Whereas the benefits of shea butter for consumers are well known, little information is given on the importance of shea fruit for smallholder farmers and the environment. This is especially true in East Africa, where shea butter production is far less developed than in West Africa.
How do smallholder farmers benefit from the direct sourcing of shea nuts?
Let’s take a look at an area called the Ajia sub-county within the Arua district (West Nile). This is an area where over 10,000 shea trees are growing well and are shaping a beautiful wild landscape. The shea trees in this region produce their first fruit when they are about ten to fifteen years old. By the time trees reach the age between twenty and thirty years old, they start bearing fruit at full capacity and can maintain that capacity for about two hundred years!
Smallholder farmers in this area sell their shea kernels directly to agribusinesses like PELERE GROUP, woman-led agribusiness with 40 employees. The impact of the agribusinesses and their direct sourcing strategy on the livelihoods of smallholder farmers and the environment in this area is impressive, despite the fact that the agribusinesses buying from the farmers are still relatively small.
PELERE: Example of the impact
- PELERE sources about 250 tonnes of shea kernels from the smallholder farmers every year to produce 80 tonnes of high-quality Shea butter cosmetics.
- PELERE pays the smallholder farmers about 4 times as much for the shea kernels compared to the local traders!
- Thus, the cooperation with PELERE provides sufficient, stable annual income for 850 farmer households or about around 5.100 people. The same amount of kernel would only provide the same level of income to 215 farmers if sold to local traders.
- Since shea nuts production allows intercropping the farmers involved can also continue growing cassava, beans, simsim (sesame), and maize for consumption of the household, also known as subsistence farming.
Besides sustainable income for farmers, direct sourcing of shea nuts can also provide a significant number of jobs. PELERE is considering new contract farming with landowners owning over 10,000 Shea trees. If both sides succeed, it will result in hundreds of new jobs for workers caring about the shea trees and the related shea kernel production.
But why is shea nut production good for the environment?
Cutting down trees for charcoal production is common in many regions like in Ajia. Shea trees are especially very suitable for charcoal production. Because only a very small amount of shea trees are utilized for shea butter production, the value of these trees is mostly unknown. However, this value can be easily quantified:
- Cutting down a typical shea tree results in 4–6 bags of charcoal worth each 30,000 UGX, thus in total about $ 40 USD per tree.
- Such trees produce around 250 kg shea kernel per annum, resulting in about $ 140 USD income each year → One single shea tree provides $ 700. USD of steady income over 5 years compared to the one-time $ 40 USD when turned into charcoal.
Ajia: One region, two landscapes
How do smallholder farmers benefit from increased transparency?
PELERE is a growing business with an increased focus on attracting international bulk buyers. For such buyers, direct sourcing, environmental protection, and social responsibility of raw material matter a lot. Thus, PELERE is using phy2App to communicate the information that potential buyers are looking for. An increase in sales of at least 20% is expected, due to the ability to assure transparency of Pelere Group shea butter products, despite the troubles caused by COVID-19 time.
What does a 20% increase in sales of the agribusiness mean for the smallholder farmers in the Ajia region?
- Additional annual off-take of 50 tonnes Shea kernels, worth about $ 25,000 USD
- Additional 165 smallholder farmers receive a sufficient annual income, assuring sufficient livelihood of 1000 household members
- Allowing kids of these households to go to school instead of working in the field
Let’s summarize the key fact
- Fact I: Agribusinesses sourcing directly from smallholder farmers provides up to 4 times higher farm gate prices for shea kernels compared to the farmers selling to local traders.
- Fact II: 250 tonnes shea kernels sold to an agribusiness exporting the product provides a steady income for 850 farmers, 635 more than what is possible when selling the produce to local traders. This assures sufficient livelihood for over 5,000 household members.
- Fact III: Commercial shea nut production allows intercropping assuring good biodiversity and variable crop production.
- Fact IV: Shea trees produce around 250 kg shea kernel per annum resulting in an average $ 140 USD income per tree per year.
- Fact V: Turning a shea tree into charcoal provides a one-time $ 40 USD income, compared to up to $ 140 USD every year.
- Fact VI: Transparency plays a decisive role for international shea bulk buyers and allows up to 20% higher offtake from the smallholder farmers with an additional positive impact on farmers and the environment.
This was just one of many stories from Uganda on how an agribusiness exporting their products are sourcing directly from the smallholder farmers to not only ensure the quality of their products but to also have significant positive social, economic, and environmental impacts.
By agribusinesses sourcing directly from the smallholders, they know exactly what is going upstream in their value chain. This knowledge is worth a lot if communicated the right way further downstream to the local, regional or international buyers. If the agribusiness is able to communicate the upstream value chain information transparently to the market, they can improve their market position and increase sales, which consequently leads to greater income for the smallholder farmers and their households.
The observations and findings were made during a field trip in April 2021 to the Arua district, close to the DRC border, as part of our research on the impact of direct sourcing and transparency on smallholder farmers and the environment.