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Recent research using scenario-based analyses and modelling suggests that cities can sustain themselves with fruits and vegetables if 30% of urban land is devoted to urban agriculture (UA).
Small-scale producers, who constitute the majority of producers globally and in South Africa, contribute 30 to 34% of the food supply on 24% of gross agricultural land. Urban agriculture offers a broad range of benefits beyond food supply, yet it occupies a strange place in our minds and cultures, as cities and urbanisation imply rural food supply, and UA is often practised as an informal economic activity.
However, these studies suggest we should take UA more seriously, as there are clear economic opportunities when cities can feed themselves. In such a scenario, where the distance between food production and consumption is short and immediate, a new approach to UA and urban food systems is called for.
Urban and small-scale agriculture will benefit as city food systems and will inevitably consist of smaller-scale intensive production units. Many new urban settlements are not served by supermarkets, presenting a key opportunity that needs to be seized.
This also calls into question the broader globally focussed food and agricultural system. This assessment of UA calls for a re-evaluation of local food production in urban areas. This goes beyond marketing and includes waste harvesting from urban areas and processing it into agricultural inputs.
Production methods that can benefit from this include technology and research and development focussed on creating resilient and robust small-scale production units that can withstand shocks and deliver a crop under difficult circumstances. As the distance to market is short, and the enterprise small, a new approach to food retail and marketing is needed, integrated with the operations and wastes of the enterprise. Urban producers thus face an unprecedented economic opportunity, and this article shows what urban producers can do to maximise the opportunities they face.
UA in South Africa
Urban agriculture is the production of food and fibre in or near urban areas. According to the Food and Agriculture Organization of the United Nations (FAO), UA involves “small areas such as vacant plots, gardens, verges, balconies, and containers within the city utilised to grow crops and raise small livestock for personal consumption or sale in neighbourhood markets with the potential to provide a source of food and income for urban dwellers.”
This definition characterises UA as a marginal activity and is unsatisfactory since it excludes commercial agricultural enterprises near urban centres.
The FAO also describes UA as “largely using and regenerating local resources.” However, 35% of all rainfed croplands are within 20 km from urban extents, and “60% of irrigated croplands were located within a 20 km buffer of urban extents,” indicating much of agriculture is a form of UA. These trends are expected to intensify, with more urban producers active in the developing world. The proximity to urban areas, as sources of both customers and inputs, conditions the nature and form of UA.
The current food system, including in South Africa, is dominated by large food producers, processors, and retailers. They are integrated with retailers, competing with small-scale producers who supply local markets. However, supermarkets have weaknesses: Their prices are tied to global shocks and constraints and they are centrally located, while we are seeing an urban sprawl and many places are not reached well by this global system. Selling kitchen vegetables at these centrally supplied supermarkets is challenging and incurs high energy and logistics costs. This presents opportunities for small-scale producers, including urban producers.
Small-scale production
All types of small-scale producers are under pressure. While estimates vary, the vast majority of producers in South Africa are small-scale, with only around 300 000 regularly engaging with the market. This is not surprising as much of the legacy knowledge, research and development, technology, seeds, and practices are aimed at large-scale rural commercial production.
Urban and small-scale producers will benefit from production, retail, engagement and technology that are appropriate to their small-scale methods.
Urban agriculture and small-scale production are susceptible to political influence and are often tied to global and sometimes distant concerns.
This undermines the opportunities small-scale producers face in their immediate communities. Urban producers are likely to be enrolled in multi-stakeholder coalitions that may not share the same interests as small-scale producers.
Engaging with value chains
To increase the viability of UA and small-scale agricultural production, producers need to command the whole value chain around their products and services. This process starts with waste management and ends with retail sales and social engagement. Alternative retail and enterprise models, such as circular or regenerative models, are needed.
These models should be vertically integrated with the immediate community, that would metabolise and valorise urban waste as an input in production and adapting the supermarket form. Harvesting waste could induce a process where consumer behaviour reduces retail prices and is a form of co-creation of the product.
Value proposition
The unique value proposition of UA is the creation of a price reduction mechanism for UA produce through local recycling and repurposing of waste.
This is a key value offering that urban producers and retailers can present to their customers. Accompanying this shift to retail sales, engagement strategies can be employed, and technology can be developed to process waste into agricultural inputs.
To understand the necessary shift in food marketing, production, technology and engagement, we need to consider how such a local food system can be created by an urban producer. This implies a decisive break from the planning agenda that recreates the global marketing system within the domestic economy.
The UA enterprise
A UA enterprise, like any small farm, can only produce in low volumes. Due to this, it must sell at the highest possible retail price to maintain a steep profit profile, characterised by low costs and high relative returns on capital invested.
This means three things:
- The quality of the produce must be as high as possible.
- The prices obtained must be as high as possible.
- Production costs must be minimal or ideally, almost eliminated or substituted with things such as biological processes, labour, design, technology and social engagement.
To secure the highest competitive retail price, or even higher prices as seen in restaurants, integration and partnerships with other enterprises are essential. Urban producers should establish a food retail enterprise at or near their farm or collaborate with others, to eliminate middlemen in the value chain. This also means a strategic pricing innovation mechanism must be established to achieve high retail prices.
An urban farm should also function as a shop. This retail base can serve multiple purposes: selling locally produced vegetables and fruits, hosting other enterprises, and organising events. This creates opportunities for experimentation and the development of new markets, products and services for urban consumers.
Achieving low input costs
Producing lower volumes compared to large farms, but maximising output per square meter, necessitates a low capital-cost input regime. Inputs should be sourced as cheaply or freely as possible, which points to a waste harvesting system and a biological production regime. Inputs should be obtained at no cost or through exchange, creating and conserving value in this transaction. By harvesting waste and repurposing it as inputs, you can avoid input costs.
