Social enabling

- Introduction- Inspiring farmer story - Facts and figures- The broader perspective- The farmer perspective- The farm road ahead

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Introduction

SOCIAL ENABLING

In general, the places with the highest yields in the world are not the places with the best climate and soil quality but the places with the best social enabling environment. Examples of these so-called social enabling factors that determine if the farmer can achieve full potential of soil, skills and climate are: government policies, the functioning of and access to agricultural markets, access to finance, access to knowledge and public expenditure on agricultural research and development.

Whereas social inequality stops progress, social enabling is the key to unlock agriculture’s potential to deliver economic growth. According to FAO, cross-country analysis shows that overall GDP growth originating in agriculture is, on average, at least twice as effective in benefiting the poorest half of a country’s population as growth generated in non-agricultural sectors1. The required increase in food production as well as distribution to feed the world in 2050 can only be achieved with an environment that is enabling. Therefore, enabling factors are the basis of future global food security.

Agriculture is vital to economic prosperity. According to a World Bank report, almost no country has managed a rise from poverty without increasing agricultural productivity. There is, however, no silver bullet and it is unlikely that one single approach works globally as we have to consider, besides others, cultural differences as well as the stage of the development of a country. A process of more than 100 years of development of agriculture in the developed world is not something you can implement overnight in developing countries. There are success stories such as Brazil, which developed thanks to strong investments in research and an enabling environment in the last few decades, from a net importer of food to one of the world’s largest exporters. By contrast, in the same period, continental Africa turned from a net exporter to an importer of food. So from a hierarchy of needs perspective, it is hard to understand why the African continent that is already a net exporter of energy, turns some

“WhErEAS SOcIAl InEquAlITy STOPS PrOGrESS, SOcIAl EnABlInG IS ThE kEy TO unlOck AGrIculTurE’S POTEnTIAl TO DElIvEr EcOnOmIc GrOWTh”

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of its good soils into the production of ethanol for bio-fuels rather than food production.

PlAnTInG ThE SEEDS FOr AFrIcA’S FuTurEBut there is also good news. The Economist reports that six of the world’s 10 fastest growing economies, last decade, were in (Sub-Saharan) Africa. The African continent combines the greatest need with the greatest potential. Due to the vast area of land that can be brought into production and possibly even five times higher productivity, there is a lot of potential in Africa. In capturing this potential, many linked issues need to be addressed, including: knowledge-sharing to improve productivity, scale, fair prices, social aspects, infrastructure, access to markets and last, but not least, access to finance. Or in the words of the farmer: “No cash no crop.”

Discussing social enabling factors as if Africa is one country is wrong and does not reflect the cultural, social and local differences between the 54 countries in Africa. We will therefore focus in the broader perspective on a case study of one specific country: Rwanda, which has shown clear progress in Africa. We will look in-depth at the farmer perspective on the rwandan rice sector and give thereafter the farmer’s perspective on the road ahead. But first we will introduce you to the story of Koos van der merwe, who is farming in mozambique. his approach to farming illustrates that individuals do make a real difference for a better future of farming.

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Inspiring farmer story

SOCIAL ENABLING

SmAll-ScAlE FArmInG In A SmAll cOrnEr OF ThE WOrlD koos van der merwe is using his 25 years of experience in agriculture and environmental protection to run a privately-owned business on a government research farm in mozambique. Often from his own pocket, koos assists small-scale farmers with training, agronomical support and a route to market. Through financial literacy, he is also helping develop more farming entrepreneurs in mozambique.

rESEArch FArm“First of all, I don’t own a farm. We rent land on a 10-year lease from the mozambique government. Three years ago, we started our operation on a government research farm in the Inhambane Province. We wanted to demonstrate what is possible if you have the correct varieties, the right production methods and water mix,” said koos.

“We research the recipe and develop the market. I cannot ask someone to grow me a product if I am not sure I am giving him a reasonable chance of success. We identify the right people, train them, provide the right inputs and eventually buy back their product,” said koos.

The mozambique Organicos business idea is based around smaller high value niche markets, focusing on labour-intensive crops and well-tested varieties, such as baby corn-on-the-cob and red chilli peppers. “About 40% of our export market is supplied by small-scale producers. hopefully, if government initiatives go through, these farmers will develop, grow, gain more skills, and then together with more new farmers they will be supplying 80% of our production,” said koos.

