Me and  M.D. Press

Research Orientation

A five-year project funded by USAID is called SANREM (Sustainable Agriculture and Natural Resource Management); the east African component, one of five worldwide. The focus of this project within which we conducted our marketing assessment is Conservation Agriculture (CA), an agricultural production system that uses the application of three principles, minimal soil disturbance, permanent soil cover, and crop rotations, to improve soil fertility and prevent soil erosion.. In addition the project aims to improve and conserve the soil of very poor smallholder farmers, reducing their workload on the farm while increasing their yield over time through soil improvement.

Introduction

Scholars of public policy and marketing, macromarketers and even some scholars of international marketing have argued for the importance of marketing as a requisite element of grassroots development in underdeveloped countries including subSaharan Africa (Arnould 2001; Arnould and Mohr 2007; Joy and Ross 1989). Layton (2009) has argued strongly for the relationship between marketing, economic development and quality of life, a relationship shown in some empirical research (Oneto and Arnould 2012).  There is mixed evidence however, and some hotly contest the ability of alternative marketing channels to deliver either development or improved quality of life (Dolan 2008; Lyon 2006). There is also limited evidence that colleagues in agricultural science have assimilated the importance of marketing for the success of agricultural development projects, since in our experience input and output marketing appears mostly as an afterthought in agricultural development. This thus reinforces the urgency of the call others have made for more research involving marketers in development contexts (Schulz, Rahtz and Speece 2004).  In this report, we highlight some findings from a multidisciplinary agricultural research project below, and conclude with some implications for outreach.

Selected Emergent Findings

We turn first to a policy issue that was not among those that guided our work but that emerged during our field studies. There are issues with the current state of NGO funding in Kenya and Uganda that threaten the success of projects such as the SANREM project and other similar projects in support of more sustainable agriculture sector. This is a pity since we frequently collected data testifying to participant enthusiasm and support not only for the SANREM project but for other now terminated initiatives in the study zone. The current funding structure is such that NGOs are constantly searching for donor money from varied sources, but there often exists a mismatch between changing donor goals and country needs or slippage in the timing of projects and participant needs. These are expressed in a few different ways. First, projects that donors sponsor often do not take into account a realistic assessment of the challenges presented by the state of basic infrastructure of Kenya and Uganda. Second, a USD$2.5mil. (the size of the SANREM grant), or even USD$10mil. spend on certain projects that in themselves are often excellent, helpful and needed, is terminated after only a few years and then no more support for these programs is available. This reflects unrealistic expectations for enterprise success and institutional self-sufficiency. Thus, we learned of a grant program that effectively supported micro-loans to farmers so they could purchase inputs at the beginning of their planting season. It ended abruptly when the grant ran out leaving farmers and input suppliers rather high and dry. A few years of support is not enough time to build stability into fragile local marketing systems so that local organizations are able to maintain such lending systems. While we believe that more effective local systems of input supply and agricultural credit could be developed, it will take more oversight, aid and capacity building than can be administered in the present 3 or 5 year grant cycles (Arnould 1989).

Second is an issue related to supposition 5 reported above (actually discussed in a full paper elsewhere). We were struck by the pervasive self-interest and lack of trust between and among market actors. Significant market actors in the study zone included farmer groups, family members of farmer groups, local middlemen, NGO staff, input dealers, mobile money providers, local political authorities, and millers. As Singh, et al. (2005, 41) develop

low trust–low value market relationships that neither foster and sustain trust nor deliver value are eventually doomed. However, as dynamic systems, trust and value contributions may rarely be in perfect balance.

