Entrepreneurship

Successful contract 
negotiations require 
that farmers have 
reliable background 
information. 
Developing market 
linkages requires 
ensuring
 regularity of supplies, 
good quality and 
an objective 
assessment of the 
risks

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Extension support for developing entrepreneurial capacity 
113
Extension workers 
should provide 
training on how to 
design records of 
budgets, market and 
gross margins.
Partnerships and 
networks can be 
developed among 
farmer organisations 
and with other players 
in the value chain 
Care is needed to 
ensure that group 
action is owned by 
its members and the 
capacity to manage the 
group exists
Newer  entrepreneurial  farmers  often  face  significant 
difficulties  because  they  do  not  fully  understand  the 
contracts they agree to. 
 
The work involving contracts covers the following:
•  Ensuring  that  a  fair  and  enforceable  agreement  is 
established, including that farmers know the details of the 
contract and that it is seen as fair by both parties;
•  Clarifying the position of both sides and building mutual 
trust between them;
•  Clarifying penalties and ways to settle disputes; 
•  Identifying alternative markets in case of buyer default.
 
Since  compliance  is  a  major  part  of  contracts, 
required activities and delivery dates must be stated clearly 
in  the  contract.  Under  such  contractual  arrangements, 
farmers must be able to organise production to ensure 
the product is available as stated in the contract. 
 
To sustain contract linkages it is necessary to 
develop  the  capacity  of  the  entrepreneurial  farmers 
in  contract  negotiation  and  compliance.    Successful 
contract negotiations require that farmers have reliable 
background  information,  including  knowledge  of  their 
production costs and break-even prices. To achieve this, 
farmers  should  keep  records  and  prepare  enterprise 
budgets,  market  margins  and  gross  margins.  Where 
these capabilities are lacking, extension workers should 
provide or organise training. 
 
Another factor affecting the sustainability of market 
linkages is risk management. Not all potential risks can 
be covered in marketing contracts. Therefore, strategies 
are needed to cope with unexpected events that could 
undermine the contractual relationship of the contracting