Emerging issues in smallholder organic production and marketing in South Africa

Abstract

This paper presents a synopsis of emerging issues in smallholder organic production and marketing in South Africa. The pros and cons of organic production for smallholder agriculture are demonstrated in a discussion of the reasons for adopting organic farming and the opportunities for and constraints on smallholder farmers in Africa. Also discussed are agro-ecological considerations; the process, requirements and costs for converting to certified organic production; and the information and decision-making required for smallholder organic production. Research and policy considerations are suggested.

1. INTRODUCTION

Organic farming is increasingly viewed as a plausible production system for sustainable agriculture (Hellin & Higman, 2002) and is considered a suitable production method for smallholder farmers. It is widely promoted, for many reasons, as an opportunity for small-scale farmers in Africa at subsistence and commercial levels (Green Clippings, 2003). These reasons are environmental sustainability, cultural factors and profit opportunities. Since conventional agriculture is detrimental to the environment, there is a need to find more sustainable farming methods (Mäder et al., 2002).

Certified organic products often fetch premium market prices, and their production and marketing could alleviate food insecurity for smallholder farmers. However, there is a lack of adequate evidence that organic production is the best production option for smallholder farmers in developing countries. Factors critical for supporting the growth of the organic industry, such as policy, markets and marketing channels for organic products, are often absent in developing countries. Likewise, South Africa lacks policy mechanisms and marketing channels for organic produce. For example, this country does not have legislated organic standards to govern the industry, although draft organic standards exist.

Decisions about farming and related activities are complex, and influenced by on-farm and off-farm factors (Food and Agriculture Organisation [FAO], 2006). Farmers do not make such decisions in a linear way but rather in simultaneous ways (FAO, 2006). Organic farming is a knowledge-intensive farming system (Scialabba, 2007), and organic farmers have particular decisions to make in addition to the typical general farm management decisions (FAO, 2006). Currently there is insufficient appropriate information to help them make better decisions about organic production, marketing, pest and disease control and certification.

Unpredictable and uncontrollable factors such as climatic variation make farming a risky business. Certified organic farming presents an even more pronounced risk because agrochemicals such as pesticides and herbicides are not allowed (Organic Farming Research Foundation [OFRF], 2001). Historically, smallholder farmers in South Africa have had little appropriate extension and research information (May et al., 1998). There is clearly an urgent need for better tools to help them make decisions. A study by Belaineh (2002) shows that production and market risks are determined by factors such as farm size, proximity to markets, roads and agro-ecological conditions. These factors are crucial in a niche market such as organics, particularly for a smallholder farmer with limited resources.

The premise of this paper is that smallholder farmers could benefit from organic farming but that they need appropriate production information to make informed decisions about organic production and its associated risks. The paper explores the production potential for organic farming among smallholder farmers by reviewing the reasons for adopting organic farming; the opportunities and constraints for African farmers; the agro-ecological considerations; the process, requirements and costs of converting to and acquiring certification for organic production; and information to assist in decision-making.

2. REASONS FOR ADOPTING ORGANIC FARMING

Organic production is a topical issue in food production. Organic farming methods support environmental sustainability through biological pest management and composting while discouraging the use of synthetic chemicals, antibiotics and hormones in crop production (Greene & Kremen, 2003). Organic farming uses readily available resources in nature to improve soil fertility and to manage pests and diseases, and appears to offer an opportunity to smallholder farmers to realise commercial and food security goals that may not be possible through conventional agriculture (Hellin & Higman, 2002; Scialabba, 2007). Organic farmers may earn higher incomes due to the potential premiums paid for certified organic produce and opportunities to earn foreign income through exports (OFRF, 2001).

2.1 Similarities between organic and African farming production systems

Organic production systems are similar to many traditional African production systems that have been practised for years by smallholder farmers. However, the Green Revolution has eroded such knowledge in Africa (M Makhanya, certified smallholder organic farmer, Mbumbulu, KwaZulu-Natal, personal communication, 1 September 2006; Juma, 2007). Organic farming relies on developing biological diversity in the field to disrupt habitats for pests, and the maintenance and replenishment of soil fertility is a key factor. Key traits of organic farming include the design and implementation of sound organic practices for producing crops and livestock products, and ‘a detailed recordkeeping system that tracks all products from the field to point of sale; and maintenance of buffer zones to prevent inadvertent contamination by synthetic farm chemicals from adjacent conventional fields’ (OFRF, 2001).

