allow them to grow millets, maize and wheat, which can be stored long term. Since it is quite expensive, however, to bring inputs such as fertilisers and pesticides to northern Namibia, it would be more lucrative to grow high-value products like fruit and vegetables. Governmental obligations, moreover, do not allow service providers much flexibility.

Service providers tend to neglect some of their duties in practice, such as the provision of fertilisers, pesticides, advice and marketing services to outgrowers. There is a sense of competition between service providers and outgrowers because the service providers are engaged in farming themselves. When supplies of fertilisers, seed and pesticides run short, the service providers prefer to use such resources for their own production. They tend to consider joint marketing an extra burden they try to avoid in view of tough competition from South African farms. The government is not doing enough to regulate and foster the relationship of service providers and outgrowers.

In a similar sense, the public-private partnerships agreed between service providers and the government tend to be inadequate. They tend to be short-term and lack incentives for using natural resources and farm facilities responsibly. Moreover, they do not spell out clearly enough who is responsible for maintaining and repairing infrastructure.

Another problem is credit. Outgrowers are eligible for support from the governmental Agribank. However, they often struggle to service their debts because their profits are quite small due to harvest losses and marketing difficulties. As the state steps in for those who are un­able to pay, there are cases of abuse. Some outgrowers use loans for other than the declared purposes and thus risk loosing their plots.

“The Green Schemes will kill us”

All in all, it is hardly surprising that major agribusiness companies are not particularly interested in Green Schemes. There are two main ramifications:
– In lack of private service providers, many Green Schemes are now managed by state-appointed administrators – with rather doubtful results.
– The Ministry is softening requirements and increasingly allowing service pro­viders to cultivate high-value crops such as fruit and vegetables.

Independent smallholders who have specialised in fruit and vegetables outside the Green Schemes worry about the growing competition. These private small-scale producers have developed without state support. They cultivate small agricultural parcels of land of between 50m2 and one hectare, and occasionally also more heavily mechanised farms of up to four hectares. They have reliable access neither to marketing channels nor to affordable inputs.

Unlike the outgrowers on the Green schemes, they do not get state support in the form of training, irrigation, equipment or Agribank loans. Nonetheless, many of them are at least as successful as the outgrowers in terms of both production and marketing, as recent research by the Berlin-based Seminar for Rural Development (SLE) in Omusati and Kavango revealed.

Matters are likely to change, however, once more service providers on Green Schemes opt for large-scale fruit and vege­table production. Smallholders could fast be crowded out. “The Green Schemes will kill us,” is the assessment of a concerned smallholder in Omusati.

Consider consequences

All summed up, the Green Scheme Policy for Namibia’s border region is flawed in several ways. The government is not setting the right incentives for irrigation agriculture in the private sector involving smallholders. Moreover, it is neither regulating nor monitoring the cooperation of service providers with outgrowers sufficiently. The government’s apparent tolerance of service providers switching from grains to the more profitable production of fruit and vegetables is problematic in particular. This trend may endanger the viability of small farms in the private sector.

These challenges and risks should have been considered right from the start. There now is a need to improve the policy in the second extension period, which is currently beginning. The above mentioned SLE study spells out what a more targeted support for small-scale fruit and vegetable farming could look like.

Some other negative impacts – environmental damage, for instance – are probable and deserve consideration too. If more pesticides and fertilisers are used, the soil and water quality is likely to suffer. Moreover, the use of river water is not
re­gu­lated so far. Extension of the Green Schemes may thus lead to increasing tensions over natural resources.