The Multidimensional Causes of Extreme Poverty
Understanding life for 10% of our population
We’ve been farming for the past 13,000 years.
The birth of agriculture triggered such a change in society that we gave it a fancy name: The Neolithic Revolution.
The birth of agriculture (in <30 seconds)
The earliest humans lived as hunter gatherers. They migrated with the seasons gathering fungi (actually a staple in the paleolithic diet!), scavenging dead animals and hunting massive prehistoric megafauna like wooly rhinos and giant elk. They were mammoth-killing nomads 🦣🚶🏽
Then, 13,000 years ago our nomadic ancestors began tinkering with planting the seeds in fruits and veggies into soil. And so agriculture began.
Slowly, we learned how to control our food supply.
We made permanent settlements, cultivated crops and farmed both animals and plants to meet demand.
And that is the entire history of agriculture in 30 seconds 🥑✨.
Snapshot of farming now
We have come a long way since the days we randomly threw wheat kernels into the ground and crossed our fingers for the best.
Some notable inventions in farming:
- Thresher (1786): now we could separate the grain from the stalk with a machine, instead of picking each individual grain by hand
- Canning (1815): which made perishable foods now non-perishable
- Reaper (1835): now we had a way to harvest entire fields of crops instead of spending weeks hand picking each individual crop
- Nitrogen fertilizer (1909): provided crops with a concentrated array of nutrients in a usable form
- Improved crop varieties (1973): we could now tailor certain crops to be resistant to pests/diseases and survive in more extreme climates
Side note: It’s because of these inventions in agriculture that we have been able to produce enough food to divert a Malthusian Catastrophe (where population exceeds the available food supply.)
Fast forward to now and agriculture is one of the most technologically advanced industries in the world! We now have:
- Genetically modified seeds to communicate with growers when they need water, nutrients or are under attack by pests
- Drones that can autonomously plant 40 000 seeds a day
- Vertical farming that uses 99% less water and 90% less land while producing 80% larger yields than traditional farming
The agriculture of 13,000 years ago is now undergoing a third revolution.
First was the Neolithic Revolution, then was the Green Revolution, and we are living through an agricultural revolution that will transform agriculture into an environmentally sustainable process that can feed 10 billion people on a hotter planet, and benefit all farmers and consumers.
I’m a tech and science nerd, and now that I’ve got a sufficient amount of interesting history and cool tech/science out of me, it’s time for the part of the agriculture conversation that often get’s left out: the people producing our food.
Farmers 👩🌾👨🌾
There are 570 million farms across our planet that produce the 4 billion metric tons of food that us humans consume each year.
Some farms look like this:
And others look like this:
Large scale, industrial agriculture like the Mudanjiang City Mega Farm, produces 65% of the world’s food, and the majority of what is consumed in the Western world.
Small scale farms, like the farm in rural Nigeria above, produce 35% of the world’s food, and the majority of what is consumed in the Global South.
Of the 570 million farms globally, 84% of them are smallholder farms. Tragically, and somewhat paradoxically, the majority of smallholder farmers live in extreme poverty.
82% of those living in extreme poverty (under $1.90 a day) are smallholder farmers. How is it that the farmers feeding entire countries are also the ones going hungry?
In this article I will cover everything about smallholder farming. You will leave understanding:
1. How smallholder farmers farm and the challenges they face along the way. *Spoiler alert* it’s much more complicated than throwing a seed in dirt and sprinkling some water on it. Specifically:
- Buying inputs
- Planting
- Harvesting
- Selling
2. Different kinds of smallholder households and why a ‘one size fits all’ solution doesn’t work.
3. Leveraging agriculture for poverty reduction. Can we transfer what worked in Asia during the Green Revolution to Sub Saharan Africa?
*Note: this article is not about solutions. The goal of this piece is to holistically understand the problems that smallholder farmers face, and the complicated and messy link between culture, infrastructure, resources, gender, corruption and poverty.
Many smallholder farmers are producing yields at the same level as the 1600s
In 1605, the average yield of wheat in the United Kingdom was 0.74 tons per hectare.
Now in 2023, the average yield of wheat in Burundi, Africa, is 0.72 tons per hectare. Burundi, and many countries in Sub Saharan Africa are producing the same yields as in the 1600s.
In the 1600s, the majority of Europeans lived on farms. Crop diseases were a constant threat to life. Famines were common, almost everyone was malnourished and many people starved to death. The average life expectancy was 29 years. There was no such thing as sanitation (hand washing didn’t come until 1848!)
That was in the 1600s. Since then, the quality of life has dramatically increased in many parts of the world.
But many other countries still face the same reality as the 1600s.
Let’s illustrate “this reality” in numbers.
Crop yields
- Crop yield in Malawi is 1.00 tones per hectare, 5X lower than the rest of the world. (China is 5.81 t/ha, United Kingdom is 7.81 t/ha, Italy is 4.22 t/ha, U.S.A is 2.98 t/ha).
Fertilizer usage
- The U.S.A uses 72.5 kg/ha of fertilizer. Burundi uses 4.5 kg/ha. 32.5X lower than the average global fertilizer usage (146.4 kg/ha).
Poverty
- 1.00% of the population live in poverty ($2.15 per day). In Malawi, 70.06% of the population do. In Burundi 65.1% live below the poverty line, in Nigeria ~ 30.06%, Somalia ~ 70.03%.
Poverty & farming link
- 82% of people living in extreme poverty (<$1.90 a day) are smallholder farmers.
- 78% of smallholder farmers live in rural areas.
These numbers should not exist. Most people think that poor countries and farmers will always be poor. We begin to see these numbers as “normal” or “average”.
These numbers should not be how 10% of the global population live. We have reduced poverty and increased food production in countries around the world. It is possible.
With all this being said, time to roll up our sleeves and get specific. Starting with a smallholder farmer’s journey.
The goal of this section is to understand what the challenges are that smallholder farmers face. To do this, we’re going to look at the yearly (in some regions twice a year!) cycle of planting to harvesting.
