A couple of weeks ago, my good friend, mentor and former workmate, John Mwebe wrote an insightful piece “Development through a ‘Rights’ Lens” which implored investors to respect the rights of the people in the communities hosting their projects. He cited an ugly experience in 2011 involving a certain World Bank funded Project in Mubende District, Central Uganda which had evicted over 200 households from their land to pave way for commercial tree planting. In his conclusion, he noted that “…communities have a role to play in their development and that violation of their rights with impunity has no place in contemporary society.”
Reading this piece triggered my memories of an activity I participated in 2013—A Learning Route (LR) dubbed “Innovative Ideas to Secure Rights to Resources and Land through Inclusive Business Models: The case of Uganda”. It is in this LR that I encountered, for the first time, the concept of Inclusive Business Models (IBM).
The need for IBM stems from the renewed interest in agricultural investment that we are witnessing of late. In Uganda, many examples abound; we have the Mubende incident cited above, the Madhvani sugarcane project in Amuru, the controversial rice project in Bugiri and so many others.
Many a time, these huge projects, naturally translate into large-scale land acquisitions to implement them. This creates so many opportunities (especially economic) for the recipient communities.
However, certain inherent risks also accompany these projects, notable inter alia, is loss of native land by the communities. Again, Uganda has a number of examples that corroborate this assertion.
Unfortunately, the debate that has always arisen out of the many such incidents is that of “land grabbing” by “these companies” or “government” but little, if any attention is given to devising creative ways of ensuring that large-scale agricultural investments do not destabilize the livelihood of the communities that host them.
Inclusive Business Models
Owing to the observations above, there is a need to promote business models that include farmers while retaining their land ownership rights.
Inclusive Business refers to profitable core business’ activity that also tangibly expands opportunities for the poor and disadvantaged in developing countries. Engagement can be through employment, distributorship, supply, or innovations by the people.
LR participants discuss their experience with IBMs
Inclusive Business is just like any other profit-oriented undertaking but the distinction is that here; there is the involvement of the “unconventional” business partners, i.e. the local community.
Inclusiveness Assessment Criteria
The International Institute for Environment and Development (IIED) 2010 identifies four criteria that can be used to assess the way in which business models share value between the business partners – particularly between an agribusiness investor and local landholders. They are:
- Ownership: of the business (equity shares), and of key project assets such as land and processing facilities.
- Voice: the ability to influence key business decisions, including weight in decision-making, arrangements for review and grievance, and mechanisms for dealing with asymmetries in information access.
- Risk: including commercial (i.e. production, supply and market) risk, but also wider risks such as political and reputational risks.
- Reward: the sharing of economic costs and benefits, including price setting and finance arrangements.
These four aspects are closely interlinked. Ownership can influence voice, though a perfect correlation between the two should not be assumed (e.g., in a joint venture, equity shares and board representation may not be perfectly aligned). Voice in price setting crucially affects reward. Ownership influences risk, as a jointly owned business also involves sharing of business risks. So a model that gives smallholders more ownership of the business may also expose them to more risk.
Types of Inclusive Business Models
IIED 2010 presents the wide range of these business models under six broad categories namely;
- Contract Farming: This entails pre-agreed supply agreements between farmers and buyers. The agreements usually specify the purchase price, or how it will relate to prevailing market prices, and may also include terms on delivery dates, volumes and quality. In many cases the buyer, who is generally an agro-processing company, commits to supply upfront inputs, such as credit, seed, fertilizers, pesticides and technical advice, all of which may be charged against the final purchase price. In summary, there is a wide range of contract farming deals, from informal verbal purchase agreements through to highly specified-out grower schemes around large estates.
- Management Contracts: Involves a variety of arrangements under which a farmer or farm management company work agricultural land belonging to someone else. Management contracts may take the form of a lease or tenancy, but carry the connotation of stewardship, of managing the land on behalf of the owner. To provide incentives for the farm management, the contract often entails some form of profit sharing rather than a fixed fee.
- Tenant Farming and Sharecropping: are versions of management contracts in which individual farmers, for example smallholders, work the land of larger scale agribusinesses or other farmers. In tenant farming the usual arrangement is a fixed rental fee while in sharecropping the landowner and sharecropper split the crop (or its proceeds) along a pre-agreed percentage. Sharecropping has historical negative associations with indentured labour in the US (e.g. as a system for freed slaves) but may be preferred to a fixed-rate tenancy because of the sharing of risk and better incentives for the sharecropper – and indeed sharecropping has historically provided the landless with land access in many parts of the developing world.
