408
Empirical evidence from SSA reveals that agricultural growth and pro-poor performance depend on the participation of smallholder farmers in commodity value chains
(Diao et al. 2007), which is currently low (Weinberger and Pichop 2009; Lie et al.
2012). The percentage of smallholder dairy farmers in countries such as Kenya,
Tanzania, Rwanda, Uganda, Zimbabwe and Zambia who are linked to milk processing is estimated to be around 20%, 4%, 10%, 11%, 32% and 17%, respectively
(Akwabi-Ameyaw 1997; de Janvry et al. 1993; Kilima et al. 2015; Sikawa and
Mugisha 2016). There are both optimistic and pessimistic views regarding the participation of smallholders in high-value chains.
Pessimistic views revolve around four key issues: Firstly, the small-scale nature
of smallholder farming may result in farmers’ inability to supply consistent
amounts of quality products, which would limit farmers’ prospects to engage in
commodity trade, where buyers seek to avert risks associated with supply disruptions and quality problems (Poirier and Quinn 2006). Evidence from Tanzania suggests that smallholder dairy goat farmers were not as keen as large processors to
comply with milk quality standards, as they tend to focus on maximizing shortterm rather than long-term gains and the sustainability of commodity value chains
(Lie et al. 2012). There have been isolated incidences where smallholder dairy
farmers have recorded significant productivity gains but failed to integrate into
high- value milk chains owing to their inability to observe milk quality and standards (Kilima et al. 2015).
The second pessimistic view concerns the poor development of most value
chains in SSA, due to inadequate investment in infrastructure and business support
services. These deficiencies lead to poor coordination mechanisms and ineffective
exchange of agricultural commodities (Barrett 2008; Poulton et al. 2010). This
underdevelopment justifies continued subsistence farming in isolated, remote areas
where there are limited incentives for smallholder farmers to engage in markets,
because transaction costs for trade are generally high and prohibitive for farmers’
engagement (Jayne et al. 2010; Fafchamps et al. 2005; Fafchamps and Minten 2012).
Thirdly, there exists a sustained mistrust between smallholder farmers and traders,
rooted in unfair exchange in determining volumes and product quality, especially
when accurate scientific measures are needed to determine value during the
exchange process. Kirsten and Sartorius (2002) report that contract manipulation by
agribusiness firms, and farmers’ distrust of these firms, is rampant in SSA. In connection to this problem, a significant majority of illiterate smallholder farmers suspect that buyers attempt to gain through illicit practices such as understating actual
volumes, using unobservable quality attributes of agricultural produce or both
(Eaton and Shepherd 2001; Minot and Ngigi 2010; Mansur et al. 2009). Buyers and
sellers are usually ill-informed about their interdependency in the context of the
value chain, and both may have short-term incentives to misrepresent the truth and
violate contract terms. The resulting mistrust impedes smallholder farmers in the
upgrading of their practices, at a time when upgrading is critical for coping with
the ongoing and rapid changes (transformation and modernization) of global food
systems (Maertens et al. 2012). The mistrust is also associated with additional
transaction costs for physically inspecting commodities before exchange, thereby
eroding gains for sellers, buyers or both.
F. T. M. Kilima and L. R. Kurwijila
Empirical evidence from SSA reveals that agricultural growth and pro-poor performance depend on the participation of smallholder farmers in commodity value chains
(Diao et al. 2007), which is currently low (Weinberger and Pichop 2009; Lie et al.
2012). The percentage of smallholder dairy farmers in countries such as Kenya,
Tanzania, Rwanda, Uganda, Zimbabwe and Zambia who are linked to milk processing is estimated to be around 20%, 4%, 10%, 11%, 32% and 17%, respectively
(Akwabi-Ameyaw 1997; de Janvry et al. 1993; Kilima et al. 2015; Sikawa and
Mugisha 2016). There are both optimistic and pessimistic views regarding the participation of smallholders in high-value chains.
Pessimistic views revolve around four key issues: Firstly, the small-scale nature
of smallholder farming may result in farmers’ inability to supply consistent
amounts of quality products, which would limit farmers’ prospects to engage in
commodity trade, where buyers seek to avert risks associated with supply disruptions and quality problems (Poirier and Quinn 2006). Evidence from Tanzania suggests that smallholder dairy goat farmers were not as keen as large processors to
comply with milk quality standards, as they tend to focus on maximizing shortterm rather than long-term gains and the sustainability of commodity value chains
(Lie et al. 2012). There have been isolated incidences where smallholder dairy
farmers have recorded significant productivity gains but failed to integrate into
high- value milk chains owing to their inability to observe milk quality and standards (Kilima et al. 2015).
The second pessimistic view concerns the poor development of most value
chains in SSA, due to inadequate investment in infrastructure and business support
services. These deficiencies lead to poor coordination mechanisms and ineffective
exchange of agricultural commodities (Barrett 2008; Poulton et al. 2010). This
underdevelopment justifies continued subsistence farming in isolated, remote areas
where there are limited incentives for smallholder farmers to engage in markets,
because transaction costs for trade are generally high and prohibitive for farmers’
engagement (Jayne et al. 2010; Fafchamps et al. 2005; Fafchamps and Minten 2012).
Thirdly, there exists a sustained mistrust between smallholder farmers and traders,
rooted in unfair exchange in determining volumes and product quality, especially
when accurate scientific measures are needed to determine value during the
exchange process. Kirsten and Sartorius (2002) report that contract manipulation by
agribusiness firms, and farmers’ distrust of these firms, is rampant in SSA. In connection to this problem, a significant majority of illiterate smallholder farmers suspect that buyers attempt to gain through illicit practices such as understating actual
volumes, using unobservable quality attributes of agricultural produce or both
(Eaton and Shepherd 2001; Minot and Ngigi 2010; Mansur et al. 2009). Buyers and
sellers are usually ill-informed about their interdependency in the context of the
value chain, and both may have short-term incentives to misrepresent the truth and
violate contract terms. The resulting mistrust impedes smallholder farmers in the
upgrading of their practices, at a time when upgrading is critical for coping with
the ongoing and rapid changes (transformation and modernization) of global food
systems (Maertens et al. 2012). The mistrust is also associated with additional
transaction costs for physically inspecting commodities before exchange, thereby
eroding gains for sellers, buyers or both.
F. T. M. Kilima and L. R. Kurwijila