Buying inputs
In developed countries, we have wonderful Amazon where we can purchase anything in the swift click of a button.
A smallholder farmer in a rural farming community in Burundi or Malawi does not have this luxury.
There are three big challenges that smallholders face under the bucket of buying inputs:
- Sourcing — where to buy the input
- Price — is it affordable / is the return on investment worth the high cost?
- Proper usage — is the input used in the right amount at the right time
How do smallholders get inputs?
If you were to bake a cake, you first need your ingredients. Flour, sugar, milk, eggs, chocolate.
The higher quality these ingredients — the inputs of the cake — the better this cake will turn out. And the more you can sell it for.
The same goes for farming. At the beginning of every season, smallholders need to source inputs, like seeds, fertilizer, pesticides, herbicides, machinery (irrigation and land also count here but we will touch on this later).
The better quality these inputs, the better their yield will be, and the more food farming households will have to eat and sell.
How smallholders across Africa source inputs varies widely. It depends on location, policy, the staple crop in that area, and “factors” that are hard to quantify like tradition and culture.
But we can broadly categorize the sourcing of inputs into a few buckets:
Local markets
The importance of local markets varies widely from country to country. For example, in Kenya:
- 41% of maize seeds are bought through a local market
- 10% of maize seeds are bought through a local market
As you can see, the numbers really vary.
Local markets are very important to farming communities, both economically and socially. They are not like the big Walmart or Sobeys at the end of your street. Local markets are:
- Decentralized — markets are dispersed across all regions (there are many markets in small, remote villages), which means they are very accessible to farmers. They are set up and operated by farming communities themselves. Prices also tend to be more stable in local markets since they aren’t regulated by governments — this means that markets are usually the cheapest option to buy inputs.
- Informal — local markets aren’t heavily regulated by governments or agencies. This means that the money ends up in the hands of the farmers themselves and the government doesn’t take a cut.
- Seed variety — local markets have a wide range of traditional seed varieties. These are important local staples in the community that cannot be bought anywhere else.
- Social hub — local markets serve the same purpose that “coffee dates” do in the U.S.A: community. Markets are important social and cultural hubs where farmers can interact, exchange information and build community.
- Exchanges — all the farmers know all the buyers and vice versa in markets. This is the sense of community and unity that only exists at markets. Many farmers selling their produce will allow buyers to make exchanges (non-monetary).
Agriculture dealer
Dealers or agents are private individuals that work for large companies. Agents both buy produce at a set price from the farmer, and sell them inputs like seeds, fertilizer and pesticides.
Agents usually take a cut of the profits, anywhere from 10–20%. The upside is that the price is fixed and farmers know that they will be getting paid.
Other ways smallholders get inputs
- Trade — many farmers trade with friends, neighbor, relatives. One farmer might give their neighbor 30 ears of corn in exchange for a bag of fertilizer. (In Zimbabwe 22% of seeds are sourced from friends/neighbors/relatives, 17% in the DRC, and 8% in Malawi).
- Government — again, this drastically varies across countries. Some countries have a strong government subsidy program, in other countries, it’s non-existent. In Malawi, 9% of seeds are sourced through the government, in the DRC, 0.0% are.
- Using grain— it is not uncommon for farmers to plant the grain (not the seeds) of their produce year after year. Seeds are expensive, and some farmers just can’t afford it. Growing the grain instead of the seed produces over 4X lower yields.
Price of inputs
Let’s say you’re Usain Bolt shooting for Gold at the next Olympics. You have the option to buy a pair of running shoes that will increase your speed by 22%. But they cost an extra $150.
It seems like a no brainer. You would probably buy the shoes in a heartbeat. (Not that Usain needs the extra speed 😂)
This is the option that smallholder farmers across the world are faced with, but for them the situation is a bit more dire.
A smallholder farmer that has a 1.5 hectare farm in Malawi would need to spend $150 on an insect resistance (GMO) breed of maize to cover their farm. This seed increases final yields by 22%, which leads to increases in profits anywhere from 30–60%.
But if this farmer can’t afford a 50 cent potato for dinner, it’s going to be a lot harder to pay $150 for fancy seeds.
It’s a tradeoff for the farmer:
- It takes $80+ more to grow a hectare of GMO corn compared to non GMO corn (one bag of non GMO seeds is <$60)
- The final yield of corn is 22% higher if GMO seeds are used compared to non GMO seeds
- A smallholder that earns $1.90 a day makes $684 a year. So a bag of regular seeds is 10% of their yearly income. Let alone GMO seeds.
Put yourself in the situation of a mother who has 7 children to feed. Would you spend 36 weeks of work on one bag of seeds?
Probably not.
This is what 80% of smallholders in Sub Saharan Africa choose. Farmers can’t afford expensive high quality seeds, so they plant grains instead of seeds).
And their farm suffers. Their yields are low, crop is spindly, and it is very common for an entire field to get demolished by pests. Many of these “issues” could be solved by investing in good seeds.
Price of fertilizer
Every second person reading this has fertilizer to thank for their life.
As illustrated by this crazy stat: fertilizer works.
Nitrogen fertilizer has single handedly supported 3.5 billion people that otherwise would have died.
To cut to the chase, fertilizer dramatically increases yields.
But it’s also hella expensive.
60% of a smallholder’s cost is fertilizer.
Fertilizer itself is an expensive product, but especially in Sub Saharan Africa. Fertilizer in Africa costs 4X more than it does in North America and Europe. (I’m not going to get into why, but I wrote an article about it if you’re interested.)
What other challenges do smallholders face with buying inputs
The price of fertilizer and seeds is only one tiny piece in a much much larger puzzle.
An interesting thought experiment — If every smallholder farmer could afford good seeds, fertilizer and machinery, would they still be living in poverty?
Many studies (1, 2, 3) have found yes. The “problem” is much more nuanced than high costs of fertilizer.
If smallholder farmer poverty was a 200 piece puzzle, high costs of inputs would be one puzzle piece.
