Key challenges in Malawi’s paprika supply chain: new insights into contract farming

ABSTRACT

Contract farming is a vital tool for linking small-scale farmers with modern supply chains. This study explored challenges resulting from contracting in the paprika supply chain in Malawi. The study used focus groups, semi-structured interviews, and email correspondence with 100 supply chain participants. The identified challenges include: inadequate input provision via the contract, a lack of opportunities to bargain and participate in contract design, and side-selling. While the contract secured the outlet for paprika, it failed to provide a reliable paprika supply for the contracting company. Thus, Malawi’s case analyses the potential of contract farming to champion the development of vulnerable economies.

L'agriculture sous contrat est un outil vital pour la mise en lien entre les petits agriculteurs et les chaînes d'approvisionnement modernes. Cette étude a exploré les défis résultant de ces contrats dans la chaîne d'approvisionnement du paprika au Malawi. Elle a utilisé des groupes de discussion thématique, des entretiens semi-structurés et des courriers électroniques avec 100 participants impliqués dans les chaînes d'approvisionnement. Les difficultés identifiées incluent : un approvisionnement inapproprié d'intrants à travers le contrat, un manque d'opportunités pour négocier la conception des contrats et y participer, et la vente à d'autres détaillants. Alors que le contrat garantissait un débouché pour le paprika, il n'assurait pas un approvisionnement fiable de paprika pour la société contractante. Aussi le cas du Malawi permet-il d'analyser le potentiel de l'agriculture sous contrat dans le soutien au développement d'économies vulnérables.

La agricultura por contrato constituye una herramienta vital para vincular a los pequeños campesinos con las modernas cadenas de distribución. El presente estudio examinó los retos surgidos al establecer contratos en la cadena de distribución de pimentón en Malaui. Para realizar dicho análisis se aprovechó la información generada por grupos de enfoque, entrevistas semiestructuradas, además de la comunicación por correo electrónico dirigida a 100 participantes de la cadena de distribución. Ello permitió constatar que dichos retos incluyen: provisión de insumos inadecuada en el contexto del contrato, falta de oportunidades para negociar y participar en la elaboración del contrato, y ventas fuera de contrato. Aunque el contrato asegura la distribución del pimentón, no garantiza una abasto seguro de este producto a la empresa contratante. Así, el caso de Malaui constituye una valoración relativa a la posibilidad de que la agricultura por contrato pueda promover el desarrollo de economías vulnerables.

KEYWORDS:

• Aid – Development policies
• Labour and livelihoods – Poverty reduction, Economics
• Sub-Saharan Africa

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Lana A. Repar is an Assistant Lecturer and Researcher with the Department of Food Business and Development, Cork University Business School, University College Cork, Ireland. Her research focuses on contract farming and supply chain management in a developing country context, with a particular emphasis on mixed methods, participatory approaches, and policy advocacy.

Stephen Onakuse is a Lecturer with the Department of Food Business and Development, Cork University Business School, University College Cork. His research interests include topics on interactions of social, cultural, and religious aspects of agriculture, development studies, how societies and cultures impact the transfer and adoption of development tools and vice versa through community-based approaches.

Joe Bogue is a Professor with the Department of Food Business and Development, Cork University Business School, University College Cork. His research interests include market-oriented new product development, knowledge management and new product development, food choice and consumer acceptance in relation to new product development, and innovation and the entrepreneurial process.

Ana Afonso is a Researcher with GESPLAN Research Group at the Technical University of Madrid, Spain. Her research focuses on food security, human development, and rural development.

Notes

1 Production-management contracts involve delegating a substantial amount of decisions regarding cultivation and harvesting from the farmer to the contractor. The farmer agrees to follow the production and input regime suggested by the contractor. In this case, the farmer decides to do so because the contractor takes over the most of the marketing risk.

2 Variety: Papri Queen.

3 The contracting company was the only contractor for paprika in Central Malawi at the time of the study. The company is Malawi-based with headquarters in United Kingdom and has offered contracts for paprika to Malawian small-scale farmers since 2010. Due to confidentiality, the name of the company is not disclosed, and the term “contracting company” is used. This study focused on small-scale farmers cultivating paprika mostly on up to 2 acres. Medium- and large-scale paprika farmers were not part of this study although they are present in Malawi. Vendors were small- to medium-scale buyers of paprika, mostly located around the capital Lilongwe. From Lilongwe, vendors operated in the Central Region.

4 Small-scale farmers selected for the focus group interviews were household heads. In Malawi, the primary building blocks of the societal structure are individuals and family units (households). In the studied area, households also performed as farming units and therefore households represented the main focus of the analysis.

5 The results from household questionnaires are beyond the scope of this article; however, Table 1 shows basic socio-economic data to provide study context.

6 Template style of thematic analysis.

7 The contract specified that all paprika produced from the seed that the small-scale farmer bought from the contracting company has to be sold to the company. Side-selling refers to selling contracted paprika to any other buyer except the contracting company.

8 600–1,500 Malawian Kwacha is US$1.28–3.12; 450–550 Malawian Kwacha is US$0.96–1.17 (OANDA 2016).

Additional information

Funding

This work was supported by Education, Audiovisual and Culture Executive Agency: [Grant Number AGTRAIN 2011-0019].