Trading commodities via SMS Lack of access to reliable and up-to-date market price information is a serious problem for smallholder farmers across Africa. Without this information, they are vulnerable to unscrupulous traders giving them prices at below-market rates. Furthermore, they are reluctant to diversify into different cash crops for fear of not finding a profitable market for their output.
The SMS system, which was launched in August 2006, is very simple to use. To obtain the best prices for a commodity, farmers simply send an SMS message containing the first four letters of the commodity name to 4455. Within seconds, they receive a text message with the best prices by buyer using abbreviated buyers’ codes. If a farmer wishes to get best prices in a specific district or province, he or she simply includes the province/district code after the commodity code. After selecting the buyer that best suits their needs, farmers can send a second SMS message with the abbreviated buyer’s code again to 4455. A text message is sent back with the contact name and phone number of the buyer, the full name and address of the company and simple directions for reaching both. Farmers are then able to phone the contact and start trading. Each SMS message costs approximately US$0.15. The system is also supported by a website, for those who have Internet access. The service allows smallholder farmers to compare current prices in their district, province or nationwide and to make the best decision on where to sell their output, thus giving them commercial power that they did not have previously. In addition, it spurs competition among traders and processors, who keep a close eye on the website to see how their competitors’ prices are moving. Commodities that are part of the market information service include maize, beans, groundnuts, soybeans, sunflower, sorghum, cassava, beef, sheep, pigs, goats and wheat. So far, over 1,000 hits per week have been recorded on the system. It is estimated that more than 15 per cent of SMS messages directly lead to farmers selling their outputs, and over 130 traders update their prices on the system weekly. The ZNFU is looking to continue the scheme, with the support of a corporate sponsor, and intends to introduce new commodities and services to the system. The SHEMP programme itself is looking into extending the system to cross-border trade with Zambia’s neighbours. To this end, the Katanga Province in the Democratic Republic of the Congo, known as the Congolese copper belt region, was chosen as the most suitable pilot region. With 11 million consumers, Katanga Province’s population is similar in size to that of Zambia, and thanks to proceeds from copper mining many of its consumers are willing and able to buy Zambian agricultural products. From September 2007, a cross-border SMS market information service will provide farmers and traders with daily information on stock availability, indicative market prices and sales trends. Congolese traders will access the information in French via Vodacom DRC and Zambian traders and farmers will receive data in English via AfriConnect/Celtel. Before the introduction of the cross-border SMS system, the SHEMP programme had already helped farmers grow and process cassava to Congolese specification in view of selling it to the Democratic Republic of the Congo and to increase goat sales at the border. Commodity-specific interventions within SHEMP Zambia ranks among the world’s best cotton producers, and its hand-picked cotton lint has an excellent reputation amongst international buyers. Despite this good quality, Zambian cotton farmers are faced with fluctuating world prices, as well as difficulties in negotiating fair prices with ginners. (Ginning is the process by which cotton fibre is separated from the seed; the seed is used to grow more cotton.) Ginners provide credit to farmers, and to some extent are able to dictate prices. SHEMP focused on building capacity of the fledgling Cotton Association of Zambia (CAZ), which represents cotton farmers. It also gave support to CAZ to develop a fair and transparent formula price model for better price negotiation and helped create sustainable linkages between ginning companies and seed cotton smallholders to reduce market abuse. To help ensure that the voice of small farmers was better represented, the programme also promoted networks with other cotton stakeholders in Zambia, in the Eastern and Southern Africa region and internationally through the International Cotton Advisory Committee (ICAC), the international body located in Washington D.C. that represents the cotton industry. The success of these interventions is particularly impressive. CAZ’s credibility as an effective voice for the 300,000 cotton farmers it represents has been boosted by the capacity building it has received through SHEMP. CAZ has been able to negotiate and finalize cotton purchase contracts for the 2006/07 marketing season with five of the seven cotton ginners operating in Zambia. As a result of the efforts of CAZ, with SHEMP acting as the prime facilitator, cotton farmers’ incomes have increased. The World Bank is now using the Zambian formula price model as the benchmark for Africa. Source: IFAD |
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The IFAD-supported Smallholder Enterprise and Marketing Programme
(SHEMP) in Zambia introduced an innovative way to address this problem.
Under its agribusiness component (one of three components, alongside
road access and group formation), it put in place an SMS Market Information
Service in cooperation with the Zambia National Farmers Union (ZNFU).
The service provides up-to-date market prices, listing buyers for
12 major commodities in a cost-effective, accessible and reliable
manner. 
Besides
the market information service, SHEMP’s agribusiness component
has also developed commodity-specific interventions for products
such as cassava, goats, bee products and particularly cotton, one
of the most important crops in Zambia after maize.
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