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The Politics of and Policies for Smallholder Agriculture

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					The Politics of and Policies for Smallholder Agriculture
Wilberforce Kisamba-Mugerwa, Director, International Service for National Agricultural Research (ISNAR) Division, International Food Policy Research Institute (IFPRI), Ethiopia

1. Introduction
The majority of the poor and hungry in the least developed countries live in rural areas and essentially depend on agriculture. Among all the regions of the world, Sub-Saharan Africa (SSA) has the highest levels of poverty and hunger and the worst human development outcomes (World Development Indicators 2004). Sub-Saharan Africa is the only region in the world where poverty is on the increase and per capita food production is declining. Alleviating poverty in most agrarian economies, including countries where the contribution of agriculture to gross domestic product (GDP) is relatively low such as South Africa, requires the development of smallholder agriculture. The forces of globalization and economic liberalization are exposing smallholder farmers, small- and medium-scale processors, and agribusinesses to new opportunities as well as new forces of marginalization. The rapid changes in the structure, dynamics and governance of food provision and agriculture places the continuing participation of smallholder farmers at stake. Various studies show a sharp contrast in poverty trends between SSA and other regions of the developing world. Available data from Chen and Ravallion (2004) and World Development Indicators (2004) and Johannesburg Summit (2002) indicate that the proportion of population living in poverty has fallen sharply in East Asia and quite remarkably in South Asia, while the proportion has increased slightly in SSA. According to the United Nations population growth projections (2004), the global population, which had reached an astonishing 6.1 billion people in 2001 could rise to more than 9 billion in 2050. This population boom will challenge the world’s capacity to feed itself and will create further stress on natural resources. The majority of this increase will be in developing countries, where people’s livelihoods, particularly the poor’s, depend heavily on small-scale farming systems. The Food and Agriculture Organization (FAO) of the United Nations estimates that in Sub-Saharan Africa, 64 percent of the population relies on agriculture as the primary source of income. The challenges facing smallholder farmers are multifaceted. Tackling these challenges requires a host of responses, including political stability and an environment conducive to farmers working in remote areas. This includes government policies and institutional reforms that facilitate efficient rural service delivery, development of infrastructure, and integrated rural development options. In addition, advisory services and development of markets are also needed. In this respect, government policies and institutions have an important role to play in supporting the success of smallholders. Government policymakers in developing countries would like to assist their people out of the poverty trap so they can enjoy a decent standard of living. Yet, despite efforts by national governments and cooperating partners to alleviate poverty and improve food security, the situation remains the same in many developing countries and is even deteriorating in some areas, particularly in SSA as shown in Figures 1 and 2.

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Figure 1. Share of People Living on Less than 1$ A Day (Percent).
70 60 50 40 30 20 10 0 1981 1984 1987 1990 1993 1996 1999 2001

East Asia & Pacific South Asia

Latin America & Carribbean Sub-Saharan Africa

Source: World Development Indicators, 2004; Chen and Ravallion, 2004; Johannesburg Summit 2002.

Figure 2: Hunger Rates in Developing Countries (percent)
40 35 30 25 20 15 10 5 0 1990 1995 2000 South Asia Latin America & Caribbean

Sub-Saharan Africa East Asia & Pacific
Source: FAO, cited in Johannesburg Summit 2002.

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This paper draws on experiences from eastern and southern Africa and from other developing countries. By using selected examples, an attempt is made to demonstrate that policies and politics have an effect on smallholder farmer’s agricultural growth. Policies need to be harmonized at local, national, regional, and global levels to benefit smallholder farmers. However, good policies alone will not necessarily create the desired impact, unless those policies are supported by political commitment in terms of financial resources and prioritized programs. Their implementation should also be closely monitored and evaluated to take corrective measures when needed to achieve the intended goals. Broad stakeholder participation, sufficient local implementing capacity, and effective coordination and accountability are vital for the successful implementation of policies that promote the smallholder farmer– led agricultural sector.

