Agricultural production is a huge factor in Africa’s economy. However, in spite of agriculture’s great potential to enhance national development and poverty eradication, African communities are persistently recording dismal agricultural performance. Evidence suggests that the continent has continued to lose out on global markets since the late 1980s. Owing to inhibiting trade rules restricting African farmers’ access to marketplaces amongst other factors, the continent’s contribution to trade in agriculture globally has dropped by ninety percent in major exports. Contract Farming may connect farmers to markets, thereby increasing agricultural productivity across the world. It has the great ability to bridge the gap formed when governments liberalised without warranting access to basic farming requirements including technologies, credit, and inputs along with other essential services.

Contract Farming is believed by the majority of authors to be a positive progress for agricultural revolution in developing countries, improving the chances of farmers in regional and international markets [1, 2]. However, the question is whether SSFs benefit at all from these activities/arrangements, because the power of buyers may result in an unequal power relationship, which influences the terms of the activities/arrangements [3, 4].

The insatiable need for new, exotic and out-of-season agricultural products in developed countries together with globalisation and market liberalisation give new opportunities for the export of agriculture goods in Africa. Unfortunately, African SSFs, in most cases, do not take advantage of these opportunities because of the following impediments:

(1) There are a lot of information irregularities between farmers and prospective buyers, resulting in sub-optimal results. Agricultural markets are considered to be very risky and frequently weak in Africa and farmers’ potential to increase productivity and income is often inhibited by the deficiency of information about efficient agricultural production technologies and market opportunities.

(2) Restricted or no access to loan facilities due to nonexistence of indemnity and the high interest rates applied.

(3) SSFs are usually more opposed to taking risks. While there is competition from producers who have embraced new and ultimately more productive technologies, they are found not to make changes in new technologies themselves because of high risks and costs involved. Instead, they would rather apportion their limited supplies to the production of subsistence crops in order to have the security of food supplies [5].

Contract Farming has become a prominent agricultural issue in most developing nations. Forces of change, such as globalisation, “industrialisation” of the agricultural sector and market reforms have paved the way to CF in many emerging countries and more so in Africa. Contract Farming is gradually changing the face of small-scale agriculture in Africa and has become a new potential to put enthusiasm in developing global agriculture. However, as observed in a study [3], there are still some huge concerns as to whether SSFs will be able to benefit from CF while buying companies may often be a single large company or at most few large companies, a usual case of monopsony. A monopsonist is a single buyer, just as a monopolist is a single seller or producer [3]. Monopsony power arises because a monopsonistic power can also develop when there is more than one buyer [3]. This situation is called oligopsony. Characteristically, there may be a few large buyers in an oligopsonistic market, where each has some point of monopsonistic power [3].

In economic theory, monopsonistic manipulation is defined as the difference between the price of a factor of production and its marginal revenue product that arises from a less than perfectly elastic supply curve for the factor of production [3]. The price the farmer is paid depends on their supply curve [3].

Scholarly literature is divided on how CF influences operations of SSFs in Africa. Small-scale Farmers are the mainstay of agriculture activities on the African continent. Spencer [6] estimated that 90% of all agricultural production in Africa originated from the output of SSFs. One line of thought which emerges from empirical evidence in certain literature suggests that CF may increase/improve farmer productivity, shrink production risk and transaction costs and promote farmer incomes among many other benefits [1, 5, 7-9].

Contract Farming has been widely performed in many countries, including developed ones, for example, the United States of America, as its benefits outweigh the undesirable effects. It has a long chronicle in developed countries and is continuously gaining distinction and importance in developing countries as well [1]. Governments are progressively stressing it in their policies for similar reasons, that is, encouraging commercialisation of SSFs and overall agriculture production [10]. In Latin America, for example, CF has enlarged high acknowledgement during the import replacement industrialisation phase as a mechanism to organise maintainable supply of raw materials [6]. This exercise is continually being scaled up [11]. Comparable developments are happening in Asia and Africa mainly, with export products such as horticulture, tree crops (avocadoes, mangoes and macadamia nuts, as an example) and poultry [9].

On the other hand, Glover a study [12] pointed out that CF is an extended form of manipulation with limited influence, and widens socio-economic differences. Sriboonchitta and Wiboonpoonge [13] found out that farmers in Thailand initially dreamt of stable incomes only to realise that CF led them into debt as they struggle to meet the requirements of the contracts drafted with craftiness of enterprising firms. In Kenya, though contracted farmers earned higher income than their counterparts, Wainaina et al. [14] found out that the farmers recognised that they were being used by large agribusiness firms as they are subjected to covering both investment and the losses. The same view was held by Ton et al, [15] though they acknowledged that if appropriately administered, mutual benefits for agribusiness companies and the farmer can be realised in CF. Nhene [16] posits that Africa’s agriculture, along with its +80 million SSFs, is up for sale to the highest bidders in the form of multi-national companies. This, he argues, has been achieved through CF by taking over huge tracts of agricultural land bought, and brought their own patented seed and agricultural inputs. Clapp [17], in his convincing assessment of CF, views the contract as a bafflement of an unequal power relationship through which the company controls the farmer. Contract Farming is usually a deal between a company, which is both a monopoly seller of its final product and a monopsony buyer of inputs, and a farmer [17]. This unequal power relationship leads to the exploitation, disguised proletarianisation, loss of independence and subservience of farmers [1].

