The Importance of Contract Farming to Small-scale Farmers in Africa and the Implications for Policy: A Review Scenario

Abstract

Introduction: Contract Farming (CF) has been largely believed to have the ability to promote the chances of Small-scale Farmers (SSFs) from less developed nations to participate in intensive agricultural production and lucrative export markets, thereby integrating them into the latest way of doing agri-business. Problem statement: A perennial issue of SSFs in Africa is a subsistence agricultural productivity due to lack of proper markets, credits and technology in recent years, aggravated by unstable prices of energy and food and lately by the global financial crisis. Methodology: The study is purely qualitative in nature, making use of secondary data (literature from journals, working papers, unpublished theses and other publications was analysed). The study reviewed CF definitions, the origins, evolution, models on CF, SSFs and CF, objectives, policy-issues and implications to conclusions and recommendations. Results: The study has shown that adjustments in agri-food systems globally are producing an increased new interest in CF as a supply-chain governance strategy. It has been established that small and medium size farmers in Africa are suppressed by market bottlenecks or unfairness, for example, restricted access to loan facilities, insurance and specialised agri-inputs at above-average costs. Conclusion: Government and the private sector must formulate contractual laws that will govern agricultural production and marketing agreements between agri-businesses and farmers in addition to establishing and strengthening contract-enforcing institutions to protect both parties contract from any contractual problems, for example, side marketing. Contract Farming brings out the best outcomes for farmers when they have sufficient bargaining power to negotiate the terms of the contract.

The influence of supplier development, in the form of contract farming, on performance in Zimbabwean tobacco industry

“…Incidentally, the auction system is plagued with uncertainties along most of the buyer and supplier performance metrics. This is evidenced by imprecise production quantities, unstable purchase prices that serendipitously swing from low prices to outrageously high prices, fuzzy quality standards, and erratic delivery schedules (Ncube, 2020). As an alternative to the auction system in 2004 the contract system was introduced in Zimbabwe.…”

Contract Farming towards Social Business: A New Paradigm

“…Contract farming has revolutionised the agriculture sector by improving agricultural productivity in both developing and developed countries. Realising the effectiveness of contract farming, non-government organisations, policy makers, donors, and researchers have proposed to governments, especially in developing countries, to promote and facilitate contract farming to enhance agricultural productivity [1][2][3][4][5]. Contract farming is a legal agreement between a producer (grower) and a buyer (agriculture firm) for a specific duration on predefined conditions, which offers agricultural inputs and economic resources to the producer, whereas the producer, in return, allows agricultural firms to control and educate farmers about the quality and quantity of agricultural product [6][7][8][9][10][11].…”

“…[12,13]. Researchers, such as [2,[14][15][16][17][18][19][20], have shed light on the drawbacks of contract farming. Researchers, including [14][15][16][21][22][23][24][25] have reported that many farmers regret participating in contract farming.…”

“…Additionally, refs [22][23][24][25][26] have raised concerns over the written contracts, including the legal language of the formal written contracts; missing elements or relational elements, even in very well-written formal contracts; weak judicial procedure; weak contract enforcement, especially in developing countries; and the inability of small-scale poor farmers to afford legal assistance in cases of contract violation by agricultural firms, leading to small scale farmers eventually losing their autonomy [2,26,27]. Relational informal contracts have been introduced as a substitute for formal contracts to ensure trust and transparency, especially in an environment where contract enforcement by third parties (courts) is weak.…”

Factors Affecting the Participation of Sugarcane and Tobacco Farmers in Farmer Groups, Associations and Cooperatives in Indonesia

“…Furthermore, in the marketing of agricultural products, farmer organizations increase farmer's bargaining power against buyers and intermediaries. Moreover, by acting collectively, farmers reduce marketing risks and transaction costs (Ncube, 2020) and have greater access to market information (Abu et al, 2016). These features will increase farmers' gains from selling their products and improve their welfare (Courtois and Subervie, 2014).…”