Our research finds that market actors struggle to develop the high trust-high market value relationships that Singh, et al. (2005) argue are key to economic growth and wellbeing. Below a certain level of economic activity we have testimony that even family members cannot be trusted to represent the interests of fellow community members.  For example, farmer groups are encouraged to start collective savings programs to assist with the micro-loans that are so hard to get, and are also encouraged to do collective input purchasing and marketing. Prior research shows that collective action can give farmers an advantage relative to bulking agents in the marketplace. However, trust and recourse for instances of self-interested behavior are relatively absent from this system and often prevent it from working. For example, a farmer group in Bungoma, Kenya tells a heartbreaking story about the demise of a thriving nascent marketing cooperative they had organized. Fifty-two members in this farmer group had organized themselves to the point where they were not only selling farmer crops as a collective, but they also had grain storage where they sold maize, soy beans, other dry beans, ground nuts, and finger millet. They were able to stock these items when prices were low (during harvest time) and sell them a few months later when the price was high. They sold as far as a market town 180km away, and when they brought their products there they used the return trip to bring products such as fish, which was not available in their local area, back for sale. The member who went with the truck to the market town brought back receipts from sales to show the group he had brought the correct amount of money. It is hard to underestimate the achievement that this business represents among smallholder farmer groups. However, the treasurer and other leaders of the group ran off with 2 million KSh (about USD$23,700), a huge amount of money for poor farmers (GDP, $1,720 per capita in PPP dollars). The farmer group members said they just had to “forgive and forget” because there was no recourse for them to take. But, “things disintegrated…we backslid.” By this they refer to an absence of effective governance above the village level that can adjudicate such problems.

Third is a set of findings also related to ideas advanced under Supposition 5 above. As we know “middlemen” perform many critical tasks in agricultural marketing. Unfortunately in the study zone, their linkage specializations come at a significant cost for farmers and consumers. Unfortunately, most middlemen are relatively small-scale operators themselves and must transfer their product to yet other middlemen in most agricultural marketing channels before product may reach processors or end consumers due to the shoddy state of transport (including both roads and rolling stock), limited storage capacity, restricted market information, and intensive competition (Anonymous 2010).  In addition, middle men can easily prey on small farmers’ economic vulnerability. For example, farmers may wait for middlemen to approach them in the villages, a not uncommon marketing practice, during which time their maize can rot if it is not properly dried. They wait because they fear that if they take the maize to the middlemen in local market towns, the latter will use the leverage of high transport costs to extract deep cuts on purchase prices. Moreover, farmers often are in such dire need for money because of the annual cycle of school fee payments that corresponds with price lows of the harvest season that they again sell to middlemen at a steep discount to annual market price rises.

Fourth, in evaluating the agricultural value chains that we encountered, our experience dovetails with that reported in other recent research. These findings relate to suppositions 3 and 4 outline above. Thus, as Mugisha (2011) perceptively writes:

Key issues in the maize value chain are the huge post- harvest losses at farm level, poor quality maize in the market, very low prices farmers get and a big informal market…. Much value is created at farm /producer level and this means that value chain intervention for upgrading is critical at this point. This can be through ensuring the use of more inputs on the farmer plots that have generally decreased in fertility. Farmers also need to be supported to produce and market in groups so as to increase their bargaining power. There should be a deliberate effort to educate all the actors in the chain to ensure that quality maize is transferred to another chain. Value chain actors along the chain need to be supported with credit facilities at affordable interest rates since, as revealed from literature; they play a crucial role in the chain (Mugisha 2011, xii-xiii).

What Mugisha says of the maize value chain is true of other major food crops such as beans, and oil crops in the study zone. The other value chain actors he refers to should include input dealers and cooperative buyers in particular who face credit constraints and contend with shortages of quality stocking and reliable transport. Middlemen also need support in learning improved crop handling, not merely financial support, particularly of high value perishables.

Fifth, is an emergent problem that has the effect of eroding economic-trust relationships (Singh, et al. 2005) in local markets, but which is related to issues of input supply that we discuss under the heading of supposition 3. We had tended to think of this in terms of material shortages or in terms of inadaptation of inputs to customers’ requirements. While issues of supply and adaptation are indeed market system issues, in some ways more pernicious is the proliferation of counterfeit agricultural inputs. All market actors we interviewed recognize counterfeit inputs as a significant problem. Consumers of inputs try to protect themselves by purchasing only from recognized sources, especially from Kenya Seed, which enjoys a very favorable brand reputation in the research zones. However, rebagging of counterfeit seed in Kenya Seed packaging is beginning to erode trust in the brand in some regions. And all have reported incidents of counterfeit fertilizers (dyed sand), seed (dyed grain to simulate seed treated with antiviral agents), and herbicides, especially from off-brand suppliers. Some Ugandan seed producers have compounded problems by producing seed, marketed as Kenya seed, in agronomic circumstances that do not produce quality seed. Here again systems governance emerges as a significant dimension of concern.

