Making stronger links

Using mobile phones and the internet to improve market supply in East Africa.

Dr. Clive Lightfoot

Using the internet and mobile phones, farmers in East Africa learn to work more efficiently with the traders who buy their goods. The Linking Local Learners method of learning explores how farmers can access market information and get a fairer deal.

Farmers often complain about the low prices they get for their goods. In fact, many feel cheated by the middlemen who buy their products, especially when they see the prices retailers ask for their tomatoes, oranges or bananas in the market. These middlemen, meanwhile, complain about the poor quality of goods the farmers supply and the retailers grumble that the stock arrives too late to fetch the best price.

With everyone so unhappy about how business is done, farmers and traders in Tanzania, Uganda and Kenya are now trying a different way of working together. In fact, the Linking Local Learners (LLL) method tries to include all those involved in the supply chain and encourages them to learn from each other. That is, everyone involved in the process of bringing goods from the farm to the market: farmers, buyers, transporters, traders and retailers. They are all asked to share market information and form a network in which each business can learn from the others to develop a better system of communication.

Anyone involved in the scheme in each of the three countries can use the LLL website to post their experiences and give advice. Farmers in Kenya, for example, can learn how to gather the latest market prices from retailers in Tanzania, while buyers in Uganda can share information on how to organize efficient transport systems.

Through this exchange of ideas and experiences, and by adapting to a new style of marketing, some farmers are now earning two or even three times more than they were previously. Traders, transporters and retailers also get a better, fairer deal. But the extra income doesn’t come from raising prices and asking the customer to pay more. Instead, the extra money comes from making the supply chain more efficient.

Savings

Money gets lost, for example, every time a middleman hires people to go through sacks of grain to remove stones. The middleman then has to recover that cost so he gives the farmer a lower price. But if the farmer supplies the sack of grain already without stones then the middleman wouldn’t have that extra expense. Transporters also complain that it takes several trips to the farms to collect a full truckload. The unnecessary journeys push up the transporter’s costs, which they then pass on to the middleman. The food processing businesses argue that the goods are of such poor quality when they arrive off the trucks that they have to dispose of a large amount of it. These losses mean the processor can’t pay the transporter a fair price and, in turn, the price to the retailer is higher than it needs to be.

Eventually, all these losses are passed on to the consumers who pay a higher price for the product, but it starts with the farmer receiving a lower price in the first place because the buyer has to cover the costs he loses through these inefficiencies.

Under the LLL system, all those involved in the supply chain are encouraged to communicate regularly with each other. Using the SMS (short message service) facility on their mobile phones, all the members of the network can keep each other informed on the progress of goods along the chain. The farmer, for example, can tell the transporter how many sacks of grain need to be picked up. The trading agent can confirm that the quality is up to standard and inform the retailer of how many sacks to expect. And if there are any problems along the road, the transporter can send a message to the farmers to give accurate pick up times. The main advantage of using SMS is that the information can be updated rapidly, meaning that all those along the chain can plan and adapt to any changes in the process accordingly.

For many farmers the LLL approach is a complete reversal of how they used to operate. Previously, the farmers would produce 10 sacks of grain, for example, then look for a buyer. This, says Clive Lightfoot of Rural African Ventures Investments, the company responsible for introducing the scheme to East Africa, is the wrong way to market any product. ‘It is much more efficient to look for people who want to buy grain and find out how much they need before the farmers even sow the seeds. Big buyers want to have their supplies locked up a season ahead to be comfortable that they will get what they need at harvesting time.’ With early agreements already in place the farmers can plan and grow produce to meet demand rather than hoping that there will be enough buyers paying the right price once all the fields have been harvested.

But, says Lightfoot, it takes an extensive information network to be able to find the buyers and match them with the right farmers who will deliver the amounts and quality of produce needed. ‘It’s not enough to just put the information on the internet and hope someone finds it. It’s also not enough to send out a few text messages. You have to combine the technology with human effort. People have to be at the truck to check that the bag is actually there, sacks have to be labelled and tagged. It’s also this human side, especially building trust, that is one of the biggest challenges in the process.’

Organization

Small-scale farmers, even those with only a one-acre field, can benefit from this approach to marketing. However, as it is so difficult for many rural growers to access to mobile phones and computers, Lightfoot recommends that they become members of a farmers’ association. ‘There have to be a few people in the farmers’ organization who at least have access to a mobile phone,’ he explains. ‘They can filter and then distribute market information to the farmers who don’t have phones or access to the web. But phone access is increasing massively in East Africa so there may come a time when the information is more widely available. In the, meantime, we are also linking up with radio stations that will be able to broadcast market information and that way help to keep everyone informed and increase transparency.’

