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Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid? Marisa da Silva [email protected] 7 November 2013

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Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid? This is a look into Fairtrade as a model and how it is currently working in the Swaziland sugar industry. This is currently a pilot test in Swaziland and the initiative was undertaken by the Swaziland Sugar Association (SSA).

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Page 1: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

Is Fairtrade a potential alternative solution to

poverty alleviation for small-scale producers and their

communities based on the principle of trade not aid?

Marisa da [email protected]

7 November 2013

Page 2: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

Trade NOT aid

According to Johannesen and Wilhite (2010):◦ Fairtrade is a market-

based approach to social and environmental development for producers through the use of standards and a price floor

What Is Fairtrade?

Producers Consumers

Page 3: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

Bananas Cocoa

Cotton

Flowers

Honey

Cereals

Rice

Spices

Tea

Wine

Fairtrade Products

Coffee&

Sugar

Page 4: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

Holistic View◦ Primary:

Fairtrade conferences and conducting semi-structured interviews

◦ Secondary: Impact Studies, Case

Studies and existing journals

Used Yin for case study guidelines

Case studies are designed to bring out the details◦ Multiple data◦ Practical implications

Single Case study

Research Methodology

DEVELOPED FAIRTRADE SUGAR COUNTRIES

Page 5: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

1968

1975

2001

2012

History of the Sugar Industry

EBA

Sugar Reform Begins

2006

Page 6: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

Sugar = substantial contributor to the GDP of Swaziland

Commencement in 2008 but only certified in 2012

Why Fairtrade is needed in the sugar sector?

Price volatility

Climate change

Competition

Swaziland Sugar Sector

Page 7: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

Producers PerspectiveThe Two Main Economic Benefits of Fairtrade1.Guarenteed Fairtrade Minimum Price

Aims to ensure that producers can cover their average costs of sustainable production

Acts as a safety net

Page 8: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

Producers PerspectiveThe Two Main Economic Benefits of Fairtrade1.Guarenteed Fairtrade Minimum Price

Page 9: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

Producers PerspectiveThe Two Main Economic Benefits of Fairtrade1.Guarenteed Fairtrade Minimum Price

Agreement Reforms

Volatile Industries

Sell Premium Products

NO Minimum

Price

Page 10: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

Comparison against developed Fairtrade sugar countries to

illustrate the potential benefits

Premium was used primarily to cover the costs of certification

3 conditio

ns

Social

Socio-Economi

cEnvironmental

Producers Perspective2. Premium Benefit

Page 11: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

According to Fairtrade Labelling Organisation (2013): A price that covers the cost of production A social premium Contracts that allow long-term production

planning Long-term trade relations Environmental standards promoting best

agricultural practice A democratic decision-making Forced labour and child labour are prohibited.

Producers Perspective3. Standards and Certifications

Producer organisations are paid a Fairtrade Premium of $60 per tonne

Page 12: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

Fundamental Element

Producers have an equal say

Democratic decision-making

Producers Perspective4. Empowerment

Page 13: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

More ethical decision-making

Greater transparency between producers and consumers

Create awareness

Consumers Perspective1. Marketing and Strategy

Page 14: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

Selling into conventional markets

Consumer guarantee◦ Quality

Brand mark is crucial

Consumers Perspective2. Mainstreaming

Page 15: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

Issues, Problems and Obstacles

Supply

Demand

55000 tonnes

10000 tonnes

2. Mainstreaming initiative with a risk of

◦ Co-option◦ Dilution ◦ “fair-washing”

3. Higher input costs to adhere to certification requirements

4. Low level of education

1.

Page 16: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

1.231 million people ◦ 40% of Swazis live below the poverty line

First year of certification, Swazilands sales of 10000 tonnes generated an annual premium of US $600 000.

With the balance of 45000 tonnes of Fairtrade sugar being sold with a premium of US $60 into Fairtrade markets, ◦ this would have the result of US $2.7 million/year being

available to the Fairtrade producers.

Potential for poverty alleviation in Swaziland

Page 17: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

1.231 million people ◦ 40% of Swazis live below the poverty line

First year of certification, Swazilands sales of 10000 tonnes generated an annual premium of US $600 000.

With the balance of 45000 tonnes of Fairtrade sugar being sold with a premium of US $60 into Fairtrade markets, ◦ this would have the result of US $2.7 million/year being

available to the Fairtrade producers.

Potential for poverty alleviation in Swaziland

Empowerment

Better Working Conditions

Premiums

Relationships

Page 18: Is Fairtrade a potential alternative solution to poverty alleviation for small-scale producers and their communities based on the principle of trade not aid?

1.231 million people ◦ 40% of Swazis live below the poverty line

First year of certification, Swazilands sales of 10000 tonnes generated an annual premium of US $600 000.

With the balance of 45000 tonnes of Fairtrade sugar being sold with a premium of US $60 into Fairtrade markets, ◦ this would have the result of US $2.7 million/year being

available to the Fairtrade producers.

Potential for poverty alleviation in Swaziland

Empowerment

Better Working Conditions

Premiums

Relationships

What started with humble beginnings in assisting a few small farmers may well be

one of the major answers in upliftment of

communities and the alleviation of poverty