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Not by technology and money alone – blog #5
Publicado el: 17 - noviembre - 2017
More loyalty and commitment in long-term farmer-firm business relationships – A blog series on the importance of relational capacity strengthening in local agribusiness partnerships
In March 2017, 2SCALE1 consortium partner ICRA organised a review and capitalization workshop. ICRA agribusiness trainers, who have been training and coaching supply chain actors in the 2SCALE programme for several years, came together from Benin, Ghana, Mali and Nigeria. The objective was to collectively reflect and draw lessons from their work. The gathering included a write-shop to translate these lessons into stories. This resulted in a booklet of 15 stories illustrating the importance of strengthening functional capacities, i.e. relational and organisational “soft skills” that make local actors function better in their value chain as agribusiness partners. Each blog in this 6-weeks series showcases two stories from this booklet and highlights how the stories address a specific theme in agribusiness development. This week features stories on loyalty in farmer-firm relations and the governance of sustainable business relationships.
Loyalty in long-term business relationships
Issues in agricultural value chains are generally positioned between farmer groups and their off-takers. More specifically, ‘side-selling’ is often perceived as a recurrent problem. Typically, lead firms accuse farmers of “side-selling” produce to local markets or traders instead of to them, even where there is no (written) pre-agreed contractual arrangement concerning purchase and supply. These firms often start their sourcing activities in a rather centralised way. Intending to support farmers to increase productivity, they themselves (sometimes with help of a partner organisation) provide agro-inputs and credit directly to farmers and collect from them (the major part) of their harvest. Depending on the type of commodity, there are however often other market outlets that may be more attractive for farmers to sell to in the short run.
As such, firms often discover that the provision of inputs and credit is not a guarantee for sustainable sourcing of raw materials and that more is required to ‘construct’ loyalty and long-term relationships with farmers. As expectations and interpretations of the importance of sourcing arrangements often differ between business actors, or are not clear, simple solutions such as trying to legally enforce contracts often do not work. Therefore, ICRA’s capacity strengthening in 2SCALE focuses on the relationships between actors, seeking to resolve these issues in a social and interactive manner by developing mutual understanding of the diverse perspectives of different stakeholders through reflection sessions. In this way, it is usually possible to find other ways of improving business arrangements and loyalty among business partners. The following cases from Ghana and Mali illustrate this process.
People, perennial pineapples and partnerships: Making it happen in Ghana
“Some emails you get can colour your day or make you walk with a jump like an excited teenager. As agribusiness trainer of ICRA within the 2SCALE pineapple partnership in Ghana, I – Benjamin Atidjah – got one such email on the 21st of March, 2017. An extract: “… Pepawani Block Farm who harvested his pineapple … reached the record yield of 28 tonnes. Everybody is very happy and proud … our best wishes and kind regards.” The email came from Veronika Hofer, leader of the technical sourcing team of HPW Fresh and Dry Ltd - and I read it again and again”.
HPW Fresh and Dry Fruits ltd (HPW) is a medium-sized company involved in dry processing of fruits such as mangoes, pineapple and coconut. A large percentage of their processed dried fruit products is exported to Europe and distributed to local supermarkets. The main challenge of HPW is to get a regular supply of pineapple at a steady level of quality that satisfies its various export and local markets. The pineapple market is a competitive space as other companies also source the same raw materials, leaving HPW all too often at the mercy of the producers. Despite agreements to sell to HPW, farmers still regularly sell to other buyers and processing companies. When the 2SCALE project began to engage with HPW as the lead firm of this dried fruit partnership, the idea was to find a solution to this perennial pineapple sourcing problem.
I started working on this problem by facilitating coaching modules on building business relationships and on financial education, adapted for the nine farmer cooperatives linked to HPW. In each of the nine cases, we had not only invited members of the cooperatives, but also other local value chain actors, including transporters, input dealers, credit providers, and some staff of the Department of Agriculture. I had trained some selected farmers of each cooperative and supported them now during the debates with the cluster actors. Soon after the discussions, the attitudes of the farmers began to visibly change towards HPW. We began to build their trust in HPW’s intentions and the farmers came to act more in a collective way, seeing the advantage of doing business with a preferred buyer. This change in attitude in turn increased the trust of the HPW in the farmers and their cooperatives. As a result of their improved relationship, HPW initiated a contract farming arrangement called “block farming”. It involves groups of ten farmers who become fully supported by the company with all the necessary material inputs required to cultivate pineapples on one acre farms. The cost of the inputs is deducted when the farmers harvest the crop and supply it to HPW. Lead farmers, most of them now also trained farmer coaches, manage and coordinate the activities of the group as a link between farmer members and HPW. The result of all of this is that the farmers and HPW now have an enriched business relationship and commitment to each other. Farmers have increased their commitment to selling their fruit to HPW. While previously they sold 30-50% of their crop to HPW, since the coaching sessions they sell 70-100% to the firm.
