The Hidden Engine of Africa’s Rural Economic Growth

Introduction

The economies of African countries are predominantly agrarian, with the various economic sectors directly or indirectly dependent on the performance of the agricultural sector.

Malawi has an agro-based economy with the agriculture sector accounting for over 35.5% of GDP, employing about 84.5% of labor force and accounting for 82.5% of foreign exchange earnings. The manufacturing sector accounts for 11% of GDP and comprises mainly agro-processing activities in the tobacco, tea and sugar industries.

The Agricultural sector in Rwanda contributes 35 to 40% of GDP, 90% of employment (especially women), 70% of export revenues and 90% of national food needs.  In Kenya, the agricultural sector contributes about 24% of GDP and about 19 % of the formal wage employment. Through linkages with agro-based sectors and associated industries, the sector also indirectly contributes a further 27% to the country’s GDP. Kenya’s manufacturing sector is largely agricultural and contributes about 10.0% of GDP.

It is clear that agriculture is the platform on which other sectors base their roots and foundations.  This makes a strong case for an urgent economic turn-around strategy that recognises and ranks the agricultural sector as the top sector in various countries in Africa. As the private sector and Government scramble for every potential market chain, it is critical that the agricultural sector be monitored closely to dictate the growth performance indicators.

In what may appear to be a paradox of sorts, the demand for the domestic agri-market is growing exponentially against rudimentary and weak agricultural systems that are gradually collapsing under the increased burden of weak market chains, climate change, increased input prices and weak support systems.  At the same time, the domestic market for agricultural produce is actually sky rocketing.

However, these activities are happening right below the economic radar without detection by African economists, development agents, policy makers and the private sector resulting in minimized prioritisation of the interventions oriented towards domestic systems.

Available evidence also reveals that urbanization, increased purchasing power and rapid population growth threatens the food economy with pricing instability and food deficits if agri-production and marketing systems are not strengthened to swiftly respond to a growing domestic demand.

The socio-economic face of the agricultural sector in Africa has however received a turn-around through the adoption of high-level marketing initiatives implemented by Farm Concern International (FCI). An Africa-wide Market Development Agency, Farm Concern International is developing pro-poor marketing models, pro-poor business models and strategic alliances to enhance economic growth among smallholder poor communities in various countries in sub-Saharan Africa.

The Case for Domestic Markets

Although export markets have been dubbed the drivers of Africa’s economic growth, recent evidence on domestic and regional markets reveals enormous market value in Africa.  The expansion of urban cities and rural towns across Africa is a recent market dynamic that creates a fast growing demand for horticultural crops in the domestic markets.

The foundations of domestic markets are the various consumer segments of both urban and rural populations. However, in the case of agricultural production, the rural populace form an insignificant portion of the market whereas the urban population drives the demand for agricultural produce for consumption by households, restaurants, institutions and others.

With the support of the Bill and Melinda Gates Foundation, a new regional project, the Domestic Horticulture Markets (DoHoMa), is set to drive domestic markets into mainstream market chains of modern African economies.

The DoHoMa Regional Project targets 70,000 smallholder farmers in Malawi, Rwanda, Tanzania and Kenya and is designed for enhanced market viability and domestic market mainstreaming with a focus on;

• Traditional African Vegetables (TAVs)
• Bulb Onions
• Irish Potatoes

DoHoMa project is a scale-up based on pilot cases, FCI has generated evidence demonstrating the potential of smallholder programs to harness and evolve subsistence farming into viable business units targeting domestic horticultural markets. Based on the additional incomes realized by smallholders amounting to over USD 1,500 the DoHoMa projections are based on conservative additional incomes of USD 700 per year (approximately 45% of incomes at pilot phase) translating into USD 49 million in annual additional incomes for 70,000 farmers by 2014.

The attraction of the Domestic Horticulture Market segment is in the vast opportunities to be found for smallholders in the emerging markets coupled with minimal market entry barriers.  The selected crops are primarily based on their relatively high market share potential, growing demand, high returns to smallholder investments and relatively easy agronomic husbandry requirements for the crops. DoHoMa predominantly targets domestic and regional markets.


