THE IMPACT OF COMMAND AGRICULTURE ON THE PERFOMANCE OF AGRO-FOOD PROCESSORS SUPPLY CHAINS IN BULAWAYO
WILLARD TENDAI DZAWO
Submitted in partial fulfillment of the requirements for the degree of
MASTERS IN BUSINESS ADMINISTRATION
Graduate School of Business, Faculty of Commerce
National University of Science and Technology
Supervisor: Mrs. CharumbiraFebruary 2018
DECLARATIONI, Willard Tendai Dzawo, declare that this dissertation is the result of my own investigations and research, done with the support of my supervisor except to the extent indicated in the acknowledgements, references and by comments included in the body of the report, and that it has not been submitted in part or in full for any other degree to any other university. However, since scholarship is a cooperative enterprise other peoples work have been used such as printed source, electronic, internet or other sources; in all such instances careful acknowledgement has been ensured and referenced in accordance with departmental requirements. “The impact of command agriculture on the performance of agro-food processing supply chains in Bulawayo” is my own work.
DEDICATIONThis dissertation is dedicated to my dear wife Muchaneta and our two sons Malvern and Marvel for their love, support and time sacrificed during the research period.
My first and foremost thanksgiving goes to his Almighty God for seeing me through to this far. Lord, my God, it is through your miraculous grace and mercy that I was able to complete this program with all the obstacles and hindrances. I wish to thank all the lecturers at National University of Science and technology for their immense academic impartation on me. Special thanks go to my supervisor, Mrs. J Charumbira for her patience and guidance throughout my dissertation. I cherish your contributions and the prompt feedback from you despite your busy schedules. I also want to acknowledge my wife, Mrs. Muchaneta Dzawo and my children for their prayers, understanding, encouragement and earlier persistent pressure on me to do this course. I would have abandoned the course when it became tough if you had not encouraged me. I appreciate the immense help of all the members of my study group especially during the first and second semester. Additionally, I appreciate the outstanding support I received from Mr. Chinjovha from the Graduate School, National University of Science and Technology whose immense contribution made me sail through this course.
INTRODUCTION TO THE STUDY
This study was on the impact of command agriculture on the performance of agro- food processors supply chains in Bulawayo. The researcher was motivated to carry out this study after observing the continued problems and challenges faced by agro- food processing companies in Bulawayo. Appropriate or required raw materials for processing are usually inadequate, compounded by the seasonal nature of the agriculture produce which greatly reduces the productivity as well as profitability of agro-business enterprises. In addition, most farm produce is highly perishable and, therefore, poor post-harvest handling results in heavy losses of raw materials for processing. This study was therefore a survey of Bulawayo agro- food processing companies.
In this chapter, the researcher introduces the research problem and discusses the major problem areas underlying the study. The study objectives, research questions, scope of the study and justification of the study are some of the topics discussed in this chapter.
1.1 Background of the study
Agriculture output is estimated to have declined by 2.6 percent in 2013, owing to depressed maize and cotton output. Overall, agriculture output in 2013 was adversely affected by an unfavorable agricultural season, characterized by late onset of rains and pronounced mid-season dry spells. The unfavorable rainy season hit hard maize, cotton, groundnuts and other small grains. Maize output is estimated to have decreased to about 798 500 tonnes in 2013, from 968 041 tonnes in 2012. This was on account of a reduction in area planted from 1 689 786 hectares in 2011/2012 to about 1 442 845 hectares in the 2012/2013 as well as a decline in yield to 0.63 tonnes per hectare from 1.0t/ha in 2011/2012 (RBZ Annual Report 2013).
Agricultural output is estimated to have grown by 25 percent in 2014, up from -2.6 percent in 2013, largely driven by increases in the output of maize, (82.3 percent); tobacco, (29.7); wheat, (49.7 percent); groundnuts, (55.6 percent); and poultry, (10.7 percent). The growth in agricultural output benefited from a combination of a favorable 2013/14 rainfall season, as well as support from both Government and cooperating partners. Tobacco output increased from 166.6 million kilograms in 2013 to 216 million kilograms in 2014, in large part, due to an increase in the number of growers from 78 756 in 2013 to 86 900 in 2014. The increase in the number of growers culminated in a 21.2 percent increase in the area planted from 88 626 hectares in 2013, to 107 371 hectares in 2014. The crop also benefitted from increased financing through contract farming arrangements. Maize output is estimated to have increased to 1 456 153 tonnes in 2014, from 798.6 tonnes in 2013.
The following factors had a positive impact on maize production: good rainfall season; increase in yields from 0.63t/ha in 2013, to 0.85t/ha in 2014; and improved financing of the crop through various financing arrangements, which included the Basic Input Support Scheme, US$160 million; the Presidential Support Scheme, US$5 million; and donor community support, US$40 million (RBZ Annual report 2014).
Agricultural output is estimated to have declined by 3.6% in 2015, following declines in maize (-49%); groundnuts (-34.2%); soya-beans (-31.7%); cotton (-16.6%); and tobacco (-7.9%). Livestock subsectors, however, registered increases in output as follows: poultry, 9.4%; beef, 8.1%; dairy, 7.8%; and pork, 19%.The agriculture sector is estimated to have declined by 3.6% in 2016, following the devastating El-Nino induced drought in 2015/2016 season. This resulted in the drastic reduction in output of key crops such as maize, cotton and groundnuts, among others. The drought also resulted in the shortage of grazing pastures and water for livestock, leading to significant herd losses and forced destocking by farmers in some provinces, particularly in the southern parts of the country. According to the Second Round Crop Assessment Report maize output is estimated at around 512 000 tonnes in 2016, against the previous year’s output of 742 000 tonnes. The low maize output for 2015-2016 resulted in a 1.3 million tonnes deficit on the national requirement of about 1.8 million tonnes, which was partially covered through imports of grain (RBZ Annual report 2015).
Maize imports in 2016 are estimated at around 1.2 million tonnes, from both Government and private sector players. Tobacco output in 2016 significantly surpassed the projected performance, despite the lower hectarage. The better than anticipated performance is attributed to late rains that boosted the late planted crop after replanting by some farmers, whose initial crops had been adversely affected by dry conditions during the first half of the season. Cotton output declined significantly, from 104 935 tonnes in 2015 to less than 30 000 tonnes in 2016. The decline was due to low harvested area due to the severe drought conditions that affected the establishment of the crop at the onset of the season. The decline in the crop size in 2016 was also due to farmers avoiding the crop following years of poor prices and reduction in contract financing from cotton merchants and ginners.
Wheat output declined marginally, from 62 261 tonnes in 2015 to 61 715 tonnes in 2016, on account of the decrease in the area planted during the season. The area planted declined from 14 789 hectares in 2015 to 14 220 hectares in 2016, due to concerns on cost and availability of electricity during the planting period for the wholly irrigated crop. The average wheat yield, however, improved to 4.34 tonnes per hectare in 2016, compared to 4.21 tonnes per hectare achieved in the previous season. The severe drought conditions experienced during the 2015/2016 season resulted in a significant herd loss, particularly in the worst hit southern regions of Matabeleland and Masvingo provinces. This resulted in forced destocking of cattle, which partly resulted in the 11.3% increase in slaughters, from 255 918 cattle in 2015 to 284 805 cattle in 2016. The destocking of cattle in 2016 had an adverse impact on the national herd and could result in low beef output in the short term, as farmers retain stock to build up their herd.
Milk production from the formal sector increased by 13.6%, from 57.5 million litres in 2015 to 65.4 million litres in 2016. The dairy industry continued to benefit from the Dairy Revitalization Strategy, which seeks to increase the national dairy herd through the importation of dairy heifers and cows, the training and capacitation of farmers and sharing and fusion of knowledge and expertise among farmers. The increase in dairy milk output is in line with the sector’s targeted annual growth of 12 percent, under the ongoing dairy herd rebuilding programme being spearheaded by the Zimbabwe Association of Dairy Farmers (ZADF) (RBZ Annual report 2016).
The first half of the year 2017 witnessed a turnaround of the national economy at a time when inflation, underpinned by an expansionary fiscal policy stance, crept out of deflation in February 2017 after two and a half years of a prolonged episode of negative inflation to reach 0.31% in June 2017. The economy is thus expected to grow by 3.7% in 2017 largely driven by agriculture, mining and tourism. Whilst agricultural output is projected to grow by 21.6%, on account of a combination of favorable rainfall season and the positive financial impact of the Presidential and Command agricultural input programmes, the mining and tourism sectors are on the rebound due to stability in the international commodity prices and price competitiveness, respectively.
The favorable agricultural season has positive spill-over effects on the agro-processing industry. This, together with the revival of around 350 firms in the manufacturing sector that are benefiting under the Government’s localization policy which is supported by Statutory Instrument 64 of 2016 has seen the manufacturing sector enhancing capacity utilization. Some firms in the food processing and packaging sub-sectors are now operating at above 70% of capacity. Prioritization of foreign exchange allocations by the Bank to these firms continues to greatly assist the localization process and enhancing local production and exports (RBZ monetary report 2017).
Command agriculture is a government initiative introduced under the guidance of the cabinet committee on food security and nutrition. The scheme is aimed at ensuring food security, food self-sufficiency and to banish importation of grain. The special program is a national outlook implying both the public and the private sector for its sponsorship and execution. The programme is a Public Private Partnership. The program is headed and implemented by the National Command Centre which consists of nine thematic committees responsible for managing the technical and policy issues associated with the program, as well as ensure it is undertaken effectively. The command agriculture programme supports the identified farmers who offer their land on voluntary basis. Under the command agriculture program, inputs support includes seed, lime fertilizers, chemicals and fuel. (Command agriculture journal 2018)
Command agriculture is a development strategy adopted by the Zimbabwe government as one of several strategies in its broad land reform policy framework. It was said to be geared toward increasing cereal production to boost national food reserves. The army championed this programme. This agricultural model targeted irrigation schemes nationwide (Mabhena 2013). The targeted command agriculture is a Zimbabwean agricultural scheme meant at ensuring food self-sufficiency that was announced at the start of the 2016 – 2017 farming season following the drought of the previous season. The scheme was introduced as Zimbabwe struggled with economic problems. It was announced in August 2016.
The scheme targeted farmers near water bodies who could put a minimum of 200 hectares under maize per individual. These were found to be 2,000 in total and each farmer was required to produce at least produce 1,000 tonnes of maize. Each participating farmer was required to commit 5 tonnes per hectare towards repayment of advanced loans in the form of irrigation equipment, inputs, and chemicals, mechanized equipment, electricity and water charges. Farmers would retain a surplus product produced in excess of the 1,000 tonnes. The programme will cost $500 million. Each farmer will be earmarked to receive US$250,000. (Ben Freeth 2016)
The manufacturing and agro-processing industries are set for a major boost due to the anticipated success of the government led command agriculture programme. The initiative is expected to reduce imports of raw materials. Command agriculture will see farmers producing two million tonnes of maize from 400 000 hectares of land. The programme is set to expand wheat and soya beans, this will boost the baking and oil expressers industry and create employment in the process. Millers and stock–feed manufacturers will also benefit through the reduction of imports. The manufacturing and agro-processing industries are set for a major boost due to the anticipated success of the government led command agriculture programme. The initiative is expected to reduce imports of raw materials (Chikwati 2017). Command agriculture is on an expansion course, which will also see the introduction of the command livestock programme targeting beef, dairy and poultry production, and command aqua-culture, among other programmes.
1.2 Statement of the problem
Despite the efforts provided by the government of Zimbabwe by introducing command agriculture, there is still evidence of challenges faced by agro food-processing companies supply chains in Bulawayo. Suitable or required raw materials for processing are usually inadequate, compounded by the seasonal nature of the agriculture produce which greatly reduces the productivity as well as profitability of agro-business enterprises. Based on the discussion above, the aim of this study is to assess the impact of command agriculture on the efficiency and performance on agro-food processing supply chains in Bulawayo.
1.3 Purpose of the study
The purpose of this study was to assess the impact of command agriculture on the performance of agro-food processors supply chains in Bulawayo. The researcher will then recommend the policy framework development basing on the information required from the study.
1.4 Research objectives The research will be guide by the following specific objectives:
1.4.1Main Research Objective – To assess the impact of command agriculture on the performance of agro-food processors supply chains in Bulawayo.
1. To determine the effectiveness of command agriculture on the performance of agro-food processors supply chains.
2. To determine the relationship between command agriculture and agro-food supply chains.
3. To establish strategies to enhance command agriculture scheme based on the findings of the study.
4. To identify the factors that hinders the operations of agro-food processors supply chains.
5. To develop a framework that guides policy development.
1.5 Research questions
The study will be guided by the following research questions:
1.5.1Main Research Question-What is the impact of command agriculture on the performance of agro-food processors supply chains in Bulawayo?
1. How effective is command agriculture on agro-food processors supply chains?
2. What is the relationship between command agriculture and agro-food processors supply chains?
3. Which strategies can be used to enhance command agriculture and agro-food processors supply chains?
4. Which factors hinder the operations of agro-food processors supply chains?
5. Which framework can be developed that guides policy development?
1.6 Hypothesis of the study
The study was guided by the following hypothesis-
HO Command agriculture has no impact on agro-food processors supply chains in Bulawayo.
H1 Command agriculture has an impact on agro-food processors supply chains.1.7 Significance of the studyThe findings of the study are likely to assist command agriculture farmers to identify opportunities and dimensions in order to concentrate on them according to their degree of importance. Thus, the present study will help the government to better understand how to implement command agriculture scheme by satisfying their farm needs with expectation that they will advocate for the government, and hold their trust upon the farmers which results in good yields and enhances food security as well.
The findings from this study are likely also to be used as references for further research work by anyone who might be interested in this area of study. The study is likely to contribute academically towards future research by leveling the sensitivity of different attributes of command agriculture and providing strategies to be put in place in order to meet farmer’s needs in terms of satisfaction.
The findings of this study is likely to assist policy makers in different command agriculture and agro-food processors supply chains, government and general public. They are likely to use it while reviewing and drafting policies that often act as guidelines on the approach that they always consider to ensure farmers satisfaction.
The study is likely to help farmers to express their feelings and perceived position on the way command agriculture sector is delivering services, with expectation to receive improved service quality.
The study will also enlighten and academically enrich the researcher as an individual and it was also done as partial fulfillment of the requirements of master in business administration degree.
1.8 Scope/Delimitations of the study
This was a study into the impact of command agriculture on the performance of command agriculture on agro- food processors supply chains in Bulawayo. The study covered the agro-food processors supply chains in Bulawayo. The study is going to be guided by the command agriculture scheme implemented by the government of Zimbabwe. The study on the impact of command agriculture on the performance of agro-food processors supply chains in Bulawayo will be conducted from February 2018 to March 2018.
1.9 Limitations of the study
Financial constraints – a lot of expenses were involved in typing, printing, binding, internet and travelling during the course of the study. The researcher had to send some questionnaires via e-mail to cut costs
Confidential information – some respondents were not comfortable in releasing information in fear of exposing the firm to its competitor.
The researcher had to give assurance and protection on information provided and that no information is to be disclosed without respondent’s permission.
Intervening or confounding variables which were beyond the researcher’s control such as honesty of respondents and the respondent’s personal biases. To minimize such conditions, the researcher requested respondents to be as honest as possible and to be impartial or unbiased.
The research environments were categorized as uncontrolled setting where unnecessary variables would influence on the facts gathered such as comments from other respondents, anxiety, stress, motivation on the part of the respondents while on the process of answering the questionnaires. Although these were outside the researcher’s control, efforts were made to request the respondents to be as objective as possible in answering the questionnaires.
Testing: It was feared that the use research aides may render inconsistencies such as differences in conditions and time when the data was obtained from respondents. This was reduced by orienting and briefing the researcher assistants on the data gathering procedures.
Instrumentation: The research tool was non uniform hence validity and reliability test was done to arrive at a reasonable data measuring tool.
Attrition: There was fear that representative sample could not be reached as computed due to circumstances within the respondents and beyond the control of the researcher. The researcher distributed questionnaires exceeding beyond the minimum sample size to avoid this situation.
1.11 Research outlineThis study report is presented in five chapters. Chapter 1 is the introduction to the research, Chapter 2 (Literature Review) reviews the literature related to Command Agriculture and Agro-Supply Chains. The reviewed literature will be used in the critical analysis of the study findings. Chapter 3 (Methodology) presents the methodology on how the study was conducted. Chapter 4 (Results and Discussion) presents the study findings and discussion of the study findings. Chapter 5 outlines the conclusions and recommendations of the study derived directly from the research findings. Furthermore, the chapter presents the suggested area of further research as shown by the study findings. The next chapter presents the literature review of the study.
1.12 Chapter summary
This Chapter outlined the background to the study, elaborated on the key research objectives and questions, hypothesis of the study, significance of the study, delimitations of the study and the main limiting factors. The major objective of the study was to determine the impact of command agriculture on the performance of agro-food processors supply chains in Bulawayo.
2.1 Trends in the Agricultural industry
In the modern times there have been a lot of improvements and breakthroughs that have radically changed the mode and environment of agriculture particularly in the developed countries. Today’s agriculture is characterised by the heavy use of synthetic fertilizer and pesticides, extensive irrigation, large scale animal husbandry, reliance of machinery, growth of Agri-business and decline of everyday farming and the transportation of products across international boundaries. Agriculture continues to occupy a significant position in the global economy. Thus agricultural sector still remains the key sector that contributes significantly to the Gross Domestic Product (GDP), employment and foreign exchange earnings in the economy of many countries.
For instance, Monke (2004) pointed out that in the United States, agriculture and related industries contribute over one trillion dollars to GDP annually and employ more than 15% of the total workforce. Similarly, in India Agriculture and allied sectors like forestry and fishing accounted for 18.5% of total Indian Gross Domestic Product in 2005 to 2006 (at 1999 to 2000 constant prices) and employed about 58% of the country’s workforce. It accounted for 10.95% of India’s exports in 2005 to 2006 and about 46% of India’s geographical area is used for agricultural activity (Sharma, 2007).