Let’s look at a few other puzzle pieces🧩:
#1 — Gender imbalance
Women are the backbone of most smallholder farming households. They account for 60% of Africa’s smallholder farmers and produce 70% of the total calories consumed across the continent.
The crazy thing is that female farmers produce yields 20–30% lower than men!
Let’s dive into some ‘whys’:
Women only own 1–2% of land titles in Africa, which really limits the power that they have.
Especially since 85% of the land across Africa is freehold tenure, which means that the land owner [on paper] has absolute ownership over the land. They have exclusive rights to the property and can exclude others from using it.
Yes there are policies like the Land Use Act of 1978 in Nigeria which provides equal land rights for all genders, but in reality, culture and tradition prevents women from owning land.
Husbands, fathers, sons and brothers are the landowners on paper, even if they don’t live or work on the farm.
Why this is important:
- Land is used as collateral to access loans. Without being the titled land owner, women can’t get loans. This means that they can’t invest in their farm or livelihood, essentially keeping female farmers stuck in this poverty and low production loop.
- Without land titles, women are at risk of losing their land. If there is a change in family circumstances, inheritance, government dispossession, women can’t protect themselves. They get forced off their land and have no money (or collateral to get a loan) to buy more property. Even if a woman’s husband dies, the land goes to a living male relative.
- Women’s voices and decisions about the farm (what to farm, where to invest, etc.) are usually overlooked in households and communities. It’s the men that have the power and the say.
- Without land titles, women really have no economic or social power. It has been shown that when female farmers own land, they invest more in education and healthcare for themselves and their families compared to their male counterparts.
This is a really messy problem, because culture and tradition play such a strong role in gender norms.
For example, in smallholder households with a husband and wife, the man grows cash crops (higher income crops). Like coca, coffee beans and sugar cane. He is the one that goes to the market and sells the cash crops for income. The women farm the food that will be eaten.
In many cultural contexts, women aren’t even considered farmers because they farm maize, wheat, rice, millet, cassava, and are only viewed as growing food for the kitchen. The men are viewed as the farmers since they are growing the crops which will be sold.
The men, who are in charge of the finances, buy fertilizer and good seeds, and use it to increase production of their cash crops. Quite often, the female farmers don’t get any. And the gap widens.
These are just estimates, but big organizations like the FAO say that if women had the same access to resources as men, total yields across Africa would increase by 22%!
#2 — The “small farm problem”
Farms under 2 hectares are the norm in many African countries.
- Average farm size in Ethiopia is 0.9 ha
- Average size in Kenya is 0.47 ha
- Average size in Nepal is 0.79 ha
So farms are very small.
Even if every farm was 1 hectare, the best maize seeds were bought and fertilizer and pesticides were used, it would still not be enough to lift households out of poverty.
A 1 hectare farm of maize using the “best practices” can only earn $560 (give or take) a season (and that’s if the farmer can sell 100% of their yield which normally doesn’t happen). That equals 30 cents, per day, per person.
Way below the poverty line.
This is what is called the “small farm problem”. Even if the best technologies are used, if the farm is not big enough, yields will be too low to lift that household out of poverty.
It has nothing to do with the productivity of the farm. It has to do with the size of the farm. Farm size is a zero sum multiplier.
For example, in Ethiopia, even an increase in average farm size by 60% would not be enough for a small scale farmer to earn a living wage.
The ‘best’ farm size can be calculated theoretically as a function of the size of the household, daily income of >$1.90 a day, and water limited yield of that community. This varies for every country, and every region within that country.
Here are some averages:
- Viable farm size in Ethiopia is 1.1 hectares (based on average household size of 7.2)
- Viable farm size in Zambia is 2.6 hectares (based on average household size of 5.5)
- Viable farm size in Senegal is 11.9 hectares (based on average household size of 16.8)
#3 — Family and cultural tradition in farming practices
Agriculture is so intertwined with agriculture and culture. Traditional crops need certain practices that have been passed down from generation to generation.
Technologies that increase yields and reduce environmental impact are knowledge intensive. To use them, farmers need to learn new skills. And to make the technology effective, farmers need to spend a lot of time and labor to integrate the new system into their farm.
For smallholders to be willing to change the way they’ve farmed there whole lives, their needs to be a very large incentive.
This study found that even if a technology will increase income by 20%, if it clashes with the tradition of farming in a community, the technology will not be adopted.
#4 — Irrigation
Over 95% of farms across Africa are rain fed. Less than 5% of farms have proper irrigation infrastructure.
You might think water is water. What’s the difference between whether it falls from the sky onto farms right away or is gathered first? There’s actually a big difference.
Irrigated land is twice as productive as rainfed land.
Irrigation allows farmers to control the amount of water that their crops are getting. They don’t need to rely on the weather and climate for water.
Droughts are now 2.7X more common than since the 1960s — this is a huge risk for farmers. For farmers who have irrigation, droughts aren’t a massive deal. But for rain fed farmers, a drought can destroy their entire crop and livelihood.
Scaling irrigation is actually a lot harder than scaling good seeds or fertilizer. Irrigation isn’t just about technology, it’s about the infrastructure around it.
Just like all decisions, the return on investment needs to be high enough for a smallholder to take the big risk and invest in a technology. So what are some of the risks that make 95% of smallholders stick with rainfed?:
Cost.
Irrigation is not cheap. Like at all 😬. There is a very high initial cost with a lot of infrastructure.
For example, a drip irrigation system for a farm in Zambia would cost $1700-$3000 per hectare. And drip irrigation is the most simple — therefor “cheapest” version of irrigation!
There are more high tech models. Like sprinkler irrigation which costs $2000-$4000 per hectare.
If farmers can’t afford a $150 bag of GMO seeds, do you think they can afford $1700 of pipes and pumps to circle water around their farm when they can get water for free from the sky?
Irrigation is the one thing that is forgotten about in the conversation about ‘increasing crop yields’ and ‘doubling efficiency’.
