Commercial farming in Africa

Contract farming brings benefits for some

Contract farming has a long history in Africa, dating back to colonial times. As with plantations, these arrangements were largely for the major cash crops, including cocoa, cotton, tobacco and sugarcane.

Contract farmers are smallholders who enter into contracts with companies that buy and process their crops. Sometimes members of outgrowers’ households might also get jobs on larger “nucleus” estates run by the companies. Whether or not they benefit, or get mired in debt and dependence, depends entirely on the terms of these contracts. Our study looked at contract farming in Ghana’s tropical fruit export sector, in French bean production in Kenya and in sugarcane farming in Zambia.

Contract farming has been hailed by some as the “win-win” solution, enabling commercial investment for global markets without dispossessing local farmers. Farmers farm on their own land, using their own family labour, while also accessing commercial value chains – rather than being displaced by large farms. But we found that this is not necessarily the case. Crucially, there are different kinds of arrangements that determine who benefits.

In Kenya, contract farmers are poorer than most farmers around them. For them, farming on contract provides a crucial livelihood, especially for poor women, who cultivate French beans for the European market and combine this with seasonal jobs on big farms.

In one Zambian block scheme all outgrowers gave up their land to Illovo, a South African company that grows sugarcane. The company pays them dividends. Here, the landowners, typically the old patriarchs, benefit from cash incomes. Young people lose out: they neither inherit the land nor control the cash incomes.

Contract farming clearly provides one effective avenue for smallholders to commercialise. It means, though, that smallholders take on both the risks and the benefits of connecting to commercial value chains.

Medium-scale farming: a promising option

Between the large plantations and the small contract farmers is another model: medium-scale commercial farms owned by individuals or small companies. We studied areas where medium-scale farms were dominating: mango farmers in Ghana, coffee farmers in Kenya and grains farmers in Zambia. While this kind of medium-scale farming also has colonial origins, the past two decades have seen massive growth in new “middle farmers”. Many of them are male, wealthy, middle-aged or retired, often from professional positions.

The medium -scale commercial farming model has a lot to offer. We found that they create more jobs and stimulate rural economies more than either big plantations or smallholder contract farmers. Yet cumulatively, such farms may threaten to dispossess smallholders, just as the big colonial and more recent plantations and estates have done.

The push behind the explosion of the “middle farmers” in the countries we studied has been investment by the educated and (relatively) wealthy. In Ghana in particular, we found, their expansion has displaced smallholders. Cumulatively, even modest-sized farms have led to substantial dispossession and reduced access to land.

Their informal employment patterns mean poor working conditions and few permanent jobs. But, unlike the plantations, these farms are well connected with the local economy. Building on social networks, these “middle farmers” often buy inputs and services from local businesses. At least some of their produce is sold into local markets.

Winners and losers

While policy choices are of course political, they can and should be informed by research about the implications of these different pathways of agricultural commercialisation. What is clear from our research is that different kinds of commercial farming will have different effects on the economy. It’s not just about efficiency. Ultimately, it’s about who wins and who loses.

****

Ruth Hall is Professor, Institute for Poverty, Land and Agrarian Studies, University of the Western Cape,, Dzodzi Tsikata is Associate Professor, University of Ghana, and Ian Scoones is Professorial Fellow, Institute of Development Studies, University of Sussex.