Furthermore, agriculture is also heavily tied to other industries such as manufacturers, feed suppliers, transportation, food retailers, restaurants and other sectors in the economy (Dandago, 2005). In effect, a healthy agricultural sector is vital to the economy as a whole. And any major problem in the sector could affect the food supply and demand which could ultimately lead to higher prices of foodstuff, increase joblessness, reduce trade, and eventually result in a concurrent negative impact on the industries that rely on agricultural sector for sources of raw material (Monke, 2004). APRODEV (2002) and Carmody (1998) observe that until recently Zimbabwe was one of the most industrialised economies in Sub-Saharan Africa, with an extensive agro-processing industry and a relatively differentiated industrial sector. However, with the recent political and economic crisis, the country’s agricultural sector and the economy in general suffered a lot of obstacles. This study is an attempt to review the developments in the agricultural sector of Zimbabwe and its impact on the performance of agro-food processors supply chains in Bulawayo. Therefore, the following key issues with regards to the Zimbabwean agricultural industry were discussed: background of the agricultural industry, crop and animal production, commercial and subsistence farming, the nature of the agricultural exports, the characteristics of agricultural sector’s workforce, extension service, agricultural training and development, challenges of agricultural sector.
2.1 Agricultural Industry in Zimbabwe
Agriculture is the backbone of Zimbabwe’s economy and underpins the economic, social and political lives of the majority of the people of Zimbabwe. Hence, APRODEV (2002) predicted that this situation will continue to be the case for the foreseeable future. Newitt (2007) on the other hand, notes that agricultural sector accounted for 18% of the country’s GDP in 2005; both commercial and subsistence farming are being practiced to produce various crops and animals. However, a significant portion of the products that are produced commercially are normally being exported. Although, women participate in the agricultural production, their men counterpart virtually dominate the industry. Furthermore, Newitt (2007) observes that Zimbabwe possesses rich agricultural resources.
In 2003 an estimated 8% of the country was cultivated. Forests cover 45% of the country, although the logging industry is small and wood cut in Zimbabwe is used mostly for fuel. Zimbabwe is also rich in minerals; for instance Gold has been mined since ancient times, and the Great Dyke contains deposits of dozens of different lucrative minerals. Zimbabwe’s climate is dependent on the rains brought by the Indian Ocean monsoons (seasonal winds). Up to 1,000 mm (40 in) of rain falls each year in the eastern part of the country between the months of October and March; rain levels reduce to about half that amount in the dry southwest. Little if any rain falls from March to October, when the weather gets cold with frosts common in the mountains and central plateau areas. Since the late 1970s rainfall has been very irregular and there have been serious droughts, which have led to soil erosion in some areas and decreased agricultural production.
2.1.1 Crop Production
The principal crops produced in the Zimbabwean communal areas are maize, cotton, sugar, groundnuts, beans and cow peas. While the minor crops in commercial terms such as beans, cow peas and groundnuts are considered to be the crops for women. The major commercial crops which generate cash income are seen as men’s crops, and these include Tobacco, Cut-Flowers, Raw Sugar Cane, Cotton, Chilled Vegetables, Coffee, Fruit, Tea (APRODEV, 2002). More often than not, the significant part of the crops that are produced commercially, are being exported to other countries. On the other hand, most of the crops that are produced in the communal area are for consumption.
Although, the initial post-independence period saw a major boom in commercial crop production in communal areas, the trend went down later. Cotton is one of the major crops produced for commercial purposes in both the communal and commercial lands. The foregoing mentioned change coincided with the fall in global demand for cotton.
APRODEV (2002) observes that since 1950 cotton’s share in total fiber consumption has declined from over 80 to 40% in recent years. Cotton prices in the first nine months of 2001 declined by 14% compared to 2000. This was in response to a 6% increase in global production in 2001. Similarly, the decline was in part a result of US policies of increased public support to cotton production, although increased production in China and India also played a role.
Prices were predicted to decline still further in 2002 by 4%. Furthermore, maize is another major crop in Zimbabwe. According to APPRODEV (2002), 80% of the population is directly involved in its production. The Grain Marketing Board of Zimbabwe receives 75% of its grain from Small holder/communal farmers. Thus maize is a very important income earner in the rural areas. From 1980 to 2001, the annual production of maize in Zimbabwe had been well above 200,000 Metric tonnes with the exception of 1990 when it fell drastically to 1,585,800. This drastic reduction was mainly accounted by the low production in the commercial sector. The communal sector however, continued to witness a general expansion in maize production despite annual fluctuation and inefficient production.
Maize is not only a basic crop for household food security but also an important source of household cash income. Therefore, any trade arrangements, which allow the import of cheap subsidized maize at prices that undermine local prices, will depress rural household incomes. Thus, this needs to be seen against the background of an existing situation of rapidly escalating input costs in the agricultural sector. The escalating costs have hampered production and reduced the economic benefits of maize production as a cash earner. Consequently, any reduction in the maize price as a result of the availability of cheap imported maize would compound this situation.
2.1.2 Animal production
The commercial ranching sector of Zimbabwe provides a rare opportunity for estimating the efficiencies of extensive cattle and wildlife production systems. This is because there is a long history of commercial cattle ranching, and that landowners have the right to commercially use wildlife on their lands (Kreuter and Workman, 1996). In semi-arid African savannas, multispecies wildlife communities tend to use heterogeneous vegetation more completely than cattle alone (Kreuter and Workman, 1996).
Although, erratic rainfall has generally restricted agricultural activities in these semiarid regions; hence wildlife has been used commercially since 1970s. Wildlife production may thus be the ecologically the most rational form of land use in these areas. Hence, wildlife that are common in Zimbabwe especially in the Midlands areas consists mainly of plains-game species but a few larger herbivores, like elephant, rhino, hippopotamuses, giraffe and buffalo. However, the most valuable game-species are leopard, eland, water buck, kudu, tsessebe, zebra, baboons, and different types of antelope (Kreuter and Workman, 1996; Newitt, 2007). Considering the importance of livestock, a unit known as Department of Livestock Production and Development was established in 2002. The department is responsible for general animal husbandry and consists of two divisions. The livestock production division supports animal production and is the livestock outreach arm.
2.1.3 Agricultural Manpower
Given that agriculture is a key industry in the economy of Zimbabwe, a large number of the country’s population depend directly or indirectly on land for their means of livelihood. For example, the industry provides employment for 70% of the Zimbabwean population with employment (Weiner, Moyo, Munslow and O’Keefe 1985; APRODEV, 2002). Further analysis shows that 71% of the total female population in Zimbabwe gain employment as communal area farmers, 20% are employed outside the subsistence sector, while 9% are classified as unemployed.
The 20% of women employed outside the subsistence sector are involved in a wide variety of different occupations, such as casual laborers on commercial farms and in some instances as permanent laborers. A small minority are involved in farming under resettlement schemes. According to Newitt (2007), Zimbabwe’s total labor force 4162 as at 2005 was put at 5.8 million people. Trade unions represent Zimbabwe’s major industries and service sectors. All the unions are affiliated with the Zimbabwe Congress of Trade Unions, which was founded in 1981. Employers’ associations are strong in the agricultural sector, particularly the Commercial Farmers’ Union which was founded in 1942.
2.1.4 Export of Agricultural Products
After attaining independence in 1980, Zimbabwe joined the African, Caribbean and Pacific countries (ACP) group and acceded to the Lome convention. Since then the nation has been considering to profit from the nonreciprocal trade preferences extended by European Union to ACP countries under the provision of the Cotonou Agreement. European Union is the major trading partner for Zimbabwe, accounting for about 35% of the country’s export income. Zimbabwe has also benefited from the financial resources under the European Development Fund, for trade development projects targeting both regional and European markets. In addition, between 1980 and 1997 Zimbabwe was one of the five most successful ACP countries in taking advantage of the trade preferences made available under the Lomé Convention. At a point in time, Zimbabwe had challenges in exporting its textile to South Africa and consequently, the European Union provided an important substitute market for the product (APRODEV, 2002).
2.1.5 Zimbabwean Agricultural Exports to the European Union
Furthermore, it was observed (APRODEV, 2002) that the most significant trade preferences for Zimbabwean exporters have been in the fields of agricultural, horticultural (fruit and vegetables) and floricultural (cut flowers) exports. During the period from 1992 to 1996 Zimbabwean agricultural, horticultural and floricultural exports accounted for 53.7% of exports to the European Union. Therefore, it was projected that output in the sugar sector alone provided an income transfer to Zimbabwe in 1998 of over 18 million EURO, an amount greater than the annual aid allocation to Zimbabwe under the Lomé Convention. The production of both fruit and vegetables on one hand and that of cut flower on the other hand have steadily increased over the years.
Hence, these products are being exported year in year out and they have been important source of foreign exchange earnings. Cut flowers are produced on both large scale and small scale commercial farms, although export of quality flowers come almost exclusively from large scale commercial farms. The production of export quality cut flowers on communal area farms is not realistic, given the investments required and production methods used.
Therefore, around 5% of land in the commercial farming sector is used for cut flowers, with a high concentration of cut flower farms in Mashonaland Central. In tonnage terms horticultural exports grew 25 folds and there was corresponding 40 fold increase in the exchange earning.
For example, cut flower alone grew 40 fold in terms of both tonnage exchange earnings. APRODEV (2002) pointed out that between 1985 and 1999 the cut flower sector increased and rose from 88th most important export product to the 11th position. In a relatively short period Zimbabwe has become one of the major suppliers of cut flowers to the European Union market. Zimbabwe is now the second largest cut flower exporter in Africa and the third largest supplier of cut flowers to the European Union in the world. The factors which have contributed to this growth include substantial margins of trade preference, favorable climatic conditions, a relatively learned work force, improvements in airfreight and private sector initiative.
Additional important agricultural product is beef, the bulk of which is being exported to the European Union market. Under the Beef Protocol of the Lomé Convention and subsequent Cotonou Agreement, Zimbabwe has been allocated a quota of 9,100 tonnes for the export of frozen and chilled de-boned beef. The utilization of this quota has varied considerably, from five percent to 178percent (NEP STOFFBERY, MEATCO see APRODEV, 2002). Traditionally this has been a consequence of two main developments: drought and the outbreak of animal diseases, with periodic foot and mouth disease outbreaks resulting in the complete closure of the European Union market to Zimbabwean beef exports and drought affecting the availability and quality of beef cuts.
2.1.6 Agricultural Tariffs and Trade-Protection
Almost all the developing countries need protection barrier to establish. For instance all the European countries with the exclusion of United Kingdom, were able to develop under trade barriers of one sort or another. Indeed, the European countries went beyond mere tariff protection and selectively dissociated from the international economy (Dandago, 2005). Zimbabwe imposed some protective trade barriers in order to guard the economy against unfair international competition (Carmody, 1998; Brett, 2005). Agricultural price controls gave commercial farmers cheap credit and cost-plus prices, while food subsidies reduced urban food prices.
Tariffs protected domestic business from foreign competition. However, with the free trade understanding between Zimbabwe and the European Union, obviously these tariffs would be removed in this regard. The European Union is one of Zimbabwe’s major trading partners. The introduction of duty free access for imports from the European Union results in a progressive reduction in government revenue from customs duties. In addition, the Tariff Commission in Zimbabwe found that, while imports from the European Union accounted for 20.9percent of Zimbabwe’s total imports, they generated 23.1 percent of total import duties collected.
This situation arises since imports from the European Union consist largely of manufactured products on which the tariffs charged are above the average. Indeed, the average effective rate of duty applied on imports from the European Union over the period 1998 to 2000 was 6.1percent compared to an average effective rate of duty on total imports from the whole world of 5.51percent.
2.1.7 Contribution of Agriculture to the Economy
Agricultural manufacturing is the mainstay of Zimbabwe’s economy and largely influences the economic, social and political lives of the majority of the people of Zimbabwe. The industry contributes only 11 – 14percent of the Gross Domestic Product. Agriculture provides 45percent of the country’s exports, 60percent of all raw materials used by Zimbabwean industry and employment for 70percent of the Zimbabwean population (Weiner, Moyo, Munslow and O’Keefe; APRODEV, 2002). However, Newitt (2007) argue that in 2005 agriculture (including forestry and fishing) accounted for 18percent of Gross Domestic Product. In any case the industry is greatly contributing in the Zimbabwean economy. It has been argued by Cliffe (1998) that despite some limitations, obstacles and challenges Zimbabwean agricultural industry is a success to some extent. According to him Zimbabwe’s track record should be copied in promoting agricultural production. Therefore, the country has prospered in producing food surpluses in most years and its communal sector substantially contributes to commercial production since 1980.
2.1.8 Agricultural Training and Development
Training, development and extension services are significantly recognized to have a positive impact on both the quality and the quantity of agricultural products. In addition, engaging in these activities ensure effective and efficient agricultural production. Many countries recognize that ensuring an effective agricultural extension system is critical, especially in view of the major challenges facing agricultural sector in the contemporary time globally (Umali-Deininger, 1997). To this extent, Zimbabwe is not left out in the provision of agricultural training, development and extension services. Hence, Chasi (2003) observes that Zimbabwe public research institution achievements are noted and well documented, none the less shortcomings are also apparent particularly in the early 1990s.
Furthermore, information services for farmers are critical for enhancing productivity. Thus the public sector provides the bulk of the extension services; however, restrictions were noted in the1990s, the performance of extension weakened with increasing fiscal constraints whilst services covered too wide an area and range of activities amidst poor linkages with research. Institutional based training is carried out in a variety of public and private institutions. The capacity of formal training institutions is limited by the educational facilities available (e.g. accommodation, size of classes, books and budgets) in universities and colleges. The case of Africa University undergraduate’s intake changes confirms the fluctuation on an annual basis or per semester.
With the indication from the rapid survey Chasi (2003) shows that the fast track has benefited individuals with formal agricultural training, the case of a new farmer with Ph.D. in Agriculture illustrates the point. Likewise, adult education is one of the ways through which farmers receive agricultural knowledge. In this vein, the Study Circle Alliance of Zimbabwe has been formed to support the study circle concept where people learn and experiment on their own based on distribution and dissemination of self-study materials. Farmers learn farming and conservation through correspondence at village and ward level farming schools. Despite these attempts 60percent of the farmers that grow crops they have not been trained to produce. Moreover, community radio programs have been used as an extension strategy by the Department of Agricultural Research and Extension (AREX). This medium is greatly used in disseminating information to the local farmers and its effectiveness varied from place to place.
It was found in Angwa survey that 90percent or more farmers, access information through the radio. The concept of community radio stations, Tele-centers and information centers for farmers is yet to develop. However, Chasi (2003) suggests that the information kiosk initiative by Ministry of Information would fill in this gap. In spite of all the attempts in the areas of training, development and extension services, Chasi (2003) acknowledged a number of constraints being faced. For instance, there is a limited capacity of formal training institutions to meet request in the short term. The universities and colleges may not meet the market demand for qualified agriculturalists or appropriate manpower needs. Second constraint has to do with the appropriateness and relevance of curriculum, knowledge generated and research at training institutions. For instance, training institutions fail to expose undergraduates to practical production issues of relevance to the farmer real world circumstances.
2.1.9 Land Reform in Zimbabwe
Land is widely viewed as central to the politics and history of both colonial and post-colonial Zimbabwe. Hence, land was the main issue over which the liberation struggle was waged (Cheater, 1990). Pressure on land as observed by Andersson (1999) is common in many parts of Zimbabwe communal areas, and it is thus, not surprising that fights erupt over the use of the agricultural resource in these areas. There are three classes of land in Zimbabwe; communal, freehold and state land. Cheater (1990) observes that there is highly skewed distribution of the country’s population over the total land mass.
Land within Zimbabwe is categorized into five agro-ecological regions. These include regions I, II, and III, which are suitable for intensive crop cultivation while regions IV and V are more suited for livestock grazing (GIEWS, 2000). Under the fast track land reform policy, the execution of land and agrarian reforms has fundamentally reframed the organisational structure of both the production and marketing institutions. The policy allocated former large-scale commercial units to indigenous farmers under the A17 and A28 resettlement models. The Mashonaland provinces (Central, East, and West), which are the main grain producing regions, accommodated 46 percent of A1 land beneficiaries and 74 percent of all A2 beneficiaries. The implementation of the fast-track land reform policy has resulted in a dualistic grain producing sector that comprises of large-scale commercial farming sector and a relatively complex set of heterogeneous smallholder farmers (Moyo, 2008).
About 20 percent of the population lives in urban centers of over 10,000 people, the majority of these in the major cities of Harare and Bulawayo. While 60 percent of the people lives in the communal lands, which cover a little over 40 percent of the total land area; the remaining 20 percent is dispersed on the state-own land, small and large freehold farms. This skewed population distribution which is as a result of colonial land legislation has therefore, provided the political rationale for land reform and redistribution. However, the repossession of the white-owned farms for redistribution to the marginalized majority black population has attracted serious attention, debates and protests (Mbiba, 2001; Moyo et al., 2000).
During the colonial period, land policies in Zimbabwe were in favor the white minority. Hence the racial division of land was done in a highly unequal manner between the European farmers and the native farmers (Moyo et al., 2000). In addition, Andersson (1999) and Potts (2000) posited that this segregationist policies of the colonial government concentrated Africans on marginal lands and the white majority control the best lands. Consequently, there is a high pressure on land in the communal areas which more often leads to serious disputes among people. Perhaps this perceived unequal land distribution led to a radical land policy by the post-colonial government. According to Newitt (2007), in 1997 Mugabe announced a controversial program of land redistribution.
This followed the unequal distribution and domination of farmlands by the white people during the colonial period. Now hundreds of commercial farms that are owned by the white-people making up nearly half of Zimbabwe’s total commercial farmland were designated to be seized without compensation and divided among blacks that either do not have any land at all or have only small landholdings. Faced with strong protests by white farmers and the international community, the Zimbabwean government retreated from this position. However, the government of Zimbabwe later went ahead and seized most of the white-owned farms and redistributed it to the landless native (Mbiba, 2001). This led to the fled away of a large number of white farmers from the country which consequently resulted to the virtual collapse of commercial farming in Zimbabwe.
