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The Business of Agroforestry: Opportunities & Challenges for Commercial Investment inAgroforestry-based Ventures
 

The Business of Agroforestry: Opportunities & Challenges for Commercial Investment in Agroforestry-based Ventures

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  • Each household uses 2.5kg of charcao/day = 875 kg charcoal /yr = 4375 kg wood/yr = 11 trees/yr?

The Business of Agroforestry: Opportunities & Challenges for Commercial Investment inAgroforestry-based Ventures The Business of Agroforestry: Opportunities & Challenges for Commercial Investment in Agroforestry-based Ventures Presentation Transcript

  • The Business of Agroforestry: Opportunities & Challenges for Commercial Investment in Agroforestry-based Ventures Sagun Saxena Rahul Barua World Congress on Agroforestry New Delhi 10 – 14 February 2014
  • Introduction: Who we are • A privately-held venture development company with offices in New York, Kampala & Rio de Janeiro • Focused on Agriculture, Energy and Retail sectors in India, Africa & Brazil since 2007 • Create ventures from “blank-sheet” stage through to commercial operation • Earn return only from capital gains or dividends generated by successful ventures – Not a consulting services or donor-supported organization 2
  • Introduction: Where we operate India • • USA • Head office Diesel displacement Off-grid energy Haiti • Clean cooking Uganda • • AgVentureLab BoP retail Brazil • • • Forestry Silvi-pastoral systems Biomass energy Mozambique • Clean Cooking Fuel & Food production Australia • • Aviation fuel Forestry 3
  • Introduction: What we do Explore Market Opportunities Design New Business Models Launch Ventures • Research unmet market needs in target sectors • Explore innovative technologies & business models • Develop venture concepts • Identify potential partners 4
  • Introduction: What we do Explore Market Opportunities • Research unmet market needs in target sectors • Explore innovative technologies & business models • Develop venture concepts Design New Business Models Launch Ventures • Refine venture concept in field with target customers and partners • Develop business and technical models • Estimate pilot launch budget & mobilize funding • Identify potential partners 5
  • Introduction: What we do Explore Market Opportunities • Research unmet market needs in target sectors • Explore innovative technologies & business models • Develop venture concepts • Identify potential partners Design New Business Models Launch Ventures • Refine venture concept in field with target customers and partners • Recruit “founding” team • Develop business and technical models • Launch pilot operation • Estimate pilot launch budget & mobilize funding • Oversee detailed design, engineering, development • Strengthen venture model based on lessons from launch • Run roadshow & help raise implementation capital 6
  • CASE STUDY 1 India • • USA • Head office Diesel displacement Off-grid energy Haiti • Clean cooking Uganda • • AgVentureLab BoP retail Brazil • • • Forestry Silvi-pastoral systems Biomass energy Mozambique • Clean Cooking Fuel & Food production Australia • • Aviation fuel Forestry 7
  • CASE STUDY 1 • Introduction to the Market Opportunity we identified India • • USA • Overview of the • Head office Diesel displacement Off-grid energy Business Model CleanStar developed Haiti • Clean cooking Uganda • Why Agroforestry? • Opportunities • ChallengesBrazil • • Forestry • Silvi-pastoral systems • Biomass energy Conclusions • • AgVentureLab BoP retail Mozambique • Clean Cooking Fuel & Food production Australia • • Aviation fuel Forestry 8
  • Charcoal is the primary cooking fuel for urban consumers throughout SSA Charcoal industry across Africa • Over $10 billion annual cash spend • $25-$35/month per urban household • Between 10-30% of household income 9
  • Using charcoal impacts women’s health and quality of life 10
  • Charcoal has wiped out nearly one third of Africa’s natural forest cover (FAO) Charcoal-based deforestation • Causes erosion, degradation & flooding • 10kg of wood = only 1kg charcoal • Major Greenhouse Gas emissions 11
  • Meanwhile, Charcoal is often a primary source of cash income in rural areas 12
  • Market Opportunity: replacing charcoal for urban cooking • Can a new cooking solution be launched for urban households? • Must be affordable and deliver enough incentives over charcoal – Fast: must save time – Safe: parents must be comfortable letting children cook – Convenient: fuel must be available everywhere and in small amounts – Clean: users are tired of dirty pots, walls, hands & hair • Various solutions considered: – Biomass briquettes: not faster, expensive to distribute, not much cleaner – LPG Cooking gas: considered unsafe, stove too expensive, fuel supply – Ethanol gel: too weak flame, fuel too expensive – Ethanol liquid fuel: never been tried commercially?