Smallholder-based production systems have not been competitive in meeting market requirements on quality assurance, quantities of similar products and varieties, consistency and co-ordinated supply chain management. However, FCI have managed to achieve the graduation of smallholder farmers into business partners through the Commercial Village Model approach, which involves the evolution of typical African villages into viable business units.  The Commercial Village is a hybrid of farmer associations, co-operatives, farmer groups and savings and credit co-operatives (SACCOs).

Although farmer organisations have been in existence in Africa for several decades, they have failed to undertake effective and viable market participation due to the absence of best business practices. An in-depth assessment on the existing farmer organisation systems and lessons learnt by farmers, private sector players, development agents and Government agents has largely informed the Commercial Villages Model.

How it works

The DoHoMa Project will be implemented utilising FCI’s proven models of Commercial Villages and Market Hubs aimed at building efficiency along farm gate –to-market systems while ensuring that market partners are able to respond to the market led initiatives at farm level. Key clients include both smallholders and informal wholesale traders in all the target countries.

In harnessing various domestic marketing systems and a special emphasis on traditional marketing systems, the DoHoMa Project offers the largest trade platform for agricultural produce.


Securing livelihoods and food security
Traditional African Vegetables (TAVs), Red bulb onions and Irish potatoes

TAVs
Farm Concern International has facilitated TAVs commercialisation for 21,000 smallholder farmers in Kenya.  A household survey revealed that over the last five years there has been an increase in consumption in Kenya and Tanzania from 64% to 88% with a high consumption rate registered in the local markets in rural towns as well as urban cities.

Traditional African Vegetables are an affordable source of micro-nutrients and are gaining an increased role along trading systems and in household diets. Listed below are the TAVs targeted in the DoHoMa project in Tanzania, Kenya, Rwanda and Malawi:

1.    African Nightshade(Solanum scabrum)
2.    Amaranth(Amaranthus spp)
3.    Spider plant (Cleome gynadra)
4.    Cow peas(Vigna unguiculata)
5.    Jute mallow(Cochorus olitorius)
6.    Ethiopian kales(Brassica carinata )
7.    Crotolaria(Crotolaria brevidens)
8.    African Eggplant(Solanum macrocarpon, S .aethiopicum, etc)
9.    Okra(Abelmoschus caillei)
10.    Pumpkin leaves(Cucurbita maxima)
11.    Fig leafed gourd leaves(Cucurbita ficitolia)
12.    Cassava leaves(Manihot esculenta)
13.    Hair lettuce(launea cornuta and Sonchus spp)
14.    Malabar spinach(Basella alba)
15.    Black jack(Biden pilosa)
16.    Wondering Jew (Commelina benghalensis)
17.    Sweet potato leaves(Ipomea batatas)
18.    Lagos spinach (Celosia argentea)
19.    Local parsley(Petroselinum sativu)
20.    Galinsoga (Galinsoga parviflora)
21.    Moringa (Moringa oleifera)
22.    Sweet bitter leaves (Vernonia hymenolepsis)
23.    Roselle (Hibiscus sabdariffa)

Red Bulb Onions

East and central African countries use significantly more red bulb onions. However, the value chain still records high instability and unreliability although prices recorded in 2009 were almost 50% higher than prices for 2008 due to weak market chains.

The Kenya and Tanzania seasons are complementary to one another, with Kenya planting as Tanzania harvests which presents a critical complementary opportunity for regional trade.  Kenya’s major cities (Nairobi, Mombasa and Kisumu) are the leading destination for red onions both from northern Tanzania and Kenya.  In Malawi, onion is imported from Mozambique and Tanzania even though the potential for production in Malawi exists.

Irish Potatoes
Potato is a major crop in the region after cereals.  Introduced to Africa at the turn of the 20th century, the potato sub-sect has greatly expanded among smallholder farmers with production rising from 2 million tons in 1960 to 16.7 million tons in 2007 (FAOSTAT 2008).

Although the DoHoMa target countries are among the top 10 producers of potatoes, they also record the highest incidences of poverty.  According to FAOSTAT 2008, Malawi is ranked 2nd, Rwanda 6th and Kenya 8th.

By facilitating sustainable value chain partnerships and market linkages between buyers and commercial villages, the DoHoMa project will contribute to the improvement of rural livelihoods in Malawi, Rwanda and Kenya.