The presentation describes the current challenges faced by farmers in Africa in supplying horticultural produce to the European markets. It suggests a closer look at how local markets and value added supply chains could make a big difference in alleviating poverty.

1. Poverty reduction through local
markets and supply chains:
a positive step towards sustainable
development in Africa
Dr P S Sahota
Executive Director
Nexus Aid CIC
p.sahota@nexusaid.org
1

2. Opening thought
“We are both strong believers in the need for substantial aid flows to the
world’s poorest countries. We believe equally strongly in the public sector’s
role in providing essential services and infrastructure…but we believe that
private investment must be the main source of income growth & job
creation in poor countries, as it is in industrialized nations…(we need to)
identify specific measures that work to unblock the private sector’s
potential…when the business potential of the developing world is
unleashed, the benefits will be more than economic.”
Paul Martin (PM of Canada) & Ernesto Zedillo (former President of Mexico)
Co-chairs of the UN Commission on the Private Sector & Development which
produced the recent report Unleashing Entrepreneurship: Making Business Work
for the Poor
2

3. Evolution of the sustainability agenda
Environment Social
Environment
Social
Environment
2 Sustain-
ability
Social 1 3
Economic Economic Economic
Millennium Development Goals
Puzzles Problems
Messes
(wicked
problems,
a system of
problems)
Formulation Agreed Agreed Arguable
Solution Agreed Arguable Arguable
Levels of integration
Complexity
Uncertainty 3
Structured/semi-structured/unstructured

4. Sustainability – an alternative
conceptualisation
social
puzzle
problem problem
Sustain
ability
mess
problem
environment
economic
puzzle
puzzle
Sustainability is concerned with unpredictable futures
and this future perspective to sustainability opens up a 4
Pandora's box of uncertainty.

5. Uncertainty – decision making
contexts and problem solving
Rate of change
Low high
A B
Low Low uncertainty Moderate uncertainty
(needed information is known (constant need for new
and available) information)
puzzle
Complexity
(number and
diversity of problem mess
the elements)
C D
Moderate uncertainty High uncertainty
(information overload) (not known what information is
required)
High (A system of problems,
wicked problems)
(Based on Duncan, 1972; Hatch, 1977; Mintzberg, 1990).
5

6. Pascal’s Wager
In a more general sense the wager addresses situations in which there is a decision
that involves a large potential risk and that must be made on the basis of incomplete
evidence.
God exists God does not exist
Pascal A B
believes
in God No problem
No problem
Pascal
does C D
not
Serious trouble No problem
believe
at the
in God
Pearly Gates
The environmental equivalent of Pascal’s Wager is the
Precautionary Principle
6

7. The precautionary principle
It is an approach to environmental policy that has been
adopted in principle by the European Commission and has
the support of many environmental organizations.
Essentially, it holds that the environment should not be left
to show harm before action is taken to protect it, because by
then irreparable damage may have been done
As a precaution, it’s safer to behave as if the problem is real
and serious from the outset.
7

8. Smallholder farmers face three main sets of
challenges as they operate their farm
businesses.
Productivity
Efficiency
Market Access
8

9. CHALLENGE #1: Smallholder farmers are
typically operating their farms at very low levels
of economic productivity.
Productivity  Farmers are often growing the wrong mix
of crops in their farms, or only growing
subsistence crops.
 Farmers are unaware of proper growing
techniques.
Efficiency  Farmers are unable to purchase the
required inputs to grow high quantities of
top-quality produce.
RESULT:
 Disappointing harvests of the wrong
Market Access
crops.
Thanks to K Mutiso
9

10. CHALLENGE #2: The current system of
produce distribution and sale is inefficient.
Productivity  Small farm produce often changes hands
3 or 4 times on the way to the consumer.
 Transportation is slow, costly, and
wasteful. Communication is person-to-
person.
 Logistical processes are a major hurdle.
Efficiency
RESULT:
 Potential profits drained from all
participants, particularly the farmer
herself.
Market Access
Thanks to K Mutiso
10

11. CHALLENGE #3: Smallholder farmers are
unable to access the right markets at the right
time.
Productivity  Farmers operate in information-poor
environments regarding prices and
market outlets.
 Farmers are unable to aggregate their
produce at levels required to access the
largest markets.
Efficiency
 Opportunities to exploit are created for
brokers, resellers, and other
intermediaries.
RESULT:
 Limited choice of market outlets and
Market Access disappointing net prices.
WE HAVE TWO PARTICULAR MARKETS – EXPORT AND LOCAL 11