Some authors and institutions regard CF as a means of manipulation of farmers by agribusiness due to imbalanced power relations [18]. Others deem it as a risk for food and nutrition security as well as a cause of environmental dilapidation because through CF, the cultivation of cash crops with high use of crop and livestock chemicals is promoted [9, 19].

Discouraging against the use of CF as a modest model for agricultural development, [12] a study discusses that market distortions (most frequently monopsony), the overriding goal of profit maximisation and weak bargaining position of growers, all contribute to serious complications for SSFs in CF, including the possibility of manipulation and cheating by companies. In an otherwise theoretically exhaustive study of vertical integration focusing on CF, another study by [20] also associated monopsony with brokering power. He alludes that, it is true that a contractis a discussion between unequal, economically powerful agro-business and rather weaker SSFs and if the integrator has gained monopsony position, he could abuse his position to breach contract requirements in his favour. Eaton and Shepherd’s [1] practical guide to CF also warns of funding companies ill-using a cartel position and, therefore, the need to shelter farmers. They recognise that there is potential for CF in promoting agricultural production and marketing, but believe that it is essentially an agreement between unequal parties.

Globally, there are over 400 million SSFs, of which 80 million are in Africa. The productivity of African SSFs is restrained by numerous factors. First, this class of farmers is restrained by the lack of requisite finance coupled with inability to access credit facilities, as they often do not have collateral. This emanates from their lack of own tenure/title deeds to their lands. Second, in Africa, SSFs have challenges in accessing information relating to methods of production and access to markets. This is especially true for those dealing in new crops and varieties. Third, SSFs in Africa tend to be more risk averse as they operate near subsistence, being satisfied with what is enough for their immediate use, compared to larger farmers who often seek to operate at a corporate level with an enterprising mind-set. Fourth, subsistence farming makes the SSFs to seek a minimum supply of food prior to expansion into commercial production for an uncertain market. Fifth, there is limited education and training on how to go about farming for SSFs, especially, when it comes to the safety on the use of agricultural chemicals and equipment.

Contract Farming has been considered controversial as it has been subjected to criticism and much debate. Parties in favour of CF view it as a solution to various challenges likely to be met by SSFs including access to technical and up to date farming information, loan facility and market risk, the characteristic features of commercial production. This view supports the idea that CF facilitates the integration of SSFs into commercial agriculture, which may be useful for improving income growth, thereby helping to alleviate poverty. In contrast, critics of CF view it as a means for enriching large firms as they may benefit from the land and poverty of SSFs. This view implies that these firms effectively pay the farmers way below minimum wages, while “taking control” of their farms. As such, integrating SSFs into profitmaking agriculture is seen as a retrogressive trend which leads to greater risk, income inequality and indebtedness [5, 9]. In their study of CF in Africa [21], they discussed the hardships that are faced by SSFs who engage in Contract Farming. Their evaluation shows negative results at current asymmetries of power whereby, through a highly unequal power relationship, contract farmers are demoted to the status of hired hands. Companies are seen to be engaged in manipulation of contracts and farmers turn to self-exploitation through extended working hours and using children as labourers [22].

This research review is essentially a qualitative approach and is based primarily on literature review from secondary data sources. It is concerned with and verifiable by both observation and experience rather than theory or pure logic. The qualitative method used here is mainly meant to gather non-numerical data and find meanings, opinions, or the underlying reasons from its subjects. In order to understand what is already known about CF, SSFs in Africa and policy issues, literature will be drawn from journals, working papers, unpublished theses, as well as publications from the global agri-business industry and government documents drawn from the African continent and other developing continents, for example, Asia and South America (for purposes of comparison).

The underpinning issues upon which this paper is based on, include the availability of evidence on the performance of CF in Africa, challenges faced by both SSFs and agricultural industries that sponsor and support CF and policy considerations in the large body of the study. This paper defines CF and reviews literature on the theoretical perspectives, models, evolution, and implications on CF. The subsequent sections analyse the state of SSFs in Africa. The paper places emphasis on what should be done to ensure that SSFs benefit from CF, given that CF has become a prominent issue in African agriculture. Finally, the paper presents conclusions and recommendations.

It is commonly agreed that working in CF arrangements is profitable and gives income stability and access to loans. However, these advantages do not get to the poorest SSFs who have the most to benefit [64]. There are obvious barriers to entry and agribusiness companies do sometimes tighten the conditions of contracts or go back to their own farms of production over time [64]. Two procedures of socio-economic differentiation are linked with CF, that is, separation between participants and non-participants and separation among participants. In some instances, out-grower schemes happen to have created full proletarianisation or landless [65].