African smallholder farmers have access to land that has not been exposed to the intensive chemical treatment of commercial agriculture. Such farmers should therefore gain certification faster than the 3-year conversion period recommended by the European Union (Biodynamic and Organic Certification Authority, 2006). Organic certification could afford small farmers opportunities to market products in fast-growing organic markets locally and globally.

2.2 The expanding niche market for organic produce

The organic food market is one of the fastest-growing markets in the developed world (Makatouni, 2001; Scialabba 2007). Some South African farmers reported an increase in organic sales of 400 per cent in the first half of 2004 (Business Day, 2005). In Europe, North America, Australia and Japan, organic sales exceeded US$114.5 billion in 1999, and many countries in the developed world experience annual growth rates of 20–30 per cent for organic foods (Makatouni, 2001). Nakashini (2003) reports that Chinese farmers are exploiting opportunities offered by emerging organic markets where sales are projected to reach US$20 billion by 2005 – $7 billion more than that forecast for 2003 in the US. However, few studies have attempted to examine consumer perceptions and attitudes and their reasons for buying or not buying organic foods (Makatouni, 2001). One study conducted in Reading, UK showed that people bought organic foods for health, environmental and ethical reasons (Makatouni, 2001). Rigby et al. (2001) found that the main motivating factors for converting to organic farming in the US were concerns about family health and about farming practices (e.g. soil degradation), lifestyle choices (ideological, philosophical, religious) and financial considerations.

According to Barret et al. (2002), in the UK the demand for organic foods is skyrocketing and organic farmers cannot meet the rapidly growing demand, so organic produce is mostly imported from the developing world. Rigby et al. (2001) say that the growing demand in the UK is attributable to government support for the organic farming sector, and that, despite the expansion of the organic farming sector, the UK imported 75 per cent of its organic food in 2001, primarily from the southern hemisphere. In the US the government has provided financial incentives for converting to organic production, which has led to a rise in consumer demand, providing market incentives for farmers to convert (Greene & Kremen, 2003).

Some South African supermarket chains already stock a range of organic produce. Woolworths stocks a wider range of organic produce than Pick and Pay, Checkers and Spar (J Ferreira, Head of Food Technology, Woolworths, Cape Town, personal communication, 1 June 2006). According to Business Day (2005), Woolworths has experienced consistent growth in organic food demand, with a 50 per cent year-on-year growth in these foods in 2004; but although the growth in organics in South Africa has been good, there is a view that South Africa is 5 years behind the organics trends in the UK.

3. OPPORTUNITIES FOR AND CONSTRAINTS ON AFRICAN FARMERS

The similarities between organic production systems and most African production systems provide production and marketing opportunities for African farmers. The organic conversion system makes provision for a shorter conversion period for land that has a history of minimal agrochemical use (European Union, 2004). Furthermore, an opportunity exists for smallholder African farmers to meet the northern hemisphere demands for organic food because the southern hemisphere's favourable climatic conditions permit longer production cycles. If smallholder African farmers can meet certification requirements this would also improve their livelihoods, because they could then gain access to lucrative organic markets. It seems plausible that, with the correct supportive environment, organic agriculture could contribute to economic development for smallholder farmers. However, as stated earlier, African farmers' rich indigenous organic production knowledge has been eroded with the advent of the Green Revolution (Juma, 2007). New capacity-building programmes in organic production for African farmers are therefore of paramount importance for success.

There are many constraints that affect smallholder organic farmers and result in low production. These include:

• poor access to productive land, inputs and credit;

• poor access to water and resources especially for small-scale farmers;

• lack of awareness of niche markets for organic produce;

• problems with accessing local, national and international markets;

• dependence on standards set by northern hemisphere countries, which limits the development of local standards;

• farmers' lack of technical skills by farmers in organic production; and

• lack of extension service in organic production systems (Niemeyer & Lombard, 2003; Quansah, 2003; Poulton, 2004; Walaga, 2006)

The limited access to factors of production and institutional constraints such as financial problems, lack of marketing information and increased labour demand have contributed to a minimal practice of the use of chemicals in organic farming and to high transaction costs (Makhura, 2001; Matungul, 2002; Ortmann & Machete, 2003). In many parts of Africa and South Africa, farmers have limited or no access to alternatives such as credit for purchasing production inputs.