2. The Enabling Policy Environment for Smallholder Farmers
Politics and Policy Benjamin’s (2000) definition is that “politics [in a democratic society] is the cooperative activity we engage in to achieve the things we cannot achieve individually.” Benjamin also claimed that the heart of politics is relationships. Merriam Webster’s Collegiate Dictionary, in contrast, defines politics as “characterized by shrewdness in managing, contriving, or dealing.” In Sub-Saharan African countries, we see both aspects reflected in our political systems. Policy, on the other hand, is defined as a definite course or method of action selected by governments, institutions, groups, or individuals from alternatives and, in the light of given conditions, used to guide and usually determine present and future decisions (ILRI 1995). A policy is a set of coherent decisions with common long-term purposes. Government policies are often supported by special legislation. The terms policy, plan, program, and project are progressively more specific in time and place. In the real world, policies and politics are intertwined. Politics can positively contribute to the successful implementation of policies. Successful smallholder farming, therefore, requires political stability, as well as a conducive policy environment supported by appropriate strategies and programs to match the ever-changing social and economic environment. A conducive policy environment requires, at the bare minimum, the absence of conflict. Unfortunately, the majority of African countries are still experiencing some sort of conflict or political instability, as shown in Table 1. And yet, in Africa, relatively wide stakeholder participation in smallholder farming transformation through the national innovation systems have been put in place, if not fully utilized and achieved (see Table 2).

Table 1. Political Stability on the African Continent
Political Stability Pattern Conflict (immediate) Post-conflict (intermediate) Relatively stable or minor conflicts Countries Burundi, Chad, Ivory Coast, Democratic Republic of the Congo, Liberia, Rwanda, Sierra Leone, Somalia, Sudan, Western Sahara Algeria, Angola, Benin, Comoros, Equatorial Guinea, Eritrea, Ethiopia, Guinea, Guinea Bissau, Morocco, Mozambique, Nigeria São Tomé and Príncipe, South Africa, Uganda, Botswana, Burkina Faso, Cameroon, Djibouti, Egypt, Gabon, Gambia, Ghana, Kenya, Lesotho, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Namibia, Niger, Senegal, Seychelles, Swaziland, Tanzania, Togo, Tunisia, Zambia

Partial Sources: Addison (2003); SIDA (2003, 2004).

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Table 2. The Relative Importance to Stakeholders of the Functions of a National Innovation System
Actors/Stakeholders Policy and Resource Allocation Key function Regulatory (Policy Level) Shared function; some standards set by government, some by business Shared function; some standards set by government, some by business Advisory Core Functions of Government Financing Performance Human (Performance Resources/Capacity Level) Building Extensive Extensive Some involvement in involvement in involvement postgraduate training supporting both business and tertiary education institutions Infrastructure Provision

Government

Extensive involvement

Business sector

Some advisory function

Extensive involvement as source and recipient

Key function

Some involvement in postgraduate training; should be important in life-long learning

Some involvement

Some advisory function Other educational No No institutions involvement involvement Multipartite bodies Key function Advisory as advisors Organized civil Key function Advisory society as advisors Interested outsiders Some may Some have an important at advisory global level function Source: Paterson, Adam, and Mullin (2003).

Tertiary education

Key recipient Recipient No involvement No involvement Some have this as a key function

Extensive involvement Limited No involvement Limited function Possible partners

Key function Key function No involvement Some involvement Possible partners

Some involvement Some involvement No involvement No involvement No involvement

Government Policies and Smallholders Worldwide, there have been dramatic increases in agricultural production over the past 40 or 50 years. In Asia and Africa, much of this growth has been in smallholder agriculture (Farm Africa 2004). Farm Africa indicated that to alleviate poverty and foster smallholder-led, broad-based economic growth, smallholder farmers need to produce marketable surplus, be market-oriented (in terms of both the quantity and the quality of their products), intensify production systems, move toward greater specialization, and assume certain risks. To move toward commercialization, smallholder farmers require research and knowledgesharing systems that are responsive to their needs; access to markets, market information, and market intelligence; and effective farmers’ organizations, among other needs. The necessary conditions for smallholder agricultural growth are summarized in Figure 3, including the need for a favorable institutional and policy framework so smallholder farmers can take advantage of technological changes (Reardon et al. 1999).