The literature indicates that beneficial spillovers from CF, for example, technology transmission, can be hindered by clampdown of competition by the contractors. Therefore, the assumption that CF motivates commercial agriculture and accommodates the rising of competitive producers and markets should not be exaggerated (there has been positive evidence for employment creation and spending relationships). Usually, deductions for inputs and advances are taken from farmers’ returns; stories of indebtedness and unfair treatment have been reported but results differ tremendously [1]. Misunderstandings can arise within families if, for example, a new cash crop requires a shift in working conditions and issues on who does receive the proceeds/earnings from the marketing of the crop/livestock arise [20].

This gives challenges to women but they also get a chance to revise their labour obligations and payment terms. The threats posed by CF as regards to food availability inside the family and in surrounding areas can be lessened by making sure that women receive some of the payment, controlling land change and introducing crops that do not clash with the farming calendar, while supporting local food markets.

Baumann [36] explained that CF schemes have different features. These features largely depend on the number and extent of involvement of the actors in the agricultural value chain. In addition, Eaton and Shepherd [1], in their FAO’s manual for CF, identified the following types of CF models/schemes (Table 5): The Centralised; Nucleus Estate; Multipartite; Informal and Intermediary Models.

Wolf, Hueth and Ligon [75] noted that agricultural contracts have three definite purposes. Firstly, they serve as a coordination tool that allows the different players to make decisions that align with the decisions of the other players in a contract arrangement. For instance, a typical farming contract would state the quantity to be delivered at a stated time and at a given location. Secondly, contracts are used as a means to offer incentives and impose penalties in order to stimulate good performance. No transaction will be concluded without each party to a contract recognising that there exists some form of incentive for them in the arrangement [5]. When the sponsor insists on a particular performance output from the farmer, for instance, where special quality is required for specific crops, the contract clearly stipulates the reward that the farmer will get for such performance compliance [76]. Thirdly, the contract spells out financial risk allocation amongst the parties to the contract [77]. For instance, Bijiman [5] stated that farmers can alleviate the risk of lost income owing to a poor harvest by undertaking an arrangement with the sponsor to state the share of compensation unfettered by realised harvests in a given season.

The taking on of CF rates in the past two decades has amplified, examples embrace USA which rose from twelve percent in 1969 to thirty-six percent in 2004; in Brazil seventy-five percent of poultry is produced under contracts; and rules that support CF have been established in Vietnam, India, Thailand and Morocco [80]. In Southern Africa, it (CF) is now gaining attention as an effort from governments to commercialise SSFs in order to increase their income, improve the standard of living, and create employment [45]. Maize production in Malawi, sugar cane schemes in Swaziland, South Africa and Zimbabwe and horticultural schemes in Zambia and Zimbabwe are some of the successful examples of CF in Southern Africa [81].

There has been a lot of market liberalisation in most African countries in the last twenty years plus and this has resulted in elimination of state enterprises or monopolies and encouraged private sector activities in production to improve competitiveness and efficiency in markets [82].

According to Pandit et al [83], CF arrangements have proved to be a positive solution, to a large extent, in Zimbabwe, especially as it draws new businesspersons with new finance and skills into the sector, remodeling economic and political relationships and spreading the gains of its land reform in new ways.

Small-scale Farmers face shaky demanding situations in cases whereby the buyer evades buying the products and they are stuck with the products. Correspondingly, contractors face the same problems of being discouraged by farmers who sidetrack inputs to other crops or sell them and sell products to open markets if the price is higher than agreed [84]. A multiplicity of factors which involve literacy level of farmers, gender preference, bias towards larger farms by contractors, tenure security and added labour burden on the farmer, need to be investigated to study their bearing on the viability of CF [84]. Environmental factors which include suitability of the area to the production of a particular crop, use of environmentally workable farming practices, economic factors which include lack of financing from banks and credit institutions, prevailing interest rates charged by banks to contractors for loans and low profit levels on both sides due to high production costs, also need to be tackled [83].

Viability of CF can be expressed as the probabilities of success that CF has, given the factors surrounding it which involve social, economic, biological and environmental/ecological issues [82].

Contract Farming seems to have the best results for farmers who are better placed on the negotiating forum owing to their bargaining power relating to contractual terms. Baumann [36] demonstrates that contracts tend to be more favourable for smallholders when the processor greatly depends on the grower for a constant flow of raw material because it increases the farmer`s bargaining power, for example, farmers of sugar cane in Kenya or oil in the palm sector of Cote d’Ivoire [36]. However, Armah et al [10] argue that dependence on a certain crop and flow of alternative markets for outputs decrease grower`s ability to gain from CF arrangement by decreasing bargaining power and thereby increasing potential for exploitation by firms. Citing several case studies, the same author shows the importance of access to information, alternative production opportunities, implementation through local intermediaries and farmer organisations and farmer input in the scheme design as key mechanisms that increase farmers’ bargaining power and contribution to favourable farmer outcomes. Other authors, for instance, Ajjan [90], found that giving conditional bonuses to farmers was also another way to minimise the probability of the contract breach by smallholder farmers.

