Sugarcane outgrowers in Ethiopia lose in state-run schemes

Most recent research, including that by DIIS researchers, has argued that contract farming in Africa leads to broadly positive welfare impacts for scheme participants. Such research focuses almost entirely on privately-run schemes whose membership is voluntary and whose participants retain off-scheme marketing options.

By contrast, this new paper published in World Development focuses on schemes for which participation is mandatory and where prohibitions on side-selling are enforced. Such schemes have been also common over the last half century in Africa, particularly for industrial crops.

The paper reports results from a study of welfare impacts of participation in state-run sugar outgrower schemes in Ethiopia, in which participation by smallholders has been a condition of their retaining access to land. Econometric analysis of survey data shows that smallholders forced to contribute irrigated land to outgrower schemes were significantly worse off as a result, relative to a matched group of non-participants. On the other hand, there were no significant effects of participation for smallholders forced to contribute rain-fed land. The paper discusses several possible explanations of these results.

The study orogonally formed part of the dissertation of DIIS-based PhD student Mengistu Assefa Wendimu, with co-authorship by Arne Hemmingsen (Institute of Agricultral and Resource Economics, University of Copenhagen) and Peter Gibbon (DIIS). Mengistu Assefa Wendimu is now a post-doc student at the University of Manitoba, Winnipeg, while Peter Gibbon has retired.