Contracting Sugarcane Farming in Global Agricultural Value Chains in Eastern Africa: Debates,Dynamics,and Struggles

Introduction

In the last decade, there has been a resurgence of interest in agricultural commercialization in Africa among governments, donors, development agencies, the private sector, civil society and academics. This interest has coincided with skyrocketing global food prices and escalating large-scale land and agricultural investments in 2007–2008. Driven by the allegedly unlimited availability of cheap land and prospects of expanded profitability in a sector that had been seen as traditionally risky by finance capital, the rise in foreign investors’ interest in African agriculture seems to be replacing the agro-pessimist trends that characterized the approaches of international financial institutions (IFIs) and governments to agriculture in the years of structural adjustment programs (SAPs). In those years, the expenditure of African governments in agriculture was drastically reduced, while the attention of international private capital had not yet taken momentum.

The debate on the commercialization of African agriculture is not new; its early traces were minutely recorded in colonial archives, especially in relation to the attempts of colonial governments to facilitate the establishment of white-settler large-scale plantations and estates, and/or impose the cultivation of tropical cash-crops that suited European markets among African (prevalently) subsistence-oriented smallholders. The emphasis on the commercialization of agricultural produce continued in the years following the independence of African countries, mainly pushed by the need of African governments to extract agricultural surpluses from the countryside in order to generate foreign revenues and initiate urban development and infrastructural projects. In this period, the state controlled much of the value extraction from the countryside through the operation of marketing boards. More recently, pushed by the neoliberal free-market ideology, we have witnessed an expansion of ‘value chain agriculture’ resulting from the rising power of corporate agribusiness capital in the international food regime (McMichael, 2013), the growing involvement of BRICS countries (especially China, Brazil and India) in the global agricultural value chains and interest in the land and agricultural resources of countries in the global South (Cousin, Borras, Sauer, & Ye, 2018).

One manifestation of the expansion of global agricultural value chains is witnessed in the renewed academic and policy interest in contract farming, outgrower schemes and other forms of contract production, as possible institutional and organizational innovations to foster links between agribusiness and farmers and to integrate them in global commodity chains. According to its proponents, among global development agencies, agribusiness capital and mainstream scholars, the fostering of links between smallholders and agribusiness capital through global agricultural value chains and contract farming schemes has the potential of increasing incomes and reducing poverty. Contract farming has been framed as an inclusive and collaborative business model (FAO, 2013), an alternative to land grabbing and a potentially less harmful farming and organizational model given that it allows farmers to keep possession of their land while benefiting from markets (Braun & Meizen-Dick, 2009; Cotula & Leonard, 2010). Accordingly, contract farming has found increased political legitimization among governments, donors and transnational corporations, as claims of inclusivity, allow them to repeal allegations of land grabbing by advocacy and civil society groups (Martiniello, 2016).

The key assumption underlying the aforementioned claims is that peasants are poor because they are excluded from the capitalist circuits (and its economic benefits), and/or because they do not commercialize enough agricultural produce. Given this diagnosis, the solution is identified in the promotion of a model of ‘inclusive development’ (FAO, 2013), which promises to provide farmers with the necessary market outlets for their produce. Yet, despite this overly optimistic, simplistic ‘win–win’ narrative, it is important to interrogate the question as to the historical and political circumstances that enable contract farming to improve incomes and development as well as the situations that lead to enhanced dependence, impoverishment and rural underdevelopment (Little, 1994, pp. 216–217).

Contrary to economistic discourses that interpret contract farming through institutionalist and organizational lenses that abstract from the wider socio-economic structures and power dynamics in which they are embedded; this article explores the aforementioned questions by analyzing the historical and comparative perspective, contract farming schemes at Kilombero Sugar Company Ltd (KSCL), in the Morogoro region of Tanzania and at Kakira Sugar Works Ltd (KSWL), in the region of Busoga in Uganda. The aim is to provide an interpretation of the debates, dynamics and struggles surrounding the emergence and deve-lopment of contract farming schemes and their social, economic and ecological implications. It does so by synchronically and diachronically demonstrating the power relations and the forms of social organization that underpin these agricultural modernization schemes.

In the sections that follow, this study provides: (a) an exploration of the current debates and controversies about the character and socio-economic implications of contract farming; (b) an analysis of the historical origins of contract farming in Eastern Africa, documenting the ways in which sugarcane production emerged during colonialism in the two localities studied and its role in the agrarian economies that characterized the post-independence period; (c) a detailed account of the revival of outgrower schemes under neoliberalism and the socio-ecological implications of the expansion of these schemes in the current scenario; and (d) a discussion of the social struggles around contract farming. Finally, the concluding section summarizes the antagonistic views surrounding contract farming and recasts the main arguments and contributions of this study.