In Asia during the Green Revolution, it was actually irrigation that had the largest impact. Not fertilizer or good seeds. Irrigation.
There are sooo many benefits of irrigation:
- Allows farmers to have two seasons a year — effectively doubling production.
- Results in higher yields and higher incomes. Households that use irrigation on average have incomes 50% higher than households that don’t. For the poorest farmers with the lowest yields, investing in irrigation will offer the highest ROI. In Tanzania, when the lowest resource farmers invested in irrigation their income increased by 86%!
- Creates an entire market around creating and installing irrigation infrastructure. Important for the direct cost of labor and materials, but also the snowball effect that this has on the economic growth of local communities.
- Allows farmers to grow crops that don’t do well with rainfed irrigation. This reduces farmers risks — if there is a maize pest and the farmer only grows maize, there entire harvest will be ruined — basically the same reason people say “diversify your economic portfolio.”
So now comes the big question: why hasn’t irrigation scaled across Africa?
It’s not a lack of water problem.
Africa has an abundance of water. The third largest underground freshwater aquifer is in Kenya. It’s 25 times larger than Loch Ness with an annual recharge rate 3 times the water use in New York City.
It’s an infrastructure problem.
Getting this water to cities and rural communities is the problem. It’s not just the pipes to get the water to people, it’s then the infrastructure to safely distribute the water, treat it, and clean it.
Asia is the best example of scaling irrigation. 70% of the world’s irrigated land is in Asia.
During the Green Revolution, the government heavily subsidized irrigation infrastructure on farms for farmers. The unique thing about these subsidies was that instead of giving farmers a predetermined ‘technology package’, they loaned farmers money and let the farmers design their own irrigation systems and decide where they wanted the money to go.
When governments across Africa have tried technology packages, they have been pre determined with physical things. Like certain amounts of fertilizer and seeds, and exact designs for irrigation systems.
This leaves the farmer with no autonomy.
#5 — Access to credit and collateral
Let’s piggyback off this autonomy idea.
This is the basis of the concept of microfinance: make financial services in rural communities accessible. Give small loan sizes with flexible repayment terms, use alternative forms of collateral and help people learn how to save and manage money.
It’s like the saying: give a person a fish, they eat for a day, teach a person to fish, they eat for a lifetime.
Already in this article, a theme that has come up is access to credit. A major problem for people living with little resources is just getting the initial funds to make an investment. Like buying a bag of good, high quality seeds.
If they just had $150 for those seeds, they could increase their yields and make more money at the market.
With that extra money, then maybe they could afford to buy medicine for a sick family member. Or pay for school tuition. Or buy fertilizer.
People need money to buy food. Invest in farming infrastructure. Invest in the health and education of their household.
People living in poverty don’t need a lot of money at the beginning. Just enough to get them off the ground. This ‘sweet spot’ is usually just $100.
There are so many examples (like this microfinance program in Malawi, or the Grameen Bank created by Muhammad Yunus) of how effective microfinance is at alleviating poverty.
The bottom line here is that while there are great success stories of microfinance, 1.7 billion around the world don’t have a bank account. Most of these people are women.
We have a long way to go. Accessing finances, loans and credit is still so hard for billions of people. People living in poverty with no collateral are too ‘risky’ for banks to take on so these people never get credit.
Banks are in urban areas. People living in rural areas have to walk for hours just to get to a bank.
#5 — Rurality
52% of people across Africa live in rural areas. This number varies across countries:
- 89% in Burundi
- 85% in Malawi
- 72% in Kenya
- 74% in Uganda
The higher the percent of people living in rural areas, the more the economy relies on agriculture:
Rurality is super complicated. Paired with rurality is limited access to basic services, lower economic opportunities and less developed infrastructure.
I’m not going to get into the causes and effects of rurality here, just know that it is another really important piece in the puzzle.
It’s more than technology
Now here’s where the problems of low crop yields and smallholder farmer poverty gets messy.
It’s not just about making technology — like seeds, fertilizer and machinery — accessible to farmers. (This is what we call a transfer of technology model.) After reading about all the problems that smallholders face accessing inputs, it’s easy to think ‘give farmers seeds and fertilizer and their yields and profits will increase’.
That works for resource rich farmers, smallholders that:
- Have fertile land
- Have 1.5+ hectares of land
- Usually at higher altitude ~ protected from droughts
- Usually have a basic irrigation system
- Use some kind of fertilizer once a year (typically this is organic fertilizer from animal manure)
- Have hired labor to help at planting/harvest
- Farms for sustenance and to sell
- Have good access to credit
The biggest challenge that resource rich farmers face is access to inputs.
But a transfer of technology model does not work for resource poor farmers that:
- Have shallow and infertile land
- Have <1.5 hectares of land
- Floods, droughts and heat waves are more common
- Irrigation is often non existent
- Crops are very vulnerable to pest infestation
- Usually no kind of fertilizer is used (animals are not owned)
- Solely farms for sustenance
- Has no access to credit
The biggest challenge that resource poor farmers face is maintaining the wealth they have.
But NGOs, organizations and government programs have solutions that solve for accessibility, and therefore benefit resource rich farmers. There are very few solutions that have benefited resource poor farmers.
Transfer of technology model (TOT model)
The TOT model works like this:
- People in laboratories develop a new technology (like how Fritz Haber created synthetic nitrogen fertilizer in 1913).
- Organizations, governments and NGOs try to transfer these technologies (aka scale them) from wealthy countries to poor countries.
Now this model has so many strengths. It is what made the Green Revolution so successful! During the Green Revolution, governments around the world created “technology packages” which they heavily subsidized to farmers.
In these technology packages were high quality seeds, nitrogen fertilizer and harvesting machinery ~ all the inputs we went through above.
But this model doesn’t work for resource poor farmers
When we say that the Green Revolution “bypassed Africa”, it’s because the majority of farmers were in the “resource poor” category, and the TOT model of the Green Revolution did not benefit them.
