Business Support Services to small producers. Report of the workshop organised in Dar es Salaam September 24 th Page 1 of 9
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1 Business Support Services to small producers Report of the workshop organised in Dar es Salaam September 24 th 2012 Page 1 of 9
2 INTRODUCTION The Trade for Development Centre has been supporting small producers for the past 8 years through a grants programme. The objective of the support is to empower producer organisations in Asia, Latin America and Africa and guaranteeing results in terms of better market access, increased profitability and sustainable trade. Over the years TDC has come to realize that a number of producer organisations, mainly from Africa, did not have access to the financial programme because of poor project proposals, reflecting weak capacities in business management. A number of other support institutions, be it NGO s, micro-finance institutions and banks, producer platforms, governmental agencies express the same concern in their efforts to enable small producers to access better markets. As a development agency, it is TDC s task to respond to the challenges of these organisations. TDC has started to extend its programme to include the provision of business support services next to our grant facility. The reason to organize a workshop around business support services to smallholders is to think with various stakeholders (i.e. producer platforms, NGO s, development agencies and providers of business support services 1 ) about how best to respond to the small producer s needs in business management capacities. While sharing experiences, best practices and lessons learned, the think thank would also guide the TDC in developing a business support strategy for its new 5-year programme. The workshop centered around four questions: - What type of business support is mostly needed by smallholders? - How do service providers and donors answer to these needs? - What about support in marketing? - How to transfer business management capacities sustainably? With a fifth, final question on how TDC can play a role in all this? 1 These are listed in Appendix Page 2 of 9
3 What type of business support is mostly needed by smallholders? When we take as a starting point the situation of individual small producers, then it is clear that they are ill-equipped to serve the market : they are disorganized, have limited access to market information and poor knowledge of the entire value chain of their products. The outcome is equally clear: bad deals for the producers. The majority of small producers therefore engage in collective marketing through producer organizations to improve their access to markets. This however implies several assets: strong leadership enabling trust among fellow farmers, qualified staff to operate the organization (in terms of financial management, quality management, sales and marketing, communication), access to both long term and short term credit facilities. Business support services to smallholders should focus on these needs. How do service providers respond to these needs? Bringing producers from the level of subsistence farmers to suppliers of cash crops to the local, regional or international market is a shift. Producers are only one actor in the entire value chain. Successful access to markets involves cooperation with other actors. As the resume below shows, rather than listing the different services provided, the discussion was more a strategic reflection on the approach of how to assist small producers. Assisting small producers starts with creating awareness that there is a difference between producing a crop, or handicraft product, something which they generally know how to do, and delivering a product that responds to the requirement of the consumer. Development efforts of the past fifty years have succeeded in building a farming culture but fall short of turning farming into a successful business. The same goes for handicraft producers, where skills where transferred from generation to generation but whose traditional handicrafts fail to respond to changing trends in consumer taste. In trying to improve market access for small producers the tendency has been to direct all efforts towards this specific target group. Producers are thus being trained in a number of fields like quality, productivity, record-keeping, communication, marketing. However producers are only one actor in the entire value chain. Successful access to markets involves cooperation with other actors. Unfortunately, in agriculture there is an endemic mistrust between producers on one hand and processors and traders on the other hand. Processors and traders find doing business with small farmers very costly, justifying a high margin to cover this cost. Producers in turn fear a bad deal when engaging with processors and traders. Page 3 of 9
4 It is necessary to induce self-esteem and instill in their minds that they are the ones that are in charge. Small producers themselves must be the owner and controllers of what has been attained through training and coaching. Service providers argue that if we truly want to enable market access for small producers it is important to also take into account the needs of these other actors in the value chain and to strengthen the overall value chain linkages. Contract farming, for example, is not a bad thing per se whereas farmers that want to engage in processing sometimes is. Indeed, contract farming can create a reliable outlet for farmers and gives them an incentive to increase production whereas diverting farmers from their core activity into processing has not always proven to be a profitable alternative, especially when it implies substantial financial investment and requires qualified staff to run the processing facility. Sustainable market access for small producers therefore depends on sustainability throughout the entire value chain. Building trust among farmers that cooperation with other actors will give them a better deal is key when assisting them. Different service providers cater for different target groups. When accepting the rationale explained above, it is important to identify the service providers, not only at the level of small producers but at the different levels in the value chain. But before even starting to deliver services to small producers, it is necessary to induce self-esteem and instill in their minds that they are the ones that are in charge. Small producers need to be empowered to analyse what their challenges are and what services they do need. Small producers themselves must be the owner and controllers of what has been attained