2.1.10 Challenges of Agriculture in Zimbabwe
Rapidly growing populations have astronomically increase the need for food, and the food-producing capacity in many countries is increasingly constrained both by diminishing opportunities to bring new land into production and by the declining productivity of over cultivated areas caused by natural resource degradation (Umali-Deininger, 1997). This trend is not different with the present situation in Zimbabwe. Consequently, agricultural sector in the country is facing a lot of major challenges that need to be tackled squarely.
Additionally, animal disease is a major challenge in Zimbabwe. The periodic outbreak of food and mouth disease which normally leads to the ban of the country’s beef meant for exportation to the European Union market (APRODEV, 2002). Animal disease could presumably lead to direct losses, either from the death or illness of affected animals. It could also lead to the loss or decrease in production levels. Similarly, animal disease could results in high indirect cost such as, cost of diagnostic testing or surveillance to detect the disease, or the further spread of the disease. Trace backs on animal movement, the implementation and maintenance of road closures, stop movements and quarantines as well as the depopulation costs and indemnity paid to the farmer, overtime costs for law enforcement and hiring additional veterinarians mean more costs. Another challenge is that of food insecurity. Although, Zimbabwe used to be largely self-reliant in the production of staple food, but recently in 1998 the country witness violent food riots for 3 days (Chattopadhyay, 2000).
Hence, in his study Chattopadhyay (2000) notes that Structural Adjustment Program resulted into destitution which further increased food insecurity by eroding the purchasing power of large section of the population. The incidence of poverty is high in Zimbabwe more especially in the rural areas. A survey conducted by the Ministry of Public Service, Labour and Social Welfare in 1995 classified 62% of the rural population as very poor, while 21% of the urban population was classified as poor, with a quarter of this number being very poor (APRODEV, 2002). Given that most of the rural dwellers are faced with a high incidence of poverty and they largely depend on agriculture for their livelihood, thus it could be argued that there is high dependency of poor people on agriculture.
Similarly Umali-Deininger (1997) observes that significant majority of the poor continue to depend on agriculture for most of their livelihood. Just like some other African countries, Zimbabwe is also facing the challenge of human disease. The HIV/AIDS infection is on the increase day by day. Other diseases disturbing the country include cholera and malaria (Sachs, 2005). These could have negative impact on the agricultural workforce and consequently affect the productivity in the sector.
2.1.11 Zimbabwean Agricultural Regions
Natural Region I is a specialized and diversified farming region. The region is suitable for forestry, fruit and intensive livestock production. Smallholders occupy less than 20 percent of the area of this region. (Ministry of Agriculture report 2017).
In Natural Region II flue-cured tobacco, maize, cotton, sugar beans and coffee can be grown. Sorghum, groundnuts, seed maize, barley and various horticultural crops are also grown. Supplementary irrigation is done for winter wheat. Animal husbandry like poultry, cattle for dairy and meat, is also practiced in. Smallholder farmers occupy only 21percent of the area in this productive region. (Ministry of Agriculture report 2017).
Natural region III is a semi-intensive farming region. Smallholders occupy 39 percent of the area of this region. Large-scale crop production covers only 15 percent of the arable land and most of the land is used for extensive beef ranching. Maize dominates commercial farm production. The region is subject to periodic seasonal droughts, prolonged mid-season dry spells and unreliable starts of the rainy season. Irrigation plays an important role in sustaining crop production. (Ministry of Agriculture report 2017).
Natural regions IV and V are too dry for successful crop production without irrigation, but communal farmers have no other choice but to grow crops in these areas even without access to irrigation. Millet and sorghum are the common crops but maize is also grown. Communal farmers occupy 50 percent of the area of Natural Region IV and 46 percentof the area of Natural Region V. (Ministry of Agriculture report 2017).
The current population in Zimbabwe is about 12 million (FAOSTAT, 1999) with an estimated annual growth rate of over 3percent. The annual growth in agricultural output is currently estimated at 2.5percent, but fluctuates with weather conditions. Therefore, whereas in years of good rainfall the country produces enough food to feed the nation and enjoys surpluses for export, in years of drought the reverse is the case. Additionally, even in good years many households are not able to grow enough food for home consumption largely because of poverty and because of inadequate access to land. Moreover the little land they occupy is poor land in general.
2.1.12 Fast Track Land Reform Programme
Land reform (also agrarian reform, though that can have a broader meaning) involves the changing of laws, regulations or customs regarding land ownership. Land reform may consist of a government-initiated or government-backed property redistribution, generally of agricultural land. Land reform can, therefore, refer to transfer of ownership from the more powerful to the less powerful, such as from a relatively small number of wealthy (or noble) owners with extensive land holdings (e.g., plantations, large ranches, or agribusiness plots) to individual ownership by those who work the land. Such transfers of ownership may be with or without compensation; compensation may vary from token amounts to the full value of the land.
Land reform may also entail the transfer of land from individual ownership even peasant ownership in smallholdings to government-owned collective farms; it has also, in other times and places, referred to the exact opposite: division of government-owned collective farms into smallholdings. The common characteristic of all land reforms, however, is modification or replacement of existing institutional arrangements governing possession and use of land. Thus, while land reform may be radical in nature, such as through large-scale transfers of land from one group to another, it can also be less dramatic, such as regulatory reforms aimed at improving land administration. (World Bank 2003)
The second phase of the land redistribution and resettlement programme in the form of the Fast Track Land Reform Programme (FTLRP), which started in 2000, has created an expanded number and array of small, medium and large scale farms, and effectively transferring ownership from the minority, white farmers to new indigenous farmers.
A significant drop in agricultural production and food availability in particular, and in economic activity in general have accompanied this change. Between 1980 and 1999 Zimbabwe’s agricultural sector grew steadily, albeit slowly.
Producing a diverse range of domestic and export commodities, agriculture contributed over 40% of national exports and 18 percent of Gross Domestic Product, employed 30 percent of the formal labour force (350,000 full-time and part-time workers) and 70 percent of the population. Its intricate agro-industrial linkages under-girded 60 percent of the industrial base and close to 50 percent of Gross Domestic Product growth depended directly and indirectly on agriculture and agro-industry. Overall economic growth since 1980 was lacklustre. Agriculture during the 1990’s was increasingly liberalized through structural adjustment macro-economic policies, and agricultural pricing and marketing were decontrolled. Greater incentives led to the growth of diversified traditional and non-traditional commodities. Food production was generally self-sufficient, with some imports, especially during drought periods. Agricultural production however depended heavily on imported inputs and machinery, which relied on stable export revenues, external commercial credit and balance of payments support.
Production remained vulnerable to five yearly droughts, especially in the peasant sector, which while producing 70% of the staple foods (maize, groundnuts, etc.) relies on rain fed farming, as it holds less than 5% of national irrigation resources. To address the lack of social justice and the problems of inefficiency that underlay this agrarian structure, gradualist land reforms were initiated up to 1996. Sporadic “illegal” land occupations sought to re-dress the land imbalances. In 1997, the government of Zimbabwe initiated a process of radical land reform based upon extensive compulsory land acquisition and redistribution, targeting five million hectares for transfer. This occurred in the context of a growing fiscal deficits and exchange rate collapse, following the allocation of increased pensions to war veterans, and related political conflict within the ruling party.
However it was only in the year 2000, when political conflicts grew, that radical compulsory land acquisitions began, and the land targeted for transfer was shifted from five to 10 million hectares by 2001. This acquisition process was accompanied by extensive land occupations led by war veterans, peaking at around 1,000 LSCF properties occupied in the year 2000. Eventually over 6,000 properties were gazetted for acquisition and allocated by government of Zimbabwe to approximately 135,000 households and small to medium commercial farmers by mid-2003. Since 1997 shifts in Zimbabwe’s land reform, agricultural and economic policies, and its relations with the international community, including external financial institutions, have accompanied dramatic economic decline.
The economy faces crisis hyper-inflation, foreign currency and commodity shortages and hoarding, the erosion of incomes, increased food and social services, insecurity, the halving of production in the real economic sector, and reduced employment. Severe droughts between 2001 and 2002 worsened this situation. Economic policy became increasingly deregister from 2000 with greater state control of commodity prices and markets (including interest rates) and greater control and rationing of foreign currency, alongside expansionary monetary policies and deficit financing. These processes have led to a downward trend of increased economic informalisation and parallel markets, and to reduced incentives for production in most spheres.
Increased political conflict since 2000, and the reduction of external international support since 1998 (balance of payments, targeted aid and commercial finance), due to differences over land reform and economic policies, as well as over the evolving governance system, exacerbated the economic crisis and political tensions.
2.15 Economic Structural Adjustment Programmes
Structural Adjustment Programmes comprise of loans provided by the International Monetary Fund (IMF) and the World Bank (WB) to countries that experienced economic crises. The two Bretton Woods Institutions require borrowing countries to implement certain policies in order to obtain new loans (or to lower interest rates on existing ones). The conditionality clauses attached to the loans have been criticized because of their effects on the social sector.
Structural Adjustment Programmes are created with the goal of reducing the borrowing country’s fiscal imbalances in the short and medium term or in order to adjust the economy to long-term growth. The bank from which a borrowing country receives its loan depends upon the type of necessity. The International Monetary Fund usually implements stabilization policies and the World Bank is in charge of adjustment measures. Structural Adjustment Programmes are supposed to allow the economies of the developing countries to become more market oriented.
This then forces them to concentrate more on trade and production so it can boost their economy. Through conditions, Structural Adjustment Programmes generally implement “free market” programmes and policy. These programs include internal changes (notably privatization and deregulation) as well as external ones, especially the reduction of trade barriers. Nations that fail to enact these programmes may be subject to severe fiscal discipline. Critics argue that the financial threats to poor countries amount to blackmail, and that poor nations have no choice but to comply
Statutory Instrument 64 of 2016
Government has come up with a number of interim measures aimed at resuscitating the local industry whose performance had been immensely affected by the influx of imported products. The most notable intervention has been removal of products from the Open General Import Licence (OGIL) through gazetting several Statutory Instruments (SIs) such as SI 64 of 2016 which regulates the importation of selected products.
SI 64 of 2016 was gazetted in June, 2016 following a recommendation from the local industry which was based on an extensive study and consultations with respective sector players on the locally available manufacturing capacities. Imports are only allowed on instances where the local producers are not able to satisfy local demand.
This strategy of reviving the local industry is key to the achievement of the economic targets outlined in the country’s blueprint, ZIMASSET (2013 – 2018), under the value addition and beneficiation pillar. Value addition and beneficiation will be achieved through boosting existing industries and also through the creation of new ones.
The importation of products specified under SI 64 of 2016 is controlled through issuance of import licences. The current licencing procedure requires applicants to physically submit their applications to the Ministry of Industry and Commerce for consideration. Import licences are only issued in cases where there is a local supply gap. The Ministry is in the process of migrating from the current manual licencing system to e-licencing.
Rationale for SI 64 of 2016
The influx of imported products and the subsequent displacement of locally produced goods from the market resulted in the following:
High Import Bill – This resulted in the worsening of Zimbabwe’s trade balance wherein the country imported US$5.2 billion worth of imports in 2016 against exports of US$2.8 billion thereby having a negative trade balance of US$2.4 billion which is unsustainable.
Use of the multi-currency regime–Exports mainly from the country’s neighbouring trading partners were being attracted by Zimbabwe’s use of a stronger US Dollar.
Capacity Utilisation – The manufacturing sector capacity utilization has been falling since 2011, from a peak of 57.2% to 34% in 2015.
Closure of Companies – Zimbabwe has experienced pronounced company closures and retrenchments. During the first half of 2016, there were 231 company closures, with about 5 333 workers being retrenched during the first quarter of 2016.
SI 64 of 2016 is therefore, part of Government’s Import Management Programme whose main agenda is to assist local industry in its resuscitation process. Regulating imports will lead to industrial recovery, as it stimulates demand for locally produced goods. The Import Management Programme will give firms space to retool and become competitive. In addition, new investments will be attracted as there will be a guaranteed market for locally produced products.
Achievements of SI 64 of 2016
The following achievements have been realised to date:-
Reduction in the import bill -The country recorded a reduction in its import bill from US$6.3 billion in 2015 to US$5.2 billion in 2016. This was partly attributed to the Government’s Import Management programme, specifically SI 64 of 2016.
Increase in revenue collection -SI 64 of 2016 has in effect stimulated local manufacturing production. This had a positive outcome on local manufacturers’ profitability and a marked improvement in their contribution to the fiscus.
In the third quarter report for 2016, ZIMRA reported an increase in gross revenue collection of 6 percent, up to US$919.91 million from US$866.96 million realised in the second quarter of the year. This has been attributed to the implementation of S.I 64 of 2016.
Increase in Capacity Utilisation and/or Employment Levels
According to the Confederation of Zimbabwe Industries (CZI) 2016 Manufacturing Sector Survey, implementation of S.I 64 resulted in an increase in average manufacturing sector capacity utilisation from 34.3 per cent in 2015 to 47.4 percent in 2016. Capacity utilisation for some subsectors or companies increased as follows:
Personal Care Products – Datlabs has increased its capacity utilisation from 30 percent to 50 percent on the camphor cream line and it is envisaged to reach 70 percent. Prochem has recorded an increase in both capacity utilisation and employment levels from 30 percent to 48 percent and 43 to 101 workers respectively.
Tyre Manufacturers – increased their capacity utilisation from 30 percent to 50 percent following the regulation of importation of second hand tyres.
Synthetic Hair Fibres Sector – Blue Track and Sensational which are in the manufacturing of synthetic hair products have since raised their employment levels from 150 to 450 and 12 to 600 workers respectively. Capacity utilisation has also increased from 28 percent to 60 percent for Sensational and 15 percent to 50 percent for Blue Track Investments.
Furniture Sector – Improved capacity from 45 percent to 70 percent. In one instance, mattresses has increased their capacity utilisation from 70 percent to 85 percent (2 700 to 3 500 mattresses per month). The industry has also increased operating hours from 5 days per week to 6 days per week.
Tinned Fruits and Vegetables – Associated Foods in Vumba increased capacity utilisation from 38 percent to the current level of 80 percent. The company’s employment also increased by 20 percent to the current level of 143 workers (98 permanent and 45 contracts).
Nestle Zimbabwe – The Company’s Cremora Plant increased capacity utilisation from 30 percent to 70percent. S.I 64 also resulted in the preservation of employment which is around 330 workers.
Fertilizer Industry – The fertilizer industry increased capacity utilisation from 25 percent in 2016 to the current level of 40 percent.
Plastic Pipes (PVC) – In one instance, capacity utilisation increased from 40 percent to 51percent, sales grew by 13percent and there was an additional employment of 27 people.
Chitaitai – S.I 64 of 2016 resulted in the company automating its production and production capacity increased from 2 400 litres of shoe polish per day to 6000 litres per day.
Capacity Utilisation for Downstream Industries
Industry Before SI 64 of 2016 After SI 64 of 2016
Label Supplies 5% 15%
Plastic packaging Supplies 37% 60%
Raw Materials 20% 37%
The following companies have invested in new plant and machinery to date:
Arenel (Pvt) Ltd
In August 2016, the company commissioned a snack manufacturing plant worth US$750 000. Furthermore, they invested into mayonnaise and bottled water plants at a total cost of about US$2 million.
Kershelmar Dairies (Pvt) Ltd
The company which is into dairy and fruit juice production, invested into new equipment worth ZAR2.146 million in August 2016.
The management of imported milk and dairy products has seen the company investing into a new dairy processing plant worth US$1.6 million in July 2016. This new investment will increase employment from 340 to 370 workers. The company has also set up a creamer making plant following a joint venture partnership formed end of 2016.
Invested in a US$5.8 million state of the art maheu making plant at its Chitungwiza branch.
Associated Foods (Pvt) Ltd
The company invested US$400 000 in a peanut butter manufacturing plant, under the Norwegian Investment Fund for Development.
Proplastics invested in a new PVC Extrusion Line worth US$1.3 million.
The company which is a division of Origen Corporation invested US$0.5 million in July 2016 for its new fertilizer blending plant in Mt Hampden. The plant has capacity to produce 200 to 300 tonnes of fertilizer per day.
In August 2016, the company invested US$1 million in a new Blending and Granulating Plant in Bindura. As a result production went up from 300mt to 1200mt per month and employment increased from 50 to 300 workers.
The company acquired an ex-Reckitt machinery for US$40 000 and installed a 50 litres tank for the storage of illuminated paraffin for US$19 500.
Challenges in the Implementation of S.I. 64 of 2016
Although some success stories have been recorded as a result of the S.I 64 of 2016, as highlighted above, its implementation is not without its own challenges. These challenges include, among others; trade-off between balancing existing employment within the retail and distribution outlets that import and protection of the local manufacturing industries; delays in payments to foreign suppliers of raw materials; and the prevailing liquidity crunch which is currently depressing general aggregate demand.
Other challenges are continued appetite for imports by consumers, poor quality and delays in delivery of goods by the local producers due to less competition from imports; incessant smuggling through the porous border posts resulting in increased black marketing; monopolistic behaviour by some local producers which has resulted in price increases; and threat of retaliation from the country’s neighbouring trading partners such as South Africa and Zambia.
2.16 Agriculture in India
The history of Agriculture in India dates back to Indus Valley Civilization Era and even before that in some parts of Southern India. Today, India ranks second worldwide in farm output. Agriculture and allied sectors like forestry and fisheries accounted for 13.7 percent of the GDP (gross domestic product) in 2013, about 50 percent of the workforce. The economic contribution of agriculture to India’s GDP is steadily declining with the country’s broad-based economic growth. Still, agriculture is demographically the broadest economic sector and plays a significant role in the overall socio-economic fabric of India. (Bloomberg L.P. 8 September 2011).
India exported $38 billion worth of agricultural products in 2013, making it the seventh largest agricultural exporter worldwide and the sixth largest net exporter. Most of its agriculture exports serve developing and least developed nations. Indian agricultural/horticultural and processed foods are exported to more than 120 countries, primarily in the Middle East, Southeast Asia, SAARC countries, the European Union and the United States.
