How important is agriculture in today’s digital age? This is a leading question trying to lead you to the wrong answer. Despite rapid growth and development in pockets of the world driven by innovation and technology, agriculture remains critical to economic growth. In sub- Saharan Africa, agriculture represents 23% of GDP, and more than 60% of the population are smallholder farmers1. Not only is agriculture a key component in developing country economies, agriculture growth is also a powerful tool to raising income, reducing poverty, increasing employment, and providing food to the population2. It is without question that we should develop and support agricultural growth to reduce poverty, but the solution is not as simple.
Imagine you are a farmer in sub-Saharan Africa, operating a small plot of land about the size of an American football field. Like many friends and neighbours, your family lives in poverty, and your livelihood depends on this farm3. There are challenges every day. To bring your product to the nearest market require long drives on dirt roads, so you use traditional traders to sell your goods. But you never get a fair trade; you choose to sell at less than market prices because the traders can just walk away, or they choose not to pay on time or in full. While you work hard to feed others, you are barely surviving.
You are not alone. Other smallholder farmers experience the same universal challenges of not having sustainable access to markets, this is due to a variety of reasons including, but not limited to, remoteness of location, low production, and lack of information4.
The Power of Intermediaries
But there is hope, with the arrival of heroes known as farmer-allied intermediaries, who are transforming Africa’s agriculture ecosystem for the better. In a nut shell, intermediaries help farmers bring product to market in a way that is more sustainable and more profitable. By providing access to inputs, information on market demand and good agricultural practices, logistics support, fair market prices, and consistent market access, intermediaries are enhancing the livelihood of smallholder farmers, improving local labour markets, and expanding the tax revenue base for local governments, resulting in impactful boosts to both local and global economies5.
However, intermediaries face a host of challenges as well. For starters, there are few intermediaries in sub-Saharan Africa, and many of them struggle to reach scale and profitability. Second is access to capital, both in terms of volume of fund and affordability. This is known as the “missing middle’, for intermediaries who are too big for micro-loans, yet too small or too remote to access traditional capital5.
Call for Action
So how do we help intermediaries help farmers feed the world?
- Investors to shift to patient capital, allowing for lower returns in exchange for scaled impact over the long term
- Foundations to support across the value chain instead of focusing predominantly on individual farmers
- Governments to help pave the road to intermediary success with benefits such as tax incentives and input subsidies
- Large food companies to support and buy from intermediaries to help them grow6.
Together, we can support farmer-allied intermediaries on their path to transforming the agriculture ecosystem. Tune in next time as we explore the world of smallholder farming from the perspective of female entrepreneurs.
Ina Liu (MBA 2021) is Co-President of the Women in Business Club and VP of Events for the Impact Consulting Club at London Business School. Prior to LBS, Ina studied business at Wharton, University of Pennsylvania and was a project leader with the Government of Canada. Ina completed her MBA summer internship with Bain in their Boston office. Ina is an intern for the Wheeler Institute, contributing to the creation of content that amplifies the role of business in improving lives.
1 McKinsey. 2019. “Winning in Africa’s agricultural market.” Accessed 07/11/2020. Available at: https://www.mckinsey.com/industries/agriculture/our-insights/winning-in-africas-agricultural-market
2 World Bank website. 2020. Accessed 07/11/2020. Available at: https://www.worldbank.org/en/topic/agriculture/overview
3 Acumen website. Accessed 07/11/2020. Available at: https://acumen.org/companies/sectors/agriculture/
4 Steve Wiggins, Sharada Keats. 2013. “Leaping and learning: linking smallholders to market.” Accessed 07/11/2020. Available at: https://www.odi.org/publications/7453-leaping-and-learning-linking-smallholders-markets
5 Bain. 2020. “A New Paradigm of African Agricultural Development.” Accessed 07/11/2020. Available at: https://www.bain.com/insights/a-new-paradigm-of-african-agricultural-development/
6 Acumen website. Accessed 07/11/2020. Available at: https://acumen.org/blog/bain-farmer-allied-intermediaries/