Market infrastructure and business environment

Markets connect consumers and producers and facilitate the purchase and sale of food. Quick and easy market access is especially important for producers when there is no way to store harvest or when storage facilities are of low quality, increasing the likelihood of infestation or decay and decreasing the produce’s value (CFS, 2016).

Kumar et al. (2018) analyse the link of market access and nutrition in Zambia and discern that many individuals must supplement their diet with local supplies as they are unable to grow enough food groups (Kumar et al., 2018). Looking at Malawi, Koppmair et al. (2017) argue that improving farmer’s market access diversifies diets more than production diversification and that more efforts should be made to enhance farmer’s market integration (Koppmair et al., 2017). In line with Koppmair et al., the quantitative analysis of this study shows a positive impact of income diversification on food and nutrition security indicators.

Favourable market prices and the gross margin per hectare are the main (dis-) incentives for farmers to (continue or stop) producing a certain crop. However, various crop prices are prone to fluctuation, as reported by the Ministry of Agriculture (Expert interview – Chipata). Exemplary, in the harvest season 2017/18, many Zambian farmers had difficulties to secure their income when prices for soybeans dropped by 44 %, with the lowest prices found in Eastern Province (Chapoto et al., 2018).

Market access in Eastern Province

Almost all households sell part of their harvests (95 % in Katete, 89 % in Petauke).

Farmers either sell maize to the Federal Reserve Agency (see Box 6) or to individuals at markets.

Box 6: The Food Reserve Agency

The Food Reserve Agency (FRA) was created in 1995 to administer food reserves, facilitate markets and manage national storage facilities. The FRA purchases maize from smallholder farmers at a set price that typically exceeds maize market prices in areas of surplus production. The purpose is to guarantee a reliable supply of agricultural commodities for the country and to meet local shortfalls in times of emergencies caused by drought, floods and other natural disasters. The FRA also takes care of food reserves, price stabilisation and essential food supply. Many criticise the FRA for interfering in the private market.

Source: Interview WFP, Farmers Union.

Farmers commonly sell their products directly after harvest, when prices are low (and often “rebuy” when prices are high, see 101), leading to a small or no profit margin. Various experts said that market prices for maize can vary from 30 to 60 % within a year.

In the project region, many farmers have difficulties to access markets. Common access barriers are summarized in Table 15.

Table 15: Barriers in reaching markets

Farmers’ market access barriers Lack of transport

means and possibilities

Only few farmers have their own means of transport. Many rent one to transport their products to local markets. Typically, they

commute by ox cart, bicycle or motorbike. Women are often not allowed to transport products by themselves, limiting their access to markets (see 5.2.3.).

Limited accessibility Low population density and long distances to neighbouring villages and urban centres. This also results in little awareness on product prices in other locations.

Lack of infrastructure

Deficient public transport services and insufficient road infrastructure limit farmers to commute

Source: Own data.

The FRA sets prices above market rates. Those who cannot afford them are sent to FRA depots where they can purchase cheaper products. Formalized markets are

often beyond reach, since farmers have difficulties to meet the requirements in production quantity and quality (Neubert et. al., 2011).

Private companies pay less for the produce of smallholder farmers because of the relatively poor quality of their produce and their poor post-harvest management compared to large scale-farmers.

Farmers reported that they had difficulties to receive fair prices due to FRA policies, product-flooded markets or high transport costs reducing their profit margins.

Whether the FRA reduces smallholders’ poverty or not is a topic of frequent discussion. One problem for smallholders, especially in remote villages with limited access to information, is that the FRA’s buying and selling activities are rarely announced in advance, which creates uncertainty about input availability (Fung et al., 2015).

Income generation and expenses

The regression results for Zambia show that women in households with business income are more likely to eat a diverse diet than women in households without a business-based income. Following the Central statistical office of Zambia (2014), the monthly per capita income in rural areas is 188.4 ZMK for males and 177.4 ZMK for females (CSO, 2014). However, only 4 % of households in the project region have a regular salary (Evan and Kuchenbecker, 2015).

While men mostly engage in marketing of crops (pure cash crops such as cotton and maize for household consumption and sale), women grow and sell food crops with lower profit margins and less demand such as vegetables (rape, tomato, beans), fruits and millet. Although women often pool their incomes, husbands have control over the households’ finances and expenses, and women need to ask permission to spend money.

Livestock is rarely kept for regular consumption but rather serves as an asset in crisis (i.e. droughts, disease), a means of transport, or a source of cash for children’s education. Despite challenges to find resources, most parents value education: “We have to spend the money on our children for their education,” one parent said,

“[b]ut coming up with the money to cover expenses like education is challenging”

(Box 7).

Income generation and barriers for women

Women’s involvement in small business activities follows seasonal patterns. They start after harvest when (if) the household has enough money and time at hand (Table 16). This seasonal investment pattern and the related uncertainty often obstruct long-term investments.

Box 7: Costs of education

Primary education is free, but families must purchase school uniforms and materials, which can amount to 750 ZMK/y. Secondary schools charge fees (~

300 ZMK per child per term) and many families withdraw their children from schools as they are unable to afford them. Other reasons for low school attendance are anaemia, long distances to school and early pregnancies.

Source: Own data.

Table 16: Typical income generating activities of women

Income generating activities of women Sale of

products

Women are involved in the sale of non-agricultural products within the villages. Typically, they sell additional food items (e.g. cooking oil, salt, sugar, sweets), hygiene products (e.g. soap and lotions) or cloths and fabrics - “Cloths sell faster than eggs”

Petty trade To buy and re-sell goods in other locations such as in city markets can be profitable. But these activities are hampered by limited transport options and a lack of information on regional prices. Some, however, make high profits. An older mother from Chimbuwa (Katete) sells bananas at the clinic with a profit of 100 %. Typically, small fish (kapenta), groundnuts, reet mats, tobacco, vegetables (rape) or fruits (banana) are bought at cheap prices in town and sold in the village at a higher price.

Sale of own produce

Sale of food crops (e.g. vegetables and fruits) in neighbouring villages for income and to exploit price differences

Production/sale of goods

Few women produce products such as fritters, bread, charcoal and bricks and sell them within the communities. However, the production of these products requires investments.

Piece work Some women work for a piece rate, especially during periods with no farming activities. For example, a woman from Kanjala (Petauke) sells groundnuts for 7 ZWA per 50 kg/bag (she produces one bag every two days) during the dry season.

Source: Own data.

Most women expressed the desire to engage in a side-business. However, many lack important resources (i.e. especially money and time) to launch a business. The household expenditure is mostly used to settle loans for agricultural inputs, pay

education-related expenses and (re-) buy livestock, and does not leave room for economic investments. Women who do not have a side-business described the various challenges that keep them from generating income (Table 17).

Table 17: Barriers in starting income activities

Barriers in starting income activities Income poverty

through poor harvests

Low- and irregular-income harvests / yields. Limited surplus that prevents households from investing in side-businesses.

Lack of capital / loans

Poor access to loans. Contract farming, in which private companies set prices, was given, but not popular. Women expressed an interest in starting a community banking system to launch individual businesses.

Lack of training The lack of suitable (business) training often leads to fears of losing money and being not successful in generating income.

Time poverty Underestimation of the necessary (extra) work time to start a business.

This can lead to failure. Many women can only dedicate time to a side-business during off-season.

Low demand Non-competitive prices for consumers and low domestic purchasing power and demand / customers.

Source: Own data.