The Research Programme on Enhancing Productivity, Market Access and Incomes of Small farming Businesses: Potential and Limitations of Contract Farming (POLICOFA), a collaborative Mzumbe University, Institute of Rural Development Planning and two departments of the University of Copenhagen – Department of Geosciences and Natural Resource Management and the Department of Food and Resource Economics, plans to have a POLICOFA Day on November 24, 2017 at the Main campus, Haile Selasie. The objective of occasion is to share with the Mzumbe University Academic Community (Staff and Students) what this project is all about and what it has achieved to date. This will be done by way of slides and poster presentation, and display of book and policy briefs. The Project completed successfully its first Phase (2011 – 2015), and is now in its Second
The Project will also inaugurate its edited volume: Contract Farming and the Development of Smallholder Agricultural Businesses: Improving Markets and Value Chains in Tanzania ed. Joseph A. Kuzilwa, Niels Fold, Arne Henningsen and Marianne Nylansted Larsen, published by Routledge.
The Permanent Secretary, Ministry of Industry, Trade and Investments, Prof. Elisante ole Gabriel will be the Chief Guess and will officially inaugurate the book.
About the Project
The Project is implemented under the Development Research Programme supported through grant from the Danish Foreign Ministry, administered by the Danish Fellowship Centre. Mzumbe University is the main applicants of the project.
Phase One April 2011- December, 2015
During Phase One the project studied different contract arrangements under specific crops, applying both qualitative and quantitative approaches in order to capture the dynamics of the contract systems. Major areas of study included: emerging contract farming arrangements; issues and policy; contract farming and impact on value chain; contract farming adoption decisions; the effect of contract farming on productivity and efficiency; and economic diversification, incomes and profitability. The Project came out with outputs from original research conducted in Tanzania which focused on four crops of sugar cane, tobacco, sunflower and cotton. All these crops have a history of trials with explicit contract farming involving smallholders and are targeted as main crops for agro-industrial establishment and upgrading in national strategies.
The research also showed how formal credit for agriculture is vital in the performance of contract farming arrangements for small businesses, and how the lessons from their research can be applied to other settings in agricultural development.
Amongst the outputs
- Better understanding of how contract farming works in Tanzania
- Better understanding of sources of efficiency / inefficiency in the production of the selected crops;
- Improved understanding of the role of formal credit in facilitating contract farming and enabling business participation;
- Understanding the importance of value chain dynamic and crop specificities for the implementation and impact of contract farming;
- Policy recommendations informed by field research and input from each contractual production situation
- Four (4) PhD theses for students who graduated;
- Four 4 MSc Researchers who graduated with improve research skills
- Eight (8) journal articles
- Five (5) policy briefs
- An edited book Volume
Phase Two – July 2014 – December 2018
The project portfolio for Phase Two consists of three separate sub-projects that all are nourished by research findings from phase 1. The three sub-projects are tied together by emerging or changing contractual systems, the overarching issue examined in four different agro-industrial value chains during phase 1 of the POLICOFA project. The projects are theoretically and methodologically based in the original framework of the (global) value chain approach and econometric analyses with the ambition to combine qualitative and quantitative methods in the empirical studies.
Improving coordination in the value chain for sunflower seed: the potential of upstream and downstream upgrading
The project also examines the possibilities for upgrading in the primary processing (milling) segment of the value chain. Research findings from phase 1 have identified several bottlenecks among the small and medium sized enterprises (SMEs) engaged in seed provision on contracts and primary processing of sunflower seeds: high operation costs (e.g. electricity), severe underutilization of capital equipment due to insufficient supply of raw materials, lack of access to credit, and obsolete technology. The consequences are clearly revealed in fluctuating output and inferior quality of the oil that not fulfil the criteria of the prevailing standards in Tanzania for food products. Effective distribution systems are non-existent and the market is highly local, often limited to sales at factory gate. Implementation of stricter standards for cooking oil quality will virtually block access to consumers for the SME as they have no refining capacity and no possibility to cope with the investment costs on an individual company basis. Hence, some form of consolidation or cooperative structure is the only way for them to stay in business. Viewed in a development perspective there are considerable benefits of SMEs in the vegetable oil industry: local technological spill-over effects to other small-scale sectors, employment and income effects and local supplies of feedstock products (oil cake).
Obscure factors in outgrower schemes: land and labour in the sugar value chain
Anecdotal evidence from Phase One indicate that outgrowers in Kilombero reduce cultivation of food crops within the catchment area while acquiring new land in relatively distant and remote areas to ensure continued production of food crops. At the same time new urban-based individuals acquire land in the sugar cultivating area as it is considered to be a lucrative investment.
Another finding from phase 1 is that most of the outgrowers hire labour to carry out field work – both in Kilombero and Turiani. Hence, many of the outgrowers are essentially ‘rentiers’ and only to a very limited extent involved in the actual work in the fields. The role of hired labour was not incorporated in the research during phase 1 so important questions concerning supply, form and price of labour were not examined. The answers to these questions may reveal a segment of poor and landless rural dwellers or migrant labourers which will be of significant interest for poverty assessment and impact analysis of contractually-based outgrower schemes.
This project aims to examine pertinent issues on land and labour with a focus on the dynamics in the Kilombero scheme and the affected communities where land is acquired by outgrowers and others from the sugar catchment area.
Global market dynamics and impact on local economic development: a comparative study of the tobacco and cotton value chains
Research findings in Phase One pointed to a number of parallel processes that link global and local dynamics in tobacco value chain in Tanzania. Indicative crop purchasing prices are determined in the immediate pre-harvest period by statutory bodies with representatives from both public institutions and private actors in the processing segments. The fixed prices take into account the expected world market prices and factor in a number of set margins for transportation, processing, and storage. The tobacco industry operates with no less than 72 quality grades with specific prices attached. Farmers complain that most of the harvest is graded as low quality and secondary data indicates that Tanzanian tobacco (on average) is lower priced than tobacco from other African countries despite its reputation as a high quality product.
The project aims to examine the factors determining the price differentials on the world market between tobacco from Tanzania and from other African countries and the extent to which the contractual systems may improve the quality (and producer prices) – and whether this improvement may transform into higher producer prices. Furthermore, the criteria for selection of farmers – between communities will be examined and the impact on the selected groups and communities will be assessed. Methodologically, the project will be based on a mix of qualitative and quantitative data with a particular ambition to combine global value chain approach with livelihood analysis.
- Lesson and outcomes from pilot intervention on constraints to efficiency and productivity in smallholder sunflower contract farming (This output will contribute to relevant stakeholders’ efforts in promoting sunflower production in the central regions (linkage to BSPS IV)
- Understanding of SMEs involvement in sunflower primary processing and opportunities and obstacles to cooperation with large scale sunflower oil processors (Linkage to BSPS IV);
- Established social and economic impact (especially on food production and poverty) arising from obscure land and hired-labour arrangements in the out-grower contract scheme in Kilombero and its implications;
- Understanding of the world market trade arrangements and mechanism (including vertical price transmission) and linkage to price differentials for tobacco from Tanzania and from other African countries;
- Understanding the different approaches and criteria for farmer selection in tobacco contract arrangements and impact on local economic development;
- Policy and practical recommendations informed by field research and input from each contractual production situation and industrial policy;
- Improved research skills among junior researchers from the University who will be involved in the project;
- 3 PhD and 4 M.Sc. theses for the students involved;
- Journal publications, policy briefs