418
the required support to smallholder farmers (Shiferaw et al. 2009) because they tend
to have multiple roles while facing several operational and institutional challenges.
One critical challenge regarding the role of co-operatives in facilitating farmers’
access to inputs and markets is the institutional means to reduce operating costs,
especially when compared with trading partners who tend to be investor-oriented
firms. Costs for co-operatives are often high, owing to operation inefficiencies that
result from centralized decision-making involving all members or their representatives (Chevallier 2011). Consequently, without external influence, farmer co-operatives in SSA rarely contract outputs and provide inputs on credit to members, but are
largely seen as means to enhance competition in procurement of agricultural produce. Many of these organizations have not been able to broaden their functions/
services, instead of performing core functions such as milk collection, and thus
usually fail to seize new opportunities.
As in contract farming, issues related to differential impacts also apply to farmer
organizations. A study conducted in Rwanda reveals larger income effects of membership for members with larger farms (Verhofstadt and Maertens 2014). Bernard
and Spielman (2009) found that poorer farmers tend not to participate in these
organizations although they may derive indirect benefit(s), while Tesfay and Tadele
(2013) found limited prospects for women in Ethiopia to engage in marketing cooperatives. Fischer and Qaim (2012) echo these concerns with an example of the
commercialization of agricultural produce through a co- operative system in Kenya
that lead to men taking over the marketing responsibility from women.
The marketing structure for milk and vegetables tends to involve several intermediary agents. For example, milk marketing co-operatives may involve primary societies that deliver milk to processors through contracts, signed by their respective
apex organizations. The intermediation is likely to be associated with high transaction costs that could be minimized through allowing primary societies to directly
enter into agreement with the processor on their own account. In Tanzania, for
example, dairy farmers were charged Tshs. 20–30, 10, and 10 per litre of milk as
primary society levies, union levies and milk transport costs to the plant, respectively (Kilima et al. 2015).
A brief analysis of vertical coordination forms in the milk value chain in selected
countries within SSA reveals small market shares for smallholder farmers (4–20%)
where, in isolated incidences (e.g. in Zimbabwe), a larger proportion is supplied by
large-scale dairy farms (Table 1). The value chain faces various challenges, ranging
from farmers’ inability to meet quality requirements and participate effectively in
marketing to agency problems (mismanagement of co- operatives) and moral hazard
issues (side selling and loan default).
A similar analysis of vertical coordination mechanisms in the vegetable value
chain (Table 2) reveals that farmers’ market shares are relatively larger (>27) than
shares for smallholder dairy farmers. In Ghana and Madagascar, for example,
smallholder farmers are the major suppliers of exported vegetables. However, this
seems to occur where: exporters have limited choices when contracting suppliers
(Minten et al. 2009) or are willing to diversify their supply (Swinnen 2005); labour
F. T. M. Kilima and L. R. Kurwijila
the required support to smallholder farmers (Shiferaw et al. 2009) because they tend
to have multiple roles while facing several operational and institutional challenges.
One critical challenge regarding the role of co-operatives in facilitating farmers’
access to inputs and markets is the institutional means to reduce operating costs,
especially when compared with trading partners who tend to be investor-oriented
firms. Costs for co-operatives are often high, owing to operation inefficiencies that
result from centralized decision-making involving all members or their representatives (Chevallier 2011). Consequently, without external influence, farmer co-operatives in SSA rarely contract outputs and provide inputs on credit to members, but are
largely seen as means to enhance competition in procurement of agricultural produce. Many of these organizations have not been able to broaden their functions/
services, instead of performing core functions such as milk collection, and thus
usually fail to seize new opportunities.
As in contract farming, issues related to differential impacts also apply to farmer
organizations. A study conducted in Rwanda reveals larger income effects of membership for members with larger farms (Verhofstadt and Maertens 2014). Bernard
and Spielman (2009) found that poorer farmers tend not to participate in these
organizations although they may derive indirect benefit(s), while Tesfay and Tadele
(2013) found limited prospects for women in Ethiopia to engage in marketing cooperatives. Fischer and Qaim (2012) echo these concerns with an example of the
commercialization of agricultural produce through a co- operative system in Kenya
that lead to men taking over the marketing responsibility from women.
The marketing structure for milk and vegetables tends to involve several intermediary agents. For example, milk marketing co-operatives may involve primary societies that deliver milk to processors through contracts, signed by their respective
apex organizations. The intermediation is likely to be associated with high transaction costs that could be minimized through allowing primary societies to directly
enter into agreement with the processor on their own account. In Tanzania, for
example, dairy farmers were charged Tshs. 20–30, 10, and 10 per litre of milk as
primary society levies, union levies and milk transport costs to the plant, respectively (Kilima et al. 2015).
A brief analysis of vertical coordination forms in the milk value chain in selected
countries within SSA reveals small market shares for smallholder farmers (4–20%)
where, in isolated incidences (e.g. in Zimbabwe), a larger proportion is supplied by
large-scale dairy farms (Table 1). The value chain faces various challenges, ranging
from farmers’ inability to meet quality requirements and participate effectively in
marketing to agency problems (mismanagement of co- operatives) and moral hazard
issues (side selling and loan default).
A similar analysis of vertical coordination mechanisms in the vegetable value
chain (Table 2) reveals that farmers’ market shares are relatively larger (>27) than
shares for smallholder dairy farmers. In Ghana and Madagascar, for example,
smallholder farmers are the major suppliers of exported vegetables. However, this
seems to occur where: exporters have limited choices when contracting suppliers
(Minten et al. 2009) or are willing to diversify their supply (Swinnen 2005); labour
F. T. M. Kilima and L. R. Kurwijila