Oral evidence: Jobs and Livelihoods, HC 685Tuesday 20 January 2015
Oral evidence, 20 January 2015.
Witnesses
Dr Keith Palmer OBE, Chairman, AgDevCo, Tim Brosnan, Small Foundation, Ken Bluestone, Political and Policy Adviser, Age International, and Hilary Parsons, Global Senior Public Affairs Manager for Supply Chain, Nestlé, gave evidence.
Chair
Thank you very much for coming in and also for the evidence that you have submitted. First of all, I just wonder if I can ask, for the record, if you could introduce yourselves, maybe from left to right.
Tim Brosnan
Good morning. My name is Tim Brosnan. I am the founder and executive chairman of a foundation called Small Foundation, which is basically a family foundation that we fund ourselves. Our focus is on sub‑Saharan Africa and the elimination of extreme poverty there, and we see that as involving the proliferation of sustainable income‑generating opportunities in rural sub‑Saharan Africa. In a sense, we would have much the same focus as DFID but writ small.
Hilary Parsons
I am Hilary Parsons. I am with the Nestlé head office in Switzerland, but part of the global public affairs team. I manage commodity issues within that. Nestlé deals directly with over 600,000 smallholder farmers, principally in the areas of dairy, coffee and milk, so it is a very important sector for our business. It is important that they grow sustainably and have sustainable livelihoods.
Keith Palmer
My name is Keith Palmer. I am founder and chairman of AgDevCo, which is one of the intermediaries supported by DFID, developing agriculture in sub‑Saharan Africa.
Ken Bluestone
I am Ken Bluestone. I am Political and Policy Adviser for Age International, which is a UK affiliate of the HelpAge international global network. I am presenting this evidence on behalf of both Age International and HelpAge.
Chair
Thank you. We will have some specific questions for you on that. As you will gather from the whole of this session and the previous session as well, we are looking at the importance of agriculture, support to agriculture or the development of agriculture for improving livelihoods, incomes and how that can work. We have fairly good evidence that says that raising productivity will reduce poverty. It is kind of logical, but that has been the evidence. Clearly if it was as simple as that it would just be happening, so why is it not? What are the barriers preventing small farmers from achieving better incomes and livelihoods? What do you think are the better or the best solutions to overcoming those barriers?
Tim Brosnan
Part of the problem is the complexity of it. It is extremely complex and extremely context‑specific as well. At a macro level, you can see that things like peace, security, the rule of law, property law and even environmental things and basic services, all of those things, have an impact on poverty and are blockers of efforts at the individual or family level to get out of poverty. At a more local level, the main problem is access to four things: access to knowledge, access to finance, access to technology and access to markets. Going back to the complexity thing, you have to address all of those things together at once if you are going to make any progress. Make progress in a few areas and one of the other things will block you. That is the bad news. The good news is that, complex as it is, great progress is being made and I would be quite hopeful that it will continue to be made. It is important to get the policies right and it is important all the time to recognise the complexity.
Keith Palmer
Can I just add to that? I agree with everything Tim said, but one of the biggest barriers of all is the fact that we are coming out of a period of 30 years of failure. There has been essentially no progress and, relative to most of Asia and Latin America, there has been regression over this period. The three things that need to be got right are, firstly, policies have to be got right. The policies were terribly wrong in the 1980s and 1990s. They have in many countries largely been fixed. Second there was huge under‑investment in public infrastructure. Wherever we go in Africa, it is utterly startling that any productive activity outside of major cities, and many of them inside, cannot get access to the basic infrastructure services necessary to do sensible business in the way that you would in this country or indeed the way they would in Asia these days.
Chair
Do you mean physical and financial infrastructure?
Keith Palmer
I mean the whole of the infrastructure supply chain. I distinguish in my head between ‘hard’ infrastructure, electricity connections to farms and, roads that have all year weather capacity to transport goods, and ‘soft’ infrastructure, such as access to finance providers, input suppliers and end-markets. The whole supply chain has been broken and needs to be fixed. The third thing, which goes to the 30 years of failure, is that there are an awful lot of farmers out there in Africa who do not really believe that farming is worthwhile. They are particularly older people. They have spent their whole lives bashing their heads against brick walls, not succeeding in commercial agriculture for want of the necessary support, falling back on near-subsistence livelihoods with dismally low incomes. That is a problem for us as well, because you cannot turn this around on a sixpence. You cannot expect these people to suddenly believe all is going to be well just because we say, “It’s all now going to be better”, even if we believe that that progress will come, which I do. You have to take a patient view and show people things are working, and then they will see it is indeed working and see an opportunity to do things on a more productive basis and make better lives for themselves and their families.
