Why smallholder farmer hubs help get to the roots of food security


We hear constant talk about job creation, food security and a more equitable society. Trade and Industry Minister Rob Davies speaks about improving and shortening regional value chains to bring down the cost of doing business and the cost of food, but little action results.

It is, therefore, delightful to see that the Spar Group has made a strategic decision to create fresh-produce hubs in designated rural areas in an effort to boost smallholder farmers and benefit consumers.

It makes total sense. At present, instead of the fresh produce grown in rural areas going straight to retail outlets in the vicinity, it is transported to urban distribution centres such as Johannesburg for processing and then trucked back again to the rural areas. Because of these logistics, farmers are paid less, consumers pay more and low-income families cannot purchase sufficient amounts of nutritious fresh produce.

Spar is teaming up with the Dutch government to build three decentralised rural hubs or what they call fresh assembly points. The company’s manager for the Rural Hub Development Project, Kenneth Carden, says it is putting up about 85% of the funding and the Dutch government about 15%. This includes infrastructure, assembly points and packhouse operations.

The first hub is already operational in Ofcolaco in the Mopani district of Limpopo, where Spar has 27 stores trading within 200km. The second is being established in Mpumalanga and a decision on the third should soon be finalised.

The aim is to have them all up and running by next December, with 100 trained smallholder farmers regularly supplying them. Each hub will be supplied by a group of about 30 farmers with about 1,000 tonnes of produce a year.

Carden says the hubs are based on a shared ownership structure that includes the producers and retailers. Spar’s goal is to transfer total ownership to the farmers after the hubs are operating sustainably. This way, the farmers will benefit directly from the value chain and supply local retail stores and informal markets. Any excess produce will be sent to the national distribution centres.

To help smallholder farmers increase production, the project requires technical assistance and agricultural know-how. the World Wildlife Fund -SA is partnering with Spar. It has a range of programmes such as climate-smart agricultural practices, increasing organic soil cover and diversified crop rotations.

Spar group risk and sustainability executive Kevin O’Brien says that sustainable investing to increase the production and profitability criteria for smallholder farmers is essential for food security, job creation and a growing economy.

Although the number of commercial farmers is plummeting at a worrying rate, this project is aimed at empowering smallholder farmers and communities with no previous access to the formal market.

The hubs are serving as a proactive implementation  model of the government’s agripark idea.

Farming is not easy and everyone involved has to be committed for the long haul, to the sweat equity and the understanding that there are setbacks beyond human control, such as drought. In the Mopani district, the borehole of a farmer participating in the hub has dried up. Spar is supporting her to overcome this problem because of her business potential.

Another major challenge facing smallholder, small-scale and communal farmers is their lack of access to credit to purchase inputs — because, in most cases, they do not own the land.

Without sorting out land ownership and security of land tenure in the land reform and restitution process, this problem will not be resolved. The government has to tackle this and agribusiness and the government have to ensure that mechanisms are in place to support food growers, large and small.

A similar small-holding farmer development model is being created in Zimbabwe in partnership with the EU. The EU believes this sector could effectively, efficiently and economically provide a platform for sustained and exponential growth with relatively small levels of investment. Zimbabwe is facing the same problems of drought and land ownership as SA.

Banks in SA and southern Africa need to be part of the solution so that farmers can access agrifinance when they need it. The hub farmers in SA will be able to do this because they can prove they are an owner in the hub and a supplier to a large firm such as Spar.

As GG Alcock, author of Kasinomics, points out, the method of determining credit viability based on the traditional “output” documents of financial statements needs to be rethought. Why not proof of invoices, delivery notes and the like, which are “input” documents? These are much easier to produce and probably more effective in determining the  viability of the business.

There also needs to be a more equitable basis for loans where the small businesses  are not charged such high interest rates to start or grow their businesses.

As O’Brien points out, until economic opportunity and growth is available to all communities, environmental and social concerns will be sidelined. The catch-22 is that it is self-destructive to marginalise these concerns.

Every person and business in SA depend on the environment and the critical ecosystem services it provides, such as water. SA also requires social stability to attract investment so that the economy can grow.

The decentralised hubs tackle all three factors — economic growth, social stability and environmental care.

They are a good start, and, crucially, the motive is based on a business relationship.

This is an example of a company putting its money where its mouth is. We need more and if the rural hubs are well managed, they will be an important pilot for the rest of the country and the region.

Prof Skae is director of Rhodes Business School. This article was originally posted in Business Day on 1 June 2017.