Current Debates About Global Agricultural Value Chains and Contract Farming

Agricultural value chains are not new in the global political economy. They were very important in the early phases of the development of capitalism, the triangular trade (sugarcane-cum-slaves) being a notable example (Mintz, 1985; Patel & Moore, 2017). Over the last decade, the study of global agricultural value or commodity chains has become very fashionable. The recent scholarship on global value chains can be differentiated from the early works, in that it interprets the geographical expansion of commodity chains as part of wider changes in the structures of global political economy, attempting to capture the tendency towards the internationalization of Western firms and corporations (Radice, 1975), the making of a new international division of labor (Frobel, Heinrichs, & Kreye, 1980) and the character and operation of newly defined hierarchical circuits of capital (Gereffi & Korzeniewicz, 1994). Grounded in the management paradigm, its main attention is devoted to the design, functioning and performance of value chains as forms of vertical coordination to reduce transaction costs (Swinnen, 2006).

Unlike in the past, when agriculture was considered as a very risky domain for investment, thus inhibiting flows into the circuits of capital accumulation in this sector, more recently, particular attention has been given to the expansion of global agricultural value chains. Donors, global development agencies, and governments have made common efforts to promote the value chain development paradigm. In this policy discourse, whose main ideas come from the pages of the OECD-FAO Guidance for Responsible Agricultural Supply Chains (OECD-FAO, 2016), the making of well-structured and fine-tuned value chains and the integration of smallholders within them are depicted as instruments that can simul-taneously generate wealth accrual, enhance governance, responsible business, protection of human rights, health and safety, food security and nutrition, tenure rights, environmental preservation and sustainable use of natural resources.

This portrayed win–win design, termed as responsible contract farming, is seen as a model with huge potential to improve the access of family farmers to markets and boost their incomes, while also ensuring that agribusinesses have a stable supply of produce that meets quality standards. As a form of agricultural production carried out according to an agreement between farmers and a buyer, which places conditions on the production and/or marketing of the commodity, contract farming is promoted as a tool capable of improving the productivity and income of farmers because of risk minimization, enhanced circulation of produce and access to previously unavailable inputs and markets (Simmons, 2002). Other scholars, from the new institutional economics approach, have advocated contract farming as an institutional innovation that reduces transactions costs by agribusiness firms within vertically structured global value chains (Poulton, Dorward, Kydd, Poole, & Smith, 1998; Silva, 2005).

This school of thought makes a series of assumptions. First, it assumes that a lot of small producers can be improved, and the goal of food sustainability and security reached within a financialized, corporate-driven and hierarchically organized international food regime. The core idea is that connections and linkages to the markets, whether to sell produce, buy inputs or access credit, would ipso facto generate a series of positive repercussions for the well-being of local petty producers. The presupposition is that rural poverty emanates from the disconnection from capitalist markets; therefore, the solution is to facilitate the incorporation of rural poor in responsible value chains. Such a rationale is problematic. The flaw results partially from the concept of the chain itself, which, based on notions of linearity and sequential ordering, assumes that the benefits of value accrual would be equally shared and obscures the conflicts and struggles around value creation, appropriation and distribution along with the key links of the chain. Moreover, it also fails to grasp that markets are historical and political institutions, and not simply an ensemble of economic transactions; thereby, ignoring past experiences of integration of African smallholders during colonial and post-colonial eras and their socio-economic implications. In order to bypass problems of linearity in value-chain scholarship, grapple with issues of value capture among the various stakeholders, disentangle the power relations (whether prompted by corporate capital, the state, or global development agencies) embedded in value chains and unpack the labor dynamics that underlie the production of value, Praveen Jha and Paris Yeros (in this issue) propose to transcend the notion of value chains with the concept of global value systems.

Another key assumption of the new institutional economics scholarship is the idea of socially undifferentiated countryside. In the various narratives sustained by this school of thought, there is, in fact, little or no trace of a sound analysis of the social cleavages of class, gender, ethnicity and generation, and the deep structures of inequality upon which contract farming rests, and, in many ways, it exacerbates. In the economistic analysis advanced by development economics experts, there is no appreciation of the ways in which uneven landholding patterns and farming systems, different modes of social organization and ecological structures affect the dynamics and prospects of contract farming. The final assumption of the value-chain paradigm is that of a level playing field in which the two sides of the contractual relationship are considered equal. Here the emphasis is on legal relations, rather than on social actors, tending to abstract them from the power relations in which these schemes are embedded. Such a view reiterates a fictitious understanding of the (contractual) law, which rather than being an expression of individual freedoms, masks relations of power and domination (Banaji, 2003).

