Tsonzo members proudly pose with their award for most improved Milk Collection Center
Story and pictures by Jennifer Hyman, Director of Communications
Land O’Lakes International Development
While the members of Tsonzo MCC struggled along with the rest of Zimbabwe during the 2008-2009 economic crisis, their history of poor governance and financial mismanagement was among their most difficult legacies when they first tried to restart though the USAID-funded Zimbabwe Dairy and Livestock Program.
But, as they proudly take turns posing for pictures with their recently-awarded prize of Most Improved MCC, which was given to them by Land O’Lakes and the Zimbabwe Association of Dairy Farmers (ZADF) at the East and Southern Africa Dairy Association (ESADA) conference in Harare, the MCC’s new volunteer leadership believes they’ve finally turned a corner and have created a viable, sustainable business.
Having initially started in 1986 with over 100 members, their 350 indigenous cows were producing about 2,000 liters a day, which they delivered to Dairibord. As a result of the hyperinflation crisis in 2008, farmers struggled to find food for their animals, and many of their cows died from malnourishment. They had no money to cover operating expenses, and the MCC was running at a loss. A few of the farmers continued to sell milk from local breeds at their farm gate, but membership dropped to 64 members.
“It was a very tough time, and the members who lost everything had no sources of livelihoods left. Some turned to growing staple crops like maize, or were looking for something they could sell,” remembered Justice Maluzika, secretary of Tsonzo MCC. Some of their farmers were able to access stock feed, revolving funds and an in-calf dairy cow though the EU-funded Stabex program administered by ZADF, and the program also helped them clear their debt and establish a processing room. But, despite the Stabex support, their membership continued to erode.
Tsonzo members proudly stand in front of their cooperative while their daily milk is being collected.
When Land O’Lakes came to Tsonzo MCC in August 2010, the MCC was on the verge of collapse, collecting 20 liters of milk a day. Member Augustin Marenji explained, “There had been poor management of revolving funds from the old committee, and many farmers feared they might be treated unfairly again.”
Land O’Lakes encouraged the group to start accounting, and trained administrators on how to handle financial statements and recordkeeping, along with three Community Livestock Workers in animal health. They held new elections to elect the leadership, who are all volunteering their time out of dedication.
The association is still small, and only includes 28 members, 19 of whom are delivering milk. However, they recently added 4 new members who were attracted by Tsonzo’s transparent posting of finances, and promise of a regular market. They are currently producing between 200-300 liters every other day, which the processor Dairibord picks up directly from the MCC.
“Some farmers were used to donors giving cows away, and so didn’t look after their animals well, because they always considered it the donor’s animal. But knowing it was theirs through a loan made them care more about their investment,” explained Justice, adding, “Only those who learned to farm as a business understood the significance of it all. Especially compared to previous assistance, where there was no real agreement for farmers to pay for their cattle.”
Among the most important things the members of Tsonzo learned was about fodder management; ensuring they had a budget for silage and haymaking; and preparing silage before the rains.
“In the past, we only did maize silage. But we learned about sugar graze, sun hemp, velvet beans and cowpeas from Land O’Lakes, which really helped us to improve our production,” explained 27-year-old Washington Sagonda, Tsonzo’s Vice Chair. “And this really worked to improve production. The farmers who ensiled saw great results, getting about 15 liters per day per cow even during the dry season, almost doubling their typical yields for that time of year.”
One thing they’re very proud of is the fact that they’re producing Grade A milk, which translates to 46 cents per farmer. Dairibord pays 56 cents, but the rest is deduced for the cooperative’s operating expenses, and ZADF also charges $25 a month for its services. Members like Augustin Marenji say they appreciate how transparent the finances are now.
“The quality bonuses are motivating us and morale is high. We are so proud to have been named the most improved center!” beamed Augustin, who says his monthly dairy income has risen from $100 to $400 a month, by milking 3 cows that produce a total of 30 liters a day. “My family is really enjoying the extra money, because we’re easily paying for school fees, I have more food for the family, and more money for maintaining my herd. But I also want to invest in building better shelters for my cows and saving money for a milking machine.”
Now that MCC is linked to Dairibord, Tsonzo’s members say they are pleased to have a reliable market for their milk, which they are confident will last beyond the ZDL program. They are also working to build their relationship with the processor independently, and are in discussions with them to provide inputs on credit after the program ends.
Justice concluded, “For those of us who embraced the idea of being a business partner, this program has made a world of difference in how we see ourselves and our futures. Things were really rough before, but we feel we’re well equipped to go on independently at this point.”
Written by Rukondo Haam, CEO Rhamz International
The Agribusiness Development & Management Centre in Uganda
Uganda, the pearl of Africa, has taken important steps in transforming conventional agricultural production into an organic farming system, with significant benefits for its economy, society and the environment. Organic Agriculture (OA) is defined by the Codex Alimentarius Commission as a holistic production management system, which promotes and enhances agro-ecosystem health, including biodiversity, biological cycles and soil biological activity. It prohibits the use of synthetic inputs, such as drugs, fertilizers and pesticides. An Agribusiness Expert in Uganda shared with our reporter the future of organic agriculture in the Banana Republic (Uganda).
Why Organic Agriculture?
Perhaps the most unique feature of Uganda’s organic agriculture is the high coordination, involvement and commitment from all stakeholders in the organic sector. From public institutions including the Ministries of Trade, Agriculture, Uganda Export Promotions Board, Uganda National Bureau of Standards, Uganda Coffee Development Authority, Cotton development Organization, the President’s office, to private institutions (all under the umbrella of NOGAMU) these include farmer`s associations, export companies, NGOs, CBOs, and private Universities. There is a high spirit of working together among all stakeholders under the public private partnership arrangement. Due to Uganda’s geographical location, a wide range of organic products can be grown in the country throughout the year. These could be looked into two categories: i.e. these largely targeting the export market and the other grown or processed targeting the local/domestic and regional markets. The local market crops range from staple foods like plantains (locally known as Matooke), millet, cassava, local and exotic vegetables and fruits, juices, honey, to processed and livestock products like eggs.
What are the Facts and Figures?
Uganda has one of the fastest growing organic certified lands in Africa. The products grown organically and sourced from Uganda include cotton (lint, yarn and finished garments), coffee (Arabic and Robusta), sesame (simsim), dried fruit (pineapples, apple bananas, mangoes, jack-fruit), fresh fruits (pineapple, apple bananas, passion fruits, avocadoes, papaya (pawpaw), ginger), jack-fruit, , vanilla, cocoa, fish, shea butter and shea nuts, bird eyed chilies, dried hibiscus, honey and bark cloth. These products are exported to Europe, USA, Asia and other parts of Africa among others. The numbers of organic exporters in Uganda has been growing and are fully certified or in conversion, from internationally accredited certifying bodies operating in Uganda.
Currently, Uganda has over 400,000 internationally certified organic farmers, the first and second largest certified farmers in Africa and world over respectively. The highest number is found in India. Uganda had the world’s 13th-largest land area under organic agriculture production and the most in Africa. By 2013, Uganda had around 350,000 hectares of land under organic farming covering more than 2 percent of agricultural land. There are 44 certified export companies. Member organizations are over 500 in Uganda and outside the country. The value of trade less organic turnover is currently over US$37 million per annum. The demand for organic products from Uganda is high about US$600 million.
Uganda uses among the world’s lowest amount of artificial fertilizers, at less than 2 percent (or 1kg/ha) of the already very low continent-wide average of 9kg/ha in Sub Saharan Africa. The widespread lack of fertilizer use has been harnessed as a real opportunity to pursue organic forms of agricultural production, a policy direction widely embraced by Uganda. According to International Federation of Agriculture Movement (IFOAM), the global market for organic foods and drinks is estimated to be around US$50 billion, and increases by 10- 20 per cent annually. This sub-sector provides a unique export opportunity for many developing countries, owing to the fact that 97 percent of the revenues are generated in the Organization for Economic Co-operation and Development (OCED) countries, while 80 per cent of the producers are found in developing countries of Africa, Asia and Latin America. As a significant producer of organic products, Uganda benefits from an important source of export earnings and revenue for farmers. In terms of price premiums and income for farmers, the farm-gate prices of organic pineapple, ginger and vanilla are 300 percent, 185 percent, and 150 percent higher, respectively than conventional products.
What is the Policy Environment for Organic Agriculture?
On the policy side, in 2004 the Uganda Organic Standard was adopted, while in 2007, as part of the East African Community, Uganda adopted the regional standard, the East African Organic Products Standards (EAOPS) developed under a joint UNEP-UNCTAD initiative. In July 2009, the government released a Draft Uganda Organic Agriculture Policy. The draft policy describes the vision, mission, objectives and strategies to support the development of organic agriculture as “one of the avenues for delivering self-sustaining growth as it provides mechanisms for individual farmers to improve productivity, add value and access markets which are keys to achievement of the Poverty Eradication Action Plan objectives”.
