Farmers Review Africa Sept/Oct 2019 Farmers Review Africa September - October 2019 dig | Page 17

farm productivity that make more raw material
available; initial government investments in
infrastructure such as roads; rapid and massive
urbanization; diet change with rising demand
for processed food; and rising investments by
the entrepreneurs themselves. (See below for
examples of the impact of SMEs, especially
when supported by government infrastructure
investments and policy.)
Compared to SMEs, and counter to common
belief, the report shows that large enterprises
play a relatively minor role in directly supporting
small-scale farmers. For example, only about five
percent of rural farmers are directly linked to large
firms through contract farming. Nonetheless,
with proper support, large African businesses,
including supermarkets and large processors
(which now comprise 10-to-20 percent of the
agri-food economy), present a huge opportunity
as they are likely to play an expanding role in how
farmers access credit, markets and will ultimately
impact employment and rural incomes.
The report identifies other pivotal changes in
African rural economies. It notes that although
70-80 percent of people in rural Africa work on
their own farms, this work is often part-time, and
comprises only 40 percent of total labor time in
rural areas.
support to family farms; and to be competitive so
that they can survive and thrive in an increasingly
interconnected and global market. Their success
will determine the future of agriculture and food
security in Africa.”
The policy recommendations laid out in the report
stress that governments and donors should not
“reinvent the wheel” by duplicating the work of
the private sector. Setting up state-supported or
subsidized businesses, even in remote areas,
would crowd out grassroots entrepreneurs.
Instead, the key is to create conditions that make
it easy for businesses to establish, develop and
grow. Given this, the AASR calls for several key
policy actions:
• Public investment in infrastructure focused
on priority needs: building wholesale
markets and roads, improving ports and
extending electrification and broadband
coverage. Infrastructure investments that
benefit the spontaneous clustering of SMEs
have the most impact, greatly supporting
the ease of doing business.
• Policies and regulations that reduce
transaction costs and policy risks. SMEs
most frequently invest in growth when
favorable policies and infrastructure are
in place. Such policies include cross-
border trade liberalization, reduction of
double taxation and regulations to reduce
corruption. It is also essential to reduce
bureaucracy, especially in areas such
as registering new fertilizer products,
approving new improved seeds or levying
taxes on primary inputs that make the cost
of access so much higher.
•
Governments have a responsibility to
protect SMEs and consumers from
substandard products be it farm inputs
like seeds, fertilizers and pest and disease
control products or food products going to
the market. Advancing and enforcement
of appropriate policies and regulatory
instruments to guide the SME landscape
in Agriculture is the critical role that
governments must play. This will protect
farmers’ investments, expand the use of
quality seed and fertilizer, increase output,
protect consumers and will increase the
ability of SMEs to compete for regional and
global markets.
Meanwhile, 60 percent of rural labor time is
spent off the farm, and about 40 percent of
this non-farm labor time is in agri-food system
work such as wholesale, logistics, processing
and retail (through both self-employment and
wage labor). SMEs are the key employers in
this sector, intertwined with rural family farmers.
This interdependence makes their survival and
growth even more crucial, with women and youth
particularly benefiting.
Policy recommendations
Although the growth of SMEs in the “hidden
middle” of agrifood supply chains has been
profound, the report notes that progress has
often taken place despite large barriers, and that
much more can be done to foster the growth of
SMEs. Processors, wholesalers and logistics
firms, in particular, face major constraints that
drive up the cost of doing business. Excessive
costs for equipment and energy, inadequate
infrastructure, especially of roads and wholesale
markets and mobile phone connectivity, and
some financial and credit restraints, make it
difficult for SMEs to compete with imported
goods that cost less to produce. Outdated laws
and regulations also inhibit business growth.
“We live in a global market,” Kalibata said. “Our
job today has to be to ensure that these SMEs
are grounded enough to provide the right kind of
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