And it is this issue of transparency that is so important to getting a fairer deal for farmers. It means that all the members of the supply chain have to be open about how much money changes hands at each stage of the process. ‘If the farmers and other members of the supply chain can easily find out how much everybody is paying for the products, it allows everyone in the supply chain to decide what would be a fair price for them. Fair trade is then defined by the players in the chain rather than some external entity that determines whether the transaction is fair or not. The farmers make an informed decision; they decide to sell their goods for a certain price because they know how much the next person will sell that same product further along the chain.’

One important step in bringing about this openness is to create a network of trading agencies. These agencies are small independent businesses, usually operated by only one person who, in many instances, would have previously been the middleman, or trader, who still deals directly with the farmer. In turn, the trade agent works closely with another business, called a market access company (MAC) which operates on a slightly larger scale at district level and probably deals with several agents in their area. ‘It makes sense to involve the people who are already doing this work ,’ says Lightfoot, ‘and to encourage them to reform the marketing process and make it much more efficient, transparent and fairer. We are introducing trust to the process and the technology that makes it possible.’

Trading agents and staff from the MAC use information on the LLL website to learn how to deal with the other businesses and members of the supply chain. The website can also help farmers’ groups learn how to be better clients in this new marketing process. There are usually a few members in any farmers’ organization with an email address and internet access who are able to post their experiences and advice from the farmers from their group on the site.

‘Often the farmers’ groups get support from a local government officer,’ adds Lightfoot, ‘or someone from an NGO who can help them to write up their ideas, post them on the web and print out the stories from others. Internet access at district level in rural Africa is moving very fast and there is always someone in the farmers’ group who can get to a town where there is an internet connection.’

Paper trail

Because the information is spread by the farmers’ groups or the local trade agent, there is no need for each individual farmer to have access to a computer or even a mobile phone. ‘The first link in this communication chain is still a piece of paper on which a farmer has written his experience. A trade agent, NGO worker or extension officer will type up the story and post it on the web. A trade agent elsewhere might see this story, print it out and distribute it to the farmers in their area.’

Although the process of communicating these stories often starts and ends with a piece of paper, that too, says Lightfoot, is changing rapidly. ‘Many trade agents now have laptops with internet access via mobile phone modems. That’s taking email to any place where there is a cell phone signal and that coverage is expanding rapidly. We’re also building a mobile phone alert so that people involved in the scheme will get an alert on their mobile phone when there is a new story on the website in a relevant topic. An SMS alert means the farmer or trade agent only has to check the website when there is something new of interest and doesn’t have to waste time and money logging on to the website if it is not necessary.’

Lightfoot makes it clear that the improvements to the supply chain and the increases in farmers’ income could not have happened without the technology. ‘None of this would have been possible five years ago. In fact, the farmers in the area around the town of Babati in Tanzania managed to make US$1.3 million extra available simply by making the process more efficient. That’s a lot of money to be shared by a group of small-scale farmers just by improving the efficiency of the work they have been doing all along.’

The money saved from a more efficient marketing system can be passed along to everyone in the supply chain. And when that system is transparent, with price and cost information available to everyone, then farmers are in a better position to understand why the buyers offering them a certain price and decide whether that amount is fair or not.

‘Fair trade is something that should be determined by those involved in the supply chain,’ says Lightfoot. ‘The market access companies, who are independent and not directly involved in the chain, act as brokers for all the parties. Fair trading only starts when everybody recognizes the value of the product as it moves along the chain.’

It is not only the farmers who benefit from better prices and a fairer deal. The savings that result from a more efficient system can also be passed on to the consumer. At a time when commodity prices are increasing all around the world, the LLL mix of technology and marketing reform might just help to ease the burden of rising food costs for many rural communities.

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Dr. Clive Lightfoot is project leader at Linking Local Learners.

Related resources

Linking Local Learners
The LLL website contains information and interviews illustrating how improved efficiency and transparency can transform the market supply chains. The site also has several videos and stories from people involved with the scheme.

First Mile project
The First Mile Project is about how small farmers, traders, processors and others from poor rural areas learn to build market chains linking producers to consumers. The project encourages people in isolated rural communities to use mobile phones, email and the internet to share their experiences and good practices and learn from one another.

Agricultural Marketing System Development Programme
AMSDP assists the Tanzanian government in reforming agricultural marketing by improving rural markets helping smallholders to operate more effectively in the marketplace.

11 August 2008

Copyright © 2014, CTA. Technical Centre for Agricultural and Rural Cooperation (ACP-EU)