As per the 2010 FAO world agriculture statistics India is the world’s largest producer of many fresh fruits and vegetables, milk, major spices, select fibrous crops such as jute, staples such as millets and castor oil seed. India is the second largest producer of wheat and rice, the world’s major food staples. India is the world’s second or third largest producer of several dry fruits, agriculture-based textile raw materials, roots and tuber crops, pulses, farmed fish, eggs, coconut, sugarcane and numerous vegetables. India ranked in the world’s five largest producers of over 80% of agricultural produce items, including many cash crops such as coffee and cotton, in 2010. India is one of the world’s five largest producers of livestock and poultry meat, with one of the fastest growth rates, as of 2011update.One report from 2008 claimed India’s population is growing faster than its ability to produce rice and wheat.
Other recent studies claim India can easily feed its growing population, plus produce wheat and rice for global exports, if it can reduce food staple spoilage, improve its infrastructure and raise its farm productivity to those achieved by other developing countries such as Brazil and China.
In fiscal year ending June 2011, with a normal monsoon season, Indian agriculture accomplished an all-time record production of 85.9 million tonnes of wheat, a 6.4 percent increase from a year earlier. Rice output in India hit a new record at 95.3 million tonnes, a 7 percent increase from the year earlier Lentils and many other food staples production also increased year over year. Indian farmers thus produced about 71 kilograms of wheat and 80 kilograms of rice for every member of Indian population in 2011. The per capita supply of rice every year in India is now higher than the per capita consumption of rice every year in Japan. (India Central Bank 2011).
India exported $39 billion worth of agricultural products in 2013, making it the seventh largest agricultural exporter worldwide, and the sixth largest net exporter. This represents explosive growth, as in 2004 net export were about $5 billion India is the fastest growing exporter of agricultural products over a 10-year period, its $39 billion of net exports is more than double the combined exports of the European Union (EU-28 It has become one of the world’s largest supplier of rice, cotton, sugar and wheat. India exported around 2 million metric tonnes of wheat and 2.1 million metric tonnes of rice in 2011 to Africa, Nepal, Bangladesh and other regions around the world. Aquaculture and catch fishery is amongst the fastest growing industries in India. Between 1990 and 2010, the Indian fish capture harvest doubled, while aquaculture harvest tripled. In 2008, India was the world’s sixth largest producer of marine and freshwater capture fisheries and the second largest aquaculture farmed fish producer. India exported 600,000 metric tonnes of fish products to nearly half of the world’s countries. (Sinha, R.K. 2010).
2.17 Agriculture in Brazil
The agriculture of Brazil is mostly one of the principal bases of Brazil’s economy. While its first concentration was on sugarcane, Brazil eventually became the world’s largest exporter of coffee, soybeans, beef, and crop-based ethanol. Brazil exported 37 thousand tons of processed cashew nuts valued at 187.7 thousand USD in 2012. The success of agriculture during the Estado Novo (New State), with Getúlio Vargas, led to the expression, “Brazil, breadbasket of the world. As of 2009 Brazil had about 106,000,000 hectares (260,000,000 acres) of undeveloped fertile soils, a territory larger than the joined area of France and Spain.
According to a 2008 IBGE research report, despite the global financial problems, Brazil had record agricultural production, with radical growth of 9.1 percent, principally motivated by favorable climate. The production of grains in the year reached a record of 145,400,000 tons. That record output employed an additional 4.8 percent in planted area, totaling 65,338,000 hectares and producing $148 billion. The main products were corn (13.1percent growth) and soy (2.4percent growth). The southern one-half to two-thirds of Brazil has a semi-temperate climate, higher rainfall, more fertile soil, more advanced technology and input use, adequate infrastructure and more experienced farmers. This province produces most of Brazil’s grains, oilseeds (and exports). (Bergad, Laird W. 2007)
The drought-ridden northeast region and Amazon basin lack well-distributed rainwater, good soil, adequate infrastructure and development capital. Although commonly occupied by subsistence farmers, both regions are increasingly important as exporters of forest products, cocoa and tropical fruits. Central Brazil contains substantial areas of grassland. Brazilian grasslands are far less fertile than those of North America, and are generally suited only for grazing. Agriculture in Brazil presents challenges, including the ongoing practice of slave labour agrarian reform, fire, production financing, and a rural exodus fueled by economic stress on family farming. Half of Brazil is covered by forests. The world’s largest rain forest is in the Amazon Basin. Migrations into the Amazon and large-scale forest burning have challenged the government’s management capabilities. The Lula’s government has reduced incentives for such activity and is implementing a broader environmental plan. It also adopted an Environmental Crimes Law that established serious penalties for infractions. (Le Breton, B. 2003).
2.18 Agriculture in Colombia
Agriculture in Colombia refers to all agricultural activities, essential to food, feed, and fiber production, including all techniques for raising and processing livestock within the Republic of Colombia.
Crop cultivation and livestock production have continuously abandoned subsistence agricultural practices in favour of technological farming resulting in cash crops which contribute to the Economy of Colombia. The Colombian agricultural production has significant gaps in domestic and / or international human and animal sustenance needs.
The main agricultural products produced in Colombia are coffee, cut flowers, bananas, rice, tobacco, corn, sugarcane, cocoa beans, oilseed, vegetables, fique, panela, forest products; and shrimp. Colombia is the fourth largest producer of coffee in the world. In Colombia the agricultural politics and policies are determined by the Ministry of Agriculture and Rural Development. The share of agriculture in Colombia’s gross domestic product (GDP) has fallen consistently since 1945, as industry and services have expanded. However, Colombia’s agricultural share of GDP decreased during the 1990s.
2.19 History of Agriculture in Colombia
Indigenous peoples in Colombia were the first to process plants and animals to produce food. The indigenous peoples had developed techniques to plant numerous plants for their feeding and to produce houses and ornaments. Predominantly the indigenous people cultivated maize and managed the Colombian climate and geography to develop planting technique using terraces. Many other plants were first cultivated in Colombia such as tomatoes, avocados, guavas, chilli peppers, manioc and prickly pear were all cultivated as additional food resources, while rubber trees and cotton plants were useful for making cultural products like latex balls and clothing. The indigenous people also were avid hunters and consumed processed local fauna, predominantly deer, rabbits, snails, fishes and birds. The indigenous also cultivated grass to use as roofs for their houses and fique fiber to saw their clothing and artifacts.
2.20 Agricultural Policy
The most relevant policy instrument affecting the recent evolution of the agricultural sector has been the price bands that Andean countries introduced to protect agriculture in the context of the trade-liberalization program of the early 1990s. According to the mechanism, when international prices decrease, import tariffs increase and vice versa. These price-band ranges remain, despite domestic controversy regarding the level of protection that they provide. This is mainly because of pressure from interest groups and because of the difficulties in identifying clearly the impact on international prices of the subsidies and internal supports given to producers in the developed world. Public policy toward the agricultural sector also has included the establishment of subsidized sources of credit. Since 1990 such mechanisms have included the Fund for the Finance of the Agricultural Sector (Fin agro). Other policy instruments have included minimum price guarantees, import quotas, subsidized credits and tax exemptions, campaigns to promote consumption, incentives for new investments and for forestry plantations, and more recent exchange-rate or currency-hedging options.
2.21 Agricultural Products
In 2006 Colombia’s most important agricultural products were cattle, accounting for 45 percent of agricultural output; coffee, 9.5 percent; fruits, 15.2 percent (including plantains, 5.2 percent; and bananas, 2.8 percent); rice, 4.9 percent; flowers, 4.2 percent; vegetables, 4.1 percent; and other agricultural products, 17.1 percent. This composition has remained basically the same since 1992, except for an increase in the share of cattle and fruits, and a decrease in the share of coffee. Cattle raising is the most widespread agricultural activity in Colombia, accounting for 74 percent of Colombia’s agricultural land in 2005.
Nevertheless, cattle traditionally were not a particularly important or consistent net export for Colombia, and coffee’s dominance within the country’s agricultural exports remains largely unchallenged. Cattles are needed for milk. Perhaps the most significant sectorial change in modern times was the creation of the National Livestock Fund (Fondo National de Ganaderos, or FNG) in 1993, administered by the Association of Colombian Stockbreeders ( HYPERLINK “https://en.wikipedia.org/w/index.php?title=Federaci%C3%B3n_Nacional_de_Ganaderos;action=edit;redlink=1” o “Federación Nacional de Ganaderos (page does not exist)” Federación Nacional de Ganaderos, or Fedegan). That fund has generated resources to tackle five major issues: sanitation, commercialization, research and development (R&D), training, and promotion of consumption.
2.22 Value Chain
The value chain describes the full range of activities which are required to bring a product or service from conception, through the different phases of production (involving a combination of physical transformation and the input of various producer services), delivery to final consumers, and final disposal after use. (Ellram and Cooper 1993).
The term ‘Value Chain’ was used by Michael Porter in his book “Competitive Advantage: Creating and Sustaining superior Performance” (1985). The value chain analysis describes the activities the organization performs and links them to the organizations competitive position. Value chain analysis describes the activities within and around an organization, and relates them to an analysis of the competitive strength of the organization. Therefore, it evaluates which value each particular activity adds to the organizations products or services.
This idea was built upon the insight that an organization is more than a random compilation of machinery, equipment, people and money. Only if these things are arranged into systems and systematic activates it will become possible to produce something for which customers are willing to pay a price. Porter argues that the ability to perform particular activities and to manage the linkages between these activities is a source of competitive advantage. Porter distinguishes between primary activities and support activities. Primary activities are directly concerned with the creation or delivery of a product or service. They can be grouped into five main areas: inbound logistics, operations, outbound logistics, marketing and sales, and service. Each of these primary activities is linked to support activities which help to improve their effectiveness or efficiency. There are four main areas of support activities: procurement, technology development (including R&D), human resource management, and infrastructure (systems for planning, finance, quality, information management etc.).
2.23 Maize Subsector Value Chain Analysis
Maize is the most main grain crop in Zimbabwe, being both a major feed grain and a staple food for the majority of the population. FAO (2008) reported that maize and maize products accounted for 43% of the total dietary energy supply (DES) between 2003 and 2005; and the average per capita food consumption of maize and maize products was 120 kg/year between 2004 and 2008. Apart from being consumed as raw grain, maize can be processed into maize meal, or alternatively used to make a variety of other products and by-products which include flour, oil, maputi, samp, grit used in the making of snacks as well as stock-feed. In terms of production, maize is the second most produced crop in Zimbabwe after sugar cane, contributing an estimated 11.6% of the gross value of total agricultural production in 2005 (CSO, Abstracts of Agriculture, 2005). At least 1.5 million tonnes of maize is consumed by humans, with an average of 350 000 tonnes16 being utilised by other commercial users, including the animal feed industry, while the remainder (estimated at an average 10%) gets used for seed and other industrial purposes (FAO, 2004).
ZIMBABWE’S MAIZE VALUE CHAIN MAP
2.24 Wheat Subsector Value Chain Analysis
Wheat is the second most important grain crop after maize, with the combined contribution to daily caloric intake in excess of 50%. Wheat is a key staple crop, consisting of 20% bran which can be sold to bakers as wheat bran or to stock feed millers. The main wheat products include flour, semolina, and break wheat, with most Zimbabweans mainly using bread and flour products for everyday consumption. However, Zimbabwe is a net importer of wheat owing to slightly unfavourable agronomic conditions. Nonetheless, with earlier advances in biotechnology and seed breeding over the year’s domestic production managed to achieve 62% of wheat requirements from locally grown wheat (MoAMID, 2007). It should be noted however, that the local wheat quality is not suitable for bread flour therefore adequate and suitable qualities of flour can only be achieved after a certain proportion of hard wheat is imported to improve the gristing qualities of the local wheat product. In fact, millers say that Zimbabwe requires 80% foreign wheat and 20% local wheat for making of flour that is suitable for bread making.
2.25 Soya Beans Subsector Value Chain Analysis
Soybean is generally perceived as a high value crop, and its value is underlined by the crop’s significance in terms of an important source of protein for both livestock and human populations. The popularity of soybean is also generally attributed to its multi-purpose benefits as a cash and food crop, making its associated production, processing, consumption, and marketing activities much more lucrative. The crop’s nitrogen fixing abilities make it a perfect rotation option with crops such as maize and wheat as it reduces input costs and therefore capital requirements for resource constrained farmers. Aside from the seed itself, soybean is used to produce a variety of high-value marketable products which include, soybean cake (stock feed), soymilk, soy yoghurts, soy flour and soybean oil.
Most of the soybean produced in Zimbabwe is however, primarily used in oil expression. In Zimbabwe soybeans contribute 30% of all the cooking oil production while cottonseed contributes 50% (GoZ, 2008). Approximately 95% of all soybean seed produced in Zimbabwe is destined for the processing industry for the production of soybean oil. Soybean oilcake (also referred to as meal), a by-product of the oil extraction process, is sold to feed manufacturers domestically and in the region (particularly South Africa). Soybean cake is an important protein source for livestock, particularly in the poultry and piggery sub-sectors. Soybean cake extracts can also be used in the manufacture of consumables such as soy-chunks. Another important by-product of the soybean extraction process is the gams which contains lecithin used in the manufacture of bread.
2.26 Rice Subsector Value Chain Analysis
Rice is an important substitute grain crop for maize and wheat. There are a only few specific varieties of paddy and dry land rice that can be grown in Zimbabwe and little has been documented concerning the local agronomic and value chain structure of the crop. Generally, most Zimbabwean rice is not of good quality and its production is mainly for subsistence purposes. It has been established that the domestic rice production in Zimbabwe is marginal, ranging from anything between 600 tonnes and 700 tonnes (FAO, 2009).
However, MoAMID (2010) records that rice production in the 2009/2010 season is estimated at 778 tonnes, down from a 2008/2009 estimate of 3,046 tonnes. However, MoAMID data does not classify the types of rice produced/planted. Recorded estimates from FAO reveal that paddy rice imports have averaged 100 tonnes between 2000 and 2007. This is because Zimbabwe does not have conducive agronomic conditions and therefore lacks a comparative advantage in the production of rice. This is why Zimbabwe has been importing a substantial amount of rice types, including milled and broken rice from traditional large scale producers such as Malawi, India, Thailand and Vietnam.
2.27 Sustainable Agriculture
Sustainable agriculture is a process of learning and adaptation (Pretty, 1995). Empirical evidence indicates that there are many examples of food deficit areas that became food surpluses areas after the adoption of sustainable agriculture (Hinchcliffe et al, 1996; Bunch and Lopez, 1996). As illustrated by Pretty et al (1997), the intersection of sustainable food production, entitlements and natural resources, guided by a conducive policy environment is food security.
According to Schneider and Gugerty (2011), evidence suggests that there are multiple pathways through which increases in agricultural productivity can reduce poverty, including real income changes, employment generation, rural non-farm multiplier effects, and food prices effects. However, barriers to technology adoption, initial asset endowments, and constraints to market access may all inhibit the ability of the poorest to participate in the gains from agricultural productivity growth.
2.28 Agricultural Infrastructure
A major source of competitiveness in agricultural value chains and sustainable food production is access to affordable physical infrastructure: according to Warner and Kahan (2008). This includes infrastructure that: supports on-farm Russian Journal of Agricultural and Socio-Economic Sciences, production like irrigation, energy, transportation, pre- and post-harvest storage; ensures efficient trading and exchange including telecommunications and covered markets; adds value to the domestic economy like agro-processing and packaging facilities, and enables produce to move rapidly and efficiently from farm-gate to processing facilities and on to wholesalers for example transportation and bulk storage. Agricultural infrastructure thus includes all of the basic services, facilities, equipment and institutions needed for efficient functioning of the food and fiber markets (Venkatachalam, 2003). Empirical evidence suggests that a three to four fold increases in infrastructure investment, reduces poverty by 0.6 to 1 % annually (Besely & Byrgess 2003).
2.29 Infrastructure and Competitive Advantage
Infrastructure in the agricultural sector improves the “comparative advantage” of the region where infrastructural investment is made (Venkatachalam, 2003). Studies by Ahmed and Hussain (1990) demonstrated that fertilizer use in the agricultural sector increased with the improvement in the quality of roads.
Fan and Hazell (2000) modeled agricultural yield as a function of traditional farm inputs, technology, infrastructure and time. The significant and positive trend in the model suggested the existence of important but missing technology and infrastructure variable in the model
This is supported by Rostow who argues that enhancement in infrastructure is considered as a necessary precondition for capital formation and increase in the production and productivity. Boosting agricultural productivity can help to address a raft of problems besetting the continent; food security and hunger, poverty and economic competitiveness (Gajigo and Lukoma, 2011).
Using aggregate agricultural production data from 47 developing and 19 developed countries, Antle (1993) observed a strong positive relationship between infrastructure development an aggregate agricultural productivity (Antle, 1993). Bhatia (1999) also established a positive relationship between composite index of rural infrastructure in 15 states of India and level of per hectare yield of food grains and also value of output from Agriculture.
Agricultural growth also aids rural and urban consumers alike by driving down food prices. The poor typically spend a high share of their income on food and therefore benefit from increases in food production that reduce prices (Diao et al , 2007).A large body of empirical studies of the green revolution in Asia demonstrates how agricultural growth reached many small farms and raised large numbers of people out of poverty (Rosegrant and Hazell 2000). In addition studies undertaken have also shown that there is a positive relationship between agricultural growth and overall economic growth. Agriculture has a strong spillover effect on Gross Domestic Product (GDP), through the service and the manufacturing sectors and in Sudan, crop production contributes approximately 45 percent of the GDP originating in agriculture, livestock contributing most of the remainder, with forestry and fishery contributing just over 5 per cent (UNDP Sudan, 2006).
Communal agriculture, in particular, plays a dominant role in Zimbabwe since the country’s economy is largely agriculture-based and the majority of the population lives in the rural areas (Luebker, 2008).
2.30 Agriculture and Infrastructure in Zimbabwe.
The agricultural subdivision in Zimbabwe has been performing poorly for over a decade due to poor rains, structural challenges, and consecutive years of drought, and as a consequence poor harvests. According to the UN (2010) the situation in Zimbabwe was exacerbated by the fast track land reform and the subsequent need for investment in the development and rehabilitation of irrigation systems, and post-harvest infrastructure that followed. The shortage of foreign currency that characterized the period affected the availability of repair and maintenance workshops close to the farmers; and supply of spare parts on the local market. The result was widespread hunger and increase in poverty levels.