Chair
Can I just ask too if there is a difference between how you support smaller and larger‑scale farmers? We had a debate where some people—I think Paul Collier was one—said we should get rid of all these small farmers and have proper large‑scale intensive farming. That is the way to raise it. I do not hear that as evidence now, but is it possible to provide agricultural support that goes to both small and medium or larger farmers and would it matter, or do you have to have a very definite distinction between who you are supporting and how?
Keith Palmer
My view is you absolutely have to have both. Relying entirely on trying to get one‑hectare land plots to make serious money is foolhardy and you will lose money. On the other hand, you do not need to move to giant latifundia of the Latin American type, but you do need sufficient scale to be able to afford the infrastructure that goes into these areas to make it a profitable commercial enterprise. You are talking a minimum of 1,000 hectares and, depending on the crop, it could be several thousand hectares. We are not talking about giant areas. My perception is we need to develop the capability and the infrastructure to allow more of these medium‑sized—they are really small but, in African terms, small and medium‑sized—enterprises to be successful. Nevertheless, as the Professor was saying in the earlier session, it will take generations before some of the smallholders develop medium size commercial farms or migrate to the cities. You cannot ignore the importance and the potential of improving livelihoods of smallholders; they may never be rich but they can earn much higher incomes than at present. We know from our experience that there are sustainable ways of increasing productivity and incomes of smallholder farmers. Some of the Mozambican smallholders that we work with earned just $200 a year – less than $1/day; in just a few years that has increased to $600 a year. The gains may not transform Mozambique, but the income gains for these people are crucial – enabling them to pay school and hospital costs, buy a bike and so on. Moreover the income increases foster rural non-farm business activities which contributes to the transition to a more productive and prosperous economy.
Chair
From Nestlé’s point of view, is support for small farmers relevant to you, or are you looking for the expansion of larger farmers?
Hilary Parsons
Small farmers are absolutely critical to our business and to supplying the commodities we need. If we look at the example of cocoa in Côte d’Ivoire, we found there are a lot of smallholder farmers and the quality had been deteriorating of the cocoa crop due to ageing trees, such that it was difficult to process it in our factory. We launched the Cocoa Plan in 2011 with the specific aim of helping farmers to improve the sustainability of their crop and also run profitable farms. We have given out 1 million cocoa planters to help them plant trees that are of a better yield and more disease‑resistant. We see the smallholder sector as important. There are things that can be done to help improve the viability of these small farms. It depends on the commodity. In China, for example, with milk farmers there are many backyard operations in terms of dairy farming, and we are looking at ways of training to help farmers expand so they can get more income. In cocoa, as I say, we have been concentrating on farmer training and looking at addressing social problems as well. There certainly has to be both. These commodities are at an ever‑increased demand. The sector is essentially comprised of smallholders, so it is very important that there are activities to help these farmers.
Mr McCann
Can I put my question directly to Ken and ask what the situation is for older farmers?
Ken Bluestone
I am glad to be here because, linking this to the previous question, one of the biggest barriers is the lack of recognition that older people even exist in these contexts. We need to situate this discussion in the context of the emerging demographic realities, and look at and understand what agriculture means, both for older farmers and what older farmers contribute to agriculture. What it means for older farmers is that, in Africa, 73% of people over the age of 60 rely on agriculture as one of their main economic activities. Why? They do not have anything else. There is no system in place of social security or social protection benefits that allows these people security of income later in life. They are relying on agriculture to supplement their income and, in many cases, to provide basic nutrition. It is also about the role of older farmers in the context of smallholder agriculture. Farming in this respect is not about isolated demographic blocks, but is inter‑generational. What you see increasingly is that more people in later life are becoming responsible for smallholder agriculture; in southern Africa, over one quarter of the people who are responsible for the land and for taking farming decisions are older. The biggest barrier is that this is just not being recognised by development actors, stakeholders such as DFID and UN agencies. Access to finance, access to market and access to technology, as my colleague from the Small Foundation is saying, which are absolutely essential, are just being denied older people and they are not being given the same opportunities.
Sir Hugh Bayley
I realise that some commodities are typically better produced on small farms and some work better or more efficiently on large farms, but does the principle of supporting small farmers in general, including those just growing subsistence crops rather than cash crops, not just keep those families locked in poverty with no real potential for long‑term growth? Would it not be better, in terms of both national growth and family‑income growth, to do more to provide opportunities for people in manufacturing, perhaps processing agricultural products? What should the balance be between the two?
