From Silicon Valley to Swaziland, Rick & Wendy Walleigh [i love reading books .txt] 📗

lot about irrigation systems. The consensus seemed to be that drip would be better from a long-term conservation and uniformity of watering perspective, but it would require more precise design engineering, would cost more, and take longer to install. We were reassured that a spray system would not damage or stain the cotton bolls. In the end, it was decided to pursue a spray system because it seemed to offer fewer short-term roadblocks, and we only had a month to get it installed. The chairman then reminded everyone of a larger roadblock. Although they would make every effort to get the Agriculture Ministry to pay for the irrigation, everyone needed to remember that the government was running out of money, so it was difficult to get money for any new projects. In fact, the local phone company had cut off service to many government offices (for nonpayment), and the government employees were making calls on local pay phones.

This wasn’t the only challenge. There were also questions as to the tenancy of the land and who would do the farming. Regarding the land tenancy, much of the land in Swaziland was not individually owned. It was owned as Swazi Nation Land and was given to specific people for beneficial purposes by the local chiefs. If the land was used for the intended purpose and generally benefited the community, the occupant of the land could possess it in perpetuity. However, if it was not used beneficially, then it could be taken away, although the process for doing this was not clear. The land designated for the pilot had been given to another group for farming, but this group had stopped farming several years prior. The task force had gotten permission for the pilot, but it wasn’t clear whether the land would be available in the future if the pilot was successful. Someone was designated to investigate this situation and to navigate the political processes with all the players to secure the rights to the land going forward. A final issue was who would do the farming for the pilot project. A group of needy women from the local area had been found to do the farming, but the interest of the local politician was primarily that the women make sufficient money from the project, not necessarily that it be a good test as to whether it would be a viable crop. So despite the fact that this was a high-priority project for a lot of people, many large challenges and conflicts remained; and there was only a month to go before planting must occur. The meeting closed with another prayer, maybe because we would need divine help to make the pilot successful.

Cotton wasn’t the only new sector I was learning about. In parallel with my other projects, I had been supporting Mkhululi in his work with smallholder dairy farmers. Their problems were inconsistent profitability and inability to expand. At the time, Parmalat (the dominant dairy processor in Swaziland) didn’t want milk from the smallholder dairy farmers because they milked their cows by hand, which didn’t conform to the sanitary procedures that Parmalat required. However, even if Parmalat would have accepted their milk, the farmers didn’t want to sell it because they couldn’t make money at the price that Parmalat was paying. These small dairy farmers could and did make money selling their milk or milk products (such as emasi) directly to consumers. In this way, they cut out the middleman. The consumer got a lower price and the farmer got a higher price. However, this informal market usually went only slightly past the neighbors of the individual farmer and no farther. The margins were good, but the demand was not consistent, and there was no opportunity for growth.

TechnoServe was looking for an opportunity to change the market. We knew that the small farmers could not compete on price; they had to have some way of differentiating their product. Mkhululi and I had heard that Dalcrue, one of the larger dairy farms in Swaziland, had just advertised the introduction of their branded products to the market. We thought that this might provide an opportunity, so we went to meet with their CEO. Although Dalcrue was one of the larger dairy farms in Swaziland, it was small compared to many dairy farms just across the border in South Africa, which could be twenty times larger. Dalcrue had been supplying most of its milk to Parmalat for processing and sale. However, at the price that Parmalat was willing to pay for milk, Dalcrue was barely making a profit. To become profitable, Dalcrue felt they had to go to the market themselves with their own brand.

We thought the Dalcrue brand might provide a channel for our small farmers to differentiate themselves in the market. Our only previous idea was based on the fact that the small dairy farmers generally owned Jersey cows versus the Friesen cows held by the large dairy farms. Jersey cows don’t produce as much milk, but their milk is richer and better suited for certain cheeses and other dairy products. We hoped that the small dairy farmers could find a manufacturer of cheese or other dairy products who would be willing to pay more for their Jersey milk because their consumers would appreciate the Jersey cheese. We hadn’t found one, but we thought Dalcrue might be a possibility. In our discussion, we discovered we were very premature. Dalcrue had only just announced their brand, and they had a lot of work on their hands just to fulfill their immediate plans. They weren’t ready to even talk about taking on a new endeavor. We still had a pleasant conversation and agreed to stay in touch.

