The emergence of contract farming in central Tanzania – A case study on farmers, local businesses and their economic relations in rural Dodoma, Tanzania
Since the liberation reforms in African countries in the 80’s and 90’s, contract farming has gained increased attention as a policy instrument that can bring capital to smallholder farmers as well as attracting foreign investment or supporting local agribusiness. But despite its potential benefits, contract farming has yet to become a dominant form of coordination in African agriculture.
In principle, signing a contract entails that each party knows their obligations and that clear rules are defined if conflicts or breaches arise. However the institutional prerequisites for this are often not present in rural Africa, and therefore contract farming arrangements often fail in the long term due to lack of enforcement mechanisms.
This thesis uses a case study of contract farming of sunflower in the Dodoma Region in Tanzania to explore the role of trust and personal relations in facilitating contract farming. A global value chain approach is employed to analyze the value chain of locally produced sunflower cooking oil and the transactions in which it is embedded. Trust is added as an analytical concept in the explanation of why certain coordination types prevail.
The findings suggest that even though the dominant coordination form is of the market type, trust and personal relations are important elements when supplier credit is given. Furthermore, the availability of trust and personal relations drive contracting companies to go through a trial and error process of developing advantageous forms of contract farming. These trial and error processes produce a spatial segmentation where successful producer-locations are preferred over others and thus potentially reproduce rural inequality.