Analysis: INA RUTHENBERG and TUGBA GURCANLAR
THE recently launched Zambia Agribusiness and Trade Project (ATP) marks part of an important shift in the mind-set for most Zambians. Most Zambians, most poor Zambians, and most Zambian women are still farmers, but agriculture is characterised by low productivity and a large amount of informality.
More importantly, the agricultural sector is still viewed as either a subsistence industry, or, at best, a side project for individuals with full-time jobs in other sectors. We hope that ATP will start to change that outlook, along with supporting income growth and shared prosperity for Zambians.
In concrete terms, ATP supports the agribusiness sector through a two-fold approach. The first component provides training and support to growth-oriented small businesses (SMEs) to help link them to larger markets, along with supporting farmers’ associations (producer organisations) to improve their production standards and alleviate key constraints such as connectivity, inadequate technology or access to critical know-how and market intelligence.
The project will support an estimated 4,500 farmer-households through producer organisations (what the project calls “Productive alliances in Zambia”), and over 300 “growth-oriented” SMEs, through an exciting new initiative called MarketConnect, so that they can meet standards set by attractive markets and immediately reap the benefits of their investments in quality and scale improvements.
The second component tackles the government policy and capacity side of the equation by supporting regulatory reform and financing investments that improve trade logistics and the standards of Zambian products so that they are better able to access regional and global markets. We estimate that the project will have over 30,000 direct beneficiaries, at least third of which would be women, but we expect it to reach many more Zambians through spill-overs thanks to the emphasis it has placed on building market linkages.
However, there can even be more possibilities to scale-up and expand if the expected results are achieved within the first three years of project implementation… Furthermore, raising emerging farmers and growth-oriented SMEs to the next level of competitiveness could go over and beyond the direct income and employment benefits, and have an important demonstration effect – which is that we can sustain and accelerate growth in Zambia while at the same time broadening its reach.
While the description of the project may sound complicated, its overall aim is simple: Grow the Zambian economy – through agribusiness and trade, by helping farmers, businesses and relevant government agencies improve their competitiveness. Even that may sound complex, so to break it down further, let’s take a hypothetical example.
Entrepreneur A – Mwila sells chili sauce, for which she sources chili peppers from a few of the farms in Lusaka Province. She’s only able to produce a small quantity per year because the farmers group represented by Evelyn can only produce during peak season and Mwila can only process a limited number of bottles at one time.
Since Evelyn and group are unable to preserve their product, that limits Mwila’s stock. Because of that, she can’t supply a large enough quantity for a chain like Shoprite, and she can’t finance expansion to support and fulfil their quality standards for packaging. Additionally, she’s unable to access certification standards because the process is too expensive and unclear.
The project can tackle Mwila’s and Evelyn’s farmer group’s situation from all fronts. Mwila can access support to help improve her quality standards, and the Evelyn’s association can request financing as part of a Productive Alliance sub-project to build a cold storage warehouse so that they can supply outside of the peak season.
Additionally, through MarketConnect, if she is eligible, Mwila can grow her business with a 360-degrees support program so that she can make strategic investments and decisions in market intelligence, sourcing, productivity, packaging and quality standards, which will allow her to work with major off-takers like Shoprite more consistently.
Evelyn and group, on the other hand, will receive financial and technical support to work towards a clear market opportunity – say a request to quadruple their production of high quality (high margin) chili peppers, as part of a wholesome business plan agreed by the Alliance, and supported by the project.
Meanwhile, the project will provide support to the Zambia Bureau of Standards (ZABS) to build capacity to help Mwila, Evelyn and their groups with their compliance and certification efforts in a cost and time effective manner. Overall, that would be a win-win-win. A win for Mwila, a win for Evelyn and her farmers’ association, and a win for the Zambian agribusiness industry overall.
The ATP project comes at a time of renewed sense of urgency for diversification and shared income growth and there are many reasons to believe that agribusiness and trade are the right places to start… In Zambia, commercial farming offers productivity gains commensurate with other sectors, as do exports by foreign investors.
Even more importantly perhaps, the regional and urban demand for food has been strong and is estimated to grow exponentially. At the same time, the growing middle class in Zambia is experiencing a change in diet, which is expected to increase the demand in value added beef, dairy, and poultry, as well as horticulture, among others. Based on the income, urbanisation, and population growth trends, we estimate that food demand in Zambia could grow more than threefold in the next 15 years, to over US$25 billion (from around US$8 billion today).
While demand is on the rise, meeting it with imports is increasingly more difficult due to the high costs associated, and retailers are eager to buy locally in a wide range of categories, as long as quality standards and quantity requirements can be reliably met by the local producers – both farmers and downstream agribusinesses.
For now, there are only a few examples of smallholders and SMEs meeting those requirements, as many are constrained by a lack of organisation and access to finance, business acumen, and poor knowledge of market opportunities and fundamentals.
This is a key prospect to take advantage of – in a sustainable way… Zambia could achieve import substitution and capture a larger share of this growing pie by strengthening the pillars of competitiveness for the agribusiness industry, which makes up more than 90 percent of the SMEs in the country – the most important engine of employment generation in any country…
In order to do so, it should address a number of critical regulatory and institutional challenges that constrain this sector’s performance, such as competition in key sub-sectors, or logistics efficiency, while supporting farmers and SMEs adopt appropriate know-how, invest in productivity, and connect to large and lucrative commercial markets across the country and abroad. This is what this project is set out to work on.
Gains for the Zambian agribusiness industry would translate into wider shared prosperity for the economy as a whole. While Zambia has made huge socio-economic strides over the last two decades, over 60 percent of the population still lives below the poverty line, and rural poverty is even higher. But growth in the agricultural sector could change that.
When we asked some of the Zambians involved in project discussions about their vision for its impact, their answers ranged from “seeing Zambian products on the supermarket shelves here and in other countries”, “Zambian products being available around the region”, “seeing livelihoods change”, to “inspiring people to take up entrepreneurship in the agriculture sector”.
We will do everything we can to make that happen. Today marks day one on a road towards that and we look forward to traveling it together as partners – Zambian farmers, SMEs, the local and regional industries, Government, the World Bank, and other stakeholders.
Ruthenberg is World Bank country manager for Zambia and Gurcanlar is the team lead and senior private sector specialist at the World Bank.