Lack of capability by the irrigation industry, equipment, suppliers and contractors to provide services led to low productivity, while lack of post-harvest infrastructure led to a high level of post-harvest losses. Existing literature supports that liberalization of the agricultural sector, accompanied by increased infrastructural development would improve efficiency and equity in Zimbabwe.
Dobermann and Nelson (2013) states that harvest and postharvest technologies save labor reduce grain losses and improve product quality. Fuglie et al (2012) however adds that the technological innovations, Russian Journal of Agricultural and Socio investments in infrastructure and supporting policies, including subsidies which were effective in some regions have been methodology data collection. Investments in infrastructure and supporting policies, including subsidies which were effective in some regions have been lagging behind, particularly Sub-Saharan Africa.
Overview of Agro-business Industry
Agro-business is a key sector in the economy of many countries, mainly in a developing country like Zimbabwe. It contributes meaningfully to the Gross Domestic Product (GDP) and it is a source of employment for a lot of people (Donges, 2000). According to Bruinsma (2009), the agro-business sector consist all the operations involved in the manufacturing of farm produce, production, operations on the farm, as well as processing and distribution of farm commodities and items made from them. Aune and Andre (2008) and Wilkinson and Rocha (2009) also agreed that, the agro-business industry comprises all the post-harvest events that are involved in the revolution, preservation and planning of agricultural production for intermediary or final consumption of food and non-food products.
The term captures various range of primary and secondary post-harvest events, ranging from basic village-level commodity preparation to modern industrial processing and involving widely differing levels of scale, complexity and labour, capital and technological intensity. Agro- food processing industries tend to dominate this sector in developing countries, including Africa. Brahmbhatt and Hu (2006) categorized food processing industries into three categories: Primary, those that are involved in the basic processing of natural produce for example, cleaning, sorting and dehusking; secondary, those that include simple or uncomplicated modification of natural produce, for example, hydrogenation of edible oils; and tertiary, those that include some form of innovative modification to the natural produce such as processing of tomatoes into ketchup and dairy products into cheese.
Agro-business is a source of foreign currency earnings as well as food and fiber which are considered to be strategically important for national security (Hussain and Ahmad, 2000). The agro-business sector in Zimbabwe is regarded as a vital segment contributing to economic prosperity of the nation and, as such, remains crucial in terms of labor absorption and export earnings (FAO, 2008). Significantly, since most agro-business activities occur in the rural areas, their development and sustainability could effectively lessen poverty in many nations.
Agro-business and socio-economic development
Kamala and Khot (1999) assessed that industrialization had frequently been advocated as a means of resolving the surplus-labour and low-income problems faced by many rural areas. The study discovered that regional development in terms of increased incomes and employment openings were enhanced if the primary material was carried through additional value addition or processing levels before exporting.
Kamala and Khot (1999) identified that processing of agricultural produce at the primary level with efficient equipment and suitable method offers huge benefits to both agriculture industry and the economy generally. Ousmane (2008) examined the agro-business industry in Andhra Pradesh, India, and found that agro-businesses do not only stimulate agricultural production but also result in diversification of activities for increased income and new employment opportunities.
Barrett et al. (2010) also argued that, agricultural development by itself does not answer the problem of poverty and unemployment among various nations but rather, integrated industrialization through agro-industries that strive to combine a mix of employment generation and change of occupations together with land reforms, reorientation of credit system and great public investment in rural infrastructure has a high possibility of success. A study conducted by Prasad (1998) revealed that, agro-businesses have developed the source of absorption of surplus labour in agriculture. He concluded that agro-based industries are important in tackling the basic economic problems of poverty and unemployment in the rural areas.
The study concluded that the formation of new agro-industries would provide additional sources of livelihood, social amenities and effective community organization. Strong synergies exist between agro-business and poverty relief in that the former promotes entrepreneurship, raises demand for agricultural products and connects farmers with markets through the handling, processing, marketing and distribution of agricultural products (Beintema and Gert-jan, 2008).
As a result, productivity and value of agricultural production, farm returns, and economic stability for rural households, food security and modernization throughout the value chain can be enhanced. Efficient agro-business can therefore spur agricultural growth and lessen poverty.
Constraints Facing the Establishment of Agro-Businesses
According to Ousmane (2008), one main challenge facing the establishment of an agro-business firm is insufficient funding and high interest rate on lending capital. Ousmane stressed that most agro-business enterprises are set-up by individuals and, therefore, are faced with financial drain and hardly get support from the government and corporate bodies. Andre (2008) also added that high interest charges on bank loans greatly prevent most agro-businesses especially the new ones from competing with the well-established non-agro-business industries. Besides, the pressure to preserve the environment has grown considerably in recent years, which has halted many agro-infrastructure projects and land development, especially in the forest areas (Grant, 1998). Jones (1996) also opined that the strict environmental rules, including requirements that land reserves (ranging from 20percent to 80percent of total area) be set aside by land users or developers are now placing further restrictions on the establishment of agro-businesses, since raw materials to feed the agro-industries are inadequately produced.
According to Feder et al. (1999), one of the major challenges facing the establishment of agro-business, especially in the developing world, is the lack of techno-economic development options for strengthening the industry and foster equitable integration into market-oriented systems. In this respect, no special emphasis is given to technical feasibility studies, assessments of potential economic and environmental impacts, international procurement, and organizational linkages, resulting in poor establishment and collapse of agro-businesses.
Barrett et al. (2010) also state that insufficient capability building in most agro-business firms, act as critical means of reducing their sustenance, productivity and marketing performances. This situation usually comes about as a result of agro-businesses paying no particular attention to strengthening their respective technical support organizations, design and technology centers as well as demonstration units for basic and advanced technologies.
Feder et al. (2003), however, argue that the most common problems facing the establishment of agro-business industry are: international trade barriers; limited access to credit, high interest rates and fluctuating exchange rates; poor trade policy; export and import taxes on raw materials; bureaucratic practices; high transportation costs; raw materials of poor quality and unreliable supply; the lack of support facilities; and the lack of professional managers.
In order to maintain proper establishment and sustainability of agro-business industry, there is the need for the industry to improve upon its productivity and efficiency, increase their integration into global value chains and promote diversity in rural livelihoods (Bruinsma, 2009). However, these are mainly not integrated into the short-, medium- and long-term plans of most agro-business firms and as such, skill upgrading, working methodologies and guidelines, process optimization, diffusion of appropriate agro-engineering systems, product innovation and diversification, compliance with quality and environmental standards, and participation in trade fairs and trade missions are poorly manned or undertaken, thus inversely derailing the level of productivity of the business.
According to Beintema (2008), highly famous non agro-business firms in the United States become well-established through frequent participation in global forum functions such as participation in the work of international organizations and normative bodies; promotion of research on priority and novel commodities; preparation of training manuals and tool kits on agro-processes and technologies; and dissemination of agro industrial data for decision making. Nonetheless, many agro-business firms fail to plan for regular participation in resourceful forums right from the establishment stage which generally leads to poor establishment and growth of the industry (Evans and Wurster, 2000).
A study done by Bandarla (1991) on the problems facing the operations of agro-business industries in Australia revealed that the major problems associated with the operations of agro-businesses are poor organizational structure, poor production and distribution channels, low technical know-how, inadequate training, poor industrial relations and inadequacy of management.
Factors Hindering the Operations of Agro-Business Industry
Several factors that hinder the operations of the agro-business industry have already been discussed. According to Evans and Wurster (2000), a key operational challenge is the inability to develop a realistic assessment of the capability and capacity of the firm or industry. This challenge goes beyond identifying the core competencies of the organization and the sustainable competitive advantage of the firm in an increasingly competitive market.
Jones (1996) added that, most agro-businesses fail to explicitly perform candid assessment of those areas where the firm’s efforts are unproductive or expertise is lacking. Specifically, agro-business firms fail to exploit and expand their capacities and competencies to maintain a strategic competitive advantage (Porter, 1996). According to Barett et al. (2010), many agro-business firms lack the capability to accurately identify and define their organizational goals, resulting in poor performance and/or productivity. Often, competitors cite cheap labour as an advantage in business; however, in reality, high taxes and confusing labour laws make hiring in many countries less attractive (Kieran, 2010). This is aggravated by shortages of skilled labour (especially, in the rural areas) to manage machinery and equipment that are highly costly.
According to Evans and Wurster (2000), labour shortages greatly affect the routine operations of any business of which the agro-business sector is not an exception. Grant (1998) stated that, a major obstruction to agro-business operation in recent years has been the rise in the dependence on foreign currencies, and thus; the high instability in the flows of the foreign currencies greatly impinges on the financial operations of agro-businesses which mostly rely on seasonal produce. Lambert (2001), however, opined that the prime challenges confronting the operation of the agro-business industry includes inadequate supply of raw-material, poor and inconsistent quality of processed products, and lack of technical support for the agro-industrial sector and absence of good management of the processing facility.
Jules (2006) states that securing competence and intellectual capital in agro-business is a major challenge that hinders their successful operations. Thus, more often than not, agro-businesses are able to determine the current skill levels needed in their daily operations, but fail to determine the capacities and competencies needed to successfully compete in the future.
According to Jones (1996), developing an attitude of continuous improvement, life-long learning, and a progressive orientation are the vital measures in securing competence and intellectual capital of agro-businesses. However, it is hardly observed among agro-business industries that investments have been made in training and developing competent employees who could effectively handle the operations of the firm (McGrath and McMillan, 2000). Low accessibility to appropriate production and processing technologies has recently become a major challenge to the operation of agro-business industry (Pursell et al., 2009). In this regard, agro-businesses are unable to ensure that their products meet world quality requirements specified by the International Standard of Operation (ISO), resulting in low productivity and general performance.
Webber and Labaste (2010) add that, the agro-business sector is mainly faced with problems pertaining to the capability of producing major products and by-products in a steady and reliable manner as well as meeting market demand for products with standardized quality. For instance, banana chips produced in Indonesia continue to have an oily odor and are, therefore, rejected by Japanese consumers, directly impinging on the general operations or production.
A study done by Jules (2006) in Brazil, however, revealed that appropriate packaging and labeling posed greater threat to the agro-business industry especially, those operated on small and medium-scale level. The study concluded that the packaging of agro-business products sometimes does not meet the needs of international markets due to unattractive designs, inappropriate quality and inadequate labeling. For instance, the packaging material used for banana chips in Brazil is usually made in the form of large plastic sacks which do not completely protect the product from the process of deterioration. In the same manner, the labels usually do not indicate product ingredients or the expiry date of the product which makes it less competitive in the US market and in turn affects the production level and income of the firm.
According to Grant (1998), low production levels and incomes negatively influence the routine operations of businesses especially, in highly competitive markets.
In addition, Wily (2006) stresses that most agro-business enterprises face difficulties in making commitments to the supply of agro-based products in specified amounts and in a continuous and reliable manner mainly due to the inefficient size and low productivity levels of landholdings. Moreover, the supporting industries (packaging, cold storage and warehousing) are not only inadequate, but also, are in need of development, which openly hinders successful operations of agro-business firms.
Narrod et al. (2009) state that many agro-business enterprises find it difficult to promote their products on the open market due to the high costs involved. For instance, many agro-business firms do not have company profiles and do not participate in any international exhibitions or promotion exercises, making their products solely confined within the region or country of production and thereby restricting production and marketing operations.
Todd and Rose (2006) also argue that agro-business enterprises are faced with difficulties in accessing formal credit with low interest rates. Generally, the credit is accessed for funding their routine activities and formulating appropriate policies. Hence, the inability to access it usually leads to slow growth and/or poor performance of agro-businesses.
Marketing Challenges Encountered by Agro-Business Processors
According to Restuccia et al. (2007), market trends are generally defined by a number of factors including: the population; the economy; increasing food imports; westernization of the diet; expansion of fast food outlets; the development of retail and distribution systems; and the improvement of market access. However, most agro-business firms fail to identify these factors which negatively impact on their market share and profitability. Porter (1996) also affirmed that most agro-business enterprises encounter problems with regards to the accurate identification of competitive advantages, understanding the market trend, identification of customer relationships, and provision of quality and adequate services to its customers which greatly thwart their products marketability and profit margins.
In recent decades, the changing tastes of consumers, the emerging competitive environment, the financial markets, and the changing customer satisfaction have indeed posed greater threat to the marketing of agro-business’ products, especially those that are newly established (Sonka, 2002). According to Tyner (1997), renowned agro-manufacturers always work to add value and differentiate their products in order to sustain their businesses; however, in the current competitive environment, this has become a big challenge to the agro-industry since any innovation developed by a given agro-business firm is quickly copied and “commoditized” by other formidable firms. This, then, suggests that agro-business firms are mostly faced with enormous pressure on winning greater market share, which highly influences the internal operating efficiency.
According to Abbott et al. (2001), a major marketing challenge confronting the agro-business industry is failure to adapt to changes. The pace of change in the industry is very rapid and appears to be increasing, making the sector highly unstable. However, most agro-business firms are unable to accurately predict the sources of the changes and innovation, anticipate the changes and innovations which might occur in the future, and fail to manage their businesses to absorb and/or adjust to the changes which affect their marketability.
Christensen (1997) opined that, ability to cope with changes in a given business improves the capacity of the business to deliver the defined products and services to its established customer base. However, Akridge et al. (2000) argued that, adopting a disruptive innovation requires that a business manager seeks out and pursues those new prospective customers and not expect the new marketing channel to promote the change. Hence, managers must understand how to search out niches and more narrowly defined markets, while managing the business to be cost effective at lower output levels. Nevertheless, managers of most agro-business firms fail to search for prospective market niches and are, therefore, faded out by rigorous non-agribusiness firms.
Since market premiums quickly dissipate as competitors copy, modify, or develop similar technologies, the potential rewards from maintaining technological leadership is substantial (Erickson et al., 2002). However, unique innovations that might create significant competitive advantage in the agro-business industry are shortly overcome by competitors through the creation of alternatives which are similar or perhaps superior in some ways.
Again, the sophistication of today’s market-place makes it nearly impossible to completely protect an innovation developed by agro-business firms, even though the concept might be technically protected by patent law (Grant, 1998). This really poses greater threat to the agro-business industry, since marketing strategies developed are easily succumbed by the non-agro-business industries thereby reducing their market shares and, consequently, their profit margins.
Promoting the Development of Agro-business Enterprises
In order to promote agro-business enterprises, production capabilities, adequate infrastructure, effective identification of niche markets and development of required skilled labour need to be greatly enhanced (Birner et al., 2010). According to Bonnen (1998), prudent macro-economic policies that ensure that the agro-business sector remains healthy must be promoted. Bonnen (1998, p 56) added that, in trade policy, “All export barriers such as export taxes for agricultural products and high import tariffs on inputs required by the agribusiness sector urgently need to be eliminated and proactive trade promotions pursued”.
Birthal et al. (2005) also stressed that in order to effectively develop agro-business enterprises, policies and programs need to emphasize on: the creation of a conducive business climate and a level playing field for small-scale agro-business ventures; the strengthening of resource supplies and support institutions in rural areas; the provision of needed investment in infrastructure and other public goods; and the provision of training for agro-business enterprises.
Birner et al. (2009) also opined that, total development of agro-business enterprises would only be achieved when strong emphasis is placed on the creation of entrepreneurs, ensuring competitive products, stimulating local investors and human resource development, supporting business partnerships, and developing agro-business terminals. Hence, policy formulation should not discriminate against agro-business firms in trade and industry and related macro policies in order to ensure total growth of the sector.
Akridge (2000) found that the development of the agro-business industry depends on: the modernization of the traditional food business; the establishment of joint ventures and strategic alliances with world-class companies; and improved collaboration between governments, industry, and research and development institutions in the production of the best seeds, processes and technologies.
Literature Review of Agro-Food Supply Chain
Cunningham scrutinized peer reviewed journal articles published during 1987-2000 in seven commercial databases on the theme of agro-food supply chain management and exposed the possibility of conducting additional studies on all agro-food supply chain processes, particularly the fishery sector.
Vorst, et al. conducted a simulation based study to explore supply chain management’s effect on logistical performance indicators in food supply chain and found that uncertainty minimization drastically boosts service level.
Frick, et al. studied issues pertinent to supply chain of potatoes, lambs by interviewing cultivators and supply chain intermediaries. They found that entrepreneurship prospects were bright in supply chain of these commodities. However, they have cautioned that such prospects are highly dependent on efficient utilization of fuel and relationships between the components of the supply chain.
Taylor conducted action research and used value stream analysis (VCA) involving farmers and a key processor and retailer and unearthed through a close scrutiny of lean supply chain mechanism that supply chain performance, efficiency, profitability and relationship between components of supply chain have got immense scope for improvement.
Batt studied potato supply chain issues in Vietnam by interviewing 60 potato cultivators, 10 traders and 25 retailers and used one-way ANOVA to explore the impact of various supply chain issues using transaction cost analysis and gap analysis. Results reveal that good inter- relationship between different components of supply chain makes a significant positive contribution to enhance chances of innovation, thereby boosting probability of competitiveness and competence. Further, the author has pointed out that supply chain management and product diversification has been necessitated in developing countries due to the following reasons; attainment of food security, increased urbanization, rises in standard of living and preference for traditional food. These developments have enhanced farmers’ income.
Deshingkar, et al. attempted to detect changes in cultivation pattern of And-hra Pradesh farmers. They found that larger farmers are engaged in cultivation of conventional vegetables such as onions, tomatoes, brinjals and cabbages while some of them have undertaken cultivation of hybrid vegetables of coriander and potatoes. The study also exposed the presence of small and marginal farmers making significant contribution to vegetable cultivation.
Chandrashekar analyzed fruits and vegetables supply chain management practices of Karnataka SAFAL market and exposed the prevalence of scope for better utilization of supply chain management concept to enhance productivity and efficiency.
Hobbs analyzed the current trends and future prospects of supply chain management of agro-food sector and established that enhanced attention on food security, free foreign trade reign, flow of foreign investments, heterogeneity of consumer choice and advancements in technology are important determinants driving modifications in supply chain management practices of agro-food sector.
