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Agribusiness management skills for agricultural smallholders in Africa

par Mohamed Ali Trabelsi
Technical University of Munich - Master of science Agrarmanagement 2020

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Technical University of Munich

University of Applied Sciences Weihenstephan-


Agribusiness management skills for

agricultural smallholders in Africa

In the master's program Agrarmanagement

in cooperation with the

Department of Life Science Systems

Chair for Governance in International Agribusiness

Mohamed Ali Trabelsi

6th semester

Freising, the 30/11/2020

Supervisor: Dr. Sebastian Rahbauer


Table of contents

List of figures II

List of tables II

List of abbreviations III

1 Introduction 6

2 Definition and objective of the Management Task 7

2.1 Management Task 7

2.2 Research questions and Hypotheses 7

3 Material and Methods 8

3.1 Farmer Business School (FBS) 8

3.2 Current Production (Current Scenario) 11

3.3 Improved Production (Improved Scenario) 11

3.4 Material 12

3.5 Methodological Approach 14

4 Result Analysis 16

4.1 Cause and effect analysis 16

4.2 Comparative analysis 20

4.2.1 Productivity 20

4.2.2 Profitability 20

4.2.3 Stability: 31

4.2.4 Diversification 32

4.2.5 Sustainability 33

5 Discussion and Interpretation 35

6 Conclusion 37

Bibliography 38

Annex 40


Information regarding GIZ, GmbH. 40

Information regarding ABF 41

Macroeconomic Analysis 42

List of figures

Figure 1 Overview of the FBS modules 9

Figure 2 Dissemination of FBS in Africa 10

Figure 3 selected FBS Training 12

Figure 4 Google Maps. (n.d.). location of the municipality el Oued 13

Figure 5 Ichikawa Diagram (Ishikawa 1990) 15

Figure 6 Cause and effect Analysis for the farm 16

Figure 7 Classification of Agribusiness Management Skills 18

Figure 8 Overview of production costs and profit margin 23

Figure 9 comparison of onion production costs and profit margin 25

Figure 10 comparison of peanut production costs and profit margin 26

Figure 11 Summary percent change of the 3 activities 26

Figure 12 share of total output Value 27

Figure 13 Potato Gross Margin evolution for both scenario 28

Figure 14 Unit cost evolution for both scenario 29

Figure 15 Depreciation of Mini-pivot and Plumbing 33

Figure 16 PESTEL Analysis for the Smallholder 44

List of tables

Table 1 Productivity of main and secondary product 20


Table 2 Potato production Comparative Analysis 22

Table 3 Onion Comparative production Analysis 24

Table 4 Peanut production Comparative Analysis 25

Table 5 comparison of Labor productivity & Capital productivity 29

Table 6 Additionall job created using GAP 30

Table 7 Production risks taken into account 31

Table 8 The gross Margin for 5 years including risks of the 3 crops 31

Table 9 Calculation of the Coefficient of Variation (CV) for the improved Scenario 32

Table 10 Calculation of Simpson's Diversity Index for both scenario 32

Table 11 Mini-pivot Investment Inventory 33

Table 12 End-of-year Operating Statement for 3 crops 34

Table 13 Measures for Whole-farm Evaluation over 2 Years 34

List of abbreviations

ABF Agribusiness Facility for Africa

ATVET Agricultural Technical Vocational Education and Training

AU African Union

BASF ''Baden Aniline and Soda Factory (Badische Anilin und

Soda Fabrik)

BMZ German Federal Ministry for Economic Cooperation and

Development (Bundesministerium für wirtschaftliche Zu-

sammenarbeit und Entwicklung)

CV Coefficient of variation

CNIS National Center for Informatics and Statistics Algeria

D Straight-line depreciation

DI Simpson's diversity index


DZD Algerian Dinar: Currency

FAO Food and Agriculture Organization of the United Nations

FBS Farmer Business School

GAP Good Agriculture Practices

GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit


GM Gross Margin

IMF International Monetary Fund

i-th species

L Expected total years

MADR Ministry of agriculture and rural development Algeria

MSME Micro, Small, and Medium Enterprises

ni Number of individuals

N Population of all individual

ONS National Office of Statistics

pp Potato Price

PV Present Value

ROI Return on Investment

RV Residual Value

SD Standard deviation

SYRPALAC System for large consumption agricultural products

X Observation

S Number of activities

SME Small and Medium Enterprises

TR Total Revenue

UC Unit Cost

VC Variable cost

Y Yield



1 Introduction

In the Algerian Sahara, the production of early vegetable crops has been made possible by climatic conditions, sufficient land and groundwater resources, a labor force adapted to these hard-climatic conditions, and the increasing national demand (Dubost and Larbi 1998).

