412
Farmers’ continued participation in the informal value chain is associated with
several problems. First, they are exposed to market risks (e.g. price shocks) because
forward contracts cannot be enforced effectively, partly due to uncertainties over
milk quality and partly due to weak institutional capacity to enforce contracts.
Second, the prospect for increasing earnings is limited as farmers supply unprocessed (low-value) milk. This is also likely to happen to formal chain participants if
there is poor price transmission between upstream and downstream actors. Third,
milk buyers in the informal chain tend to buy small quantities of milk, as they have
limited capacities to store the milk or distribute it to distant markets, which, in turn,
limits growth in milk production and market development.
Experience from East Africa shows that farmer’s institutions are important vehicles for market integration. Farmer groups, associations and primary co- operative
societies enable collective action, economies of size and increased bargaining
power vis-à-vis corporate buyers. In Kenya, Kenya Co-operative Creameries Ltd.
(KCC) has been the bedrock of dairy enterprise development over many decades
(Muriuki 2011). In Tanzania, the Tanga Dairies Co-operative Union (TDCU) has
anchored more than 6000 smallholder farmers firmly in the formal dairy value
chain linked to Tanga Fresh Ltd., the biggest dairy processor in the country (Kilima
et al. 2015). In the southern highlands of Tanzania, Njombe Livestock Farmers
Association (NjoLiFa), a farmers’ co-operative in the Njombe region, has amalgamated the individual work of farming families into a formidable player in milk
processing and the production of high-quality cheese, linked to the distant Dar es
Salaam market, the commercial capital of Tanzania. Similar stories abound in
Uganda and Rwanda, the rising stars in the dairy hub of East and Southern Africa
(Technoserve 2008a, b).
3.2 Vegetable Value Chain
Historically, vegetables have played a vital role for farming communities in many
SSA countries. In the context of resource-poor smallholders, these crops are particularly important because they can be successfully farmed in small areas and are
usually intercropped with other crops to enhance resource-use efficiency. The perception that vegetables are subsistence crops has led to the neglect of these crops in
terms of crop and market development initiatives (Weinberger and Lumpkin 2005).
Consequently, the production and marketing of vegetables in SSA has been a modest affair, with produce being grown in small quantities for local consumption,
resulting in less investment in processing. In general, the aggregate demand for
horticultural crops in SSA shrunk between 1971 and 2000 (Weinberger and
Lumpkin 2005).
A significant change in production and marketing was noted after the 1990s,
when African countries changed their trade policies from protected to more open
economies, which paved the way for new trade agreements that created new avenues for trade in high-value products. Since then, vegetable production became one
F. T. M. Kilima and L. R. Kurwijila
Farmers’ continued participation in the informal value chain is associated with
several problems. First, they are exposed to market risks (e.g. price shocks) because
forward contracts cannot be enforced effectively, partly due to uncertainties over
milk quality and partly due to weak institutional capacity to enforce contracts.
Second, the prospect for increasing earnings is limited as farmers supply unprocessed (low-value) milk. This is also likely to happen to formal chain participants if
there is poor price transmission between upstream and downstream actors. Third,
milk buyers in the informal chain tend to buy small quantities of milk, as they have
limited capacities to store the milk or distribute it to distant markets, which, in turn,
limits growth in milk production and market development.
Experience from East Africa shows that farmer’s institutions are important vehicles for market integration. Farmer groups, associations and primary co- operative
societies enable collective action, economies of size and increased bargaining
power vis-à-vis corporate buyers. In Kenya, Kenya Co-operative Creameries Ltd.
(KCC) has been the bedrock of dairy enterprise development over many decades
(Muriuki 2011). In Tanzania, the Tanga Dairies Co-operative Union (TDCU) has
anchored more than 6000 smallholder farmers firmly in the formal dairy value
chain linked to Tanga Fresh Ltd., the biggest dairy processor in the country (Kilima
et al. 2015). In the southern highlands of Tanzania, Njombe Livestock Farmers
Association (NjoLiFa), a farmers’ co-operative in the Njombe region, has amalgamated the individual work of farming families into a formidable player in milk
processing and the production of high-quality cheese, linked to the distant Dar es
Salaam market, the commercial capital of Tanzania. Similar stories abound in
Uganda and Rwanda, the rising stars in the dairy hub of East and Southern Africa
(Technoserve 2008a, b).
3.2 Vegetable Value Chain
Historically, vegetables have played a vital role for farming communities in many
SSA countries. In the context of resource-poor smallholders, these crops are particularly important because they can be successfully farmed in small areas and are
usually intercropped with other crops to enhance resource-use efficiency. The perception that vegetables are subsistence crops has led to the neglect of these crops in
terms of crop and market development initiatives (Weinberger and Lumpkin 2005).
Consequently, the production and marketing of vegetables in SSA has been a modest affair, with produce being grown in small quantities for local consumption,
resulting in less investment in processing. In general, the aggregate demand for
horticultural crops in SSA shrunk between 1971 and 2000 (Weinberger and
Lumpkin 2005).
A significant change in production and marketing was noted after the 1990s,
when African countries changed their trade policies from protected to more open
economies, which paved the way for new trade agreements that created new avenues for trade in high-value products. Since then, vegetable production became one
F. T. M. Kilima and L. R. Kurwijila