Food security and entrepeneurship

Climate & Natural resources,Food Security30 Oct 2010Hans Eenhoorn

Agricultural development that enables subsistence farmers to feed their families adequately and produce surpluses to feed the cities is, for the time being, the only realistic alternative to fighting chronic hunger and poverty in sub-Saharan Africa.

This blog is part of the blog series about the ‘It’s Down 2 Earth’ conference on agriculture, food security and climate change held in The Hague between 31 October and 5 November 2010. The participants discuss the future of agriculture; how it can contribute to food security and be placed at the heart of sustainable development and poverty eradication – and still be an instrument to challenge climate change?

It is imperative that we start concentrating on smallholder entrepreneurship, as there are virtually no examples of mass poverty reduction that did not start with sharp rises in employment and self-employment due to higher productivity in small family farms. Few countries have ever enjoyed an industrial revolution without first undergoing an agricultural revolution.

A simplified definition of entrepreneurship can be used for entrepreneurial smallholder development: planned production for a defined market with a profit objective.

However, this simplified definition lays bare many of the problems and constraints smallholder farmers face in day-to-day life, or in their struggle to survive or progress to a level above subsistence farming. Planning, markets and profit are concepts subsistence smallholder farmers are at best ill at ease with, and at worst these words are meaningless to them.

‘Planned production’ assumes the availability of relevant information about market opportunities, climatic circumstances and information about the availability, quality and prices of input factors. A ‘defined market’ assumes an understanding of market demand, market forces (e.g. middlemen and ‘market queens’) and the availability of an infrastructure to physically reach that market. A ‘profit objective’ requires, on the one hand, an understanding of the cost of input factors like fertilizer, seeds, water, land, labour (including the opportunity cost of their own labour) and capital, and, on the other hand, a reasonable expectation of revenue.

There are many constraints preventing smallholders from moving from (sub) subsistence farming as a way of life towards a more entrepreneurial attitude. From an entrepreneurial perspective, four categories of constraints for smallholders can be defined regarding market-driven productivity increase.

  • The first category includes constraints related to production and processing. These constraints concern problems farmers have with land, labour and capital. Productivity increases are constrained by a lack of capital, limited access to (micro) credit, poor soil quality or no possibility of increasing soil fertility, poor seed quality, a lack of water, uncertainty about land entitlement, a shortage of adequate labour, a lack of traction and a lack of knowledge and technology. The weak physical and mental state of the undernourished rural population is an additional burden on productivity.
  • The second category contains the insurmountable risks and uncertainties farmers face. These risks are related to erratic climates, a lack of information, uncontrollable market forces, corruption, crime (a lack of ‘law and order’) and hostile institutions. Farmers feel extremely vulnerable and have great difficulty organizing themselves in order to establish a power structure to offset these risks and uncertainties.
  • The third category deals with what poor smallholders perceive as a lack of incentives to invest. This prevents farmers from facing the uncertainties and taking entrepreneurial risks. Most activities that sustain rural livelihoods are essentially unprofitable under current conditions (unfavorable input/output ratios). The highly deficient infrastructure is a serious constraint as well. On top of that, farmers are aware that when they make a profit, their extended family, their patrons and the government (tax) will claim most, if not all, of the fruits of their activities.
  • The fourth category deals with the mindset farmers have developed that limits their entrepreneurial activity. Culture and religion often restrict them from exploring new opportunities. They are more inclined to consume rather than save and invest. A lack of knowledge and information also feeds their sense of vulnerability. Most importantly, subsistence farmers deeply mistrust their local, regional and national governments.

These constraints seriously limit entrepreneurial behaviour in terms of ‘planning production for defined markets with a profit objective’.Despite prevailing constraints, there are examples of successful smallholders operating above the subsistence level. However, in most cases, opportunities are contingent on governments providing an enabling environment for private sector (entrepreneurial) development and the availability of sufficient money for investing in agriculture.Arguably, the most important constraints are:

  • Capital: money means improved soils, better seeds, funds for water-harvesting projects, the provision of knowledge and technology, and funds for labour and extension services.
  • Power structure: strong farmer-based organizations (FBOs) means more negotiation power with governments and partners in the agro-food supply chain and more efficient technology transfer.
  • Good governance: reliable governance means law and order, the mitigation of risk and uncertainty and stronger FBOs.
  • Technology and education: technology development and transfer is essential for increased productivity.
  • Infrastructure: better roads and communication is an enormous incentive for entrepreneurship.
  • Mindset: understanding the mindset of smallholders is essential for providing effective support, while changing the mindset is essential for progress.

Renewed international interest in agricultural support has made ample funds available to increase smallholder productivity. However, there are two burning questions about how efficiently these funds are being used.

First, how will external support funds (the World Bank, the Alliance for a Green Revolution in Africa, bilateral Dutch support, the Gates Foundation, etc.) reach the intended beneficiaries? Funds deposited into the treasuries of African governments tend to be creamed off for political or personal benefit on their way to the bottom rung of society. Checks and balances are required to avoid this.

Second, how well will the market work for smallholders so that they can profitably absorb increased productivity? More often than not, agro-food markets do not work well for the poor. New initiatives need to build measures into their programmes to ensure profitable access to markets for smallholders. The development of support programmes for smallholders – bottom-up, not top-down – is therefore highly recommended. Public and private donors should take this into account.