Machinery Hire Service Providers Capacity Development: A Necessity for better Economic Integration

1. Regional workshop to share experiences of sustainable
agricultural mechanization hire service provision
practices in Sub-Saharan African countries.
What opportunities for investments?
Machinery Hire Service Provider’s
Capacity Development: A Necessity for
better economic integration
December 9-12, 2019,
Grand Imperial Hotel, Kampala, Uganda
Eng. Richard Shetto
Mechanization Specialist
Private Sector

2. 2
Contents
1. Introduction
2. Status of Mechanization in Africa
3. Business Models in Tractor Hire Services
4. Machinery Hire Services in Africa
5. Capacity Development and Empowerment
6. Roles of the Public and Private Sector

3. Introduction
• There are strong correlations between economic growth and
mechanization worldwide.
• Countries that have achieved economic growth have also
advanced to higher levels of mechanization
• Countries that have stagnated economically have also lagged
behind in mechanization
• Farm power with fertilizers, improved seeds, irrigation and
pesticides are interdependent for growth in agricultural
productivity
• Tractors the “unsung hero” significantly transformed
agricultural productivity, contributing immensely to the
economic growth of the United States and Europe
• Tractors also revolutionized agriculture and contributed to
economic growth in Latin America and Asia

4. Status of Mechanization in Africa
• About 80% of the cultivated
land is done by human muscle
power in Africa, 15% by
draught animals and tractors
5% while in Asia 60% of the
land is tilled by tractors.
• At the time of independence
in the 1960s, Africa was at the
same level or higher in
mechanization with most
Asian countries. 172,000
120,000
126,000
383,000
221,000
6,000,000
1,700,000
1,800,000
AFRICA
ASIA
NEAR EAST
LAC
Number of Tractors 1961-2000
2000 1961

5. Business Models in Tractor Hire Services
Tractors are owned by
mmedium and large scale
farmers who provide hire
services (70-100%) to other
farmers
Hire Services Business Models
include:
i. Small-Scale Farmers
Tractor Owner Custom
Hiring Services
ii. Medium-Scale Farmers
Tractor Owner Custom
Hiring Services
iii. Specialized or Professional
Enterprises Hiring Services
– Private sector lead
iv. Specialized or Professional
Enterprises Hiring Services
– Government lead
v. Contract Farming
Machinery Operators
vi. Farming Syndicates or
Partnerships
vii. Machinery Dealer-
Contractor Partnerships
viii. Machinery Rings

6. 6
Small Machines Hire Service Model
Powertiller
Puddling with oxen
Rice transplanter
Motorized Reaper

7. Machinery Hire Services in Africa
• Started with introduction of ox ploughs and
tractors in 1930s
• More prominent after independence in the 1960s
as countries wanted to become food self
sufficiency and produce raw material
• In Tanzania 1,217 tractors were imported
between 1982-1994 to boost the regional and
district hire service centres
• Most of these hire service schemes were not
successful and were abandoned during the
Structural Economic Adjustment Programmes in
mid 1990s

8. Make and Size of Tractors
• Farmers own a wide range of
tractor makes or brands being
mainly influenced by
Government importations
• In Tanzania New Holland
(24%), Massey Ferguson
(15%), Farmtrac (13%), Swaraj
(9%), and other in smaller
numbers
• The size of the tractors varies
from 35-90 Hp
• In Ghana the majority of
tractors imported for
agricultural use are in the
range of 50–80 Hp
45-60 HP
30%
61-75 HP
56%
76-90 HP
14%
Size of Tractors (HP)

9. Agricultural Machinery Supply Chain
• The supply of agricultural
machinery and spare parts is
managed by well-established
machinery dealers in major towns.
• There are also small traders in
some townships who deal in
limited consignments of spare
parts
• Fuel, lubricants and repair services
are available in many urban and
village centres.
• Repair and maintenance services
are mainly provided by mechanics
in small garages
• Most of the mechanics have
attained only primary education
with no formal training in
mechanics
• Local manufacturing is limited in
SSA varying from country to
country
• Small manufacturers are
prominent in the production of
agro processing equipment -
maize shelling, hulling and
milling; paddy threshing, and
hulling; coffee hulling and
pulping; cassava grating, chipping
and oil expelling machines
• Artisans and rural craft
workshops fabricate tractor
drawn trailers; engine powered
maize shellers and other small
equipment on demand.
• The workshops are poorly
equipped mostly rely on scrap
metals as raw materials.
• Welders/artisans are primary
school leavers with no formal
training

