Why South African Manufacturers Are Turning to Smallholder Farmers: And Why It's Changing Agriculture

From the Margins to the Supply Chain

For decades, South Africa's smallholder farmers have occupied the margins of the formal agricultural economy. Despite making up the vast majority of farmers by number, they have historically struggled to break into the supply chains of large manufacturers and food processors - kept out by compliance costs, volume requirements, quality standards, and logistical barriers that simply weren't designed with them in mind.

That picture is starting to change. Driven by a combination of government policy, ESG pressures, brand storytelling opportunities, and the genuine economics of securing reliable, local raw materials, a growing number of South African manufacturers are actively looking to smallholder farmers as procurement partners rather than procurement problems.

For the agricultural sector, this shift has potentially transformative implications - not just for the farmers themselves, but for rural economies, food security, and the resilience of South Africa's manufacturing base.

What's Driving the Shift?

Several converging forces are pushing manufacturers toward more inclusive procurement practices. Government policy is a significant factor. South Africa's Agriculture and Agro-processing Master Plan prioritises the commercialisation of black producers and the development of market access for smallholder and medium-scale farmers. The plan specifically targets gaps in finance, inputs, infrastructure, and support services - and calls on private sector players to be active participants in closing those gaps.

ESG considerations are equally powerful. Manufacturers with international investors, export ambitions, or retail partners who are themselves committed to sustainability are under growing pressure to demonstrate that their supply chains are ethical, inclusive, and traceable. Sourcing from smallholder farmers -and being able to tell that story authentically -is increasingly seen as a commercial asset rather than a charitable act.

Nando's and the Peri-Peri Precedent

Perhaps the most compelling South African case study in inclusive smallholder procurement is Nando's. The restaurant chain's procurement of peri-peri chilli from African smallholder farmers - managed through its Peri Farms Project - demonstrates that quality, consistency, and inclusive sourcing are not mutually exclusive.

Research from Brookings Institution and the University of Cape Town's Graduate School of Business highlights what made this initiative work. Nando's chose a crop - peri-peri chilli - that is inherently labour-intensive, allowing smallholders to compete on price with commercial farms. Local partners were used to aggregate produce, manage post-harvest handling, and introduce traceability systems. The result was a supply chain that was both commercially viable and genuinely inclusive.

The lesson for South African manufacturers is clear: smallholder procurement works best when it is designed with the realities of smallholder farming in mind, rather than simply grafting small farmers into procurement systems built for large commercial operations.

The Challenges That Remain

Despite the momentum, significant barriers remain. South Africa's National Agricultural Marketing Council has identified smallholder market access as a critical policy challenge. Farmers often lack the financial means to test water quality, ensure food safety compliance, or meet the certification requirements - such as SA-GAP accreditation - that formal buyers require.

Volume consistency is another challenge. Large manufacturers need reliable, consistent supply. Smallholder farmers, operating individually on small plots, often cannot guarantee this. The solution lies in aggregation — farmer cooperatives, farmer collectives, and coordinated supply chains that pool smallholder output into commercially viable volumes.

How Manufacturers Can Make It Work

The manufacturers who are successfully integrating smallholder farmers into their supply chains share several common characteristics. They invest in farmer development - providing training, inputs, and technical support that helps smallholders meet quality and volume requirements. They use intermediaries - cooperatives, aggregators, or agricultural development organisations - to manage the complexity of dealing with many small producers. And they take a long-term view, accepting that building inclusive supply chains takes time and investment before it delivers returns.

Sugar is a powerful example. The Sugarcane Value Chain Master Plan committed large sugar users to procure at least 80% of their sugar needs from local growers. The Illovo Small-Scale Grower Cane Development Project developed fields for more than 1,600 new growers - demonstrating that with deliberate policy support and private sector commitment, inclusive supply chains can be built at scale.

The Role of Regenerative Farming in Inclusive Supply Chains

Here is where regenerative agriculture and inclusive procurement connect in a particularly powerful way. Smallholder farmers who adopt regenerative practices - low-till cultivation, cover crops, microbial inoculants, and composting - progressively reduce their input costs while improving crop quality. This cost reduction strengthens their ability to price competitively for large buyers. Improved crop quality helps them meet the standards that formal markets require.

The convergence of regenerative soil practices, inclusive procurement programmes, and growing manufacturer interest in local sourcing creates a genuine pathway for South Africa's smallholder farmers to become meaningful participants in the formal economy.

A Supply Chain That Works for Everyone

The shift toward smallholder procurement is not simply a matter of social responsibility. It is a strategic response to the vulnerabilities that global supply chain disruptions have exposed - the risks of over-reliance on imported raw materials, the reputational risks of opaque supply chains, and the missed economic potential of South Africa's significant but underutilised smallholder farming sector.

For manufacturers who get this right, the rewards are real - cost-competitive local supply, authentic sustainability credentials, and a strengthened social licence to operate in communities where their raw materials are grown. For smallholder farmers who access these opportunities, the impact can be transformative - moving from subsistence to commercial viability, from the margins to the mainstream.

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