In their pioneering book Living Under Contract (1994), Peter Little and Michael Watts analyzed the rising significance of contract farming in agricultural and rural policies, and the implications for agrarian transformation. In particular, they associated the emergence of contract farming in Sub-Saharan Africa to the processes of global restructuring of industrial agriculture, which were initiated in the 1970s and promoted the incorporation of selected rural production processes amenable to industrial reproduction as inputs. As the recent research across the African continent has shown, depending on the selected farming models and existing land and labor regimes, large-scale agricultural investments may generate quality employment, sustained monetary income, enhanced and diversified rural livelihoods, and more vibrant local economies (Hall, Scoones, & Tsikata, 2017). Unpacking the class dynamics of contract farming allows us to understand the social outcomes of these schemes (Pérez Niño, 2016).

However, this set of more politically engaged considerations has been sidelined in the economistic-oriented scholarship. This perspective, which has strongly influenced debates on contract farming in the last couple of decades, promotes free markets as the best mechanisms for the optimal distribution of resources in a society, and even as the only possible intellectual horizon. The depoliticizing effect of the neoliberal anti-politics machine (Ferguson, 1994) has undermined re-distribution and equity concerns. As McMichael (2013, p. 672) has convincingly argued, the currently re-phrased ‘value chain’ agriculture rather than just a virtuous instrument to connect producers to market and expand their productivity, embodies a power relationship based on debt dependence that allows for the appropriation of value generated along the chain by agribusiness and financiers. Yet, the problem of pro-inclusion, donor-driven, and policy-oriented analysis is that it has been driven mainly by a pragmatic preoccupation with how to make the market work for the poor (see The World Bank, 2007), thus silencing the ways in which markets have been historically and asymmetrically constructed, and emptying the contract farming relationship of its political content (Martiniello, 2017).

At various latitudes, scholars across the continent have shown a common interest in unpacking the social dynamics underpinning various models of agricultural commercialization in Africa (Hall et al., 2017; Yaro, Teye, & Torkivey, 2017). Whereas, evidence from West Africa has shown growing agribusiness-stallholder arrangements in establishing highly remunerative global value chains in fruits and vegetables (Yaro et al., 2017), and data from Southern and Eastern Africa point to the re-invigoration of sugarcane cultivation (Dubb, 2016; Dubb, Scoones, & Woodhouse, 2016; Hall, 2012; Martiniello, 2016; O’Laughlin, 2016; Richardson, 2010; Smalley, Sulle, & Matale, 2014).

Sugarcane has become, in fact, a global agricultural crop of commercial significance with the potential and it is argued to support the developmental and societal needs of many countries that cultivate it, including Sub-Saharan Africa. Driven by the region’s high production potential (e.g., in Tanzania, 120 tons per hectare [ha]), low costs of production and proximity to European markets, the crop is emerging as a versatile resource (with diverse fungibility), diversifying into a wide range of value-added products that go beyond food/sugar, particularly bioethanol and bioelectricity (or green electricity), and also bioplastics (Borras, Franco, Isakson, Levidow, & Vervest, 2015; McKay, Sauer, Richardson, & Herre, 2016). Even though Sub-Saharan Africa contributes only 5 per cent to current global sugarcane production, this proportion is growing due to its suitability to tropical and subtropical climates. It has been estimated that in Southern Africa alone 6 million ha of suitable land is available for sugarcane production. This hectarage is significantly larger than today’s cultivation of 0.37 million ha in the region and 1.5 million ha across the entire African continent in 2014. Countries such as Mozambique, Zambia, Angola, Malawi, Tanzania and Zimbabwe have the best potential in terms of land availability for expanding sugarcane production, while others, such as Uganda and Congo, have best agro-ecological and hydro-geological conditions (Watson & Puchase, 2012).

A Historical-comparative Perspective of Commercial Agriculture and Sugarcane Contract Farming in Eastern Africa

Large-scale plantations based on slave labor were initially set up by wealthy landowners of Arab and Swahili origins along the East African coast and inland in the sixteenth century to cater to the expanding markets of the city-states (Sheriff, 1987). Omani rulers of the Zanzibar Empire organized an intricate state apparatus, which supported the plantations in their need for slaves, land, markets and credit. Later on, in the phase of European colonization, the German and later British governments gave preferential treatment to large-scale European growers, affluent private individuals engaged in mixed farming, large coffee estates and corporations. Spurred on by mercantilist influences of the world capitalist economy (1840–1890) and by the coercive interventions of the colonial rule (1890–1961), peasant commodity production was substantially intensified in the region. Peasants were induced to participate in commodity production by means of state force and extra-economic coercion, such as taxes, penalties, imprisonments and labor conscriptions (Williams, 1976). State force was exerted directly through military repression and indirectly by using the decentralized power of ‘traditional’ authorities (Mamdani, 1990). The progressive integration of peasants into commodity production for export, as petty producers and as migrant workers, was aimed to further monetize the natural economy, integrate the colonial economy into the metropolitan capitalist structures of power and accumulation and extract a surplus from the colony. In other words, peasants were compelled to produce more commodities and exchange values (cash crops) in order to maintain certain levels of consumption (Bryceson, 1980, p. 282).

