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Re: HLPE consultation on the V0 draft of the Report: Investing in smallholder agriculture for food and nutrition security

Save the Children , United Kingdom
01.02.2013
FSN Forum

Introduction

The Committee on World Food Security (CFS) is to be commended on a comprehensive and well informed report that will clearly contribute to the on-going debate on how smallholder agricultural production can contribute to the world’s demand for food.  However, save the children wishes to make a number of comments, which will further strengthen the paper’s breath of coverage and quality. 

Save the Children (UK) has prepared this submission to inform the report on Smallholder Investments on Agriculture which has been prepared by a High Level Panel of Experts on Food Security and Nutrition, for consideration by the Committee on Food Security (CFS).  Outlined below are Save the Children’s responses to the issues and questions raised, both at a technical level and at a political level. 

Save the Children is focused on reducing child mortality and levels of child malnutrition, which are seen as a significant impediment to the future development progress in many developing countries.  Save the Children sees cost effective investment in small scale agriculture as a cornerstone to the eradication of poverty and hunger; in addition towards building countries with equal access (both women and men) to resources. 

About Save the Children

Save the Children works in more than 120 countries, saving children’s lives, supporting the rights of children, helping children fulfil their potential.  Save the Children has a vision of a world, in which every child attains their rights to survival, protection and development.  Through our vision, we seek to inspire breakthroughs in the way the world treats children, making lasting changes to their lives. 

For further information on this submission please contact Hugh Bagnall-Oakeley  or David McNair.

Smallholder Business model:

The paper discusses at length the need to engage smallholders with the market for the sale of agricultural commodities.  The importance and centrality of markets is recognised on page 63 and in the recommendations (page 12).  The document appears to have taken the view that smallholders are “fully part of the market economy”.  The paper explains market types.  At no time within the paper have the different smallholder business models been considered, nor how smallholders currently engage with the market; on an ad hoc basis or in a regular systematic way. 

A number of business models have been discussed, such as the “Teikei” system in Japan or contract farming.  Different business models have evolved, some smallholder farmers have engaged with large wholesale or retail organisations, haricot beans from Kenya, Zimbabwe frequently end up on supermarket shelves in UK and Europe.  Nevertheless, for those smallholder farmers with limited access to resources and only partial engagement with the market, need to be mapped.  A better understanding of the business model and how smallholder’s engage with this market will yield information on the infra-structural and institutional constraints.  A more bottom up and investigative approach is advocated. 

Save the Children strongly recommend that the different smallholder business models are researched; business models based on different gradations of access to resources, particularly access to labour be developed.  The business models will identify the markets that smallholders are engaged with, the constraints to market access, providing insight into likely strategic interventions that may lead to increased market access (less regulation and blocks, thus greater smallholder engagement).

Quality Standards

Poor grain quality (frequently excess moisture content), is a significant constraint to trading grain, both regionally and internationally.  Many trading blocs and world markets have set minimum quality standards.  A frequent problem is that smallholders are offering commodities that fall outside these quality standards, representing a huge constraint to smallholder market engagement.  A number of project and organisations are actively pursuing the attainment of quality standards Purchase for Progress (P4P) and many business oriented development projects/programmes.  Save the Children suggest that any investment in the smallholder sector must include quality standard attainment as a significant programme design criteria. 

The issue of agricultural quality standards (grain, livestock fat class and fish quality standards) goes unmentioned in the report, a serious lacuna.  Attainment of quality standards will by definition make smallholder produce tradable on the world market, greatly facilitating the process of smallholder market engagement.  Providing a strong incentive to the private sector to invest in a market infrastructure and supply chain, through which to bulk and sell quality proven products.

Land Market

Throughout the document, a fully functional land market appears to be assumed.  In Africa, and in many Asian (including South East Asia) countries, the land markets are not functional or are only accessible to the wealthy and politically powerful.  It has to be emphasised that no legal framework or land markets exist in the majority of these countries.  The absence of a functional land market is a huge risk to smallholders and directly threatens many smallholders security of tenure on land that they technically own.  The absence of a land market, to prove title and ownership is a significant investment constraint, not fully articulated in the report. 

The report must recognise that a number of countries have recently developed a legal framework (Uganda Land act 2004 or the Kenya Land acts 2012 ).  Within these legal frameworks, there are considerable hurdles to address; legislation may be in the process of being promulgated or the expertise to survey and demarcate land may be unavailable, slowing the whole process of ownership of land title. 