Resource poor farmers would buy the technology packages, but couldn’t sustain paying the price of the package each month.
So the farmers defaulted and the government/banks took the technology packages back.
This happened across Sub Saharan Africa and Southern Asia during the Green Revolution in the late 1900s, and has happened again and again with government programs and input vouchers in the early 2000s.
Now time for a framework to think about this!
I call it hanging in, stepping up or stepping out.
Looking at these three very different situations that smallholders are in helps to show why TOT does not work for many low resource farmers, and works really well for higher resource farmers.
1 — Hanging in
People who are “hanging in” are just trying to survive. Increasing yields and profits, buying fertilizer, words like ‘yield gap’ and ‘underproducing’ aren’t even on their mind. These people are in full survival mode.
Their #1 goal is to just maintain their current wealth and welfare.
The TOT model fails to benefit people who are “hanging in” because increasing productivity via technology is not the focus for these farmers.
Solutions for the most vulnerable farmers should be focused on maintaining and protecting people’s wealth and welfare so they can bounce back from stresses and shocks (like high inflation, a global pandemic, supply chain issues.)
What solutions should be: decreasing livelihood vulnerability.
2 — Stepping up
People who are stepping up are what I called “resource rich” farmers earlier. These farmers have enough resources that they can afford to take risks (like investing in technology).
This is where the TOT mode shines. People in the “stepping up” category have the resources to invest in technologies that will increase their yields (and profits).
Increasing the productivity of their farm (which is done through technology) is the most effective way they can increase profits. Increasing profits then leads to higher income which over time decreases poverty.
What solutions should be: increasing agriculture production (and profits)
3 — Stepping out
“Stepping out” means stepping out of agriculture all together (and stepping out of poverty in the process).
If we look at any country on any continent that is now ‘developed’, they were once a peasant economy — meaning that at one time the majority of the population were smallholder farmers that relied on agriculture and lived in poverty. Eventually, after social welfare and government aid (helping farmers to “hang in” then “step up”), farmers made the leap and “stepped out” of agriculture.
A great example of this is Singapore. In the 1960s, over 60% of the population was employed in agriculture and the majority lived in poverty. Then in the matter of 10 years, Singapore embarked on a big development plan.
The country shifted its focus and job creation from agriculture to industry and manufacturing (among many other things), and now 10% of the population lives in poverty and it is a global finance, trade and technology hub.
The TOT model isn’t for people “stepping out”, since agriculture isn’t the focus. The focus should be accumulating assets so that farmers can invest in new industries. Basically the goal is de-risking the farmer so they can take big risks like leaving agriculture to enter industry.
What solutions should be: accumulating assets
Now you’re a pro about buying inputs!
It’s time to move on to putting these inputs to use and starting the farming process. Let’s talk about about planting 🚜😎
Planting 🌱
With inputs come planting. And *surprise* it’s not as simple as putting a seed in the ground and letting it do its thing.
What does planting look like in the Western world?
- Tractors to till soil
- GPS guided equipment to make sure seeds are perfectly spaced, and at the optimal depth
- Large scale monoculture to optimize efficiency
- 98% of land is prepared mechanically
- Drones and satellites provide real time data for farmers
- Seeds are coated with protective chemicals to speed up germination
- And so many other technologies this list would have 50 bullet points:)
Agriculture in the Western world is defined by technology and efficiency. We have the art of agriculture perfected — large yields and even larger incomes.
Because of this, 6% of people in the Western world live in extreme poverty (varies country to country), population increases by one billion every one decade, education is at an all time high, healthcare is at an all time high and quality of life has never been better.
This is not the case everywhere in the world.
Let’s rewind to what planting looks like in developing countries:
- 5% of land is prepared mechanically in the Global South
- Africa is the only continent where yields have decreased in the past 100 years
- Across Africa, one in three people live in extreme poverty
Preparing land
Land prepared mechanically produces 4X larger yields
Yup 4 times larger yields.
For comparison, fertilizer increases yields by 60%.
Preparing land means getting it ready to plant seeds. It breaks up the soil (making a great home for the little seeds) and improves the water retention of the soil.
In the West, this process looks like driving a big tractor or machine over the soil:
In developing countries, this looks like bending over all day in the hot sun for weeks with with a shovel, spade or rake in your hands:
Manually preparing land is:
1 — A lot of work.
Small scale farmers spend 80–120 hours a season turning the soil by hand. They have to do this before planting every single season.
2 — Inefficient.
Yields are 4X lower than using a machine.
Planting seeds
In the West, we use huge pieces of machinery to mechanically drill holes into the soil. These holes are perfectly spaced apart and at the optimal depth. This same machine drops a seed into the hole and spreads dirt across.
It can plant 48 rows at a time. And it does this all while moving.
In developing countries, all planting is done by hand. Holes are dug manually with some good ‘ol eyeballing at how far apart and how deep to plant each seed.
This is extremely labor intensive, and it’s inefficient.
In Uganda, 94% of seeds are planted manually. This yields 1.0 ton per hectare of maize.
The DB80 John Deere Planter above yields 12 tons per hectare of maize.
Now time to dig deeper 🌽🌾
The two areas we talked about — preparing land and planting seeds — have the same thing in common: they are much less mechanized in developing countries than the West.
Let’s look at some of the whys.
1 — Economic
- Machines are expensive. Depending on the kind, they can range from $200 (for a manual seed drill) to $3000+ (for a multi row mechanical planter).
- Operating machinery is also expensive! The costs of fuel, maintenance, repairs and spare parts is a huge financial burden that the majority of smallholders cannot afford.
2 — Infrastructure
- The logistics of physically getting machinery to rural farms is complicated. In many rural areas, road infrastructure is very poor, so transporting machinery is challenging. And because of the logistical challenges of getting the machine to the farm, the price is raised.
- Most farms don’t have storage facilities for crops let alone machinery. Without properly storing equipment like tractors, they are left out to Mother Nature and take a heavy beating from the elements.