Yet, it would be erroneous to assume that only exogenous factors were shaping cash crop growing in Eastern Africa. In Tanganyika, in the West Lake and Kilimanjaro regions, the powerful thrust of indigenous entrepreneurship emerged in competition to white settlers and European companies (Iliffe, 1979, p. 290). By the time the system of slave labor gave way to other unfree forms of forced and waged labor in the 1920s, white settlers had already established coffee and sisal plantations. Colonial authorities further supported the ‘success’ of large-scale plantations by assuring a regular flow of cheap labor power through the enforcement of 60-day contracts for indigenous African workers, under the 1922 Masters and Natives Servant Ordinance, which imposed legal sanctions for the breach of contracts (Shivji, 1988).

According to Ahluwalia (1995), despite the support of the colonial government, in Uganda, the success of large-scale European farmers was more limited due to a combination of constraints, including the absence of a sustained supply of labor force and high costs of production. These adverse conditions were enhanced by the global recession of the 1920s, inducing a plethora of economic defaults. Indian merchant capitalists, whose activities had been previously confined to trade, profited from the situation with many low-cost acquisitions, thus becoming key players in the agricultural and later on manufacturing sectors. Differently from Kenya, where large-scale farming became the prevalent form of agricultural production, and Tanzania, where a combination of large- and small-scale agriculture took place, in Uganda the bulk of the agricultural production was carried by the peasantry (Iliffe, 1979). Such distinctive feature resulted from the landholding pattern created by the Buganda agreement of 1900, which allocated 9,000 square miles to traditional chiefs, de facto transforming them into a class of rural notables and landowners (Mamdani, 1976).

Early attempts to establish formal farmer–corporate agreements in Africa to foster the integration of agricultural producers within the commercial circuits of colonial economies included the Gezira Irrigation Scheme in Sudan in 1920s, in which farmers were contracted to grow cotton under a land tenancy agreement (Eaton & Shepherd, 2001, p. 2; Gaitskell, 1959); large-scale settlement projects with African farmer tenants initiated by the Tanganyika Agricultural Corporation (Cliffe & Cunngham, 1968); outgrower schemes at Kakira Sugar Works in Southern Busoga in the 1950s (Ahluwalia, 1995); and initiatives by the Kenya Tea Development Authority in the 1960s (Ochieng, 2009). The general aim of the colonial state was to transform traditional African cultivators into modern farmers by separating them from their traditional environment and integrating them into production systems ‘under close supervision’ (Huizer, 1971, p. 3).

Despite the existence of substantial differences between the paths taken by capitalist development in the region, it is useful to point to significant similarities in the existing trajectories of agrarian change. In his analysis of the transformation of the agrarian class structure in East Africa, Lionel Cliffe (1977) signaled the emergence of what he called ‘frontier areas’: areas characterized by the penetration and settlement of European (and other foreign) farmers, increased capitalist production methods and ensuing needs for labor, and the integration of smallholders within the circuit of agribusiness. Both geographical areas are considered in this study, Busoga in Uganda and Kilombero in Tanzania fit within this typology. According to colonial accounts, the Kilombero valley was an area of enormous agricultural potential where large-scale irrigated cultivation could be undertaken, as favorable conditions of climate, soil and water availability made agricultural production possible on an unprecedented scale (East African Royal Commission, 1955). The area was also the target for a series of experiments with tea, rubber, cocoa and tobacco (Beck, 1964). In Busoga, agronomic tests conducted by colonial agronomists were instrumental in introducing new sugarcane varieties that suited the soil conditions. Capitalizing on such favorable conditions, and through a mix of leasehold concessions and private purchases from both European settlers and African landowners, the Madhvani family established Kakira Sugar Works in 1932, on a surface of 4,000 ha of very fertile land endowed with abundant water sources (Ahluwalia, 1995). Similarly, in Kilombero, the first large-scale sugar plantations, which emerged in the 1930s, were owned by Indian and, to a lesser extent, Arab landowners who processed sucrose into coarse sugar slices known as ‘sukari-guru’ (Sprenger, 1989, p. 11). Benefiting from privileged access to bank loans, the number of plants owned by Arabs and Indians greatly expanded under colonial rule in the 1950s. Such expansion also manifested itself in Busoga in the same period, with the Kakira group of estates covering 22,750 acres of land and becoming the largest landowner in Busoga (Uganda Protectorate, 1960, p. 79). Indian family firms accounted for two-thirds of the total East African production of sugar (Ahluwalia, 1995, p. 159).