After hearing that, even Dalcrue had trouble making money in dairy; my opinion on the potential for a dairy industry in Swaziland declined even further. As I had presented to the people in our office, we needed to focus our resources, and I didn’t think the dairy industry was one to focus on. However, Leslie and Mkhululi weren’t ready to give up on dairy. They felt that even if it wasn’t commercially attractive, a dairy industry might provide a source of income for smallholder farmers. I argued that if it wasn’t commercially viable that it wouldn’t be independently sustainable, a very important concept for TechnoServe. TechnoServe does not believe in being a long-term source of charity or subsidy. Their objective is to establish market systems that can survive on their own and then let them go. We couldn’t agree on whether a dairy industry could sustain itself in Swaziland, so we continued to explore possibilities. As we continued to search for ways to help the small dairy farmers, Mkhululi and I were invited to a meeting of large and small farmers at the Dairy Board offices. We had also been invited to share our ideas on the milk industry with the director of the Dairy Board in a private meeting.

Many African countries have “boards” to regulate and promote the production of various commodities (such as cotton, mentioned earlier). Sometimes these boards actually help. Frequently, they just distort the free market and offer opportunities for corruption and political manipulation. Usually, these boards are heavily lobbied by farmers to institute minimum commodity prices and to limit imports. Purchasers and processors of the farmers’ produce usually lobby the boards to let the free market reign, which typically drives down their costs. Schemers on both sides often lobby the boards to institute particular regulations so that they can manipulate the market to their advantage. I hadn’t seen this type of behavior in my limited exposure to the Cotton Board, and I was curious as to what I would see when I went to the Dairy Board, the analogous organization for the dairy industry.

As part of the Dairy Board’s efforts to grow the industry in Swaziland, the meeting with farmers was intended to get them all (large and small) to form a united front for the anticipated meeting between the dairy farmers and the production/marketing companies. The hope of the Dairy Board was that they could get local dairy farmers to provide a reliable and continuous supply of milk to the formal market. On the other side of the equation, the Dairy Board wanted to get the production/marketing companies to buy the local milk at a price that would allow the dairy farmers to make a profit. It was a huge challenge, but the Dairy Board had resources beyond the normal market mechanisms to make things happen. For example, the local milk production companies had been importing powdered milk from South America at a very low price and reconstituting it to sell as whole milk in Swaziland. The Dairy Board put an import tariff on powdered milk. This hurt the profits of the milk production companies and got their attention. They became more willing to explore options for using local milk, and so the meetings began.

This first meeting in the planned series indicated that the process would be long and difficult. We only stayed for the first three hours, but the general tone was pretty acrimonious. The dairy industry in Swaziland, a very small country, was very fragmented. There were a few moderately large dairy farms, but even those had only a few hundred cows each, much smaller than the successful dairy farms in South Africa. On the other end of the scale, many small dairy farmers had only a few cows. Some of these small farmers were organized into associations or cooperatives, but none of these organizations spoke to each other. The only things that the collected participants could seem to agree on were that the selling price of raw milk was too low and that the government (including the Dairy Board) was not doing very much for the dairy farmers. As an independent party with no vested interest in the industry and a personal orientation to free trade and comparative advantage, most of the comments sounded to me like self-serving statements from a very parochial point of view. On the other hand, isn’t this what happens with every industry in every country with the outcome based more on politics than economics? Just look at the history of sugar, cotton, corn (including ethanol), steel, dairy, and computer memory chips in the United States. We preach free markets to the developing world but manipulate as much as possible with subsidies, import tariffs, etc., for the benefit of narrow interests (with political influence) at home.

At the break in the meeting after the first three hours, we took our opportunity to meet with the director of the Dairy Board. I had not met the director before. I was anticipating a political hack with unreasonable goals and no plans for accomplishing them. I was totally wrong. The director was an intelligent, articulate youngish man with a degree in veterinary medicine and an MBA from Leeds University in England. He listened intently as we presented our view that the commodity milk industry was not viable in Swaziland because of the high cost of production compared to the much larger farms in South Africa. We went on further to say that we thought the only opportunity for success was to develop a branded specialty dairy industry by integrating forward and promoting the desirable qualities of the Jersey milk produced by the local farmers.

After we had finished our presentation, the director thanked us, and then went on to explain, very thoughtfully, why the Dairy Board was not going to follow our approach. He explained the political issues, mentioned the huge level of unemployment, discussed treaties on trade, discussions with the South African government, actions taken by Namibia to close their border to dairy products, etc. In the end, it all came down to the imperative of developing a broad Swazi dairy industry. Politically, he had no choice, and