UN Division for Sustainable Development

Case Study Detail Record

Organization type:	Government

Name of Ministry/Agency:	Department of State

Country:	United States of America

Name of Focal Point:	Hiram Larew

Initiative Title:	Building Agricultural Value Chains in Zambia for Retail Input Services

Internet links:	http://www.usaid.gov/zm/economy/eg.htm http://www.microlinks.org/ev_en.php?ID=21638_201&ID2=DO_TOPIC

Scope:	Regional: - Africa

Status:	Ongoing

Timeframe:	Start: End:

Lead Institution:	U.S. Agency for International Development

Stakeholders/Partners:	Small holder farmers

Relevent issues:	- Food security and sustainable agriculture - Enhancing agricultural productivity through adequate and sustainable inputs - Empowerment of local rural communities - Natural resources management - Capacity building - Access to local markets - Poverty reduction strategies and policies - Reducing rural poverty - Strategies for effective resource management - Capacity-building for local governments and communities - Improving natural resource revenue investment and sharing - Sustainable development in a globalizing world

Objectives/Challenges:

Following an assessment showing that Zambia’s smallholder farmers were poorly served by the agricultural inputs industry, the USAID-funded Production, Finance and Technology (PROFIT) project decided to revitalize the agricultural inputs industry – especially seeds, sprayer services, tillage services and veterinary services – using a value chain and market facilitation approach.

PROFIT’s competitive upgrading strategy for the agricultural-inputs value chain focused on improving the way in which input firms understood, planned, and marketed their products to smallholders, by:

• demonstrating the large but untapped value of the smallholder market to commercial input firms.

• redesigning input firm business models to make them more cost effective.

• shifting the branding strategy from the product to the firm.

• shifting from a product focus (selling inputs) to a service focus (selling services and advice).

Future activities are planned to: assist commercial firms to manage growing distribution networks; accelerate the shift to service provision by focusing on crop spraying and tillage services; and, integrate veterinary services into the broader agro-inputs distribution network to further reduce transaction costs (one-stop shopping) and improve access and value-added opportunities for smallholders.

Lessons Learned:

A competitive value chain for agricultural input services is critical to the competitiveness of the principal food crop (maize) and cash crop (cotton) value chains.

• Rural smallholders are a potentially good market with a business strategy sensitive to the specific small holder consumer characteristics and the need to avoid high transaction costs that often confront rural consumers.

• Improving the ability of small holders to improve their product in terms of buyer demand characteristics (smallholder upgrading) can be achieved by fostering a close relationship with commercial input and service providers. Providing services can be another cost-effective way to achieve better control quality and extend access to new value-added technologies to all smallholders.

Summary:

Key Results -

The agricultural inputs value chain and market facilitation approaches have achieved remarkable results since PROFIT’s direct involvement started in 2005:

• The retail cost of agricultural inputs for smallholders decreased by as much as 50 percent as the expanding network of retailers reached more locations, lowering transaction costs.

• Over 700 new jobs were created by the expansion of retail agricultural input suppliers.

• Over 400 new sprayer service providers set up businesses as part of a retail inputs shop.

• A private sector-driven extension system is in place and growing.

• The number of third party service providers (such as oxen-plowing, weeding, harvesting and transporting) in out-grower schemes is on the rise.