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Figure 3. Necessary Conditions for Smallholder Agriculture Growth

Stimulate demand for agricultural produce

Macroeconomic (National economy) - Low inflation - Macroeconomic stability - Good governance - Reasonable prices - Transparent trading system

POLICY
requires requires

Develop supply capacity in smallholder production

Local economy (meso) - Locally responsive support services (govt, private, farmer organization,

Cross-cutting themes - Strong banking/financial system, political support, security of land tenure, good infrastructure, good communications, availability of food, reliance,

requires

Issues of concern - HIV/AIDS, GMOs,

Assume households have (greater or lesser) asset endowment, e.g., land, access to water, indigenous

knowledge

Household Economy (micro) - Market linkages - Access to finance - Access to insurance -Skill development - Access to technology

vulnerable people

Source: Farm Africa, 2004, p.12.

Government Policy for Land Tenure Issues In Sub-Saharan Africa, where more than a quarter of the population lives on small farms, the average holding is less than 1 hectare (Dunstan 2001). Moreover, plot sizes are continuously declining and becoming more and more fragmented. In many of these countries, inefficient land tenure policies, difficult contractual institutional arrangements, cultural norms, and rural population growth are preventing small farms from becoming large and efficient. In some countries, division and subdivision of land has approached the point where many farms are now too small to provide subsistence living for households. According to Larsen 2003, by 2050 farmers in Ethiopia would cultivate just 0.04–0.05 hectare, and in Uganda, just 0.01 hectare per person.

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According to Deininger (2003), in many developing countries, governments own much of the land that poor people work and occupy. Land also may be held under traditional systems that are not legally recognized, or the legal status of the land may be otherwise unclear. Virtually everywhere, land tenure systems discriminate heavily against farmers, with negative consequences for the entire society. In all these situations, lack of secure tenure undermines incentives for poor people to invest in their land—for example, for small farmers to build terraces. Deininger (2003) showed that increased tenure security increases the value of land and can greatly increase poor people’s wealth, in some cases almost doubling it. Poor people with secure land tenure are more likely to invest in the land. Where credit markets function, formal land rights can make it easier for poor people to borrow money to start a new business (FAO 2002; Mwakubo 2002; Deininger 2003). Many of these benefits are evident in Kenya (Mwakubo 2002). History has left some countries with a highly unequal distribution of land and other assets. High levels of inequality inhibit growth and make it very difficult for poor people to share in whatever growth occurs. In this case, government intervention to promote security of land tenure and market interventions can be a worthwhile investment in a country’s future. This calls for land reform and land tenure policies in Sub-Saharan Africa that will promote land markets and consolidation of land, as well as promoting the empowerment of people who can effectively adopt technology and investment and utilize arable land for agricultural production. Complementary policies are also required to economically engage those who move out of agriculture. In a number of African countries, land reform policies are determined by politics or are poorly implemented to the detriment of smallholder agriculture. Land reform policies should aim to develop smallholder production systems that are compatible with the sustainable management of natural resources (Zano 1999; Roth and Haase 2000).

Government Policy for Transaction Costs Issues In many cases, smallholder farmers are edged out of farming due to high transaction costs and fluctuating prices of their produces. Smallholders are usually engaged in primary production of highly perishable produces, with no storage facilities and quick means of transportation. Thus, government intervention to lower transaction costs in terms of transportation and infrastructure, such as roads and storage, may lead to high value addition and fetch better prices for producers. The transaction costs faced by rural market actors in Africa are much higher than in other parts of the developing world (Thorbecke 1992 cited in Germano, Mwabu, and Thorbecke 2001). The marketing chain is very long and consists of many distinct exchange configurations from the farmers to the consumers. Each of these distinct exchange configurations deals with its own item at different stages of processing and in different locations and involves different actors and environments. Each exchange configuration can be thought of as a node in a marketing chain. The more such nodes along the marketing chain, the higher the overall transaction. According to Pingali, Meijer, and Khwaja (2005), there is compelling evidence to suggest that increased transaction costs deter entry of small farmers into the market. Thus, interventions aimed at reducing transaction costs could encourage increased farmer participation in competitive markets. Koné and Thorbecke (1996, 303 cited in Germano, Mwabu, and Thorbecke 2001, 31) in a detailed study of sectoral investment priorities in Zaire, found that owing to chronic transport and marketing problems, about 40 percent of total production is consumed by the farmers themselves, while urban markets are increasingly supplied by imports. “The poorer the infrastructure, the less competitive the marketing systems, the less information is available, and the more risky the transactions, the greater the size of this band” . As discussion with the chief executive of Uganda Grain Traders Limited indicated, transporting agricultural produce by road and railway from Uganda to Zimbabwe and Malawi makes the Ugandan farmers out-competed by produce transported by sea from other parts of the world (e.g., Latin America and Asia) (Personal communication with chief executive of Uganda Grain Traders Ltd. 2005).