A sixth point is directly related to supposition 4. A well-developed agricultural market landscapes in developed countries are dotted with storage facilities. In the US agricultural bulk storage is handled by a mix of independent and vertically integrated grain elevators and the like. By contrast, the agricultural landscapes in Kenya and Uganda are marked by isolated, large (by local standards) centralized warehouses, often empty and derelict, and a paucity of local storage and processing infrastructure above the farm level. It appears that a systemwide liquidity crisis, coupled with a lack of small scale and low costs moisture monitoring and drying technology, constrains the development of a storage market player. An informant from a significant cooperative organization argued against the establishment of decentralized stocking facilities in favor of rapid evacuation of stocks from rural points to a central warehouse, assuming development of the rural road network, an unlikely occurrence in our view. Another informant spoke of initiatives with the World Food Program (WFP) to establish large warehouse facilities in another part of the study zone. But at the muddy farmgate level or even that of rural bulking markets, what appears to the observer are the paucity of secure drying, grading, and storage facilities, forcing farmers to dry their grain on the road verge, and bulking agents to spill grain all over the roadside as they rebag and load farmers’ maize, barley, beans and rice.

Seventh, and most crucially to the assessment of supposition 3 is the quality of the distribution infrastructure, i.e., roads, stocking and storage points. For example, a 5km (three mile) drive to a study site outside Kitale, Kenya took 20 minutes; the last kilometer on a heavily carved out dirt road easily consumed half of that time. Worse, a 24km (15 mile) drive from Kapchorwa to Kwosir, Uganda, another one of our study sites took one hour and a lot of stamina (especially if seated in the back of an SUV) and courage. During our visit, it had rained heavily during the night (not of course an uncommon occurrence in this high altitude zone) and the dirt roads were muddy with slippery clay film. We hired a local professional driver to drive our 4wd Toyota SUV up the mountain because many experienced Ugandan drivers have failed to make it. Our colleagues in the car jokingly have named certain hills, summits and corners after various colleagues who have gotten stuck on them. The main commercial artery we climbed up to the Kwosir study site would be more aptly described as a rocky, washed out trail with steep cliffs on one side. While our story is anecdotal, the more systemic situation is that farmers who live on this mountain side are virtually cut off from Kapchorwa during the rains. This is a city that has developed greatly in the past few years including a very large new cooperative warehouse that both buys grain and stores grain on credit. It is arduous and expensive for farmers to take their products to this town even though they can get the best prices at the cooperative warehouse. Thus, something somewhat overlooked in recent value chain analyses that would really benefit the mass of smallholder farmers in Kenya and Uganda is paved and maintained rural roads.

Finally to end on a more positive note, there is much positive to report about the evolution of banking especially in Kenya, but increasingly in Uganda as well. Cell phone banking is a stunning if uneven success. M-PESA and other such services in Kenya; mobile money and other such services in Uganda have dramatically increased security and convenience and decreased delays in making money transfers between exchange partners even in remote areas. Imagine that one has to pay school fees of 100,000 KSh but the cost of transport is 15,000 KSh in each direction plus another 5000KSh for meals, not to mention the opportunity cost of lost time standing in line at one of the understaffed local bank branches to pay these fees. Mobile money cuts these costs to 50KSh.  We found rural women who bear the brunt of agricultural work are often the beneficiaries of remittance transfers from urban family members. Informants among input dealers reported that mobile banking permitted easier payment of suppliers, while farmers reported the benefit of relief from the burden of carrying cash from markets to their homes. The increase in financial privacy was similarly appealing.

Further, Centenary and Equity Banks in Kenya and Uganda respectively have found a formula that allows them to loan money for agricultural inputs to small farmers based on assessments of their land and other assets. A minority of the most progressive farmers we interviewed access these services, but fear, lack of understanding, and in some cases unclear traditional land title hampers further access to bank loans. The biggest obstacles however may be interest rates on loans of 18-22% on the balance. Of course, these are dramatically better than the 100% middlemen in the informal sector may charge, but the banks are not nearly so agile nor so close to their customers as are the middlemen. We are not blind to the dangers of expropriation associated with expanded loan practices, but merely point to encouraging evidence of new suppleness in the financial infrastructures in agricultural banking. Reinforcement of ethical lending practices seems high on a list of priorities.

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