Case study of paprika supply chain efficiency in Malawi central region

Rapid population growth and income increase in countries across the world resulted in rising demand for quality and diverse food. Trade liberalisation and modernisation of production, processing and distribution systems enable agro-food companies to quickly access raw materials directly from farmers. However, the threats of exclusion and unbalanced benefit allocation from high-value markets represent the challenges for vulnerable small farmers affected by the transformation of food industry. The re-emerging contract farming tends to balance market imperfections and include small farmers into modern food chains. This research looks at the supply chain dynamics of paprika sector in Malawi Central region with the purpose to identify key challenges its players face, and propose changes to improve supply chain efficiency. Paprika supply chain was explored using mixed method approach: 428 household questionnaires and eight focus group discussions with small farmers, and five key informant semi-structured interviews with the company and enabling environment representatives. The data were triangulated and analysed using SPSS and NVivo. The result shows that paprika supply chain consists of direct players (farmers and company) and indirect players with significant role in building chain's efficiency (agro-dealers, NGOs, civil societies, Government, financing institutions, vendors). Additionally, for small farmers efficiency implies secured inputs and highest possible selling price. For the company, efficiency is related to minimised transaction costs and obtained planned volumes of appropriate quality. The research finds that communication quality and consistency, together with the trust level among players influence paprika supply chain efficiency. Moreover, the lack of understanding and complying with the contract terms hinders effective performance. The failure to define selling prices in the contract encourages farmers' opportunistic behaviour, e.g. side-selling. The study concludes that companies can increase farmer's loyalty by awarding long-term value through input bonuses, renting equipment and transportation, or subsidising the purchase of mobile devices and applications.