East Africa Food Trade project

Challenges

Smallholders remain isolated from markets; operating individually, they are unable to attract volumes that make economic sense and therefore incur the highest trading costs when they produce a surplus. Lack of storage facilities and equipment, poor handling practices contribute to high levels of post-harvest losses and low quality produce further reducing profitability and ability to meet standards required for formal trade. This is exacerbated by a challenging regulatory environment and market failures; political restrictions on trade especially affect staple crops, and the highly seasonal nature of staple production leads to major price fluctuations.

As a result, when big surpluses are produced, farmers are restricted to selling quickly and on local markets attracting lower prices, undermining incentives for future production. This can create a vicious cycle in which low production generates food security concerns, this discouraging relaxation of trade restrictions, and therefore holding down future production. In years of poor harvests, shortages cause prices to soar and this is exacerbated by barriers to cross border trade. Despite the fact that smallholders produce around 80-90% of maize, rice and other staples in East Africa, many are net buyers of staples, with less than a third selling their produce.

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Results

Overall Rikolto supported 31,182 farmers to trade nearly 35,000 MT of produce over the period of the project. This equates to roughly USD 17m of trade, from which farmers on average achieved 10% better prices than the farm gate price. These results were reviewed by an independent evaluation which confirmed that the results had been 100% achieved, taking into account the challenges.

Significant progress which enabled this achievement were as follows:

• In Tanzania improved storage capacities of the Village Stores enabled nearly 10,000 farmers to store grains for 4 to 6 weeks longer on average. This was critical in 2017 where a bumper harvest coincided with severe export restrictions leading to traders being able to dictate lower prices. The ability to store their crops improved the farmers bargaining position with the buyers. The impact was particularly felt in Simanjiro where for the very first-time 2090 smallholder farmers aggregated grain which led to sales of 5027 MT of maize and beans from the renovated and equipped Village Stores.
• Piloting of a quality management on rice is supporting farmers in Meru to learn how to produce rice that meets the East Africa Standards for rice while reducing the costs of production. When fully operational and adopted by farmers organizations, the QMS will have the impact of increasing income for farmers from improved quality, reduced losses at milling and from input costs savings.

There were also challenges and the following lessons were learnt:

• One size fits all approach does not apply in aggregation of grain surplus from smallholders. Facilitating for a win- win- win between farmers- traders - end buyers within each of the aggregation arrangements proves to be a more realistic approach to development of structured grain trading systems.
• Aggregation and storage of grain comes with a significant level of market and security risks. Farmers mitigate these risks by aggregating and storing only a portion of their surplus and selling the rest though different market channels.
• We have learned that low cost investments such as upgrading the Village Stores can have significant benefits in traded volumes and better prices for farmers. Simanjiro and Meru farmers responded quite positively to aggregation under Food Trade partly because of the minor renovations and upgrading of Village Stores in the two districts
• Including the local traders in structured systems could hold the key to success of any future grain trading system. Local traders have better resources and more credible profiles in terms of raising the working capital required to trade under electronic systems. They are also better informed about markets. A more inclusive trading system should therefore aim at a win- win- win between farmers, traders and end buyers.
• The roles of ICT supported trading system as a way of reducing the power of middlemen still needs to be explored after the poor performance of G-SOKO.
• ICT based market information systems are important enablers of structured trade of grains and enhance inclusion of women who ordinarily have less access and mobility. Dependency of these system on donor funds however makes their benefits to farmers short term and unsustainable. Pursuing commercially sustainable models from the beginning and only using the donor money to bring down the costs of set up. Bundling up information services, which is reality a public good, with other value-added services such inputs, insurance, credit and extension makes the system viable.
• Grain business environment has been characterised by frequent weather, political and market shocks. Better accuracy in predicting these shocks and mitigating their effects by market actors and governments is key to development of structured grain trading systems. Hence the need to invest more resources in intelligence
• Aggregation centres are gradually becoming service hubs attracting different service providers. Services such as seed, logistics, inputs and packaging.

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