BRIEFING PAPER ON THE ROLE OF COMPANIES IN SUPPORTING INCOME RESILIENCE FOR SMALLHOLDERS
Traditionally, off-takers who provide investment to farmers in exchange for a share of their harvest, have focused on improving the productivity of smallholders in relation to their primary cash crop. This investment in a supply chain is seen as helping agribusinesses to source the raw materials they need to boost their own sales or processing capacity. However, this has not always guaranteed them the quantity they need. As a result, operations at many processors in Africa run at only 20 to 30 per cent capacity, leading to inefficiencies in production and the inability of manufacturers to be competitive.
Now, new information is changing the view that off-takers should focus solely on the primary cash crop. Smallholders who depend on a single crop are reluctant to take chances because it is hard to mitigate risks such as the weather or fluctuations in price. Their willingness to invest in their farms is compromised when they do not have a stable income. Low levels of investment ends up affecting production quality and quantity, which ultimately has negative implications for the profitability of off takers too.
As a result, progressive companies are increasingly recognising that building income resilience or financial stability for suppliers is a prerequisite to developing a more robust and regular supply chain for their own operations. As this is a relatively new idea, the question this paper asks is how companies can support income resilience for smallholders?