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The Status of Contract Farming and Contractual Arrangements in Zambian Agriculture and Agribusiness
7 December 2005
Mwikisa L. Likulunga


Introduction

Contract farming in Zambia can be traced back to the late 60s and early 70s when the government set up Lint Company of Zambia (LINTCO) with the explicit objective of increasing the production of cotton through contractual arrangements with the small- scale farmers. This was followed by the setting up of Tobacco Board of Zambia (TBZ), also aimed at involving small- scale tobacco growers through out grower schemes. A significant non- government initiative was for sugar where Zambia Sugar Company Limited partnered with Commonwealth Development Cooperation (CDC) and Development Bank of Zambia (DBZ) by setting up Kaleya Smallholder Limited to contract smallholder producers to supply sugarcane to Zambia Sugar Company (ZSC) for processing. In the same vein the Coffee Board of Zambia (CBZ) was formed but it was soon realized that coffee did not take off quickly with small- scale farmers as a cash crop due to various reasons such as the long gestation period (3 years). Following the liberalization of the Zambian economy in the early 90s key players from the private sector came on board such as Lonhro (later succeeded by Dunavant), Clark Cotton, Agriflora (export vegetables), Cheetah and Bmzi (Paprika). Thus new commodities were introduced on contract farming arrangement but mainly through private sector driven initiatives.

The definition of contract farming is very well documented but may vary in coverage from country to country depending on prevailing circumstances (Eaton 2001, Williams 1996 and Watts 1994). In Zambia contract farming (or out-grower) may be defined as a range of initiatives taken by private and public firms to secure access to smallholder produce under forward agreements. Contract farming compels farmers to commit themselves to provide a specific commodity in quantities and at quality standards determined by the purchaser while the company commits itself to purchase the commodity at agreed prices and to support its production through provision of inputs (seed, fertilizers and pesticides) on credit and technical advice (extension services). Costs are recovered when the produce is sold, in effect making the contract non-transferable. The term out-grower scheme is often used interchangeably with contract farming (Hantuba, 2004).

This paper examines the status of contract farming in Zambia (in section 2), giving a synoptic overview of the main raw commodities produced under contract farming. It also examines the potential crops suitable for contract farming (in section 3) and gives an overview of contractual arrangements in place (in section 4). In section 5 the key issues that may affect the growth and expansion of contract farming are also examined and specifically the commercialization of small scale farmers. Finally the paper attempts to draw conclusions on the analysis of issues raised in section 6.

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