The Edge of Tomorrow: Africa’s Smallholder-Inclusive Businesses Confront Another Crisis
The blockade of the Strait of Hormuz and a prolonged conflict in the Middle East represent another major disruption for Africa's smallholder-based food systems, following the COVID-19 pandemic's unprecedented supply chain breakdown and the Russia-Ukraine war's restrictions on fertiliser and grain flows. This all takes place against a backdrop of increasingly volatile climatic conditions: shifting rainfall patterns, increasing drought frequency and rising temperatures are already reducing smallholder yields across sub-Saharan Africa independently of any geopolitical disruption. Even the best-designed smallholder-inclusive business models are not immune to these intensifying pressures.
The transmission channels are already evident. The conflict has knocked out considerable amounts of urea production in the Middle East, the world's most widely used nitrogen fertiliser, while over 40% of global sulphur exports, a key component for phosphate fertilisers, also typically pass through the Strait of Hormuz. Shortages and price rises in liquefied natural gas (LNG) are simultaneously suppressing fertiliser production in Asia and North Africa. Brent crude prices were around 50% higher after the first month of the crisis.
As in the 2014 film Edge of Tomorrow, Africa’s smallholder-inclusive businesses may feel trapped in a cycle of repeated shocks. But repetition does not necessarily imply stagnation. Each disruption provides new information about where business models are most exposed, and where they can be strengthened to better withstand the next disruption. In this blog, we draw on past research to assess the impacts on such business models and explore opportunity pathways for the development sector and agribusinesses to respond more effectively.
How the crisis affects smallholder-inclusive businesses in sub-Saharan Africa
Farms under 5 hectares play an outsized role in food production in sub-Saharan Africa, producing over 75% of domestically consumed food. Smallholders are crucial to food systems, whether integrated into markets through smallholder-inclusive business models, or engaging on a more informal basis. For those operating smallholder-inclusive business models, the Russia-Ukraine war provides a useful reference point for the impacts we can expect. For instance, smallholder-inclusive businesses faced higher input and output prices, elevated fuel, and energy prices, as well as tightened credit conditions, all taking place at the same time as lower yields for some crops driven by reduced fertiliser use.
Below, we explore these impacts in more detail:
- Higher input prices will be the immediate impact. At the time of writing, urea prices have increased by over 60%. Africa's smallholders face a double disadvantage. Approximately 90% of fertiliser consumed in sub-Saharan Africa is imported, meaning every global supply disruption lands at full force on domestic markets with limited local production buffer. Equally, smallholders' inability to buy in bulk means they face higher per-unit prices than commercial farmers, even when they can access the credit needed to purchase inputs. This cascades directly to businesses selling inputs to smallholders. Our data shows input provision is among the more commercially viable service offerings within inclusive business models, precisely because it generates recoverable revenue. As a result, it is often a feature of inclusive business models operating in African markets (see below). When smallholders cannot afford to buy, that revenue disappears, which also impacts the ability of companies to use input margins to cross-subsidise other services such as training.
- Lower yields at farm level follow as a natural consequence. During 2021 and 2022, Africa's fertiliser use dropped by around 14% and, as a World Bank study across six sub-Saharan African countries confirmed, reducing fertiliser application rates was the primary coping strategy employed by smallholders facing high input prices. With fertiliser use in Africa already considerably lower than global averages, such reductions continue to halt the continent's progress in closing yield gaps. Furthermore, we could expect women and youth, who traditionally have less credit to absorb price rises in fertiliser costs, will be disproportionately impacted. For agribusinesses working with smallholders, this is also a key concern with lower yields translating directly into lower sourcing volumes and underutilisation of capacity, impacting competitiveness.
