Technology can enable smallholder farmers to access markets, locally and internationally. They could, for example, use technology to take advantage of the growing global demand for fruit. Fruits, particularly citrus, are in great demand because of their health benefits. There are real opportunities to expand in global markets. Here too there are platforms already in use. For example, Ghana’s Mergdata, multinational Esoko, and South Africa’s Phytclean offer traceability. They also offer farmers training on meeting buyer specifications, market data, and official e-certification.
Small-scale farmers in the region, however, face some challenges with adopting technologies. Some are relatively expensive. There is also the concentrated nature of agro-processing and agriculture value chains. These may result in SME farmers either being excluded or adversely incorporated into technology driven supply chains. This would force them to incur high costs of upgrading their technologies but receiving limited rewards.
One way around this is for governments to work with the private sector to provide smaller players with support. This includes using existing supply chains and programmes – such as those driven by supermarket groups.
Developing supplier capabilities
In the past, South African supermarket chains have helped small suppliers meet food safety requirements. They did this by providing technical assistance, business development and market readiness. They have also assisted them with climate change risk mitigation, access to infrastructure such as packhouses, irrigation facilities and distribution centres.
The impact of these programmes was limited because they were ad hoc and in place for short periods. They were typically undertaken as part of corporate social responsibility and done to comply with the country’s measures aimed at increasing the participation of black South Africans and firms in the mainstream economy.
Interviews for our research conducted with some supermarkets suggest that there is a positive move toward more long-term, commercially oriented and mutually beneficial programmes. These go beyond limited corporate social investment or responsibility initiatives. With this approach, supermarkets ‘project manage’ a supplier, using turnaround strategists and industrial engineers. Financial managers assist a supplier with the management of working capital, which is a key constraint for small businesses.
This approach can help improve the efficiency of a supplier and reduce warehousing and transport costs – all of which should also benefit a supermarket chain.
There are potential downsides too. The close management and tighter control exerted by a supermarket over a supplier can lead to governance problems, including a lack of independence and control over company decision making for SMEs. The arrangement can also give a supermarket chain stronger bargaining power, leading to poorer terms of trade for the SMEs.