Establishing a comprehensive system of food exchange for biowaste, and recyclable waste will ensure a steady stream of inputs without incurring significant costs. This strategy also serves as a great marketing tool, attracting people to your farm, lowering prices and increasing value. Recyclable waste can also be sold directly to reclaimers, providing an additional revenue stream and forming the core of your unique value proposition.
This approach necessitates highly intensive production. To achieve this, a grand approach to the design of the farm, from layout to energy, water and all other systems is required. This must integrate production, harvesting, technology and community engagement. Permaculture design and other methodologies should be used to maximise productivity and create nxazonke or links between systems, where waste from one cycle feeds the next.
Innovation and value
Innovation in biological technologies and other areas is crucial. Planting in deep trenches, whether below or above ground, is crucial. Biological technologies are important here and the aim is to combine as many systems and cycles as possible.
Exchanging and integrating waste from one cycle or nxazonke to another increases its value. The movement of materials, goods, technologies and people from one nxazonke to another is what builds value in these enterprises. This creates multiple products and services and is key to understanding profitability, robustness, and sustainability, ensuring a long-term viable livelihood.
An urban producer should design a series of interlocking ecological systems that combine production and retail on their farm.
Deep trench planting together with robust intermediate technologies such as good composting systems can contribute to this. It is important to consider the impact that highly fertile soil has on all other farm activities. The soil acts as the central ‘machine’ that keeps the farm running – its heart.
The productivity of the soil conditions the productivity of all other actions on the farm. A deep trench multiplies the value of all other farm activities.
The profitability profile
It should be clear that underlying the UA business model is a profit profile initiated by low input costs and completed by high-value retail sales. Most businesses operate linearly, often with overall input costs and overheads close to or exceeding 50% of the turnover of the company.
They then manufacture and add value or services to the inputs and after all wages, taxes, etc. are paid, most companies will be happy with a 3% profit margin (as their competitors). Anything else above this is a bonus.
A UA enterprise will have a very high profit margin – over 200 to 300%, but from an extremely low base. This can only be achieved by harvesting biological wastes from urban areas (even harvesting sewerage and human excrement one day) and manufacturing high-value inputs (possibly through biological and simple manufacturing) on their own, and ultimately selling produce at the highest retail level.
Differentiate your produce into first, second and third-grade produce. Use first-grade produce for high-value cash sales, second-grade produce for food-for-waste exchange, and feed third-grade produce to your animals.
Differentiating your produce in this way allows the customer to gain higher value as they can discern what is best for them. Additionally, linking this to your staple bulk-selling can offer a good value proposition to your customers.
Own produce and bought produce
Any food retailer needs to source from multiple points to ensure consistent supply. However, a product manufactured or produced and then sold invokes a different supply and value chain than when a product is bought and then sold linearly, and the profit profile is a lot different.
An urban producer can achieve a very high profit from their own produce by manufacturing their inputs themselves, but this creates an opportunity to sell produce alongside linearly bought produce.
Partnering with a bakkie trader to sell staples next to your locally produced foods may increase sales of both. This is because staples, which urban producers often cannot produce, can complement the more expensive vegetables used to make relishes such as morog with pap, or nsima from Zambia. Marketing these combinations can create an important niche product and service for urban producers.
Product and service design
The key differentiating factor for the kind of produce sold by an urban producer is price. We know it may all be the same potatoes, but the price, where it is sold, what is sold, and the way things are produced have deeper effects on society.
This needs to be emphasised by urban producers. They can sell and market at a lower cost than nearby competitors such as supermarkets.
This will enable them to capture the immediate market for vegetables.
Advertising these lower prices is important as supermarkets often have high costs associated with selling vegetables. Customers of UA are typically not millionaires and will likely seek the best price.
Setting prices lower than those of supermarkets will over time attract customers to the urban farm, allowing it to influence the whole market. Emphasise the freshness, nutritional value and local, organic nature of your produce. These prices should be advertised on social media and at the farm, right next to your farm’s beautiful name.
Since UA produce is often produced with waste materials, it can positively impact the landscape’s beauty. Harvesting waste improves the entire area over time. Urban producers need to be mindful of these benefits, as ultimately, they could engage with state and waste planning.
Over time, people will buy food at lower than market prices, improving human development at better than market rates. Community health will improve as nutrition drives this change, fuelled by lower prices.
These are tangible effects, and the urban producer needs to be aware of this as it has marketing value. These effects need to be operationalised as advertising messages at community events to promote and brand the urban farm.
Small farm requirements
To establish a successful small farm, start by choosing a beautiful name and designing your garden with permaculture principles in mind.
Allocate at least 30% of your farm to compost production, and build a simple worm farm to harvest worms, casings, and liquid manure.
Incorporate liquid manures, biochar, deep trench beds, and above-ground deep trenches into your farming practices.
Utilise intercropping and companion planting and ensure proper mulching and irrigation. Maintain a diverse seed library and consider raising animals. Invest in tunnels and infrastructure, and explore vertical, indoor, and controlled environment agriculture. Prioritise safety and security and develop enterprise opportunities such as a farm shop.
Your retail system should include grading produce, price differentiation, and experimenting with prices that are 5% lower than competitors. Implement waste exchange mechanisms for food, biowaste, and recyclables, and form partnerships with informal traders like bakkie traders for market-sourced staples.
Develop loyalty programmes, offer harvest specials, and sell consumer goods. Leverage social media and technology, including Wi-Fi, to enhance your farm’s presence. Finally, host events to engage the community and showcase your farm’s offerings. – Prof Naudé Malan, Business Management, University of Johannesburg.
For more information, email the author at nmalan@uj.ac.za.