- Elevated purchase prices stimulate side-selling. Rising commodity prices are, on the surface, good news for smallholders; selling surplus produce at elevated spot prices is a genuine income gain. We have previously observed how such price spikes lead to side-selling. Side-selling is economically rational from the farmer perspective, but when a business has invested in training, inputs on credit and relationship-building, and a farmer sells to a spot-market buyer at a crisis-inflated price, that investment is lost and the supply relationship breaks down. For the farmer, a broken relationship can result in less access to premium markets and services in the future, highlighting how a rational decision in the short term, is often outweighed by the medium term consequences
- Transport and energy costs threaten the bottom line. The cost of serving smallholder farmers varies significantly, from around $5 to over $5,000 per farmer per year, with the complexity of the service offering being a key driver of this variation (see below). Transport costs for reaching fragmented farmers affect nearly all services, irrespective of whether it is a business model of low complexity offering just training and inputs, or of higher complexity with additional services such as irrigation, mechanisation, and labour. On the procurement side, collecting produce from dispersed plots along poorly maintained roads contributes to intra-African logistics costs that already exceed many international benchmarks. Additional fuel cost increases compound the already restrictive transaction costs of working with scattered smallholders. In some contexts, the challenge goes beyond cost entirely: acute fuel shortages can mean that produce simply never makes it from farmgate to factory. Furthermore, increased energy costs compress processing margins and make services such as mechanisation more expensive to deliver
Working capital comes under severe pressure. The combination of higher input prices and elevated commodity prices creates a compounding squeeze that is easy to underestimate. Off-takers and input providers are the most prominent source of finance for smallholders – the vast majority of smallholder inclusive businesses operating in regional African markets provide inputs to farmers on credit (see below), carrying those costs on their balance sheet until repayment at harvest. When input prices double, so does the capital required to sustain the same volume of service delivery. On the procurement side, buying produce at crisis-inflated prices requires significantly more working capital for the same physical volumes. At the same time, in times of volatility lenders frequently tighten credit conditions or reduce facility limits for businesses they perceive as higher risk. For smallholder-inclusive businesses already operating on thin margins, losing access to affordable working capital can severely constrain their business models
Doubling down on smallholder-inclusive business models
Getting smallholder engagement right can be frustrating and time-consuming even in normal times. In times of disruption, a retreat from smallholder-inclusive business models can seem like the easy way out. Development actors may revert to direct relief; agribusinesses may switch to a purely transactional approach. While tempting, we believe this would be a mistake. Smallholder-inclusive models remain one of the most powerful drivers of sustainable impact available: they build market systems rather than dependency, attract capital and offer the potential to generate farm-level productivity gains at scale. Rather than abandoning the approach, there is a clear opportunity to double down by designing better models. The Farmfit Insights Hub brings together data from over 150 business model analyses across 22 countries and 25 value chains, and we believe the insights it contains are more relevant today than ever.
Three opportunities for the development sector
1. Turbocharge local production efforts. Sub-Saharan Africa spent approximately $65 billion on food imports in 2025. The food security impacts of successive crises reinforce the imperative to strengthen local food production, through increasing productivity, agro-industrialisation and developing the agricultural service ecosystem. IDH’s work on food systems transformation takes a holistic approach to empowering local food systems. Yet production potential alone is insufficient without the financial infrastructure to support it. Access to affordable, patient, and suitable capital remains one of the most persistent barriers for agribusinesses, especially agri-SMEs
2. Target trade corridors for investment. In a context of high transport costs and food insecurity, investments along existing transport routes offer a more efficient approach to connecting surplus-producing regions with those facing a deficit. Trade corridors, corridors such as Abidjan–Lagos or the Northern Corridor linking Kenya, Uganda and Rwanda are often already supported by infrastructure and policy, mitigating many of the typical frictions of intra-African trade and making them a structurally smarter entry point for development capital.
3. Be laser-focused on commercial viability. If corporates are to be convinced to invest in smallholder engagement, the development sector must continue demonstrating the business case. Taking a data-driven approach to identifying cost and revenue drivers, such as our Inclusive Business Analyses, can identify opportunities where commercial viability and impact interact in a win-win fashion.
Three opportunities for agribusinesses
1. Drive cost optimisation through aggregation. Geographical diversification of sourcing areas builds resilience but also leads to costly fragmentation. Combining a cluster-based approach with the block farming model, which groups farmers around contiguous plots of land, can reduce both service delivery and procurement costs through consolidation while creating structural entry points for women and youth who often lack access to land. Leveraging commission-based agent models alongside company staff can further reduce fixed costs while maintaining geographic reach.
2. Invest in organic fertiliser and biochar. When synthetic fertiliser is physically unavailable or unaffordable, organic alternatives move from aspirational to commercially necessary. Organic fertiliser rebuilds soil organic matter over time, improving water retention and enhancing long-term yield stability. Biochar provides a more durable soil amendment: its carbon-rich structure improves nutrient retention, reduces leaching losses, and can remain effective in soils for hundreds of years, making it particularly compelling under erratic rainfall conditions. Both approaches reduce synthetic input dependency while building climate resilience into the farm itself, but it is important to note that the transition periods before profitability can take several years. Our Regenerative Agriculture guide provides a practical framework for anchoring these transitions commercially.
3. Strengthen farmer relationships through structured incentives. Guaranteed offtake agreements provide the market certainty that farmers need to continue investing in their farms at times of elevated input prices. Tripartite financing agreements unlock the credit needed for farmers to make those investments, using the offtaker's purchase commitment rather than land title as collateral, making them more accessible to women and youth. Farmer and farmer organisation segmentation reinforce smallholder engagement by tying access to progressively better services, credit terms, and market linkages to track records of contract compliance, creating a progression pathway that reduces side-selling risk precisely when it is most under pressure.
At this stage, it is hard to know how the current conflict will play out and its impacts are highly uncertain. Either way, the lessons and recommendations remain relevant for strengthening Africa’s food systems. As IDH’s CEO, Daan Wensing, has emphasised, food system resilience starts with strengthening the foundations. Designing stronger smallholder-inclusive business models is a crucial pillar of food systems transformation in times of crisis and beyond. Via the Farmfit Insights Hub, we aim to accelerate this process by providing access to a large and growing collection of resources: 150+ business model analyses, practical innovation guides and a searchable Innovation Library built to help businesses identify what works for their context and implement it with confidence. Explore the Hub, use the tools and get in touch if you want support applying them to a business model you are working with.