The relevance of business practices in linking smallholders and large agro-businesses in Sub-Sahara Africa

Abstract

Smallholders often have to certify according to international standards and produce under contract for large agro-businesses to access export markets. While mostly positive effects for the farmers have been found for contracts and certifications, often these effects do not persist because contracts fail and certifications are not renewed. We suggest that individual firm behavior is crucial for the long-term success of farmer-agro-business relationships. In this article, we use data of 386 smallholders in the pineapple export sector in Ghana, analyze them quantitatively and enrich it by a detailed case study of a large-scale agro-business in Ghana. The results show that, in an environment with weak contract enforcement, certification is an agent of change in farmer-agro-business relations and that building trust and aligning expectations of farmers and firms largely determine success. We conclude that individual firm behavior matters more than taken into account in previous research. Our case study shows that three ‘R’ – reliability, reputation and respect – constitute the basis for contract relationships that benefit all.