Agricultural Business Linkages Project: quick guide

What we do

The objective of the Agricultural Business Linkages Project is to make agricultural input markets work better for the poor by increasing the absolute and relative participation of about 4,000 small-scale emerging producers in the mine-sending areas of the Eastern Cape in high-tech agricultural input markets and so increase their margins.

Why this intervention

The Northern parts of the Eastern Cape in the former Transkei are notoriously under-serviced with general infrastructure. As a result, farmers in this area are completely isolated from agricultural businesses and markets. Market isolation, lack of capital and low levels of skills development limit livelihood opportunities, resulting in a high level of poverty. Socio-economic surveys have revealed average annual family cash incomes to be extremely low and largely made up of wage remittance provided by migrant labour and state welfare payments.
Although many of these households have access to agricultural land, agriculture's contribution to household annual cash income varies from o% to 10%.When this project was initiated, trading volumes of high-tech inputs were particularly low - attributed to the poor availability of product information and the absence of an efficient low-risk distribution and payment system. These inputs are not only high-value and perishable, but contain genetic capabilities that give farmers considerable production advantages and efficiency. Vegetable seedling, day-old chicks and potato seed supply markets are the main focus of this project. Although the standard inputs such as fertiliser and maize seed are not neglected, some market supply infrastructure was already in place at the start of the project for these products through local trading stores. However, none exists for the higher-value inputs, as these suppliers have never traditionally viewed emerging farmers as a potential target market. Lima works directly with a number of private sector input suppliers to develop an alternative marketing, administration and distribution system that considerably reduces emerging farmers' transaction costs and increase the consumption of high-tech agricultural inputs.

What we achieve

Successful input market development activities to date include:

• The establishment of a direct linkage between vegetable seedling & day-old chick suppliers and emerging farmers.
• The establishment of a direct linkage between bulk input suppliers and emerging farmers for inputs such as fertiliser and maize seed.
• The facilitatation of a system of order placing with suppliers using cellular communication and short message services.
• The facilitatation of a system of payment that relies on electronic banking as well as branch banking networks.
• Building relationships with transporters to set up appropriate, cost-efficient delivery systems.
• Ensuring extension farmers receive ongoing support from input suppliers so that they are able to advise farmers on input usage.

How is this sustainable

While a broad-based agricultural development programme such as the Agricultural Business Linkages project is necessary to kick-start rural development, without the full integration of these farmers in to commercial value chains, the sustainability of this intervention and thus its impact is limited. The true commercialisation of these farmers entails breaking down their isolation and incorporating them into the mainstream of agricultural business. While subsistence farming can be undertaken independently, commercial farming relies on a range of service providers, advisors, suppliers, processors and markets. Effectively integrating the emerging farmer into the agri-business system is the main challenge of the project.
Once these linkages have been fully established, they will be sustained by the underlying logic of this transactional relationship - input suppliers recognising the business opportunity emerging farmers represent and emerging farmers recognising the productivity gains which can be made by the use of agricultural inputs.

Who we work with

LIMA Rural Development Foundation

Lima provides an integrated rural development service to rural communities, through the establishment of appropriate institutions, local economic development and training to empower rural people - particularly women - in their own development efforts to overcome poverty.