Kalinda et al. (2000) indicated that labour (i.e. the number of able family members and livestock) is an important element of production strategies employed by farming households in southern Zambia. Rigby et al. (2001) have shown that European and American farmers who convert to organic farming have smaller farms, possibly because of the high labour requirements, since organic farming is labour intensive. Similarly, smallholder farmers in South Africa have smaller farms of about two hectares each (Naledzani, 1988; Thamaga, 2001).

4. AGRO-ECOLOGICAL CONSIDERATIONS

Soil fertility management and crop diversification are critical elements of organic farming management (Altieri, 1989:180, 186), as is pest and disease management. The volume and types of crops grown organically varies worldwide, with vegetables being the most widely grown (Greene & Kremen, 2003).

The onset of disease is influenced by the natural environment (Agrios, 2004). The reality for most smallholder farmers in South Africa is that they are situated in parts of the country that are of inferior agricultural potential (Aliber et al., 2006). Such areas score poorly in terms of key agronomic factors such as productive soils and favourable climates. Often the most limiting climatic factor is low rainfall, so water conservation is an important element of sustainability in organic farming. Smallholder farmers often lack irrigation systems (Thamaga, 2001). Therefore the location of potential organic farmers is important for successful farming; for example, in matching the choice of crop to the agro-ecological zone (Jones et al., 1991).

Soil fertility management plays a central role in organic farming (Altieri, 1989). Increased efficiency of nutrient flows from a fixed soluble state, and high levels of organic matter are associated with reduced soil erosion and better water infiltration, movement and retention. Nutrient cycling can be improved by crop rotation, tillage systems and increased rates of manure application (Stine & Weil, 2002). Conversion from conventional farming to organic farming may be challenging, especially from the point of view of integrated soil fertility management and natural crop protection (Harris et al., 1998).

5. THE PROCESS, REQUIREMENTS AND COST OF CONVERTING TO ORGANIC PRODUCTION

The process of certification is lengthy, technical and costly. Certification is required in order to distinguish between organically produced products and conventional products, to inform consumers of the production method used, and to protect farmers who adhere to the set standards for organic production against competition from those who do not. Certification is a requirement for accessing high-value niche markets, both locally and abroad.

Organic certification involves the process of determining compliance with a set of local or international organic standards (OFRF, 2001; Barret et al. 2002; Biodynamic and Organic Certification Authority, 2006). The steps followed in organic farm certification involve applying to the certification body, who will gather relevant information, assign an inspector, carry out the actual inspection, review all the submitted information, and issue recommendations from the certification committee and internal monitoring system (see Table 1). The basic steps set by the International Federation of Organic Movements relate to organic ecosystems, crop production, animal husbandry, aquaculture production, processing and handling, forest management, labelling and social justice (Hellin & Higman, 2002:2). South Africa does not currently have uniform national organic certification standards or legislation. If South Africa and other African countries wishing to benefit from international organic export opportunities do not formalise and match the export country standards, they could lose international export opportunities.

Table 1: Steps followed in organic farm certification (Callear, 2003)

Step in certification process	Activities
Application	Standards and certification cost information is acquired. History of the farm is recorded.
First review	The certification application is reviewed. An estimate of the total costs is drawn.
Assignment of an inspector	An inspector is assigned to inspect the farm based on the information provided.
Inspection	An inspection is conducted and a report is produced. No recommendations are made at this stage.
Second review	A review of all information. A recommendation is made to the certification committee regarding the application.
Recommendation by certification committee	Several outcomes are possible. Full certification may be granted or refused. Other outcomes of this stage may include a farmer being given a status of ‘organic in conversion’, with or without conditions.
Internal monitoring system	Once certified, trained internal monitors, in conjunction with a quality control officer, carry out the inspection. The inspection uses a questionnaire to assess the state of the farm, soil fertility, crops grown, and fertiliser regime and pest/disease/weed control. The form is currently written in English. Many African farmers do not speak or write English.

Organic certification standards include checks of the production chain from processing to labelling. The standards are generally set by international bodies such as the International Federation of Organic Movements and adopted by local certifiers (Hellin & Higman, 2002). Table 2 shows the advantages and disadvantages of using local standards (see also Bañados & Garcia, 2001). Local inspection bodies can be accredited by international certifiers to lower the certification and monitoring costs, and small farmers can group themselves into cooperatives or producer groups for group certification to further lower certification costs (Barret et al., 2002). However, the complexity of the certification process is complicated by annual inspections and rigorous internal monitoring processes to retain certification. Good functionality of the internal monitoring system in group certification is critical to maintaining and checking standards and should ensure an annual 10–20 per cent group farm inspection (Barret et al., 2002).

