Food Trade East Africa

Food Trade East Africa

Food Trade East & Southern Africa is a five year trade enhancement and promotion programme, with a focus on staple food crops. Funded by the UK Government and implemented by DAI, FoodTrade ESA operates in nine East and Southern African countries Kenya, Rwanda, Tanzania, Uganda, Burundi, Malawi, Mozambique, Zambia and Zimbabwe and works with the private sector and relevant institutions to improve storage, inputs and service markets, information and coordination mechanisms and policy and regulation with the aim to get more people trading in regional staple food markets.

In its vision “To embrace a world class knowledge-sharing ethos that addresses regional staple food markets constraints by making information creation, collection, and dissemination the corner stone for effective change,” the Knowledge Hub provides an interactive platform among FoodTrade ESA stakeholders and other users to access and share up to date information, results and best practices from FoodTrade ESA investments and other programmes and projects in agricultural trade, policy reforms and regional staples value chains in a bid to promote knowledge sharing and learning.

Wellspring have been providing senior advisory support to FTESA and DFID, in addition to acting as the DFID nominee on a Joint Technical Committee to review the performance of GSOKO (commodity exchange, warehouse certification, standards) under the East Africa Grains Council (EAGC).

Following this Wellspring and partners at Darhei Noam have worked with a broad range of stakeholders, including rural commodity aggregators, warehouses, large regional offtakers/millers and banks to develop recommendations for new ways of implementing structured trade.

Broadly, our view, building on feedback by agribusiness and financiers, and working within the prism of farmer interests, is that it is important to shift the emphasis of farmer aggregation efforts – at least on the post-harvest side – from ‘supply push’ to ‘demand-pull’.

A ‘supply push’ approach to farmer aggregation is characterised by efforts to mobilise farmer produce into warehouses and then to sell those stocks to buyers. In this approach, the market signals are sent by the sellers to the buyers broadcasting the stocks available, the locations and the desired price. To date in G-Soko, EAX or Panex – as far as stakeholders have informed us – this can lead to fragmented and irregular stock levels, insufficient to be attractive to buyers, a challenge compounded by the perceived lack of reliability on the presence and condition of the stock at the warehouse, and the costs and complexity of managing small-scale rural collections. These challenges are exactly why large buyers have tended to prefer working with intermediaries rather than buy directly from the farmers.

By contrast a ‘demand pull’ approach is characterised firstly by engagement with buyers to structure and finance their procurement in a manner that creates sustainable opportunities for farmers, and then work with farmers to capacitate them to address these opportunities. In this approach, the market signals are sent by the buyers to the sellers, broadcasting the quantities, locations and price (spot and forward). Such an approach can create win-wins backwards along the value chain. It builds on three pillars:
• the starting incentive is procurement efficiency and financing additionality for the agribusiness – a hard bottom line motivation that provides a foundation for commercial sustainability;
• this translates into more predictable, stable and attractive terms of market access for producer groups – market-driven spot and forward prices they can access, back-ended into financing solutions that deliver the necessary cash in hand at time of collection and a competitive market-driven price thereafter;
• a strengthened aggregation function with empowered ‘brokers’ providing genuinely value-adding intermediation, with or without village-level aggregation infrastructure, according to what works best on a case-by-case basis.