Supermarkets’ new frontier What does Walmart mean for African farmers?

If your bus makes a stop in the countryside in Madagascar or Malawi, there’s a good chance you’ll be greeted by a pandemonium of sellers before you’ve even stepped down.10,15, 20 farmers and their children will anxiously show you a basket of peanuts, oranges, mangoes, beans, or whatever the nearby fields produce to excess.

These are producers desperate for a cash market, and it can be heartbreaking to watch their prices fall by half or more in the last seconds of a 5 minute pitstop. In Mozambique, I’ve seen truck drivers rev the engine and move a few feet forward in order to force a sale at a lower price. This is the context that explains headlines like this one, on How We Made it in Africa: Why the growth of modern retail should be good news to African farmers.

There is no disputing the growth of modern retail in Africa: Walmart has announced plans to open more than 1200 stores around the continent by 2016. Indeed, most major supermarket chains now seem to have at least one store or a subsidiary somewhere south of the Sahara. The largest homegrown chain, South Africa’s Shoprite, has expanded to more than 1000 stores and franchises.

One argument in favor of modern retail is that supermarkets can be a catalyst for an underdeveloped agriculture industry. When the South African company Pick n’ Pay opened its first store in Zambia, the national farmers’ union prevailed on the government to require that the chain buy half of its fresh produce from Zambian suppliers. Today, Pick n’ Pay’s 6 stores buy two thirds of their produce from local farmers. The wholesale orders and strict delivery schedules required by large grocers could help to propel some of those farms into a different kind of business—with bookkeeping, more sophisticated growing techniques, and an appreciation of marketing. Surely, this represents a positive step in the way of innovation in Zambian farming.

But what might have happened without the intervention of the Zambian farmers’ union? The answer is that until Zambian produce became cheaper, it would have come from commercial farms in South Africa, just as a portion of the produce does now.

Therein lies the danger: as supermarkets take over the food business in African cities, the small farmers selling at open-air markets will find themselves competing with the most sophisticated industrial farms around the continent. And if you fast forward to an economy like of that the UK or the US, where supermarket chains predominate, the power of supermarkets over their small suppliers is not too different from the power of bus passengers over farmers selling their produce in the middle of nowhere.

Supermarkets often require binding contracts without guaranteed prices for producers, and custom packaging that may cost double what farmers would use otherwise. Forced to sell raspberries and milk below the price of production, or to wait for months to be paid, farmers simply can’t make a living. According to the Guardian, supermarkets’ ruthless arrangements with growers forced more than 3000 small and medium farmers in the UK out of business between 2001 and 2011.

Evidence from Chile shows that even when smallholders form cooperatives of 50 or 75 farms, they are unable to absorb the costs of doing business with large supermarkets, such as the high rates of rejection for produce that doesn’t fit size and shape requirements.

As ‘modern retail’ pushes towards a new frontier, It’s up to government, social entrepreneurs, and civil society to help find a model where today’s subsistence farmers aren’t tomorrow’s bankrupt farmers—selling for cash, yes, but less cash than they put in.

The feature by, Rowan Moore Gerety was originally published in / African Makers 3 June 2012

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