The strategy put in place to implement the policy is based on interventions in nine policy areas: the promotion of organic agriculture as a complementary agricultural production system; the development of a system of standards, certification and accreditation; the promotion of research, to enable technology development and dissemination; support to the development of local, regional and international markets for organic products; the generation of information, knowledge and skills through education and training; the improvement of post-harvest handling practices, preservation, storage and value addition; the sustainable use of natural resources; and participation of the special interest groups such as women, youth, and the poor and vulnerable.
Uganda has taken an apparent liability – limited access to chemical inputs – and turned this into a comparative advantage by growing its organic agriculture base, generating revenue and income for smallholder farmers. Through organic farming, Uganda not only gains economically, it also contributes to mitigating climate change, as Green House Gas (GHG) emissions per ha are estimated to be on average 64 per cent lower than emissions from conventional farms. Various studies have shown that organic fields sequester 3–8 tonnes more carbon per hectare than conventional agriculture.
By Deborah B. Hamilton
Feed the Future Partnering for Innovation
Most companies want to “do well by doing good,” and Jose Jaar, president and founder of DelCampo Soluciones Agricolas, proves this is possible. Over the past two decades he has built an agribusiness that earns nearly $2 million per year selling drip irrigation supplies to smallholder farmers in Central America.
Jaar recently attended Feed the Future Partnering for Innovation’s AgBusiness Lab in Tanzania to discuss his business model with African drip distributors. The Lab was an interactive event featuring system design simulations, expert-led discussions, site visits, and farmer interviews all aimed at identifying profit-driven opportunities for African drip distributors to engage a largely untapped smallholder market potentially worth billions of dollars.
So, how did Jose Jaar build a profitable business in a smallholder market?
Business success depends on knowing the target market, creating products that fit the customers’ needs, providing excellent customer service, and pricing products to sell. Over the years, Jaar and his team of agronomist salesmen have cultivated customer relationships built on trust. They started by visiting the farms, listening to smallholders’ needs, and then providing training, advice, and support along with equipment sales. Today more than 60 percent of DelCampo’s sales are repeat business, and its sales representatives earn nearly 80 percent of their competitive salaries from commission.
In 2009, to build momentum, Jaar used funds from the Millennium Challenge Account-Honduras to offer credit to farmers to finance their purchases, which allowed many to access irrigation equipment for the first time. Today, DelCampo provides $250 in revolving credit to its regular customers, which they repay after the growing season.\
Approximately 40 percent of the world’s food producers are smallholder farmers, and estimates of potentially irrigable land in the developing world top 110 million hectares. So why do only 3 percent of the world’s one billion smallholder farmers have access to drip irrigation? Because, as Jaar notes, most irrigation systems are too large and too expensive for smallholder farmers.
Feed the Future Partnering for Innovation is a USAID program that helps to commercialize agricultural technologies and promote sustainable partnerships that benefit smallholders. Its sponsorship of the AgBusiness Lab included providing participating drip distributors with extension advice, and system design and cash flow tools, in addition to highlighting the Del Campo model as one that successfully adjusted in products to meet smallholder size and budget requirements – and made a good profit doing it.
Partnering for Innovation recognizes that drip irrigation is a critical piece in solving the food security puzzle, and projects that increased access will double yields and incomes for millions of African farmers. The program has additionally invested almost 20 percent of its total grant portfolio in companies that are scaling drip technologies to meet smallholder needs.
By Dave Ramaswamy
David Blumberg, CEO, Blumberg Grain -West Africa
AAM: Please give an overview of your company? Operating History? How/when did you decide to enter the grain storage business?
Blumberg: Several generations ago my father’s side of the family immigrated to America. They settled in Dothan, Alabama, the “peanut capital” of the United States. That’s when our family got into farming, growing cotton and pecans. Our family later dispersed across the U.S. but kept that farming backbone to some extent. In South Florida, we grew mangoes, tomatoes and other crops. From that history, we knew that storage and control over supply chains, from farm to retail, were the key to ensuring agricultural profitability
A couple of generations later, my grandfather, David Blumberg, became a developer in the city of Miami, where he was responsible for some of the largest residential and commercial real estate projects outside downtown. My father, Philip Blumberg, after graduating from Harvard Business School, started a construction company, Southern Projects, the origination of what was to become Blumberg Capital Partners. Starting in the early 1990s, as the youngest investment manager in institutional real-estate, he was able to raise money from family foundations, pension funds and other institutional investors. This he invested in Class-A commercial office space.
Through an approach that was both conservative and disciplined, he was able to build the leading investment fund in that sector. It delivered average annual returns of 18 percent through the ’90s and 2000s. One method he used for tracking and forecasting pricing was through analyzing the inflation component of the commodities that served as construction materials. A building is nothing but a bundle of commodities, an assembly of copper, nickel, glass, steel and concrete. So his company had a team that tracked those underlying commodity prices.
In 2006 my father saw a cliff on the real estate horizon and started divesting his real estate assets. The company returned 22 percent to its investors in 2007 – the highest-performing fund of its kind that year. The company was sitting on some sizable cash reserves at the end of the process. Looking to diversify the business, my father decided to focus on commodities. He decided to set up a fund, not focused on virtual assets, but to invest in actual brick-and-mortar projects.
For the commodities fund, the company looked at investments across the globe – wind farms in west Texas, rare earth deposits in Greenland, solar fields in India, etc. On a trip to India in 2010, to check on a solar field investment, our team traveled into a thriving agricultural area. It was the end of a bumper harvest season, and people were packing wheat into small warehouses called “godowns.” Due to a big harvest, and lack of fixed storage capacity, the wheat spilled over onto the area outside the godowns. The nightly rains had then started in earnest and would wash this wheat away onto the streets. The next morning cows and other animals were feasting on this rotting wheat. That year India lost a large part of its wheat crop to post-harvest losses, while hunger persisted across the country.
My father decided that food security was an area where someone needed to step in and play a role. Our company did research into post-harvest losses in grains, into agricultural value chains and into different emerging markets across the globe. And what became clear was that while India has problems with post-harvest losses, it is in a much better position relative to countries in Africa and some countries in Southeast Asia and South America.
So it was the trip to India in 2010 that made clear to us the opportunity in grain storage. My father found that it was an opportunity to use our expertise in real estate in combination with the latest technology from the United States. The company set up an R&D center in Ames, Iowa, a scientific hub in U.S. agriculture. And we started working with Iowa State University to develop our products and systems. We formed a team to come up with an offering for emerging markets to solve the issue of post-harvest losses.
The key was to develop a storage system that was simple to maintain and that also utilized the highest levels of technology. This included things like aeration fans, dehumidification systems and inventory management systems. The storage system would have built-in security with keypad entry and security cameras that could be monitored with an iPad. It could even be equipped with sonar guns, which blast sound waves at a person’s inner ear, and that would force any intruder to leave the warehouse.
Even though the name of the company is Blumberg Grain, we also knew that the issue of post-harvest losses affected the perishables (fruits/vegetables) area. So our Applied Engineering team developed systems that not only use refrigeration technology but also build in a controlled atmosphere capability. In the storage room, this displaces oxygen with nitrogen, unlike other systems that use lethal carbon dioxide. It’s the technologies we use in the warehouses that make us a market leader in food security.
AAM: Could you give us an overview about your range of storage systems?
Blumberg: We have our Grain Vault, which is a warehouse that can accommodate 1500 metric tons of grain, in a 600-square-meter facility, which we can put up in three days. We target this at smaller trading operations, farmers etc. It can also serve as the foundation for a larger network of disparate warehouses.
We also have huge systems that can accommodate 60,000 metric tons of grain or more. These compete with silos and surpass them on many levels. They have inflow/outflow rates of 200 metric tons per hour using pits, screening systems and drying systems. We use a new technology, designed with experts in the plastics industry, where we can fill 1.5-metric-ton FIBC jumbo bags. We’ve put them through a process where we vacuum seal them, and by doing that we extract the oxygen from the environment. This also allows for natural fumigation of the crop in the package. We don’t have to apply any hazardous chemicals, and because we are able to bring the oxygen levels in that bag to almost zero, grain can stay preserved for decades. This is game-changing technology.
We have the Blumberg Arctic Vaults which are refrigerated storage warehouses. Take a mango, for example. If you’re able to use controlled atmosphere technology with a mango, you can extend the shelf life of the mango to six months.
The Blumberg Grain warehouse is only one part of the equation. In order to maximize gains for our clients, Blumberg Grain offers a proprietary network management system that helps form the backbone of a country or company’s food supply and crop management program.
AAM: American companies perceive Nigeria as a difficult place to do business. Would you tell us about your work there?
