French beans to Tesco's

One of the great Kenyan success stories in recent years has been the growth of the horticulture industry, serving the European market with air-freighted fresh produce ranging from flowers to fruit and vegetables. The industry has its share of detractors - particularly from the environmental and health & safety lobbies - but its economic impact has been huge - to the extent that in the space of 30 years it has gone from zero to be Kenya's largest export industry.

Last week, I was lucky enough to attend the AGRA/ILRI-sponsored conference on the subject of making agricultural markets in Africa work more effectively and efficiently. Among many interesting papers presented was one by Miet Maertens of Leuven University on the growth in high value export markets in sub-Saharan Africa. This paper stood out because it contained hard evidence of the economic impact of the horticulture industry at a household level (something which is all too often ignored in favour of the heart-warming but meaningless anecdotes which pervade the development world).

In brief, the paper concluded that high value trade in fresh produce has a significant and substantial quantifiable impact on rural development and poverty reduction. These effects occur both at the producer level (where farmers grow for exporters) and through the creation of rural labour markets - where there is also a substantial gender bias in favour of women.

My view is that there are numerous other benefits resulting from the fresh produce industry which may be more difficult to quantify than household incomes, but which are no less important. For example, without the massive injections of cash into rural economies brought through employment and the sale of produce, a whole network of small trading and service businesses would be at risk. Access to schooling and healthcare would be restricted. Because export standards are high, significant quantities of produce do not make the grade. Export reject produce is sold in the local market or consumed at home (with attendant nutritional benefits). Farmers have learned new skills and developed new farming techniques and greater exposure to crop protection products. Employees have access to training and advancement opportunities - and the precious practical experience of learning from systematic and organised business administration, agricultural technology, food standard compliance and so on.

The standards required by importers have also thrown up business opportunities. One of AAC's first investments was in a business called Africert. Africert is accredited by a number of international standard-setters to audit producers and issue a range of certificates confirming adherence to the required quality standards. This is an essential link in the export produce value chain, ranging from tea and coffee to fresh vegetables and flowers - since without it high value markets would be closed.

Like most agribusiness, it's easy to throw stones and criticise the fresh produce industry. In comparison to the ultimate $2 dollar selling price of a 500g pack of French Beans in Tesco's, the grower's share of a few cents is tiny - but it's a share, nonetheless, that wouldn't otherwise be there, and it's a share which offers an better income-earning opportunity than alternative crops (otherwise the grower wouldn't do it). Employees don't earn much, but they create a market price for labour and generate tax revenue for local and national Government.

So don't knock it. Support it.

Africa for sale

There has been a spate of announcements and news items in recent weeks about the acquisition of African land by foreign governments and investors for the purpose of food production. While not quite on the scale of the colonial era, this trend raises numerous questions over the role of government, over food security, over land ownership and over the rights of African smallholders and pastoralists (who, one fears, will be displaced from customary land to make way for large-scale agriculture).

Many economists seem to think that this is a good thing. They point to employment creation, infrastructure investment and increased agricultural efficiency. To be sure, in an environment where population growth remains rapid, where inadequate infrastructure hampers communication and distribution and where agriculture is, in general, extremely inefficient, the potential benefits are substantial.

And that's the key word - potential. Historically, I am sorry to say, Africa is littered with investment failures in large scale agricultural projects. Most famous among these is the Tanganyika groundnut scheme. This plan, to cultivate a large area of modern-day Tanzania with groundnuts, was a catastrophe in every way (see Wikipedia http://en.wikipedia.org/wiki/Tanganyika_groundnut_scheme for the full story - which is almost comical in its catalogue of disaster). It is, however, by no means unique.

The latest investment fad has centred around the production of biofuels and, in particular, a plant called jatropha curcas. This plant, it is claimed, will yield four times as much fuel as soya, and will thrive in semi-arid conditions unsuitable for almost any other commercial crop. To go back to a theme running through this blog, just remember, if it sounds too good to be true, it probably is.

What can the new investors learn from past and present mistakes? Three things stand out: the importance of research; experimentation and pilot programmes; and the need to invest in management and training. Simple, really.

Leaving aside these long term issues, let's hope that the details of these transactions are made public and that the proceeds are used first to compensate smallholders and pastoralists who have been or will be affect by the proposed developments, and second to invest in long term improvements to infrastructure. Sometimes it's good to be an optimist: in the words of David Landes "...pessimism offers little more than the hollow satisfaction of being proved right"