GLOBAL prices for agricultural commodities have risen dramatically in recent years, making agriculture an attractive investment once again.
This, coupled with improvements in the overall business climate in Zambia and Africa as a whole, has seen a resurgence of large scale investment in agriculture on the continent.
Such investment has the potential to create jobs and raise rural incomes, particularly by promoting uptake of improved production techniques and greater use of inputs.
Whether that potential is realised, however, depends largely on the extent to which commercial buyers and Zambia’s smallholder farmers, who dominate the landscape, can discover mutually beneficial ways to work together.
Many factors limit the ability of smallholder farmers to boost their productivity and make the transition from subsistence farming to market-oriented production.
They commonly lack security of tenure over the land they farm, restricting the investments they are willing or able to make in improving the land.
They also typically lack access to productivity enhancing inputs such as improved seed, fertilisers, water and information or to the credit needed to finance investment in these inputs.
As a result, smallholder farmers are unable to deliver the volume and quality of produce that commercial buyers, retailers, processors and other agribusiness firms require, which in turn limits the development of markets for agricultural produce.
Out-grower schemes are one possible way to overcome these obstacles while securing mutual benefit for all stakeholders involved.
Recently, President Lungu announced that Government will engage the Industrial Development Corporation (IDC) and other stakeholders to explore prospects of an out-grower scheme at Zambeef’s US$40 million Zampalm Estate in Chief Kopa’s area in Mpika district.
In this project 5,000 out-growers will be incorporated in the Napalm Estates in Chief Kopa’s area and another 8,000 within Mpika district to provide the company with palms for the production of edible oil and other by-products.
Speaking when he toured the over 2,000 hectare plantation recently, President Lungu said his government will ensure that the out grower schemes kick off soon to benefit the local people.
The President said Zambia Sugar Plc will be consulted so that it can provide advice on how it has grown the out grower scheme over the years.
And Chief Kopa thanked Government for delivering development to his area.
“Taking development to rural areas is one thing we have longed for, and the coming of the Palm Plantation here is a dream come true. We appreciate this investment,” Chief Kopa says.
And Zambeef joint chief executive officer Francis Grogan said the company has already spent US$21 million to develop the estate which will have a huge impact on the locals once fully operational.
“The Zampalm project currently has some 370,900 palms planted in the main plantation with another 39,000 seedlings in the main and pre- nursery,” he said.
He said at current prices, Zampalm could generate more than US$170 million in revenue over the next decade.
Mr Grogan said the Zampalm out growers’ scheme will contribute to the substitution of the 70,000 tonnes of edible oil currently imported into the country every year, saving around US $70 million in foreign exchange outflows annually.
He said the project will require a further US$24 million investment over the next five years.
“Over 180 permanent jobs have been created and 400 seasonal jobs and more to come,” Mr Grogan said.
Out grower schemes bring together four elements namely a central facility surrounded by growers who produce on their own land under contract, and the provision of inputs and technical assistance to growers.
The rest are that out-grower schemes guarantees to purchase the growers’ crop subject to meeting predefined standards, and growers typically receiving a pre agreed percentage of the final sales price of their product, thus leaving them still fully exposed to price risk.
Lumuno Organic farms proprietor Khama Mbewe says one of the challenges that small holder farmers face in Zambia and Africa as a whole is how to access funds and getting to proper market for their produce due to poor road infrastructure and other transportation challenges.
“Most of the feeder roads in rural areas are in a deplorable state and this is one of the challenges that smallholder farmers face. Small holder farmers are a vital component in Zambia’s food production. So with all these challenges, out grower schemes become handy,” says Mr Mbewe.
Giving an example of his farm, Mr Mbewe said as a result of a Strategic Partnership Grant from USAID’s Southern Africa Trade Hub, new equipment was installed at Lumuno Organic Farms, Lumuno, a locally-owned factory that produces condiment sauces in Zambia.
“Benefits of out-grower schemes are a lot both to the buyers like us and the smallholder farmers. Like the USAID grant, the grant is upgrading the current chili processing line and establishing an out grower arrangement to boost production capacity from 9,000 to 15,000 bottles of chili sauce per month,” Mr Mbewe says.
As part of the out grower scheme, Lumuno will guarantee an end market to 300 smallholder farmers to supply chili pods, onions, and garlic to Lumuno and to receive special training; 60 farmers have been trained already.
The precision of the filling machine has increased efficiency while the capping machine has enhanced food safety and hygiene.
Increased production is enabling Lumuno to supply to supermarkets and other chain stores.
Mr Mbewe says despite the challenges that Zambia and Africa may be facing, the good news is that there is already a ready market and high demand for agricultural produce due to the ever increasing population.
“Agriculture is one of the best business opportunities in the world because food never goes out of fashion. People must eat food every day. This fact puts Zambia’s small holder farmers at an advantage to partner with commercial farmers and produce enough food for export,” Mr Mbewe says.
“It’s not just the food industry that depends on agriculture. Several other industries, especially the manufacturing and processing industries, depend on agriculture for a wide range of raw materials,” says Mr Mbewe.
Mr Mbewe says as Zambia’s economies continue to grow, the demand for raw materials will surely increase and create more interesting opportunities for agriculture as a business in the country.
“Agriculture as a business in Zambia has suffered through the years because of its poor yields and crude farm practices. Most of the crops cultivated on the continent produce very little and are often very prone to pests, diseases and drought,” Mr Mbewe said.
To help grow their farming activities into a viable business, rural and small holder farmers need access to finance, which is often a barrier to success for most small holder farmers who wish to take farming as a business.
In Zambia like many other developing countries, accessing financial services is difficult for anyone, due to the unfavourable terms needed by banks and lending agencies.
However, for smallholder farmers who often own less collateral, such as land, accessing capital can be even more challenging.
One pathway to explore such challenges is through the out-grower schemes. PUBLISHED IN THE ZAMBIA DAILY MAIL ON MARCH 20, 2016
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