  • Business Model: New ethanol cooking solution Ethanol fuel • Ethyl alcohol with denaturant & color • Can be produced locally from different feedstocks • Can be bottled and sold in small amounts Loaded into stove after refilling Ethanol Stove: Fast: Ignite & extinguish instantly; 2x efficiency of Improved Charcoal Stoves Clean: No smoke or odour; no soot on walls; fuel handled without dirtying hands Safe: Not pressurized; won’t leak or explode 14
  • Business Model: How can ethanol fuel be produced and marketed sustainably? • Partnering with smallholders to produce feedstock using improved planting material and practices • Procuring surpluses directly from farmers and processing them into food & cooking fuel products for urban use • Retailing products via own shops + 3rd parties, under NDZiLO brand A vertically-integrated business model is essential to secure margin over long-term 15
  • $21 million was raised in commercial equity and debt investment from strategic corporate and institutional investors between 2010-2013  Founder, impact venture developer, Africa, Asia & Latin America  Urban Cooking Fuel, Sustainable Agriculture, BoP Retail, Rural Utilities  Global leader in enzymes for bioenergy and agriculture  $2 billion revenue & 6,000 people  US ethanol process technology contractor  Built 6.7 billion gallons of ethanol capacity globally over last 30 yrs  Leading global bank, $50 billion environmental commitment  Innovative financier in carbon and climate solution markets  Soros Economic Development Fund  Impact investor in post-conflict societies, part of Soros group  Danish government-owned Development Finance Institution  Invests in sustainable businesses in least developed countries Invests in sustainable businesses that alleviate poverty 16
  • Distribution: Since early 2013, stoves and bottled cooking fuel are being sold via direct sales team, company stores and large network of 3rd party retailers Large direct sales team delivers in-home demonstrations and takes orders Customers visit shops to fulfil orders and collect stoves & fuel NDZiLO shop network in low-income neighbourhoods Customers return every day / week to buy fuel 17
  • Distribution: The cooking fuel is bottled in a custom-built facility in Maputo 18
  • Processing: The cooking fuel has been produced in a custom-built facility in central Mozambique (pilot plant opened May 2012; now being upscaled) Sales team undertakes in-home demonstrations and take orders 19
  • Cultivation: What is the best farming strategy? • Many different ethanol feedstock sources possible – Sugarcane, Sweet Sorghum, Cassava • Many commercial farming models possible – Large-scale land acquisition for sugar cane plantation – Contract Farming / Outgrower Schemes with Smallholders – Tenant farming / Sharecropping – Joint ventures – Farmer-owned businesses
  • Cultivation: Guiding principles for strategy • Engage subsistence farmers (ex-charcoal producers) in cultivation • Build on their existing knowledge & capabilities • Don’t burden them with more risk (i.e. no debt) • Provide year-round benefits in terms of food security & income • Recognize gender issues & opportunities • Design for long-term sustainability & mutual growth
  • Cultivation: CleanStar co-designed a smallholder-based agroforestry program that is low-input and resilient Mix of multi-purpose crops & trees Crop rotation Processed into Food Prod Processed into Ethanol • Agroforestry Cassava X x No burning Cowpeas* X X • Integrated pest mgmt Soyabean * x X Sorghum X x Ground nuts* X X Native trees* x Pongamia* y Lucaena* Pigeonpea* x X • Ecosystem services (z) • 1 ha Agroforestry Zone Rotation 1 Rotation 2 Rotation 3 1 ha Forestry Shelterbelt Zone Processed into Diesel Alt Better planting material Subsistence Food x • Pruning as firewood/mulch KEY ELEMENTS x s x x X X x x y x X x x X Integrated food & energy farming system boosts local food security & cash income X : main uses; x : secondary uses; y : leaves can be used as fodder; s: if sweet variety of sorghum; * : leguminous /nitrogen-fixing ; ** : cycle nutrients, promote biodiversity, sequester CO2, provide shade, retain moisture 22
