Factors of success and failure of large agro-enterprises (production, processing and marketing): a pilot study; results of case studies in the fruit, maize, and palm oil sectors

published on African Journal of Food, Agriculture, Nutrition and Development (AJFAND) 13 (5)

The actual and potential roles of large scale agro-enterprises (LSAEs) in the agriculture and food systems in Sub-Sahara Africa is a hotly debated issue. They can play a dominant role for the local economy, social and organizational live and the ecology in those rural areas where they exert their businesses, for good and/or bad. But not only their existence, even the mere announcement of the establishment of a LSAE, and in particular their failure, can provoke considerable turbulence. Failure can confront entire regions with massive loss of jobs, of income sources, of marketing channels, of revenue for communities, and of sources of support for social and physical infrastructure. Thus, it is extremely important to understand and decide in which kind of enterprises and enterprise models to trust. Yet, not much is known about under which conditions such LSAEs survive or fail.
This study contributes to this knowledge gap by investigating factors of success and failure of LSAEs in Ghana. For these purposes, a conceptual model was designed which structured such factors in five layers both internal and external to the enterprise - entrepreneur, enterprise, rural, national and international environment. In addition to looking into a number of case studies of enterprises, a methodology has been elaborated and tested which help to assess these factors both qualitatively and (partially) quantitatively.
A key finding of the study is that most (in the end successful, at least surviving) LSAEs in the sample had gone through extremely difficult times for one or another reason during which they could have easily collapsed. Thus, it must be taken for granted that doing business in the agricultural sector is indeed a risky business even for larger entities, which are usually assumed to be more robust and rely on a larger financial buffer than small and medium ones. The reasons for failure and success are found across all proposed layers of analysis, finance being particularly critical to overcome crises provoked by other issues. One important finding is that there are indications that without at least a minimum of positive impacts on its rural environment (smallholders, communities) such enterprises cannot survive, at least those which depend on provision of primary products for processing. However, impacts proved difficult to assess, given their many facets. A number of recommendations are drawn on how to support LSAEs and their external benefits.

About the author

Brüntrup, Michael

Agricultural Economy

Further experts