Urbanization and rising middle-class incomes across Africa mean that half of Africa’s food now sells in cities – and, increasingly, in supermarkets. Significant local and foreign investment in food manufacturing and retailing, combined with the middle class demand for quality food products and one-stop-shopping, places Africa on the cusp of a supermarket revolution. Indeed, across Southern African, urban food sales are increasingly dominated by supermarkets, a trend likely to continue across the continent.
The rise of supermarkets assures smallholder farmers (SHFs) of a new set of buyers for their produce. Additionally, a survey of SHFs in Kenya found that those who supplied produce to the supermarkets increased farm productivity by 45%, and reduced poverty levels by 50%. This linkage to retail outlets has consequently increased the farmers’ ability and willingness to invest in technologies that enhance productivity.
Many smallholder farmers still find it difficult to supply to supermarket chains.
Chains buy in volume and have specific quality standards that farmers need to meet. Additionally, consumer health regulations demand proof that quality and safety parameters are met for produce handling (e.g. origin, pesticides use). Many smallholders are not well-equipped to meet these requirements, while larger commercial farms can. One consequence is that some exporters are now changing their business focus to instead supply local and regional supermarkets.
The 2017 Africa Green Revolution Forum, held early in September in Cote d’Ivoire cast a spotlight on this African Supermarket Revolution, and the challenges and opportunities of integrating SHFs. We heard from Food Lovers Market Ltd, Eden Tree Ltd, Root Capital and AGRA on how farmers are making progress. Some key principles would better equip smallholders to seize this opportunity, including:
Aggregators need to bridge the gap between smallholder farmers and supermarkets. A good example is Eden Tree, a leading producer and distributor of high-end fresh vegetables, fruits and herbs in Ghana. “Supermarkets just want to deal with one face, not multiple farmers,” says Catherine Krobo-Edusei, Eden Tree Founder. Her company has managed to source produce from small-holder farmers for over 15 supermarkets in Ghana. Eden Tree also manages the farmers and trains them to meet quality and handling standards. Others can follow suit across Africa, to simplify the process.
The need for Small and Medium Enterprise (SME) financial access cannot be understated. Many SMEs do not have access to affordable financing as they do not meet the required thresholds. For example, after operating in Ghana for over 18 years, it is only now that Eden Tree has found an investor to support its business. Alternative financiers such as Root Capital exist in this space referred to as the “missing middle.” In addition to providing debt finance, they work with businesses to strengthen their fundamentals to enable them to take on capital. According to Root Capital’s recent assessment of over 600 SMEs, only five met the eligibility criteria for funding. SMEs, therefore, need to focus on developing management capacity as a key driver of risk reduction. Businesses must work to improve governance, leadership, accounting and middle management, to make them more impressive (and bankable) to lenders and their investors.
Governments can use incentives to encourage retailers to buy produce from smallholder farmers. Namibia now has favorable policies developed in collaboration with major stakeholders, including farmers, retailers, and government. The government also set targets to grow its agriculture sector. The government started off buying 5% of agricultural produce locally, which has now grown to 45% government purchasing, depending on the availability of the food crop in the country.
Capacity building remains critical for both farmers and extension agents. This requires collaboration among partners. The Food Lovers Market opened its doors to extension service providers so they could learn more about the quality required by supermarkets, so they could teach the farmers. AGRA most recently launched its revised strategy and will continue to build small-holder management capacity in its priority countries. Their focus is on holistic support to cover multiple stages, including farming practices, farm management, post-harvest loss reduction, market development, and promoting the concept of farming as a business.
Within an international trade regime marked by ever more stringent quality and safety standards, sophisticated value chains, and daunting contracts, the challenge of linking smallholders to markets is no simple task. Yet with the increased importance of agricultural trade to food security, it is also not a task that we can afford to ignore.
Consider that by 2030, 47% of Africans will live in cities. Notably, for every 1% increase in urbanization, there is a 5% increase in food sales. If we want to succeed in securing supermarkets contracts for the smallholder farmers, perhaps we should explore replicating models such as Eden Tree’s. More so, consider investing in the opportunities we have highlighted here, so smallholder farmers can take their place in this revolution.