  • Cultivation: Over 1000 smallholder farmers adopted the approach in 2012-2013 Baseline farming is subsistence-only Lack of inputs/storage/markets CleanStar has identified high-yielding diseasefree cassava, soya, beans, sorghum, pigeon peas through collaboration with IIAM & IITA CleanStar provides free planting material and guidance to farmers that agree to adopt system Nitrogen-fixing trees provide free fertilizer and help improve soil over time 23
  • Cultivation: The cassava is pre-processed, procured and transported to the plant Community-level pre-processing Local aggregation and storage Standardized inspection, weigh & pay Efficient transport to pilot plant 24
  • Benefits of this approach are becoming clearer and can be scaled across subSaharan Africa where charcoal is used POTENTIAL BENEFITS OF 20% ADOPTION OF ETHANOL-BASED COOKING IN AFRICA • 5 million women save time & improve quality of life by avoiding need to buy, handle & ignite charcoal • 25 million people saved from indoor air pollution, charcoal burns, or unsafe LPG equipment • 50 million trees saved every year • 90 million tons CO2e emissions reduction every year • 1.5 million farmers benefit from greater and more diverse income every year • 500,000 new jobs created in urban and rural areas 25
  • Summary of Key Opportunities Presented by Agroforestry Approach • Reduction of common risks – Low input and low cost  faster scalability – Mutual value creation with local communities – Multiple layers of resilience to market shocks – Creation of multiple product value chains with low cost base • Delivery of environmental benefits – Improved soil fertility and health – Restoration of multiple ecosystem services – Potential to receive PES (e.g. carbon) • Delivery of real social and economic benefits to local communities – Food security and nutrition – Income (increase and smoothing) – Knowledge, capacity, and resilience
  • Summary of Key Challenges Presented by Agroforestry Approach • Design of business model – Identify “anchor” market opportunity – Build internal and network resilience to market shocks • Design of venture – Identify appropriate stakeholders and create venture ecosystem – Manage expectations • Venture development and implementation – Prove out initial hypotheses – Adjust to local community responses – Manage stakeholder platform – Allow for continued innovation and operational improvements
  • Conclusions & Takeaways • For commercial developers and investors – Agroforestry an attractive approach to reducing commercial risk and delivering developmental benefits to local communities – Requires a platform of stakeholders - design and maintain carefully – Requires ongoing innovation, patient capital, and stakeholder management • For research, NGO & governmental organizations – Publicly funded groups can support commercial actors during early stage design and development activities – Advocate streamlined institutional processes within host country governments – Continue public-private linkages to ensure best practices are implemented and shared
  • Contact Us USA UGANDA INDIA Sagun Saxena, Managing Partner CleanStar Ventures LLC 373 Park Ave South, 6th Floor New York, NY 10010 Greg Murray, Managing Partner CleanStar Ventures 41 Luthuli Avenue Bugolobi, Kampala Vikalp Pal Sabhlok, Partner CleanStar Ventures Bangalore s.saxena@cleanstarventures.com g.murray@cleanstarventures.com v.sabhlok@cleanstarventures.com BRAZIL AUSTRALIA Richard Taylor, Presidente CleanStar Brasil Bioenergia Ltda Rua Carlos Goís 469/401 Leblon CEP 22440-040, Rio de Janeiro Don Murray , Chairman CleanStar Australia Pty Ltd Level 29, The Chifley Tower 2 Chifley Square Sydney NSW 2000 r.taylor@cleanstarventures.com d.murray@cleanstarventures.com www.cleanstarventures.com 29