Blumberg: Right now, there are many agriculture initiatives in Nigeria under the leadership of Minister [Dr. Akinwumi] Adesina. At the Nigerian Economic Summit in 2013, the focus of the summit was agribusiness in Nigeria. I spoke there about the issue of post-harvest losses. At the end of my talk, the farmers in the audience stood up and said, “We need Blumberg Grain Warehouses.” Minister Adesina, whom we had been in discussions with previously, spoke at the conference the following day and said he was going to buy 800 Blumberg Grain units, one for each district across Nigeria. Fast forward, and Nigeria is now receiving a large order of Blumberg Grain systems, for development across many states. The systems are mostly cold storage. In fact, the split is 75 percent versus 25 percent between cold storage and grain storage. Some of them are controlled atmosphere, and it’s the first time that this technology is going to be used in Nigeria. The minister is excited about this project. Our products catapult Nigeria into the 21st century when it comes to agricultural value chains, particularly in the crop storage space.
AAM: What is your business model? Who pays for the warehousing system, the government or private sector? What is the investment required for a standalone system? What is the payback period?
Blumberg: Blumberg Grain provides food security systems to both private- and public-sector clients. The main model by which customers use our technology is on a rental/leasing basis. In Nigeria our products are used in this way. Nine different states are receiving our technology. They’re going up now, but the government is renting them out to the private sector at subsidized rates. This is because the private sector has a problem with accessing financing, accessing land, accessing civil works etc. to get these storage facilities up. So the government is putting them up for the private sector to rent later.
What our storage system does in a country like Nigeria or many of the countries where we work is that it enables the farmer or trader to (1) cut down on the post-harvest losses that they suffer (in essence, doubling their true output); and (2) realize a sales price difference between the harvest season and that lean season that could be 400 or 500 percent higher. It puts a lot more money into the farmer’s or trader’s pocket.
As a result, the payback period on our technology is quite short. This is especially true, if you’re able to take advantage of this market timing arbitrage opportunity. In many instances, with our systems customers can recover their investment within one year.
AAM: Do your systems run on a variety of power inputs? Grid power is not always available or reliable, with voltage fluctuations, in these markets.
Blumberg: Good point. When designing our systems, we told our R&D team that they should plan for poor infrastructure as well as harsh climates. The Applied Engineering division designed our units so that a 600-square-meter facility (with 1500 metric tons of storage) can pack up into just one 40-foot cargo container. Our engineers designed our units for fast installation – as little as three days. They designed them for flexible use. Our units are modular when it comes to adding capacity and are upgradable when it comes to adding our technology options.
Speaking to your point about energy – it was clear that the units would have to be able to handle different kinds of energy supply. So we offer solar power, wind power, etc. as a supplementary power source for these systems. Our Grain Vault can run completely on solar power.
AAM: Is it solar PV? How exactly does it work? How do you handle power failure and redundancy?
Blumberg: That’s correct, Solar PV on top of the warehouse roof. You can get quite a bit of power out of those panels. What we’ve done is leverage technologies on the inside of our warehouse that are energy-efficient. The only issue is the cold storage component for which the power needs are quite high. Our cold storage could run on 100 percent solar power, but it then becomes inefficient from an economic perspective.
For our refrigerated storage, what we suggest to our clients is to locate these close to the existing grid. If that isn’t possible, we need to have generators in place to run the system. Even if we’re on the grid, we have the option to hook into different independent power solutions.
Our video on the technology describes this flexibility and some other features of our systems: http://www.blumberggrain.com/video/
AAM: What is the secret of your success in these demanding markets?
That is because of two things: first, the success that we have realized in the market vis-à-vis the application of our product; and second, for some reason, there haven’t been companies that emerged to play a role in this storage space in these emerging markets.
When you look at these developing countries, our competition is, for the most part, local concrete contractors. These contractors put up a concrete warehouse that has only a tangential application to food security. The warehouse offers no specialized ancillary options or specialized components. They don’t provide the safety and security needed to keep the crop preserved in-condition. So you continue to see high post-harvest loss rates.
We designed our warehouses with coatings and primers that reflect about 65 percent of the sun’s heat. We have seals that create foam closures between each panel. This means you don’t have leakage and you don’t have water coming into the facility. We’ve designed our warehouse to be basic nuts-and-bolts assembly, so any skilled labor can put it up fast. So there are no problematic issues with construction, and we can be sure the facility works as intended.
In agriculture, the harvest season dictates the timeline for construction projects. If you miss the harvest season deadline, you lose that year’s benefit. It is critical to be fast and timely. We hold the record in the industry for the ability to get 600 square meters of covered storage up, in three days.
AAM: If a private party approaches you interested to buy, what are the different options – and what are your price points?
Blumberg: Our systems are customizable. Though we have different product lines, they are all systems that come out tailor-made for the customer. We like to work them through a process where we identify what their needs are, and we come up with the solutions that meet them. When it comes to the private sector, the solutions are the same as what we would do for the public sector. I talked about our Grain Vault and Arctic Vault. We also offer our Self-Contained Bulk System that competes with silos. This system beats silos on cost, quality, natural fumigation, safety etc.
Every silo project that I’ve seen in Sub-Saharan Africa has failed because silos are difficult to maintain. Also, suppliers of silos are coming not from Africa, but from Asia, Turkey, North America and Brazil. For example, to fix a panel that breaks is difficult. You have to first evacuate the silo when you do maintenance, and then it takes too long to get spare parts to the site.
We designed our systems to be easy to manage and maintain. All our systems come with our export and repair kit. With our shipment you get a full kit of spare parts, to enable easy swap-out of a broken panel, or cracked gear – as the case may be. Because our structures are horizontal, it is easy to do that maintenance.
We designed our systems to be cost-effective – that’s the key variable that people use to compare in Egypt, Nigeria, D.R.C., etc. Cost is a bottom-line factor when making procurement decisions.
As an example, we can compare our Self-Contained Bulk System to a silo system that is 15,000 metric tons in capacity. The silo system with turnkey installation will set you back about $235 to $240 per ton. Compared to that, our system will cost you about $200 per ton. We include costs for the site prep (because foundations are a factor that we have to consider). So you see an almost 20 percent price difference between our systems and systems available in vertical silo form.
AAM: How did you target countries like Nigeria, D.R.C, Egypt? Could you speak about the sociopolitical implications of your work?
Blumberg: Blumberg Grain works across the globe. We’re in South America. We’re in the Middle East. We’re in Southeast Asia. And as you pointed out, we’re active in Africa. The common thread across the countries we target is a huge incidence of post-harvest losses. That is the main reason we are there, and the governments there have set an agenda for tackling food, water, and energy shortfalls.
Ministers and government officials now realize that the fastest way to increase farm productivity is to reduce post-harvest losses. In comparison, putting more acreage under plough requires considerably more expenditure and time commitments. They discuss the topic of food security among themselves, and the Blumberg name comes up. That’s how it happened in Nigeria and the D.R.C.
Policymakers now understand that losing large amounts of food grains is not just bad economics. The resulting food inflation could be a social tinderbox, resulting in riots – or a political tinderbox, resulting in the overthrow of a government.
The children of farmers in Sub-Saharan Africa see their parents lose almost half of their produce. They also see traders/middlemen take advantage by offering rock bottom prices at the peak of harvest. Farmers don’t have two dimes to rub together. And the children say, “We’re not going to do this. We’ll get out of farming, go to the city, where there’s more opportunity.” But in the city they face terrible living conditions. With few employment options, they sometimes have to turn to the underground economy to scrape a living. There’s also violence. You see what is going on with the Boko Haram [abducting children]. A hungry belly is vulnerable to extremist influence and propaganda.
In Egypt, Mubarak’s overthrow was set in motion the day he decided to raise bread prices. He was running out of reserves to import wheat. Egypt is the world’s No. 1 wheat importer. I am visiting Egypt now to put in place systems to stabilize wheat prices, and replace the shounas (open-air cages) in Egypt. 400 of the shounas store most of the harvested wheat – and see about 30 percent losses, based on conservative estimates.
The product that flows in to the Egyptian Ministry of Supply is “out of condition” for the most part. So they lose billions of dollars a year on this wastage. The Ministry of Supply plans to upgrade shouna facilities into a modern Blumberg Grain infrastructure. That’s one of the projects we are working on right now.
Through our work in food storage, we would like to prevent unnecessary rural-to-urban migration. This in turn maintains social harmony and encourages political stability. The countries where we work can then have a stable environment for economic growth and development.
AAM: American companies typically think that doing business with African governments is a nightmare, e.g., the possible need for hush payments and kickbacks to win contracts, and officials making promises they can’t keep. What has been the difference between that perception and your reality?
Blumberg: As an American company, we don’t play those games. And in the past, we’ve had to abandon projects when such talk has come up.
One of our primary conduits into these countries has been the U.S. government. Our embassies and commercial officers help with introductions into the private sector. When they introduce us to counter-parties, they know that we abide by the Foreign Corrupt Practices Act (FCPA). So we get to build on relationships that are available through them while using the shield that they provide. We also go straight to the agriculture or trade minister, or the heads of state, who are progressive in their thinking.