It is worth noticing that both areas were known as food baskets prior to the opening of these frontiers of accumulation; they had high levels of cultivation of food crops, such as millet, groundnuts, simsim and cassava, and as the century progressed, maize and rice. Petty producers were relatively successful in combining food production, which occupied the center of gravity of agrarian livelihoods, with little cash-crop production, generally sugar or cotton, to pay for the mounting colonial taxes and other forms of exactions.

Interventions of agricultural modernization were also motivated by the growing political grievances and protests that animated the Eastern African countryside in the 1940s and 1950s, in the late colonial period. In the Ugandan protectorate, agitations were driven by rich peasants (kulaks), yet supported by poor tenants, targeted both Indian capital and the local emissaries of decentralized colonial governance, demanding higher revenues for their agricultural produce and the freedom to sell to operators other than Indian merchants (Mamdani, 1975). In Tanganyika, a series of responses emerged in response to enforced agricultural programs or institutions, and eventually channeled these resentments into nationalist demands (Cliffe, 1964). Capitalist penetration in the region set into motion processes of social differentiation within the peasantry, with its poor sections, such as (migrant) workers in the plantations and petty-commodity producers, being subordinated to and exploited by both internal and external classes (Shivji, 1975, p. 10).

In the post-independence years, the exigencies of producing cheap food for a growing urban population and cash crops for the international markets pushed governments in Eastern Africa to play a significant role in agricultural production, for example, by linking farmers and smallholders to state-controlled marketing boards. In 1960, Tanzania’s agricultural policies followed two strategies: the ‘improvement approach’, based on small-scale agriculture and cooperative marketing, and the ‘transformation approach’, based on large-scale agriculture and settlement schemes (Coulson, 2014). In the same year, the Kilombero Sugar Company Limited (KSCL) was officially formed on a surface of 25,000 acres, under joint private ownership, by the International Finance Corporation, the Commonwealth Development Corporation and the Standard Bank of East Africa. Four other privately-owned sugar estates plus three government-sponsored land settlement schemes were located in close proximity. KSCL aimed at encouraging sugarcane outgrowers to join the scheme by providing inputs and services on credit. In the first milling season, sugarcane was provided by a few large Indian and European plantations, while the settlement scheme included 250 smallholders and a group of 14 African (medium) farmers (Baum, 1968, p. 23). The company operated under the pattern of nucleus-estate plus outgrowers, with the former producing 70 per cent of the cane and the latter 30 per cent (Kopoka, 1989, p. 19). The political scenario was dramatically altered by the adoption of the Arusha Declaration in 1967, and its three major pillars: land nationalization, villagization and collective farming (Coulson, 1982). All KSCL shares were then purchased by the government. Yet, as the government did not possess the management skills, management was outsourced to a Dutch firm, Handels Vereniging Amsterdam (Sprenger, 1989, p. 11).

In Uganda, under Obote’s ‘Move to Left’, and related strategies of Africanization in the late 1960s, the cooperative movement played a key role in integrating smallholders into state-orchestrated agricultural activities, producing significant results from an economic point of view. The government acquired 50 per cent of Kakira Sugar Works (KSW), meaning a larger involvement of the state in the control of key commodities, such as sugar, which was increasingly traded under preferential agreements between African, Caribbean and Pacific (ACP) countries and the European Economic Community (EEC). Yet the acquisition also facilitated the company’s access to credit by international donors, as the alliance with the state gave more security and stability to the company in a period of social and political turbulence (Ahluwalia, 1995). In this period, the number of outgrowers increased from four in 1958 (the beginning year of the outgrower scheme) to 1,462 in 1970.

The trend towards the growing involvement of the state in agriculture was further strengthened by the Lomé Convention. Signed in 1975 by the EEC and 71 ACP countries, the convention stipulated trade and aid agreements of targeted agricultural commodities towards European markets at advantageous prices (twice higher than prices on the international markets). The studied cases share important similarities. Both companies were pioneers in establishing the model of nucleus-estate plus outgrower schemes. The companies used to provide inputs, such as seeds and fertilizers, on credit, while outgrowers were contractually obliged to deliver sugarcane at certain times to a sole buyer. Both schemes were to a certain extent successful in opening new avenues to agricultural commercialization, as sugarcane began to attract significant investments from development agencies and bilateral donors. Both companies experienced forms of state ownership of their assets, given that the Ugandan and Tanzanian states found it increasingly strategic to control a sector that was benefiting from preferential prices and access to European markets.

Outgrower Schemes Under Neoliberalism: Old Wine in New Bottles?

