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Monday, 22 February 2021 19:07

Demystifying agripreneurship

Written by

THE CONTEXT

Traditionally, agriculture is seen as a way of life especially in countries where farmers are mostly focused on doing things better rather than doing new things.

However, the situation is changing rapidly mainly because of the following reasons:

  • Rising levels of literacy and education
  • Economic liberalization and commercialization
  • Deregulating or opening of agricultural markets
  • Better means of communication and transportation.

With the changing market dynamics, many choices are available to the consumers. The agricultural producers and especially the Agricultural companies have to adapt increasingly to the market demand, changing consumer habits, enhanced environmental regulations, new requirements for product quality, chain management, food safety, sustainability, and so on (Lans et al 2011).

 

WHAT IS ENTREPRENEURSHIP?

Entrepreneurship, value chains and market linkages are terms that are being used more and more when talking about agriculture and farming. Many small-scale farmers and extension organizations understand that there is little future for farmers unless they become more entrepreneurial in the way they run their farms. They must increasingly produce for markets and for profits.

Becoming more entrepreneurial can be a challenge for small-scale farmers. They will need help from extension workers and other institutions.

 

What is an entrepreneur? An entrepreneur is someone who produces for the market. An entrepreneur is a determined and creative leader, always looking for opportunities to improve and expand his business.

 

An entrepreneur likes to take calculated risks, and assumes responsibility for both profits and losses. An entrepreneur is passionate about growing his business and is constantly looking for new opportunities. Entrepreneurs are also innovators. They always look for better and more efficient and profitable ways to do things. Being innovative is an important quality for a agripreneur, especially when the business faces strong competition or operates in a rapidly changing environment. 

 

FARMERS AS ENTREPRENEURS

Can small-scale farmers become entrepreneurs? Yes.

Small-scale farmers all over the world have shown a remarkable ability to adapt. They look for better ways to organise their farms. They try new crops and cultivars, better animals, and alternative technologies to increase productivity, diversify production, reduce risk – and to increase profits. They have become more market oriented and have learned to take calculated risks to open or create new markets for their products. Many small-scale farmers have many of the qualities of an entrepreneur.

For small-scale farmers to become entrepreneurs they need all of these qualities and more. They need to be innovative and forward-looking. They need to manage their businesses as long-term ventures with a view to making them sustainable. They need to be able to identify opportunities and seize them.

Some small-scale farmers do have these qualities, but they still focus on maintaining their traditional way of life. Their production decisions are based on what they need -- not on what is possible.

The agripreneur produces a clear picture in his mind of what is possible and the future he wants.

He knows that what is possible is determined by the market. The agripreneur is always looking for new opportunities. He knows that new opportunities are found in the market. The agripreneur wants to make profits. He knows that profits are made in the market. An entrepreneurial farmer has the initiative, drive, capacity and ability to take advantage of opportunities.

 

Smallholder farmers usually farm for one of four reasons:

  • Exclusively for home consumption with rarely any surpluses produced;
  • Mostly for home consumption, but with the intention of selling surpluses on the market;
  • Partly for the market and partly for home consumption; or
  • Exclusively for the market.

 

On the first rung of the ladder are farmers who farm exclusively for home consumption. If there is a surplus, they will sell it on the market, but this is very rare. Often these farmers are struggling with the basic survival of themselves and their families. They usually lack security in terms of health, water, food and shelter. They are rarely in the position to commit their minds and bodies to entrepreneurial tasks. While they may be entrepreneurial in spirit, they usually lack the opportunity to farm as entrepreneurs.

On the second rung are farmers who have greater opportunities that allow them to produce beyond just surviving. These opportunities are still very limited. However, by changing their resource mix and overcoming access and risk issues, opportunities can be expanded. Such farmers are sometimes viewed as ‘preentrepreneurial’, requiring support to move into a more independent position. At this level the farmers are not ‘entrepreneurs’ in the true sense and neither are they truly market-oriented. They have a greater appreciation of the market and have expanded their survival farming to include some economic activities. They are just starting out on the path towards developing profit-driven farming businesses. These farmers do yet see their farms as businesses. Long-term investment is not yet a priority. They are hesitant about diversifying to higher value products. They are comfortable selling surpluses of their food crops. Shifting to cash crops is too extreme and involves risks that they are not willing to take.