4. Joint Ventures: entail co-ownership of a business venture by two independent market actors, such as an agribusiness and a farmers’ organization. A joint venture involves sharing of financial risks and benefits and, in most but not all cases, decision making authority in proportion to the equity shares
5. Farmer-owned businesses: are formally incorporated business structures for farmers to pool their assets to enter into particular types of business (e.g. processing or marketing), gain access to finance, or limit the liability of individual members. Such businesses are often owned by cooperatives in order to facilitate business transactions.
6. Upstream and downstream business links: is an umbrella expression for the set of business opportunities beyond direct agricultural production that exist for both agribusinesses and smallholders and small local enterprises.
This model has been applied in a number of projects across the continent, some of which include; Mali Biocarburant SA in Mali and Burkina Faso, Rural Income Promotion Programme in Madagascar, Community Investor Partnership Project in Mozambique, Lower Usuthu Smallholder Irrigation Project in Swaziland, etc.
In Uganda, we have a number of agricultural investments which utilize this model. An example is the Good African Coffee of Andrew Rugasira, Kakira Outgrowers Scheme of Madhvani Group pf Companies, Nile Breweries Eagle Project, Kinyara Sugar Factory, among others.
During the LR, we visited three companies using this model, namely; Vegetable Oil Development Project (VODP), Star Café and Kawacom. I will highlight two of them.
Vegetable Oil Development Project
Implemented in partnership with Bidco Oil Refineries, the Project targets 10,000ha of land. Government allocated it 3,200ha of public land, and it bought 3,300ha from privately owned mailo land thus 6,500ha. Occupants of this land were compensated duly. The remaining 3,500ha is cultivated by small holder farmers through out-grower schemes.
The parties formed Oil Palm Uganda Ltd (OPUL)—a consortium in which Bidco and the small-scale producers are partners – and the Kalangala Oil Palm Growers Trust – the local farmers’ association which has a 10 per cent share in OPUL.
The trust provides farmers with credit and helps them to obtain fair deals when selling their produce. OPUL provides seedlings and fertilizers, technical support, housing and healthy meals to its employees.
LR Participants pose in front of the Bidco Oil Refineries factory in Kalangala
The Project has had a significant positive impact on the island: in 2001, Kalangala District was ranked 71 of 76 districts; by 2007 it was seventh in terms of wealth. Employment has been created for about 3,400 people: 2,000 employed at the palm oil mill and 1,400 directly involved as smallholder farmers.
The Company has a contract farming relationship with a private coffee processing company in Uganda, and the Kabeywa United Coffee Farmers Group (KUCFG), a coffee farmer group located in the Eastern district of Kapchorwa.
The author enjoys Star Café coffee in Kapchorwa
Star Café sources its raw materials from small scale farmers. Its motivation is dual; Firstly, to cut out middlemen because they are too profit-oriented and always adulterate the coffee by adding poor quality beans to the good one, or even at times, adding soil to the coffee—to increase its weight. Secondly, working with the farmers directly enables them to influence the farming practices. In so doing, they can get better quality beans from the farmers.
Farmers here are happy that they are assured of good prices, but most importantly, they have grown a lasting relationship with Star Café that guarantees their productivity.
Security of tenure for both farmers and the investors is crucial for the implementation of business plans that will not only improve the livelihoods of the people but also protect their land—a vital factor of production
Inclusive Business Models (IBMs) are a safer way of doing business but at the same time, safeguard the land and resource rights of the community since the model is sensitive to the socio-economic needs of the people. There is need for effective and functional institutions like farmer groups, local governments and model farmers etc. because they are central in the implementation of developmental projects.
The author is a Kampala-based Private Legal Practitioner and an Access to Justice Activist
 Fellow, Atlas Corps and Policy Coordinator, International Accountability Project
 a planned journey with learning objectives that are designed based on i) the knowledge needs of development practitioners that are faced with problems associated with rural poverty and, ii) the identification of relevant experiences in which local stakeholders have tackled similar challenges in innovative ways, with successful results and accumulated knowledge which is potentially useful to others.
 Steven Jonckheere, Scoping Paper, Learning Route: Innovative Ideas to Secure Rights to Resources and Land through Inclusive Business Models: The case of Uganda. 2013.
 Ibid 4
 Ibid 4