How big trade corridors can benefit small farmers

Many trade corridors in Africa were designed in colonial times, primarily to serve extractive industries and ease the transport of goods from the interior of the country to the ports, and back. Even those corridors, which have been developed more recently – such as the Maputo corridor (connecting South African provinces, including the economically developed areas around Jo’burg and Pretoria, with Mozambique’s capital), which is said to be the most efficient in terms of facilitating the transport of goods – tend to target large enterprises, while seemingly failing to benefit smallholders. If designed well, trade corridors could do more to support agricultural development. This would not only serve the majority of the African population that is still living in rural areas and is (self) employed in the agriculture sector, but also increase food security.

When it comes to how big trade corridors can benefit small farmers, Tanzania seems to be a role model. It is developing the Southern Agricultural Growth Corridor of Tanzania (SAGCOT) and is linking it directly, more than any other corridor, to the food security agenda promoted through the continent-wide Comprehensive Africa Agriculture Development Programme (CAADP). In early September, Tanzania also hosted the FANRPAN Annual High Level Regional Food Security Policy Dialogue, a key event of the yearly calendar of food security events in Africa, brining together a broad range of stakeholders. I was a panelist at a session discussing African-EU partnerships in the agriculture development at this meeting organised by FANRPAN, a key partner of ECDPM. We work together on a series of activities aimed at informing and facilitating policy dialogue around the linkages between regional integration and food security, particularly in the context of CAADP.

Address basic economic weaknesses first

Can corridors like SAGCOT really link small farmers to markets, as amply advertised by the governments, companies and donors involved in building them? Or are they going to benefit mostly large business that have already achieved a minimum level of capacity and competitiveness allowing them to trade their goods with other countries in Africa and the rest of the world? Rumor in Tanzania has it that SAGCOT was launched mainly thanks to the strong involvement of a large multinational from the chemical and fertilizer industry, which wanted to use the port of Dar Es Salaam better and connect to markets in Eastern Africa and beyond.

But before tackling problems with cross-border trade, small farmers need to solve their basic economic weaknesses. Without access to land, key inputs such as fertilizer or seeds, and loans - in Tanzania, local banks ask as collateral for a loan at least 20 acres of land, ruling out vast majority of small scale farmers, who own 1 or 2 acres on average – any commercial activity becomes virtually impossible. Lacks of basic rural infrastructure to bring produce to towns or to store them make trading difficult. Insufficient entrepreneurship skills hinder farmers from writing business plans, which is a prerequisite for getting credit.

The corridor movement can help addressing these basic weaknesses by:

  1. Creating better business environment for smallholders. For instance, hopefully, local banks will accept SAGCOT as a 'package' or marketing tool and make access to loans easier.
  2. Connecting rural areas to larger infrastructure and ports, for regional and international trade of smallholders' produce and for better access to input by farmers.
  3. Attracting large investment and linking smallholders to agribusiness, provided a critical mass of production can be guaranteed by the total of those smallholders (or their cooperatives).

SAGCOT tries to do this through ‘clustering’ smallholders and investment in specific value chains and through linking small farmers with large estates. Eventually, more commercially oriented smallholders will be able to use the corridors directly for trade. However, this will take time. So probably trade corridors will only benefit smallholders in the medium term, and the cross-border dimension of corridors is not the main priority for them. If more basic interventions for small farmers are not prioritized over trade facilitation and large infrastructure, then corridors may end up helping mostly large companies.

National champions needed

Whether trade corridors can be successfully linked to broad-based agriculture development is also a question of high-level political will and action. Tanzanian President Kikwete is seen as a champion of food security promotion in Africa and at global level, he received the FANRPAN's annual Food Security Policy Leadership Award last month. In his passionate, though improvised, acceptance speech of more than an hour, he highlighted the Tanzanian government's plans to make SAGCOT a development tool for the whole population. He said that the regional dimension of corridors can immediately help food security by connecting food surplus with food deficit areas, and increasing intra-regional trade of food staples; but also that corridors should help primarily small farmers. For this reason SAGCOT is accompanied by 'participatory land management processes' based on village council meetings, which are called whenever there is interest for large investment, to avoid 'land-grabbing' by large companies. Further, it works to get 'customary land rights' recognized by commercial banks as collateral for small farmers. SAGCOT also tries to provide incentives for foreign investors to enter into joint ventures with local companies and banks, as small and big companies need to be both involved and developed.

These are important ideas and actions that should be fully implemented, in Tanzania and elsewhere in Africa. But when there is no national champion pushing for them, like in other parts of the continent, trade corridors will not really benefit small farmers.

This also calls for more lesson-sharing across African regions, to make the corridors more efficient and agriculture-friendly. Tanzania and Mozambique could learn from each other: SAGCOT could establish an online-payment system so that trucks arrive at border with all fees and taxes already paid for, just like they do on the on South African side of the Maputo corridor, while the Maputo corridor should become more agriculture and smallholder friendly, by replicating some of the positive experiences of SAGCOT.

Date: 
Friday, October 5, 2012
Authors: 
FRANCESCO RAMPA
Source: 
ECDMP
Category: 
Dialogue news