1. Food losses in Zimbabwe
Zimbabwe has a total land area of over 39 million hectares, of which 33.3 million hectares are used for agricultural purposes. [1] According to FAO, over 70% of the population depends on agriculture for their livelihoods. [2] Zimbabwe is currently experiencing a multifaceted, complex and protracted crisis, characterized by 70% of the population living in poverty, [3] hyperinflation (annual inflation reached 230% in July 2019, compared to 5.4% in September 2018) [4] and widespread, chronic food insecurity, with 59% of the rural population (5.5 million people) food insecure at the peak of the lean season (January-March 2020), of which 3.58 million people will be at crisis or emergency level (Integrated Phase Classification 3 and 4 respectively). [5]
Zimbabwe’s current crisis is exacerbated by the effects of climate change, with crop losses associated with both drought and floods. Within this complex environment, in which millions of people live in poverty and at risk of starvation, food loss is a critical concern to ensure that agricultural production achieves maximum potential for food supply and income generation. A study commissioned by the Ministry of Agriculture in 2015 estimated food losses at critical stages of two common value chains, tomatoes and maize. The critical loss points for tomatoes are at the grading and packing stages while those of maize are at the harvest stage and during storage (Figure 1). For maize the study only addressed losses in maize produced for home consumption, and did not account for the additional losses experienced in storage and transportation during the marketing stage. The African Postharvest Loss Information System estimates that in 2017, the total postharvest loss in Zimbabwe was about 16.4% in maize amounting to 182,720 tonnes valued at US$71,260,800. [6]
This shows that vast potential exists for increasing the supply of food at the national level (and improving farmer incomes) by addressing food losses alone. In this way, increased food availability can be achieved without the need for increased production, and the associated use of scarce resources (land, water, energy, labour, money) or agricultural inputs. In the current context of Zimbabwe’s food deficit, reducing post-harvest losses for maize would also reduce the need for using limited foreign currency reserves for importing grain.
2. The Evolution of the Agricultural Business Centre (ABC) Model
Welthungerhilfe (WHH) [7] emerged from the Freedom From Hunger Campaign of the United Nations Food and Agricultural Organization (FAO) in 1962. WHH is one of the largest non-religious, private development NGOs in Germany, with 30 country offices in Africa and Asia. Supported development projects in its partner countries are focused on food security, which includes all the activities along the value chain from the field to the consumer, in order to improve quantity and quality of available food. WHH has been working in Zimbabwe since 1980 with an annual turnover of €12.7 Mio, reaching 786,000 people (2018).
WHH-Zimbabwe takes a market-oriented approach to agricultural development, recognising that successful agricultural production is hinged on viable sustainable markets for the end products. However, WHH’s experience of linking farmers and farmer groups directly to commercial buyers has shown that breakdowns in these relationships can easily occur, requiring third party intervention to resume effective communications and relationships between the private sector and the farmers. In general, agribusiness companies and financial institutions find dealing with individual smallholder farmers too risky, time consuming and expensive, whilst private companies often neglect minimum environmental and social standards. In some instances, farmers deal with unscrupulous ‘middle men’ who prey on farmers’ desperation when they need to sell crops and might be willing to accept lower than market prices (and even lower than cost price) just to raise cash to meet immediate needs. In other cases, farmers that engage in contract farming agreements will side-market to external companies for a slightly higher price, but in doing so jeopardise the future of any further private sector investment. At the same time efforts to formalize farmer organizations as cooperative and community-based enterprises are often not sustainable once external project funding has ended.
With funding from the European Union, WHH, in partnership with a business development organisation, Empretec, [8] established the Agricultural Business Centre (ABC) as a means of formalising and commercialising the market intermediary role that is usually played by NGOs. The ABC is constituted as a private limited company, to be a commercially viable entity that provides various intermediary services to local farmers, such as identifying and brokering viable market opportunities, bulking, processing, transporting and value addition for output markets and procuring and retailing inputs and services for high quality market-oriented production. Located in Gokwe South, the second largest district in Zimbabwe, the ABC concept and structure emerged from WHH’s ten years of engagement with smallholder farmers in the district.
The ABC is a ‘social’ enterprise, meaning that it takes a private sector, cost-efficient, profit-making approach to delivering services that achieve social goals. In this instance, the ABC as a private sector entity is an innovative solution for the long-term sustainability of in-demand services that benefit family farmers. As a social entity the ABC looks beyond the profit motive to ensure that the opportunities created by the business are inclusive and sustainable. At the same time, its private sector service delivery is focussed on identifying and satisfying market needs, ensuring cost-effectiveness and reliability in order to maintain commercial contracts. Unlike ‘projects’, the ABC’s services are not time-bound and are forward-looking by nature, anticipating and adapting to changing circumstances. The concept of the ABC as a private sector entity replacing the intermediary role of NGOs for facilitating value chain output and input markets is a disruptive innovation in the sphere of rural development. It is premised on the notion that continued support is both necessary and desirable for maintaining functional relationships between commercial agro-businesses and smallholder farmers.
