• Thursday, July 25, 2024
businessday logo


Why Africa needs fair trade to create a sustainable agro-commodity sector

Why Africa needs fair trade to create a sustainable agro-commodity sector

According to the International Fund for Agricultural Development (IFAD), there are an estimated 33 million smallholder farms in Africa. The farmers who live on these farms contribute up to 70 percent of the food supply.

Despite contributing to Africa’s food systems, many of these farmers are impoverished and have limited access to markets and services. To address this imbalance, stakeholders in the African agriculture sector need to rethink their strategy and leverage technology to improve farmers’ livelihood, by increasing their earning potential through a transparent and efficient value chain trade system.

The need to better reward farmers for their input is an on-going contemporary conversation amongst stakeholders in Africa’s agriculture and food systems. Ultimately, this is a conversation about fair trade. Africa needs fair trade to exchange value among players that breed a virtuous cycle of sustainable agricultural practices, efficient and prosperous producers, and health and food-secure consumers.

The current food systems in Africa are far from this ideal. Farmers live in a vicious poverty cycle primarily because they are financially excluded and have limited access to the market and the necessary infrastructure to be efficient. They remain cut off from the formal economy, and almost all their assets exist in cash. This prevents wealth creation, especially in an inflationary economy, and results in smallholder farmers’ remaining the most impoverished and most under-served group in Africa’s economy.

This understanding has driven interventions in some commodity value chains across the continent. Wage support and subsidy based programs have historically been instituted to drive fair trade in Africa. Still, they have missed the mark on sustainability, failing to deliver fair trade benefits to smallholder farmers and our food systems at large. A recent example is an introduction of the Living Income Differential (LID) by Ghanaian and Ivory Coast cocoa boards, which has resulted in a supply glut of the premium-priced cocoa in the two countries. The global COVID-19 pandemic further led to the tightening of some of the biggest buyers’ purse strings.

Read Also: Despite COVID-19 headwinds, BUA Cement grows profit by 16.3% in 2020

Africa needs fair trade that empowers the smallholder farmer while strengthening our food security position and delivering economic benefits. For this to happen, we need to establish a vibrant agricultural economy that facilitates simultaneously a systematic change in productivity, access to finance for scalability, and access to an effective market system.

By collaborating with smallholder farmers – providing training, access to credit and input, storage as a service, and market access, AFEX Fair Trade enables these farmers to increase their productivity, while producing at international standards. With aggregation and trade, individual farmers are given access to larger markets, increasing their income potential. Leveraging technology like AFEX WorkBench – a value chain management platform, AFEX Fair Trade continues to facilitate input sourcing, loan administration, sales, and a transparent and efficiently executed farming process.

With these holistic solutions, fair trade is incentivized increasing the farmers’ capacity to purchase inputs, earn more, and more importantly manage market and commodity price risks. Our food systems also benefit from food production at the right quantity and quality for Africa to feed itself.

At AFEX Fair Trade, we are on track to impact one million smallholder farmers, and through our infrastructure enables fair trade to become the reality of our food systems.

At AFEX, we harness Africa’s commodities and talent to build shared wealth and prosperity. Our infrastructure and platform investments work to unlock capital to power a trust economy in Africa’s commodities markets. Since its inception in 2014, we have developed and deployed a viable commodities exchange model for the West African market, and are on track to impact one million producers; providing services in productivity and value capture and access to finance and markets. By deploying an efficient market system, we will facilitate trade with Africa worth over $500 million in the next five years.

AFEX’s vision is to be the reference point for commodities in Africa. To achieve this goal, AFEX looks to introduce products that de-risk the sector, drive financial inclusion for rural communities, develop technology for data collection and market access, and enable capital deployment.

Raji is the managing director, AFEX Fair Trade limited, the business unit of AFEX responsible for commodities trading and storage; providing extension services to farmers and boosting their productivity and incomes