Assessment of agricultural contacts for market access in South Africa a smallholders' perspective

1. Objectives: This project intends to contribute to the on-going debate about whether and how restructured agri-food markets can provide viable market opportunities for small-scale farmers in Africa. It aims at analyzing contract farming from the smallholder perspective and at better understanding the implications for small-scale farmers regarding contractual arrangements, contractual choices and forms with processing and/or marketing firms. It also aims at assessing contract farming potential for poverty alleviation and at highlighting the conditions facilitating the integration of small-scale farmers in restructured markets. 2. Methodology: Studies conducted in South Africa will analyze farming systems and the livelihoods of farmers under contracting schemes. This entails the analysis of different types of contractual agreements linking small-scale farmers with processing and/or marketing firms leading to their integration into restructured markets. In addition it requires the examination of the local conditions and rural dynamics in which farmers engage in some type of contracting. Based on empirical research and a pluridisciplinary approach, the study will develop three major research topics: ? The characterization of small-scale contract farmers in terms of farming and marketing practices including product specificities; production system and system of activities; assets including land size, equipment, title deeds; and an assessment of their livelihoods conditions. ? In depth assessment of different types and forms of contracts in which these smallholders are engaged (i.e. specificity of contracts, opportunities, constraints and major obstacles) ? Analysis of the situations in which small-scale contract farmers operate, focusing on two levels: i) analysis at the community level to comprehend local agricultural product market dynamics, ii) local dynamics associated with national land and agricultural policies. 3. Significance of the proposed research: The modernization of markets, combined with the dismantling of international commodity agreements and the liberalization and restructuring of agricultural and agri-food markets, resulted in both the rise of supermarkets and the growth of contract farming in developing countries (Swinnen, 2007). Although contract farming could respond positively to the market access problems of small-scale farmers, the latter face many constraints on both the production side and the financial side. In this context, can African smallholders really benefit from contract farming? Is contract farming an effective way for smallholders to escape poverty? While the general trends of market restructuring have exclusionary effects on small-scale farmers, it is important to determine the suitability of contract farming (defined in its widest sense inclusive of marketing and production contracts as well as outgrower schemes) as a vehicle for linking small-scale farmers to agribusiness supply chains. Given the political imperative of social inclusion, it becomes necessary to analyze how to promote the conditions facilitating the integration of these farmers in restructured markets. 4. The research enabled to identify six types of contractual arrangements between farmers and buyers/agribusinesses: (i) Long term total integration contracts (Resource providing contracts); (ii) Short-term quasi-total integration contracts (Resource providing contracts); (iii) Production specification contracts (Production management contracts); (iv) Production management and market specification contracts (Production management and market specification contracts); (v) Certified market specification contracts (Market specification contracts); (vi) Ad hoc 'informal' contracts. Shaped according to and their efficiency depends on several internal and external factors. The results, however, show that contract farming is not a panacea for small-scale farmers. As such the results emphasizes pros and cons regarding con