Farming as a business

Food Security18 Mar 2013Bob van der Bijl

Netherlands-African Business Council (NABC) is activating the Dutch private sector for market development and knowledge transfer to local farmers in Africa.

Since April 2012 the Netherlands-African Business Council (NABC) has been running two 3-year programmes in agriculture: one in poultry in Ethiopia and another in dairy in Kenya and Uganda. These programmes are partly financed by the Dutch government and have a dual objective: enhancing knowledge transfer to local farmers (strengthening the sector) and encouraging Dutch companies to become more active in Africa. We formed two groups of companies, knowledge institutions and NGOs that aim to trigger market development in these two sectors. It is widely known that a large proportion of the rural population in Africa is working in the agricultural sector, mainly as subsistence farmers with limited surplus production. At the same time we see sharply rising demand for food products in African cities, as a result of continuing urbanisation and rising income levels. Increasing the purchasing power of African consumers is an important driver of development in the agricultural sector, but international demand for these products is also an important factor.

On the basis of these developments, we predict a rapid consolidation process in which subsistence farmers will largely exit the agricultural sector. Production will take place on large-scale commercial farms (often financed by private capital or industrial conglomerates) and medium-sized farms. Medium-sized farms are currently limited in numbers, but NABC is focusing on this group in its sectoral programmes. A typical example is a Ugandan farmer with 100 milk-producing cows with a limited yield per cow, relatively poor farm management and unfavourable terms of trade with the milk processor. It is our aim to set up demonstration farms in which Dutch companies can showcase their knowledge and technology. The interesting thing is that we have identified private farmer initiatives in both Kenya and Uganda. Given the general lack of confidence in the public sector, medium-sized farmers have united themselves in a network where they share experiences and help each other to improve the results of their farms. In Uganda we are working with a group of 50 farmers, and in Kenya with a group of 30. On the basis of one demonstration farm, we can therefore already reach 30 to 50 high potential farmers. Besides medium sized farmers, we can also reach smaller farmers: farm staff on the demonstration farms will be trained to function as a trainers for farmers from the surrounding area.

Our vision is that it is very important to have role models. Presently there are only very few local farmers who can make a good living and who are able to formally employ their workers. In the coming decades the African agricultural sector will develop towards larger scale production units that can deliver high-quality products on time. This consolidation process will give a strong boost to production. At the same time we see a need for fragmentation on the processing side, which will give the farmers more options in terms of who they sell to. This will improve their bargaining power. Many farmers will also get together and establish their own processing operations.

What does this mean for the subsistence farmers who are now leading a difficult life in rural areas? Those who stay will work for larger farms, in processing plants or in other sectors. However, most subsistence farmers will probably move to urban areas. This will create more space for larger farms, but also a need to create employment in urban areas. This is illustrated by an anecdote from the Netherlands. In response to the question “What was the best impulse for rural development in Friesland (province in the North of the Netherlands)?, someone replied “Philips establishing a big factory in Drachten (city in Friesland), creating thousands of jobs for the smallest farmers!”