Perspectives On Middlemen: The Bogeymen of the Agriculture Value Chain
By Takudzwa Nyakanyanga
No-one is more reviled in the agriculture sector than the “middleman”. While technically speaking, a middleman within the context of the marketing of produce is any person who acts as an intermediary between the farmer and the end consumer (and this includes all the formal and informal fruit and vegetable wholesalers and retailers), the term when used in Zimbabwe usually refers to the unscrupulous, callous and downright parasitic wholesaler who “takes advantage” of farmers. And it is this bogeyman who is the focus of this article as we explore three market mismatches that sustain this variety of middlemen.
Product Orientation Vs Market Orientation
Product-based farming is one of the cardinal and truly unforgivable sins of commercial farming. Failure to secure markets before producing the product or failure to match production appropriately with market conditions, often leads to a multitude of problems. The mismatch between the farmer and the market precipitates product gluts and the low prices that come with them. Instead of a ready-market seeking the product the farmer has, it becomes a scenario of the farmer’s product desperately searching for a market. This naturally leads to extreme pressure, stress and pure desperation, which every middleman can smell from a mile away and exploits without remorse.
Farmer Needs Vs Buyer Needs
A very interesting gap exists between the needs of the farmer and the needs of the buyer. And it is that gap that some of the most notorious middlemen exploit. I will illustrate this gap using two examples:
Example One: Let’s assume we have a farmer who grows 10 000 heads of cabbage staggered into 2000-head batches per week. When the cabbage gets ready, a supermarket expects the farmer to deliver to each one of their 5 branches, 200 cabbages per week for several weeks on 30-days credit. Why these terms? Because these are the terms they use with all their other suppliers and they suit the supermarket just fine, after all the farmer is a convenient source of cheap credit under this arrangement. The farmer on the other hand would prefer to get paid immediately on delivery, and in cash, as well as deliver the produce in bulk to one central location or even better have the supermarket collect the cabbages right from the farm themselves. Why? Simply because the farmer pays for most production costs upfront and in cash and these terms would boost his viability. Sadly, oftentimes this mismatch of needs and wants never gets resolved and the middleman slides right in to fill the gap. The middleman collects the cabbages with his own truck, pays the farmer in cash at the farm, and delivers to the supermarket’s branches on credit and in the quantities required. In return he gets a hefty margin for his efforts largely from securing a considerable discount from the farmer and a considerable premium from the supermarket (usually resulting in a higher cost to the end consumer). In this scenario, however, if the farmer and the supermarket negotiate and meet each other halfway, the middleman can be eliminated. The supermarket could do central buying and distribute to the cabbages to the branches themselves. Reducing credit terms from 30 days to 7 days or less could also help bridge the gap.
Example Two: Let’s assume we have a farmer based in Mutoko who grows tomatoes. Once the tomatoes are ready, the farmer aggregates his produce with others farmers and they hire a truck to ferry them to Mbare Msika in Harare. Once they arrive, the farmer sells his tomatoes in bulk to middlemen (makoronyera) for cash, albeit at low prices. While the farmer produces high grade tomatoes and should be able to sell to formal markets that pay way better, he won’t because the formal markets have yet to understand and accommodate the needs of the farmer. This farmer absolutely needs to be paid on delivery so that he has the funds he needs to make all the purchases he wants and is able to catch the same truck that brought him to Harare, as his ride back with his wares. And all this has to happen in a space of 24 hours. In this scenario, if formal markets paid cash on delivery, most produce would flow through formal markets. But again, it is the middleman who is filling the gap between the farmer and the formal markets and again at a hefty margin, at the expense of both the farmer and the end consumer.
The solution to this mismatch between farmer needs and buyer needs can only be bridged once we start building our markets and systems around the realities on the ground and not around some perceived notion of how formal markets should be structured. Formal markets simply have to figure out how to start paying farmers on delivery even if it is just half of the invoice amount. The one million smallholder farmers cannot continue providing credit to large businesses or to put it another way big businesses cannot continue leeching off of small farmers. We simply have to find a middle ground or middlemen will continue to carry the day.
Farmers United Vs Farmers Divided
Farmers can bypass all intermediaries and go direct to consumers, but all these intermediaries in the value chain cannot survive without the produce from the farmer, yet it is the farmer who is always on the losing end. How?
Firstly, the sad truth is this: farmers are not united. It is your fellow farmer who lowballs you at the market in an attempt to offload their own produce and it is this behaviour that has taught middlemen that farmers will accept low prices. As a result, farmers are nowhere close to harnessing their collective bargaining power. They are yet to fully understand that it is their sweat that sustains the entire value chain – without the farmer everyone else in the agriculture value chain starves.
Secondly, a lot of people who purport to advocate on behalf of or purport to formulate policies for the benefit of farmers have no business whatsoever doing that, because they are not farmers themselves. Hence you will see so many well-meaning but ineffective market linkage interventions. These solve cosmetic issues while missing the main point entirely: if you want formal markets and smallholder farmers to transact simply provide credit to formal markets to purchase produce from farmers on a cash on delivery basis because the small farmer has absolutely no capacity to provide credit to a customer.
Thirdly, farmers have so far failed to fully appreciate the inevitability of intermediaries in the marketing of agricultural produce. Specialization and as a result the existence of specialized actors within a value chain is one of the foundational pillars of capitalist economics. Right now farmers are not pulling together to form marketing collectives that serve the same function as middlemen but on much better terms. This is despite the fact that collective marketing coupled with coordinated production has the potential to change the face of commercial smallholder farming in Zimbabwe.
In conclusion, the continuation of the status quo will see smallholder farming remain an unprofitable vocation despite its importance in employment creation. The rules of engagement in the marketing of produce simply need to change if we are to ever realize the outcomes we plan for but never attain from one economic blueprint to another.
Takudzwa Nyakanyanga runs Beyond Fertile, an eco-inclusive enterprise that helps small-scale commercial mushroom growers in Zimbabwe increase their productivity, profitability and scalability. You can reach him on +263 782 868 277.
