Cotton sustainability standards like the Better Cotton Initiative (BCI), Cotton Made in Africa (CmiA), Fairtrade and Organic Cotton should take initiative to achieve gradually a living income for „their“ certified smallholder cotton farmers. The following English article designs a pragmatic way, how this objective can be achieved.
An income that provides a family with sufficient calorie and vitamin-rich food, adequate housing, access to water, electricity and a toilet and access to the necessary medical services is a human right. This is stated in Article 23 of the Universal Declaration of Human Rights.
It was on this basis that the demand for a „living wage“ for workers in Asian textile factories producing for consumers in the North first developed. This „living wage“ is intended to provide workers and their families with a sufficient and secure income. In the meantime, the demand for a „living wage“ has also found broad public resonance for other branches of industry. There are various studies on the determination of such a „living wage“ in different countries and in the different regions of each country. And there are initial attempts to gradually implement such a „living wage“ in the textile companies concerned.
Driven by the debate on „living wages“, there have been calls for a „living income“ for smallholder farmers in the Global South for several years now. As in the industrial sector, this should provide farming families with a sufficient and secure income.
However, the determination of such a „living income“ for farmers is even more difficult in the smallholder sector than the determination of „living wages“ in the industry. Most smallholders own the land they farm (respectively they have customary rights concerning their land). This raises the question of how high the housing costs should be set. Should they be calculated on the basis of maintenance requirements, which are not so easy to determine, or by applying „comparative rents“? In addition, the typical small farmer who grows cash crops (e.g. cotton, coffee, cocoa, cashew) ) usually also grows other crops for his own use or also for marketing and he is often also active in small businesses or trade. The cash crop usually only accounts for 40 – 50% of his income. So should the „living income“ be secured only or largely through the cash crop?
For African smallholder cotton farmers, there are hardly any calculations on the establishment of a „living income“. However, from a non-representative GIZ study in Cameroon, from the author’s own surveys (individual interviews) and from comparisons with existing studies from the cocoa sector in Cote d’Ivoire, it can be roughly estimated that the living income of a cotton farmer from all his acitivities in Cameroon with a family of 6 members is 217 euros per month, in Cote d’Ivoire it amounts to 300 – 350 euros. If one compares this with the actual income of the farmers from all their activities (cash crop, food, small business), the farmers in Cameroon achieve approx. 30 – 40 % of a „living income“ on the basis of these very provisional figures, in Cote d’Ivoire as much as 60 – 70%. It must be however said that the farmers in Cote d’Ivoire are relatively wealthy on average and are theefore not representative of the majority of smallholder cotton farmers in Subsahara- Africa.
Ways to a „living income“ – price increases for small farmers?
So how can we ensure that smallholder cotton farmers in Africa gradually achieve a living income? All sustainable cotton standards, i.e. Better Cotton Initiative (BCI), Cotton Made in Africa (CmiA), Fairtrade Cotton and Organic Cotton, promise consumers that they want to help improve the living conditions of (not only) African smallholders.
Let’s take the example of Cotton Made in AFrica. The standard works directly with cotton companies that have 900,000 CmiA farmers under contract, who produced 715,000 tonnes of raw cotton in 2022. In purely technical terms, CmiA could pay a premium for every tonne of certified raw cotton from its licence income, which would be paid directly to the farmers per kg of cotton delivered via the cotton companies, bypassing the entire value chain.
If, on this basis, the income of CmiA farmers in Africa were to be increased by 30% based on the prices currently paid for raw cotton in West Africa (285 FCFA/Kg) , around 300 million euros would have to be raised. This compares with current CmiA licence fee income of EUR 4-5 million. It seems highly unrealistic to implement a corresponding increase in CmiA licence fee income in the currently highly competitive textile market.
In addition, such premium payments, which are nothing more than a price increase for farmers above market prices, can be quite problematic. It would probably lead to farmers significantly expanding their cotton acreage at the expense of other crops. This would be detrimental to crop rotation, soil fertility and would reduce the desired diversification of the smallholder crop portfolio. . In addition, prices that are significantly higher than market prices are often unsustainable in a highly competitive market. Fairtrade and the cotton farmers had to experience this a few years ago in Cameroon, when Fairtrade’s firm commitment to purchase 3,000 tonnes of fair cotton at a „high“ Fairtrade price had to be cancelled at the last minute because the end buyer, a large British retail chain, pulled out of the contract that had already been concluded against the backdrop of a sharp fall in world market prices,
Pathways to living income – investing in the productivity and living conditions of smallholder farmers
Instead of „artificially“ increasing prices for smallholder farmers, it seems more meaningful to invest licence fee income from CMIA or the volume-based fee from BCI in improving the productivity and living conditions of smallholder farmers in Africa.
