Institutional models for accelerating agricultural commercialization: Evidence from post- independence Zambia, 1965–2012

Abstract

Introduction The process of agricultural transformation involves a shift from low-productivity, subsistence farming to high-productivity, commercial agriculture. These changes in agriculture, in turn, trigger sweeping structural changes that ripple through the broader economy. At the macro level, agricultural transitions pave the way for economic diversification into services and manufacturing. At the household level, commercialization enables agricultural specialization as well as diversification into nonfarm activities. Spatially, agricultural productivity growth and commercialization contribute to increasing geographic concentration of population and economic activity in urban centers. The widely varying institutional contexts within which agricultural transitions unfold help to shape agricultural trajectories, with consequently important implications for rural households and the macro economy. Commercialization and agricultural productivity advance hand in hand during this transition. Productivity gains enable farmers to generate surpluses for sale and reduce unit production costs. Market access provides the conduit for monetizing productivity gains, permitting household specialization and kick starting the structural transformation process. Yet one component without the other will not suffice. Productivity gains without markets lead to temporary production surges and price collapses. Markets without increased farm productivity remain moribund, with farm households unable to generate surpluses for sale at competitive prices. As a result, two sets of institutions become crucial for stimulating agricultural growth – those that affect farm productivity and those governing market development. In practice, substantial variations in the structure of farmer organizations, in the political power of farm and agribusiness lobbies and in governments’ propensity to intervene in agricultural markets give rise to a wide variety ofleading actors and institutional arrangements driving successful agricultural growth trajectories (Mosher 1966; World Bank 2008; Haggblade and Hazell 2010). Some governments prefer public management of agricultural input and output markets (Kherallah et al. 2002). Others supply public goods such as research, roads regulatory frameworks and then let private agribusinesses manage market transactions. Over time, agricultural policies and institutions change – sometimes abruptly (Jayne et al. 2002). Emerging commercial farmers must, therefore, continuously adjust to changing circumstances as they navigate the pathway to higher productivity commercial agriculture. To understand how differing institutional frameworks influence farmer opportunities and agricultural trajectories, this chapter examines three commercial crops – maize, cotton and horticulture – with widely different institutional support systems. Discussion focuses on Zambia, where a rich institutional landscape offers widely contrasting models and where detailed rural household survey data facilitate empirical exploration of smallholder trajectories. Zambia’s maize, cotton and horticulture farmers all enjoy large commercial markets. But market structures, credit systems, extension support and government policies all differ markedly. By tracing smallholder transitions within each commodity subsector, this chapter aims to understand the processes underway and to compare alternative institutional models for increasing agricultural productivity and commercialization. Using a mix of quantitative and qualitative methods, the analysis aims to identify personal characteristics and institutional factors that enable smallholder transitions to high-productivity commercial agriculture. In doing so, the chapter traces two broad agricultural pathways out of poverty: a low road, involving a two-generation transition via low value but well-structured markets, and a more restrictive high road, which offers a steeper ascent, enabling prosperity within a single generation, but requiring commensurately higher levels of financing, management and risk.