The ABC is constituted in a manner that adheres to the FAO’s ten Principles for Responsible Investment in Agriculture and Food Systems by ensuring that investments made prioritise, strengthen and secure the needs and priorities of smallholders. [9] These principles reinforce the ABC’s commitment, as an inclusive social enterprise, to balancing sustainable economic development with maintaining a focus on food security.
Figure 2 illustrates the various points along the value chain at which the ABC plays a critical role in reducing food loss, supporting farmers for improved efficiency at production and post-harvest stages, and facilitating efficient storage and delivery to predetermined markets. The next section explains in more detail the specific roles and services provided by the ABC as a market intermediary connecting smallholder farmers to markets.
3. The ABC Market Intermediary Role
The ABC acts as a strategic market intermediary, receiving high quality produce from the local farmers. The ABC is able to pay farmers a price for their produce that in most instances is above the previous market norm. The ABC invests in appropriate technologies for on-site storage, processing and packaging, thus adding value to achieve a higher market value for the produce. As an intermediary, the ABC acts as both buyer for output markets and as a service provider for farmers. During its first year of operation the ABC in Gokwe has developed and tested four business models:
Model 1: Staple Crop (Maize): In its first year of operation (2018) the ABC helped smallholder maize producers to sell and deliver their maize to the Grain Marketing Board (GMB), the parastatal entity responsible for grain procurement and distribution. Based on market analysis the ABC identified that GMB offered the best price for that season, and provided an aggregating and delivery service for farmers.
The ABC also provided capacity building to local farmers to ensure that they were aware of the GMB’s minimum requirements (quality, moisture content and others). This was done as a joint effort with GMB staff, including procurement of grain moisture test meters so that farmer groups were able to check the moisture levels ahead of delivery to GMB (or other markets in the future), reducing losses when grain that does not meet the standards is rejected.
Maize was bought from the farmers at a premium price of US$4 per 20l bucket, which translates into US$240 per ton, compared to US$ 180-200 that the traditional middlemen were paying at that time, hence the farmers received 20% more income from selling their product through the ABC. The GMB price was fixed at US$390 per ton. In total, 218 tons of maize was procured for a value of US$52,423. Payments received from GMB amounted to US$86,359. Taking into account costs of delivery (US$3,653 for labour and transport) the ABC was able to realize a surplus of US$30,283.
Model 2: Contract Farming (horticulture): In this model, the ABC secures a private sector buyer and then sub-contracts local farmers for production. Farmers are able to access more lucrative markets than they could as individuals, whilst the ABC is able to realize a surplus, after paying farmers and meeting costs, from bulking and delivering high quality produce. The ABC as contractor provides inputs, technical support and guidance to farmers to ensure high quality production. However, unlike traditional commercial farming arrangements, the ABC also acts in the interest of the farmers when negotiating with the private sector buyer, and ensures that it is able to buy from the farmers at the best possible price. For example, for a Nyimo bean (a pulse, also known as Bambara nut) contract the ABC offers the following services to farmers to ensure high quality production:
- Procurement of seed for selected varieties that will have to be grown by the farmers. Each farmer receives the seed for free up front, but the amount received is then deducted from the produce at point of sale. For example, if a farmer receives 5kg of seed, 5kg will be deducted from the harvest delivered to the ABC and the farmer will get paid for the balance at prevailing market prices. This reduces losses associated with use of sub-standard inputs.
- Farmer assessments by ABC trainers with the help of Ministry of Agriculture extension officers and selected lead farmers to establish if the farmers have the land and required labour, as well as successful production history. Thus, only farmers with demonstrated capacity were contracted for Nyimo production, reducing losses from speculative planting from farmers who do not have capacity
- Farmer technical training for high quality Nyimo production. This involved local extension services, business and group dynamics training. Extensive monitoring visits supported the trainings, ensuring optimal crop management throughout the growing cycle, including timely and appropriate pest and disease management, reducing losses during the production stage.
- Bulking and grading of the produce and a guaranteed market, minimising losses of speculative production result in market surplus, and of inefficient transporting of small loads.
In this why smallholder farmers are linked to commercial buyers, with ongoing technical support from the ABC, which also then manages the relationships with the buyers ensuring on-time delivery of the required quality and quantities.