Moazzem and Fujita analyzed the Bangladeshi potato supply chain management with a special emphasis on the marketing system. They found that time and finance constraints, too little productivity of potato cultivation, inadequate skill-level and shrinking rate of return from potato refrigerated warehousing business restricted the agriculturists and warehouse owners from undertaking trading activities. Despite these problems, investment in warehousing potatoes has been on the rise due to liberal credit offered by traders engaged in refrigerated warehousing.
Shukla and Jharkharia undertook a review of 20 years (1989-2009) literature on fresh-produce supply chain management. They classified the available literature based on problem milieu, methodology, product and other structural attributes. Their study revealed that fresh-produce-supply chain management papers have concentrated on maximizing revenue, customer satisfaction and minimization of post-harvest wastage.
The other issues researched were disparity between demand and supply and inefficient demand predictions and the review revealed that majority of the articles available on fresh produce supply chain management is fragmented.
Fuglie conducted an inter-country study on economics of potato warehousing in India, USA and Tunisia. This paper found that agriculturists might be exposed to lesser degree of market risk if they had access to market prices and stock details in time and forward and futures pricing mechanism existed.
Beck and Demirguc-Kunt analyzed research relating to access of finance for small and medium enterprises and suggested that factoring and leasing can play a significant role in providing finance for these enterprises in economies where financial institutions have not been well established.
Sagheer, et al. analyzed efficiency of agro-supply chain management of India at industrial and firm levels using Porter’s Diamond and Momaya’s Asset Process Performance (APP) Models respectively. Their study has revealed that human components (processors, government, producers, etc.) and non-human components (governing setup, food quality, etc.) significantly influence supply chain management competence.
Minten, et al. surveyed branding of agriculture commodities and supply chain management issues in Bihar. They found that brand materialization in agriculture commodities results in enhanced delineation in retailing segments. The authors have revealed shocking information for consumers that quality of branded commodities sold in packed materials are inferior when compared with those available in the market in loose lots.
Hellin and Meijer scrutinized Ecuador supply chain management practices and found that consumer market requirements for processed potatoes are on the increase. They also found that increasing role of retailers and processors in potato supply chain management have successfully countered this demand spurt.
Punjabi studied problems confronting supply chain management practices of fresh food and vegetable items in India by obtaining responses from corporate managers involved in the process. Her study exposed issues like insufficient refrigerated warehousing facilities, excessive competition among traders in conventional markets, contractual obligations of agriculturists and agro-business firms, dearth of standardization in agricultural commodities, non-compliance with APMC Act while procuring agricultural produce from agriculturists and improper handling of the postharvest produce due to lack of training.
Ghai conducted a descriptive research on financial aspects of components of agro supply chain using secondary data. The study has advocated that all components of supply chain should be interrelated and cooperate by ethically sharing benefits equally among themselves in order to sustain in the business through mutual coexistence.
Bala Subrahmanya conducted a research to expose various problems confronting the Indian small scale sector in the light of globalized scenario. His study has revealed that inefficient infrastructure, insufficient financial support due to low flow of formalized credit and outmoded technologies resulting in substandard quality and poor productivity and capacity utilization are the major issues adversely bothering Indian small-scale units.
Shilpa analyzed the vegetables supply chain management practices in Bangalore and identified that inefficient recording of sales managed by agriculturists, procurement managed by middlemen, quantum sold to consumers and quantity remaining unsold and intra-day price variations are the major restrictions of vegetable supply chain management.
Khairul Islam analyzed Bangladeshi potato supply chain management through desk research and interviews and unearthed that Information Communication Technology (ICT) is the permanent solution to enable agriculturists in identifying various sources of qualitative inputs and enforcement of regulatory mechanism to check sale of substandard inputs in the market.
Singh analyzed potato supply chain management practices in Bihar and highlighted the major problem of agriculturists being exploited by middlemen who eat away lion’s share of price paid by consumers, leaving the farmers a very little share.
Policies affecting the segments of agro-food supply chain
Driessen and Glasbergen have compared efficiency of organic and generic farming. They have exposed some limitations of organic farming such as complexities associated with it and squat desire among consumers to use eco-friendly commodities. The study has revealed that governmental policies exert slender impact on potato supply chain management practices.
Cromme, et al. endeavored to study ways of amplifying efficacy of potato supply chain management practices in developing countries by analyzing secondary data provided by UN’s FAO (Food and Agriculture Organization) and exposed important problems confronted by potato Supply Chain Management as dearth in support from both public and private parties, production initiatives, diversified fabrication clusters and market integration. Nations with minimum assortment in diet practices and those with high imports and exports are immensely benefitted by potato supply chain management.
Wei and Yanrong have analyzed supply chain management practices of Melons and established that despite institutional scenario being supportive of supply chain management practices, social infrastructure has been the major cause of concern.
Wheatley and Peters analyzed the means and modes of enhancing efficacy of agro-food supply chain management practices of Asian farm sector and recommended that innovation, supply chain intermediaries diversifying their activities to participate in other supply chains, precise consideration of different stakeholders in the supply chain and the mechanism of apportionment of cost and utility to these stakeholders shall enhance the efficiency of supply chain Management practices.
Kumar, et al. scrutinized 76 presentations made during eighteenth conference organized by NAARM covering supply chain management practices of agriculture items and its contribution to accomplishing food safety and eliminating poverty. Their study revealed that institutional framework comprising professional societies and national institutes might shoulder the responsibility of taking initiatives to develop sound theoretical concepts to strengthen supply chain management issues of agricultural food items.
Basu evaluated efficacy of Bengali potato supply chain management based on secondary data during July 2000 to December 2001 and has advocated intervention of private corporate in potato supply chain management to boost its efficacy.
Rais, et al. have conducted an in-depth scrutiny of India’s food processing segment and its capacity to generate jobs. They stressed the importance of better government policies to institute proper infrastructure support for developing the industry that is engaging predominantly lesser skilled laborers.
Jha, et al. studied monthly data of 55 Indian wholesale commodity market segments during January 1970- December 1999 to test prevalence of integration among these segments. Their study has revealed the incompleteness of market integration among the segments due to excessive governmental intervention.
Joshi, et al. examined trends of revenue from crops cultivation during 1980-1981 to 1999-2000 and have suggested better investment in agricultural R& encouraging marginal farmers to diversify into cultivation of high value crops through assistive institutional framework.
Popkin analyzed the trends of living pattern of developing countries and found that globalization has drastically altered pattern of energy usage and food habits of people in developing nations, leading to many health complexities.
Sharm has scrutinized trends in growth of India’s sectors including agriculture and has established that despite the strong impact exerted by agriculture on progress of other sectors of economy and effectively addressing the menace of poverty, the sector has not been accorded due importance in the country’s planning process, resulting in vast disparities of income and wealth distribution.
U. Kleih analyzed issues pertinent to providing financial assistance to small and medium agriculturists and fishermen and advocated that banks and financial institutions should educate these marginal sections of society about managing finance which will enhance their accessibility to finance.
Rao, et al. analyzed the nature of credit extended by 97 banks to SSI (Small-Scale Industry) sector and concluded that non- repayment of loans obtained by SSI units resulted in banks being reluctant to accord credit to the sector.
Tchale and Keyser found that high farm prices in other nations, exploitation by middlemen, shrinking productivity and rising cost of inputs adversely affected the competitiveness of agricultural items such as rice, maize, cotton and tobacco in the international market. Smith has suggested that those engaged in agro-based business can prosper only if consumers are educated about healthy food habits and encouraged to consume food harvested and preserved in their respective localities and accomplish a good and well sustained supply chain management practices in the agricultural sector.
Trilochansastry has suggested that effective supply chain management will lead to maximization of income and wealth for small and trivial farmers. A well-designed supply chain management warrants sufficient financing all components of supply chain, rendering modern technologies such as internet and cellular networks affordable and accessible to the intermediaries of supply chain, establishing agriculturists associations and providing expertise in all components of supply chain.
Swinnen and Maertens have evaluated the influence of privatizing and globalizing the economy on agro-food supply chain management of Latin American and Central European nations in transitionary stage of economic development and found that the process has resulted in privatization and global integration of agro-food supply chain management practices of these nations.
Gandhi and Namboodir studied the Ahmedabad’s wholesale price and cost components of vegetables and fruits and found that marketing cost constituted nearly 8% of price paid by end-user in the case of former and 11% – 15% for the latter. Transportation and commission expenses constitute the bulk part of price paid by end-users while the agriculturists get only 48% and 37% of price paid by consumers in the case of vegetables and fruits respectively.
Pal, et al. scrutinized the Indian potatoes and groundnuts supply chain management practices and exposed the diversity of cultivation environment prevalent among states and within a state at some instances. Hence, they have advocated that regulations in seed legislations pertaining to compulsory registration or private participation might not hold valid for the entire nation.
Naik and Jain analyzed shift in the role of institutional infrastructure in farming sector of India and highlighted private sector, acting in coalition with public sector, gaining predominance in effecting growth of the agricultural sector at better pace, by better utilization of natural resources and knowledge.
Reardon and Minten have highlighted revolutionary changes drastically transforming Indian food Supply Chain Management practices during past twenty years. Role of retailers is assuming immense significance with retail sales witnessing a whopping annual growth of 49%, penetrating both urban and rural markets, transforming lives of agriculturists.
Cromme, et al. have studied the potato supply chain management practices in developing nations and advocated that effective private-public support, improving production process through formation of producer groups and integrating markets can strengthen potato supply chain management practices.
Miller and Jones analyzed issues pertinent to financing agro-food supply chain management practices. They suggested that financial institutions should carefully consider supply chain management dynamics while deciding about granting agricultural credit.
Ghosh and Ganguly have identified stumpy productivity as the key problem of Indian agriculture due to fragmented land holdings, irrational resources utilization, shrinking demand for food items, diminishing investments in the agro sector and inaccessible farm credit for petty and trivial agriculturists.
Mancero has hinted that rapid variance in requirements of agricultural sector due to fast changing economic conditions warrant petty agriculturists to adopt innovative supply chain management model by taking a consorted and coordinated approach.
Gaiha and Thapa have analyzed the comparative strengths and future opportunities for supermarkets and small players in Asian agro supply chain management practices and points out that the small players will not be affected by supermarkets if their constrictions are adequately addressed. They advocate that supermarkets and petty players can mutually benefit through partnership arrangements and strategic alliances.
Individual segments of agro-food supply chain management
The individual segments of Agro-food supply chain management are classified into two categories viz. structure of supply chain segments and conduct of supply chain segments. These two categories are elaborated in this section.
Structure of Supply Chain Segments
Loader analyzed Egyptian potato supply chain management practices and established that supply chain comprising of numerous processing players will result in complexity of inadequate intra-firm relationship. This might lead to businesses adopting vertical integration as growth strategy which can be managed by adequate dissemination of information among different supply chain management segments.
Narrod, et al. talks about petty Indian and Kenyan fruit and vegetable producers coping up with pressures of their profession and have advocated that effective supply chain management practices shall be the best solution. However, they have suggested that government has to play a facilitative role in correcting supply chain problems and not trying to control it.
Beck and Demirguc-Kunt have analyzed the problem of accessing finance for small to medium enterprises (SMEs) and have advocated conduct of more research at both micro and macro levels to arrive at better solution to this problem of enabling SMEs access to external finance.
Solér, et al. analyzed the Swedish food supply chain management practices and found that consumers perceive information about the environment relating to food supply chain management distinctly and this distinct perception is affected by their location in the supply chain in relation to other stakeholders.
Vorle established that agricultural markets have undergone tremendous changes with wholesale markets replaced by closer supply chain management participants comprising of food processors, retailers and servicing personnel.
Markelova, et al. has recommended that petty agriculturists have to implement drastic alterations in organizing their producing and marketing mechanism to enhance their productivity and efficiency. Some of such initiatives may be adoption of sophisticated technology like spreading out producing processes, utilizing innovative means, enhancement of quality in processes, utilizing micro-irrigation mechanism and maintaining schedules of plantation and record of such schedule, quantum of plantation and expected productivity and likely date of harvesting.
Pingali has traced changes in Indian food habits during the preceding two decades and found that economic growth has transformed dietary habits of Indians which will adversely injure the interests of petty farmers engaged in subsistence agriculture. Adequate incentives and rational policies are needed to be provided for maintaining the livelihood of these agriculturists, integrating them to the world’s food market.
McCullough, et al. reported problems encountered by the stakeholders in agricultural supply chain management such as farmers, middlemen and consumers in Madhya Pradesh. The agriculturists encounter difficulties in production process of insufficient availability of human and financial resources, raw materials and other inputs, fertilizers and pesticides, information sharing and possibilities of burglary while they encounter difficulties in marketing such as deficient refrigerated warehousing, transporting and other infrastructure facilities, weak negotiating power, unjust share in consumer price and lack of grading and homogeny. Intermediaries encounter complexities such as lack of warehousing, grading and homogeneity, poor quality and highly perishable nature of agricultural produce, lack of consistency in demand and supply for agricultural produce and knowledge about prevalent consumer price.
Complexities for consumers consist of low quality, poor warehousing causing seasonal fluctuations of supply resulting in abnormal swinging of prices, lack of standardization of agricultural commodities, deceitful weight measurements and weak bargaining power.
Conduct of supply chain segments
Viator, et al. conducted a study based on Philippines and Thailand to explore importance of business dealings and cold chain in food exports. They established that pricing of exports is significantly influenced by quality while opportunistic character of consumers may discourage flow of investment in cold chain segment that can be addressed only by winning assurance of the chain stakeholders for a longer period.
Bertazzoli, et al. conducted a research on 189 firms engaged in potato supply chain management, 187 in fruit supply chain management and 203 in cheese supply chain management and established that distribution creates 35% value in the cases of potato and fruit supply chain management while the contribution is a mere 13.6% in the case of cheese supply chain management. The study also revealed that over a five-year period, the value diminishes by 5% in the case of fruits and potatoes while the percent of diminishing is at a faster rate of 9%. Lack of effective coalition among all stakeholders of the supply chain of these three commodities has resulted in retailers gaining immense power at the cost of others.
McCluskey and O Rourke evaluated the difficulties of SME agricultural firms of US and established that demands of retailers in the chain such as registration charges, utilization of upgraded technologies and food security examination complicates the survival of these SMEs.
Rademakers and McKnigh have studied the Dutch potato supply chain management and established that globalization has resulted in a paramount change in preference of consumers towards better superiority and assortment of agricultural commodities and fair pricing. supply chain management practices of US agricultural firms have led to retailers gaining immense authority in European markets.
Mmasa and Msuya have analyzed the Tanzanian potato supply chain management practices by studying 150 intermediaries and established that agriculturists sell either directly to end-users or through retailing merchants or village petty sellers. They have also found that a shade above half of the agriculturists (50.7%) consider feedback from co-agriculturists to take pricing decisions while 44% of them adopt direct selling to consumers.
Singh evaluated the effective usage of concept of CF (Contract Farming) by three Indian companies in raising three crops of potatoes, organic basmati paddy and mint. His study has revealed that the CF (contract farming) arrangement shall yield fruits for agriculturists and the economy in the very short and medium run if the arrangement is clear on contract expenses and promotes innovation and coordination.
Birthal, et al. have established the growing contribution of CF (contract farming) to small agriculturists gaining immense benefits by engaging in high value agricultural commodities by way of declining transaction expenses, enhanced market efficacy and higher reward for produce.
Singgih and Woods tried to explore the impact of culture on Indonesian and Australian supply chain management practices of bananas and established an adverse relation between the intermediaries of supply chains of these two countries. Indonesian rural areas were dominated by conventional systems while Australian villagers enjoyed more equity, amity and democracy. Nature of these relationships significantly influenced the mechanism of fixing prices and negotiating proclivity of farmers.
Concepcion, et al. surveyed all intermediaries in vegetables supply chain management of Philippines and established that agriculturists possess very little alertness about requirements of the vegetables market, resulting in them wrongly perceiving about demand characteristics and quality requirements of their commodities, leading to unavoidable wastage in supply chain management.
Driessen and Glasbergen explored the role of traders in linking Indonesian cocoa farmers and consumers and established that traders provide useful information to rectify quality issues.
Hingley analyzed nature of power politics existent in UK among fresh food supply chain management intermediaries comprising of supplying institutions, retailers and consumers. The study revealed that power politics always exist among the supply chain management components and such prevalence does not always result in adverse scenario. Relations-building may lead to power unevenness and weaker intermediaries are insensitive to such disparities.
Sohal and Perry examined practices of comprehensive supply chain management of cereals in Australia. They found that factors such as pattern of demand influenced by globalization, complexities associated with nature of business, pricing mechanism, authority relations, vitality of timely and prompt deliveries, supply chain human resource needs, environmental situations affecting agricultural productivity, flow of useful and timely information and responsibility needs of industry significantly impact the environmental conditions of Indian agriculture.
Fafchamps and Minten assessed the utility derived by Maharashtrian agriculturists from RML (Reuters Market Light) providing agriculture-related information to their cell phones and came out that transmission of information through mobile services failed to make any impact on price managed by agriculturists for their produce, rational modification in agricultural practices or variety of crops and minimization of losses due to natural calamities.
Minten, et al. found in Delhi that organised contemporary retail outlets sell food items at price in par with or lower than the conventional retailers and hence, the former may play a decisive role in accomplishing food safety.
Ramakrishnan conducted a research on 605 retail grocery establishments in 2 Indian cities and found that even smaller retailers adopt unique operational tactics to boost efficiency and profitability.
Banker and Mitra studied an e-auction of coffee beans in India and established that e-selling of agricultural items may be successful under certain scenario only and state authorities can play a vital role in facilitating e-trade by enhancing negotiating skills of farmers and enhance confidence among consumers to buy directly from farmers.
Rodger describes the structure of a Bayesian network from a real-world supply chain data set and then determines a posterior probability distribution for backorders using a stochastic simulation based on Markov blankets.
Akoijam established the positive contribution made by NABARD’s micro finance programme implemented through self-help group linkage model in addressing rural poverty. He established the contribution of micro finance providing rural credit, which has provided an opportunity of sustained living for huge rural masses.