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Clearly, a reduction in the number of nodes along a marketing chain and a consolidation of trading activities would normally lower transaction costs. The extreme case is approximated by the American Supermarket Model, where all functions from production to consumption are vertically integrated into one giant corporation to minimize transaction costs (Germano and Thorbecke 2001). Government Policy for Collective Action by Smallholder Farmers Although introductory economic textbooks preach individualism, the safety and prosperity of smallholder farmers depend on collective actions to mitigate against the challenges experienced in farming industries. Collective action by farmers’ organizations becomes efficient and effective when they build on experiences, organize without political interference, and have clearly defined objectives to address self-felt needs. Unlike state parastatals that have become widely discredited because of their poor performance and inefficiency, smallholders’ organizations should be organized in such a way that they are voluntary, economically viable, self-sustaining, self-governed, transparent, responsive, and accountable to their members. Thus, policy support without political interference is needed to achieve these goals (World Bank 1 1995; International Conference on Agriculture and Development 2005). As historical experiences have shown, from 1913 to 1962, Uganda had very strong cooperatives. On attaining independence, the Ugandan government systematically introduced policies wherein the management of unions and societies were eventually replaced by government-appointed agents. Government policy interferences with the cooperative management systems weakened the movement and never prepared it to compete with the private sector. However, supporting collective action by smallholder farmers requires government support to promote producer-based organizations so they can develop business and management skills, establish information systems and connections to domestic and global markets, and create good governance practices and the infrastructure needed to connect small farmers to finance and input supply systems. Effective farmers’ organizations provide the necessary political voice to ensure that smallholders can articulate their demands. Government Policy for Liberalization and Private Sector Participation Under liberalization policy, the state no longer provides direct markets and service functions to smallholder farmers. This policy has both positive and negative implications, depending on how it is implemented. A case in Uganda: During Idi Amin’s regime, the marketing of commercial produces, such as coffee, tea, and cotton, had collapsed. By the 1980s, the government marketing bodies had become inefficient and could not purchase any crops. In such circumstances, smallholder farmers face problems in accessing markets at local, regional, and global levels in most developing countries (as shown in Figure 4).

The role of farmer organizations in relation to agricultural service provision is one of these required institutional innovations, which will lead to organizational innovations in agricultural services provision and other actors in the economic chain, as well as to social innovations in the markets. Farmer groups and organizations are not only instrumental in bringing farmers’ knowledge to the forefront in innovation systems, but will also have to enhance their influence on the formal innovation system and get involved in actual agricultural service provision (ICAD 2005).

1

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Figure 4. Barriers to Market Access by Smallholder Farmers

Regional/ Global Market

Consumer demand Supermarket preferences Standards: quality, labor, ethical trade agreements (e.g. WTO, EU)

National Market

Structure physical

Local

Disadvantaged groups remoteness
Source: adapted from Rachel and Julie, 2001, p.2. Note: There are two market-access constraints (1) physical: remoteness/lack of road, high transaction costs/low value-weight ratios; and (2) structural: inequitable and uncompetitive market relations, lack of innovative institutions, government-supported parastatal groups.

On the other hand, however, liberalization assumed that the private sector would provide financial services and undertake agroprocessing, wholesale, and trade. In many cases the private sector needs government support to build capacity and performance efficiently and effectively. In 2003, for example, cereals and legumes could not be exported to any other countries, such as those in eastern and southern Africa, even when there was a food deficit in those countries. To address this, the Ugandan government supported a consortium of private companies by providing warehouse facilities and access to working capital. Government support with appropriate policies—involving and encouraging private sector participation in market development—can help smallholder farmers access domestic and global market opportunities.