Model 3: Agri-equipment and services: The ABC provides a number of technical services to local farmers. For example, the ABC developed a Shelling Services Business as part of the value chain enhancing services to help address losses – as well as labour, time and cost challenges – faced by sorghum and maize farmers. The maize/sorghum sheller has a cost-saving advantage of up to 30% when compared with the traditional methods used by farmers. Farmers can also access and share agricultural equipment using AgriShare, WHH’s mobile phone-enabled platform that links farmers without assets with commercial or private hiring services for production, processing and transporting. [10]
The ABC has also invested in constructing solar dryers, which are used for drying vegetables and mangoes, both of which generate added-value for on-selling (attracting up to a 500% premium on fresh fruit for mangos) as well as preserving fresh produce which may otherwise go to waste.
Model 4: Agri-inputs supply (last mile distribution): The ABC secures low prices for bulk purchase of inputs and passes this saving on to member farmers. Currently, this service is being offered as an incentive to local farmers, who are able to purchase inputs from the ABC at cost price. This allows local farmers to secure high-quality inputs from a local supplier, reducing costs and/or time for farmers to access inputs. In 2019 the ABC also piloted a model for taking inputs directly to farmers, reducing the need to travel to the district capital business center, using a ‘mobile shop’ model, which applied a modest 10% margin to cover the additional costs, but still delivering at an improved price for farmers who benefit from the ABC’s economies of scale for bulk purchasing and reduced transport costs for reaching input suppliers. Further economies are achieved by farmers’ aggregating their input needs through existing informal and formal financing groups such as Rotating Saving and Credit Associations (ROSCAs) or Savings and Credit Cooperatives (SACCOs). This helps to ensure that farmers have access to high quality inputs at the correct time, reducing losses from poor quality seeds and late planting.
4. Role of the ABC in reducing food loss
At the farmer level, the ABC supports improved production, focusing on efficiency and cost effectiveness. The ABC is motivated to ensure that the farmer herself or himself will maximise their income potential, as well as applying an overarching lens of environmental sustainability and climate adaptability. Thus, agricultural extension support is focused on ensuring that farmers can gain the maximum potential from the most efficient use of inputs, in a manner that is socially, environmentally and financially sustainable, as well as commercially viable. The ABC works with government agricultural extension agents to provide technical support and guidance for the diverse range of crops grown by local farmers, which includes direct technical support to contracted farmers (as per Model 2 above) to ensure that minimum standards for the market are achieved. This includes a specific focus on pest and disease management, harvest and post-harvest handling, all of which contribute to minimising food loss and maximising the efficient utilisation of resources. In line with the social mandate of the ABC, integrated pest management is prioritized over the use of agrochemicals, and efficient water use is promoted for irrigation. Thus, capacitated farmers are able to increase their final production without increasing their landholding or use of resources. In addition to the specific technical support for contracted crops, farmers are also able to access production guides and market information using WHH’s Kurima Mari mobile phone app. [11]
Importantly, as a social enterprise that works closely with the community, the ABC also promotes ‘Family Farming as a Business’ (FFAB) through the partnership with Empretec. Farmers working with the ABC are encouraged and supported to view their farming as a business activity. This enables the farmer to quantify the cost of crop losses and appreciate the gains achieved through improved production and harvesting techniques, as well as minimising the use of expensive inputs as much as possible. Similarly, the ABC promotes planned planting, ensuring that planting windows are designed to maximise access to markets, reducing the risk of a glut harvest with no market, resulting in loss of fresh produce. This combined approach allows farmers to see the impact of improved production and motivates farmers to reduce loss at all stages from planting through to harvest.
The ABC plays a vital role in securing markets for its member farmers. The ABC manages the market relationships and negotiations and ensures that production quality, quantity and timing are all assured to meet the needs of the market. Efficient and timely transportation and delivery ensures that produce reaches the market in optimal condition, further minimizing losses. Currently the ABC is supplying centralized markets in Harare, but in future will proactively pursue packaging, branding and marketing for local markets, reducing the time and distance to reach markets and ensuring that produce reaches end users at peak freshness, reducing food losses experienced at the consumer level. By investing in packaging and branding, the ABC is motivated to ensure that its brand is associated with high quality and lasting freshness of its produce.
