1. Why Contract Farming in Africa Mohammad Karaan Dean AgriSciences University 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