SCALING OF INCLUSIVE BUSINESS IN AGRICULTURE Wytske Chamberlain & Ward Anseeuw Washington DC, The World Bank, « Land and Poverty » conference March 2016

Overview  Methodology  Scaling concepts  Scaling in, out and up  Conclusion

Definition & Methodology A profit oriented partnership between a commercial agribusiness and low-income communities or individual, in which the low-income community or individual is integrated in the commercial agricultural supply chain as suppliers of land, produce or value-sharing employment with a particular aim to develop its beneficiaries.  Governance structure: unique hybrid organisations  Combination of instruments: collective organisation, supply contracts, mentorship, equity, lease/management contracts  Level of Inclusiveness  Dimensions: ownership, voice, risks, rewards

Scaling concepts  Scaling out  Increase number of beneficiaries within existing IB structure. Scaling out includes internal growth of the IB and replication of IB structure  Scaling up  Enhances the complexity of the IB through the application of additional instruments and stakeholders  Scaling in  Increases the level of inclusiveness for existing beneficiaries by intensifying dimensions of inclusiveness without changing overall IB structure

Status quo Benefic iaries Land ownerOperationOwner ship VoiceRiskRewardAver age Benoni1IndividualFarmer Winterveld145IndividualFarmer77687 TNS/MM87IndividualFarmer Mphiwe Siyalima1IndividualFarmer Seven Stars36IndividualAg partner46686 Gxulu Berries200CommunityCommunity + partner New Dawn/ Dinaledi 1,615CommunityAg partner44575 Mondi420CommunityAg partner BMB69IB THS3,000IndividualAg partner Katmakoep5IBAg partner Richmond1,615CommunityAg partner

Status quo  No direct relation between scale of IB and level of inclusiveness  Inclusiveness rather impacted by  Land ownership  Operational activity of beneficiaries  Highest potential for individual, active smallholders

Scaling in  Voice  Collective organisation can increase voice but at expense of individual  Equity = representation in BoD  Contracts/lease agreements compromise short-term decision making  In practice limited by  Entrenched power disparity  Lack of financial capacity leads to dependency on commercial partners  Capacity and capacity development

Scaling in  Rewards  Mentorship + equity increase skills  Collective organisation allow market access threshold volume  Contract and lease stabilise financial rewards  In practice limited by  Individual share of shared rewards small  Required investment into IB  Commercial partner not driven by inclusiveness

Scaling in  Ownership High for active smallholders  In practice limited by Lack of financing for individual smallholders Collective ownership does not stretch beyond land  Risks Alleviated by IB participation Indicates lack of inclusiveness  In practice Collective organisation: internal & external management Grant funding manages financial risk

Scaling out  Organic growth  Visible through: land under production, asset accumulation, turnover, number of beneficiaries  Limited by: financing, commercial viability, value proposition for smallholders  Replicability  Unique hybrids limit exact replication  Essence of models have been duplicated  Reluctance by commercial partners

Scaling up  Drivers for multi-instrumental IBs:  To overcome limits of individual instruments  Experience of previous IBs  Evolution of existing partnership  Contractual end-date  Capacity development/financial independence  Increases complexity but not necessarily inclusiveness  In practice development towards less inclusiveness

Conclusion  Impact of IBs depends on scale and level of inclusiveness  Outcomes highly diverse  Highest inclusiveness potential for IBs working with individual smallholder farmers, but hardest to reach size  IBs to be part of wider strategy for structural transformation

Thank you! Wytske Chamberlain & Ward Anseeuw University of Pretoria / CIRAD