Global and regional supermarkets: implications for producers and workers in Kenyan and Ugandan horticulture

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East Africa is emerging as an important horticultural producer and exporter, but with different levels of success in different countries. Kenya has become an established exporter of niche vegetables, mainly to the European Union (EU); other countries, such as Uganda, have struggled to enter this export trade. However, destination markets are shifting, with a rise in South–South trade, including within Sub-Saharan Africa (SSA). Supermarkets play a key role in horticulture trade with the EU, coordinating sourcing from production through distribution to retail, rather than purchase through remote market agents. Supermarkets are also expanding within newer destination markets, driving the rise of regional value chains within the global South. This paper asks what the implications are of global and regional value chains for upgrading of fresh fruit and vegetable (FFV) producers and workers within Africa, focusing on the rise of supermarkets within Africa? Global value chain (GVC) analysis provides insights into changes taking place in both global trade and regional trade (across SSA) led by supermarkets. The concepts of economic and social upgrading and downgrading facilitate analysis of the extent to which producers have been able to move to higher-value activities (economic upgrading), and to which workers have experienced improved conditions and rights (social upgrading). European supermarkets require adherence to stringent global standards (including their own certification, GlobalGAP (Good Agricultural Practice) and social and environmental standards). Large horticultural producers are more able to meet these private standards, which in turn have helped raise product quality and improve conditions for workers. Standards can represent significant barriers to smallholders’ ability to access global supermarket value chains. Kenyan case study research confirms that economic upgrading has taken place in Kenyan horticulture among larger commercial firms able to supply global supermarkets, and finds this has contributed to some social upgrading for workers – although low real wages and job insecurity remain a problem (workers in Kenyan flowers have fared better than those in FFV). Some smallholders have been able to access GVCs as out-growers to larger firms. In Uganda, one medium-sized flower farm is also supplying FFV to regional and global supermarkets. Its workers have experienced some social upgrading, but again real wages remain insufficient. However, Ugandan horticulture is mainly dominated by smallholder farmers, who have been unable to access GVCs or upgrade, and at best manage to supply small ethnic markets in Europe. South African and Kenyan firms are leading the expansion of supermarket retailing within East Africa (albeit from a low base). Within Kenya, domestic firms dominate the supermarket sector, and rumours of foreign firms entering have yet to become a reality. In Uganda, both South African and Kenyan firms operate, including the South African company Massmart Holdings, acquired by Walmart in 2011, which has a store (and plans to expand). Regional supermarkets are an emerging channel for expanding trade in fresh produce across East Africa. They are opening up new opportunities as well as challenges for smallholders and workers, and provide an alternative to exporting to European supermarkets. Domestic and regional supermarkets operating within East Africa also apply standards (mainly product, some process; rarely social or environmental), which are normally less stringent than those European supermarkets require. In the first phase of entering a country, regional supermarkets mainly import produce (often from their home country); in the second phase, as capacity develops among local suppliers, they expand domestic sourcing; in the third phase, as supermarkets move to new countries, they may 2 import from phase two suppliers through their regional distribution chains (although suppliers themselves are often unaware their produce is exported). Within Kenya, case study research demonstrates the ability of some organised smallholder groups to supply domestic and regional supermarkets, as both phase two and phase three suppliers. In Uganda (where supermarkets are more recent), regional supermarkets import produce from their home countries that could be produced locally, but they also source locally from one medium-sized farm and a few well-organised out-growers. Small amounts of Ugandan FFV are also exported to their other stores in East Africa and South Africa. However, fragmented smallholders are struggling to supply regional supermarkets. Uganda is therefore largely in phase two. However, Ugandan FFV exports to Africa are expanding, and supermarkets provide a potential channel to promote this. Domestic and regional retailers open up an expanding but lower entry point into supermarket value chains. They provide a channel through which suppliers (especially smallholders) can be encouraged to ‘climb the value chain ladder’, whereby economic and social upgrading are incremental processes, with movements from one level to the next, rather than attempting to reach higher-level global standards and markets in one go. This has important policy implications, as donor and government policies often focus narrowly on supporting smallholder access to GVCs. Kenya provides an example of support (from both government and donors) helping local producers to move up the value chain through access to domestic (and, through this, regional) supermarkets. Within Uganda, there is little evidence of government or donor support for local smallholders to supply regional supermarkets operating within the country; their focus is on meeting GlobalGAP standards. Interviews with South African supermarkets operating across SSA indicated they had little engagement with policymakers (although this is beginning to change). ‘Value chain upgrading’ strategies need to be buyer- rather than producer-led, taking into account differentiated requirements of domestic, regional and global supermarkets. Key challenges include supporting producer capabilities and organisation to meet standards; enhancing the skills, rights and rewards of smallholders and workers; and building a cool chain, logistics and trade facilitation. Supporting wider communities (education, health, housing and transport) is also essential to reverse the move out of agriculture by more skilled farmers and workers and to enhance rural appeal. Both public policy and public/private strategies need to be more ‘joined up’ in addressing challenges across the different value chain nodes, rather than focusing on separate nodes without taking others into account. Better alliances need to be forged between different initiatives (particularly to address the multitude of standards). With better support, smallholders could begin to climb the value chain ladder (upgrade) as they gradually adapt to the increasing demands of different supermarkets. A global and regional value chain approach illuminates possibilities for addressing these challenges and provides a framework for forging new forms of partnerships to support more resilient horticulture value chains in the medium to long term.