The third rung represents farmers who understand the value of farming for the market, but are often limited by access to finance, labour or market information. The elements are all there, but they cannot risk family food requirements without greater certainty of income from cash crops. The choice between producing primarily for the market with some produce utilised for home consumption or primarily for home consumption with some produce sold in the market depends on their circumstances and their willingness to take risks.

Farmers on the fourth rung are fully market oriented. Their primary reason for farming is to make profits by producing for the market. They are interested in profits, not food production. To be successful at market-oriented farming, the farmer needs greater farm management and entrepreneurial skills.

 

THE ENTREPRENEURIAL ENVIRONMENT

Being an entrepreneur is a way of life and a way of looking at the world. Entrepreneurs enjoy independence and freedom. They decide for themselves what to do and when to do it. Entrepreneurs also face risks, work under pressure and are immediately accountable for the outcomes – good or bad – of their decisions.

While agripreneurs are free and independent, they do not work alone. They operate in a complex and dynamic environment. They are part of a larger collection of people including other farmers, suppliers, traders, transporters and processors, each of whom has a role to play in the value chain.

For farmers to cope with the risks they will face in the complex world in which they compete, they need to develop an entrepreneurial spirit. A farmer with an entrepreneurial spirit energetically, enthusiastically and carefully makes many different decisions about his farm in the context of the value chain that influences the profits of the farm business. This is all happening in a dynamic, ever-changing and uncertain setting.

To make sure their farm businesses develop and adapt in response to these changes, farmer entrepreneurs need to:

  • Stay focused on their purpose;
  • Do their best to turn every event to their advantage;
  • Seize every opportunity and make the best of it;
  • Make the whole system work in their favour.
  • This is living in the spirit of entrepreneurship.

 

The ‘way of life’ of a AGRIPRENEUR

  • Freedom in making decisions about the business and the relationship with family
  • Control over what has to be done, when and in what order
  • Working alone often in solitude
  • Coping with a wide range of managerial and ‘day to day’ tasks
  • Lives with uncertainty; if you can’t generate profit you may not survive in the future
  • Risking personal assets and security
  • High level of responsibility and risk of failure
  • Lives with an inability to control the actions of stakeholders upon whom the success of the business depends
  • Develops trust and alliances with other stakeholders where mutual benefits exist
  • Works long and irregular hours to meet demands
  • Closely interwoven family and business life
  • Social status is linked to the success of the business
  • ‘Learns by doing’ under pressure from stakeholders, by solving problems, experimenting, seizing opportunities, and learning from competitors

 

GROUP ENTREPRENEURSHIP

Entrepreneurship can also occur among groups of farmers who want to form a business together. These farmers have similar goals and objectives and a willingness to share the benefits and risks. Ownership and control of the enterprise are divided among the group members.

The group is the financial investor, employee and risk taker.

Group entrepreneurship is particularly attractive among those farmers who would not be able to start an entrepreneurial business on their own. Often these are the poorest farmers in the community or the farmers with the weakest links to the economy. They seek security through group activities which allow them to pool their resources, share the risks and develop a social ‘safety net’.

 

To be successful, group enterprises must have the same entrepreneurial skills and spirit as individual entrepreneurs. Group members need to have the desire to be self-employed, the motivation to undertake something new, the willingness to take calculated risks and the mind-set of always looking for opportunities. They must be willing to work together in a common productive activity and to take full responsibility for the outcome.

 

There are many advantages to group entrepreneurship. Key among them are:

  • Group solidarity
  • Greater power from pooled resources
  • Drawing on shared life/business experience
  • Protection from shared ‘enemies’ in the form of exploitive traders and markets
  • Drawing on the common desire to progress and advance economically

 

These form a good foundation on which to build a group enterprise. But despite these advantages there are also pitfalls:

  • Instead of only one farmer failing, the whole group could fail with serious financial and livelihood repercussions.
  • Given the initial and prolonged need for mentoring, there is a real risk of creating dependency; this risk increases if the extension worker is paternalistic in his approach.
  • The generally low economic status of the members there may create pressure to spend whatever money is earned. Saving, which is needed as an investment to grow the business, may prove challenging.
  • The collective decision-making process and the unclear roles and responsibilities which are often a cultural standard, may not suit the needs of an entrepreneurial business which needs clearly defined roles and decision-making processes. To meet these challenges will require developing strong managerial capacity and a system of discipline within the group. When a group is able to apply its rules, even against powerful members of the group, it shows signs of true group entrepreneurship.