- Machinery breaks down a lot, and it needs repairs. The challenge for smallholders becomes where will they get the machine fixed? In many countries across Africa there isn’t infrastructure or a market around repairing machinery. This makes maintenance challenging.
3 — Logistical
- Small scale farms are usually fragmented. Mechanically preparing land or planting seeds doesn’t make economic sense on small pieces of land. It doesn’t justify owning or renting expensive machinery.
4 — Social
- Manuals that come with machinery are often not in local languages, making it harder for farmers to learn how to operate the machine.
- Usually there is little to no training that comes with machinery. Without training, farmers don’t know how to properly use equipment. This means 1) the machine is less efficient if it isn’t used right, and 2) machinery tends to break down more often if its not used right.
- There is a very high risk that comes with investing so much money (and time) into an unfamiliar technology. Farmers who have been farming traditionally can be very hesitant to adopt new technologies.
Harvesting
You spent months and months creating the perfect cake for your best friend’s birthday. 🎂
You perfected each individual layer until the ratios of chocolate to coconut to caramel were just right.
After making each layer, you put it in the freezer, until the assembly day came. You whipped up some thick chocolate buttercream and used it as glue to stick each layer together.
You went to put the second last layer on and the ENTIRE. Cake. Broke.
It crumbled to the ground. Completely inedible.
Months of hard work resulted in nothing (and a very messy house you need to now clean).
This is what happens to many farmers during harvest
Farmers spend all day in the fields for months on end. They spend most of their budget on things like fertilizer and good seeds to ensure that they have a large harvest.
And then comes the devastating world of harvest and post harvest losses.
Harvest losses
Imagine a harvesting machine that only harvests 75% of crops. This is harvest losses. Losses that happen on the field during harvest.
There are two buckets that I like to categorize harvest losses in:
- Physical losses — missing 25% of the crops during harvest. This reduces the physical quantity of the final yield.
- Quality losses — decreases in the monetary value of produce. The price farmers ‘could have got.’
Physical losses
- Harvesting crops by hand is inefficient. Not just in the amount of time and labor it takes, but in the actual yields. Harvesting by hand means yields are 20–30% lower than with a machine.
- 40% of harvest losses are because of pests and crop diseases. Pests can destroy entire fields of crops, leaving farmers with nothing.
Quality losses
- If crops are harvested too soon and are not ripe, they won’t sell for as high at the market. This is a loss in quality of otherwise perfect produce. And on the flip side, if they are harvested late, the produce is overripe, and again, won’t sell for as much at the market.
- Certain crops need to be processed after they are harvested. For example, maize needs to be threshed and dried. If the grain isn’t completely separated (threshed) or the corn isn’t totally dry, it will develop mold and begin to rot. This decreases the quality of the crop.
Post harvest losses
Losses after the crop has been harvested are called post harvest losses. This stretches right from harvest to the retail level, but not past retail (so post harvest losses doesn’t include losses in grocery stores, during transportation to consumers, in restaurants or individual’s homes.)
- 23.56% of food produced in Western Africa is lost after harvest
- 16.07% of food produced in Northern Africa is lost after harvest
- 20.37% of food produced in Southern Africa is lost after harvest
These are some substantial numbers!
And they get even bigger when we zoom out. In East Africa:
- 43% of cereals (specifically maize which makes up 26% of cereal losses).
- 19% of roots and tubers, and
- 11% of fruits and veggies
are lost after being harvested. Each country has varying numbers: Ghana loses 18% of annual maize production because of post harvest losses, and in Uganda this number is 38%.
The post harvest losses across Africa is enough food to feed 1.6 billion people each year.
So obviously there is a huge food security aspect to post harvest losses. But then there is also a huge economic aspect. Post harvest losses cost Nigeria $9 billion annually, Uganda $105 million and Ghana $350 million annually.
This means that smallholders are losing 10–50% of what they could be earning, if post harvest losses didn’t exist.
So…why do post harvest losses exist?
Infrastructure
Most smallholders don’t have any cold storage facility. Or any storage facility at all.
Most farmers harvest their crops, then leave it outside on the ground or a tarp to dry and store before bringing it to market or selling it.
Cold storage is so important to reduce post harvest losses. It protects crops from animals, pests, and weather (like rain or extreme heat), and extends the shelf life of all produce.
What happens when smallholders don’t have cold storage:
- Crops left outside in the sun and warm temperatures spoil quickly and eventually rot. This leads to big financial losses to farmers who can’t sell or consume the produce.
- Poor quality crops get lower prices in the market. Reducing what farmer’s could have earned on average by 15%. Poor quality also reduces the bargaining power that farmers have in the market — with low quality produce, farmers may not even be able to sell anything.
- Produce sitting out in the sun is an easy target for pests. It attracts insects and rodents, which can damage the entire harvest.
- Especially in regions where farmers farm for subsistence, post harvest losses mean less food. Less food means food security, on a household level, but also in markets and on a regional level. Just in East Africa alone, cereal yields would increase by 40% if there were zero post harvest losses.
- All of the money, time, resources and effort put into farming and harvesting the crop goes to waste. This just exacerbates the food insecurity, poverty and low yields that the household is already stuck in.
- Smallholders become dependent on middlemen. They buy the produce at a lower price than its market value, and sell it to the market for a higher price. The farmers only receive a fraction of what their produce is actually worth.
2 — Transportation
Let’s pretend that every single smallholder had a cold chain facility.
This would still not solve the problem of post harvest losses.
*Even when cold storage facilities exist, the infrastructure to support getting produce to market does not exist.*
- This means that in many rural communities, there is no electricity to power a light bulb, let alone an entire storage room.
- There are no proper roads to transport the produce to the market.
- There is no structured market to ensure that farmers get paid a fair price.
The theme that you should be seeing is that technology is not the solution.
Proper infrastructure is the building block for technology.
If you give a smallholder in rural Burundi a state-of-the-art cold storage facility with all the bells and whistles, but there is no electricity to power the facility; the technology is useless.
