Ayelech Tiruwha Melese
298 Unif. L. Rev. 2012
product quality because of inadequate farmer resources, poor management,
poor timing of operations and side marketing. On the other hand, farmers feel
that there is no transparency in the way prices are set by the contractors and
that the output grading systems work against them.
16
Frigoken, a vegetable processing company in Kenya, has been involved in
several contract arrangements with smallholders in different parts of the country.
It also tried to establish a similar scheme in Kisii, which however did not lead to
the expected success. According to
the company, the main reason for its
failure in Kisii was the lack of entre-
preneurial culture and the farmers’
failure to regard farming as a busi-
ness, unlike other regions such as the
central region around Mt. Kenya
where farmers are accustomed to
growing crops for market.
17
Nijhoff
18
uncovered a compa-
rable situation in Ethiopia that can
cause contract failure. Aiming to
develop policy recommendations
for the Ethiopian government, which is keen to promote contract farming as a
means of linking smallholders to markets, he identified ten critical issues that
determine the success of contract farming with smallholders. He ranked the
issues based on a review of the literature, case studies and expert interviews
and tested them in Ethiopia by asking smallholders and agribusinesses how
important these issues were and who they expected to address them.
The result shows a difference in expectations and in terms of ranking, in
the importance that was attached to each issue. For instance, agribusinesses
ranked the first three issues as highly important and they expected farmers to
address them. Farmers, on the other hand, ranked those three issues as less
16
S. MAUNZE, Contract Farming in Zimbabwe … Business Unusual, SNV Netherlands
Development Organisation, Case Studies, Zimbabwe (
2010), <www.snvworld.org>.
17
K. STROHM / H. HOEFFLER, “Contract farming in Kenya: Theory, evidence from
selected value chains, and implications for development cooperation”, Contract, Nairobi
(Kenya) (
2006).
18
H. NIJHOFF, It takes two to tango. Contract farming in Ethiopia: critical issues and
policy recommendations for linking up small scale farmers with (inter)national markets,
Wageningen UR Centre for Development Innovation, Wageningen (the Netherlands) (2010).
10 critical issues (Nijhoff, 2010)
1. Meeting quality criteria
2. Open communication with well-organized
groups
3. Contract terms (complying with
contractual terms)
4. Provision of extension, training and
knowledge
5. Collection of produce (logistics)
6. Side selling
7. Access to credit
8. Access to input
9. Pricing and method of payment
10. Sharing risk