Employment generation in inclusive value chains in agriculture

Integrating Africa’s smallholder farmers into inclusive value chains by modernizing agribusiness is seen as an effective way to create better jobs and reduce poverty. Technological innovation and higher yields could potentially boost agricultural employment and make farming a ‘sexy’ occupation, especially for youth. However, the policy-context in which this potential is to be realized is complex. Regional and local market integration may offer best opportunities. Building truly inclusive value chains requires close cooperation and continued exchange of knowledge and evidence between research, policy and practice.

On June 23, INCLUDE ¹ together with the Food & Business Knowledge Platform and the Dutch Ministry of Foreign Affairs (MoFA) organized a discussion session with Executive Director of ‘Partnership for Economic Policy’ (PEP)² Dr. Bekele Shiferaw, and policy makers and practitioners in the Netherlands. Dr. Shiferaw was invited to discuss with MoFA staff and various other experts about strategies to overcome barriers for employment generation in inclusive value chains.

Integrating African smallholders in value chains

Dr. Shiferaw emphasized in his presentation that the key challenge for Africa is to translate rapid economic growth into inclusive growth for poverty reduction and employment. About 75% of the poor and 60% of the labour force in sub-Saharan Africa is engaged in the rural areas related to agriculture and allied non-farm opportunities. This argument was based on statistical evidence collected from all over the continent from PEP research projects and outcomes, including PEP’s recent High level policy forum on unlocking Africa’s growth for employment and poverty reduction. Therefore agriculture remains one of the key economic sectors in reducing poverty in Sub-Saharan Africa, and thus the integration of farmers into inclusive value chains is crucial, Shiferaw stated in his talk. There are however important limitations in the current African markets of fresh produce such as lack of market information, farmers’ lack of credit to invest in more productive technologies and farming methods. High transaction costs and imperfections in rural input and output markets have led to market segmentation and over-extended supply chains with large number of middlemen or ‘brokers’. This often leads to high input costs as well as low farm-gate prices for producers and high output prices to consumers.

For small producers to realize their potential, greater market integration and more inclusive and equitable value chains are needed. In that regard Dr. Shiferaw mentioned the importance of ‘Production Marketing Groups’ (PMG) rural institutions that coordinate marketing activities of small producers through aggregation, value addition and contracting with large scale buyers (e.g. processors and exporters).  Through PMGs, farmers are connected directly to the buyers, overcoming high transaction costs and bypassing middlemen and brokers. Farmers become empowered to negotiate more equitable contracts and increase their productivity, hence income, through training and innovation within those groups.

As an example for integration of producers into inclusive value chains, Dr. Shiferaw elaborated on PEP’s work as a consortium partner in the INCLUDE research on productive employment in segmented markets. This ongoing project studies how various contracting models, providing adequate trainings and marketing information for smallholder farmers to modernize the avocado market in Kenya. By drawing lessons from Peru, this research explores options that bring better prices to farmers, improvement of working conditions, especially for women and the youth, and overall productive employment creation. The research design includes models, which ensure technical support and marketing information, that pilot quality based pricing and benefit sharing schemes, contributing to improved  supply and productivity.

Making agriculture ‘sexy’

A main contributor of the session Monique Calon, Senior Policy Advisor for Food Security at the Dutch Ministry of Foreign Affairs, mentioned that Shiferaw’s presentation fits well with two of the current Dutch policy food security challenges. The first challenge is the necessity to make agriculture an attractive occupation for youth, and the second is to include small-scale farmers in the process of agricultural transformation. These urgencies were underscored by a participant from the Dutch Knowledge Platform on Security & Rule of Law who added the need to pay attention to the food and human security challenges of large rural to urban migration flows among young Africans.

In a fruitful discussion with the audience, the unemployment challenge of Sub-Saharan Africa was mentioned as a multi-faceted problem. Calon stated that Africa’s agricultural transformation also requires an understanding of the constituencies that bring policy-makers into power. Enhancing productive employment through agriculture is not just scaling up technical innovation in order to ensure agriculture becomes more attractive. It requires opening opportunities for leveraging local and regional markets to benefit from growing demand driven by income growth, urbanization and changing demographics.  From the perspective of mitigating climate change. Integrating farmers into global value chains might not be the best way to achieve a transformation. She stressed that in such value chains, the farmers, especially the young ones, are the weakest link as they are not able to control these chains. This was underscored by Dr. Shiferaw who stated that in many African countries smallholder farmers – or peasants as they are to his regret generally still called – are often marginalized and lack access to productivity-enhancing technologies and business development services. Calon concluded that farmers might benefit from more regional, national and local markets rather than integrating into global value chains through technological improvements.

A more coherent knowledge agenda for better policy and practices

As concluded from the discussion, better coordination is needed between research, policy and practice in order for inclusive value chains in Africa to be realized. One attendee from the Ministry remarked that although a good amount of research has been conducted and many projects implemented, there is still not enough known about how these issues really work. The five Dutch Knowledge Platforms on global development were mentioned as important actors in bringing more coherence to the research agendas and making better connections with policy efforts. Those Knowledge Platforms can play an important ‘brokering’ role between research and policy-making in this respect, whereas researchers and policy makers often lack time for this. Subsequently, an active approach from academia and policy makers is needed to propose relevant knowledge questions.

The discussion ended up in six policy questions for researchers, policy makers and practitioners to focus on that can be explored within the knowledge platforms:

1. How can we access the relevant and correct data on labour productivity and employment (especially for the youth) in Africa, including in the agricultural sector?
2. What does agricultural transformation look like and how can agriculture be transformed into an attractive field to work in?
3. What is the role of aid and trade in agricultural transformation and rural development? Is a system approach the solution?
4. What are the potential effects of inclusive regional trade on (youth) employment and food security?
5. What should be the key focus in policy to enhance productive employment and reduce poverty?
6. What approach should be adapted to improve productive employment in fragile contexts?

INCLUDE, the F&BKP³ and PEP, but also KPSRL⁴ expressed their interest in working together to address these knowledge questions further and to facilitate more pragmatic approaches for policy makers and better practices.