Tim Brosnan
Could I have a go at that? I would not start at it like that. I would start with the reality. The reality is that you have hundreds of millions of smallholder farmers who are extremely poor and will in fact remain extremely poor unless policies help them to change that situation. Being extremely poor carries the threat of famine. It is as severe as that. It does not require much to go wrong if you are extremely poor for you to be in that life‑threatening situation and have your children in that life-threatening situation, and so on. What do you do about it? What can you do about it? What you can do about it straightaway is improve their lot, not as subsistence farmers. If they are subsistence farmers, you improve their lot over a period of years by giving them access to those four things in a programmatic way. You actually change them into business farmers, where they are above the subsistence level; they are producing surpluses. They are re‑investing that surplus back into their business and you have a benign spiral where they get out of poverty. That is stage one. However, that can only be stage one. There is a theory, which I believe is absolutely true, that most young people will not want to work on farms, be they small or large. They want to go to the cities. You need to work on the manufacturing side at the same time as on the smallholder farm. It is not an either/or. Experience in Asia, which I only know from reading about—we do not have any operations in Asia—would suggest that the successful countries that have got out of deep poverty have in fact started with agriculture but no sooner had they started on agriculture than they began investing in manufacturing as well and began repairing their financial services sector, so that it provided what was needed by the manufacturing, the farmers, agri‑business and so on. I began by saying the complexity of the thing. You need to do all of those things. A policy mind-set that starts from saying, “Will we do this or will we do that?” will in fact lead you astray.
Keith Palmer
That is absolutely right. There were a couple of recent studies that were quite startling. When you focus on manufacturing, which we all naturally think of as the dynamic growth area, because of the experience in Asia, today the productivity of African labour intensive manufacturing, despite the very low wage rates, is not high enough to create competitive industries. This is what we see all over Africa, including somewhere where some of you have visited recently and know very well, Tanzania. The cotton and textile industries there ought to be thriving but they are not. It is absolutely right, as Tim has said, that it is wrong to focus on one sector or the other. Clearly there does need to be an emerging manufacturing sector, but there also needs to be profitable commercial agriculture. In fact experience elsewhere shows that in early stages of development in many cases manufacturing becomes an extension of agri-processing e.g. cotton and textiles. Moreover agriculture clearly has great potential to meet the growing demand for food in Africa and elsewhere profitably, so long as the barriers are overcome. The central reality is that we know that agriculture in Africa can be profitable. We know the demand is there. Already there is a flood of food imports flowing into Africa, and we know that population growth will push up demand even further. All the work that we at AgDevCo have done shows that, if you can remove the barriers which Tim mentioned earlier, African agriculture can grow rapidly and the livelihoods of rural people will be much improved. So for me, the question is not agriculture or manufacturing. For the next generation we must have agriculture, because we must produce profitable food to feed the growing urban population and in doing so begin the transformation of rural economies. That was exactly what happened in Asia because, as Tim has already said, the essential complement to industrial development in those countries was the growth and increased prosperity of the rural areas. That was the case in Asia and the same pattern can be expected in Africa. And regarding the agriculture sector we are saying that you need the medium‑sized farms and agribusinesses to create the foundations for profitable agriculture – to feed the people, but you also need help for the smallholders – to sustain their livelihoods until better opportunities emerge for their children. Smallholders will still be quite poor by your standards or mine, but they will be a lot better off than they are today.
Ken Bluestone
We also have to look at the demographic shifts that are happening across Africa. One startling trend is the increase in the percentage of people over the age of 55 in rural areas and the decrease in the number of children under the age of 10. Looking to the future, what is agriculture going to look like? It will inevitably change. It is going to look different than it does today, but we have to be careful when having this discussion and we have to embrace the complexity of this. This is not about either/ors, but we have to make sure that we are not trying to impose very long‑term thinking to deal on what are still very imposing short‑term and medium‑term realities. The realities and needs of smallholder farmers are going to be around for quite some time to come. What we cannot know for certain is how that is going to develop into the future.
Sir Hugh Bayley
Here is an odd question for me to ask. As an economist, I am always looking for Adam Smith’s hidden hand, but it seems there is a cultural issue. We had a panel of parliamentarians from developing countries who gave evidence to us a few weeks ago. All of them said, “People in our countries, young people, do not want to stay in rural areas. They want to move to towns.” My wife was born in a low‑income country 30 years ago. I saw some of her elder relatives eking out a poor existence as peasant farmers. Now nobody in her small Caribbean island farms. They have gone into manufacturing and services. There is a cultural issue here. I understand there will be some old people in Africa left behind in the fields, but how do you deal with that cultural expectation that farming cannot produce anything other than hard work or poverty, and you had better take a risk and move off the land? How do you address that?