Impact on food loss at different stages of the value chain
Before and during production:
- Providing access to proper inputs at the correct time (reduced losses associated with sub-standard inputs and wrong planting dates)
- Improved technical and extension support to farmers, including proper use of pesticides and integrated pest management (reduced losses from poor crop management, pests and diseases, and post-harvest handling; reduced losses from rejection based on the quality requirements of the market)
- Contract farming offering a calculable market (reduced losses from speculative planting resulting in production surplus to market demand)
Post-harvest handling and storage:
- Improved focus on food safety (reducing losses due to pesticide and fungal contamination)
- Improved storage and handling, including promoting higher quality storage bags for on-farm storage (reducing losses due to molding, rotting and rodents)
Market delivery and processing:
- Improved local markets and bulking facilities (reduced loss from extensive transportation to distant buyers and processors)
- Improved local processing and preservation facilities (reducing losses associated with inefficient manual shelling, or from glut harvests or market surpluses)
5. Sustainability
The hypothesis of the ABC model is that institutional sustainability will be achieved through meeting a clear gap in the market for provision of value chain intermediary services between smallholders and the private sector. By establishing a private sector entity, the ABC will be flexible, opportunistic and dynamic in responding to changing market conditions and arising opportunities. As a founding board member WHH takes the lead in ensuring that a commitment to promoting sustainable agricultural production is entrenched within the ABC’s mission as well as the social commitment to improve the living conditions of smallholder farmers, which will form an important component of the ABC’s business plan. Meanwhile in commercial platforms the ABC will promote and exploit the commitment to sustainable production as a unique selling point for the business.
The founding members of the ABC comprise the two NGO shareholders, WHH and Empretec. However, the growth vision for the ABC is to bring on board both private sector actors and farmers. Private sector shareholders and investors will ensure that the ABC remains commercially focused and viable, whilst the development agencies ensure that the ABC remains socially and environmentally accountable.
6. Challenges to the Model
Zimbabwe currently ranks 140 out of 190 countries in the Ease of Doing Business Index, [12] and the Zimbabwean operating environment presents a myriad of challenges to establishing and maintaining a viable business enterprise. For example, during its first year of operation, it took five months for the ABC to secure all of the documentation needed to open a commercial bank account. Business registration processes are all highly centralized, necessitating trips to the capital to complete each stage. Even once a bank account is secured, hyperinflation and lack of cash liquidity in the economy present ongoing challenges to all businesses. A further challenge is the unstable regulatory environment around agriculture. For example, in 2018 maize bulking was a win-win activity for farmers and the ABC; in 2019 the government reinstated its monopoly as sole purchaser of maize in Zimbabwe (at prices that are not commercially viable), thus depriving both farmers and the ABC of a profitable income stream.
7. Future Plans and Potential
The ABC model is designed to be self-sustaining through its commercial activities, hence it will also continue to seek out and access public start-up capital as well as private investors. As such, in the coming year the ABC intends to expand its services and further diversify the supported value chains. Planned services include an increased focus on localized value addition, including drying, packing and/or branding for local markets (reducing losses from transportation and storage). Crop diversification will be promoted, targeting e.g. sunflower production, which is a more drought-tolerant dry-land crop than maize. The ABC will buy the sunflower seed and invest in an oil press for oil processing. Whilst some sunflower is already produced in the district, currently no pressing capacity exists locally. Thus, local processing can help to reduce losses associated with bulk transporting, whilst the ABC will also produce seed cake for stock feed from the usually discarded residues for on-selling to local livestock farmers as an additional income stream. The ABC will also be expanding contracted chili production in response to identified market opportunities for supplying chili processors (including potential for export). The ABC will also research viable opportunities for further expanding its service provision and market intermediary role for relevant livestock markets. For farmers the ABC intends to pursue options for linking ABC customer cards to a local bank to improve the efficiency of payments, and will also look at ways for increasing the use of targeted ICT solutions for more effective and efficient extension delivery.
Early activities of the ABC have shown that it can provide in-demand services for farmers, paying a fair price for fresh produce and then adding-value for on-selling and achieving a surplus after covering costs. In the longer term the surpluses can be reinvested into additional services and equipment to grow the portfolio offered by the ABC, ultimately moving it towards financial self-reliance.
End notes
[1] FAO in Zimbabwe: Zimbabwe at a Glance
[2] Income security for smallholder farmers in Zimbabwe, FAO.
[3] World Bank, Zimbabwe Country Profile, Accessed on 22 January 2020.
[4] World bank in Zimbabwe: Overview. Accessed on 22 January 2020; Page last updated October 13, 2019.
[5] UN OCHA Revised Flash Appeal 2019
[6] African Postharvest Losses Information System (APHLIS)
[7] Welthungerhilfe
[8] Empretec Zimbabwe
[9] Principles for Responsible Investment in Agriculture and Food Systems, Committee on World Food Security.
[10] Agrishare
[11] https://play.google.com/store/apps/details?id=zw.co.kurimamari&hl=en
[12] The World Bank: Doing Business