PrOvIDInG InPuTS AnD IrrIGATIOnThe research farm is not large scale, not corporate, and not supported by money from outside. “We are planting 150 hectares of horticulture crops per year, and we are going to expand to 400 or 500 hectares. We have a very good idea and model, and the potential in the market is there,” said koos.

mozambique has good agricultural potential and a very favourable climate but must have irrigation. Getting water to the crops is expensive. Drip irrigation costs uSD 3,000 per hectare, which is usually more than a small start-up farmer can afford.

“Initially, we provided the first few guys with irrigation to show that the model works. We have also provided all the input costs, but you only get your input costs back four or five months after you have put your money in. It is a very capital-drenching activity on a very small entity that just started up,” said koos.

“Anything that has gone into the farm has been money from me and my wife, which wasn’t much. We had to make a plan that the stream going out had to be balanced by something coming in. Everything must provide revenue as quickly as possible. And that is also what the small grower requires because he has no other income or means to support himself,” said koos.

“We are planting 150 hectares of horticulture crops per year, and we are going to expand to 400 or 500 hectares”

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BuIlDInG TruSTIt has been a very difficult journey to build trust in the region with the farmers and workers. mozambique has had many stories of failed agriculture, things have gone wrong and the population has been disappointed. Outsiders have come in and promised the world, then a month later no one can be found, said koos.

“most of the people in the region had never seen a commercial green maize field,” said Koos. “Around the province, there were no good examples of commercial farming. In the first year, there were no small growers who volunteered to start farming with us.

“Part of our function was to open the minds of the people, create a positive story and be a positive example. Then, all of the sudden in the minds of the small growers, there was a new picture. They could see ‘I can have so many maize plants and I can harvest so many cobs from it’,” said koos.

“now, we have people on the farm every day who want me to provide irrigation and say, ‘let’s start growing together’. Unfortunately, our financial means doesn’t allow for that. We are dependent on the government or other institutions that may want to fund all these small growers to provide the basics to start up with. In that way, we will be able to grow the business,” said koos.

WOrkInG WITh WOmEnBecause horticulture is a very labour-intensive operation, the research farm is providing jobs and training which is exactly what a country like mozambique needs. “There are a lot of unemployed people and no established work ethic. They are, however, very diligent, hard working and eager to learn. most of the people employed on our farm are working for the first time in their lives. We had to register people for identity documents, unemployment insurance and bank accounts,” said koos.

The research farm has been especially valuable to the women in the region who now have a source of income and a bank account. “We employ a lot of women. A bank account for these women means they now have control of

the family’s finances, or at least on the parts they earned. The women are eager to advance themselves, in all kinds of little things, like taking English classes. They are really keen to learn every little bit more,” said koos.

PrOvIDInG FInAncIAl lITErAcyIn an effort to create more financial literacy, Koos has also set up financial counselling and training with a local accountant and consultant. Together with his wife, the accountant provides financial training to the workers and small-scale farmers.

“They teach our workers how to manage a bank account, what a bank account is, what a profit and loss concept is, and how you budget.

“These are basic financial skills, but it means so much to people who have not been exposed to budgets and financing before. With the financial training, we hope to create better business entrepreneurs for the area,” said koos.

ExPOSurE FOr mOzAmBIquEThe business has innovative, adaptable and biological production techniques to largely reduce production costs. In the modern agricultural environment, competition comes from mega farms, mass production, mechanisation and high chemical inputs. What does he hope for his small research farm, the people and for mozambique?

“Most of the people in the region had never

seen a commercial green maize field”

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Facts and figures

“We are in a remote part of the world. most people have no idea what we do. We are so far removed from the modern ways of agriculture. We are small and need to have a bigger audience to discuss and share our concerns about the water, the area, the people and our business model.

“This model is giving people of mozambique the opportunity to improve their lifestyle on their own land. We don’t even attempt to buy the land. I don’t want the land. We need the production of the land,” said koos.

“If we can help people benefit from what they produce on their land, then we have a more sustainable model. There are so many benefits to the world knowing more about this farming model in this small corner of the world in mozambique.”

