Innovative Practice Kenya: Access to high value markets by smallholders of African indigenous Vegetables

by Isaac K. Ngugi, Raphael Gitau and James K. Nyoro, Tegemo Institute, Egerton University

Summary

The collective action by small-scale farmers in Githunguri area (Central Kenya) started in 2001 when FAO through Farmers' field schools organized farmers and provided capital that could support farmers in training on various enterprises or opportunities. The groups were formed as a bargaining platform for the poor small-scale farmers, who were being exploited by the brokers and traders in the local markets. Following poor performance in floriculture, the farmers in 2004 explored other avenues with the help of a development agency, Family Concern.

The development agency organized the groups into Business Support Units (BSUs) that now had commercial orientation rather than subsistence. The BSUs were taken through a 26-module training covering production techniques as well as business management, administration, record keeping, invoicing, and group dynamics and cohesiveness. The development agency conducted a market survey to help inform on the product's value chain, its stakeholders, and the market potential. These efforts led to linking the BSUs to Kenya's leading supermarket chains, Uchumi and Nakumatt. While the farmers deliver direct to Uchumi, the supply of indigenous vegetables to Nakumatt is done through traders who supply to its subsidiary company, Fresh ‘n' Juici.

The membership of Kamuchege BSU was 9 in 2001 though grew to 30 by mid 2006. Mugima farmer-group was 26 people and now 19.

The supply order ranges from 720 Kgs to 1200 Kgs per week. Over the past three years, the production of indigenous vegetables by the groups has been going up. The average weekly frequency of delivery to Uchumi was twice in 2004, thrice in 2005 and in 2006 they are delivering 4 times per week. The supermarkets prefer shorter shelf-life of vegetables dictated by the consumers' preferences for fresh vegetables.

As a result of all these efforts, the supply of the African indigenous vegetables to the major supply chains has increased dramatically.

What capacities did the producers develop, and what were the drivers that enabled them to innovate?

The farmers practice good farm management. This has enabled them produce superior standards required by the dynamic markets. They keep proper records. This promotes transparency and accountability and consequently building confidence. Mugima BSU has a Savings and credit cooperative (SACCO). This facilitates prompt payment to the farmers upon delivery of vegetables pending payments by supermarkets. The payments have therefore been consistently made on weekly basis.

The farmer in addition to production and harvesting do cut the produce into standard length and also package into units (about 600gm each).

What were the potentials and limitations of private business in promoting smallholder participation?

Supermarkets work closely with the development agency and small-scale farmers. They normally give guidelines on the quality and quantity required. Unlike Uchumi that procures from producer organizations, Nakumatt procures largely from preferred individuals. Farmers do not receive advance payments but are paid on delivery. In Nakumatt (Fresh n Juici), payment is done daily for the suppliers who bring in produce valued at most US$ 275. The rest is paid in a month's time depending on the agreement. The company does not offer transport services to the suppliers. The company does not provide extension services to farmers.

Uchumi presents orders to the BSUs mainly by telephone communication, while Nakumatt through Fresh n Juici has agreements with suppliers that are either farmers or brokers. There are about 200 suppliers to Fresh n Juici comprising of 3 or 4 suppliers per product.

What facilitating role did support agencies play, and how sustainable is that role?

The development agency helps farmers to get organized into business support units. They then train them on good governance of the groups. They also link the farmers to outlets such as supermarkets and also assist them in identifying and negotiating with the transporters. Family Concern and the supermarkets determine prices.

The development agency links the input supplier to prominent seed manufacturers and negotiate price on his behalf. He therefore acquires the seeds at a discount and the agreement with the development agency is that this discount should translate to low seed prices at retail level, hence low cost of seeds by farmers. When payment to farmers is delayed for whatever reason, Family Concern intervenes and pays the farmers.

Other nongovernmental organisations such as Food Agricultural Organization (FAO), private sector and the government through the Ministry of Agriculture also provide training to farmers. As members of the BSUs join in regular (weekly or monthly) meetings this has improved accessibility by the ministry staff, or other interested groups that would like to train the farmers or offer services to the group.

What were the enabling and hindering policies?

The Government promotes the consumption of indigenous vegetables. They do this by sensitising farmers and community in general on the medicinal and nutritive value of these vegetables. This way, they are able to promote consumption, raise the demand and thereby accelerate the flow of indigenous vegetables along the supply chain.

What factors explain the inclusion of the smallholder producers in the market chain (while others are excluded)?

The adherence to the private grades and standards that are set by supermarkets and other high value outlets determine whether or not small scale farmers will access the markets.

Farmer-groups or farmers that were unable to meet the stringent standards set by supermarkets were excluded from the chains that supplied these high value outlets. One requirement is that farmers are organized in groups and make the deliveries consistently.

Water would enable farmers produce even during dry seasons and access to irrigation water is therefore crucial, all-year round production is a key requirement

What are the costs and benefits of inclusion?

For the farmers who have joined the BSUs, they have the benefit of selling their products directly to retailers at a higher price, by-passing the middlemen and merchants altogether. BSUs provide a larger amount of produce due to pooling together and maintain a continuous supply and the farmers are in a stronger bargaining position. Farmers that are selling their vegetables in the high value markets make between 30% and 70% more profits compared to farmers selling in the local markets; they are able to fetch US$ 0.23 from the supermarket and US$ 0.21 from the informal markets unlike the counterparts that sell at US$ 0.09 normally to middlemen. On the average, the farmers that were members of BSUs made a margin of US$ 0.16 per Kg of indigenous vegetables delivered to the supermarkets. On the other hand, farmers outside the innovation (non-BSU members) make a margin of 0.07 per Kg. Therefore on the average, farmers that benefited from the innovation and hence included in the chain that sold to the supermarkets realized 55% higher margins than those that sold in the local market.

What does this all mean for efforts to promote smallholder participation in dynamic markets?

It is clear that farmers selling through collective action and hence accessing high value markets such as supermarkets realize more income than those selling individually in the local markets. The farmers in the group make between 35 -72 % more profit per bunch compared to those not in groups. Also the groups are able to diversify their market by selling to green grocers and large wet markets at a higher price.

For the small-scale farmers to sustain their inclusion in the dynamic and restructured markets, they should adhere to private grades and standards demanded by the markets. They should also be able to make the deliveries consistently. This calls for continuous adoption of innovative strategies by farmers.

Although there are many areas in the country where indigenous vegetables can do well, commercial production is concentrated in near large urban centres due availability of a market. Given the increasing demand, supply from such areas may not be adequate. This calls for improvement in transport system that would ensure access to vegetables from far away from markets.