Hilary Parsons
We have something called a Creating Shared Value prize, which was awarded to the Fundación Paraguaya. They have a programme that they run in schools, which is to encourage young people to seek ways of setting up small businesses, but in things that might be to do with farming. They actually look at things like milk production, beekeeping or all sorts of things to help young people see that there can be business benefits and that farming can be attractive. There are things that can be specifically done at that level, although it is correct that we find—and maybe it just our properties—that with cocoa farming young people are not seeing it as so attractive. It is something that we are actively trying to address as a business to help people see that they can stay on the farm. The other thing that I have heard, which has come back from the local farmers, is that sometimes their young people have not taken much interest in the farm, have gone off to the cities for work, have not been able to find it, then have had to return to the village and have not really had the skills to work on the farm. Some of the village elders are quite keen that young people do have these skills, so that they can use them should things not actually work out in the cities.
Ken Bluestone
Can I follow directly on from that? You start by not making things harder for farmers. We want to try to invest in the farmers of today to allow them to benefit the people and the community around them. As I said before, this is inter‑generational. Very explicitly, you have programmes in Zimbabwe and other countries that stop at the age of 55, where one quarter of the people responsible for farming are over the age of 55. By investing in these people, you are also investing in farming, making it possible for them to pass on their experience and skills to the younger generation as well.
Keith Palmer
In the long run the reality is they (the younger people) are right to leave the farm. If you look over a generation, those people will want to go. There is no country in the world that I can think have, where that did not happen. You have to create a greater opportunity set in rural Africa in the short term to accommodate the fact that there will not be jobs in the cities. At the moment, there are already floods and floods of people in the cities. I am sure you have all seen them as you go around, where people are not really doing jobs at all. They are just hawking or killing time and going back to the village to get some food. I was quite taken by an article I read in the Financial Times a long time ago about a Vietnamese elderly farmer growing very productive rice. He was bemoaning the fact that, despite having produced this very impressive rice yield—seven tonnes a hectare, which in rice terms was good stuff—on less than one hectare, his children all left because as the family size grew, income per head fell despite the high rice the yield. As family size increases, you cannot divide up one hectare of land—and there was a land shortage in Vietnam— because even with high yields, everybody would starve. There is an inevitable rationale that young people will move to the cities, which is why we need to move gradually to having more small and medium‑sized farms that can be productive and profitable and sell food into the cities, so that people who eventually get jobs in the cities can buy food produced locally rather than import it.
Tim Brosnan
There is an important analytical thing here. Those of us who spend our money, spend our time and put our efforts into smallholding farming in Africa, why are we doing it? It is important to know that we are not doing it to save smallholding farming; we are doing it to save smallholder farmers. Over time that salvation will come by precisely what you say: by the vast majority of them ending up not in farming, and possibly a lesser proportion but still a large proportion not ending up in rural areas. They will end up in cities. It is a question of, given where they are now and the situation they are in, what is the next step? If you accept that the destination, either inevitably or because of some sense it is a desired destination that you want to bring about, is in fact going to be an urbanised world, with farming producing food, but a very small percentage of the population having to work to produce the food, if that is either what you want or what you think it is inevitable—and if you think it is inevitable, you are almost certainly right—then you still need to start with improving smallholder farming. Work by us as donors into smallholder farming is designed to improve the lot of smallholder farmers, not to save smallholder farming.
Sir Hugh Bayley
My lay city dweller view of Africa is that the parts of Africa where the land is suitable for agro‑business are parts that you think of as highland areas, like Rwanda or somewhere, where a smallholding probably makes sense. You seem to be describing a transition over a generation from a situation where the majority of farming is done by smallholders with a hectare a piece, shall we say, to a situation in a generation’s time, when there will be some of that left but far more agro‑business. What is driving the growth of agro‑business in Africa and how far will it go? How much of the land will be capable of being run as large high‑tech farms?
Tim Brosnan
As a businessman—but an economist would give the same answer—what drives the growth of anything is demand. What drives the growth of agriculture and what will drive the growth of agriculture is demand for food. It is easy to make a case that demand for food, with increasing populations and with increasing wealth, which will bring rise to greater food consumption per person, is going to be large. It is a question of whether Africa has competitive advantages that will enable it to compete in the food market, and I think it certainly does. If you analyse it down into smaller and smaller segments, smallholder farmers will in fact have competitive advantages in some sectors of the food business, but not in staples, not in grain.
Chair
We saw that in Tanzania, where Unilever said that they thought they would get better quality and better yields from the tea plants that were run by the smallholder farmers than from their own. That was their justification for entering the programme. That is what they felt the outcome would be.