As many African or Asian smallholders do not technically hold title to their land, which they may have farmed for century’s poor security of tenure undermines livelihoods and is a constraint to obtaining credit and consequently a significant block to further investment.

Save the Children recommend that the report should emphasise the importance of land tenure for poverty reduction in the context of negotiations around the Principles for Responsible Agricultural Investment.

Nutrition and smallholder investment

The recommendations and summary outline the main constraints to smallholder agriculture, as well as articulating the types of situation where the investment climate may stimulate discourage or block investment. 

The overwhelming emphasis of the paper is towards production and productivity, emphasising models and market engagement.  The paper does not give sufficient prominence to the role of nutrition in the smallholder paradigm.  Pages 46 & 47 give reference to persistent poverty and the lack of resource access.  The paper acknowledges that agriculture plays a role in “increases of overall production”, while simultaneously “contributing to poverty alleviation”.  Three coordinated pillars are emphasised; social protection, technical and organisational proposals and market infrastructure.  At no place within the document is nutrition dealt with or advocated.  This is an oversight.

The individual smallholders’ nutrition, and that of his/her family is critical; they will consume the food they cultivate, household food items that they purchase from the market will be funded by what agricultural commodities they sell.  It is regrettable that no or very little mention of nutrition is made; it appears to be assumed, symptomatic of the current smallholder debate.  Agricultural policy is strongly oriented towards cash crop production.  Some cash crops can be sold as food, or processed into food products (posho, Maize oil). 

A significant body of evidence shows that good nutrition during the period minus 9 months (conception) to + 24 months is critical for human physiological and the development of mental acuity. 

Any development or further commercialisation of the smallholder sector should not omit nutrition for both the unborn, young children and juveniles. The cost to developing countries in lost potential is as much as 2-3% of GDP.  Human capital needs to be conserved, as good and balanced human nutrition under pins it.  Individual smallholder nutrition throughout their lives is important and must be considered to be an integral part of any investment plan for smallholders.  Whilst peripheral in the report, it is central to their livelihoods and wellbeing.  Good health is the best social capital to have.  Save the Children strongly emphasises the importance of addressing nutrition within the report particularly in the context of smallholder investment plan/opportunities. 

National Vision and Strategic Framework for Smallholders

It is uncertain why a national level document (the national vision and strategic framework) is being called for in an international document.  It is contended that the national Vision and strategic framework for smallholders is outlined in the many country (National) economic development plans.  Kenya has a vision 2020, Rwanda and Zimbabwe has a vision 2030, as does Malawi.  In all these documents, Governments have outlined vision of what they want to achieve in the economic development of their country. 

The vision is translated into the national economic policy and the different agricultural policies and strategies.  In Kenya, Rwanda, Malawi and Zimbabwe the smallholder sector comprises 70 – 80% of the agriculture sector.  Many National Economic Development strategies and the different National Agricultural Policies frequently articulate a vision and strategic framework for the development of their country’s smallholders.  In many cases, a vision and strategic framework is already outlined; in the Kenya Vision 2020 document, the privatisation policy (Rwanda) and the Plan for the Modernisation of Agriculture, Uganda.  These are all examples of individual African countries which have through different strategic plans articulated a vision and a strategic framework for the development of their smallholders

Thus the call for a national vision and strategic framework for smallholder agriculture is out of place.  Its utility is questioned, as is its relevance across the different national contexts.  Save the children recommend that reference to a national vision and strategic framework for smallholder agriculture be dropped. 

Typology

The paper, early on, acknowledges that the smallholder sector is “highly heterogeneous”.  That being the case, the idea of running a typology on something that is described as “highly heterogeneous” appears to be inadvisable.  A typology is a useful research tool that may in this case; arrive at a highly fragmented typology.  The paper does not make clear, how the typology will be used.  It is probable that on a country basis, that each smallholder will have varying access to resources and differing access to markets.  Many civil society organisations, government departments, particularly the Extension service and donor sponsored projects (or programmes) may have undertaken a basic typology already.  Consequently a typology may already be available at District and National levels. 

Save the Children suggests, that if a typology is to be used, a stronger case needs to be made.  The emphasis must be on how the typology will enhance the analysis already undertaken. 

