Allan Majuru
Trade Focus

ZIMBABWE has experienced an increase in smallholder farmers in recent years.

Although some of these smallholder farmers can meet local demand, the same cannot be said for the export market, which normally requires huge quantities over prolonged periods.

Given this challenge of quantities, participation of local smallholder farmers on the export market is limited, resulting in most of them losing the market share previously dominated by Zimbabwe.

As the country picks up on agriculture, primarily on export of horticultural produce, there is a need for increased consolidation, which presents the viable option that will increase the contribution of smallholder farmers to national exports.

In Zimbabwe, horticulture performance is deeply rooted in the ability to consolidate and aggregate farmers’ products from different production zones.

To integrate smallholder farmers into the high-paying export market, there is a need to consolidate their products for destinations which require large quantities such as the Netherlands, United Kingdom and China.

To achieve this, concerted efforts must be made to mainstream group cohesion and embark on aggregation as a way for these farmers to tap into these lucrative destinations.

Currently, ZimTrade is implementing a Best Model Farm approach, working with selected exporting farms to onboard smallholder farmers in production of high-value crops. This will ultimately increase the volume of the country’s exports and reduce cost of freight.

Although the project is still in its infancy, there are indications that it will have a positive impact on export competitiveness. It should be emphasised that the export market is a game of right volumes to attract buyers and meet demand.

For example, the Netherlands, which takes most of Zimbabwe’s horticultural exports, imported peas and beans worth US$192 million in 2018, according to Trade Map. Although Zimbabwe was among the top 10 exporters of beans and peas to the Netherlands in 2018, the value was around US$8,7 million.

Given the demand in the Netherlands and its preference for Zimbabwean produce, trade figures indicate potential to increase supply, which local farmers are failing to meet.

For smallholder farmers, producing enough of the required horticultural products can be achieved by arranging themselves into groupings, combine their products from different smallholder plots and send to targeted markets.

Relatively small-scale supplies from smallholder farmers need bulking into a sizeable volume that can be readily and economically transported, sorted, processed and stored by processors, wholesalers, exporters and retailers.

Smallholder farmers in the country are largely located in the rural areas. They are often geographically dispersed, and have limited access to road and communication infrastructure, thus raising the cost of market participation.

For high-value horticultural products that are often perishable, the situation is even more difficult.

Economies of Scale

Thus, aggregation brings together small farmers and buyers to achieve economies of scale, create market signal, and provide access to adjacencies.

Success stories in Africa where farmer consolidation is paying off include Kenya, which is currently dominating the horticulture export sector in Africa.

Results from the TradeCom II project, which looked at the integration of smallholder farmers producing macadamia, paprika, pineapples, floriculture, bananas and avocado, revealed that aggregation is a key necessity.

From the project, value chains that were strong were found to be having strong private sector participation acting as hubs consolidating products from both small  and large-scale farmers.

Commendable consolidation efforts within these value chains were from companies such as Matanuska, Cropate, Katcholo and Zimbabwe Chillies.

From these successes, it is important to note that one of the most important issues farmers will have to deal with is producing a homogeneous product with same colour, taste, size and weight.

Once a homogeneous product has been achieved, selling is easy as compared to selling differentiated products.

With no doubt, aggregation of smallholder farmers into groups makes it easy to link producers with off-takers and helps achieve economies of scale along the value chain.

It also helps smallholders to meet the standards and requirements of modern markets and address other barriers to access. It helps farmers improve their productivity through increased access to services and markets, and enhances their competitiveness by reducing the transaction costs of companies choosing to work with them.

From an off-taker perspective, aggregation is critical because engaging numerous individual and dispersed smallholder farmers results in high transaction costs, which need to be reduced.

In addition, aggregation presents several cost-saving opportunities that include transport logistics, improved quality, marketing, capacity building, information dissemination and increased volumes.

There are various market opportunities created by using aggregation after securing higher volumes, which enables off-takers to deliver to new market players. A key constraint of smallholder farming is access to guaranteed markets for crops, and this can be rectified by conglomerating their products through production groups.

Bargaining Power

When farmers aggregate their products, they can have higher volumes to offer and greater bargaining power, they can diversify their off-taker base. Collective action also gives farmers bargaining power to secure competitive prices.

Aggregation also stimulates significant increases in income for smallholder farmers by providing demand-driven services, which in turn facilitate increased productivity, including access to improved inputs and value-added services (sorting, grading, drying, warehousing, credit                                                                                          provision).

With regards to cost of production, aggregation enables smallholders to reduce transaction and overhead costs by purchasing inputs together, reducing the cost of transport per farmer and accessing discounts through bulk purchasing.

The current situation is that most smallholder farmers acquire inputs as individuals and, thus, fail to leverage on all advantages associated with bulk buying.

To make it easier to access inputs at relatively cheaper prices when buying as a group, there is a need for both producer organisations and main buyers to set up buying centres close to clusters of growers where produce may conveniently be aggregated.

Although the advantages of consolidation are many, the obvious drawback that is noted by many is that of non-performing partners.

Going forward, there is urgent need for smallholder farmers in Zimbabwe to come together as common groups and find best models that will turn their numbers into sustainable businesses.

There is also a need to address some key challenges impeding aggregation. For example, TradeCom II findings highlighted that the major challenge impeding aggregation for export market of various products was compliancy.