Jeremy Lefroy
I should declare an interest, both that AgDevCo is an investor in Equity for Africa, which I set up and I am still a director of, and also that I used to sell a lot of coffee and cocoa to Nestlé from smallholders. I want to ask questions about the wider enabling environment for businesses that helps smallholder farmers, but I want to focus on two or three specific areas. The first is over markets. We all have heard how important it is to have access to markets, but maybe, Hilary, if I can address this particularly to you, the markets that you are involved in are notoriously volatile. If you look at the coffee market over the last five years, it has soared, plummeted and come up a little again. Given that it is not just having access to a market but the price that farmers get, what can be done to ensure—everybody likes a smoother price, because it ensures that you know roughly how much income you are going to get next year, the year after and the year after that. What kinds of things can be done in terms of bringing the financial instruments that we have here, such as future markets, options and so on, to enable smallholders to get that kind of income-smoothing that is so important for development, as against the peaks and troughs that have proved so destructive in the past 20 or 30 years?
Hilary Parsons
We are certainly in favour of price stability. Prices rocketing up and down is not something that we are favourable to, in terms of our own business. It is a complex problem. There are practical things that have taken place. On the cocoa side, in Côte d’Ivoire, they have set a minimum price, which will help the farmers and give them some kind of guarantee. I think it is a similar situation in Ghana. In coffee, we focus ourselves as a business on looking at ways in which the farmer can get a high price, irrespective of what is happening in the commodities market. For our Nespresso business, for example, there was an independent study done that showed that there was a considerable difference in income between the Nespresso farmers and farmers who are not in the programme. Those sorts of things have a practical effect. In terms of international instruments, I know that our chairman, Peter Brabeck, was very actively involved in the UN committee and they did make some recommendations. I could send that separately to the Committee. It was three or four years ago now, so I have not got the details fresh in my head, but there were some very concrete and quite detailed recommendations about how to stabilise prices, which were put forward by the Eminent Persons Group that he participated in.
Jeremy Lefroy
You referred to Nespresso, and I imagine you are talking there about the quality, because I know that the quality standards for Nespresso are very high. You were saying that that is part of the price stabilisation. If smallholders are helped to produce high quality that will inevitably result in a more stable market and more stable prices.
Hilary Parsons
Obviously we have to think what happens in the international markets, and that is quite a complex thing, but in terms of the farmers who supply us it is certainly in our interest to help make sure that they are receiving a decent price for their coffee or their cocoa—their commodity. One way of doing that is helping them to increase quality, looking at making sure that our standards are in line with that, so that they can get that premium for their coffee, which will help in these times of fluctuation. There are things that Governments can do and other actors too.
Jeremy Lefroy
What sort of things?
Hilary Parsons
In terms of perhaps fixing the price and looking at the amount of tax that is taken—that sort of thing.
Jeremy Lefroy
This really brings me on to the second issue, which is about taxation. We tend to find that, when DFID or others look at taxation, they tend to look at corporate tax, capital gains tax and income tax. They do not tend to look at the more local taxes, such as the produce levies and cesses, which are often the most significant for small‑scale farmers. I once worked out that a coffee farmer in Tanzania had a higher marginal rate of tax than the President because, when you take a turnover‑based or a volume‑based tax—a kilo‑based tax as opposed to an income‑based tax—and do not take into account the costs of production, you inevitably result in very high marginal rates. Do you see DFID or others doing work on that or do they tend to just look at the revenue authorities, which do not tend to be the implementers of those rather nuisance local taxes anyway, because they tend to be collected by the local authorities? Is this any work being done? Is this something that DFID and others ought to be looking at more closely, and indeed organisations such as perhaps the World Bank—the impact of these produce‑based levies, rather than income‑based levies?
Hilary Parsons
I am not an expert enough on what DFID does, I am afraid.
Tim Brosnan
It is an issue I have not been aware of. Clearly if it is a problem, it should be addressed by somebody, but I have nothing to contribute.
Keith Palmer
We recognise the problem, not just in Tanzania but in many countries in Africa, that there are these irrational taxes that work in the wrong way—as you suggest high marginal rates on poor people. I am not aware of the extent to which DFID does, or should, commit more resources to try to understand and then influence Governments about this issue.
Jeremy Lefroy
It would seem to me that they are the most regressive of all taxes, because they impact the poorest people at very high marginal rates.
Keith Palmer
In the 1980s and 1990s, there was a plethora of those sorts of things deliberately imposed by Governments on farmers to extract rents. Most of those have been removed and rationalised but, if there are still some important ones remaining, then somebody should take a look at that.
