The use of information sharing systems to address opportunistic behaviour between tomato farmers and brokers in Zambia

Abstract

Small-scale farmers are often unable to profitably participate in agricultural output markets due to the challenges engendered by their inability to access agricultural market information. The main horticulture output market in Zambia, the Soweto market, is characterised by such challenges. In 2010, it was found that brokers on the Soweto market inflate fresh produce prices to extract an extra commission (hidden commission) without the farmers’ consent. On the Soweto market, brokers take advantage of the existing information asymmetry to increase their financial gains when they transact with farmers by providing false price information to the farmers. The slow sales resulting from this behaviour leads to the deterioration and spoilage of tomatoes on the Soweto market. This behaviour deprives farmers of their profits and ultimately leads to reduced livelihoods of the rural population. In an effort to enhance market information availability and access for small-scale farmers in Zambia, an information sharing system was introduced in the four largest horticultural markets in Zambia. The expectation was that the system would enable farmers to access real-time commodity prices for selected fresh produce in the four markets, thereby reducing information asymmetry. The effects of this system on different aspects of the broker–farmer relationship are, however, not yet known. This applies particularly to the effect on the supposed opportunistic behaviour of brokers which was previously identified as a major problem for farmers who trade on the Soweto market. This study therefore aims to determine the extent to which broker opportunism (using the hidden commission as a proxy for opportunistic behaviour) in the tomato industry in Zambia might be reduced by using such information systems. In addition, a check for information spillovers from the users to the non-users of the information sharing system is conducted. The study further identifies the main information needs and the most important information sources used by the tomato farmers. This study provides insights into how the reduction of information asymmetry achieved through information sharing systems could contribute to a reduction in the opportunistic behaviour of brokers in the horticulture supply chain. Although opportunistic behaviour studies have been conducted in other sectors, little attention has been given to addressing broker misconduct, which is a big challenge for farmers in horticultural supply chains, particularly in developing countries. The use of information systems on a large scale is expected to significantly reduce information asymmetry in transactions. It is also expected to increase the bargaining power of farmers and reduce artificial price inflations by better-informed brokers. These more transparent transactions are expected to foster more efficient market systems and thus have a positive impact on farmers’ incomes and livelihoods. These systems could, in turn, increase farmer participation in the horticultural sub-sector to ultimately contribute to agricultural and economic development in Zambia. A total of 40 non-users of the information sharing system and 30 users have been interviewed for the study. Primary data has been collected from face-to-face individual interviews and focus group discussions, while secondary data has been obtained from the Agricultural Policy Research Institute (IAPRI) price database and the Lima Links platform (the information sharing system). The study employs a t-test to determine the statistical significance of the hidden commission as a proxy for opportunistic behaviour for the sampled group of 30 tomato farmers who are users of the information sharing system. To compare this with opportunistic behaviour in transactions that involve non-users of the system, the same test is conducted on the sampled group of 40 tomato farmers who are non-users of the information sharing system. The other research questions related to the spillover effects and information sources are analysed by means of descriptive statistics. The results indicate that the use of the information sharing system, in this particular case, contributed to reducing the opportunistic behaviour of tomato brokers. It was found that the users of the information sharing system were charged a hidden commission of 5%, and it was not statistically significant. This indicates the absence of broker opportunistic behaviour when farmers have access to price information. The non-users, on the other hand, were found to be charged a hidden commission of 12%, which was statistically significant. This is indicative of opportunistic broker behaviour when farmers do not have access to price information via the information sharing system. The study found no indications of information spillovers of the information sharing system from the users to the non-users of the information sharing system. It was also found that the tomato farmers often need information about agricultural commodity prices and crop management. Lastly, the results show that the users of the information sharing system depend on mobile phone applications and radio programmes (radio networks have a wider geographical coverage than mobile phone networks) as their most important sources of agricultural information, while the non-users depend on radio programmes and brokers.