Effectiveness of Agriculture Development
Reflections on a year in the field
Originally posted on July 2, 2012
After the better part of a year working for Negros Women for Tomorrow Foundation (NWTF), a microfinance institution in the Philippines, I decided to head west again – specifically, to West Africa. In late 2010, I moved to Ghana to work with TechnoServe, a non-profit specializing in market-driven solutions to economic development. This is really just a fancy way of saying that TechnoServe recognizes the importance of competitive markets in creating jobs for people living on less than a few dollars a day.
My mandate was a bit nebulous at first (and for the bulk of my time in Ghana). I was seconded to another organization – ACDI/VOCA – on a $30 million USAID project called ADVANCE (an acronym standing for Enhancing the Agriculture Chain in Ghana, or something like that). The project was a bit dysfunctional, having undergone substantial personnel changes when I arrived (the Chief of Party and Technical Advisor – the equivalent of the CEO and COO – either quit or were fired after being significantly at odds with one another over the direction of the project.
The methodology of the project was something called “Market Facilitation,” a relatively new and trendy approach to catalyzing positive change in the agriculture sector. For a much more detailed overview of what it is, my good friend Mark Brown with Engineers Without Borders Canada has a great overview at his blog, Kulemela. But I will give the quick and dirty.
In the past, most projects were unsuccessful because they were both short-sighted and unsustainable. They were short-sighted because the interventions focused on supply rather than demand. In other words, development agencies would provide fertilizer and tractors and other implements to improve yields for smallholder farmers. Yet, without simultaneously improving the infrastructure and building the market for the higher product volume, increased crop yields actually had the adverse affect of driving down prices, as there was nowhere to sell the surplus except for the same markets as before, which now had greater leverage in negotiation. And it was unsustainable because, once the funding for the project was complete, the gravy train would grind to a halt, and the tractors would sit in a garage somewhere – if they were lucky – broken-down and rusting away into oblivion. And a butterfly flaps its wings.
The logical response to these failures was to focus not on the production side, but rather the markets. Work with the buyers to develop their capacity to handle greater volumes, and they, in turn, will invest in suppliers to handle increased demand. Assisting a maize aggregator (a term for the middleman buying and selling the product) to get a loan in order to purchase an tractor-mounted maize sheller (a device that removes the kernels from ears of corn) which not only create an alternative source of income for them, allowing them to buy more maize from more farmers, but it will also save time by eliminating manual shelling. This is an example of a win-win situation that benefits the entire market in a sustainable way.
Market facilitation, specifically, tries to catalyze these connections. For example, on one side, a Swedish jatropha company in the northern part of Ghana has 40 tractors that it uses only during the planting and harvesting season, leaving them idle for the remainder of the year. On the other, a group of aggregators buying maize and soyabeans from more than 1,000 farmers needs tractors to prepare the lands for planting. Connecting these two entities in a mutually-beneficial business relationship creates a sustainable partnership, where the jatropha company earns additional income from maximizing utilization of its equipment, while the aggregators solve their tractor problem. In another example, a large juice manufacturer needs a reliable source of pineapples, mangoes, and citrus to keep its factory running at full capacity, while groups of small- to medium-sized farmers have no market for their products, other than the local “market women” – the aggregators who purchase for domestic sale. By connecting the two groups, the juice manufacturer can establish lasting partnerships, supplying farmers with inputs in exchange for a guarantee of the final product at a fixed price.
It is an elegant idea that works well in theory, but less so in practice. For one thing, relationships between buyers and sellers in these agriculture markets are notoriously plagued by years of mistrust. On this blog, I put up a guest post from Mark of EWB detailing this problem. The juice manufacturer says it needs twenty tons of pineapples, and then, when it comes time to purchase, scales back due to capital constraints and only buys ten tons, leaving the farmers with the remainder rotting on their farms. And, because of poor management, the manufacturer fails to pay the farmers for three months, leaving the farmers in the lurch. On the other side of the coin, the manufacturer provides fertilizer, seeds, and equipment to the farmers on credit in exchange for a guarantee of their products. But, come harvest time, the farmers find a better deal elsewhere and sell their crops to someone else, leaving the manufacturer out thousands of dollars and without produce for its factories. These are the realities of dealing in these markets.
Needless to say, the challenges are great, as I have written about before. And, while I feel the idea of market facilitation has merit and has seen some successes, particularly in cash crops like coffee and cocoa (differentiated from staples, like rice and maize), where the markets are ready to handle any volume that comes from the farmers. But, on balance, I think that the forces affecting agriculture markets are complex and global in nature, and the problems cannot be simplified to a lack of communication between buyers and sellers.
It is true – communication is a major impediment to efficiency in developing world agriculture markets. That is why many companies, like Esoko in Ghana and M-Farm in Kenya – are leveraging the penetration of mobile phones to close the knowledge gap between buyers and sellers. These companies offer subscription-based services that allow farmers to check prices in various markets around the country, preventing them from being ripped off by middlemen. They also allow the juice manufacturers, as an example, to communicate order sizes directly with their farmers. This creates a more efficient system, but does nothing to really address the underlying factors influencing these markets.