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Government Policy for Emerging Market Chains and Smallholders Marketing chains are also changing and becoming more integrated, and food quality and safety demands have increased. These changes are creating new opportunities for farmers involved in high-value agriculture to compete in and link to these markets. Supermarket standards and the ensuing marginalization of small-scale producers and suppliers is inhibiting smallholder farmers’ access to markets. In many cases, smallholders are not yet positioned to compete and access these markets, and many will be left behind if they are not properly organized to meet the standards and qualities required. According to IFPRI 2001, African farmers must become more competitive in export markets if they are to gain market share. Therefore, government policy instruments are needed to provide the necessary support services to enable smallholder farmers to effectively participate in emerging markets. Supermarkets could implement policies that require sourcing a portion of their produce from smallholders as an appropriate contribution to broad-based rural economic development (Bienabe and Sautier 2000). Government can introduce policies that induce supermarkets to train farmers in skills that require meeting handling standards for quality. Policies that are reflected in nontariff barriers, such as EurepGAP — particularly the traceability and equivalence rules — deprive farmers from benefiting from the emerging market chains opportunities. Government Policies for Decentralization and Support Services According to IFAD 1995, decentralization is an umbrella term for a number of related policy reforms under which central government agencies transfer rights and responsibilities to local institutions. Decentralization is a multidimensional process of shifting the focus of development away from central planning and bureaucratic government agencies and toward community-based participatory systems that use the full range of local public and private institutions. The political, fiscal, and institutional elements of decentralization are particularly important. Research findings suggest that each element needs to complement the others for effective results to be realized (World Bank 2004). In the case of public services, decentralization most often refers to • • • shifting power from central offices to peripheral offices having the same administrative structures; giving semiautonomy to field officers for routine decision making; and planning functions in accordance with the central government’s guidelines.

Ineffective, centrally administered local development programs, as well as weaknesses in rural policies and programs that address local needs, have led to the realization that poverty alleviation cannot be achieved unless the poor have a voice in the planning and implementation of schemes meant to help them. Decentralization’s merits include easier access to local information, greater sensitivity to local needs, and accountability to the local community. Smallholder farmers have not benefited fully from decentralization due to partial implementation, local politics that are counterproductive, and lack of accountability. There are a number of success stories, however, including the decentralization of research and extension in Uganda, where the National Agricultural Advisory Services program represents an ambitious plan to decentralize extension services by scaling up from six pilot districts to national coverage by 2008. An autonomous board coordinates the program at the national level. Local farmer groups are represented in subcounty and district levels, and farmer forums approve project proposals submitted by farmer groups. Funding for projects comes from the program funds, most of which are allocated to subcounty farmer forums. Based on this initial experience, efforts are underway to form an eastern and southern African network of service providers. Sustainable intensification of smallholder agriculture is crucial to create necessary surplus for the market. Smallholder farmers need access to appropriate technologies and support services to effectively

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participate in the transformation process. The agricultural research and development (R&D) system has been undergoing a series of transformations over the years. The reform agenda includes • • • • • • • redefinition of the role of government in agricultural R&D; decentralization and/or privatization of agricultural R&D activities; broader and active stakeholder participation (pluralism in service provision); increase in networks, partnerships, and new funding arrangements; separation of financing from service provision and research execution; orientation of R&D to be more outward looking and client- and impact-driven; and adoption of a “systems” perspective.