After Idi Amin’s expulsion of the Indian population in the early 1970s, sugarcane production dramatically stopped in Uganda. When Yoweri Museveni came to power in 1986, he re-invited Indian sugar giants to regain possession of their properties and reinvest in the country. With the financial aid from the World Bank, sugar plants, which had been abandoned, were upgraded and production restarted. Under the new neoliberal winds, outgrower schemes were actively paraded by offering accumulation opportunities for those who joined the scheme. In neoliberal Uganda, outgrower schemes were meant to replace the collective model of cooperatives, reduce the role of the state, and bring in a more individualist and entrepreneurial spirit (Wedig & Wiegratz, 2017).

In the Kilombero valley, the 1980s were years of intense difficulties, especially because the SAPs were making state coordination of agri-cultural activities increasingly problematic. Village production and cooperation were increasingly replaced by more individual forms of production, as the policies of villagization progressively became more coercive, obliging peasants to produce what the state demanded. Simultaneously, the state became heavily indebted with international creditors who had funded the massive investments in sugar complexes, which covered up to 30 per cent of the industrial investments of the Third Five-Year Plan, with excess capacity in the sugar processing plants of 57 per cent (Kopoka, 1989, p. 17). The combined efforts of both government and donors had fueled the expansion of milling plants much beyond their organizational capacities. Moreover, the emergence of a labor crisis jeopardized the prospects of the sugar industry (Mbiliny & Semakafu, 1995). Outgrowers experienced a serious decline in farm income along with the non-availability of farm equipment, inputs and credit. As a result of converging economic and political pressures, KSCL was privatized and purchased by Illovo Sugar Ltd (with a 55% share), the largest sugar producer on the continent, and by Ed&F MAN (20%), a British commodity trader, while the Tanzanian government retained 25 percent of its shares.

In both cases, outgrower schemes were aggressively promoted by both companies and the state as a model aimed to boost productivity and cost efficiency. Campaigns of sugarcane promotion were launched in the areas; for instance, incentives were allocated in the form of credit, free seeds for the first years, and attractive prices. In Uganda, the outgrower scheme was officially re-introduced in 1992, in line with the overall policy environment aiming at promoting agricultural commercialization. KSW offered the provision of a package of farm services and inputs on credit: tractor ploughing, seedlings, pesticides, transport, and sometimes fertilizers, along with an attractive price in the initial years. The price of sugarcane/ton paid by KSWL to outgrowers increased from USh24,066 in 1995 to USh28,404 in 2000 (Kafuko, 2005, p. 31). The collapse of state marketing of cash crops and the demise of cooperatives drastically reduced the opportunities of cultivating cash crops for rural households. The increased difficulty in accessing the necessary inputs pushed many smallholders to look for alternative avenues to access markets, credit, and other essential inputs. In Tanzania, the state removed any legal constraint to participate in outgrower schemes and, at the same time, provided residents of the area surrounding KSCL with two acres of land between 1990 and 1995 (Smalley et al., 2014, p. 7). A general effort was deployed to reacquire trust among local farmers, as previously there were no incentives and little motivation to grow sugar, coupled with major limitations in terms of access to inputs and transport services (Sprenger, 1989), and transmitted skills and technologies (Kopoka, 1989). Along with agricultural support, state authorities also promoted the construction of new transport and social infrastructures, such as roads, schools and hospitals reserved for the farmers who joined the scheme.

In the last decade, Uganda and Tanzania have become the promoters of neoliberal agricultural policies. Both governments see the rise in the price of agricultural commodities as an opportunity to be seized, not as a treat to the social order. By promoting export-oriented agricultural policies, both countries are at the forefront of a socio-economic and political battle to transform prevalently subsistence-oriented peasants into petty-capitalist entrepreneurs. The cause of their poverty is associated with the lack of entrepreneurial skills and the distance from markets. Given this diagnosis, the proposed solution is to link them in corporate-driven global agricultural value chains, where they can learn the appropriate business skills and benefit from market opportunities. The recent Manifesto for Peace and Prosperity in Uganda and Kilimo Kwanza (Agriculture First) in Tanzania magnify the virtues of large-scale, capital-intensive agricultural production by portraying corporate agribusiness and large-scale farmers as the key actors to advance agricultural transformation.

