Exploratory Analysis of Contract Farming: Evidence from Ethiopia’s Barley Contract Farming

Abstract

The advent of multinational brewing companies to the Ethiopian brewery sector has contributed to the introduction of Contract Farming Arrangements (CFAs) among small scale malt barely farmers in various parts of the country. That is, subsequent to the arrival of multinational brewing companies to the Ethiopian business landscape, the major brewing companies have introduced CFAs with smallholder barley farmers from major barley growing areas of the country, particularly in Arisi, Sebeta, and North Gondar areas. However, no systematic, empirical study has been conducted to assess the ongoing contract farming practices implemented by those breweries in terms of progress, achievements and challenges encountered. Accordingly, this study endeavours to provide an original, empirically anchored evidence, on the prospects and challenges of the ongoing barley CFAs with particular focus on the perspectives of the smallholder barley farmers towards addressing existing challenges they face and in order to better delivery the CFA for the benefits both the smallholder farmers and the sponsoring companies involved by way of better organizational commitment. Towards this end, an exploratory, qualitative studies approach was employed to assess the concurrent barley CFAs that the prominent foreign and local breweries are implementing. In doing so, the study conducted in depth interviews with fifteen respondents, including six managers from three sponsoring companies and nine individual farmers’ representatives. This study has hugely benefited from the unique opportunity that CFA offers in terms of assessing the direct relationship between the sponsoring firms and the smallholder farmers involved. The study results show that there are diverse organizational support activities that the sponsoring firms are rendering to the smallholder farmers in the CFAs such as providing improved quality seeds, subsidizing prices of improved quality seeds, input credit, premium prices, and agronomical support in terms of training and technical assistance. Nonetheless, there are certain concerns raised by some of the smallholder farmers that deserve due consideration of the sponsoring firms, which can be addressed through further organizational commitments from the part of the sponsoring firms of the CFAs.