12. Challenges in export markets
E
G
N
• EurepGap standards A
H
C
L
• Dependency syndrome A
R
LTU
• U
Lack of marketing knowledge/ market access
C
A
• Middle-men andS
brokers
E
I R
U
•
EQ
Poor decision making processes and information
accessR
• Breakdown of trust between exporters and farmers etc.
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• Being “survivors” rather than looking at farming as a

13. The EUREPGAP standards are
particularly difficult for the
smallholder to meet.
Is all crop protection Are crop protection
product storage Is the EUREPGAP products stored in a
Are keys and farmer to
Has the access Have soil maps been
fire-resistant, well-
registered product
Is a documented wasteprepared for the shelving made of non-
the crop protection
completed a risk farm?
product store limited plan in
management to absorbent materials? traceable backventilated, well-lit, and
to and
Protective clothing is
assessment for food Protective clothing is trackable from secure location?
the
workers withoperator health, available for all farm
safety, formal
place?
cleaned after every
Is surplus application Is the source of water
registered farm where it
training in the handlng workers?
and the environment? mix disposed of use? used forbeen product
has final grown?
of these products? Has an internal, annual
according to national Are first aid boxes
washing potable or application
self-inspection been Is
Are safety and
Does the farmer law? documentedthe vicinity of suitable by
present in anddeclared equipment calibrated
emergency procedures Are empty containers
Does disposal of empty substrate
participate in recorded? an the competent
all workers? and verified on an
visible within 10 metres rinsed with
crop protection Has a hygiene risk
recycling programmes authorities, through a
Is organic fertilizer annual basis?
of the crop protection integrated pressure-
containers occur in a analysis been
for substrates where stored in an laboratory?
competent
product store? rinsing device?
manner that avoids
available? performed forsystematic
Have the entire appropriate manner,
exposure to humans? farm? methods of prediction which reduces the risk
Has an annual risk Are breakage-safe
been used to calculate of environmental have
Do farm workers
assessment for lamps in place above
the water requirement contamination? Have all the crop
access to toilets and
irrigation water the sorting, weighing,
of the crop? protection product
Is the farmer able to washing facilities
hand
pollution been Is a documentedand storage provide current nearby?
action areas? applications been
completed by a plan in place if recorded with product
evidence of annual
laboratory? maximum residue name, crop name,
residue testing,
levels (MRLs) are date, and reason for
traceable to the farm?
exceeded? application?
Source: EUREPGAP Checklist Version 2.0 Jan-04
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14. Why local consumer markets?
Rapid changes in our approach to work and leisure have significantly altered our
eating patterns and attitudes towards food. Increasing availability of cheaper food
in real terms, rising standards of living, growing female employment, the rise in
single person households, shrinking household sizes and increasing importance
of leisure activities have brought about major changes in consumer habits.
The emergence of self-service supermarkets has changed the face of grocery
retailing. These s/markets were quick to recognise the trends as they emerged and were
often instrumental in pioneering change. They purchase in large volumes and deal
directly with suppliers. Through ‘pile it high and sell it cheap’ the superstores dominate
the retail sale of food and have diversified and expanded their product ranges,
incorporating greater quantities of perishable foods, including meat, fish, fruit and
vegetables.
Dumping of produce that is outside supermarket specifications or is surplus to
programmes becomes common practice. As a result market wholesalers are
increasingly left trying to earn a living selling secondary quality products to the
remaining independent retailers kiosks and street market traders. 14

15. Why local consumer markets?
The rapid expansion of fast food outlets and sandwich bars has provided cheap
food to office and factory workers in the last few years. More meals are provided by
the institutional sector such as prisons and hospitals in line with their growth in
occupancy. However, it is the continuing increase in disposable income, leisure
activities and single person households that have driven a significant change in the
consumption of food.
Coupled with increased tourism, catering has become a significant and growing
sector of the supply chain. Although large groups of hotels and fast food restaurants
conduct much of the business, there is a major increase in small and medium sized
enterprises (SMEs).
It is anticipated that in the long term the trend towards eating out of the home will
increase. As catering matures and the catering sector becomes more organised,
improvements in supply chain efficiency are needed to reduce costs and deal with
environmental issues such as waste management.
15

16. Typical traditional food chain
between farmers and various
markets.
Processors
Large Plot Farmers Transporter Market & Other Fees
Exporters
Small Plot Farmers Farm gate Brokers Local Brokers Central Brokers
Large Retailers
Local Retail
Large Institutions
Market
Retailers Distributors
Retail Distribution
Local
Distant
Wholesalers Consumer Wholesalers
Consumer
Informal
Market Retailers
Distributors
Today, smallholder farmers are retaining a low
percentage of the wholesale value of their farm
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produce.