First of all, agriculture is truly a global industry. In the United States and other developed nations, agriculture production is highly subsidized, where large industrial farms are actually paid to produce more than they can necessarily sell on the open market. When the government explicitly agrees to purchase the surplus, there is little incentive on the part of the farmers to manage their farms according to market demand. Much of the excess corn in the country is either utilized for biofuels and, to a lesser extent, food aid. What’s more, industrial agriculture farms are able to leverage incredible economies of scale, in the form of mechanization, irrigation, and bulk-buying of inputs. These two factors allow large-scale farms to produce at far lower costs, rendering smallholder farmers – which comprise the bulk of the poor in Africa – uncompetitive in all but the local markets.
I once caught a ride back from a citrus stakeholders’ meeting in the central region of Ghana with a pineapple grower and importer of fruit-fly traps from India that protected mango trees from the insects that decimate the crop. My friend Mark, who worked with Engineers Without Borders Canada, knew them from his work with mango farmers in the Eastern Region, and he finagled a ride back to Accra for us. We were working on three hours of sleep after partying with a group of Canadian journalists and he promptly fell asleep in the back seat, leaving me to carry on the conversation for the two-hour ride.
At one point, I asked him what he thought of organizations like mine and USAID in general. He had a tendency to use me as the embodiment of the aid industry in general, and told me that I was the like the defense lawyer for the criminals. In other words, here I was, trying to improve the competitiveness of the agriculture sector when my government, or, more generally, the entire industrial-agriculture complex, was responsible for creating the problem in the first place. I thought that his characterization, while a bit harsh, had some merit.
Aid, as I have discussed in this blog, is one of the three D’s of foreign policy: defense, diplomacy, and development. It is the hearts in the phrase “winning the hearts and minds.” Being so, the work is certainly not borne entirely, or even at all, out of altruistic motives. Instead, it is one way of winning sympathy and gratitude from people whose governments we need to provide favorable trade agreements and ally with us against our enemies. In East Africa, for example, Uganda has moved up in stature with the U.S. government for its willingness to send troops and lead AMISOM – the UN peacekeeping mission in Somalia. Al-Shabab is one of the more pressing threats in the eyes in the U.S. state department, given its ability to operate freely in the lawless country and its track record for recruiting disaffected youth from American cities like Minneapolis. Kenya, on the other hand, is viewed as relatively weak, as its military has done little in the region, save invade Somalia six months ago and fail to take full control of the key Al-Shabab stronghold in Kismayo. When a country scratches the back of the U.S., it is more likely to scratch back in the form of government-to-government aid and development funding through mechanisms like the Millenium Challenge Corporation (MCC).
With this in mind, it is no surprise to me that foreign aid – particularly within the agriculture sector – is ineffective. The incentives are completely misaligned. In the zero sum game of global commerce, a stronger domestic agriculture sector in a country dependent on imports from the U.S. will adversely affect our own farmers. If donor countries really wanted to end food insecurity once and for all, it would be relatively simple: eliminate import tariffs on African agriculture products, end agriculture subsidies for maize and other crop productions, and regulate commodity speculation more closely. I am not necessarily advocating any of these things, and I understand why they exist. I’m just saying that it would work. Instead, the most important thing about these projects is that every single piece of literature, sign, poster, or whatever else have the following words displayed prominently: “From the American People.”
Aside from the fact that agriculture is a global business and donor countries must look out for their own interests above all else, the execution of agriculture development projects is generally poor. I once had a discussion with some friends in Ghana about looking at the impact of projects like ours on the hospitality sector. I wouldn’t be surprised if 25% of the $30 million allocated to the project I worked on went to hotel rooms. With per diems of $100-150 per day, people could do a lot of damage with very little oversight. This frivolous attitude toward spending was a bit troubling in my mind, particularly since the young field staff were required to ride motorbikes, which resulted in the death of one person and multiple broken bones to others, some of whom were good friends of mine.
Most of the emphasis in these projects seems to be on placating congress more than anyone else. The monitoring and evaluation department called the shots most of the time, demanding that the field staff just “get the numbers.” In other words, if congress says to train 1,000 farmers, then go train 1,000 farmers, regardless if that is in the best interest of the people being trained.
I have one particularly vivid memory of arguing fiercely with the head of one of the sub-contractors responsible for the horticulture segment of the project. I said that we were wasting our time by working with small-time juice processors and needed to focus our attention on the big guys. He insisted that working with small processors – none of whom had the business acumen, capacity, or capital to scale – was the only way. After we reached an impasse, he walked inside and brought back a piece of paper, which he slammed down on the table in front of me. It was a list of the indicators and targets given to him by ACDI/VOCA, which ultimately came from USAID and the U.S. Congress. All of them pointed to helping the small guys. “In this world,” he said, “there is what is, and there is what should be. Until someone starts paying me for what should be, I am going to give them what is.”
That, for me, summed it all up. It wasn’t as if this man did not get it. He knew that what we were doing didn’t make any sense. It is just that his financial incentives were not aligned with doing what works. So, unfortunately, he has to do what doesn’t work.
That moment represented the turning point in my opinion of government aid projects. I detailed my frustrations in a post comparing the emphasis on stats to that of the police department in the TV show “The Wire.” From then on, I began looking for something new. I wanted to return to something more organic and grassroots, where people were motivated and given the freedom to be creative and proactive. I decided that Kenya – more specifically, Nairobi – was the place where I could find all that. So I booked a flight, quit my job, travelled around Ghana for a month, boarded a plane, and set out to become inspired again.