Most investments into agriculture are not backed by a thorough contextual analysis of the prevailing marketing environment, which explains some of the usual disappointments encountered in the market. Although they know the importance of an investment analysis, financial institutions are often not willing to spend money on detailed investigations of the horticulture landscape, for instance.
What problem are
you trying to solve?
With more than 60 different types of crops, horticulture markets are diverse and dynamic. Every investment should have a unique selling proposition because most commodities and actors often have someone serving them and existing systems and relationships built over years through shared pain and problem solving.
In addition to identifying specific problems to solve, investors should clearly identify potential clients or customers. A contextual analysis will prevent cases where financial institutions extend loans to horticulture farmers, only for the farmers to spend the money looking for inputs or trying to find a market. It is through a contextual analysis that appetite for value addition can be discovered, leading to opportunities for investing in value addition technology.
Contextual analysis
elements for horticulture
A contextual analysis is fundamental because horticulture has several facets compared to livestock and small grains that have simple supply chains.
The following are some key elements of a horticultural investment contextual analysis. Annual volumes — Zimbabwe has more than 100 horticultural commodities with different markets in terms of consumption/uptake as well as supply chains.
As an investor, do you need to know volumes of 100 commodities by province? Do you want to know production-based volumes or market supply-based volumes? Do you also want to know volumes consumed in households so that you can determine how much goes to the markets? What is the timeframe for the data? Obtaining answers to these questions will be quite revealing.
Top 10 crops — Do you want to know top 10 crops at production and harvest level or at market level? This is important to know because a commodity may have high volume, but low returns while another can have low volume, but high returns. Cabbages, for instance, have high volume, but low returns compared to peas or carrots.
Also critical to know is the monthly average prices of each commodity in the market. What are the selection criteria for the top 10 horticultural crops?
Ideally, it should be by revenue generated, consistency in supply, perishability, demand patterns and other critical factors. Once crops have been identified through the given selection criteria, that becomes the context for analysing farmers’ different contributions.
For example, of the top 10 horticulture crops, what is the number of farmers growing that crop per district or province? It is critical to find out how many carrots producers are in Mutoko before deciding to invest in carrots production in the same district or in a competing district like Murewa.
Number of farmer associations — Farmer associations are important to for the purposes of stimulating organised production and consistent supply. Farmer associations should be linked to identified crops and locations. For example, how many farmer associations do we have for butternut squash or bananas in Chipinge district or Manicaland province? This information will reveal supply chains linked to crops.
Unless farmers and farmer associations are contextualised by commodity, you end up with just a list of farmers or farmer associations, but no idea of gaps that need to be filled in the form of setting up new commodity associations for selected crops.
Irrigation schemes — These should be linked with identified commodities as part of organising production and supply in those schemes. Irrigation schemes with potential, but not producing selected commodities due to various reasons should be identified and profiled.
Production areas (A1, A2, large-scale commercial and others — These must be linked to crops. How many A1 farmers are growing onions in Makonde or Mashonaland West province? The contextual analysis becomes a basis for selling different horticultural models to different farmers and other actors.
It is important to know why some farmers are not producing. Some farmers may have stopped producing because the market is too small and unfriendly, or they have been cheated by contractors in the past. What is critical to identify through the contextual analysis are competing uses of resources like tobacco and maize production, which undermines horticulture.
Markets — It is critical to define several types of markets. They start at community level, district, provincial, roadside, mobile and even regional markets. Do you want to work with markets registered under local authorities only or not? There is need to look at other competing markets like mobile, private informal and roadside types. This can be linked to number of traders and consolidation points. How many traders are in each market and where are they trading from?
The markets should be linked to commodities. What is the market share of commodities like carrots in informal markets like Mbare versus formal markets like supermarkets? What is each commodity’s competitive edge? Such details can inform setting up of a commodity exchange for horticulture commodities.
Off-takers — These should be defined for each commodity. For instance, how many food processors are available, where and at what scale?
We may think 1 000 food processors are enough for our market when they are only buying from informal markets. Top 10 buyers of produce should be linked to the top 10 crops identified earlier. For horticulture, top 10 buyers are obviously mass markets. If the top 10 buyers comprise the mass market, how can they be part of the formal commodity exchange? Without a detailed contextual analysis, it is difficult to build a sustainable processing plant or commodity exchange.
Fluid information gathering and processing should feed into the commodity exchange. After a contextual analysis it becomes easy mobilise farmers to grow commodities for export or persuade them to participate on the commodity exchange as well as provide tailored market t-related training and advisory services including facilitating aggregation.
◆ Word from the market is a column produced by the Agricultural Marketing Authority (AMA). This article was written by Mr Charles Dhewa for the AMA Horti-Focus Magazine. Feedback mmlambo@ama.co.zw or gmashiri@ama.co.zw