through training and coaching. This way, we truly prepare producers to compete in the market place. What about support in marketing? Producers of agricultural crops are often convinced that the market is there. Key for them is just to produce. They think about production, without thinking about the market. Often this is directed trough governments and donor programs. Business management is out of their comfort zone. Numerous are the cases of farmers failing to secure a good market for their products, or worse, failing to sell all together. Handicraft producers are aware of the difficulties of selling their products and cry for better market access. In both cases producers tend to blame the market for a failure which is theirs. Producers need to be guided through the process of understanding the whole process of marketing a product. What product(s) do I have? Which market do I need to focus on? What does that market require? are basic questions that are paramount for any business to be successful but are often foregone by small producers. Page 4 of 9
5 Assistance in strategic marketing thinking is as important as producing a quality product if we want to improve market access for small producers. Entrepreneurial dynamism and a minimum of knowledge needs to be available within the organization. One of the key aspects marketing assistance should focus on is helping producers to understand who the different actors are in the entire value chain. Ideally, it should empower producer organisations to analyse the value chain while providing them with relevant market information. This is very different from pushing producers into one particular market. It is about creating opportunities, i.e. giving them a choice of what they can do with their product. Following the analysis, a producer can then identify which market channel(s) to target and which areas (product development, costing and pricing, promotion, ) to focus on in order to successfully access the targeted market(s). To achieve results out of a capacity building process, entrepreneurial dynamism and a minimum of knowledge needs to be available within the organization. It is essential to support them in hiring the proper human resources (e.g. marketing, sales, communication) and to focus the coaching on this personnel and the HIPOs in the organisation. Sustainability of delivering business support services We need to give space for people to practice what they have been learning, then assess how they have put it into practice and identify what they still need. While training is the starting point, coaching is what it takes for support services to be sustainable. Producer platforms play a key role. Producers have to pay for the services. The choice of service providers is of great importance. It is suggested to create a platform to exchange information on service providers. Support services are effective if they have a positive impact on the producers business. The way the services are provided and by whom is hereby essential. Capacity-building mostly starts with training farmers or handicraft producers in a series of technical aspects like agricultural practices, product design and development. When it comes to business capacities, trainings are provided in financial management (record-keeping, accounting), sales techniques and overall business management. Capacity-building often also ends there. Especially when it comes to building business capacities, this short-term approach has not been successful. Capacity-building should be considered as a long-term investment, the more so when we work with grassroots organisations. We need to give space for people to practice what they have been learning, then assess how they have put it into practice and identify what they still need. So, while training is the starting point, coaching is what it takes for support services to be sustainable. Page 5 of 9
6 Training staff is widely available, coaches on the contrary are not. Faced with the challenge of delivering proximity follow up services that are affordable and preferably be applicable at a large scale, different approaches were discussed. Methodologies. Participatory working methods. Tailor made approach based on the USP s and challenges of each producer organisation the marketing plan should aim at first selling the product that producers have, like it is, discovering longer term opportunities and integrate them in a business plan. Learning by doing: training and coaching should be done on the farm and not in a class room. Necessity to involve the beneficiaries and not to do the work for them. Empowerment-driven capacity building enables producers to identify themselves market opportunities, assess their needs and demand the services that they need. No matchmaking with buyers if no parallel activity of capacity building on how to prospect the market themselves. Producers need to be confronted themselves to buyers, ex. at trade fairs, and coached accordingly so that they gain self-confidence. Instead of providing the results of a market research, train them in why they need specific market information and enable them to demand for research. Necessity of mentors assuring long term proximity accompaniment and coaching, through a process of setting a strategy, accompanying producers in implementing it, controlling the results and correcting where necessary. So when marketing and business plans are designed, in a participatory way with high level specialists, the implementation of these plans has to be followed up and coached. In analogy with the farmer field schools (FFS) where lead farmers pass on the knowledge to their fellow farmers, we could envisage farmer business schools. FFS have proven to work well, but can this methodology be used when it comes to transmitting capacities in business management? In FFS, the skills to be transmitted relate to agriculture which is the core activity of both trainers and trainees. With respect to business management and marketing however, this is not the case. Nor need every farmer be trained in business capacities. Peer to peer learning is interesting when it comes to exchange knowledge. These exchanges should actually be promoted by donors (e.g. how to present and communicate at a trade fair, how to design products, etc.). Peers talk the same language and are always willing to follow what successful fellow producers have done. Success-stories are often inspiring. Producer platforms are best placed to facilitate this. The striking observation was that the producer platforms are the ones that really organize themselves as to respond to the needs of their members in business management, by employing skilled marketing staff, quality supervisors, financial specialists, etc. Even having around the table best practices in support to market access, donors/ngo s mainly Page 6 of 9