Anchored in a modernist and productivist paradigm, these narratives tend to celebrate uncritically the successes in terms of yields and quantities of sugar produced and traded on the national and international markets, yet concealing the social and ecological implications of these schemes. Whereas contract farming is often depicted as an alternative to large-scale land enclosures, as it leaves, on paper, farmers in control of their land, fieldwork was undertaken in both areas reveals significant processes of dispossession and expulsion of less productive farmers from agro-industrial sugar complexes. Given the industrial nature of sugar production, outgrowers engaged in these schemes face enormous and rising monetary demands. In the wait for the sugarcane to mature (20 months on average), farmers become heavily indebted for the mechanical work of ploughing, farrowing, and line preparations, the labor costs for weeding, maintenance, and harvest, and a variety of inputs. Even though the mechanized tasks are provided on credit by the company, which subtracts the amount at the moment of cane delivery, a significant part of these agricultural activities requires substantial availability of money. Smallholder farmers borrow money from local available banks at exorbitant interest rates (17–22%) in the case of Busoga. The adverse incorporation of smallholders into vertically structured, and increasingly financialized, value chains can be read from the prism of the technological treadmill (Amanor, 2018), which, by virtue of the multiplicity of technological requirements involved in these schemes, subjects farmers to grow and diversified monetary demands especially for fuel, fertilizers, credit and pesticides. High technological requirements and standards of quality have increased the entry threshold for smallholders. Accordingly, as showed by Harriss (1987, p. 321) in the case of Indian peasants adopting green revolution technologies, those who disposed of more resources were in a much better condition to cope with risks associated with higher cash-intensity technology. Moreover, the monopsonistic power of the company and the poor representativeness and leverage of smallholders within outgrower associations allow the company to establish the producer price at will.

The result is a price-cost squeeze, growing indebtedness and deeper involvement of finance capital in agricultural activities. In numerous cases, smallholders unable to repay loans are obliged to sell their (mortgaged) land to the bank. The bank will then sell it to the most affluent farmers, who benefit from the crises of the majority by accumulating land at the expense of poor farmers who get expelled from the agro-poles. Amanor refers to this as a process of dispossession from below (2012), in which land change hands not through the violence of the state but through sanitized market coercion. In other cases, large-scale farmers and sugar tycoons rent portions of land from less productive smallholders who do not have the start-up capital to join the scheme. These market imperatives and pressures shape the agrarian social structures in the sugar agro-poles, paving the way for rising inequalities, enhanced social differentiation and polarization.

Another key drawback of contract farming schemes is the growth of food insecurity among rural households. Both areas under consideration have, in fact, been transformed from food baskets to sugar belts, given that farmers tend to allocate most of their land to sugarcane cultivation in the hope of maximizing monetary revenues, at the expense of more traditional food crops. In both areas, 80–90 per cent of the land situated in the proximities of sugar plants is devoted to sugarcane, thus making farmers dependent on the markets for their basic food requirements. Worsening nutritional intake has been registered, especially for women and children of rural households. In other cases, members of rural households are obliged to commute to distant lands, where the land prices and rents are lower than the highly attractive sugar belts, for their household’s food production.

The spatial invasiveness of sugarcane cultivation represents another common feature of sugar-agro poles, representing a major obstacle for farmers to engage in other agricultural and livestock activities. In both cases, the landscape was dramatically transformed through sugarcane mono-cropping at the expenses of forests and pre-existing livelihood activities. In this sense, the expansion of the sugarcane frontier (Moore, 2015) (re-)produces an artificialized nature, which suits the conditions necessary for value extraction and capital accumulation. An illustrative example is water usage. Abundant availability of water is paramount to large-scale sugarcane cultivation and processing. In the cases studied, companies benefit from unlimited access to the waters of Ruaha River in Tanzania and the Nile in Uganda. In the former, inhabitants of the area have often protested against what they believe is an incremental process of declining water levels of the river (Mwakalila, 2011). In the latter, there is wider evidence of excessive concentration of nitrogen and phosphorous in the waters of Victoria Lake and the Nile ensuing from the use of agro-chemicals (Munabi, Kansiime, & Amel, 2009).

Social Struggles in Contract Farming

The aforementioned combined processes of adverse incorporation, surplus value extraction and appropriation, land dispossession and social polarization have not gone uncontested. In direct contradiction to the arguments raised by mainstream commentators about the potential of contract farming to create win–win situations, in which conflicts and economic antagonisms are silenced by market transactions, fieldwork in the two sugar-producing areas brought to light the emergence of multifarious social struggles. Given the variety of actors engaged in shaping the social reproduction of contract-farming schemes, the forms of social conflicts have been taking place at multiple and interconnected levels, ranging from organized and visible forms of action and struggle to the more hidden or subterranean forms of contestation (Martiniello, 2016, 2017).

