Connecting African smallholder farmers to EU Markets
Understanding Agriculture export value chains
Agriculture export value chains are rife with inequalities and unfair dynamics with smallholder farmers most exposed to bullying practices from foreign large retailers with whom they trade. These practices can include delayed payments, last-minute cancellation of orders, or misleading market information. Such methods of operating contribute to unsustainable supply chains where smallholders are unable to generate fair rates of return and end up accumulating losses in trade. This situation was even made worst by the COVID-19 pandemic. For producers, this means the current vertical arrangements and regulatory systems in the agricultural export value chains obstruct their capacity to enter export markets.
Locating the stop signs along agriculture export value chains
At the infrastructural level affecting production and post-harvest handling, smallholders are challenged by the availability of few or inefficient quality processors and undeveloped storage facilities.
Few or bad processors undermine value addition in domestic countries
The constraint related to a few processors is relevant to the bean value chain in Uganda where most beans are traded in dried form. Few processors of bean products cause for a missed opportunity to supply increasingly demanded bean flour by urban populations of export markets. Where the final product is bean flour, the increased number of operations in the value chain that involves domestically processing the beans improves profit margins for value chain actors in Uganda. Few processors could be tackled with trade policy intervention from donor countries that should be looking to encourage processing raw materials into something more valuable for the world market within the domestic country.
On the rice export value chain in Tanzania, the most important problem related to the processing stage affecting smallholders is the outdated and small equipment for milling that compromises the quality grade of the final rice product. The milling process is the main determinant of quality grade affecting the rice’s appearance and the proportion of broken rice. Where small mills are dominant in the industry and dispose of large proportions of broken rice, large volumes of rice do not pass the stringent quality standards for export. The quality canons are variable depending on the destination country and generally, the European style of Good Agricultural Practices and standards, EurepGAP, are more rigid against the standard regulations passed by African regional partner states such as KenyaGAP.
As a side note, Kenya was the first African country to formulate its own GAP to guide food standards that could draw inspiration from GlobalGAP and tailor the framework to smallholders’ capabilities by introducing more modest compliance costs and in turn lowering the high entry fees to export markets.
Forced to sell cheap
Smallholders in the onion chains in Tanzania are negatively affected by poor post-harvest handling because of undeveloped or at worst inaccessible storage facilities. For example, ideally, smallholders must store onions for 3 months before being bulked and transported to urban market places ready for export. From working with the adequate structures, the longer onions are stored, the higher the price smallholders can charge. But only a few smallholders are able to stock their onions for the reasons that either they cannot access appropriate storage structures or they cannot wait 3 months of storage time for better prices because they do not have an alternative source of income to cover household expenses. It forces producers to sell their products immediately to prevent high losses, because of perishability and product rejection at export markets, causing market price volatility.
It is important to note that the problem of lack of capital is heightened by poor access to credit from commercial banks that are not prepared to make loans to smallholders who are demeaned to be not creditworthy and because they lack collateral. Again, most financial service provides do not fund capital expenditure like an investment on equipment or info structure and are skeptical to lean money because of the uncertainty surrounding COVID-19. Women are the most affected group since lack of collateral is heightened by cultural barriers related to asset distribution and management within the household.
Understanding European Union-Africa relations
Europe compared to the USA and China is by far Africa’s main customer for food and the largest export market, progressively increasing trade since 2013. However, the institutional environment in which food exports are embedded provokes uneven development outcomes. This is because the regulatory conditions for trade are governed by institutions in the Global North and affect whether smallholder farmers in the Global South can comply with export regulations.
The current practice
Europe’s relations with Africa have witnessed a changing trend and this is so in the global arena which is a total reset. A shift is moving from Aid to trade and Africa is treated more as an equal and valuable partner who has what Europe wants and in return, Europe can provide what they need. The issue is farmers have good products, but no markets. As such with market information from service providers, institutions, or social media, farmers are connected with off-taker for their products. However, this year due to COVID-19 there are some market restrictions for products entering the EU markets. This has caused an already difficult situation even harder. Prices for agri-products for example is volatile. In addition, there are additional costs like the Covid-19 Fee, extra packaging, and the cost of transportation (freight) that has increased tremendously be it by sea or air. This has created much uncertainty and make things harder for both smallholder producers as well as buyers.
Suggestions on how the connection could be done practically
Currently, the operations of European Union-Africa trade relations are regulated by a patchwork of overlapping and inconsistent arrangements with different African trade blocs. The EU should work to renegotiate its comprehensive partnership with Africa to encourage free trade with a continent-to-continent deal. Most importantly, any improvement in the operation of agricultural export value chains hinges on the improved understanding of policymakers and development agencies on the entry barriers that affect most smallholders.
Again, rapid digitalisation will be a game-changer in agriculture for African farmers. The market connection could be much easier and with this technology, farmers will shape Africa’s digital farming narrative.
Also, there should be a contractual agreement between producers and buyers as well as who ultimately pays for the additional cost or should it be shared.
Noting that smallholder farmers have good products but accessing markets is one of their challenges, EuroAfri Link mission is to support these farmers (with a focus to women-led businesses) to access EU markets. They act as an interface ensuring the business transaction process is smooth from initial contact to order delivery. They help create win-win collaborations between producers and off-takers ensuring trade is fair, sustainable durable, and inclusive.
Authors: Claudia Zaccari, Project officer @ EAl in charge of EU-Africa cooperation and Patience Chindong, co-founder, EAL