Yogisha conducted a study on Karnataka commodities market and established that in the case of all crops studied (Groundnuts, onions, potatoes and Ragi) market price was shrinking during peak seasons and the prices of these crops displayed an inverse association.
Sikkel explored the possibility of SMEs getting integrated with supply chain management practices at local and world levels and established that efficient utilisation of supply chain management practices and formation of association of small agriculturists lead to optimum capability utilisation and declining transaction expenses through economies of large scale operations, which capacitates even small agriculturists to access international markets.
Fan has established the role played by government spending on rural India in eradicating poverty. Such expenditure directly generates more jobs in villages while enhanced investment on education, infrastructure, health and R&D in villages results in stimulation of overall growth of the villages, resulting in more jobs and enhanced income of rural masses.
Har- birSingh have established that potatoes supply chain management suffer from irregularity in provision of timely information delinking public-private partnerships, warranting the necessity of effective R & D reconciliation to precisely study requirements and demand of market.
Atre established that existence of numerous intermediaries in agricultural supply chain drastically diminishes the agriculturists’ share of price paid by the end-user.
Performance of supply chain segments
Adetonah, et al. surveyed 235 growers of good rice variety and vegetables in Benin and Mali and concluded that difficulties associated with accessing product market, poor availability of inputs comprising of seeds, fertilizers and petty tools, exorbitant cost of transportation, massive after-harvest loss and insufficient refrigerated warehousing facilities were complexities encountered by these agriculturists.
Esterhuizen and Van Rooyen have analyzed the efficacy of South African agro-business to venture into international markets and established that the comprehensive supply chain management of South African agro-business is not adequately qualitative to participate in global competition and quality of produce sold in local markets is so poor, disabling global participation.
Gandhi and Namboodiri analyzed the complexities confronting the wholesale vegetables and fruits markets of Ahmedabad, Chennai and Kolkata. They established that improvement in marketing infrastructure by enhancing quality of road transportation, refrigerated warehousing, convenient weight measurement and loading amenities made available and lucidity of operations will go a long way in boosting efficacy of these markets.
Ghezán, et al. has examined the influence of MNCs on potato supply chain management by surveying managerial personnel of processing organizations and potato agriculturists. They have identified developments in potato supply chain management due to arrival of MNCs such as importance of wholesalers shrinking due to emerging supermarkets, novel supply chain management intermediaries such as expert wholesalers integrating with supermarkets gaining importance, advanced technologies and innovative strategies executed by supply chain management intermediaries shrinking the role of petty agriculturists.
Mitra, et al. established that Bengali middlemen in potatoes market swallowed 34%-89% of consumer price during 2008. Their study also revealed that information flow had no impact on margin levels but did exert an impact on traded volume. The traded volume had a direct relationship with information gained by agriculturists about wholesale price.
Pocock studied supply elasticity of Idaho potatoes and impact of contractual obligations on such potato cultivators. His study revealed that during the last three decades, supply elasticity of these potatoes has remained unaltered. The study has also established that price of potatoes which prevailed recently determine quantum of land used by agriculturists for potato cultivation. The study also revealed that potato cultivation had 3 – 3.5 year cycle.
Sahadevan studied the acuity of potato and mentha cultivators about commodities futures market and suggested that establishing agriculturists associations alone can improve efficiency of agricultural supply chain management and enhance partaking of petty agriculturists in commodities futures market.
Thorne assessed the impact of market factors on the volatile potato prices and applying ARCH technique. The study revealed that elasticity of demand for potatoes is high and increased demand for potatoes enhances their price while enhanced supply diminishes price.
Morgan, et al. have scrutinized the role of Indonesian vegetable supply chain intermediaries in serving interests of agriculturists in the light of food security and satisfying consumer aspirations. They established that supermarkets assist agriculturists by granting them steady orders well in advance, enabling them in scheduling their output.
Grigg and Walls assessed the role of SQC (Statistical Quality Control) in assisting enhancement of quality of manufacture of food and drinks. Their study revealed that SQC resulted in good quality manufacturing process while this quality gradually diminishes due to interior and exterior environmental conditions tried to assess the influence of cellular services on Niger’s food grain prices. Utilizing time-series data and applying Linear Regression technique, the study established that cellular services during 2001-06 reduced grain prices dispersal by 10%-16%.
Kinsey assessed impact of market concentration and price movements on profits of US retail traders in food grain industry. His study revealed that price of dry groceries is on the upswing while that of refrigerated food items are witnessing a downward trend. The study further indicates that wholesale market concentration results in price decline while profit surges.
Bardhan, et al. evaluated the Heckscher-Ohlin model of North-South trade in benefitting intermediaries of agricultural supply chain management and overcoming problem of hazardous products. Their study has revealed that liberalized trading practices have disproportionately benefitted agricultural traders.
Thampy assessed the benefits which shall accrue to Indian agriculturists in designing their products due to flow of information and established that cellular services can significantly influence rural economy by prospering agriculturists. Ghosh evaluated the effect of reforming agriculture practices on spatially integrating agricultural markets. He applied the Optimum Likelihood technique of Co-Integration in this endeavor and established that reforms succeeded in strongly integrating the regional markets, satisfying the principle of uniform pricing throughout the region.
Kuruvilla and Joshi examined profile of some 3026 mall customers spread over 8 Indian cities. Their study revealed prevalence of significant difference in socio-demographic attributes, behavior, attitude and shopping preferences among heavy-shoppers.
Ali and Kumar have endeavored to assess the decision-making competence of agriculturists and found that information flow to agriculturists through measures such as ITC (Indian Tobacco Company) sponsored e-Choupal can improve their decision-making skill and aptitude. However, such skill will also be affected by the socio-economic profile of agriculturists such as education, category, income and pattern of land ownership.
Shilpi and Umali Deininger surveyed 400 retailers and agriculturists spread over 40 villages and 20 wholesale markets in the year 2005 to assess the impact on marketing decisions of agriculturists and established that provision of facilities such as improved marketing infrastructure diminishing cost for agriculturists by way of declining travelling time to markets from residence, motivates agriculturists to boost their sales.
Kopparthi and Kagabo have stressed the significant impact exerted by accessibility to supply chain financing on output and profitability of petty agriculturists based on surveying 122 agriculturists and personnel of Micro-finance institutions.
Joshi, et al. used FISM (Fuzzy Interpretive Structure Modeling ) technique to arrive at two categories of that exists a group of inhibitors, one with dominant authority, maximum strategic dominance, attracting utmost attention and stumpy reliance while another group with exactly the opposite features.
Roy and Thorat evaluated the performance of Mahagrapes agriculturists and they found that these agriculturists manage high returns due to enhanced qualitative output enabling them to access external markets also.
Pingali and Khwaja analyzed the impact of westernizing dietary trends in Asian countries on petty agriculturists and propagated that linking rural with urban economy through efficient infrastructural facilities such as effective transporting and communicating facilities, enhanced investments in rural market on R&D which shall lead to optimal utilization of resources and enhance output and foresighted strategy facilitating these petty agriculturists in getting transformed to commercial world shall enable them to sustain the assault of changing pattern of consumers.
Gangadharappa endeavored to analyze fluctuations in pricing potatoes in Karnataka commodities market by analyzing monthly arrival prices collected from KSAMB (Karnataka State Agricultural Marketing Board). He established the prevalence of fluctuating prices in all markets excepting Kolar market. Similarly, the trend in fluctuating prices is dissimilar among the different markets.
Bhagat and Dhar have scrutinized the supply chain management practices of agriculture and established that belief, dedication and transparency prevalent amidst supply chain management intermediaries determine the success of agriculture supply chain management by way of gaining good knowledge about uncertainties of agriculture, serving the rights of farmers and all stakeholders in supply chain, boosting responsibility and importance of petty players in supply chain management, inter-personal relations among intermediaries of supply chain resulting in lucidity and belief among them and supply chain management practices assuming consumer orientation. Ramaswami, et al. have found that though intermediaries in supply chain management of poultry business in Andhra Pradesh corner major portion of consumer price, CF practices have enabled poultry farmers to gain immensely due to low risk element and enhanced profitability.
Khan has found that production volume of Indian food grains segment is lower when compared with commercial crops such as sugar, oilseeds, vegetables and fruits. He has pointed out that agro-food industry is positively influenced by yield of agriculture, improved infrastructural facilities, modified pattern of consumption, foreign markets becoming accessible for agricultural commodities and assistive governmental policies.
Naik and Jain studied the efficiency of 6 Indian commodity futures markets and established that improper managing of risks and pricing mechanism have rendered these markets under-developed. A comprehensive analysis of agro-food like potato supply chain in India Upstream-Farm: 30% of medium sized cultivated farm lands in India account for almost 70% of potato cultivated farm lands. Rent and lease charges of farm lands are galloping at rapid rates making payment of rent for land equally strenuous like acquiring capital and paying interest for the same. Labor dearth is assuming significant proportions in India, hampering agriculture growth in the country and this problem has become more acute even in small farm lands.
Government efforts of providing irrigation subsidies for potato cultivators is largely eaten away by the large farmers, incapacitating the small and marginal farmers from utilizing irrigation facilities for their small sized land holdings. Further, these small farmers do not have access to markets and are not aware about the remunerative prices prevalent in the market for their produce. As a result, they often end up being exploited by unscrupulous middlemen who acquire the potatoes at cheap rates from the farmers and sell at exorbitant prices in towns and cities. This problem can be solved only if farmers are made responsive to latest technologies in cultivation and market information for which the agriculturists should be facilitated to remain connected through the mobile technology.
Midstream-Refrigerated Warehousing and Traders Providing easily accessible refrigerated warehousing facilities for potato farmers will contribute immensely to them from being exploited by middlemen and getting sizeable proportion of price paid by consumers for the potatoes. In short, a well accessible warehousing can almost eliminate the wholesale market for potatoes which will be highly rewarding for farmers. Enhanced logistics support to farmers in the form of improved transport and warehousing facilities will contribute significantly to improve the lives of potato farmers. The main problem in providing effective warehouse facilities is in shortage of power warranting enhanced investment in electricity generation. Further, farmers can also be saved from traders delaying or defaulting payment for their produce.
Downstream-Retailers Though retailers have contributed to quality enhancement of potatoes packaging and branding of potatoes have not yet developed at all. Modern retail outlets have uprooted in both rural and urban areas, posing severe threat to the traditional retail traders. Government’s initiative of getting directly involved in aiding potato retailing by establishing cooperative form in the retailing sector has started penetrating the potato retail market, which is a positive sign. 5.3. Performance of the Potato Supply Chain-Rewards, Costs, and Margins A whopping 71% of refrigerated warehousing cost is occupied by energy implying that almost 21% of the total supply chain cost and 11% of market price of potatoes is directly accounted for by energy cost. Almost two-third of potatoes cultivated is stored in refrigerated warehouses and hence, cost of power highly influences potato price. Further, prevalence of market cost for marketing potatoes at the rate of 5% of total cost exerts almost 2% impact on potato price.
Another constituent of cost of potatoes is cost of transportation, which accounts for 8% of total cost during harvest times and 11% during off-times. Considering the different cost elements involved in potato supply chain, it can be said that potato cultivators may get 57% of the retail price during harvest season and 52% during off season. Since power occupy a significant proportion of cost and price of potatoes, rational utilization of power or rise in power tariff will exert a telling impact on potato prices, leading to inflation. Recent efforts of government to develop refrigerated warehousing facilities, investing more on research and development in rural areas, distribution of quality seeds at subsidized rates, providing irrigation and extension facilities, improving transportation facilities via road and rail, establishment of power grids and provision of mobile services have contributed positively to enhancement of economic standard of living of potato cultivators. Farmers have started utilizing the refrigerated warehousing facilities for storing their produce, enabling them to get remunerative prices while consumers can get potatoes perennially without seasonal fluctuations. A Delhi-based potato supply chain study has revealed that importance of wholesale market is shrinking drastically as almost farmers have moved towards refrigerated warehousing, enabling them to sell in the open market during any part of the year. Investors felt it highly remunerative to invest in refrigerated warehouses, farmers felt it immensely beneficial to store their potato produce in these warehouses, traders used these warehouses to buy their stock directly from farmers while consumers enjoyed perennial availability of potatoes irrespective of season or off-season. Hence, a rational combination of all logistics support at various stages of potato supply chain has yielded fruits for all sections.
In addition to provision of effective logistics support, if government efforts to provide agricultural subsidies reach the intended beneficiaries, all components of supply chain of agricultural commodities including that of potatoes, will flourish in the near future. Research Gap A close scrutiny of prior literature on agricultural supply chain management has revealed that lot of research literature exist on Supply Chain Management practices of different agricultural commodities However, these studies have focused on problems encountered by different components of the supply chain management. Not much work has been conducted on examining the financial and energy aspects of all components comprising the entire supply chain management.
Similarly, very few studies have been conducted on important aspects concerning the fresh food supply chain like potato under Indian context. Furthermore, negligible quantum of studies have been conducted exploring problems confronted by different participants of potato supply chain, particularly the finance delivery mechanism available for agriculturists, agro-food processors and medium, small and micro enterprises (MSMEs). In the backdrop of this scenario, it shall be significantly important to conduct a research work on exploring the problem of accessing finance and energy aspects of each segment of agro-food supply chain management and arrive at concrete solution to assuage this serious problem. Conclusions and Future Directions The paper has identified gaps and issues in agricultural supply chain management (SCM) practices.
A thorough scrutiny of the literature suggests that Indian agriculturists suffer seriously from the following problems: Stumpy bargaining capacity of farmers, putting them under the mercy of selfish traders and middlemen, who invariably exploit them to the core; very little fragmented land holdings; very little marketable surplus; exorbitant cost of cultivation and marketing; informal sector dominating the marketing process of agricultural produce; fragmented agricultural supply chain; poor marketing infrastructure installed for agricultural produce; imperfect market conditions for agricultural commodities; massive wastage of agricultural produce to the tune of 30% – 60%, due to ineffective warehousing and storing facilities; rapid perishability nature of high value commodities; non-availability of effective packaging, branding and certification; lack of adequate market information about remunerative returns available for cultivating particular crops; poor price-discovery means available to farmers, incapacitating them from getting the lion’s share of price paid by consumers for their produce; soaring of risk ingredient to the tune of 60%-70%, associated with agricultural production and marketing process; low productivity yield resulting in truncated quantum of output; difficulty in accessing finance, particularly for working capital; inefficient crop insurance programmers; agro- firms existing for long period acquiring monophony; inadequate availability of information incapacitating farmers to comply with food security issues; non- availability of knowhow to utilize fertilizers and pesticides; lack of proficiency on the part of farmers in asset management, incapacitating them from effecting suitable portfolio modifications in the production process; lack of sophisticated technology reducing capacity utilization, leading to meager raising of output from inputs; excessive usage of chemical fertilizers having ruined land fertility; stumpy quality of produce; inadequate availability of power.
Combinations of majority of these problems magnify the inefficient functioning of agricultural sector in India. Variety of measures may be adopted to overcome these problems of Indian agriculture. Some of such measures may be: Farmers may be encouraged to form associations, consortiums, cooperatives and self- help groups which will enhance efficient utilization of resources. Contract farming is a good development towards this direction; marketing facilities for agricultural commodities should be improved; market for agricultural commodities needs to be improved; processing centers should be made more efficient; cautious execution of the model act; formulating and executing effective and relentless agricultural policies to establish favorable environment for rapid development of agriculture; sophisticated warehousing with effectual refrigeration facilities should be established to minimize wastage of agricultural produce; transportation needs to be developed vastly, particularly in rural areas; power shortages have to be urgently addressed by exploring generation of power through non-conventional sources such as solar, wind, etc. Banks and financial institutions should be encouraged to provide financial support to farmers by way of incentives to them for making investments in rural infrastructure and agriculture. These measures may contribute to catalyze agricultural growth in India by improving the supply chain process. Agro-food supply chain management is an initiative towards this direction, which might serve a lot in overcoming problems encountered by Indian agriculture. The problems engulfing Indian agro- culture are unique, complex and tough due to presence of majority of them among bulk of Indian agriculturists. Hence, advanced techniques need to be device to address these problems which warrant rapidly changing methodologies, technologies and management practices in the supply chain mechanism.
Notwithstanding the numerous benefits derived from the agro-business sector, several challenges such as deficiencies in infrastructure, including poor transportation, storage facilities and high production costs have offset some of the benefits in recent years. Again, environmental pressures, high cost of labour, high interest and exchange rates and land litigation have regressed the sustainability and profitability of the agro-business industry. With the dramatic changes occurring in the industry in recent years, it is crucial for both firms and individuals to develop and maintain competencies that would enhance a competitive position in the present rapidly evolving market.
Hence, dynamic capabilities which embrace new ideas, change, innovation, analyses, integration, and teamwork have to be adopted by the sector. Economic globalization and market liberalization as well as market opportunities for agro business products are greater in countries with competitive products. However, a more open market creates more competitors and more complex quality standards imposed by trading partners. It is, therefore, imperative for agro-business firms to explore possibilities for improving competitiveness and sustainability. Notwithstanding, governments and corporate bodies ought to devise competent policies that are conducive for agro-business development in order to reap the full potential and benefits of the sector.
This chapter outlines the approach and methodology used in gathering data, the processing of the data and analysing it into meaningful information. Saunders (2003) defines a research as a systematic investigation to find answers to a given problem. The research methodology specifically focuses on the data collection methods, how the data is collected, the advantages and disadvantages of the collection methods and the concepts of data reliability and validity. Areas covered include research design, research instruments, sampling methods, data analysis and data presentation. These tools helped the researcher to make sense of the data collected.3.1.1 Research PhilosophyThe study adopted the positivism research philosophy which specifies the need for the researcher to carry out a bias free research. Thomas (2010) argues that positivism research philosophy believes that reality can be observed empirically and explained with logical analysis. It assumes that reality exists and can be measured. The researcher adopted the positivist research approach because it would assist the researcher in obtaining objective truth about the effectiveness of the strategies that were implemented by the government to improve maize production for the farmers in Bulawayo province.