Most important are the labor disputes between companies and agricultural plantation workers. Between 2012 and 2016, the Kilombero valley has been one of the epicentres of vigorous strikes organized by seasonal migrant workers employed in what is probably the most exploitative and physically demanding labor task in the contract production complex: sugarcane cutting. Despite the absence of organized trade unions, which are difficult to establish because of the seasonal and migrant character of the labor, and because of a rigid social discipline and control exerted by the companies, sugarcane cutters have significantly contested the exploitative labor conditions imposed on them. Through the organization of unauthorized demonstrations and strikes, which paralyzed the continuous functioning of the mills, they have jeopardized the viability of the sugar business. Although bloodily repressed by both the state’s police and the company’s security personnel, these struggles provide an important hinge in the redefinition of the centrality of labor in processes of value extraction and appropriation. Similarly, the period between 2015 and 2018 in Busoga was characterized by the resurgence of agricultural workers strikes. Motivated by very low wages and poor working conditions in the face of a rising sugar consumer price, agricultural workers, both seasonal and permanent (men and women), strongly demonstrated their concerns (Martiniello, 2017), bringing to a halt in the circulation of value in the sugar production complex.

Interestingly, and in stark contrast with the past, the last 5 years have been characterized also by a crescendo of antagonism between the companies and outgrowers themselves. This growing conflict, which the creation of collaborative and non-political outgrowers associations was meant to eradicate, is associated with the deteriorating conditions generated by the adverse and subordinate incorporation of farmers and smallholders, in particular in the sugar commodity complex. In Kilombero, between 2013 and 2016, smallholders were caught in a vicious process of produce price deterioration and thus falling revenues, combined with rising fuel prices and thus growing input costs. The former can be linked to the monopsony power of the companies, which have used in the absence of competition as an instrument to arbitrarily fix the sugarcane price. Moreover, outgrowers, once contractually bound, do not have an alternative purchaser for their sugarcane and quickly need to find an outlet for their sugarcane once cut, therefore limiting outgrowers’ bargaining power and further exacerbating contract-farming scheme inequalities.

Outgrowers have used both open and veiled forms of mobilizations, as well as strikes, as instruments to negotiate better sugar prices and terms of inclusion from the contractors. In Kilombero, outgrowers’ associations exerted pressures against the company through petitions and by sending delegations to pressure the national parliament. Tensions have mounted, especially between 2012 and 2016, when the company does not fulfil its contractual obligation to harvest pre-established out-growers’ sugarcane quotas, justifying this decision through arguments of market saturation. The decision of leaving a part of outgrowers’ cane in the fields, spurred further reactions from outgrowers who reportedly initiated a set of low-intensity, hidden forms of struggle by burning sugarcane on the company’s estate. In Busoga, the confrontations were more direct with outgrowers stopping to deliver cane to the company at established times. Fire incidents were also registered on the company’s estate. Such confrontations were exacerbated by the dramatic period of drought in 2016–2017, which parachuted thousands of small outgrowers into destitution, precipitating the current crisis of sugar.

The tremendous drought that hit the eastern part of Uganda alerts us to the ecological limits of unfettered sugarcane cultivation. These events and tensions pushed KSW to source sugarcane from distant areas in western Uganda, paid at double the price (USh170,000), to avoid mills to operate at crushing capacities below acceptable profitability rates. KSW now seems increasingly interested in opening new frontiers of sugarcane in northern parts of the country (Martiniello, 2015, 2017), given, evidently, the exhausted ecological limits to capital accumulation. In conclusion, the sugar production complexes and their mechanisms of externalization of competitive pressures onto the weaker rings of the chains, that is, both agricultural workers and smallholders, have contributed to growing social conflict rather than its demise as assumed in the optimistic win–win narratives of mainstream commentators and stakeholders.

Conclusion

Employing a historical perspective, this article has analyzed the origins, rise and development of contract farming schemes in Eastern Africa and provided a critique of mainstream thinking about contract farming, exploring the often silenced social, economic, political, and ecological dynamics in which it is embedded. Through empirical case studies at Kakira Sugar Works in Uganda and Kilombero Sugar Company in Tanzania, this article has brought to light many of the economic and political forces that have sustained contract farming, while also pointing to its nefarious socio-ecological implications. It has been argued here that the diffusion of sugar agro-poles and outgrower schemes in the regions concerned has been a catalyst for social differentiation through the creation of pyramidal and fragmented agrarian structures, where large-scale corporate industrial agriculture is at the top, large landowners turned-capitalist entrepreneurs are below and agrarian classes of medium- and small-scale farmers, and dispossessed agricultural workers, are at the bottom. This study has also situated contract farming schemes within the dynamics of adverse incorporation, dispossession from below, and rural inequalities, providing an alternative narrative to win–win interpretations of inclusive development: far from being a space of pure market transactions, contract farming schemes have become the site of intense political contestation and social conflict. Social struggles for better terms of incorporation, often silenced in the legalistic rhetoric of ‘free’ contracts among equal partners and in the economic discourse of free competition, represent instead a key element in shaping the trajectories of agrarian transformation and the ‘success’ or ‘failure’ of contract farming schemes. There is, therefore, need to produce a heuristic shift away from market determinism and towards an approach that aims to grapple with the social dynamics and forms of social organization underpinning contract farming schemes.