Smallholder Institutions

The paper proposes the support and further development of sustainable producer associations.  Experience has shown that for such institutions to be sustainable, they need to overcome the basic problem, of what value addition do individual smallholders receive from such organisations.  The European Union sponsored the Zimbabwe Farmers Unions; the project ran into difficulties as the fundamental problem was there was no tangible benefit to individual smallholder farmers.  Consequently, many smallholder farmers were not renewing their membership.  A similar situation has been found in Uganda. 

Box 5 outlines a number of lessons learnt from the World Bank, none of these lessons outline how to deliver on the needs of smallholder farmers.  A number of rural producer organisations sell inputs, in competition with the private sector outlets.  Demand in a smallholder environment is notoriously difficult to predict.  It is a risk to both producer and producer organisation.  There are significant logistics issues to overcome. 

The procurement of seeds, fertilisers and agro-chemicals, means the procurement plan must have a clear idea of seed varieties (those preferred by famers) and fertiliser brands (again those preferred by farmers).  To have the aforementioned in stock, assumes the availability of operating capital (or credit), to procure and transport the goods to the point of sale.  Experience has shown that Producer Organisations are uncompetitive with the private sector; inputs frequently arrive late and are more expensive than local private sector outlets. 

Civil society has invested in producer organisations, as have individual governments and donor funded projects.  A survey of producer organisations (or farmer groups), by a Hyderabad based NGO in India, showed that 90% of Producer Organisations on a project were inactive.  The support required to launch a rural producer association is usually vastly under-estimated.

Most Civil Society Organisations and donor funded projects provide support to rural producer associations for about a 2 year period.  Experience has shown that support is required for an extended period often greater than 5 years.  The paper seems to be working on a much shorter timescale.  Whilst the paper clearly states that the changed institutional landscape has resulted, that is true.  But the fact that the producer organisations can influence policy is a more dubious claim.  Considerable support will be required before many producer organisations can make this claim. 

Whilst there is huge potential, sustainability remains a significant challenge.  Some farmer organisations have become highly politicised.  The most successful producer organisations are those that bulk up agricultural commodities, apply a quality standard and sell into intermediary and terminal markets.  For those Producer organisations that do achieve the required quality standard, there will be traders pay premium prices.  But inherent suspicion between different members is a handicap. 

Save the Children suggests that the paper focuses on producer organisations becoming sales outlets for bulked quality assured agricultural products, assuring the business base and the sustainability of the organisation.  Political advocacy and social support will be organic developments and is part of the maturation process. 

Prioritisation

The paper has an excellent analysis of the smallholder producer situation.  There are a number of recommendations emerging from a recommendation framework.  It is regrettable that no prioritisation process has been developed and implemented.  There is a need to have some assessment of the recommendations made, that if implemented will have the greatest impact on smallholders.  Save the Children recommends that the second and subsequent versions of the document, the recommendations made, require to have some assessment of impact and cost, thus a process of prioritisation.

Credit and banking systems

For many smallholders, taking credit is an unacceptable risk.  Many smallholders are highly credit averse.  Para 33, specific recommendations (P14) state that there is an “urgent need to reconnect financial and banking systems to smallholder agriculture”.  We concur fully with this statement.  However, experience with credit and banking systems in their support to smallholder agriculture has been chequered, notwithstanding that the smallholder producers themselves are averse to taking credit.  The problems with credit in the rural environment have been well documented, and include problems with repayment system, repayment period, mitigation of risk (poor harvest) and high transaction costs. 

Box 8 provides an excellent analysis of the risks and reasons why private finance institutions and banks do not provide credit facilities.  Linking finance with the value chain is a way of introducing credit to the smallholders.  High levels of delinquency make the provision of credit unattractive.  Side selling is another unacceptable risk. 

Furthermore in a number of countries, particularly African Countries, the legal framework does not provide a necessary legal context, from which credit and banking institutions can operate.  The absence of land as collateral has already been cited as a handicap (see land market section).  The introduction of a transparent and free land market would remove a significant constraint to the finance and credit markets.  Over-riding, these consideration, the financial viability of providing small loans to many producers, a critical mass is required, something that is present in Asia, but may not be present in more sparsely populated countries.  Nevertheless, the use of business models for the provision of credit that are viable and are likely to be unique to the country is to be encouraged and promoted.  Save the children recommends that consideration needs to be given to the overall viability and sustainability of providing credit and banking facilities in more remote parts of the world.  There are some very successful examples of agricultural credit, in areas of over-population, under-population and of extreme poverty (E.g. Grameen bank model).