Social enabling factors help achieve yield potential. This potential is determined by an interplay between the soil quality and the local climate.

SOIl quAlITyConsidering the first, the quality of the soil available, the map (source uSDA)2 shows that there are three areas where soil quality is best: the uS (midwest), ukraine and parts of South America (particularly Argentina). Furthermore, it is also visible that the soil quality in many parts of Europe and china is not optimal.

clImATEApart from the quality of the soil, climate is important to potential crop yields as well. The (köppen climate classification) map on the next page shows the prevailing climate in the different regions of the world. The best climates for agricultural production are found in the uS (midwest), Argentina, parts of Sub-Saharan Africa, Eastern china, Southern and central Europe and parts of Australia

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and new zealand. It is clear there are overlapping areas of very good soil quality and a favourable climate in, for example, Argentina and the uS midwest.

POTEnTIAl yIElDThe potential yields are determined by the combination of soil quality and the prevailing climate. The realised yields are determined by these factors, but also by the enabling factors that enable the farmers in attaining the potential yields. The yield gap therefore is determined by the enabling factors, or lack thereof, available in the different regions.

In a perfect world, soil quality plus climate plus an optimum enabling environment creates an actual yield that equals 100% of the yield potential.

Based on calculations on a combination of data sources including the Economist Global Food Security Index, The FAO, the World Bank and climate maps (based on the Köppen climate classification) we have determined a ranking to illustrate the actual yield being realised versus enabling factors versus climate and soil quality.

Social enabling criteria used in the analysis include access to finance, political stability, agricultural infrastructure and public expenditure on agricultural r&D. Please note that there are some statistical limitations due to variances in classifications of different data sources etc.

The findings as shown in the graph below indicate that there are high yields in Europe, despite lower soil quality compared to the Americas. This might be explained by the enabling environment as, for example, the r&D policies and the umbrella of the common Agricultural Programme. In East Asia high yields are found, despite a low soil quality, due to a favourable climate and the large use of subsidised fertilisers. Bringing the obvious question on the sustainability of the yields as the high fertiliser use will over time reduce the soil quality. latin America, and in particular Argentina, has the best soil and a good climate, but is not reaching its potential due to the negative impact of agricultural policies such as export taxes. Within latin America, Brazil is doing better than Argentina even though it has a similar soil quality and climate as Sub-Saharan Africa, however, Brazil produces much better yields due to, besides other factors, a high r&D spending that enables farmers.

Source: own analysis based on data from World Bank, FAO, The Economist, climate maps (based on Köppen Climate classification2,3,4,5

north & WestEurope

East Asia north America Australia + newzealand

All countries South Asia latin America Sub- Saharan Africa

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Social enabling environment Soil quality and climate Actual yield Potential yield

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The broader perspective: Rwandan rice sector case study

InTrODucTIOnIt is clear that creating a social enabling environment is a delicate task, which does not have a one-size-fits-all solution. To show some of the complexities and necessity of social enabling factors, a case study is used. This case study will focus on the rice sector in rwanda, but the lessons learned can be indicative to other sectors in the country and even to other countries.

rwanda is a small country in Sub-Saharan Africa with a favourable climate for agricultural production. It is the most densely populated country in Africa, with a population density of over 300 people per hectare. 80% of these people are either directly or indirectly employed in the agricultural sector. In 1994, the genocide in the country destroyed the economic base at the time and severely impoverished the population. however, over the past decade rwanda has shown significant progress in Africa. This has been recognised by the World Bank, which, at the time appointed rwanda as the fastest reforming country in the world. Starting a new business is faster and more efficient compared

From a purely technological point of view, and based on the significant gaps in yield potential, the earth’s surface has the ability to produce a European diet for twice the global population expected by 2050. This illustrates the enormous opportunity the social enabling environment has in solving the global food security problem.

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to many countries in Europe. nevertheless, there are still many challenges in rwanda to overcome. Poverty remains widespread, with approximately 50% of the population living on less than uSD 1.25 per day.

Considering the specific enabling factors discussed in the previous section, it is clear that there still is a lot of improvement to be made to help the farmers in rwanda (see table below). The factors are ranked from 1 to 5, where a higher score indicates a better enabling factor.