Lack of contractual enforcement, particularly in Africa, has been discovered to hamper private investment and economic growth. The governments and other relevant stakeholders in the agricultural sectors should work together as highlighted in Fig. 2 below:

(1) Research & Development activities BLOCK

• Demonstration farming
• Evaluation of farmer Economics Model
• Identification of Varieties and hybrids
• Trials and Short listing – Selection
• Blue Print for Agricultural Practices

(2) Technology transfer BLOCK

• Farmer Education Program
• Field Trials
  • Multi Locational and Crop timing
• The Extension Services Team
  • Selection & Training
• Farmer Organisation

(3) Commercialisation BLOCK

• Harvesting & Transportation
• Crop Monitoring
• Processing & Packing
• Farmer Payment System
• Land Preparation & Planting
  • Source [94]:

In Java, farmers reported that economic motive was the main driver affecting the farmers’ decision to engage in chilli agribusiness [93]. He says, regarding the technology introduced to SSFs, a wise decision needs to be considered in selecting environmentally friendly farming. A recent study [95] shows that chilli farming has excessively applied agrochemicals and led to environmental problems. This a very crucial point to consider for all those involved with CF.

It is necessary to note that intensively operated chilli agribusiness provided more income and employment than other crops in Java [93]. The country’s chilli agribusiness has primarily been done by only a small fraction of farmers due to limited resources. Many SSFs are still poor and subsistence or semi subsistence.

The concept of ‘Stepping up from Subsistence to Intensive Agriculture’ with high-valued crops started in Java, provides hope for welfare improvement [93] and is recommended for all forms of CF.

The essential prerequisite for CF investments should encompass the potential of the arrangement to yield profits. Following the identification of a likely profitable market, the sponsoring company may consider assessing whether contracted farmers in a certain area may profitably supply the market. The process entails assessing the physical and social environment of the target location and the probable support that the concerned government may provide. Below is a summary from various authors, of some key preconditions for successful CF in tabular form (Table 8):

An important finding drawn from a study [100] was that, using the participatory research approach can be an effective tool to enhance SSFs’ knowledge and increase the rate of adoption, especially with SSFs engaged in CF. Additionally, according to Adhipanyakul and Pak-Uthai [100], other factors such as farmers’ risk attitude in CF and behaviour should be involved in the adoption model as they may affect the adoption of innovation and rate (this paper does not discuss these issues and is, therefore, recommended for another study).

According to Singh [9], coordination, motivation and transaction costs are three pillars of a contract arrangement. As such, it is essential to consider contract design as a multi-criterion design problem. Singh [9] summarises the basic rules for contract design as follows (Table 9):

Fig. (1). Contract Farming Framework; Source 1.

Fig. (2). Building Blocks for Contract Farming to Work.

Contract agreements/arrangements that have failed previously have missed at least one of these rules. Though these rules are useful as a checklist for keeping the contract relationship balanced between firms and farmers, it is never an easy task to timely realise every item [9].

Below, in Table 10, the author will take a look at some points on potential advantages and disadvantages associated with Contract Farming taken from selected authors.

Finally, Goldsmith’s [107] reviews of several case studies of CF in Africa, Asia and Latin America and established that in the majority of cases, the income of growers is greater than that of non-growers. Moreover, he finds that participation in CF is associated with the adoption of better production technologies. Singh [9] also compares CF Arrangements in the Indian State of Punjab and finds that those SSFs who participate in CF have higher incomes.

The issue with both studies by Goldsmith and Singh [107, 9] is that they do not consider the fact that it is entirely possible that those SSFs who elect to participate in CF may have already been better off than those SSFs who choose not to participatein CF prior to their participation. This is known as the selection problem and not only threatens the internal validity of empirical findingsbut is also challenging to address in practice [108]. Warning and Key [48] were the first to deal with the self-selection of growers into CF in Senegal and they found the participants in CF did, indeed, have significantly higher incomes than non-participants.

Another usual issue in the literature on CF is the nonexistence of external validity. That is, researchers tend to focus on a single crop or on a single region, with little to no implications for other crops or regions. Simmons, Winters and Patrick [109] were the pioneers to aim for more validity (external) by looking at three contracted commodities, that is, maize, poultry and rice in three different locations in Indonesia and they found that those households who participated in CF as poultry breeders and maize growers had better returns to capital than non-participants. Likewise, Wang et al. [110] reviewed apple and onion CF arrangements in China and found that participation in CF was associated with higher incomes.

Aiming for external validity, Bellemare, et al [101] studied CF over more than ten contracted crops across six regions of Madagascar. Using field experimental methods to deal with the selection problem, he discovered that CF appeared to lead to a 10% increase in income. Most of the information indicates that participating in CF improves the standard of living [111].

