Problem Statement

Given the small volume-nature of informal MSME production, commodities often undergo a process of rural aggregation, at least some warehousing and bulk transport. High numbers of intermediaries in agricultural value chain means that commodities from different sources are often mixed together. Irregular storage standards between the variety of producers and intermediaries, such as traditional storage shelters, can fail to keep out produce-eating pests, nor control humidity and temperature variability, putting entire consignments of bulked commodities at risk of failing to meet required standards for formal export trade.

Agribusiness facilities (such as exporters and commercial processors) are also often located far from the sites of production and have specific moisture and quality standards before they can accept any agricultural produce. Similarly, at official border crossings, phytosanitary certificates are often required by the destination country to prove that the consignment has been inspected by agronomists and is free from harmful pests and plant diseases. Commodities may also sometimes be inspected at the border (for a fee), or in the absence of available equipment, may require samples to have been inspected beforehand by agronomists – typically only available in the originating country’s capital.

Problem Statement

High transfer costs associated with small volume transactions limit the market opportunities available to informal MSMEs. These transfer costs relate to the transport fees to cover long distances, market search costs and official trade costs, such as duties and tariffs, among others. With relatively smaller volume production, these transfer costs eat into a large share of MSME business profits, minimizing reinvestment and MSME opportunities to scale.

For informal MSME cross-border traders, small cash reserves mean they are unable to purchase stocks in bulk and must make frequent trips across the border – exposing them to the risks of corruption, harassment and insecurity. For farmers, who are frequently leveraged throughout the growing season, the revenues from small volume outputs leave little after paying seed borrowing fees.

Moreover, given that 95 percent of MSMEs depend solely on personal resources and loans from friends and relatives, credit from suppliers and peer lending, unexpected shocks to business revenue (made more pertinent with climate change) can have detrimental and community-level effects.

Problem Statement

Estimates for post-harvest losses in Africa vary between commodities but are commonly between 20 and 40 percent. Losses are concentrated further up the value chain, either on the farm or in processing and distribution. For agricultural goods, most commodities are lost during post-harvest handling and storage on-farm, while loss of fresh produce, meat and seafood is concentrated in processing, packaging and distribution.

One factor related to on-site post-harvest losses are the few opportunities producers have to preserve, process, mill, and add value to their production of raw commodities. While some farmers engage in on-site drying and storage before selling, commercial processing facilities are often concentrated near urban centres or major export ports. Many remote towns have traditional milling facilities, using stone grinders, mortar and pestle or steel plate grinding, which rarely produce outputs at the quality necessary for formal sector trade. Commercial millers, on the other hand, are often not accessible to MSME farmers because of producers’ small-volumes, relative distance and high transport costs.

The issue of access to value-add processors is more significant for commodities with faster spoilage times. Many livestock and animal products are impacted by the variability of seasonal climate conditions. Pastoralists, in particular, depend on a regular rainy season for water resources, nutrient-rich pastures, for consistent production. Moreover, women are often predominant in agricultural value-chains with faster spoilage times (e.g. fruits), compared to male dominated agricultural commodities (e.g. maize).