Small farmers - big business?

Engaging the Private Sector in Sustainable Agricultural Development

Discussions at the 2012 G8 meeting centred around the premise that development involves not only delivering aid, but in generating economic growth, and a pledge was made to encourage investment in agriculture as route to alleviate poverty. This new policy environment promotes development through private sector investment, and agricultural programmes are increasingly envisaged within a context of partnerships between donors, developing countries, and the private sector.  However, these new initiatives must remain focused on the target: food security and poverty alleviation, with small-scale farming and sustainability at the forefront. 

Rural economies are changing fundamentally. In a process of profound private sector transformation, value chains are becoming shorter with higher standards and stronger, vertical integration and information flows. This is driven by the increasing participation of developing country players in global value chains, as well as domestic private and government investment in the South.    

From a development policy perspective, inclusive business models are a promising tool for strengthening rural economic activity by improving income, jobs and food security. However, unless small-scale farmers can organize in order to capture benefits through collective action and through taking advantage of existing technological or institutional innovations, they face a growing disadvantage. This problem is especially challenging for women farmers. If more small-scale farmers are to have a viable future, there is a need for a concerted effort by governments, NGOs, civil society, the private sector and the donor community to create an enabling environment for their development.  

In addition, globalisation has made the management of supply and product attributes inherently more complex. As a result, markets apply ever tighter supply chain and industry self regulation systems to ensure safe food and demonstrate responsible sourcing. While participation in formal markets offers important trade opportunities, SMEs in the South are often unable to enter formal local or global supply chains as they lack the know-how or the resources to meet these stringent and constantly evolving market demands. It is important for donors, the public sector, and private sector players to work together to help smallholders and SMEs gain access to profitable market opportunities, and be accepted as reliable suppliers.

Consideration needs to be given to inclusive business models between smallholders and agribusiness as well as on appropriate institutional and technological innovations that help to empower small-scale farmers as competitive suppliers in sustainable value chains. There are a growing number of practical examples where inclusive business models really work to:

• support small-scale farmers to better cope with risks and vulnerability
• adequately share benefits and voices between business partners
• empower small-scale farmers with the necessary capacity, finance, training and regulation to increase their productivity, production, and competitiveness, and in turn to contribute to food security
• make large investments pro-poor, by setting the right framework

Promoting value chains thus has the potential to generate real benefits, but there are significant challenges and critical questions such as:

• What can be done to ensure that poorer producers and workers benefit from participation in local/regional/global value chains?
• In the current (post-G8) environment, what is needed in term of policy to enhance the private sector contribution towards poverty alleviation, food security, and sustainability?

Our panel discussion will be split into two parts, addressing each of these questions in turn. Part 1 aims to provide examples and learn lessons from inclusive business models where public and private sectors, donors and industry, have worked together to help suppliers gain access to, and benefit from, profitable market opportunities and innovative approaches. Part 2 will attempt to identify key messages for donors/governments/companies in terms of policies and partnerships that will leverage private sector investment and engagement towards social and economic upgrading, food security, and sustainable agriculture.

For more information, please go here: www.smallfarmersbigbusiness.org