The South African Civil Society Information Service

Food Insecurity: Who Will Save Us, the Smallholder or Large-scale Farmer?

By Saliem Fakir · 27 May 2011

Picture: World Bank

Land reform in South Africa is back as a lead item on the government’s agenda. It is a tacit admission that the process over the last seventeen years was a failure. The issue must also be seen in the light of growing food insecurity, as food prices seem to only go up rather than down.

South Africa’s land reform policy is not only a way to redress past loss but also an attempt to diversify farming as mainly white farmers dominate farming. However, in opening up the space for new entrants, the policy has inadvertently favoured larger farmers.

This too has not been entirely successful.

For a set of different reasons, the balance between small and large farming is quite important. Something we still have to get right. And, how we deal with it going forward will also determine how we deal with food insecurity.

In the meantime, food insecurity grows the world over, especially in Africa, where agriculture has not quite performed the way it should have despite the huge potential for both rain fed and irrigated farming.

Just as an illustration of the global challenge: about 925 million people are undernourished. Developing countries account for 98% of this number, while a significant number live in sub-Saharan Africa.  Feeding an additional 1.4 billion people by 2030 or a global population of 9.1 billion people by 2050 would require food production to increase by 50%.

The race to feed the world adequately is on. The question is, who can best help meet this projected demand: small or large farmers?

In classic supply and demand economics, food inflation tends to improve food production as high prices incentivise more planting. But the beneficiaries tend to be large farmers and commercialised agribusiness because of access to finance, well-established logistics and connections with the market. They tend to respond more quickly to incentives from increased food price shifts.

However, there is considerable scope to look again at the role of smallholders in developing countries, especially Africa, where opportunity is ripe and also given that the success of large-holding ventures have not been as promising as initially thought.

There has also been a traditional bias against smallholding. In South Africa, smallholders have received little policy support, subsidies or preferential funding. The bias continues despite changes to land policy since 1994. Smallholdings are still thought of as being uneconomical and inefficient.

However, a report by Oxfam titled, Who Will Feed the World? The Production Challenge, seeks to dispel some of the myths around family run smallholding and small farming in general. The paper shows that in Vietnam and Thailand, family farming is highly productive and provides sufficient sources of income and food security for large rural populations.

Smallholding income can also be far more productive for rural areas than export orientated or foreign-owned large farms because any income earned, is spent in the rural area. This tends to stimulate other forms of rural economic activity besides simply just holding down the growth of unemployment.

However, the bias in favour of large-scale farming in Africa is being bolstered by a combination of factors acting in concert with each other.

Countries, such as China and Saudi Arabia, with significant sovereign funds are taking liberties by purchasing large chunks of land, most of which is in Africa, as they seek to feed their own growing populations and solve their own food insecurity. They tend to favour staple food or even cash crops that are capital intensive and largely labour saving operations.

Currently, Africa registers the lowest level of agricultural productivity in the world and this combined with the lack of infrastructure, large geographic spread and conflict, reinforces policy bias in favour of large-scale farming operations.

Large-farms tend to be associated with more productivity. They get favoured above investment in small-scale farming because foreign investors also inject significant investment in roads, irrigation schemes, power supply and making new market connections.

There is also that dazzle effect as big is seen as beautiful with the usual promise of lots of jobs and cash.

Increased migration from rural cities to urban areas in the next decade or so is expected to double. The demand for food will grow while the supply of labour in rural areas to plough land and harvest fields is going to diminish.

Proponents for the revival of agriculture in Africa take these as cues for the defence of large-scale farming.

They argue that modern agriculture – in terms of technology, markets and finance – favour larger holdings as they give better economies of scale, they are more productive, efficient and it is the only way to meet growing demand for food quickly.

Opponents argue that this model tends to favour corporate agribusiness. That agriculture becomes too commercialised and less attuned to a pro-poor agenda.

Large-scale farming can also displace smallholdings through consolidation or African governments desperate for foreign investment who will grant concessions that involve the removal of people -- raising questions about land rights and other entitlements that are eroded as a result.

Overseas sovereign funds that own these large tracts of land can also undermine national development objectives. They are not necessarily pro-poor even if they create jobs.

While Brazil has shown that large-farming, that is export orientated (cash crops such as soya), can boost foreign earnings and the country’s reserves. This is not often the case with farms owned by foreign sovereign wealth funds – depending on how governments set capital repatriation terms on earnings – as access to land does not translate into localising benefits in a substantive manner.

Sometimes, developing countries would be better off with a lesser evil. Large retail businesses, like supermarkets, that have strong supply chain ties and favour smallholder production can do more for smallholders as they are more likely to create beneficiation than foreign holding of land that is unconditional.

A retail food market that is decidedly pushed in a pro-poor direction can ensure that contract arrangements retain the smallholding character of African agriculture and help diversify crop production from staple to high value crops. They could bring financial stability through long-term contracts.

Sometimes large-scale farming makes sense for crops that have short shelf lives and require good storage and transport infrastructure so they can be dispatched quickly to overseas markets. In areas where a large in-migration of labour is required mechanised large-scale farming is probably better suited because labour intensity is not an option.

In the meantime, about five hundred million smallholders currently support two billion people. They are an important part of the agricultural system. However, most smallholders (close to 60%) either produce sufficiently for themselves or have to still purchase food to meet all their requirements.

The Oxfam paper argues for complementarity, while overwhelmingly suggesting that smallholdings can vastly improve the productivity and value for African rural economies provided the right types of policies and forms of support are put in place. The paper though, intriguingly, says little about co-operatives and nationally owned farms.

A pragmatic approach may be warranted in this debate. It is not, as numerous studies have also shown, an either/or situation. Smallholders can bring far more than just economic activity in rural areas as they also can act as safeguards over social capital. Large-holders whose aim is to see agriculture as an investment opportunity will always see it that way rather than protecting a way of life.

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