Farming contracts play two critical roles for the company, that is, quality assurance and risk management [112]. Baumann [36] argues that contracts should specify both the risk and responsibilities between the growers and companies, incorporating the penalties for breaking the contract on either side. Vermeulen et al. [87] noted specifically that out grower schemes often fail when productivity is overestimated and that lower than expected harvest prices can prompt early termination or default. Where institutional structures for contract enforcement are weak, companies absorb more of the risk and cost of contract default because they are often unlikely to pursue growers who breach their contracts [87].

Lack of contractual enforcement in many developing countries, particularly African countries, is often cited as hampering private investment and economic growth. However, in a study about [113] China, CF agreements do not necessarily require a robust legal system. Such contracts thrived before public enforcement mechanisms developed because in small communities, social norms and pressure are functioned to ensure that contracts are being honored. Similarly, in a study on one hundred agribusiness companies engaged in CF in China [114], found that when public enforcement mechanisms are weak or missing, private or self-enforcement mechanisms such as price floors and specific grower investment requirements significantly improve growers’ contract fulfilment rates. Gow, et al [115] noted that the major causes of contract breaches are bottlenecks, which occur when unexpected external environmental changes affect the cost/benefit ratio adequately to make contractual violation optimal for one party.

Gow and Swinnen [116] found that firms could minimise the probability of contract breach by SSFs by providing conditional bonuses. If farmers delivered their products on time, the company could offer input investments or loan guarantees. Furthermore, to ensure that farmers use conditional inputs on company related production, companies have also tied bonuses and/or sanctions to quality and volume requirements [115]. Technical assistance and extension services that companies provide to farmers also serve as enforcement and monitoring mechanisms; in the course of provision, the service agent can verify input and loan use for contract purposes as well as commitment to quality [116].

Engaging with SSFs throughout the entire negotiation and planning process can improve farmer outcomes [117]. They also found out that SSFs signed up to participate in the CF scheme without completely understanding the terms of the agreement. Farmer attrition and breach of contract during the subsequent year were largely a result of incomplete information about the terms of the contract. Ensuring that all parties were aware of the perils and reservations involved in the CF scheme might have mitigated some of the problems [117]. In addition, successful dissemination and uptake of agricultural technologies required thorough testing and farmer input [117].

Contract Farming schemes can have negative consequences for non-participating farmers by directing public/government resources on a small number of farmers [36]. However [32], it has been found that CF schemes were equally likely to reduce social separation as they were to promote it; CF can act as a leveller by reducing risks, creating access to inputs, markets and technology and can also favour the relatively wealthy farmers in selection into the scheme [36]. Furthermore, while CF often involves SSFs, evidence shows that it generally requires a title to land, thereby excluding the poorest farmers, tenants and the landless. Apart from secure land tenure, contracts often stipulate minimum land size, health status, ability to provide or hire labour and sometimes even marital or education status, further narrowing the subset of SSFs able to participate [36].

Due to unintentional selection of partaking farmers to join CF schemes, the trickle of empirical studies on the welfare effects of CF participation has faced methodological difficulties in establishing the pivotal impacts of CF [118]. It is difficult to determine whether observed welfare changes can be attributed to CF involvement, so the degree to which participating farmers benefit from the schemes remains uncertain [117]. For example, a higher income per capita in CF merely reflects the fact that more industrious or more skilled farmers have a greater likelihood of becoming contract farmers [118]. In other words, these contract farmers might have relatively high incomes regardless of whether they participated in CF programmes or not.

It is critical to observe that the effect of CF includes not only direct impact on contract farmers, but also the indirect impact on non-contract farmers through farm labour and industry employment [118]. Certainly, when contracting farmers pledge themselves to supply higher quantities of an agricultural product to a buyer, family labour is usually not enough and they depend more on locally hired labours. Thus, they provide work to those who do not meet the selection criteria for CF schemes. When factory plants are set up locally by the processing companies, the increased production obviously requires labour for the processing activity and thus leads to create employment oppourtunities.

Land ownership is a big problem and particularly discriminatory against women in Africa because not many women in Africa own land [139]. Documenting on the gender gap in agriculture, the FAO [140], indicated that as compared to men, women across all developing regions and countries are most likely not to have land on their name, including rented land, and if they do have land, it will be of poor quality and comprising tiny plots. Drawing from most all-inclusive information on women’s access to land, the investigation established that women represent only fifteen percent on average of all agricultural landholders in Africa and in addition to being more likely to hold land, men typically control larger land holdings than women [140]. This definitely interprets into a severe gender discrimination/disparity in access to land and has critical repercussions for gendered access to CF schemes in Africa [139].

Additionally, CF is utilised mainly for the growing of cash crops. In African societies, cash crops are typically considered a man’s duty, while females are relegated to look after subsistence crops to feed the household. Some CF companies insist that the farmer must produce a certain volume of a specific crop or type of crops in order to qualify for the scheme [140]. This makes it difficult for women to become CF participants because the restricted land that women have control over is used for the production of subsistence crops to feed the household, including their husbands [141]

The women are handicapped in their participation and joining of formal CF schemes and agreements because of low literacy. They normally depend or rely on their literate husbands or sons to be their representatives when it comes to signing formal contracts that require a minimum level of literacy [140].