AAM: What is your near-term company outlook, in the next one to three years? Are you considering opportunities beyond storage?
Blumberg Grain wants to solidify our position in Africa as leaders in food security. Meanwhile Blumberg Capital Partners, our holding company, wants to make other investments in these countries, in sectors like real estate, steel, etc.
We are looking to set up Blumberg Grain Food Security Fabrication facilities all across the globe. We plan to produce Blumberg Grain’s steel warehouses and components in the countries that matter most to us. This is a huge investment for the countries we’re in discussions with. We are close to finalizing our selection process in in West Africa.
KPMG has done studies on our Food Security Fabrication facilities. They would provide employment to 1000 people, produce 1200 units every year, and increase trade and industry. The estimated economic impact would be over $1 billion in the first year of operation, and reaching $10 billion over five years. So these projects are something governments are fighting over.
Blumberg Capital Partners is on track to expand investments across the agricultural value chain as well. They’re analyzing investments in different countries across the globe. We’re looking at $250 million investment opportunities that touch the entire value chain.
Beyond storage, investments in high-yield, high-efficiency farming will be the next step. Investments in logistics infrastructure will follow, going downstream. Then we’ll look at processing facilities, packaging facilities.
For example, in Nigeria they’re importing plastics. They’re bringing plastic bags from Lagos in the south all the way up to Kano in the North – about 500 miles – and it might as well be “transporting air.” That packaging can happen close to the final destination, and for significant cost savings. There is lot of opportunity like that, and there’s a strong emphasis within our company to look at agriculture in these emerging markets.
AAM: Some say that vested interests – like speculators, traders, local politicians – allow food wastage. So they can keep farmers at their mercy and/or be a source of patronage. How do you respond to that?
Blumberg: I don’t see anyone opposing improved storage. Even the players who control the grain trade still benefit if they can keep their product “in condition” for a longer period of time. As technology providers, we provide solutions to anyone willing to work with us. We also organize the financing to capture that value.
Many of the governments we work with are offering this technology as a rental to the private sector. This way a trader or logistics player can get access to more capacity. The local communities benefit because more crop volume is able to reach the market and more money stays in the community. The farmer can sell more crops and increase her income.
Our storage systems lay the groundwork for establishing commodities exchanges. The first step to develop a grain commodities exchange in a country is to have warehouse infrastructure on the ground. This is one way to move toward a market-oriented system where ALL participants stand to benefit. In the interim, stakeholders can still use and monetize our storage systems in their interests.
AAM: Finally, any lessons for American businesses considering working in Africa?
Blumberg: First, for market entry, I would suggest using the resources of the U.S. government. One can leverage U.S. government officials for market data and meeting facilitation. This can happen through the commercial offices of the embassy, the Trade Department, or other on-the-ground resources. Additionally, the U.S. government assists the private sector in financing activities abroad. Organizations like the EXIM bank, OPIC, and USAID-DCA provide low cost debt in countries, where financial markets are not that developed.
Second, I would tell American business not to be afraid of the Chinese competition. To a large degree American businesses are wary of facing off against Chinese businesses. Some American companies think Chinese companies, either state-owned or private, have a stranglehold over business in Africa. The truth is that governments in Africa are looking for American companies to step in and play a role in their economies. Customers and officials all over Africa recognize U.S. products as having superior technology, and we compete on that basis. Leveraging that strength of innovation and quality can overcome any issue arising from Chinese influence.
Third, there is a need to be realistic about timelines when viewing investment cycles. It’s not a novel revelation, but the speed of doing business in Africa is quite slow. So American companies need to internalize thorough preparation and focus on the long-term, as part of their business development strategy. Of course, there will be ups and downs in realizing any corporate goal in Africa. But if there is patience in the ethos of the company and a desire to look forward, there are enormous opportunities waiting to be engaged.
In 2012, while my country was the chair of the African Union (AU), and in my capacity as a champion of agriculture in Africa, I made the decision to commemorate the 10 year anniversary of the Maputo Declaration by declaring 2014 “Year of Agriculture and Food Security”. In 2003, the then President in function and other African heads of State and Government committed to invest a minimum of 10% of their national budget to agriculture. Yet, 10 years later, less than 10 countries have kept this promise. At the continental level, too few investments are made today in agriculture. Therefore the agriculture sector remains under-developed and the circles of hunger and food insecurity continue to hit Africa and the 220 million fellow citizens who suffer from hunger every day. As an African Head of State, I think this situation is intolerable.
In my country, Benin, I personally committed to the fight against under-nourishment and malnutrition. I am proud to say that the percentage of people suffering from hunger in Benin was more than 22% in 2002. It has since reduced to less than 8% in 2012. This exceeds the 11% MDG1 target well in advance of 2015. Benin has been rewarded for this performance by FAO in 2013, at the in conjunction with 19 other countries across the world. But I don’t want to stop here. Knowing that 8% of my fellow citizens still suffer every day from hunger is intolerable. I want to do more and keep on investing more in agriculture so that hunger disappears from Benin because hunger and food and nutrition insecurity are the first barriers to development in a country. To enable us to improve nutrition indicators, my government has put in place, with partners’ support, reforms and a coherent programme of fight against the causes and effects of malnutrition.
By declaring 2014 “Year of Agriculture and Food Security”, I was willing to give a deserved homage to the courageous women and men that work in agriculture sector and so recognize their huge potential. Beyond nutrition and food security, the development of the agriculture sector can boost African economies, grow jobs for youth and lift millions of our fellow citizens out of poverty. Indeed, growth in agriculture sector is eleven times more efficient in reducing poverty than a growth in any other sector. So, agriculture can be the motor of our growth. Yet, with more than 400 million poor people, Africa needs more champions. Therefore I am calling my peers to join me so that the commemoration of the 10 year anniversary of the Maputo Declaration will show a change and so that our populations can see a lasting difference in their lives. We all need to increase our budget expenditures in agriculture and invest at least 10%. I would like this objective to be achieved throughout the continent. And it can be achieved. With 60% of our arable land abandoned, our continent has the potential to feed its entire population but also to feed the world. But this requires a strong political will from all the African heads of State and Government.
In a few days, we will meet during the 23rd AU Summit of heads of State and Governments in Malabo, Equatorial Guinea. I am really looking forward to working with you all so that the declaration calls for concrete actions.
As a champion, I commit myself to bring the voices of more than 2 million Africans that have signed the petition “Do Agric. It pays” supported by ROPPA and ONE, to Malabo and present it to you. I also commit to present you the 10 joint policy recommendations of the non-state actors so they can guide our discussions.
Together, we have the authority and the responsibility to ensure that Africa rises sustainably for everyone. This is possible through the development of agriculture sector.
Interview with Shamima Mallam Hassan, Senior Director, Board of Investment – Mauritius
By Dave Ramaswamy
AAM: Why are investors coming to Mauritius, and what are key things you are doing to promote investment?
Mauritius is a small island, we don’t have natural resources except for good beaches and the sea. We used that as a basis to initially promote tourism industry. Then, over the years with different challenges, Mauritius had to reinvent itself. Today, we can say that we have a very well-diversified economy. And when investors are looking for a destination, where they want to invest, I think they look for countries that are stable, that have certainty, countries that have predictability. Over the years Mauritius has been able to show that we do have the stability, we do have the certainty that investors are looking for, and we do have an environment that offers predictability. Mauritius has a vibrant economy: we have a stable democracy and a very business friendly environment. And you would see that increasingly over the years we have attracted a lot of investment in different sectors. Initially, we started attracting investment in the tourism sector, to develop that industry; we developed the manufacturing industry because we had preferential market access agreement with the European Union and the US. So, initially some investors from China and Hong Kong – that had export quotas and faced tariffs, established presence in manufacturing. Over the years, as China started to open up – many of them went back to China. The industry then evolved to attract Mauritian companies to invest in the textile sector as a diversification strategy from sugar and tourism. Textile manufacturing in Mauritius then began to face issues, with other countries coming up – countries like India, Bangladesh. Then manufacturing costs in Mauritius started not to be competitive especially for basic products. We had to reinvent ourselves, yet again. Then we started to look at services. And among services, financial services were one of the main sectors where we started. That started with a treaty that we signed with India. And that started to create momentum around offshore and that sector started to get propelled. Then, over the years we realized we cannot put all our eggs in one basket. We could not just rely on India. So, we started to position ourselves as a platform for Africa. And more and more we see in terms of the figures: funds and structures that have been created, over 50% have been created for Africa rather than India. We also developed our free port to be a logistics platform for the region. The geographic position of Mauritius makes it interesting for those who are exporting from Asia to Africa; using Mauritius as their base they have several advantages. If they are in the free port, they have 0% corporate tax, and they don’t pay any import duty when importing products within the free port. They can do product transformation, they can do packaging/repackaging, they can even do manufacturing if they want to export to Africa and benefit from the corporate tax. And they would also benefit if they meet the rules of origin criteria – duty concessions that we have under COMESA and SADC. All these, predictability, the certainty and finally all the advantages that our government has put in place makes Mauritius an interesting place for investors to look at.