17. Traditional food supply chains exhibit
the following key characteristics:
1. Business relationships within the supply chain are often framed in win-lose
terms, with resulting levels of inter-organizational mistrust. Relationships are
constructed as competitive, even adversarial, whereby each company seeks to
buy as cheaply and to sell as expensively as possible.
2. Farmers/ranchers (and fishers) are treated as interchangeable (and exploitable)
input suppliers, often operating in restricted markets or under short-term
contracts where risks are usually born by producers
3. Benefits/profits from the selling of final food products are unevenly distributed
across the supply chain, with food processors and marketers usually receiving a
disproportionately higher share.
4. Operations are increasingly located and coordinated on a national a international
scale, with food production, processing, and marketing sited according to short-
term economic gains for those parties who dominate the chain.
5. . Traditional food supply chains can handle both undifferentiated (commodity)
and value added” food products
17

18. Values and value added
The terms “value” and “values” are used in different ways when referring to food
production and food business networks. “Value-added” is used to characterize food
products that are converted from raw product through processes that give the
resulting product an “incremental value” in the market place.
An “incremental value” is realized from either higher price or expanded market.
“Value-added” is also used to characterize food products that have incremental
value in the marketplace by differentiating them from similar products based on
product attributes such as: geographical location; environmental stewardship; food
safety; or functionality.
The words “value” and “values” are also used to characterize the nature of certain
business relationships among interacting food business enterprises, rather than
any attribute of the product itself. In general, this collection of relationships is
known as a “supply chain”
18

19. Value based supply chains
When these relationships are expressly based in an articulated set of values, they
are becoming known as “values-based supply chains” or, more succinctly,
“value chains”.
Some in the agri-food business community use the term “value chain” to focus
on supply networks that deal with food products given incremental value through
processing and/or attribute differentiation.
In other words the term “value chain” embraces both the characteristics of
the business relationships within a food supply network, and product
differentiation.
A food supply chain is a network of food-related business enterprises through
which food products move from production through consumption, including
pre-production and post consumption activities. Typical links in the supply
chain are: (i) Inputs, (ii) producer, (iii) processor, (iv) distributor, (v) wholesaler,
(vi) retailer and (vii) consumer. 19

20. Value based food chains differ from
traditional food supply chains in the
following important ways:
1. Business relationships among “strategic partners” within value chains are framed
in win-win terms, and constructed on collaborative principles that feature high
levels of inter-organizational trust. (“Strategic partners” are those businesses that
significantly add value to food products and/or to supply chain performance. It is
possible that not every business “link” in the chain is a “strategic partner.”)
2. As producers of differentiated food products, farmers/ranchers (and fishers) are
treated as “strategic partners” with rights and responsibilities related to value
chain information, risk-taking, governance, and decision-making.
3. Commitments are made to the welfare of all strategic partners in a value chain,
including fair profit margins, fair wages, and business agreements of
appropriate duration.
4. Operations can be effectively located and coordinated at local, regional,
20
national, and international scales.

21. A summary
These food value chains are distinguished from traditional food supply chains by
• the combination of how they operate as strategic partnerships (business
relationships)
• how they differentiate their products (focused on food quality & functionality and
on environmental & social attributes).
•Value chains have the capacity to combine scale with product differentiation, and
cooperation with competition, to achieve collaborative advantages in the
marketplace
•Value Chains emphasize high levels of performance and high levels of
interorganizational trust
•Value Chains emphasize shared values and vision, shared information
(transparency), and shared decision-making among the strategic partners
• Value chains make commitments to the welfare of all strategic partners in the
chain, including fair profit margins, fair wages, and business agreements of 21
appropriate extended length

22. Local consumer markets
“entrepreneur – farmer partnerships”
Regional Logistics Centre
Farmer Groups Supermarkets
Farmer Groups 9% 3%
Farmer Groups Transporter Market & Other Fees
23% High-end catering
Farm gate Brokers Local Brokers Central Brokers
Fruits
Fruits Middle-sector
Retail Distribution
Retailers Large Retailers
Fruits Distributors
of catering
Fruits Farm Inputs
Large Institutions
Wholesalers Wholesalers
General Public
+
(formal and informal
Retailers
Producers of meat, fish, Distributors markets)
Producers of meat, fish,
and eggs Consolidation of products
Producers of meat, fish,
and eggs
and eggs
Processors Waste Management Improvements here
will result in higher
incomes for
smallholder farmers.
22

23. Advantages of setting up local
consumer markets and value chains
Re: The sustainability agenda
ECONOMIC
SOCIAL
ENVIRONMENTAL
23

