Rural-Urban Linkages: Agro-food Value Chain

The study makes an assessment of agro-food value chains that occurs in South Africa’s rural and urban areas in order to accentuate the interdependencies that these spaces exhibit. It uses 1-2 food items that demonstrate the existence of a full value chain that occurs in both rural and urban areas. Secondly, the study analyses the dynamics (internal and external to the selected value chains) that could impact on policy developments for either of the two spaces (rural and urban). Thirdly, it identifies entry points for interventions that can enhance innovation, address imbalances and improve profitability especially of those who operate in the lower end of the value chain. The research team elected to study the tomato and potato value chains in Limpopo. The study was conducted over a three-month period and interviews were conducted with value chain participants in person, telephonically and over electronic mail. Through this methodology it was possible to investigate the roles played by the various value chain actors. Value chain mapping explored dynamics driving inter – linkages between the value chain actors. Value chain actors included farmers, traders, transporters, processors, wholesalers, retailers and consumers for both products. Researchers observed that value chain activities take place along the rural-urban continuum, but most production occurs in the rural areas while processing and retailing occurs in the urban and peri-urban areas. Innovation within the value chain is also explored.

The following key observations stand out of the research:
a) Agro-food value chains are dominated by large commercial operations with sophisticated operations such as ZZ2 and Montana;
b) Smallholder farmers face many production and market related constrains within the value chain such as –
Land tenure issues determine the status quo in South African agriculture sector;
Access to finance;
While barriers to entry are in general relatively low, quality and quantity factors present strong barriers to entry in the more profitable markets;
Processor constraints are largely due to supply issues;
c) Threats of cheaper imported processed products are a factor in both tomato and potato supplychains;
d) Cold chain maintenance is an important part of the value chain; and
e) Retailers and market agents have significant buying power.