The government introduces policy reforms aiming to foster a more pluralistic, performanceoriented culture in a less-centralized public sector. The whole notion of extension has also changed, so that extension agents are now viewed as service providers and knowledge brokers. Nonetheless, the public sector still has a crucial role to play in providing services to smallholder, subsistence farmers who live in remote areas, far from markets. Decentralization has been used as an instrument to make services more relevant, to bring them closer to the end users, and to enhance ownership and empowerment (Crook and Sverrisson 2001; Jütting et al. 2004; African Governance Forum-V 2002). Government Policy for Emerging Technologies The use of modern biotechnology is on the increase in most parts of the world, except Europe and Africa. Concerns about the use of biotechnology in Africa are partially a spillover from concerns in Europe about food safety and environmental issues, as well as public mistrust of multinationals, which are often seen as being manipulative and unscrupulous (Eicher, Maredia, and Sithole-Niang 2005). If judiciously combined with other technologies to produce food and agricultural products and services, biotechnology represents an undisputable potential to increase production and productivity among smallholder farmers and holds serious promise for the sustainable intensification of agriculture. To fully benefit from new technologies, including biotechnology and information and communication technologies (ICTs], national governments should have a clear vision of what they expect from those technologies and how they can integrate them harmoniously with other options, including the development of conventional technologies. When dealing with the issue of agricultural biotechnology, countries in Sub-Saharan Africa need to address three major policy issues: appropriate intellectual property rights, biosafety and regulation mechanisms, and national capacities. There is also a clear need for an open exchange of technical information on genetically modified products, training for African scientists, and helping African nations develop their own policies to guide regulatory, legal, and technology transfer issues (Eicher, Maredia, and Sithole-Niang 2005). Government Policy for Globalization and Smallholder Farmers The idea of globalization was enthusiastically welcomed by many developing countries based on the assumption that it would provide access to markets in developed countries. Ibi Ajayi (2003) reviewed there are a number of reasons why globalization is being advocated in Africa at this time. The overriding reason is the poor macroeconomic performance in Africa, which is the resultant effect of various factors including colonial history, heavy dependence on primary products, macroeconomic policy errors, extraordinarily disadvantageous geography, ethnic fragmentation etc, and the advantages that Africa can derive from globalization. Africa’s economic marginalization is the resultant effect of isolationist policy and a closed economy approach to economic development. Africa’s exclusion from the global economy accounts for the fact that economic prosperity has eluded most of the continent. The appeal to open up its

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economy is based on a simple but powerful premise: economic integration will improve economic performance. Africa cannot and must not remain in a state of isolation as failure to open up its economy will deepen its rate of economic marginalization and further exacerbate the income disparity between it and the rest of the world. Additionally, globalization has the promise of new opportunities for expanded markets, the spread of new technologies and ideas, heightened competition as a spur to achieving world standards of efficiency, and ability to tap cheaper sources of finance at the international level. All these hold out the promise for increasing and greater productivity but also a higher standard of living. Collier (1997) suggests a number of developing countries, particularly in Asia, have taken advantage of globalization and have made substantial progress toward closing the income gaps relative to the industrial countries. While most other regions have derived significant benefits from the growth in trade and investment, thus fueling their structural transformation, Africa has been marginalized, as its share of world trade, investment, and output declined to negligent proportions. However, policies that restrict access to the markets of developed economies adversely affect smallholders, depriving them from fully exploiting these market opportunities. Debates surrounding biotechnology, biosafety, the World Trade Organization, and nonmarket barrier issues remain a puzzle to many smallholders, who require increased capacity and income to actively participate in these markets. In this respect, the global economy’s potential benefits can only be fully realized when the necessary complementary policies and institutions have been put in place by the respective government. African governments must put in place sound macroeconomic fundamentals and accelerate structural reforms that would make its economies less vulnerable to swing investor sentiments and capital flows. Thus, before smallholder farmers can benefit from globalization, government must initiate some policy changes. Africa’s growth prospects and its full integration into the global economy are dependent on its domestic policies, as well as developments at the international level. Government Policy and Harmonization Very often, policies are crafted without much consideration for their implications on other policies. In addition, given the forward and backward linkages between the agricultural sector and other sectors of the economy, such as health, education, water, infrastructure, and energy, there is a need for policy harmonization at the national level. Similarly, some policy frameworks proposed by developed countries have implications for smallholder farmers. There is a need to integrate and harmonize various policies to ensure that they do not have a negative impact on smallholder participation in emerging markets.

4. Conclusions
It is increasingly evident that in the majority of Sub-Saharan African countries, smallholder producers are there to stay for the foreseeable future. This paper argues that both politics and policies are intertwined and equally important for smallholder-led, broad-based economic growth. The paper advocates for policies that will lead to market-oriented, smallholder production systems that are compatible with sound natural resources management. Specific policies are needed to promote collective action by farmers, increase private sector participation, facilitate greater participation of smallholder farmers in emerging market chains, and capitalize on the potential benefits of biotechnology. Good policies are necessary, but not sufficient, to create the necessary transformation. To be fully effective, there must be political commitment so tha these policies should be followed up with effective implementation plans in terms of strategies, programs, financial resources, monitoring and evaluation systems to detect problems and avoid adverse unintended effects.

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