Working Paper
Contracts between smallholders and private firms in Mozambique and their implications on food security

The focus of this paper is the role played in rural contexts by contract farming agreements between smallholders and private investors. These contracts can take different forms, but in general are agreements under which producers commit to supply produce to a buyer firm. They are—at least on paper—at the centre of agrarian policies in Mozambique, through the Strategic Plan for the Development of the Agricultural Sector 2011-2020. Studies on the effect of these contracts on producers usually find out an increase in income, but the effect is still unclear with respect to other variables.

The focus of this paper is on contracts’ effects—in the Mozambican case—on food security. We may expect contrasting effects to be at work: on the one hand, the effects of increased income, while, on the other, the effects of giving up food production and of monopsonistic market relations.

This paper exploits a panel dataset (2002-2005) collected by the Mozambican Ministry of Agriculture among a nationally representative sample of rural households. Overall, the main findings of the paper indicate that selection in contracts is the main driver of the observed differences.