Table 2: Advantages and disadvantages of local certification programmes (Barret et al., 2002:307)

Advantages	Disadvantages
Lower costs for producers	Lack of competence and information at start-up phase by local certifier
Better knowledge of local conditions and languages by certifier	Difficulties in obtaining international recognition for export opportunities
Better information flow between certification body and producer due to closer proximity	High initial investment costs may take resources from other activities
Develops trust between producers and certifier	Conflicts of interest may lead to struggles of control
More possibilities for making unannounced inspections
Keeps money in the economy

However, many smallholder South African farmers have not had the opportunity to participate in the production of high-value products due to limited resources and institutional constraints (Ortmann & Machete, 2003). Consequently, these farmers may need to build management capacity in terms of labour training, production and pest and disease management skills. Factors such as access to technical and financial information and institutional barriers such as problems with accessing loans and meeting certification costs may also hamper conversion to organic farming in South Africa and the developing world.

The cost of organic certification is determined by several factors, including whether local organic or international certification bodies are used, the history of chemical application, and the size of the farm and the distance travelled by the inspector. In South Africa, costs vary between R9000 and R15 000 per annum, which is very high for smallholder farmers. Government interventions, such as subsidised organic certification and facilitation of group certification among smallholder farmers, is vital to promote local organic production. Without the sponsorship it received to cover these costs, the Ezemvelo Farmers' Organisation (one of the first groups to hold certification in South Africa) could not have afforded certification in 2003 (AT Modi, Associate Professor, Crop Science, School of Agricultural Sciences and Agribusiness, University of KwaZulu-Natal, personal communication, 6 April 2004).

6. INFORMATION AND DECISION-MAKING FOR SMALLHOLDER ORGANIC FARMING

Effective decision-making requires good information, sound judgement and flexibility. However, resource-limited farmers in South Africa lack the appropriate production information and successful farming experience to make sound judgements on many production decisions (Poulton, 2004). Access to appropriate information is important for managing risk. A study by Belaineh (2002) identified farm size, proximity to markets and roads and the suitability of the agro-ecological zone as production and marketing risks. These factors are crucial in a niche market such as organics because smallholder farmers have limited resources and may fail in the conventional market if not assisted.

Organic farming requires a knowledgeable farmer. Many authors agree that the marketing problems organic farmers experience are mainly due to lack of information (Mnkeni, 2001; Hellin & Higman, 2002; Matungul, 2002; Anseeuw, 2003). Historically, smallholder farmers in South Africa have been given little attention with regards to appropriate extension and research, and the situation is still similar today (May et al., 1998).

The availability of good information is important in decision-making. Typically, general farm management decisions include choice of agricultural enterprises, allocation of labour, land allocation, allocation of capital, acquisition of capital, and acquisition of inputs and marketing (FAO, 2006). Only a small proportion of smallholder farmers have access to written information (Bembridge, 1997). Farmers use information if it is accessible, credible and understandable (Stefano, 2004). There is a sizable volume of printed agricultural information for farmers in South Africa but only a small percentage have access to such information because many producers of agricultural information fail to meet the smallholder farmers' real needs in South Africa (Stefano, 2004). Farmers need to receive context specific information that is appropriate for their level of literacy and delivered through an appropriate channel.

7. RESEARCH AND POLICY CONSIDERATIONS

As discussed above, organic farming is a young industry with a promising future driven by fast-growing international and local demand. African smallholder farmers have an opportunity to benefit from commercial organic agriculture because of lower purchased input costs, similarities in production systems, access to land less exposed to chemical use, more favourable climatic conditions, a growing niche market and environmental sustainability. But despite all this, these farmers have poor capacity in production, management, financial resources, knowledge and information, and they face restrictive institutional challenges to certified organic production and marketing. In the developed world, government intervention has focused on market facilitation, certification cost-sharing, funded market research and subsidised conversion to organic farming systems. Such interventions may include transport infrastructure development, relevant training, appropriate extension services, skills training and market facilitation such as local consumer awareness and facilitation of access to export opportunities in Europe and America. Such support requires a policy environment that is conducive to the growth of organic agriculture. This should include legislated organic standards that will govern and facilitate organic production, marketing, processing and labelling.