With positivist research philosophy facts speak for themselves and bias is minimised at all costs. Positivism could be viewed as a research strategy and approach that is rooted on the ontological principle and doctrine that truth and reality is free and independent of the viewer and observer. The methodologies frequently used by positivist investigators and researchers comprise: confirmatory analysis, nomothetic experiments, quantitative analysis, laboratory experiments and deduction (Olesen, 2004; Ryan & Julia, 2007).
According to Kaobub (2008) the positivist paradigm underlines that genuine, real and factual happenings could be studied and observed scientifically and empirically and could as well be elucidated by way of lucid and rational investigation and analysis. The decisive factor for assessing and appraising the soundness and validity of a systematic scientific and logical theory is whether a researcher’s facts view point (i.e., theory-based on guesses and hunches) are reliable consistent and dependable by means of the knowledge researchers are capable to achieve by means of their senses.
3.1.2 Research Design
Several experts have attempted to define research design in several ways. Bryman (1998) defines a research design as a sequence of advance decisions that, taken together, comprise a model of how the investigation to answer research questions was conducted. It can be considered as a blueprint to guide the data collection, data processing and information transmission and analysis. Zikmund (1997) defines research as seeking through methodical processes to add to one’s own body of knowledge and hopefully to that of others, by the discovery of nontrivial facts and insights. Research design provides the glue that holds the research project together.
Judd et al (1991) suggests that a research design can be thought of as the structure of research that holds all of the elements in a research project together. It is a plan of procedures of data collection and analysis that are undertaken to evaluate a particular theoretical perspective. It is a blue print for collection, measurement and analysis of data. Meithei and Bitner (1996) agree with the above author by postulating that, a research design includes approaches such as experiments, survey methods, observations and case study. This study used survey methods to gather quantitative data with the aim of getting ideas that will explore the impact of command agriculture on agro-food processing supply chains industry. The research design depicts the strategy that the research used to collect and analyse objective data.
Glasow (2005) postulates that survey research designs support the researcher to describe an existing situation and the amount in which it manifests itself. The survey research design allowed the researcher to collect data from a large sample and presented and analysed it quantitatively. The results produced by the survey research design could be generalised to the population of interest. The use of the survey research design made the government understand whether its strategies were effective or not in enhancing farmers maize production in the Matabeleland province. The researcher also adopted a survey research design because of its grounding in positivism research paradigm and related notions of objectivity.
3.1.3 Research Approach
The study adopted the quantitative and qualitative research approach. Quantitative research allowed the research to gather numerical data and present and analyse it using statistical concepts. Creswell (2004) noted that quantitative research depicts an approach to research that that explains a phenomenon under investigation by gathering numerical data and analyse it mathematically. The use of quantitative research approach dovetailed with the positivism research philosophy and gave the researcher the opportunity to have an objective truth of the effects of the strategies that were adopted by the government to enhance maize production in the Matabeleland province. This was because quantitative research approach gives the researcher the opportunity to quantify data that was collected and employs statistical concepts for analysis.
3.1.4 Descriptive Survey
Feagin et al (1991) define descriptive survey as gathering data that describe events and then organises, tabulates, depicts, and describes the data. It uses description as a tool to organize data into patterns that emerge during analysis, and often uses visual aids such as graphs and charts to aid the reader. A descriptive survey, by contrast, typically seeks to ascertain respondents’ perspectives or experiences on a specified subject in a predetermined structured manner. It is used to establish the statement of the problem, selection of data gathering instruments, target population and sample, design of information collection procedure and the analysis of information. A descriptive study uses historical and current data to describe a situation; therefore it relies on secondary data.
This study required descriptive data in order to have a snapshot of the situation at which the research is carried out regarding the impact of brand extension of the firm’s competitive advantage.
3.2 Types of Data
3.2.1 Primary Data
According to Tanur (1992), primary data is data collected specially for a particular study. The aim is to enable management to address a new problem with new information. Primary data is expensive to collect but it is possible to formulate structured and unstructured questions that focus on the study topic. The information is crucial to the study as it specifically addresses issues of interest to the study area according to Jancowincz (2003). In this study, primary data was obtained using questionnaires and structured in depth interviews. This is original data that was collected for the first time to investigate the impact of command agriculture on agro-food processing companies in Bulawayo.
Primary data was collected from the small scale farmers, Arex officials, agro-food processing management and managers at the ministry of agriculture in the Matabeleland province. Curtis (2003) postulates that primary data is collected to answer a specific research problem and the researcher has no doubts on its truthfulness. It is only through the collection of primary data that the researcher was able to understand whether the strategies implemented by the government were effective in enhancing maize production by the farmers in the Matabeleland province.
3.2.2 Secondary Data
Secondary data is data that is gathered and recorded by someone else prior to and for the purpose other than the current study (Wegner 1993). Zikmund (1991) suggests that secondary data has the following advantages, availability, highly accessible and less expensive to obtain. In this study, the researcher used the internet, journals and newspapers. It also helps to structure and narrow the primary research by pinpointing the data that is missing to solve the problem. This data was obtained from grain marketing board and agritex. The documentary data that was obtained from these institutions was analysed to determine whether the production of maize by the farmers increased as a result of the command agriculture implemented by the government. The importance of secondary data was observed by Curtis (2003) who argues that secondary data is easy to obtain either in electronic or published form. The researcher used secondary data because it was the only way that the researcher was able to obtain records on whether production went up or down as a result of the strategies that were implemented by the government.
3.3 Population of Study
The population is the group of interest to the research. Fraenkel and Wallen, (1996) explain that it is upon this group that the researcher would generalize the results of the study. The population includes all individuals whom the researcher is interested in obtaining information and making inferences on. The population can be in two categories, the target and the study populations (Fraenkel and Wallen, 1996). The target population is the actual population to which the researcher would really like to generalize. However, this population is rarely available. Therefore, the population to which researcher is able to generalize is the study (Saunders et al, 1997).
Defining the population is important because it helps the researcher in selecting a sample for study (Labovitz and Hagedorn, 1976). The population of the study consists of all agro-food processing companies in Zimbabwe.
3.3.1 Sample Procedure
Wegner 1993 defines a sample as a randomly selected group of people or objects from a larger group which can be used to ascertain data on the composition of the group. It is a sample as a subset of all possible observations of the random variable under the study. Only the sample observation was analysed and used as the basis for generalizing the whole population since it is not possible and practical to study the whole population, hence agro-food processing companies in Bulawayo were used for this study.
3.3.2 Sampling Technique
This is the method that the researcher used to collect data from the respondents. To collect data from the agro-food processors in Matabeleland province the researcher used systematic sampling technique. Fricker (2013) postulates that with systematic sampling technique the first unit of the sample is chosen at random from the target population and other respondents are chose at an identified space interval from the target population. The researcher used systematic sampling technique to select the list of the sample for small scale maize farmers because it is bias free. To select the sample for the members of agritex officials the researcher used stratified random sampling. The districts formed the strata and stratified random sampling technique was used to select respondents from each district. With stratified random sampling technique each member has an equal chance of being selected which minimises bias. Fairfax (2002) argues that stratified random sampling technique obtains a sample by independently selecting a separate sample from each population stratum. Stratified random sampling technique was also used to select respondents from the ministry of agriculture who were divided into top and middle management.
3.3.3 Simple Random Sampling
The researcher used simple random sampling basing on the availability of the customers in each stratum, thereby creating equal opportunity for each member of the group to be chosen. The research will tape into employee files and randomly select employees, customer databases and members of the management team who will be interviewed. According to Indrayan A (2008) a sample may be defined as random if every individual in the population being sampled has an equal likelihood of being included. Random sampling is the basis of all good sampling techniques and disallows any method of selection based on volunteering or the choice of groups of people known to be cooperative.
3.3.4 Stratified Sampling
A stratified sample is one where items are specifically chosen from each stratum to represent a population (Lewis, 1994). Different agro-food processing companies are grouped into the following strata:
Edible oil processors
The respondents are chosen from each strata where the different strata have different categories of purchasers. Stratified sampling techniques are generally used when the population is heterogeneous, or dissimilar, where certain homogeneous, or similar, sub-populations can be isolated (strata). Simple random sampling is most appropriate when the entire population from which the sample is taken is homogeneous. In stratified sampling, the population is partitioned into regions or strata, and a sample is selected by some design within each stratum. The design is called stratified random sampling if the design within each stratum is simple random sampling (Steven K Thompson 2012). Stratified sampling advantages include minimizing sample selection bias and ensuring certain segments of the population are not overrepresented or underrepresented.3.3.5 Systematic Sampling
A simple method of random sampling is to select a systematic sample in which every nth person is selected from a list or from other ordering. The researcher employed a systematic sampling method whereby the company payroll will be used as the source data. The employees were alphabetically arranged and systematically selected. The researcher selected the fifth employees until the total number of 40 was achieved.
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3.4 Research Instrumentation
The following instruments were used by the researcher to capture data:
3.4.1 Survey Questionnaire
The researcher used questionnaires as the suitable data collection instrument because of the applicability of this instrument. It is a set of questions designed to generate data necessary for accomplishing the objectives of the study. It outlines the impact of command agriculture on the performance of agro-food processors supply chains. The major advantage of using this instrument was that it could be administered to a large number of people at the same time (Fraenkel & Wallen 1996). This was ideal for this study because the researcher wanted information from a various group of people in the agro-food processing industry and this method proved to be cost effective and convenient in collecting data.
The study used questionnaires to collect primary data from the respondents. The researcher personally distributed the questionnaires and respondents were given seven days to fill in the questionnaires. The questionnaire consisted of closed ended questions most suitable for collecting specific data essential for a quantitative study. Phellas, Bloch and Seale (2003) argue that questionnaires are easy to use and can be used on a wider geographic area. They afford greater anonymity thereby ensuring confidentiality. To ensure high response rate the researcher followed up the questionnaires to clarify some grey areas.
In order to ensure clarity, the researcher pre-tested the instrument before administering it. The aim was to identify questions and phrases in questions that could be ambiguous and clarify them. The researcher used structured questionnaires the most widely used survey data collection techniques, (Saunders et al, 1997). This method was used in order to capture the desired information and consequently, to produce quality results.
Hundred questionnaires were administered to the management and staff. They were assigned unique numbers and random numbers were generated using Microsoft Excel and used to select the 100 respondents from the middle management. The questionnaire as a research instrument enabled the researcher to achieve the maximum coverage with the least expenses. Open ended questions were used to give the respondents a platform to express their minds on brand extension strategy.
Closed ended questions were used to allow the rating and evaluation of the strength of the brands of mobile cellular companies` services and products. A questionnaire sample is provided in the appendix
3.4.2 In-Depth (Personal) Interview
An interview is called personal when the interviewer probes questions with an interviewee (Keogh 1999). It is an open-ended, discovery-oriented method that is well suited for describing both program processes and conclusions from the perspective of the target audience or key stakeholder. In-depth interviews involves not only asking questions, but the systematic recording and documenting of responses coupled with intense probing for deeper meaning and understanding of the responses.
According to Cook & Campbell (1979), the advantages of in-depth interviews are that respondents use non-verbal cues such as facial expressions to emphasize response and that respondents can expand on areas of interest. The goal of the interview was to deeply explore the respondent’s point of view, feelings and perspectives. Key characteristics of in-depth interviews include: open ended questions, semi structured questions, seek understanding and interpretation, conversational, recording responses, observations and reflections.
3.5 Data Collection Procedures
The researcher used questionnaires and interviews to gather data from the respondents. Questionnaires were administered to 80 employees while interviews were conducted with 20 managers. Questionnaires were sent to respondents by electronic mail while other were hand delivered to the respondents as a way of confirming the researcher’s seriousness on getting the questionnaires back. Electronic mails were used as they are cheap and fast.
The researcher had to make several follow-ups for the respondents to complete the questionnaires. Both e-mail and telephone follow-ups visits were made to remind respondents to create time to complete the questionnaires. The follow-up was done to increase the response rate as evidenced by the study’s response rate.
Some respondents were evasive, alleging that they could not waste time filling questionnaires, while others due to lack of care lost some of the questionnaires. The researcher had to kindly explain and ask the respondents to find time to complete the questionnaires. The approach worked to some but others were not cooperative.
For the success of the study, the researcher had to conduct interview administered questions with the remaining respondents, where the researcher had to ask questions from the questionnaire in an interview manner and filling the questions himself. This method eventually worked and pushed the response rate by about 30%.
3.6 Reliability and Validity
Saunders et al (2003) asserts that in order to reduce the possibility of getting the answers wrong, attention must be given to the research design, reliability and validity.
Stiles (1993) define reliability as the trustworthiness of the procedures and data generated. It is concerned with the extent, to which the results of a study or a measure are repeatable in different circumstances, the degree to which an assessment tool produces stable and consistent results. Reliability defines the extent to which a questionnaire, test, observation or any measurement procedure produces the same results on repeated trials.
Thietart, Raymond-Alain (2007) consider that reliability means that the measuring instrument must allow different observers to measure the same subject with the same instrument and arrive at the same results, or permit an observer to use the same instrument to arrive at similar measures of the same subject at different time . Thus, it will be important to be careful when getting the answers and especially when analysing them and the fact that one of the interviews has been recorded will enable to lose less information about the respondent’s answers.
To be able to carry out an objective study the researcher tried to guarantee maximum reliability and validity. According to Joppe (2000) reliability is the extent to which an a study or a research instrument produces consistent results over time. To maintain the reliability of the study the researcher pilot tested the questionnaires. Validity is the extent to which a research instrument measures what it is supposed to measure. Joppe (2000) stated that reliability implies the extent to which a research instrument is truthful. The research instrument is supposed to measure what it is supposed to measure. To ensure the validity of the research instrument the researcher gave colleagues the questionnaires so that they assisted in its design. The researcher also carefully designed the directions for the measurement and ensures clear instructions.
Miller (2000) defines validity as the degree to which an instrument measures the traits that it is intended to measure. It involves the systematic examination of the test to determine whether it covers a representative sample of the behavior domain to be measured. To increase the reliability and validity of information a pilot study of questionnaire and interview guidelines were conducted. In this instance the researcher gave out 5 questionnaires to chosen respondents so that they could answer. This provided information on whether the required information will be acquired from the questionnaire. This enabled the researcher to restructure questions where necessary.
3.7.1 Data Presentation Methods
Data analysis is a process of gathering, modeling, and transforming data with the goal of highlighting useful information, suggesting conclusions, and supporting decision making (Tellis 1997).
The following are the proposed methods of analysing data:
3.7.1. Factor Analysis
It is a data analysis approach that aims to reduce large amounts of data into a manageable set but still retaining the information from the original data. This was mainly used for qualitative information regarding the impact of command agriculture on agro-food supply chains in Bulawayo.
A comparison of respondents from different strata is made by calculating percentages of respondents from different groups of customers for agro-food processing companies. The percentages were used to determine the factors that are perceived by different customers to be the best one in delivering superior customer service.
3.7.3 Multidimensional Scaling
It is a method for comparing products or brands in a perceptual map with regard to offering superior customer service. Different responses are plotted in a positioning map in order to understand the strength of each factor in determining superior customer service offered from command agriculture officials.
It is a method of comparing brands or products on the basis of how one variable influences another variable. The objective is to identify whether there is a strong relationship between variables. Data was manually processed. Answers from different respondents were analysed. Data was processed quantitatively using statistical measures and organized in frequency tables, pie charts, a chart divided into sectors. Research findings were discussed with references to research questions in light of major findings from previous research studies and literature from texts. In this research, the quantitative data was mainly presented and analysed through tables and charts and bar charts. Linked with the research objectives, information or data obtained through various techniques was analysed, displayed and presented on pie charts, graphs and tables.
3.8 Statement of Ethics
According to Singer (2000), ethics is mainly defined as rules or standards for governing the relations between people to benefit all concerned, with mutual respect for the needs and wants of all parties involved. The researchers largely gathered data from individuals representing various organizations in the agro-food processing industry. It was in the researchers’ best interest to uphold the quality and integrity of this research through ethical research practices such as keeping all data collected anonymous and confining it to the purposes of this research. None of the information gathered in this research was used for commercial or any other purposes other than advancing the objectives of this research.
The researchers did not manipulate respondents or use any other unorthodox means to gather data for this research, and all gathered data was interpreted without prejudice and objectively to ensure the validity and credibility of the research findings and conclusions. The researchers also respected the respondents’ confidentiality and privacy in gathering data for this research.
The success of this dissertation depended on the complete anonymity being given to all parties who took part in the study and their employees who participated in the survey. Questionnaires were completed based on company and individual names which will instil confidence amongst the participants. Copies of interview questions from the interviews and also completed questionnaires would be kept confidential for the duration of this dissertation after which they will be destroyed after the submission. The study was carried out in an ethical manner. To ensure that the study is carried out in an ethical way the researcher did not disclose the names of the respondents. The respondents were also not forced to participate in the study but their consent was first sought. The researcher also fully explained to the respondents the purpose of the study. The results of the study were used for academic purposes only. The researcher also obtained a letter of authority to carry out the study from the university. The results of the study were published in an honest way.
3.9 Chapter Summary
This chapter has deliberated the research design used in the study and the reasons for choosing the design. The chapter also discussed how research instruments were developed, methods of data collection, data entry, data processing and analysis. It presents and discusses the research findings. The chapter also underpins the key steps undertaken in collection and presentation of data. The researcher is satisfied that the methodology used adequately fits into and achieves the objectives of this study. This chapter outlines the various steps that the research would use to collect the data for the purpose of investigating the effectiveness of the strategies that were adopted by the government to enhance maize production. The chapter will detail out the research philosophy, research approach and the design. The chapter will also outline the target population, sampling technique and the data collection methods. The chapter will also explain the data presentation and analysis methods that the researcher will use.
DATA PRESENTATION AND ANALYSIS
4.0 IntroductionThis was a study on the impact of command agriculture on the performance of agro-processing supply chains in Bulawayo. In this chapter, the researcher presents and discusses the study results. This is done in relation with the objectives of the study.
4.1 Response rateQuestionnaires were used to collect data in the study from middle managers of British American Tobacco Zimbabwe Limited (BATZ). A total of fifty questionnaires were administered to BATZ middle managers and forty were successfully completed. This gives a response rate of 80%. This response rate is good enough to proceed with the results of this study.