In the first post of this blog series, we traveled to the center of Côte d’Ivoire during rice harvesting season and met two people whose livelihoods depended on the outcome: Sali Soro, a smallholder farmer and member of a regional rice cooperative, and Zié Coulibaly, director of the Katiola rice mill.
Their stories illustrate the challenges faced by local farmers and millers and show how the chain is not reaching its full potential in contributing to poverty reduction in Côte d’Ivoire.
The potential for a win-win
Improving agricultural productivity is at the core of poverty reduction in Africa. Better technologies such as improved seeds, irrigation systems and mechanization services, and access to higher-value markets which yield better prices are key ingredients to accomplish this. But they are typically out of reach for most smallholder farmers. They don’t have access to credit and don’t deliver the volumes and quality needed to be able to penetrate these higher value markets. At the same time, following urbanization and a growing middle class in many African countries, the domestic demand for a consistent supply of high-quality food is expanding rapidly, with the gaps now largely met by imports, from within and outside the region.
Value chain development could result in a win-win for all. The approach simultaneously addresses the constraints of the different actors within the chain (input providers, producers, processors, and distributors), thereby reducing transaction costs and boosting overall efficiency of the chain. This potentially creates a win-win for all actors, with the transaction conditions and division of the value added typically stipulated in a contract. Could this also be a solution for the Ivoirian smallholder rice farmers? As the economist usually has it, it depends.
The first step would be getting smallholder farmers to participate in value chains. This is more likely if buyers have limited options to source from large farmers, and if they can enter enforceable contractual relationships with smallholders. The latter in turn depends on the potential for value addition and the specificity of the crop or product. The higher the value added and the more specific the product requirements are, the easier it is to incentivize farmers to uphold the contract by giving them a higher price and the less opportunities there are for side-selling by the farmers or sourcing from other farmers by the firm. For these reasons, contract farming has more often been observed for cash crops and high-value products such as vegetables, fruits, poultry and dairy: not for staple crops like rice.
Second, transaction costs are also important. From the perspective of buyers and suppliers of credit and farming inputs, entering a commercial relationship with many farmers is costly given the many transactions this involves, including to monitor them and ensure good quality products. Farmer organizations and productive alliances can help reduce these costs, while also brokering a greater share of the value added for their members.
Third, equally important is having reliable buyers with the capacity to buy, process and sell to high value markets. Larger firms have often been privileged for private sector-driven value chain development. Yet smaller firms, which are closer to farmers and typically less capital intensive, thus having greater potential for job creation off the farm, can equally fulfill this role. But these firms often need support to overcome challenges ranging from managerial capacity and information gaps to limited access to finance and markets.
Lessons from abroad
Studies of the horticultural value chain in Senegal and Madagascar found that inclusive value chain development contributed to a significant drop in the poverty rate. But what about the experience with contracting in staple foods? A rice contract farming project in Benin built around the cooperative production-processing model like the one Soro and Coulibaly are a part of in Côte d’Ivoire led to expanded rice areas, intensified rice production, increased commercialization of rice, higher prices at the production sites, and ultimately increased farmer incomes.
Encouraged by these insights from the literature and the experience from Benin, the Government of Côte d’Ivoire has embraced the idea of inclusive value chain development. It is now testing such an approach in the context of a social safety net project. Whether it will suffice to overcome the challenges related to value chain development for smallholder rice farming in Côte d’Ivoire remains to be seen. But then again, we won’t know if we don’t try it out and carefully evaluate it.
This is the second post in a blog post series exploring why and how developing the rice value chain can improve job opportunities for the rural population in Côte d’Ivoire. It draws from the literature as well as extensive consultations with public and private stakeholders of the rice value chain and field visits Côte d’Ivoire .
Rising with rice in Côte d’Ivoire 1: How local farmers and millers are leading the way
Rising with rice in Côte d’Ivoire 3: The contours of a pilot project
Rising with Rice in Côte d’Ivoire 4: Rice in Côte d’Ivoire is Big Business That Depends on Small Firms
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