Jeremy Lefroy
That brings me on to this issue of older farmers. One thing that we have seen is that people who are involved much more in the informal sector, working for themselves, such as in small‑scale agriculture, have no opportunity to build up any kind of retirement savings as people in the formal sector would through a national provident fund or many of the other schemes, or even people working now in the casual sector, where sometimes there is a national provident fund contribution. Have you seen any examples of ways in which smallholder farmers are able to build up, with government support, these kinds of savings for their retirement, or is that something that is very much missing? Would that not perhaps encourage people to stay in smallholder agriculture, if they knew that, even when they were not physically capable of doing it anymore, they had been able to build up this kind of officially backed system, rather than any private savings that they might make?
Ken Bluestone
I assume that is for me. What we need to do is make the connection, as you have done, with livelihoods. We cannot look at farming as a separate economic activity. It begs the question: why is it that people of this age continue this economic activity? Why are they still farming? Research we have conducted in Tanzania shows that having access to income support, a social pension for example, has a direct impact on farmers’ own investment in agriculture. It is not an either/or situation. Most people are not trying to stop being farmers; what they want to do is to be able to do less of that. In the case of this research, what you have is that 21% of older people who did not receive any form of income support in later life had to sell land in order to sustain and support themselves and their families, whereas that figure was only 11% for people who did. Access to a social pension therefore allows them and their families to be more productive. Back to your question as to what can be done, we have to understand what income support and benefits look like in the context of these African countries and in other parts of the world as well. Pensions, as we understand it here in the UK and Europe, are not necessarily the answer. There are many people who do have access to formal contributory pensions, where you put money in throughout your life, but there is another form of income support, what is often called a social pension or non‑contributory pension. We are talking extremely modest amounts of money. It is something that is being done in all parts of the world very successfully. You have countries like Mauritius that have been doing this for a number of years, and successfully been reducing poverty. The answer is not saying how we stop farmers from being farmers, but how we allow them to have more economic security. The answer is social pensions and non‑contributory pensions.
Jeremy Lefroy
I have two more questions, if I may. Finally on the business environment, both Keith and Tim have referred to land issues and the importance of having land tenure and doing more about that. It seems to me that a key in building up viable units is to somehow de‑link ownership of land and use of land, and the only way to do that is through formalised enforceable leasing arrangements. All over the country, in my constituency, you will find farmers leasing 50 acres off someone else and then 25 the next year and then 100, depending. It is a very flexible system, whereby farmers are able to increase the size of their business without necessarily having to invest in the land. Conversely, they can give up, especially when they get older, farming a particular piece of land without having to sell it, because they can lease it out. Given that that is probably something that will help, because people do not, especially in Africa, like to sell land, do you see any moves towards the decoupling of the productive use of land and ownership of land? Does there need to be more work done on the legal framework across sub‑Saharan Africa to ensure that that is something that is trusted by smallholder farmers?
Tim Brosnan
It is not an area that we are expert on. We do find a number of things. One is that for a farmer to invest in his own livelihood he needs security of tenure. That is the key thing. How in fact he has security of tenure seems to be almost irrelevant. In Ethiopia, where we have probably been operating for longer than anywhere else, the Government owns all the land, by and large, but people feel they have security of tenure. There are “usufructuary rights”, I think they call them, and there is just the general way of doing things. They do invest in their livelihoods. I know from reading that in Russia there are good land rights, but people do not feel security of tenure there because the land rights can be abused. In China, it is the same as Ethiopia, so you have the security of tenure that people feel, despite not owning the land, incentivised to make long‑term investments. Again without being an expert, I have the feeling that it is context‑specific or culture‑specific, and that it is as much that as legal frameworks. In any situation where felt security of tenure does not exist, including the change in law but maybe not limited to the change of law—the administration of the law might be just as important as the law itself—anything that can be done to improve security of tenure should be done. I must admit we have not actually found it to be a problem in the areas that we have got to know.
Keith Palmer
I would just add that there are some countries where there is a thriving leasehold market in land. The issue for people who want to invest significant amounts farming the land on a leasehold basis is the tenure of the lease. If it is too short, then they may not be content to invest the capital because of the risk that a fair return on that capital can be earned before the end of the lease. There are also some situations where people who want to commit to, say, 25 years on a medium‑to‑long‑term lease are not terribly enthusiastic about then having to hand it all back after 25 years, because often they are family farmers, although slightly bigger family farmers, and they hope to be able to pass it on inter‑generationally. There is a preference clearly for freehold, but it is very difficult to get. If you want to get significant investment, you should agree a long enough lease that people will commit for the long term. Otherwise there will always be a tendency to say, 10 years or so before the end of the lease, “We are going to stop investing until lease renewal is secured, and indeed some may even seek to dis‑invest”. It is an inevitable consequence arising from the difficulty of getting freehold land in many of these countries. But like Tim; I think you can usually find a way through these issues. There are a few Governments that make life difficult for farm investment, but not very many.