Transportation is an example of an infrastructure problem. Many rural farming communities have zero existing infrastructure. No roads, no running water, no electricity.
For a smallholder farmer, this means that they can’t store perishable food, they can’t power lightbulbs, they can’t power cold storage facilities, they can’t easily get to cities, they can’t irrigate crops, they can’t transport food to market easily.
Transportation is the basis for agriculture, but also for all other industries. People in rural communities need proper road and transportation infrastructure to:
- Get to markets to sell produce
- Get to cities to buy things, access banks
- Get to hospitals and clinics
- Get to schools
Without infrastructure, the cycle of poverty continues.
And without road and transportation infrastructure, produce rots during transit to markets. Some farmers get to the market after 5+ hours of driving or walking with heavy bags of fruits and veggies, and by the time they reach the market, the food is already spoiled from the heat and sun.
If we visualize that multi layer birthday cake, transportation is the very first layer. It’s necessary. Without it, the entire cake crumbles.
Selling
We’ve been dancing around the tree of selling produce since the beginning of this article. Time to address it head on 😎
Selling produce is the last ‘step’ in the farming process. After planting, growing and harvesting, you need to sell the fruits of your labor.
This process looks a lot different for smallholder farmers than it does for the massive agricultural conglomerates that produce our food in the West.
For smallholders, this means bargaining prices in the local market and selling produce to neighbors. It’s a complicated and sometimes messy process. Much different than the structured market and ironed out supply chains that big ag companies have the luxury of in the West.
How farmers sell their produce
Farmers have three options if they want to make money from their produce:
- Go to the market — physically transporting their produce to the market
- Make the market come to you — selling to a buyer at the farm gate
- Best friend the market — sell produce to a trader (a “middleman”)
Markets in the 1990s vs now
First let’s start with a little history lesson. This will paint the backdrop of why markets are structured the way they are now.
So four decades ago, most markets across Sub Saharan Africa were controlled by the government.
There were huge marketing agencies that operated produce ‘depots’. Smallholders transported their produce to these depots. From here, the agencies sold the produce to consumers, and paid the smallholders a fixed price that all smallholders got paid.
And then in the 1990s the South African government introduced a policy called Berg 1994. The goal was to decentralize markets. “Free the market” was the slogan that was used.
With the “freeing of the market” came the switch from publicly owned — by the government — to privately owned and operated — by smallholder farmers — .
What this led to:
- The expectation of the private sector to provide what the state had previously provided. This placed a huge burden on farmers to now transport their produce all the way to the market (instead of the depots) and sell it all.
- To fill this gap came intermediaries. Served a similar purpose as the government had. These ‘traders’ or ‘agents’ bought produce from smallholders at a fixed price and sold it to (usually international) markets.
What this meant for farmers:
- Farmers now were in charge of farming crops and also selling these crops. They went from being farmers to now businesspeople. This brought a whole slew of challenges. To sell all their produce, farmers needed to understand market trends, consumer preferences and prices that consumers would pay.
- The best way to describe any market is volatile. Markets fluctuate and are unpredictable (who would have guessed a global pandemic would shut down global markets for 2 years? 😂). This is the world farmers were now in. Fluctuations in prices and demand meant that farmers needed to adapt their prices. Sometimes this meant having to sell produce for less than it cost them to grow it. This had a huge effect on the economic stability of smallholder households.
- Now comes the transport question. Before, farmers could drop their produce off at depots. The depots were usually located on paved roads on the outskirts of big cities. This was still a long trek for rural farmers, but at least they could take a few backroads then end up at a main road. Sometimes depots also had vehicles which picked up produce at the start of main roads and brought them into the depots so farmers didn’t have to travel all the way in. Now, farmers had to take only poor quality “backroads” to get to rural markets.
- This shift empowered farmers. They now had complete control over every aspect of their farming. They could negotiate prices at the market, and choose which crops to grow based on local demand.
- Because of this, local economies began to sprout up. These local markets attracted larger, national or international, buyers and traders, which created an entire market in communities that previously had nothing.
The theme with this shift is that it presented smallholders with a bunch of new challenges. But also with a bunch of new opportunities.
These challenges
Let’s start with some stats:
Ethiopia
- 62.9% of households sold produce
Malawi
- 39.5% of households sold produce
Niger
- 28.3% of households sold produce
Tanzania
- 49.2% of households sold produce
This means that in many countries, farmers don’t sell what they produce. They are subsistence farmers.
It is actually these subsistence farmers that are the poorest. They don’t have the resources to even participate in a market. They use everything they grow to feed themselves.
Now for the farmers that do sell their produce, they don’t sell all of it. Smallholders that farm primarily for income sell 60–80% of what they produce, and use the rest to feed their family.
Out of these income-focused farmers, around 50% of them sell their produce at a market.
Farmers that sell at markets:
- Get higher prices
- Offload large quantities of produce
So for the other half of smallholders that don’t sell at markets, what are challenges that make the ROI not worth it?
1 — Fluctuating prices
You’re a smallholder farmer living in rural Malawi. The weekly market is 11km away from your farm.
You have to walk for 3.5 hours carrying all your produce just to get to the market.
Then once you get there, you find out that it’s a bad day at the market. Prices are low. You won’t even make enough to cover the fertilizer it took to grow the corn that you lugged 11km here.
This isn’t a fictional scenario. This is what happens to millions of smallholders.
Since there is no set or regulated price, the market is dictated by the consumers. Very often farmers have to give away their produce at whatever price the buyer will pay.
This is a problem of demand, supply, economics and policy. I’m not going to cover all the reasons why markets across Sub Saharan Africa fluctuate so much in this article. If you’re interested, this documentary does a great job explaining it.
It’s not that smallholders lack access to markets, they lack access to profitable markets.
For example:
- In Kenya, only 33% of the final retail price goes to farmers
- In Ghana farmers only get 45% of the final price
Even when farmers sell their produce in markets, they still get exploited.