AAM: Can you talk about some specifics that investors would find of interest?
When investors are looking at a country, they are looking at a place where they can do business easily. Firstly, the Mauritian government has come up with major reforms where we have made it easy for someone to incorporate companies. Within 1 or 2 working days, you can have an incorporated company. You can incorporate a company that is 100% foreign-owned, you don’t need a local Mauritian partner. No minimum capital is required. And for some sectors you don’t require any clearances – like an Environmental Impact Assessment etc. You can start a business immediately once you get your clearance from your Building and Land Use permit – the activity can really start. That has really helped to propel the industry. The second point that has really helped is the taxation. Whether you like it or not, Mauritius is a low-tax platform. 15% of corporate tax, 15% for individuals, VAT is at 15% which really creates an enabling environment for investors to do business. In addition, we have made it easy for a lot of foreigners to come and work and live. That policy has helped to not only bring in the capital, but also bringing in the know-how, the technology into Mauritius.
AAM: Speaking of tax incentives and speedy business incorporation, are there any financial incentives like tax holidays?
No, we don’t have any tax holidays any more. When we started the Export Processing Zone (EPZ), we did offer investors a tax holiday – where people were given 5- or 10-year tax holidays. Long ago, we have abolished that system. What we have done, and especially starting in 2006 when we did the major reforms, instead of having different schemes – we used to have 20 or so schemes, where you required approval from the Board of Investment before you started business. What we have done is abolished all those schemes. And instead of giving a particular scheme 15%, another one 3%, another one 2% – we have made it a simple platform where we have made it 15% for everybody. No tax holidays, but you pay 15% corporate tax across the board. Except, that there are 2 schemes where today people will get incentives. One is the Freeport – where you don’t pay any corporate tax. And the second is within the offshore sector – it is not 0%, people would pay the tax, but they would have a deemed tax credit of 80% where it could bring down the effective tax that they pay to 3%.
AAM: Some people still consider Mauritius a tax haven, even though from what you said it is a low-tax jurisdiction. They say that Mauritius siphons away money from countries where economic activity takes place. Some politicians in Asia, specifically India, have launched attacks against Mauritius because a lot of stock market inflows are routed through Mauritius structures. What is your response to such charges and how do you counter these arguments?
If you look at the definition of a tax haven by the OECD, they would look at 3 criteria when they define a country as a tax haven. First of all, jurisdiction will have no or nominal taxes. Second, the laws or administrative practices do not allow effective exchange of information between governments and regulatory bodies. Third, they look at lack of transparency. In fact if you look at those 3 criteria, it is very difficult to say that Mauritius is a tax haven. IF you go to the first of those criteria criteria, we are a low-tax platform. It is not that people are not paying tax. Corporates within the global business are paying tax. They are paying to a maximum of 3% of tax. We don’t have a system where we don’t have any taxation. Second, if you look at the exchange of information, Mauritius has done a lot in terms of exchange of information. We have signed 9 Tax Exchange Information Agreement and a number of MOUs with different countries and regulatory bodies have also been signed. So, there is a mechanism in place where we exchange information with relevant entities. Whenever there has been a request, and that has been the case with India as well, where that has been any concern about cases or companies, the Mauritius Financial Services Commission (FSC) and even the tax authorities have always addressed that. Third, if you look at the transparency, we have a transparent system. OECD itself has classified us as being on their whitelist, being a transparent jurisdiction. So, I don’t see where – looking at the OECD definition of a tax haven, Mauritius fits into that category of tax haven. If you look at the global business sector today, the number of Know Your Customer (KYCs), the number of procedures have been in place to check the ultimate beneficiary owner – all this is in place in Mauritius.
Over the last 3 or 4 years we have started to engage with the media to counter misperceptions. We need to tell the framework we have put in place in Mauritius. Over the last year to 18 months, we have started to see a change in how Mauritius is perceived. It is a question of education. We started to invite people to Mauritius to see that there is a real economy, real employment being generated. Today, we have 15,000 people working in that sector. It is creating employment, creating jobs and is contributing towards the economy.
AAM: What sectors are attracting the strongest investment interest? Both into Mauritius, as well as using Mauritius as “a bridge into Africa”.
If you look at investment into Mauritius, and the trend within the last 3 to 4 years, real estate has been an important sector that has attracted a lot of investment, a lot of FDI. Real estate – not just residential, but also in terms of office space, mixed-use development. That has helped in terms of enhancing our infrastructure. If you are asking foreigners to come and work and live, you need to have the appropriate infrastructure – in terms of housing, malls, offices and schools. That has created a boost in the construction industry in Mauritius . Besides that we have tried to emphasize services. The Information and Communication Technology( ICT) sector has contributed about 6.8% to the GDP. It has created over 15,000 jobs in Mauritius. Today, we have more than 600 companies that are operating, servicing their global clients out of Mauritius. Data centers, shared services. The education sector has been another sector where we have tried to attract players trying to position Mauritius as a regional hub for education. We want to attract foreign students to come and study in Mauritius rather than to go elsewhere. In the healthcare sector, we have tried to position ourselves as a medical hub and we have attracted hospitals to come and setup – not only for general services but also for very specialized services. Manufacturing is still important – it contributes to 18% of GDP. We have been pushing for more value added manufacturing to come and setup in Mauritius and that includes jewelry, diamond cutting-and-polishing, electronics – parts and components for electronic products. Medical devices is another area where we want players to come in
If you look at the idea of being a platform for Africa, financial services has played a key role for us. Financial Services has contributed to 10% of GDP. So we have worked to Attract foreign banks, attract companies to have their holding, their structures in Mauritius. Most of the leading private equities in the U.S., U.K. are either going to India or Africa. And they are using Mauritius as a platform for their structuring to go into Africa. For the platform into Africa, the free port has also played an important role to provide access to the African market.
And something new that is coming up – is the government of the ocean economies. That came up last year. Mauritius has an Exclusive Economic Zone of 2.3 million square kilometers, and that provides a lot of opportunities for development in fisheries, and in aquaculture. There are several components being identified: (1) Seabed exploration for hydrocarbons and minerals, (2) Fishing, seafood processing and aquaculture, (3) Deep Ocean water application, (4) Marine Services, (5) Seaport related activities, (6) marine renewable energies and (7) ocean knowledge cluster.
AAM: How can the Mauritius financial platform facilitate investment in African agribusiness? Can you give a couple of examples of companies who have been successful doing this?
We are looking to develop strong relationships with African governments. We have been given land for agricultural development in Mozambique. We have invited expressions of interest from companies that would go develop these lands. 2 or 3 companies already going there – one going there for seed cultivation, other is going there for rice, and one going for a project in renewable energy.
Mauritian companies in the sugar sector are evaluating opportunities in Africa. Some of them have setup factories for sugar production in Africa. Others are cultivating sugarcane as well. Olam, headquartered in Singapore, who are big investors in agriculture in Africa, are using Mauritius as a financial platform. Other companies too are using a similar approach for their African agribusiness investments.
Regional Development Company – that is doing agricultural projects in Mozambique, has the Government of Mauritius as a partner.
We have setup an Africa Center of Excellence within the Board of Investment. The goal is to provide information to companies that would like to go to Africa, including the agricultural sector.
What we like to see is more companies do their R&D in Mauritius, do their company structuring and then go to Africa. That gives you the whole package where Mauritius has an important role to play.
AAM: Can you speak a bit about this Regional Development Company and its focus?
Currently, it is operating in Mozambique but also looking at opportunities in Zambia and Tanzania for agricultural development.
AAM: What services does the Board of Investment Provide? E.g. Like single-window investor clearance.
We promote and facilitate investment in Mauritius. Our role is advising and counseling investors into which sectors to consider. Once they have decided on a particular sector, help them with the process and implementation. We help them getting any required permits, we connect them with relevant ministries, we help them with identifying partners, and we help them in identifying land for their projects. We are really a facilitator for the investor. We also help with the Occupation Permit for foreign employees – with due diligence, which is later approved by Passport and Immigration Authority.
We provide Certificates for operating in the Free Port. For residential projects, investors need approval from the Board of Investment. We have a strong role in policy advocacy to the government.
AAM: What milestones would you like to accomplish in the next three years?
We are constantly trying to attract new players to take Mauritius to the next level. We want to avoid the middle-income trap. We need to create jobs, we need to build a country that is pleasant to work and live. Board of Investment has a very important role in that.