7 focus on institutional strengthening, advocacy, bulking (getting producers to work together), better agricultural techniques, quality upgrading and in few cases, linking producers to processors or buying their products. The other component influencing the effectiveness of support is the choice of service providers. The stage of setting a strategy for an organization and assessing its needs is most crucial. And it is at this stage that high level service providers have to be found. Experience has learned that it is best to engage a service provider that is specialized in specific skills and that can be sourced locally as this allows for continuity over time. Different service providers could be linked up to each other as to cater for the different needs in training. When it comes to business support services, it is important to do a critical assessment of the competences of the different service providers. It was therefore suggested to create a platform to exchange information on service providers, ideally with a ranking based on experiences of the different members of the platform. We finish this chapter with a short note on the financing of delivered services: as mentioned above small producers need to be empowered to analyse what their challenges are and what services they do need. We can add here that it is preferable that small producers pay for the services themselves, or at least contribute. If producers see the added value of a service, they will be happy to do so. Role of Trade for Development Centre? TDC engages with small producers which provides TDC with first-hand information and has allowed it to come up with the idea of organizing this workshop. Participants see TDC as a good facilitator to bring together different stakeholders in business support and would like to see this type of event be repeated periodically (once a year). TDC could take up the challenge to becoming a knowledge centre on business support services to small producers. TDC could start to identifying the gaps in business support services and look for ways to fill up these gaps as to increase the competencies of service providers. TDC could also work on collecting best practices, or rather, best fits, and to actively share these among different stakeholders. In that sense, TDC could take up the challenge to becoming a knowledge centre on business support services to small producers. This is a good base on which meaningful programmes for capacity development of small producer organisations, ideally in collaboration with producer platforms, can be designed and be piloted. TDC being part of BTC, these can then be proposed for up-scaling within the framework of bilateral programmes, thus widening the outreach and eventually influencing governments in Belgium s partner countries to engage in this kind of support to small producers. Producer platforms also welcome the Page 7 of 9
8 fact that, unlike most other donors, TDC can provide them with market information. This allows small producers to go the extra mile to grow. CONCLUSION Although falling short of giving concrete answers to some of our questions, the workshop has allowed for a more strategic reflection on delivering services to small producers. If our aim is to enable small producers to improve their market access, then small producers are not the only ones to target. An analysis of the entire value chain will determine which actors to involve and support. As for support to small producers, more than telling them what to do, we should empower small producers to be in the driver s seat themselves. They are the ones to identify their challenges and their needs in training. When we engage in marketing support for example, making them aware of how the market works is a good start. Support given to small producers relies heavily on training. However, without accompanying producers in the longer run, i.e. coaching, our efforts in helping producers to become successful market players will fail. Producer platforms can facilitate this. The choice of service provider is equally important in pulling small producers to a higher level. The creation of a platform to exchange information on these is encouraged. When delivering services to producers, their willingness to pay is a good indication of the added value they expect these services to bring. The participants have expressed the wish for Trade for Development Centre to facilitate this type of workshop at least once a year. They also invite TDC to take up the challenge of becoming a knowledge centre on business support services to small producers based on which programmes for capacity development can be designed and piloted. Page 8 of 9
9 APPENDIX: LIST OF PARTICIPANTS WORKSHOP SEPTEMBER 24 TH INSTITUTION REPRESENTATIVE FUNCTION Embassy of the Kingdom of Belgium, Tanzania Mr. Koenraad Adam Ambassador Embassy of the Kingdom of Belgium, Tanzania Mr. Ronny Dynoodt Attaché of Cooperation National Organic Agricultural Movement of Uganda Mr. Charity Namuwoza International marketing officer Tanzania Organic Agriculture Movement Mr. Jordan Gama Director Tanzania Organic Agriculture Movement Mrs. Jane Albert Marketing Consultant Cooperation for Fairtrade in Africa Mrs. Alexandra Farrington Market access program manager SNV, Netherlands Development Organisation Mr. Monsiapile Kajimbwa Sector Leader -Agriculture VECO Tanzania, NGO Mr. Kain Mvanda Country Director RUCODIA Tanzania, NGO Mr. Joseph Mhagama Director Burundi Business Incubator Mr. Pierre Claver Nduwumwami Director SPARK Mrs. Annelies Van Berg Country Manager Burundi World Food Program Purchase for Progress Mrs. Emmanuela Mashayo P4P coordinator Rwanda FAO RDCongo Mr. Massimo Giovanola Coordinator east zone Congo RD FAO RDCongo Mr. Franck Luabeya Project Manager Moshi University College of Cooperative and Business Studies Moshi University College of Cooperative and Business Studies Mrs. Magareth Msonganzila Mr. Michael Tiruhungwa Director of the Institute of Continuing Cooperative Development and Education Director of Consultancy Services BTC Rwanda Mr. Raf Somers Co-manager BTC agriculture program Rwanda BTC Tanzania Mr. Vincent Vercruysse Resident Representative BTC Tanzania BTC Tanzania Mr. Hermengild Mtenga National Technical Advisor BTC - Trade for Development Centre, Belgium Mr. Steven De Craen Fair & sustainable trade officer BTC - Trade for Development Centre, Belgium Mrs. Josiane Droeghag International trade officer Page 9 of 9
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