Jeremy Lefroy
Finally, on DFID’s work in supporting the livelihoods of smallholder farmers, do you see DFID as having a clear strategy on this? Maybe I can come back to you again, Keith, because I know that you do quite a lot in various ways with DFID. Do you see a clear strategy? Is one developing or is there nothing at all there?
Keith Palmer
I am going to put up my hand and say that I applaud the approach that DFID has been taking. The fact is that these are very difficult problems. DFID has indicated a strong desire to support the economic and agricultural growth agendas, but they are no better sighted on what the solutions are than many others. It would be unwise for them to try too early to develop some grand strategy, so what they have been doing is experimenting and learning lessons and adapting. They have been seeding a number of intermediaries, of which AgDevCo is one, to explore different approaches to achieve productivity improvement and growth in agriculture; some of these initiatives will work and some may not. But the approach seems to me to be right. If as a result of taking a little bit more time, learning some good lessons and some bad lessons, they hit the spot with a well-defined strategy and effective implementation on the ground that can only be a very good result.
Ken Bluestone
I would add that there is a blind spot, however. The blind spot is people in later life, older people. There is very little, if any, explicit recognition within DFID’s policies or programmes that points to older people as development actors. When we look at the discussion we have just had and the recognition of the central role that older people are increasingly playing in agriculture, in these contexts, it is impossible to craft a well-developed intervention unless you put them firmly at the centre and the heart of it. There is a huge gap there that needs to be filled. One thing that is going to greatly strengthen this visibility is investment in better research data. We have heard a lot about this, but it cannot be over‑emphasised. So many agencies and Governments stop collecting data on their populations when they get old; sometimes stopping at age 49. It is impossible to develop an effective investment strategy or poverty intervention strategy unless you have a clear picture, at all ages, of what is going on.
Tim Brosnan
If I could say something on the strategy, I have a lot of sympathy for DFID in this whole area. Your question implied that it is possible to have a clear strategy and often it is not. Often, if the situation is very complex or if it is fast‑changing and so on, it really is impossible to have a clear strategy; it is not sensible to have a clear strategy. What you need in that situation is what the literature would call an emergent strategy, and that involves trying things, experimenting and seeing what happens, and then iterating. The beauty of our situation is that we can do that. In fact, we do that and we consciously see ourselves doing that. It is probably a lot more difficult to do that if you are a Government Department, but maybe you guys can make it a bit easier. The reason it is difficult is that you will not tolerate it. You demand clarity and sometimes it is just not possible to have clarity.
Jeremy Lefroy
I am very encouraged to hear that. I would entirely agree.
Fiona Bruce
Broadening out Mr Lefroy’s question about DFID working with smallholders, how do you think DFID could work better with the private sector? Does it have the right skills and capacity? I was going to ask you, Hilary, about whether you have noticed an improvement in the way DFID works with Nestlé, although I think earlier that you indicated that your personal interaction with DFID is limited.
Hilary Parsons
Yes, my personal interaction is, but I did check before I came in and the only work that we do with DFID is the Tropical Forest Alliance, of which Nestlé is a part, via the Consumer Goods Forum. DFID is very active in that and we find them a very useful and active partner. I am not aware of any other work that we do with DFID, although we do work with the Swiss equivalent—obviously it is a Swiss company—in the areas of water and agriculture. We are very pleased to have a much more active dialogue with DFID and would be delighted to work with them.
Keith Palmer
I would just say about the private sector that DFID has understood clearly that trying to directly deal with big multinationals or, even worse, putting government money into big multinationals is not something that they would wish to do. They have done a good job in facilitating contacts between in-country parties and some of the big private sector companies with complementary business interests. We have already encountered a long list of private investors interested in trying to find ways to partner with national parties with the aim of finding ways of doing good business that is also socially responsible and helps smallholder farmers. DFID support goes to the national stakeholders, not to multinational companies. This approach is part of the experimentation supported by DFID. Initially they could not be quite sure what would work and would not, so they are exploring different approaches, trying to find out what has worked and what can be replicated; then build on the successes, and take them to others and say, “Look, this worked really well. What about you doing it?” It is the beginning of an emergent strategy.
Hilary Parsons
May I just add a point of clarification? We certainly would not expect the investments to be made directly into Nestlé, but there might be opportunities with investments into the smallholder sector, for which they would need a private sector actor as part of the overall approach. It might be a sectoral approach, rather than one private company, but that is where we could play a role.