Here are two examples of what can be achieved with such investments.
In the above figures, the difference between the incomes of cotton farmers in Cameroon and Cote d’Ivoire is striking: The latter are significantly higher. The main reasons for this are probably that the farm sizes in Cote d’Ivoire are significantly larger (at least +50%) and that over 95% of farmers in Cote d’Ivoire have their own oxen for ploughing, whereas in Cameroon only 35% do. This results in higher labour productivity, more compost available for fertilisation and therefore higher incomes in Cote d`Ivoire. There are now 200,000 cotton farmers in Cameroon. That is 22% of all CmiA farmers in Africa. If 10,000 of these farmers were given access to oxen, this would probably already have made a significant contribution to increasing their living income.
There are functioning farmers‘ cooperative banks in some areas of northern Cameroon. Their expansion to other regions can be significantly promoted with investments of a few hundred thousand euros from CmiA licence fees. These co-operative banks could in turn grant farmers low-interest loans for the purchase of draught oxen in collaboration with the cotton company Sodecoton. In Cote d’Ivoire, the EU subsidised the purchase of oxen some years ago. A pair of oxen currently costs 550 euros in North Cameroon. If the interest on loans for draught oxen were subsidised by 5% per year, for example, from 15% to 10%, this would amount to an annual cost of 275,000 euros for 10,000 benefiting farmers. It should be borne in mind that such a programme would of course not be rolled out from one day to the next, but over several years. In addition, there may be costs to expand the existing veterinary services. Another advantage of subsidising oxen would be that it would benefit the entire farming operation, including the cultivation of maize, soya, peanuts, etc., thus increasing not only the cotton income.
Another example is the promotion of women’s productive co-operatives. Throughout Africa, women in cotton farming families are helping to feed their families by growing vegetables and rearing small livestock. This can account for 10 – 15 % of the household income. Through co-operative associations, women can significantly increase their productivity through joint field cultivation and investments, e.g. in proper rabbit or chicken hutches. Across Africa, women are very willing to organise themselves in such cooperatives. In many places, there are also opportunities for such co-operatives to obtain credit from local microfinance institutions. What is fundamentally lacking is organisational, management and business know-how. As in Germany, a professional advisory infrastructure for such co-operatives and SMEs is also needed in Africa.
This could be realized by the cotton companies with their advisory structures (perhaps in utilizing the GIZ tool for Cooperative Business Schools), provided that someone (CmiA?) can be found to pay these additional advisors for activities that do not affect their core business. A few tens of thousands of euros per country could go a long way in this respect and bring thus farming households closer to a living income.
These are only two examples for many other initiatives which could be envisaged by cotton sustainibilty standards. Many others could be easily identified.
Overall, there is no simple secret recipe for significantly improving the income and living conditions of African smallholder farmers from one day to the next. Rather, a variety of different measures are required, which must be adapted to the specific situation in each country. It must also be said that many African smallholder farms are so small that although they may be able to improve their income in certain areas, they will find it objectively difficult to optimise their farms in such a way that they can generate a „living income“ for themselves and their families. As in other parts of the world, only a gradual increase in farm size will help here
However, this does not change the fact that hundreds of thousands of African farmers have the potential to gradually grow into a „living income“. To achieve this, however, sustainable cotton standards must do much more than finance individual small flagship projects, as is currently the case. Aid by Trade Foundation, the owner of CmiA, currently has around 4 – 5 million euros at its disposal, which it could invest annually in promoting smallholder farmers. (The exact amount can only be guessed, as the AbTF’s annual report remains imprecise in this respect. No distinction is made between the costs of the system, e.g. for verification and measures to promote farmer productivity). The BCI currently has 15 million euros available worldwide each year as part of its Growth and Innovation Fund, which is paid from the volume-based fee.
However, these amounts are not nearly enough to utilise the many opportunities to systematically improve smallholder productivity and the living conditions of African smallholders. Based on 2021 figures, Aid by Trade Foundation charges its licencees a licence fee of 0.004 euros per garment. The BCI levies are even lower. If AbtF and BCI were to jointly increase their licence fees or the volume-based fee by 50%, around 10 million euros more would be available for smallholder support worldwide. At first glance, this does not appear to be a very large sum, but – as the above examples show – it can make a big difference on the ground. And this is specifically the case as smooth implementation with the cotton companies imnplies much lower ovrhead cost than traditional development aid.
And further increases in licence fee income should be envisaged for coming years.