It is often said that in business success never comes easily, nowhere is this principle more fitting than with the story of Liberia Cocoa Corporation (LCC). Founded in late 2009, LCC is a 100% Liberian owned agribusiness nestled in the Northeast corner of the country near the Guinea border. Like its name suggests, LCC specializes in the production of the high quality commercial grade cocoa for the export market. The company’s socially conscience business model incorporates both community out-grower farmers as well as plantation style farming for its cocoa development. With an ambitious development plan to establish 6,000 ha of hybrid cocoa within the next 5 years, LCC will likely be the largest privately owned cocoa plantation in the Africa and certainly one of the largest in the world, if successfully implemented.
The company is the brainchild of its founder and CEO, Mr. Momolu (Lu) Tolbert (a western educated Liberian entrepreneur) who simply dared to challenge the perception that African run businesses are neither serious nor viable. Despite its many social and governmental challenges that confront Liberia, unique business opportunities still do exist – albeit not for the faint at heart. For what should have been a rather straight forward business implementation model, for the first two years, LCC was heavily bogged down by many challenges including having to deal with corruption, a culture in which people were unaccustomed to working in a professional environment and the difficulties of funding such a pioneering project.
As the CEO recently explained, “I never imaged that planting trees and creating jobs would be so difficult”. Part Hollywood movie, part political thriller, the story of LCC is one of survival, unwavering perseverance and the sheer will to succeed against all odds. Though the company has had many setbacks, it has had even more achievements. One such example is the company’s corporate social responsibility programs that have developed over 15 kilometers of new feeder roads, a 6 classroom primary school, local bridge construction, local scholarships, boreholes as well as plans to begin construction of a community clinic in mid 2014.
Like that of LCC, Liberia itself has experienced some turbulent times. After gaining its independence 1847 (the first African nations to do so), Liberia was for a while considered a beacon for economic and social stability. Though its economy was largely based on extractive industries such as iron ore mining and precious metals, the country also had vibrant agriculture sector that included ) rice production, poultry, timber, cocoa and coffee. At the time, Liberia was home to the largest rubber concession in the world (owned by Firestone) but also had locally owned commercial fisheries that exported processed fish and shrimp as far away as Japan, United States and the United Kingdom – as early as the 1960’s and 70’s. Despite its many industrial gains, Liberia , as with many other African nations during the 1960’s through 1980’s, the geo-political pressures of the Cold War coupled with the home grown movements for self determination and national identities brought with it social unrest and in extreme cases – bloody regime change.
Such was the case in Liberia when its 133 years of peace was abruptly ended in 1980 with a coup d’état that deposed of the then president William R. Tolbert and his administration. In the preceding years intermittent and protracted civil wars raged on until the signing of the Comprehensive Peace Agreement in 2003. Though peace was in place, the country was in virtual ruins and with it the once burgeoning commercial cocoa sector. Neglected during the war years much of the country’s cocoa trees were lost to the forest and its once internationally renowned research center (CARI – Central Agriculture Research Institute) completely destroyed.
Like neighboring Ivory Coast, the world’s largest cocoa producer, Liberia has ideal conditions for cocoa cultivation. With its rich soils, warm climate and over 170 inches of rain per year, Liberia has the very real potential to become a serious player in the world cocoa export market. Recognizing this potential, LCC has begun positioning itself through its outreach to thousands of out-grower farmers and the direct hiring and training of community based local labor for its nurseries and nucleus plantation. The wider social benefits of LCC’s business operation are palpable and can be seen in many ways but more significantly in the reduction in the number of food insecurity cases as many community household heads now earn regular monthly incomes.
Asoka Ranaweera, who is advising LCC on the development of its concession and marketing and sales, says that the company has a clear vision for producing the finest cocoa beans and in ensuring that its product is ethically sourced and fully traceable. This is a project whose success will revive Liberia’s prewar cocoa sector with big implications for the economy and the population at large most of whom are subsistence farmers according to Asoka.
Asoka who trades cocoa beans from different origins in Africa on behalf of a number of clients says the cocoa market is in a structural deficit during which years of neglect has resulted in falling supply. This coupled with increasing demand from countries such as China and India as well as revived demand in the U.S. and Europe has further contributed to a deficit in supply.
LCC is therefore primed to grow into a market in, which there is already significant demand and the forecast is for increasing demand years out. “Lu, the founder of LCC is typical of a new generation of African entrepreneurs, who have returned to their countries determined to make a difference. These guys want to make things happen, are resourceful and in the process are changing the image and perception of African businesses.” said Asoka. “Its people like Lu that are transforming Africa and its going to be private enterprise that is going to deliver the biggest impact because its self generated growth, not aid dependent” he added.
In a country and region where unemployment rates have in the past reached upwards of 80 percent, the need for private sector investment like that of LCC is crucial to the long-term peace and stability of the country. When asked about the challenges of doing business in Liberia, Mr. Tolbert was quoted as saying…“conditions in Liberia are extremely tough and this is primarily because the normal support structures that exist in other countries do not function well in Liberia. For example the country’s physical infrastructure, roads, bridges and power generation services all need major rehabilitation and without public investments to these areas, the country will have difficulty attracting the private sector especially in the area of agribusiness.
Another serious constraint, is acquiring access to financial capital. Most banks require a minimum of 150% collateralization on loans and often impose 12-24 months payback periods which as you know does not work for tree crops. ” With the exception of Bridgestone firestone and a few of the Malaysian oil palm giants such as Sime Darby and Golden Veroluem, there are no other companies quite like LCC and its companies like these that are at the forefront of reviving the country’s agricultural sector.
For more information on LCC
For 70 percent of the developing world, agriculture is the main source of income and employment. In Ethiopia, agriculture accounts for almost half of the
country’s GDP and 90 percent of its exports. However, agriculture in Ethiopia is often characterized by low productivity, with most smallholder farmers having limited access to inputs, information and services. While the demand for these ingredients for successful agricultural production is high, access and delivery is often
An innovate solution to these constraints, the USAID-funded Commercial Farm Service Program (CFSP) is establishing a network of private, retail supply and farm service businesses called Farm Service Centers (FSCs) throughout the Oromia region of Ethiopia. The program was designed by CNFA, a U.S. international development organization that focuses on stimulating economic growth by empowering the private sector. CFSP adapts CNFA’s market-oriented, private sector model for a sustainable enterprise-based delivery of farm supplies and services. The Farm Service Centers are one-stop-shops that provide smallholder farmers with agricultural and veterinary inputs, services and technologies that will help them produce surpluses and become better linked to end markets. This highly adaptable model, with support from CNFA in capacity building and training, has already been proven successful in Afghanistan, Georgia, Moldova and Romania. Building off the success of these enterprises in previous countries, CNFA is adapting the model to build a Farm Service Center network in Ethiopia – the first of its kind.hampered by a variety of factors including high transaction costs, inadequate infrastructure, the lack of commercial distribution networks and limited financing. In addition, many smallholder farmers have a poor understanding of the productive benefits that would be achieved through the use of quality inputs and improved cultivation practices.
Setting out for Success
Launched in the fall of 2012 through a partnership between the United States Agency for International Development’s (USAID) Innovative
In the initial phase of the program, staff worked to survey target Woredas (counties) for a viable year-round market demand for agriculture and veterinary products and services. Outreach events were then held in targeted towns and cities to generate interest in applying for the opportunity to work with CNFA and USAID in establishing these new enterprises. Applications were reviewed and ranked on a competitive scale that evaluated their technical capacity, proposed business plan, and potential impacts. CNFA then selected six of the applicants for the matching grant award and subsequent Farm Service Center development. Of these six, one is a woman-owned proprietorship, three are privately owned and two are owned by Cooperative Unions. The six selected CFSP grantees include:Fund for Ethiopian Agriculture (IFEA) and CNFA, CFSP kicked off its two-year operation with the goal of creating six locally-owned Farm Service Centers in Ethiopia’s Oromia regional state and establishing a wholesale buying cooperative owned by and dedicated to serving the inventory needs of the Farm Service Centers and linking them to national and international suppliers.
- Bishoftu – Alema Farms PLC
- Shashamane – Barite Agricultural Inputs Trader
- Fiche – Biftu Salale Farmers Cooperative Union
- Nekemte – Etafa Mekonnen Crops Trade
- Ambo – Gadissa Gobena Commercial Farm Products PLC
- Dodola – Raya Wakena Farmers Cooperative Union
Leveraging Investment from the Ethiopian Entrepreneurs
In addition to encouraging a competitive business plan evaluation in its grant award process, CFSP places an equally important emphasis on investment on behalf of the selected entrepreneurs. For each of the new Farm Service Centers, USAID has dedicated a $40,000 grant to be used for branding costs (uniform shelving and signage), environmental mitigation measures, worker safety measures, farmer outreach activities, and office and/or service-providing equipment. But the investment into this agribusiness start-up does not end there. To promote buy-in and sustainability, CFSP also asked that each selected grantee “match” USAID’s investment to the dollar. As a result, each grantee has contributed a minimum of $40,000 to the project in the form of construction/renovation, inventory and salaries for newly created jobs. By leveraging private sector investment, the Farm Service Centers will have a minimum initial value of $80,000 – a first for an Ethiopian business dedicated solely to serving the needs of s
Appreciating the potential as well as recognizing the need for improved capacity of these new business ventures, CFSP has also provided targeted training to all Farm Service Center staff which includes an Owner/Operator, General Manager, Accountant, Agronomist, Veterinarian and two Sales Clerks at each Farm Service Center. Trainings ranging from business management, to integrated pest management, to environmental mitigation, to marketing and communication have developed the business and technical capacities of all Farm Service Center staff members and helped to ensure the sustainability of the Farm Service Center network.