Both sides now look forward to the regular coaching sessions. HPW has come to realise that coaching in soft skills is as important as technical (hard skills) training. Together with the farmer coaches and some company staff, I facilitate coaching sessions on different themes, most recently on: leadership skills, communication within and without the farmer groups, tracking of results. The email from Veronika Hofer is clear proof of how farmers’ attitudes have changed towards a more committed partnership. I am confident that I will receive more of these kinds of emails as the partnership deepens.
The long journey toward sustainable sesame business relationships in Mali
Soungo Diarra is one of the lead farmers involved in the buying and bulking of sesame in Mali. During the commercialisation campaign of 2015, he collected 145 tonnes of sesame from members of a local network that he had built up over the years. Today, this network covers some 20 villages each counting about 25 producers. At the end of 2016, his group formed a cooperative and signed its first “win-win” contract with Promotion du Sésame au Mali (PROSEMA). With the support of 2SCALE, about ten other similar cooperative organisations have been set up in this way. Together they constitute the sesame supply chain for PROSEMA, which leads the sesame export market in Mali and is the lead firm of this value chain partnership.
By organising services such as training, credit for inputs and small equipment around second-level (umbrella) producer organisations (POs), PROSEMA hoped to win the loyalty of the sesame producers. This plan sounded fool proof, but in practice, the results were rather disappointing. Despite PROSEMA’s support, the producers sold a large amount of their sesame during the marketing period on parallel markets. Therefore, ICRA organised a reflection workshop to look into this situation in greater detail (see the team photo). It was discovered that PROSEMA’s different supply channels were not equally efficient. In particular, the collectors proved to be more efficient compared to other supply channels.
What is it that made the local collectors more effective? During the session, Soungo Diarra explained it well: “I gradually built up my network. When I received inputs from PROSEMA, I distributed them to the producers I trusted. Not everybody proved to be an honest partner, but I discarded the bad players over time and continued my selection process until I had built up a network of loyal producers”. Jointly reflecting on what Soungo Diarra said, all involved partners came to understand why Soungo’s network was successful: gradually, trust was built up on the basis of concrete activities between people who know each other well. Realising this, PROSEMA’s leaders were encouraged to once and for all adopt a decentralised model; and completely focus on the development of a network of local collectors like Soungo Diarra.
From here onwards, PROSEMA continued on this path of trust building towards more loyalty. First, the ICRA agribusiness trainer supported close working relationship between local cooperatives, input suppliers and financial services, thereby establishing local ABCs. Within these local networks, good relationships of trust can be built. Secondly, 2SCALE supported balanced business partnerships and “win-win” contracts between PROSEMA and the second-level producers’ organisations which unite the local cooperatives at ABC level.
PROSEMA’s CEO, Soumaïla Coulibaly, learned that improving loyalty is not a one-shot process, neither a one-sided one, but rather a matter of reciprocity. He has concluded that mutual trust and loyalty comes only after investing in relationships and through decentralised service delivery within ABCs.
Please find the full stories in the ‘Not by technology and money alone’ booklet. Next weeks’ blog will feature stories on the future of coaching services and the processes of embedding these into (the cost structure of) commodity value chains. Interested about the business support model of ICRA? Read all about it in 2SCALE’s thematic paper: “Strenghtening Business Support Services for Agribusiness Partnerships”.
1 2SCALE (Towards Sustainable Clusters in Agribusiness through Learning in Entrepreneurship) is a major agribusiness incubator programme implemented since 2012. The programme promotes inclusive agribusiness partnerships in nine African countries and is implemented through an international consortium, led by the International Fertiliser Development Centre (IFDC) together with the Base-of-the-Pyramid Innovation Centre (BoPInc) and ICRA, an international centre for developing facilitation skills in agriculture.