Most of the buyers at local markets are actually traders, many international traders. They pay farmers a fraction of what their produce is worth, and sell it to big companies in the West for a profit.
2 — Distance
70% of rural households across Sub Saharan Africa live 2 hours away (on foot) from “community hubs” where markets are.
This number varies depending on what country and how rural the household is. For example, in Burundi (where 90% of the population live in rural areas), households are on average 5 hours away from an urban center.
I’ve already talked about how transportation infrastructure affects literally everything, so here it is to pop up again.
The distance to market, road quality, transportation quality and time it takes to travel there are the deciding factors that answer the question “is it worth it?” for farmers.
This is the roads that farmers have to walk hours on just to get to a market:
3 — Gender
And up pops another theme throughout this article: gender imbalance.
Female farmers are much less likely to go to markets.
- The head of the household (80% of households are male headed) decides whether to sell at market and how much.
- When both a male and female are selling at the market, females get significantly lower prices (25%! +)
- There are many cultural implications of women accessing transportation that makes it hard for a female farmer to get to the market. In many places, the cultural norm is that women don’t ride bicycles, hitchhike or drive vehicles.
- Females usually grow subsistence crops to feed the household, and men grow the cash crops which they sell.
- Traditional gender norms prevent women from haggling for better prices. So females get a lower price for the same quality product.
- Men are in charge of the social interactions of farming. They have more contacts in trade and with trading agents and farmers groups. Female farmers lack these contacts and are usually excluded from direct negotiations with the buyer.
- Women typically have many responsibilities. Like taking care of children and household chores. Going to the market is a full day thing, and many women can’t sacrifice that much time.
4 — Transaction costs
The transaction cost is like the ‘hidden cost’ of 1) transporting and 2) selling produce at markets.
For example, a farmer might need to rent a truck or hire a transportation service to get them and their product to the market. The fuel, vehicle rental and intermediaries along the way are an example of transaction costs.
Another transaction cost is the time and labor of being at the market all day. Spending a full day at the market is taking away from the time they could be spending on important tasks around the farm. This is a transaction cost.
The cost of hiring labor to help prepare, package and store produce is a transaction cost.
Then there are market fees. Farmers have to pay for a stall, booth or selling space.
All of these transaction costs are a huge barrier for farmers to enter the market.
5 — Risk
Risk and uncertainty is another example of a ‘hidden cost’ of entering the market.
Farmers don’t know how much they will get. There is no way to know if the transaction costs and distance they need to travel will pay off.
In the end, the decision comes down to this uncertainty.
Smallholders living in poverty can’t afford to risk their entire yield and budget on the potential of earning a few hundred dollars. They need to know for sure how much it will cost them and exactly what they will get in return.
This risk model depends on the quantity of produce a farmer has. The more produce, the less risky.
Farm gate
The other option is selling at the farm gate.
Let’s start with the obvious: selling at the farm gate is exactly what it sounds like. Farmers sell their produce at their own farm gate to people walking by the road.
- There are a lot less customers. Selling at a farm gate limits the customers to who walks or drives by on the road.
- Prices are even more volatile than prices at a local market. Farmers make over 30% less at the farm gate than they do at markets.
- Customers usually make small purchases. Much different from markets where businesses and traders will buy in bulk.
As you can imagine, this is not the best option.
But still, about half of the smallholders in Sub Saharan Africa earn their living like this.
Why farmers choose to sell at the farm gate:
- No transportation
- No transaction costs
- No risk
- 78% of smallholders who sell at the farm gate are women. Women can sell produce while at the same time balancing other responsibilities like taking care of children and household chores.
Before we wrap up, I wanted to share some resources, companies and documentaries if you want to dive deeper into this area! This is definitely not an exhaustive list, just a starting point to get your toes wet:)
Videos and documentaries
- A Day in The Life of An Ethiopian Farmer
- Tomatoes and greed — the exodus of Ghana’s farmers
- Living on One Dollar
- Poverty Inc
- Poor Us: An Animated History
- What Extreme Poverty Looks Like
Articles and reports
- Rural Poverty Report 2021
- Causes of Poverty in Africa: A Review of Literature
- The State of Food Security and Nutrition in the World 2022
- Agricultural Productivity, Poverty Reduction and Inclusive Growth in Africa
- The Food Security Conundrum of sub-Saharan Africa
Startups
- RiceAfrika, AgUnity, Hello Tractor, KITOVU, Digital Green— connecting smallholders with technologies
- Apollo Agriculture, Agriwallet, Juhudi Kilimo — access to credit
- Twiga Foods, Agrocenta, Esoko, Farmerline — access to markets
- Mandulis Energy — waste to energy
- One Acre Fund, Faulu Kenya, ECLOF Kenya, Zambuko Trust, ACEP Burkina— microfinance funds and loans for smallholders
Let’s recap! What should you take away?
- 10% of the global population are living in extreme poverty, and 82% of them are smallholder farmers. This is a very complicated link.
- Farming looks different in different parts of the world. In the West we use fancy technology that makes agriculture so productive. But this is not the case everywhere. Many developing countries are producing yields the same as the 1600s.
- Smallholders across Sub Saharan Africa and Southeast Asia face so many challenges. From buying fertilizer to selling produce. There is always some way to make a farmer’s life easier.
- Smallholders don’t need charity. They need investments and autonomy to give them choices and possibilities.
- There is no one size fits all solution. Every country is so different and each has different problems depending on policy, culture and infrastructure.
1B people live on less than $1 a day. 1.8B people live in countries with absolute water scarcity. 10M die from easily preventable deaths. 20% of children today, 150M, are stunted. 570M lack access to energy. 1 in 9 go to bed hungry every single night.
The quality of life for billions of people is horrendous.
This is not acceptable.
Let’s treat poverty and food insecurity with the same urgency as the COVID-19 pandemic.
It’s time to stop accepting the reality of 10% of our population as “normal”.
Let’s use this as an opportunity to understand the complicated root causes of systematic problems, instead of ignoring them.