This case study will now turn to the rice sector of rwanda. This specific approach allows to investigate the enabling factors, or lack thereof, in the country.

rIcE SEcTOr rice is designated as focus crop by the rwandan government considering the strong (growth in) demand for rice by its population. nevertheless, domestic production still lags behind consumption, leading to the importing of rice. This production gap is present because the social enabling factors are not sufficiently developed in Rwanda, resulting in lower rice yields of a poorer quality than potentially possible.

The rwandan government’s national rice Development Strategy envisions being self-sufficient in rice production by 2018. The strategy recognises that many hurdles need to be overcome. Examples are a lack of mechanisation, lack of access to finance for cooperatives and knowledge that is insufficiently dissipated through the value chain.

There are approximately 62,000 rice farmers active in rwanda, each with an average plot size of less than 0.1 hectare per household. This already illustrates one of the issues in the sector: there are no economies of scale and the level of mechanisation is low. This makes the production process much more expensive than the production process in South Asian countries that have a similar quality of soil and climate.

rwanda

Access to financing for farmers

Public expenditure on agricultural r&D

Agricultural infrastructure

Political stability

3 1 1 2

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The farmers are operating under 52 cooperatives, which in turn are organised in six different unions. This is already a fragmented structure, which is exacerbated by the management of the cooperatives and unions, which generally are not very professional. This fragmentation results in a loss of economies of scale and much work being unnecessarily duplicated throughout the value chain. next to that, many of the cooperatives lack access to finance; this means that the farmers do not immediately receive cash for their rice paddy. This has resulted in a large informal value chain dominated by small-scale, illegal, cash traders. These traders process the paddy rice themselves, which results in a final product of low quality. The lack of access to finance for the cooperatives and the farmers also results in a production process where almost no fertiliser at all is being used, because they are unable to buy it.

There are almost no investors actively involved in the agricultural infrastructure to make the rice value chain competitive, such as investments in post-harvest storage facilities. next to that, although the government has announced rice as focus crop and has invested in r&D for rice, transfer of knowledge to the farmers remains problematic. This shows that besides investing in r&D, a clear communication strategy needs to be worked out to get the knowledge to – and adopted by – the farmers.

many problems in the rice value chain, ranging from the dissemination of knowledge to the existence of an informal value chain, undermine the lack of cash credits stimulating the enabling environment for rice farmers. This leads to low

paddy yields and a low quality product. As a result, there is still a need to import rice from abroad.

Solving the problem of a lacking enabling environment is necessary to achieve the government’s ‘rwanda vision 2020’6, of being self-sufficient in rice production by 2018. Next to that the situation in the rice sector is representative for the rest of the agricultural sector in rwanda. A successful restructuring of the rice sector could be used as a blueprint for streamlining other sectors such as coffee, beans and other crops.

62,000 Farmers

52 Cooperatives

6 Unions

“There are almost no investors

actively involved in the agricultural

infrastructure to make the rice value chain

competitive”

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The farmer perspective

The above case study was discussed during the Global Farmers master class with 50 leading farmers from all continents and they were asked to give their perspective on how to create the required social enabling factors. Asking this to such a diverse global group of farmers, representing developing, emerging and developed countries, is invaluable. many of these farmers live in countries that have experienced the transition from mainly subsistence farming to commercial farming – a transition that still has to be made in rwanda.

The farmers acknowledged that the creation of a social enabling environment is complex and multifaceted, and requires action from a set of different actors. roles were singled out for the farmers, the overarching value chain and the government.

Firstly, concerning the individual farmers, consolidation of farm plots to create economies of scale and possibilities to increase mechanisation are required. This could be done using group farming schemes, where the farmers pool their land, make decisions collectively but manage it with a (small) cooperative farming group. After the harvest, the proceeds are divided among the group members. The proceeds after consolidation would likely exceed the proceeds if each farmer worked individually.

Secondly, the value chain around the individual farmers needs adjustments to enable the individual farmers to reach their potential. According to the farmers, it is critical for the cooperatives and unions to have a professional management. This should allow the cooperatives and unions to gain access to credit they can use to pay the farmers immediately in cash after harvest and supply their members with inputs, such as high quality seeds and fertilisers. next to that, the farmers suggest that the unions forwardly integrate with the mills to make the value chain operate in a more efficient way. Also, communication and transparency of the cooperative towards their members need to improve. Dissemination of

knowledge should be done through these cooperatives, but currently the available knowledge is hardly transferred at all.

