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Changes in the governance of global value chains of fresh fruits and vegetables:
Opportunities and challenges for producers in sub-Saharan Africa

Temu A.E and N.W Marwa1
Contact: ,

South Centre

June 2007

SARPN acknowledges South Centre as a source of this document:
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Executive summary

Horticultural trade, especially fresh fruits and vegetables from Sub-Saharan African to European market, has received a great deal of attention over the past decade due to the rapid and sustained growth of its exports to Europe. This impressive growth has undoubtedly contributed to increased national incomes and has reduced rural poverty in Sub-Saharan Africa. Good examples in this respect are Kenya, South Africa and, to some extent, Zimbabwe. Despite this growth, the inclusion and proportion of the rent obtained from this lucrative business for smallholder farmers, who in the past used to be the major players, have been worsening over the span of the horticultural trade. One of the major contributing factors is the recent changes and dynamism of the global governance of fresh fruits and vegetables value chain. The changes of governance of global value chains for FFV from the market based coordination to the explicit vertically integrated coordination, coupled with other factors such as stringent phytosanitary measures, private standards like EurepGAP, and the increased consumers’ demand and choices, have led to the exclusion of smallholder farmers in the value chain because of their failure to comply with different requirements and standards. This poses a potential threat to the efforts of addressing chronic poverty and well being of the rural poor in the region.

Thus, the purpose and scope of this paper were: to investigate, compile and analyze concrete evidence regarding the nature of changes in the governance of fresh fruits and vegetables value chain and their causes; to identify the opportunities and challenges stemming from these changes and what determine success and failure in the new future governance and architecture; to see how the competitive advantage of FFV producers is affected by the changes in the governance of FFV value chains; to discuss the implication of the changes for the aspirations of economic diversification of commodity dependent developing countries. Finally, the paper provides recommendations on copping mechanisms, private sector strategies, and public policy responses that would enable developing countries’ producers, taking into account ownership and equity considerations, to appropriate a fair share of the rents in the FFV value chains.

Our investigation has uncovered ample evidence that fresh fruits and vegetables trade contribute substantially to the GDP of several SSA countries involved in the business; and that FFV is a better agricultural investment alternative to complement or substitute the deteriorating benefits from traditional agricultural exports like cotton, coffee, sisal and tea. Nevertheless, in the past few decades there has been a remarkable transformation in the governance of the global value chain in the fresh fruits and vegetables industry. The complex operational difficulties of the traditional arm length market relationship of fresh fruits and vegetables trading, and other inherent weaknesses like huge number of players, leading to low profit margin across the chain, have been some of the driving forces behind these changes.

The changes of GVC into an explicit coordination which is a special form of hierarchy based global governance of value chains in FFV has substantially reduced the number of players to almost two or in some special cases one. The supermarkets and large retailers have bypassed the European based wholesalers and they are now directly working with exporters from Africa. On the one hand, this entails the increased share in the rent obtained among the remaining few players in the value chain; but on the other hand, it entails the exclusion of some players including smallholder farmers who fail to meet the standards and set conditions due to lack of capital, technology and technical know how. The analysis of global value chain of FFV has paved a way towards the exploration of the consequences due to changes on the structure of the value chain, the distribution of functions within it, and the inclusion and exclusion of different agents in the chain.

The changes in the FFV global value chains have opened some opportunities to medium and large-scale farmers and exporters in Africa and to supermarkets and large retailers in Europe but leaving the smallholder farmers (which form the majority of the population in developing countries) in the bad economic state. For Europe, the most affected people are the wholesalers of FFV, the agents and smaller retailers who were depending much on the wholesalers because the European based wholesalers are skipped by the current governance of the value chain.

Apart from the marginalization of smallholder farmers in the FFV value chain in Sub-Saharan Region, other changing patterns include: high transaction costs, costly access to market and technical information, inadequate infrastructure, limited access to credit, limited management skills and capacity, stringent legal, commercial, and private standards.

On the other side, the opportunities available for African producers include favourable regional and international protocols like the regional and international preferential market access, favourable agro-ecological conditions and the EU market trends, and the increased consumer demands for tropical produce like fruits.

  1. Associate Professor and Assistant Research fellow respectively at the Department of Agricultural Economics and Agribusiness, Sokoine University of Agriculture.
    P O Box 3007 Morogoro, Tanzania.
    Correspondence Email: ,

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