Open for Business
By January 2014, five out of the six Farm Service Centers held ribbon cutting ceremonies and were formally open for business. At the Bishoftu Farm Service Center opening ceremony USAID Mission Director Dennis Weller expressed his optimism by commenting that, “these Farm Service Centers provide increased access to high-quality, reasonably priced inputs, training, technical advice and output market linkages to at least 30,000 smallholder farmers. At the same time, they also serve as an innovative model for scaling up private farm supply and service networks in other regions of Ethiopia and other nations of Africa.” Ribbon cutting ceremonies were held at the five locations and attended by officials from the Government of Ethiopia, USAID, input suppliers, local media and eager customers that were ready to shop. Delayed due to land acquisition and construction, the sixth Farm Serve Center is slated to hold its ribbon cutting ceremony in April.
The positive reaction from Ethiopian Farm Service Center customers has been astounding. Chaltu Senbetu, a customer of the Nekemte FSC commented that she has, “never seen any other shop in town that is as appealing to shop in, that is very clean and safe for medicines and that provides quality products on a timely basis.” She also expressed gratitude that the shop provides everything she needs “without having to travel as far as Bishoftu or Addis Ababa.” Even from Chaltu’s testimony, it is clear to see that the Farm Service Centers alleviate the traditional input supply bottlenecks by reducing the time and money spent typically spent for traveling to find the relevant products. Now, customers can purchase relevant, high-quality products that are available at the time the farmers need them.
Complimenting a diverse agriculture and veterinary product line, customers can also visit uniformly branded and environmentally sound stores to receive agronomic and veterinary consultations and training from highly trained staff. When describing the immense value of accessible expert advice Atsede Abate, a customer of the Ambo FSC, stated, “I bought a calf and it became so sick and very close to death. I lost all my hope before I came to this center and got treatment for my animal. Now my calf is more than well and is even running around. I believe this center brings hope to many of us in the town as it is accessible, knowledgeable and welcoming.”
By providing quality inventory and expertise that is tailored to the demands of their respective local customers, the six Ethiopian FSCs are helping improve the productivity, incomes and food security of the smallholder farmers that they serve. And because each FSC is locally owned and operated, it is a sustainable model that showcases the success of harnessing the power of private sector entrepreneurs to help solve development problems.
Few farmers in Mozambique’s Manica province could have predicted the tremendous impact joining a dairy cooperative would have on their lives, considering their resounding skepticism when they were first presented with the opportunity to expand beyond growing crops. And their concerns were completely understandable, considering smallholder dairy farming had never before been seriously attempted in this part of Mozambique, near the Zimbabwean border, and many residents had been burned by their past engagements with cooperatives.
But, after hearing about the successes of the farmers who had worked with Land O’Lakes International Development under the first phase of a USDA-funded Food for Progress Program, which ran from 2008-2012, the fears of many Mozambican farmers were allayed, and clients began enrolling. Through the latest iteration of the program, which runs through 2016, Land O’Lakes will link 4,050 smallholder farmers in Maputo, Sofala and Manica provinces to a commercial dairy value chain. Moreover, through a partnership with Tillers International – which works to preserve, study, and exchange low-capital technologies that increase the productivity of rural communities – innovative farming tools focused on animal traction and transport are being made available to 20,250 farmers. Through the program, Land O’Lakes provides Milk Collection Centers (MCCs) with working dairy infrastructure, such as a cooling tank and generator, to ensure the constant flow of uninterrupted power needed to keep their milk fresh, and each member with a cow and training in dairy farming.
“Our biggest challenge in trying to mobilize members was just proving there could be different results through a cooperative system,” explained Marcelino Manuel Francisco, Secretary of the Gondola Dairy Cooperative, which was formed in 2010 and registered as a cooperative in 2011. He explained, “Many of us used to be part of a trading cooperative that was involved with buying and selling products. With that old system, it was mandatory to join, and the income was divided equally among all members, regardless of performance. Now, membership is voluntary, and earnings are commensurate with effort and yields. If you sweat more, you earn more.”
Despite residents’ reticence to join another cooperative and unfamiliarity with dairy, the farmers were ultimately lured by the promise of having a cow – which was universally recognized as an important asset – and the difficult life they would continue to have just growing crops like maize, cowpeas and cassava for their livelihoods. Farmers grappled with the fact that insufficient rainfall could quash their best efforts at reaping a good harvest from their crops. Even more confounding, since they were only paid once a season for an entire year’s effort, they struggled with how to ration their limited money.
According to Gondola Dairy Cooperative Vice President Curruissa Zinanga José, “I used to earn about 7,000 MZN ($232) a year from farming crops. I sweated a lot to make ends meet, and to pay for medicine and school fees. But, sometimes, there was simply no more money left, and it placed my family in a very tenuous and vulnerable position.” Curruissa and other Gondola farmers are now making about 5,000 Mozambican Meticals (MZN) in one month alone, about US$165, just from delivering their morning milk. “The extra income has made a huge difference in my ability to care for my family and sleep peacefully at night.”
Gondola’s President Jaime João Tobias added, “We’re now actually planning and budgeting for our household needs. Before, there was no planning. And, even if plans were made, there was no way to achieve them. These days, we’re able to create viable budgets and plans for growth in the years to come.”
Beyond mobilizing members, an equally large challenge for Gondola Dairy Cooperative at the outset was finding a reliable market for their milk. Most farmers had an ever-changing group of customers that they sold their produce to at small markets or at the farm-gate. Without a guaranteed buyer, they often risked having their milk spoil before it could be sold.
That problem was alleviated in large part after Land O’Lakes established a relationship with the processor DanMoz, which agreed to purchase every drop of milk that the farmers’ cows could produce.
Curruissa explained, “Initially, we had an ever-changing group of customers, and engaging in dairy wasn’t providing us with guaranteed income. But, when DanMoz partnered with Land O’Lakes and agreed to buy all of our milk, it significantly raised the confidence of Gondola’s members, and they began delivering more milk to us on a regular basis.”
USDA Program Incentivizes Private Sector
The important role the USDA-funded Food for Progress Program played in developing Mozambique’s nascent dairy industry cannot be overstated, explained the Chairman of DanMoz, Henrick Ellert. One of several partners who collaborated in buying the processing plant in 2012, Ellert noted, “One of our main incentives in purchasing the plant was the existence of the Land O’Lakes program, and knowing that program farmers could provide a growing source for fresh milk.”
DanMoz is primarily processing yogurt, and to a lesser extent Gouda, Mozzarella, Halloumi and Feta cheeses. The company recently purchased an ice cream machine, as well, in the hopes of expanding into frozen treats later in 2014. DanMoz is also working to expand their geographic footprint into the capital of Maputo and the Tete Corridor – which connects Mozambique to neighboring Malawi – and they’re staffing up and hiring managers to lead their marketing and sales efforts. Indeed, building local demand for a diversity of products will be a key challenge for their new marketing staff. “Mozambicans tend to like sweet yogurt and ice cream, and so we want to do more to promote milk as a healthy, nutritious option. We’re also looking at infant feeding supplements and think there’s a lot of opportunity on that front,” Ellert noted.
The plant is currently operating at only 10 percent of its 18,000 liter/day capacity, but production is rising exponentially, as Land O’Lakes farmers learn how to increase their animals’ yields with improved nutrition and animal husbandry practices. As of November 2013, they were receiving 1,000 liters a day from farmers supported by the Land O’Lakes program. Another 15 percent of their milk comes from a handful of dairy animals owned by DanMoz that are being raised outside the processing plant, and the remainder is met by expensive milk powder imported from New Zealand and South Africa. “We are trying to encourage farmers to also deliver their evening milk, as this would greatly increase the capacity of DanMoz and improve the incomes of farmers, but right now only one cooperative is delivering in the evening,” added Ellert.
Although DanMoz is not currently providing farmers with bonus premiums for meeting Grade A quality levels, the processor is supporting the farmers in other ways, including providing the cooperatives with stock feed and other needed inputs, which farmers can purchase on credit and have deducted from their milk payments.