Ken Bluestone
I wanted to just add something to the broader question about DFID, but not specifically on the private sector, so I do not know whether it is appropriate to say that now. Basically, it is essential that we do not lose the connections and linkages between the work that DFID is doing in the area of smallholder agriculture with other aspects, as you mentioned before, of social protection and the importance of strengthening and improving the ability of people of all ages to have livelihoods, and of course health in rural settings. What is crucial is that you have people who are in good enough health to carry out their daily activities. One of the biggest impacts on the household economy and the productivity of smallholder farmers is damage to their health, so we have to bring these things together into an integrated strategy, where we see that part of the enabling environment for more effective, productive smallholder farmers is having good health systems, but also having social protection floors that are nationally owned.
Chair
We have addressed that issue in other ways as well, with our report on disability, women, girls and so on, so we understand that point.
Mr McCann
I have a sense of the answers to these two questions from previous answers that have been provided by the panel, but perhaps I can just roll it all in for clarity and ask these final two points. The first one is: do you think that the criticism that donors and Governments concentrate on large private companies at the expense of small‑scale producers is justified? The final question is: how compatible are the aims of the private sector with those of a development agency?
Tim Brosnan
I have nothing really to contribute on the first question. On the second question, I will not attempt to answer it directly, but tell you how we look on it, because we wrestle with the same issue and we have come to this conclusion. The aims of any player or any category are totally and utterly irrelevant. All that matters is their actions and the impact of their actions. There is a bit of the invisible hand thing at work here, which was mentioned earlier. You can have aims that have nothing to do with development, nothing to do with the wellbeing of smallholders or indeed the wellbeing of anybody, which do promote the wellbeing of that, by accident almost or as a by‑product. As policymakers, we have to take account of the overall system and whether the system is providing the outcomes that we want. Compatibility of aims must be judged in that way, rather than looking at the aims themselves.
Hilary Parsons
I was just going to add that there has been an increasing recognition of the role of the private sector in these sorts of activities. While obviously we are coming at it from entirely different angles—from a business angle, from a development angle—it is possible to develop a shared agenda for some of these aspects, particularly around smallholder farmers in that rural development framework. We do talk to stakeholders, addressing these issues with farmers, farm workers and communities. We also look at what the priority issues are in the country and what big development organisations are saying is the agenda we should follow. We see if we can effectively build those into our activities, but for business reasons. That is starting to take place more across the private sector and is a way of jointly addressing these issues, with different aims and outcomes. The two sides do talk perhaps more than they did in the past.
Mr McCann
There will be times inevitably when a clash occurs, where the business interest will always overtake the development interest.
Hilary Parsons
In my experience, it is not so much the clash of the business interest; it is a question of priorities. In our case, we have to look at the materiality of the countries and the issues that development organisations are raising to our business. There could be some commodities that they want to focus on that are perhaps not so material and so much a priority for our business. It is the same for the different countries that we work in. We will look at prioritising those countries where we perhaps work a lot with smallholders, we have direct supply and also where there are social issues. That list is probably not going to be the same as the list that DFID would come up with, so we do find that there are differences in that sense, in terms of the business.
Keith Palmer
I was only going to add that a lot of the thinking about the way to deploy DFID funds now comes out of country or regional offices. They have a fixation almost on the development impact, which is entirely proper, given their role. There are more cases of these sorts of private sector interventions being turned down than there are ones that have worked productively, because of this—it is not exactly a tension between the business imperatives and the development impact—recognition that sometimes it may be a good business initiative, but it is not the way we want government donor money to be deployed. There is a healthy choice process going on saying, “DFID wants to work with the private sector, but only to advance, not exclude, our primary development goals”.
Ken Bluestone
I would add to that that the starting point, from our perspective, is to ask why older people are involved in smallholder agriculture. In some cases, they are doing this because it is their active choice. They want to be doing this as their livelihood. In other cases, they do not have a choice and need to be involved in agriculture at a subsistence level or at a slightly higher level, because there is no other economic activity available to them. We need to create the enabling environment in which people are able to carry out their lives in a successful and productive way at all ages. Critically, as you would expect, we think that the international organisations need to place much greater emphasis on people in later life as part of that mix.
Chair
Thank you very much. We all recognise that those countries that have lifted themselves out of poverty have done so because the private sector has expanded. The real context is the extent to which the development activity helps that to happen or does not. Businesses in the private sector and the development agencies at least talk to each other and have some shared agenda. What people are worried about is using public money to subsidise the private sector, but that does not appear to be the cause of the problem. Can I thank you all very much, both for your written evidence and your oral evidence? As I said to the other panel, if you have any reflections afterwards, which you think you should draw to our attention, or to add or qualify anything you have said, please feel free to contact our team to do that. Sometimes it can just add value to the eventual report. Thank you all very much indeed. Oral evidence: Jobs and Livelihoods, HC 685 25