Alongside the growing date palm and figs in the region Biskra, the region El Oued has become the leading potato producer in the country and has produced 1.1 million tons of potatoes in 2014, representing 35% of the national production. Potato is cultivated mainly by small farmers in circular plots. It is the main source of income for these investors and their families. Some farmers practice this production in monoculture (growing and off season), others have led to crop rotation (potato, onion and Peanut). If the famers are producing in monoculture, yields are low and face rapid drops, which can reach 50%. (Oueld Rebai et al 2017).

Yield is not the only problem, smallholders face some issues such as the lack of agronomic skills, market knowledge and efficient use of modern technologies. Because of these inconvenience as well as the fluctuations in the market prices and climate change, smallholders cannot boost their income and sometimes, they make losses.

To address the lack of agronomic skills, organizations and companies of German Development Cooperation started a program in 2010 in Africa and have implemented Agribusiness training approaches at a large scale. (GIZ 2010)

Accordingly, farmers will be equipped with knowledge about entrepreneurial skills to optimize their production and maximize their incomes. Additionally, they will be able to manage their budget for household expenditures, education of their children and for the improvement of their Enterprises. Those skills will have a beneficial impact not only at the farm level, but also on the scale of food security, economic growth and employment.

With proper training and more support, smallholders show great potential for development with better allocation of production factors and investment decisions. For this reason, it turns out to be interesting to study the effects of these agribusiness management skills from the perspective of smallholders. To this study pursues several lines of


Analysis. First, it identifies the agribusiness management skills and the independencies between them. Second, it compares the Income-current situation of potato producers in Algeria and the progress after the participation in the Farmer Business School (FBS) training in terms of these performance criteria productivity, profitability, stability, diversification and sustainability.

For the next study (master thesis), the focus will be on several cases in different countries analyzing the impacts of Agribusiness management skills for agricultural smallholders in Africa from two perspectives. The first perspective is Broad-based Human Capacity Development (HCD) for agricultural smallholders and the role of implementing partners/ partner institutions of German Development Cooperation. The second perspective is about the contributions to alleviate poverty, food security and employment generation. Also, more research questions could be tackled and elaborated including micro and macro-economic analysis, effect of the horizontal-vertical integration and the advantages of producer's organizations.

2 Definition and objective of the Management Task 2.1 Management Task

Within the scope of this management internship, the intern received insight into the Agribusiness Facility for Africa (ABF), a programmer implemented in 2020 by Deutsche Gesellschaft für Internationale Zusammenarbeit GIZ, GmbH. ABF is commissioned by the German Federal Ministry for Economic Cooperation and Development (BMZ). The aim of the management task is to assess agribusiness management capacities and skills considered important for agricultural smallholders, economic growth and employment from Agriculture in Algeria. The following part will be devoted to the questions related to the theme and then develop the approach on how to answer them.

2.2 Research questions and Hypotheses

The present study will focus on the importance of agribusiness management capacities for African agricultural smallholders for their incomes, food security, economic growth and employment.

This study will give answers to the following questions:



What's the importance and roles of Agribusiness management skills which are the improved production techniques, management improvements and the economic skills for smallholders?

o What are the interdependencies between economic skills and managerial improvements as well as economic skills and improved productions techniques?

Meanwhile, these queries will reply to the agricultural smallholders' demands:

o To what degree the improved production techniques and access to financing increase our farm profitability?

o What parameters (cost and technical) and performance criteria must be considered?

o To what degree skills development can lever investments, intensify agricultural production, increase smallholders' incomes, provide employment opportunities and contribute to growth?

