Pondering AGCO's Africa initiative
Late last month US-based farm equipment company AGCO launched a strategy for selling mechanised equipment to smallholder farmer clientele. Called the ‘Farm in a Box’ (FIAB) initiative, it consists of (a) tractors and implements, (b) parts and workshop tools, as well as (c) access to expertise and training through FIAB support centres; all channelled via a combination of distribution partners, franchises and mobile technology for monitoring the equipment.
The initiative appears a continuation of AGCO’s thinking on the region since 2016. Namely that smallholder farmers in Africa are a large, growing and important potential client base, currently producing below potential because of inadequate access to mechanised equipment.
In a nutshell, this is true. Smallholders tend to account for the bulk of cash and food crop production and they do not have the equipment they need. For example, according to 2012 Food and Agricultural Organisation estimates, Africa had on average 13 horsepower per hectare compared to 200 horsepower per hectare globally. Rural populations in most of our countries are growing in absolute terms but falling in relative terms. It is difficult to get the young to stay on the farm.
Mechanisation is a valuable response to these labour shortages. Building training and ongoing access to training into the FIAB model, also seems wise. However, on the understanding that the better FIAB smallholders do over time, the better customers they will be, and the greater their developmental impact, there are at least two considerations:
Is FIAB training limited to AGCO kit? Or will it include good agricultural practices, good environmental practices, and business/financial management for example? All have a role in bringing farmers to attainable yield sustainably. And if not provided by FIAB or its distribution partners directly, will they ensure that opportunities for wider skilling up are made accessible by others?
Cashflow is king. In most of our markets smallholder access to finance is a foundational problem. Even knowing best practice and having physical access to inputs or equipment, farmers may be prevented from taking advantage because of financial constraints. Again, speaking in general terms, private sector credit tends to skip past the agricultural sector in most of our countries. And this is especially the case for smallholders. Linked to this, how will machinery be maintained and by whom? And what linkages are being made with nascent agricultural sector insurers?
The benefits from access to equipment rest on access to other services as well. On finance and extension at least, there is a large set of potential service delivery partners: from cooperatives and producer associations, central government to local government entities, international civil society organisations, financial institutions and private manufacturing or trading entities. The difficulty is in finding the right match of interests and sustainability, navigating politics, policy and bureaucracy. One is left wondering where those questions will be answered, at AGCO or among its local distributors.