Burden of producing under contract

maizeMoses Moyo Correspondent
Producing commercial crops under contract exposes smallholder farmers to a myriad problems. Farmers are increasingly exposed to multinational corporations which come in as foreign investors, but are the proverbial “wolves in sheep clothing”. According to statistics, since the advent of land reforms, at peak in 2012, 88 536 mostly smallholder farmers have become involved in tobacco production. By late 2015, the figure dropped by 20 percent to 70 412. Promising lucrative global markets turned to losses, with prices crashing from a peak of $5/kg to 2015’s low of $0,20/kg.

Tobacco farming has always been associated with successful large-scale commercial farmers. The 5 000 farmers who were tobacco farmers enjoyed high profits and riches. Indeed, in 2000 the Tobacco Industry Marketing Board reported a record harvest of 206 000 tonnes which raked in $500 million in foreign currency. Following the land reform programme of 2001, politicians and community leaders urged smallholder farmers to take up the production of tobacco. This new farmer was expected to emulate or surpass all production records set by the colonialists, who had just lost the land.

The success of white commercial farmers centred on their control of financial markets, and their close connections to Western tobacco cartels. With full information on the operations of the cartels, quality and market requirements, the white farmers always made huge profits. There was nothing to lose, cheap labour was abundant to exploit, and all that was needed was to manage. After all, it was the African labourer who toiled in the sun, facing all the hazards associated with tobacco production.

Producing tobacco requires heavy investment in special purpose structures and working capital. The take over of farms saw most smallholder farmers occupy periphery areas with no infrastructure, while the urban elites inherited most of the farm infrastructure from the departing whites. Nursery facilities, and barns for curing tobacco became private property, and the poor smallholder farmer had to improvise. Financial capital, inputs and know-how suddenly dried up. Efforts by Government to provide service hit a brick wall and in 2004 the first contract farming arrangement was born. Farmers were in dreamland, with the new capital they hoped for higher profits.

Twelve years on and the smallholder farmer is still moaning. The Look East policy that brought in Chinese contractors with a high appetite for commodities never delivered the requisite infrastructure and capabilities needed for tobacco production.

The white farmer had access to finance to build quality barns, acquire grading facilities and farm equipment, and had working capital necessary for the production of a quality crop. However, for the inexperienced smallholder farmers, the contractors only provided inputs at high interest rates and the vicious cycle continued. Meanwhile, the barns, grading facilities and equipment left by departing white farmers are now obsolete, and underutilised by the few urban elites as there are busy with other ventures.

Each marketing season is greeted by falling prices, lower than the preceding year and below the marginal cost of production. The neo-liberal cartels’ stock hoarding tendencies are not readily known to the poor farmer. The tobacco cartel continues to accumulate more stocks at prices far below the cost of production. Pressure from the World Health Organisation and anti-tobacco activists to reduce smoking will certainly add to the farmers’ misery.

The end of the marketing season brings yet more misery to the smallholder farmer. This poor farmer now realises that he never understood the meaning of the paper he had signed and left at the office of the contractor. The contractors claim some of the farmer’s assets, cows being the primary target, to recover every cent they advanced to the farmer. The politician who actively encouraged the farmers to enrol with contractors disappears into thin air. There is no one to protect the poor uninformed farmer.

As the moaning turns into despair, the farmer ponders his next source of livelihood, the farmland is now a desert. Trees were cut to provide energy for curing tobacco. Rivers are drying up. It no longer rains as it used to do, and environmentalists say it is because of too much carbon emission from the coal the white farmers used to cure their tobacco. Insecticides and other chemicals used in the fields have left the farmer sick and weak, wondering where the next meal will come from.

Surely farming remains the most feasible option for the smallholder farmer to escape poverty. Due to the complexity of the value chain and modern marketing channels, Government needs to regulate and educate the farmers, and establish institutions that protect the farmer. The contract farming policy is a step in the right direction. However, a policy needs to be transformed into a binding regulatory framework well supported by grass-root institutions that can interpret the new farming order.

The success of smallholder farming also depends on understanding the global value chain system and agricultural markets. This can be achieved through information systems championed by rural institutions. Information on markets, farming methods, risks and contracts can easily be communicated through linkages with the rural governance system. This requires Government systems that are interlinked with traditional rural governance systems.

The smallholder farmer weaned from Government care by the International Monetary Fund’s structural adjustment programme now cries for more Government care. It is care of a different nature; care that will empower the farmer with information — protective institutions that are the basis for self-determination. Only the Government can intervene to ease the smallholder farmer’s burden of producing under contract.

  • Moses Moyo is a development economist, with interests in rural development.

 

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  • Graaf

    Which statements are not factual according to you? YOU are the one making a sweeping statement that is not factual.

  • Graaf

    Good article, but forget about Government intervention to salvage the situation. Government only knows how to cut off its nose to spite its face.