As a result, the present work highlights the two subsequent main hypotheses H1 and H2:

o H1: improved production techniques can intensify and increase yields and profit.

o H2: improved managerial skills and better economic understanding will impact notably on the farm management and financial planning.

3 Material and Methods

3.1 Farmer Business School (FBS)

Farmer Business School (FBS) is an approach developed by GIZ with financial support from the Bill and Melinda Gates Foundation and the World Cocoa Foundation to promote entrepreneurship and business skills among smallholder farmers.

In 2010, the Sustainable cocoa business (SCB) project, GIZ and other public and private partners developed the FBS approach which was adapted to other food and export products. In fact, 900,000 smallholders have benefited from the FBS training in 16 different African countries. Currently, a growing number of GIZ projects and partners are interested in adapting this perspective to their needs which makes FBS an exceptional asset for GIZ.


Based on empirical learning, the FBS aims to make farmers be entrepreneurs and investors. It's a necessity in order not only to adopt new techniques, exploit trade's opportunities and agricultural investments but also, to ensure better productivity and quality, diversified income and improved nutrition.

FBS's objective is to professionalize male and female producers' agricultural business and the input services `management. Nutrition is one of the FBS approach's objectives which aims to ensure the productive capacity of adults, the improvements of production efficiencies, product quality and the creation of professional organizations of producers for the sake of facilitating access to inputs, services and markets.

Considering the example of Potato, the objectives are illustrated in the following figure:

Figure 1 Overview of the FBS modules

Source: GIZ/ FBS Potato 2020

FBS is based on one main product and two other complementary products with good market opportunities having a role in the production, the improvement of nutrition quality and soil fertility. The promotion of the main product meets the expectations of local markets, import substitution and international markets.

This structure of FBS can be easily applied to other production systems if technical and economic data on production processes are available. Thanks to the FBS improved knowledge, skills and attitudes, smallholders are able to increase their income, request financial services and improve technical knowledge as well as the knowledge of producer organizations facilitates the promotion of value chains by promoting the


competitiveness of small farms and other actors within it. FBS is always linked to other services such as extension, finance, product diversification, market access and producer organization. (Kling 2017)

FBS targets three learning dimensions: entrepreneurs' business knowledge, skills and attitude to run agriculture as a business. (Matthess 2011).

Regarding the impacts of FBS in Africa 480,000 cocoa producers in the Ivory Coast, Ghana, Cameroon, Nigeria and Togo participated in FBS trainings within the SSAB framework. Since 2012, 20 other development programs, their partners, national organizations such as the Ethiopia Agricultural Transformation Agency and 7 companies have adapted FBS with support from SSAB for 34 value chains other than cocoa. In total, more than 1,400,000 farmers (33% women) in 22 African countries have completed the FBS training.

Figure 2 Dissemination of FBS in Africa

Source: GIZ/V.Kling. 2020. Overview of FBS in Africa

Concerning the introduction and adaptation of FBS training we can cite the following steps starting with the preparation phase and the partnership agreements in case of the approach's introduction. Next, the adaptation related to economic analysis, training material and pilot training with producers. Afterwards, the development capacity stage which concerns training, learning and validation of trainers `performance. Finally, the stage of real-scale delivery and quality management. (Matthess 2017)


3.2 Current Production (Current Scenario)

The current or traditional agricultural production is characterized by a lack of organization, knowledge and financial resources which make it inefficient.

For instance, let's take Algeria's case as a current scenario since it faces many challenging problems in the agricultural sector. When we talk about Algeria, we refer directly to the desert. The desertification, the non-use of the desert in the agricultural production, low fertility due to soil erosion, sand storms and the overexploitation of water tables touch on the reproductive capacity.

Additionally, the water tables' lowering, the recourse to fossil water, the salinity and the pollution have decreased the volume of water available which impact disapprovingly the water's quality. Added to this, the mobilizable potential of soil and water have reached a critical threshold.

Hence, Algeria, is among the countries that suffer from a high risk of climate change. Consequently, climate change will lately exacerbate the anthropogenic factors of degradation originating in the decline in soil productivity.

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