As most disadvantaged SSFs and women are not likely to be selected to join CF schemes, these groups are trapped into a painful poverty cycle. A lot of development policies aim to upgradethe livelihood of women and the most underprivileged SSFs in Africa because they need more help [138]. The World Bank believes that productive and successful CF can start as an effective tool for poverty reduction in developing economies [142].

However, CF firms/companies should look at research work, which was carried out by authors regarding which gender group is more reliable when it comes to payback of loans. For example, a research carried out in Ethiopia [143], discovered that approximately 44% of defaulters were female farmers and fifty-six percent of defaulters were male-headed households.

A number of literature studies have found that females perennially outperform men in terms of paying back loans [144]. For example, Armendariz and Morduch [145] reported that in its initial phase, the Grameen Bank also included male customers; however, the bank decided to move over to a nearly full concentration on women due to repayment problems related to male customers.

Adjognon [139] lists Table 11 the following policy actions to be engaged in order to create and enforce more favourable environment under which the most deprived groups such as women and SSFs can participate and benefit from the CF Arrangements:

However, this paper is not going to discuss in detail the issue of women and CF in this review, this will be dealt with in a different paper altogether.

This section summarises lessons drawn from my review of literature as it relates to this paper. The conclusions are subject to the different results of various case studies which are influenced by specific environments.

(1) The study has concluded that changes in agri-food systems regionally and internationally have created a transformed interest in CF as a supply-chain governance strategy, and that the theoretical framework of transaction cost economics can be used to describe the increasing use of contracts in vertical synchronization agriculture.

(2) The confirmation collected in this research review is pointing out to increasing acceptance of CF and pointed its advancement in the developing world, including Africa, as a tool for agribusiness promotion.

(3) As a policy proposal and involvement, CF, has the capacity to improve the agricultural production by SSFs and their incomes. Findings from literature confirm that contract farmers do better in agricultural production than those that are not participating in CF. This is ascribed to the involvement by contracting companies.

(4) For African countries to get full advantages, there is a requirement for the state and private sector to finance agriculture, both in physical and soft infrastructures, like financial services and research development.

(5) Evidence on the economic and social benefits of CF for SSFs is mixed. The impact of contract innovations to improve farmer outcomes is not easy to evaluate because many aspects can affect farm production output instantaneously. In addition, rapidly moving economic environments require continuous contract enforcement and frequent proper adjustments.

(6) Ton, et al. [15] stated that CF is an authoritative procedure that will attract agricultural producers who desire to obtain access to agricultural services or inputs that they find difficult to get in the traditional (spot) market, or reach markets that are more profitable. Comparatively, large and well to do farmers are able to better handle the risks and are therefore, more likely to take part in a contractual agreement.

(7) Saenz-Segura [146] pointed out that, despite the attractiveness of contracts, just having contract arrangements does not guarantee the longevity of the trade relationship. He emphasised that as an institutional model, CF needs to be reviewed continuously in order to do any required adjustments according to internal and external agents and conditions prevailing at that time. Issues to be looked at for adjustments that proved to have a positive efficiency for production and sustainability of co-operation include, non-price aspects in contracts such as frequency of transactions, promissory of back payment, input supply and technical assistance.

(8) Echanove and Steffen, Saenz-Segura [146, 147] analysed power relations between the farmer and sponsoring company and established that farmer participation in contracts influenced by their lack of other profitable replacements for financing technical assistance and access to markets. The puzzle that remains to be solved pertains to whether SSFs are dictated recipients of the dictated clauses (with only illusory control over production) or if the SSFs may cooperatively relate with other farmers to enhance their bargaining power. The varied outcomes of contracting are influenced by political, economic and cultural variables of that location and the heterogeneity and context of CF make it difficult to synthesise.

(9) Several risks associated with CF that are able to create/cause big damages to the standard of living of the rural people have been identified. Be that as it may, this review has explained some methods that can be taken in order to calm these risks and their impact. The most common danger experienced by SSFs when signing CF agreements is the exposure to legal issues when there is a breach of the contract, the danger of becoming too reliant on or exploited by the contracting company and to receive a reduced price than the one paid for the product in the local market. Issues regarding land tenure and different production methods are also part and parcel of the threats. Some situations concerning risks are when SSFs are barred from CF, if there is a possibility that the company can benefit from its monopolistic position on the market or when farmers breach on the market.

(10) Contract Farming per se can support augmenting rural development, and in turn rural livelihoods, however, as with other development projects, it is not a universal solution for poor SSFs in Africa [148]. This review study has shown that CF has positive results in both the short and long term, but there are restrictions for its influence on rural development.

(11) Governments are expected to set up an executive body responsible for settling disputes and solving conflicts. Investments in infrastructure like irrigation, road networks and establishments/institutions are also essential for the agricultural sector and the development of successful contract schemes.

