LOCAL MARKETS FIRST

We live at a time where the so-called ‘trickle-down economy’ is failing spectacularly all over the world. If statistics aren’t convincing enough, then take note of what the world’s third richest individual, Warren Buffet, said: ‘The tsunami of wealth didn’t trickle down. It surged upward’. We need to build value chains bottom-up and make sure a fair share of the value created remains at the base of the pyramid.

THE LOCAL FOOD MARKET

Currently, poor countries with more than 80% of their population engaged in agriculture are importing food. To change this paradox, we have to start where subsistence farming has the potential to become commercial farming and thereby cover the demand for food. Nutritious food for the local markets, produced effectively with a profit, is where we may find a strong foothold for the poor. Smallholders are at the same time producers and consumers, sellers and buyers. This local value chain has only a few missing pieces. Our ‘investment kits’ address these and are used to kick-start the development of a future value chain with more players and better logistics.

A BOTTOM-UP APPROACH

The transition from subsistence farming to commercial success can be achieved in small steps since nutritious food is needed both in the family and the immediate neighbourhood. The fact that the local, unstructured market can absorb the first increase in production is a huge advantage. By selling in the local market first, or to the nearest open-air market, growth comes step by step. Long before access to the structured urban market is a reality, value creation is increased through higher efficiency and better products offered locally.

RURAL ECONOMIC DEVELOPMENT

Since a large proportion of the workforce in most African countries remains engaged in agriculture, strategies for economic development cannot ignore the millions of smallholders. Greater profits in farming will generate greater expenditures by millions of people in rural areas that fuel the transition to a more diversified and robust economy.

The main finding in John W. Mellor’s study ‘Agriculture Development and Economic Transformation’ is that small commercial farmers are the ones that create the greatest ripple effects for economic development in rural areas in low-income economies.

In countries where the majority of the population is rural and far away from modern supermarkets, smallholders have a unique advantage: a huge local market. With increased efficiency and new products, they can explore this huge market as a steppingstone and work their way up to the structured market step by step. As the number of participants in this program increases, their purchasing power will attract and create suppliers of goods and services as well as off-takers that link them to a larger and more structured market.