Malt Barley: a short-term cash crop or sustainable investment? A study on the impact of the CREATE project on the livelihood and food security of contracted smallholders in Ethiopia.

Abstract

A predominant view to foster rural development and overcome food insecurity and poverty is that more agricultural investments are needed in developing countries. The true question is however not whether foreign direct investment should contribute to meeting investment needs but how its impact can be optimized to maximize the benefits and to minimize the inherent risks for all involved (FAO, 2009). The purpose of this thesis is to contribute to this question by investigating the impact of the CREATE project on the livelihood and food security of local smallholders who have been inserted in the malt barley value chain of Heineken in Ethiopia. The CREATE project was set up as a public-private partnership and makes use of contract farming. The study was conducted in Addis Ababa and Arsi and used a mixed-method approach including interviews, focus group discussions, stakeholder analysis, value chain analysis, and a survey, which was completed by 148 smallholder farmers. It is seen that farmers firstly experienced a shift from market governance to a captive network, offering on the one hand price certainty and a guaranteed buyer, but limiting on the other hand the farmer’s freedom to directly act and react to market demand. The results further show that short-term effects on livelihood and food security are positive. Farmers experienced in particular an increase in social and human capital. In terms of food security, farmers stated to have access to a more variate food basket and can now consume three meals instead of two. It was however seen that contract farming has a certain degree of exclusiveness since better-resourced farmers tend to capture the contracts, leaving poorer farmers out of the project. In addition, the contractual agreements transferred the production from the lead firm to cooperatives, which in turn put a smaller risk in the hands of farmers. Concerns are also raised about the long-term effects since the value chain is rather weak since most nodes are currently controlled and supported by one actor, which is Heineken itself. In addition, the majority of farmers is dependent on a single buyer to sell their malt barley to, which is Heineken as well. Looking at environmental issues, the new seeds are high maintenance, disease sensitive, and input intensive varieties. Much chemicals and fertilizer are needed in order to grow these seeds, which might lead to harmful side-effects on the environment in the long run (Environment, 2015). It is thus recommended to develop an environmentally and economically sustainable agricultural value chain to ensure that short- term results become long-lasting.