(12) ActionAid [149] concluded that the evidence they gathered revealed that most prevailing CF and out-grower schemes are inappropriate development models to eradicate poverty and hunger. They argue that central government support to agriculture, especially public investment targeted at the poor, SSFs and women rather than partnerships with large private companies, is proven to be one of the most important ways to achieve food and nutrition security and alleviate poverty. However, what is evident from the above observation [149] is the lack of explanation on how to persuade African governments to increase budget allocations to agriculture.

(13) Conclusively, CF is now an integral part and the way forward for African agriculture, especially for the SSFs. However, there is a need for adjustment and perfection to be made in order for CF to be more profitable and everlasting for both the farmer and investor. This can be achieved by full government support via political stability, pro CF legislation (policy issues), land tenure and policy issues (Table 11 depicts policy actions to promote successful CF).

Contract Farming is a container idea that involves an extensive variety of vowed schedules, which makes it difficult to draw exceedingly general conclusions. This does not have to change if more reseach studies are available. It may be necessary to analyse new research/reviews to gauge the income effects in specific instances of CF, particularly when it evaluates the effects of various well-specified service packages.

At the initial stage of all CF arrangements, it is necessary that both contractors and SSFs have a clear understanding of the concept and roles they play in an agreement. Rigid contracts are untenable, SSFs do not fully understand concepts, standards of quality, or loss due to late or untimely delivery [150].

Ton, et al. [15] offer some recommendations for future research on CF (Table 12):

Contracting agribusinesses essentially need to sensitise SSFs about CF since most of them lack understanding of its existence, operations, and benefits [40]. They may choose direct forward production contracts with farmers to reduce incidences of side-marketing and then assist contracted farmers to buy the necessary inputs at realistic prices. It is also imperative for agribusinesses to offer extension services to SSFs to improve farm productivity, to encourage crop rotations and quality of products as well as educate agents about ethical business practices, particularly on the importance of being honest with farmers on weights and payments [1].

Fearing that CF, if promoted only where farmers have abundant alternatives, may lead to segregation of poor farmers, Glover [12] states that the availability of substitutes is one of the most important prerequisites for a CF situation that benefits SSFs. According to Rehber [20] monopsony power is abused when substitute marketing opportunities are closed and an excessively integrated company or sector may beat the terms of the contract. In India, for example, in many cases, the companies that have contracts with SSFs in crops have alternative outlets in spot markets like potato, tomato, chili, and cotton [3]. Companies and farmers take this factor into account in the pricing structure of contracts that a prior cannot be considered ‘prejudicial’ or ‘manipulative’.

Glover [149] states that SSFs must be inspired to uphold other sources of income and companies must not constrain farmers from growing alternative crops. Another study shows that [38], substitute production possibilities can ensure a greater share of benefits being passed on to SSFs. The contract farming should then only be advocated as a second or third crop.

Key and Runsten [21] argued that alternative production and income possibilities strengthen the bargaining power of the SSF. They preach that companies favour SSFs who have reduced production openings so that their bargaining power is somewhat greater.

The provision of alternative options to growers by itself is not an antagonistic recommendation. Nonetheless, one must query who is to offer such alternative options especially in nations that have removed state-controlled marketing through closing down marketing boards [1]. In other words, is it not CF being recommended to instil dynamism in the agricultural sector in a more liberalized economic environment since alternatives could be scarce? If a monopsonist keeps grower profits at a level just above their reservation utility (this can be understood as the expected utility from profits the farmer believes he can get by putting his land to an alternative use, less search costs), then providing alternative opportunities advocate CF a rather unnecessary exercise [21].

Policy architects are also recommended to put in place the contractual laws that will govern contracts for forward production and marketing amongst investing companies and SSFs, in addition to creating and reinforcing the contract establishments for the protection of both investing companies and farmers from possible extra-contractual problems [21]. It is necessary to encourage out-of-court settlements in dispute resolution, as it is quick and cheaper, making use of non-governmental organisations and industry representatives as arbitrators.

Another policy proposal that has often been made in the literature is for combined bargaining through farmers’ cooperatives. Growers’ organisations augment the bargaining power of contract sellers in negotiating the terms of contract, which in essence is a bargaining game with an indeterminate outcome and such organisations act as a countervailing force to the monopsonist [20].

Singh [9] particularly calls for brokering cooperatives or other producer organisations to negotiate unbiased contracts. He also sees the reason for intermediation by the state, non-governmental organisations and community organisations to protect the farmer. According to Sriboonchitten, [151] SSF cooperatives could be a solution to the uneven capturing of value added by monopsonistic buyers since cooperative profits would ultimately go to its members. Making the same case for communal bargaining, Key [21] argues that a grower’s union that can monopolise product supply could potentially extract profits from corporations.