24. Advantages of setting up local
consumer markets and value chains
The local population can be supplied with a variety of
food products (cereals, vegetables, fruits, fish, meat,
eggs) of high quality.
ECONOMIC This quality does not only refer to the nutritional value
of the products, but also to food safety: chemical
residuals control, sanitary quality, storage and handling
care. In fact, these aspects refer to the same
requirements which the EU attaches to the import of its
SOCIAL food.
By the developing local markets, economic activities
that add value and income to the farmers, wholesalers,
traders and other economic agents will be enhanced.
ENVIRONMENTAL
In fact, the value created in the entire supply chain will
stay in the region and therefore be a real engine for
economic prosperity and poverty alleviation. 24

25. Advantages of setting up local
consumer markets and value chains
The increase of local production will provide
opportunities to people to use their land and
work in the countryside.
ECONOMIC
It will create work in various ways and therefore
will reduce unemployment and people hanging
around in the city without any useful purpose in
their lives.
SOCIAL
These measures are there to protect the interest
of the public. The Kenyan people have the right
to enjoy the same qualities as the EU
inhabitants.
ENVIRONMENTAL
An improvement in the quality of food consumed
by ordinary Kenyans will also contribute to the
health of the population, reducing sickness and
25
health care costs.

26. Advantages of setting up local
consumer markets and value chains
The chain management approach creates different
opportunities to reduce the environmental effects of the
production, distribution and consumption of products.
ECONOMIC
Improvements can be made by the way agricultural
products are produced through the: (i) use of proper
methods of production, (ii) limiting of the use of
chemicals, (iii) prevention of soil degradation, and (iv)
SOCIAL implementation of proper waste management strategies.
In respect to storage and transport, different benefits can
be achieved both in terms of emissions and waste. Here,
the following order is valid: (i) prevention, (ii) reuse and
ENVIRONMENTAL recycling, (iii) controlled incineration (possibly with reclaim
of energy) and (iv) controlled landfill (protecting people’s
health and preventing leakages to groundwater).
26

27. PILOT STUDY
Way forward
PE
MULTIDISPLINARY RESEARCH O
entrepreneur
SC
WASTELogistics Centre O F
Regional MANAGEMENT
S
Farmer Groups IE
FOOD PROCESSING 3% M
Supermarkets
Farmer Groups 9%
Farmer Groups Transporter NO
Market & Other Fees
O
MARKET 23% C
ANALYSIS
E
High-end catering
Locals
v
Farm gate Brokers Brokers Central Brokers
Fruits
Fruits QUALITY E CONTROLS
LLarge Retailers Middle-sector
A
Retail Distribution
Retailers
Fruits C Distributors
of catering
Fruits S
ENVIRONMENTAL IMPACT ANALYSIS
F
Farm Inputs
O Large Institutions
S
Wholesalers Wholesalers
IEENTREPRENEURSHIP + General Public
M (formal and informal
Producers of meat, fish,N O Distributors Retailers
markets)
Producers of meat, O
TRAINING IN BUSINESS MANAGEMENT
fish,
and eggs
E C fish,
Producers of meat,
and eggs
Consolidation of products
and eggs SOCIO-ECONOMIC FACTORS Improvements here
Processors Waste Management
will result in higher
incomes for 27
SOCIO-POLITICAL FACTORS smallholder farmers.

28. RECOMMENDED APPROACH
The consideration of farming as a business requires an action plan
that includes the following chapters:
• Development of a marketing plan: which products will be grown, potential
client identified and a logistic plan designed.
• An initial review conducted that takes stock of the existing capacities and
agricultural practices; gaps identified as far as environment, social and
economic sustainability are concerned and a remedial program
designed.
• An institutional plan of action drawn up.
• The development of an investment plan.
• A stepwise schedule directed at getting the sales through the company
started at an early date.
•A training program for sustainability.
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This plan leads both to an implementable business and a pilot for

29. Closing thought:
“I am enormously distressed that 200 million Africans remain hungry and
malnourished…we Africans are the ones who must act to meet our food
and nutrition needs in a sustainable way…The only way to stimulate and
sustain measures to ensure food security, is to make access to markets
possible. Agricultural production is only for three purposes: subsistence,
commercial or as a hobby. Food production for subsistence only is not
sustainable because you cannot feed the stomach only when you have no
clothes, no shelter, no income to send your children to school and pay for
medical bills…Engaging in Agriculture as a hobby is only sustainable for
the rich and idle. Therefore, you cannot talk of sustainable food security
without speaking of commercial agriculture, which means market access.”
Uganda President Yoweri Museveni (2003)
29