Finally, the government has a role to play as well. First of all, it should make sure that the land property rights and tax regulations are creating incentives for farmers and cooperatives to invest in their businesses. These policies need to be supported by a rule of law that is able to enforce them. next to that, apart from investing in agricultural r&D, the government should also make sure the acquired knowledge is transferred to the relevant players in the value

Grant ludemann – a large dairy farmer from nz, one of the initiators for setting up a new farmers initiative for developing countries – pictured during a farm stay in the netherlands to share experience with a Dutch farmer

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chain. Without that transfer, the knowledge is useless.

A senior representative of the rwandan Government has highlighted that the solutions suggested by the farmers would contribute to achieve self-sufficiency in the rice sector. “The recommendations were forwarded to the rwanda Agriculture Board. We requested that the global farmers’ ideas be incorporated in the rwanda’s national rice Development Strategies (nrDS) purposely to improve competitiveness of rwanda rice in local and regional market places through significant advances in quality and production.”

Inspired by the lessons learned and social aspects of the rwanda case, as well as the opportunities the farmers saw in rwanda, some decided to come together and pool resources and knowledge. This group will try to help assist in building a sustainable agricultural environment that helps developing countries by working together with the local stakeholders. This again emphasises the power of global knowledge sharing and the entrepreneurial, cooperative mentality of farmers to make a meaningful difference.

new zealand farmer hamish Alexander had to wonder: “how many rwandan farmers would be just as successful as us given the same enabling factors we have?”

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The farm road ahead

First, on a less formal note, a thoughtful quote on the life cycle of farming around the world, brought a smile to the Global Farmers master class: “how to scale up farming in developing countries? First bring in the people from Paraguay to set up the system. Then ask the kiwis and Aussies to make it more efficient. Then go to the people from the USA to scale it all up. lastly the Europeans will come in to regulate it and red/green tape it. Then it starts all over again.”

Obviously, the above quote should not be taken too seriously as it generalises so much. The real point is that farmers, governments and others around the world can learn a lot from each other in the different stages of the farming life cycle and how to create the right enabling environment. Too often farming is discussed without involving the farmers.

1. EnABlE AccESS TO FInAncE – nO cASh nO crOP• “no cash no crop”. Globally four billion people lack

access to financial services including most African small-holder farmers: women. Microfinance as offered by, for example, kiva.org, is a direct way to connect the developed and developing world through the internet. Another way is replicating the cooperative banking and farming models in developing countries by investing in knowledge and (financial) resources and infrastructure. For example, the Dutch cooperative rabobank, founded over 100 years ago by farmers for (poor) farmers, is already active for many years in Africa to assist partner banks in building a financial infrastructure based on cooperative principles to provide access to finance for small holders.

2. GOvErnmEnT lOnG-TErm vISIOn AnD rEFOrmS• Exchange best practices by involving local and foreign

farmers at the kitchen table with government officials.

“Apart from investing in agricultural R&D, the government should also make sure that the acquired knowledge is transferred to the relevant players in the value chain”

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3. lEArn FrOm EAch OThEr – knOWlEDGE TrAnSFEr• Pool resources to create a knowledge centre or virtual

farm for knowledge exchange. • Invest in financial literacy.• look beyond the border, the offered farm stay at the

start of the Global Farmers master class enabled farmers to share ideas and learn from their peers.

4. BuIlDInG A SuFFIcIEnT AGrIculTurAl InFrASTrucTurE

• Starting at the farm with silos to reduce waste and improve income due to less price-taking dependency.

• Building roads, post-harvest handling, access to domestic markets and, in case of oversupply, access to foreign markets for the produce.

5. cOmmunIcATIOn BETWEEn All STAkEhOlDErS In ThE chAIn

• cooperation within the value chain is key. • create a transparent communication platform.

While 75% of the world’s poor live in rural areas in developing countries, a mere 4% of official development assistance goes to agriculture. Agriculture truly can make a difference for the poorest people in the world. let’s get the balance right and invest in the future of our food.