It is required for agribusiness companies to use applicable prices (spot or forward), which are impartial to both parties. There is a requirement for additional training of SSFs so that they can improve skills in negotiating for good prices for their commodities. There is a need to organise farmers into groups to augment their bargaining power in dealing with contracting companies that are often monopsonies or oligopsonies that have high market power. Besides, SSFs need to be well-read in the importance of CF and the need to abide by agreed-upon contracts. The inducements provision to agribusinesses that includeand promote CF in their strategies, is supreme. Research and development, and extension activities related to crops being promoted by CF must be fully supported. It is also necessary to create mutual trust between farmers and promoters through frequent interaction and information sharing regarding costs and market prices.

Lack of uniformity in the regulations and laws of many African states hamper full access of SSFs’ to the markets. Governments are urged to advance the establishment of identical policies and laws; especially those that eliminate trade barriers.

Companies need to consider the political stability of the country where they are setting/operating business . Sometimes, there is a threat of CF operational disruption when politically connected farmers become unhappy with the company. Another possible scenario is political authorities’ interest to gain popularity (vote buying) while jeopardizing the contract agreement.

The farm/land assessment is crucial because sidestepping any single issue could imperil the success of the CF programme. The climate, soil and lay of the land must be suitable for the achievement of commercially viable yields. For example, frost prone areas can destroy or reduce yields of some crops. The pH in the majority of smallholder farms is low; therefore, the investing companies may consider the provision of a liming programme or utilising crops that are tolerant to acidic soils. If irrigation is considered, there must always be adequate water to meet crop requirements. The farm should be analysed for any hazards from disease, pests or vermin, for example. The previous non-observance of crop rotations could have increased the incidence of nematodes.

Big processors, exporters, or sometimes chains of supermarkets must be encouraged to organise CF operations. Therefore, an investment environment that capacitates private investment in agribusiness sectors is a necessary pre-condition for the development of private CF schemes. This improved climate involves cutting unreasonably high capital requirements to start new companies, restructuring registration procedures, limiting licensing requirements to sectors in which public health or safety is an issue, for example, pesticide distribution, developing a fair and clear tax code, simplifying customs clearance procedures, adopting a modern commercial and legal code and lessening corruption.

It is quite obvious that despite all of its great potential to fuel economic growth, CF is not spontaneously geared towards the most deprived farmers because of the high transaction costs involved. For as long as the most disadvantaged farmers are excluded from CF schemes, the only way CF can participate in poverty alleviation is through generating labour employment on farms and processing plants rather than having a direct effect on SSFs [140]. Actions that need to be taken in order to create and enforce conditions under which the most deprived groups and SSFs can participate in and benefit from CF arrangements are listed in Table 13 as follows:

Employment of extension staff (both government and private) in CF is critical for its future improvement as they are the key connection between contractors and farmers. Contractors must, therefore, coordinate with extension staff prior to the introduction of contracts and educate farmers to arrange projects for them. Extension staff will then supervise development throughout the farming season and farmers will be able to report locally any challenges, for example, pest and disease incidences. This kind of technical support and close monitoring will certainly improve the quality of farmers’ produce. It may discourage cases of side-marketing or rerouting inputs for other uses by farmers. Timely provision of inputs, collection and transporting of harvest is crucial for a successful venture.

Farmers must collect enough information and understand the terms of the contract before committing to CF. They must adhere to contractual agreements despite the lure to side-market the product due to higher prices elsewhere. Small-scale farmers should take advantage of such openings and learn new technical skills to produce high quality product for the market. It is commended for farmers to be associated with farmer associations in their community.

Contract farming is seen as a resource for developing markets and technical skills in a way that is money-spinning to the farmer and the contractor. Agricultural extension staff has a responsibility to accomplish in order to ensure that farmers and contractors should understand the factors that affect the viability of CF. They must have good comprehension of crops or animals under the specific contract. Furthermore, they must have effective communication skills to organise and administer cropping and livestock schedules and buying procedures fairly and honestly and be well versed with the understanding of social customs, farming practices and language of the communities they work with. Extension staff must not participate directly as farmers in Contract Farming arrangements. Both government and private sectors must not allow this.

Availing and facilitating SSFs with access to long-term sources of finance and areas of policy intervention is paramount. The banking and insurance systems have a responsibility to play in agriculture and investment banks could use the existing SSFs groupings and agriculture marketing cooperatives and warehouse receipt system to lend to farmers. The African governments could expediteg the release of customary land titles for them to be used as collateral. Related to this is fast tracking the establishment of, and access to, crop insurance schemes to reduce related risks to crop failure due to unfavourable weather conditions and the outbreak of diseases. Other measures include, accelerating operationalisation of agriculture banks and strengthening credit guarantee schemes.

It is very necessary to improve the quality of feeder roads in the areas surrounding the schemes in order to guarantee accessibility throughout the year. This should build on the ongoing governments’ efforts to improve roads that connect the districts.

With the current effects of climate change and erratic rainfall, governments in collaboration with other stakeholders should consider establishing irrigation schemes. Such moves would require synchronising the infrastructure demand with the priorities set under agriculture development plans which translate the objectives into actionable programmes at district and local levels.

Finally, further research studies are required to find methods to wean-off SSFs from perpetual CF arrangements so that they stand independently when it comes to funding and marketing of their agricultural production.