Poverty reduction is one of the major concerns of policy makers in many countries in Sub- Saharan Africa. Given that in many Sub-Saharan countries the vast majority of people live in rural areas, promotion of employment and/or income generation for rural households is considered the key approach for poverty alleviation. Since the agrarian structure in most parts of Africa is dominated by smallholder production, particular emphasis is given to strengthening rural economies by supporting productivity growth in smallholder agriculture (van Damme & Dirckx, 2000). Past poverty alleviation strategies through commercialisation of smallholder farming have
primarily focused on the promotion of a number of ‘traditional’ export cash crops such as tea, coffee, cotton and tobacco. Because of declining world market prices for many of the
traditional export commodities, African countries are now attempting to diversify their
agricultural export base and try to locate new market opportunities through crop
diversification into high-value non-traditional export or niche commodities (van Damme &
Dirckx, 2000).
However, smallholder farmers often lack the financial resources to invest properly in
production and marketing of both traditional commodities and high-value non-traditional
exports. Access to credit is often limited by a lack of collateral or preliminary savings. There
is also a lack of necessary production and marketing information, particularly for new crops and species/varieties. Uncertain and inefficient markets also undermine the ability to fully benefit from producing high-value export commodities. Coordination of production and marketing activities is crucial, especially when production is carried out by many dispersed smallholder farmers (van Damme and Dirckx, 2000). Efficient market linkages and vertical arrangements are generally not well developed, or inaccessible or unprofitable for individual smallholder farmers because of the small quantities they produce, and thus the absence of economies of scale. One of the main development challenges in Africa is the delivery of agricultural services (marketing, input supply,
financing and other support) to smallholder farmers. Economic liberalization and institutional reform have reduced and redefined the role of the state in service provision and the emphasis is now on the emerging private sector to provide production and marketing services. Better services are needed to increase production (or arrest declining production) of traditional
smallholder crops and, where appropriate, to enable diversification into more profitable, highvalue cash crops (Coulter et al, 1999).Research by the Natural Resources Institute (NRI) in several Sub-Saharan African countries
has identified two important approaches that have the potential to deal with many of the
production and marketing problems of smallholder farmers (Coulter et al, 1999):
· Contract farming, often referred to as outgrower schemes
· Cooperation through formal cooperatives, farmer associations, or farmer groups