 

ENTREPRENEURSHIP DYNAMICS

The idea of entrepreneurship is complex. When a farmer introduces a new enterprise into his farming system, there are different stages of development that the enterprise goes through. The skills of the farmer must also change and develop to meet the management demands of the

enterprise.

 

The development of a farm enterprise as a business occurs in five phases:

  • Establishment
  • Survival
  • Early growth
  • Rapid growth
  • Maturity (and possible decline)

 

Establishment: The organisation of the business at this stage is usually quite simple. Challenges relate to market potential, the motivation of the farmer, the availability of resources and basic business skills. Farmers require skills to negotiate with banks and other agencies in order to get the assistance they need to establish their new enterprise. The key questions are:

  • How can this become a profitable business enterprise?
  • How will it impact on my farm as a whole?
  • How can I establish a market?
  • Do I have enough money to cover the cash demands in setting up the enterprise?
  • During this stage, the organisation is simple and the farmer has to do most everything himself. The focus is on making sure the product is produced, gets to market and is sold. Since it is the first time he is producing this product, everything is new. Many new enterprises do not survive the first season of production and marketing.

Those that do, enter the survival stage.

Survival: Starting a new enterprise shows that the farmer has some entrepreneurial skills. Surviving the first stage shows that the new enterprise has short-term viability.

In the survival stage, the focus is on the relationship between the income earned and the costs entailed. The key questions are:

  •  Can I generate enough income to break-even in the short-run and to replace capital equipment?
  •  Can I generate enough income to expand or diversify production according to market demands to ensure long-term viability?

Many surviving enterprises stay in the survival stage. The farmer will need to consider if he wants to do the work to keep growing. If he does, he will need to figure out how to build on the success of the enterprise to move to the next stage.

Early growth: If the farmer decides to take his new enterprise beyond survival, the enterprise needs to grow. To achieve this, the farmer needs to develop a broader product and buyer base while ensuring that the farm business remains profitable. He must also ensure that farm operations are efficient, find the information needed for better management and hire more skilled staff to cope with the increased production, marketing and management activities. While the organisation may still be simple, growth requires more managerial skills and qualities to cope with the more complex farm management activities and decisions.

Rapid growth: Once the farm enterprise is working as a well-integrated farm business, it is in a position where it can achieve rapid growth. One way to grow is by increasing the amount of land planted and/or raising more livestock. This will give more product to sell. 

Another way is to add value to the product by processing it and/ or packaging it. During the rapid growth stage the farmer is likely to have to delegate some managerial responsibilities.

He will need to change the way communication is done, and to make some tasks routine. To do this, the farmer will need even broader managerial skills. As the scope of the farm business increases, the entrepreneurial and managerial skills of the farmer must also increase.

Sometimes a small-scale farmer may prefer to remain small. When his farm reaches the size that satisfies his requirements and purpose for farming, he may prefer to keep the business at that level. But making this decision must not be because of a lack of knowledge, skill or opportunity. maturity (and possible decline): Eventually, the farm business reaches maturity. This means that it stops growing or expanding. It reaches a point of balance where land size, market opportunities and the scope

of activities are in balance with the skills and vision of the farmer. As long as the farmer and the farm business continue in this balance the farm business will continue. If the enterprises are profitable and the farm is well managed, the business can be sustained

However, a thriving business will still face challenges and threats. There might be many competing farmers selling in the same market. Other farmers may have newer, more efficient methods of production and processing that give them an advantage. The farmer has to be entrepreneurial in adapting to these threats; innovating and developing strategies to ensure the farm business remains profitable and viable.

Inevitably, the farmer will need to decide about the future of his thriving business. Will the business outlive the farmer? Will he sell the business or hand it over to another family member? Should he close the business down?

It is important to remember that, in most cases, farmers are not starting with a completely new farm. They have working farms that already have one or two enterprises. Aspects of their farms may already be in the post-survival stages – some even in the maturity stage. Each new enterprise that is introduced, however, will follow these stages.

CHALLENGES

A few examples of how agripreneurs have grown their farm businesses have been discussed.

These include increasing the area under production and processing and packaging to add value. They also include handicrafts and agro- eco-tourism.

However agripreneurs have developed their farm businesses, they will face many challenges.

Agripreneurs need to be as ready as they can to meet these challenges. Some of the more significant challenges are:

  • Market-related risk
  • Access to finance and credit
  • Access to information
  • Low bargaining power
  • Vulnerability to economic shocks
  • Access to training and related challenges

BY

David Kahan

Senior Officer, Agricultural Innovation and Extension FAO.

 

 

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