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Why Contract Farming in Africa Mohammad Karaan Dean AgriSciences University of Stellenbosch

Why Contract Farming in Africa Mohammad Karaan Dean AgriSciences University of Stellenbosch. NAMC/FAO Workshop Indaba Hotel Johannesburg May 2009. The Motivations (Theory). Why firms? (Coase) Markets & hierarchies (Williamson) Transaction Costs: Information asymmetry Asset specificity

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Why Contract Farming in Africa Mohammad Karaan Dean AgriSciences University of Stellenbosch

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  1. Why Contract Farming in AfricaMohammad KaraanDean AgriSciencesUniversity of Stellenbosch NAMC/FAO Workshop Indaba Hotel Johannesburg May 2009

  2. The Motivations(Theory) • Why firms? (Coase) • Markets & hierarchies (Williamson) • Transaction Costs: • Information asymmetry • Asset specificity • Opportunism • Bounded rationality

  3. The Motivations(Practice) • Growth in global markets • Africa nett importer of processed goods • Diminishing share of world exports • Much potential for value addition • Latent resources • Underinvestment in agribusiness • Growth in chains • Efficiency of scale

  4. Examples • Sugar • Cotton • Grains • Dairy • Flowers • Seeds • Oilseeds • Poultry • Aquaculture • Hydroponics

  5. Challenges • Asymmetry • Trust • Opportunism • Enforcement • Asset specificity (infrastructure) • Incomplete contracts • Embeddedness • Induced innovations

  6. A development agenda • Incentives to engage • Safety nets • Incubators • PPP in investments • Integration

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