Ellert and his partners are excited about the development impact of the program, but are understandably focusing their efforts on commercial sales. Considering the USDA-funded Food for Progress program is slated to culminate in 2016, the leadership of DanMoz is already ruminating about potentially hiring Land O’Lakes’ staff to continue their work with program farmers, which would help ensure that the dairy development efforts USDA has catalyzed can continue to grow and flourish.
Training in Transparency
With only 87 members currently delivering milk, as well as some inactive members, the leadership of Gondola Cooperative realizes work remains to attract additional members into the fold. Still, they’ve already made a number of transformative changes that are making a broader impact on how community members interact with and trust one another.
According to Jaime, Gondola’s president, “Much of the cooperative development training we’ve received from Land O’Lakes has focused on transparency. This means that if we want to make a decision, they must involve all producers in the decision-making through a participatory process. Thinking and acting in democratic ways is a new model for us all, but it is working. Our farmers appreciate that all members can vote and be elected, and that women’s voices are just as important as men’s. They’re also learning that along with rights, each cooperative member also has certain responsibilities and obligations to the broader group.”
But beyond the cooperative, the focus on transparency and accountability has built broader community cohesion, too. Curruissa summed up the sentiment by saying, “Everyone is united by the fact that we are all dairy farmers with cows, and we’re now working together as real neighbors, sharing ideas and resources, because we know working together will help each of us improve.”
Digital Green is a not for profit international development organization that uses an innovative digital platform for community engagement to improve livelihoods of rural communities across South Asia and Sub-Saharan Africa. We partner with local public, private and civil society organizations to share knowledge on improved agricultural practices, livelihoods, health, and nutrition, using locally produced videos and human mediated dissemination. In a controlled evaluation, the approach was found to be 10 times more cost-effective and uptake of new practices seven times higher compared to traditional extension services.
Till date, we have produced over 2800 videos in more than 20 languages, reached 2,200 villages and over 130,000 farmers. We currently implement projects in eight states in India and in select areas in Ghana, Tanzania, Mozambique and Ethiopia in Africa in partnership with over 20 partners.
We engage with and empower rural communities to produce participatory localized videos, leveraging pre-existing group structures to disseminate these videos through human mediation. These videos are of the community, by the community and for the community. The approach includes: (1) a participatory process for video production on improved livelihood practices, (2) a human-mediated learning model for video dissemination and training, (3) a hardware and software technology platform for data management customized to limited or intermittent Internet and electrical grid connectivity, and (4) an iterative model to progressively address the needs and interests of the community with analytical tools and interactive phone-based feedback channels
Our data management software called Connect Online | Connect Offline (COCO) and Analytics dashboard suite customized to low resource settings are used to collect and analyse near real-time data on dissemination, adoption, and community interest.
Ministry of Agriculture, Oxfam America, Sasakawa Africa Association Geography: Three districts (Arsi Negele, Gumer and D. Libanos) in Oromia and Southern Nations Nationalities and Peoples Regional State (SNNPRS) Regions
We are collaborating with Oxfam America (OA) and Sasakawa Africa Association (SAA), along with the Ministry of Agriculture (MoA), to implement a pilot project to use participatory, mediated videos to promote key agricultural behaviors among rural community members. This pilot adapts our approach to the Ethiopian MoA agricultural extension context to reach approximately 1,000 farmer households.
We aim to amplify the effectiveness of government extension systems for agriculture by building the capacity of Ethiopian Development Agents (DAs), Ethiopia’s cadre of agricultural extension officers working in every kabele (clustered village) location, as well as Government-supported Farmer Training Centers (FTCs), also set up in each kabele. By training DAs in our video production and dissemination techniques, and by providing technical operational support of low-cost mediated, instructional video as a method of extension services, we aim to ensure the sustainability of the project.
The key behaviors disseminated through videos relate to locally relevant agronomic practices to help farmers increase productivities and save costs. Videos are being produced by local intermediaries trained in each of the 3 engaged districts on topics such as land management, pest and weed management, harvesting, post-harvest care and market linkages. Existing farmer groups, each consisting of approximately 20 farmers, attend disseminations conducted by trained DAs
International Development Enterprises (iDE)
Geography: 3150 households, 105 villages, seven districts of Rift Valley and Highlands in Oromia region.
We partnered with iDE in 2012 to leverage our approach in two districts of the Rift Valley to gauge its efficacy in communicating good agricultural practices and technologies in the Ethiopian context. The project elicited strong interest and support
from the 335 households in 19 villages participating in the pilot. This encouraged the scaling up and expansion of this approach to enable food security and livelihoods promotion.
The project is operational in seven districts where we provide training and supportive supervision to iDE staff and community intermediaries in project design, introduction of low-cost technologies, capacity building in video production and dissemination, quality assurance and monitoring and evaluation. iDE is primarily responsible for executing activities through their existing network of domain experts and community intermediaries by making use of our standard operating procedures and technology stack to implement the project.
The key behaviors disseminated through videos relate to low-cost irrigation technologies and locally relevant farming practices to help farmers increase productivities and save costs. In Ethiopia, many small-plot farmers cannot afford to irrigate their land and therefore have to rely on rain-fed cereal crops. iDE has developed low-cost irrigation technologies such as rope and washer pump and suction only treadle pumps to support farmers in irrigating their land. iDE employs local community marketing agents (CMAs) in ensuring easy access to these technologies as well as to spread awareness about its benefits and use. To support the CMAs in this, approximately 50 instructional videos on topics such as benefits of rope and washer pump are developed. Existing farmer groups, each constituting of approximately 15-20 farmers attend human mediated screenings of such 8-10 minute long videos conducted by CMAs. Regular adoption verification visits to assess behavior change are also conducted with a target that at least 1500 farmers adopt at least 1 practice successfully through the project.
Alliance for a Green Revolution in Africa
We have partnered with Alliance for a Green Revolution in Africa (AGRA) to build the capacity of existing extension personnel within four Sub-Saharan countries – Ethiopia, Ghana, Tanzania and Mozambique – to amplify the effectiveness of AGRA’s Soil Health Program. The project will integrate videos showcasing farmers who have begun innovating with AGRA-supported blended fertilizer and lime inputs across various staple crops. The project will roll out in 30 different villages, engaging approximately 2,500 farmers. In Ethiopia, our trainers conducted video production and group facilitation trainings for MoA DAs. In Tanzania, our trainers will work with community facilitators engaged with Faida Market Link, an organization working to improve linkages between producers and market value chains.
Alliance for a Green Revolution in Africa
We have partnered with Alliance for a Green Revolution in Africa (AGRA) to build the
capacity of existing extension personnel within four Sub-Saharan countries –
Ethiopia, Ghana, Tanzania and Mozambique – to amplify the effectiveness of
AGRA’s Soil Health Program. The project will integrate videos showcasing farmers
who have begun innovating with AGRA-supported blended fertilizer and lime inputs
across various staple crops. The project will roll out in 30 different villages, engaging
approximately 2,500 farmers. In Ethiopia, our trainers conducted video production
and group facilitation trainings for MoA DAs. In Tanzania, our trainers will work with
community facilitators engaged with Faida Market Link, an organization working to
improve linkages between producers and market value chains.
Sasakawa Africa Association – Nutritious Maize for Ethiopia project
Digital Green aims to increase the consumption of protein in 3000 vulnerable
households in the Amhara region by engaging communities with locally relevant
instructional videos on quality protein maize (QPM). By working with Sasakawa
Africa Association within three woredas (districts) in the region, Digital Green will
build the capacities of health extension workers (HEWs) as well as development
agents (DAs) to produce and showcase the videos to farmer groups as well as
health development armies (HDAs). QPM consumption recipes, nutritional
components of the maize crop itself, cultural practices affecting nutritional
Sasakawa Africa Association – Nutritious Maize for Ethiopia project
Digital Green aims to increase the consumption of protein in 3000 vulnerable
households in the Amhara region by engaging communities with locally relevant
instructional videos on quality protein maize (QPM). By working with Sasakawa
Africa Association within three woredas (districts) in the region, Digital Green will
build the capacities of health extension workers (HEWs) as well as development
agents (DAs) to produce and showcase the videos to farmer groups as well as
health development armies (HDAs). QPM consumption recipes, nutritional
components of the maize crop itself, cultural practices affecting nutritional child-feeding, and the best QPM-related agronomic practices are examples of some of the
video topics that will be shared with households to promote healthy diets through the
consumption of QPM. Digital Green aims to integrate agriculture and nutrition-centric
messages into the videos that will be produced for this pilot project. Each of the three
engaged woredas will serve as video production hubs to produce these locally
relevant videos. The videos will be produced by a mixed team of technical health and
agriculture experts and will leverage the strengths of HEWs, HDAs, DAs, and farmer
Digital Green’s collaboration with PATH will reach approximately 4000 households in
2 districts of Oromia region – Wuchalle and Dodata. Pregnant and lactating mothers
will be targeted through the Ethiopian health development army structures, as well
as pregnant women’s conferences located in each kabele.
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