10. 10
Local Manufacturing
Trailer
Sunflower oil mill
Maize sheller
Coffee huller

11. Accessibility of Capital Investment
• Loans from commercial banks are
very limited with high interest rates
from 15-22% annually payable
within 3 years.
• In Tanzania about 65% of tractors
are procured through cash
financing from farmers’ own equity;
only 8% from commercial banks.
• Used machines (2nd hand) still play
an important role
• About 42% of the sampled tractors
were 2nd hand
• In Ghana while the government
imported 3,000 new tractors; the
private sector imported 3,000 used
tractors in the past 10 years
0
10
20
30
40
50
60
70
Own Equity Govt Financial
Inst
Lease for
Purchase
Commercial
Banks
Percentage
Accessibility of Financing

12. Management of Machinery Hire Services
Business
• Management of tractors is
directly under the control of
tractor owners
• Operators are hired to manage
the tractors on daily basis
• Poor management as more than
90% of tractor owners have never
attended any training
• Proper tractor utilization records
are rarely kept
- 40% never keep records at all,
- 46% keep some scanty data
- only 14% keep appropriate data.
• Business nor work plans are
prepared
• Depend on walk in customers no
marketing
• The majority of tractor owners
have attained primary school
Technical Skills
• The majority of TSPs and Tractor
Operators (TOs) have insufficient skills
in operation and management of
tractors and implements.
• They have limited knowledge on proper
setting, adjustments and operation of
major tractor control systems such as
Draft and Position Control System; 3
Point Linkage
• Poor adjustments lead to dis-
functioning and damage of hydraulic
systems; and frequent breakages of
lower links, lift links or arms and poor
quality of work.
• Hydraulic failure accounted for 12% of
the most frequent breakdowns ; and
lower links accounted for 10% in
surveyed tractors
• Tractor owners and operators do not
read or consult the provided Operators
Manuals and safety measures are rarely
observed when operating the tractors.

13. Harvesting and Agro-processing
• About 90% of the crop in SSA is
harvested manually harvested
and only 10% by combine
harvesters.
• Harvesting by reapers and
threshing with motorized
threshers is minimal being
• Many combine harvester
operators lack formal training
• Routine maintenance is
commonly undertaken but not
preventive maintenance
• Lack of skilful trained operators
lead to poorly adjusted machines,
reduce the efficiency of work and
lead to increased grain losses
when harvesting.
• Value addition of agricultural
crops is still low in SSA with the
exception of grain milling which is
wide spread to the village level.
• Hammer mills, one stage paddy
dehullers and screw oil press mills
with capacity ranging from 1-3
tons/day are dominant.
• Small and medium scale agro-
processors account for more than
85% of the milled flour and 70%
of the oil processing business in
Tanzania
• Under-capacity utilization (<30%)
is common in the agro-processing
industry mainly because of
inadequate supply of grain and oil
seeds from farmers.
• Main challenges include mixed
varieties of grain and oil seeds;
contamination with impurities,
chaff and sand, sometimes up to
10%; high energy costs; lack of
capital for investment; poorly
trained operators and mechanics.

14. Harvesting Machines

15. Profitability of Machinery Hire Services
Tractors
• The average operating tractor
cost per hour is USD 13/acre)
varying from USD 9-25/acre).
• Fixed costs account for 27% of
the tractor costs and variable
costs account for 73%.
• Fuel accounted for 54% of the
cost; Repair & Maintenance
accounted for 21%; labour
accounted for 17% and lubricants
accounted for 8%
• Gross Margins show small profits
only ranging between Tshs
250,000 to 4,000,000
Combine Harvesters
• The average operating
combine harvester cost per
hour is USD 47/acre) varying
from USD 22-55/acre).
• Fixed costs account for 35%
and variable costs 65%.
• Repair and maintenance
accounted for 43% of the
variable costs, fuel accounted
for 38% and labour accounted
for 19% of the variable costs.
• Gross margins show profits
ranging from Tshs 2.4 to 26.7
million

16. Capacity Development and Empowerment
Why Capacity Building?
• Technological development is
continuing at an ever-increasing
pace, especially in new areas such as
information and communication
technology and biotechnology.
• These developments are exciting, but
demand increased engineering
capacity.
• Land degradation is accelerated by
the extensive tractorization and the
effects of climate change are
threatening food security
• Farmers are unaware of innovative
new smart climate technologies such
as CA.
• Agricultural machines and agro
processing plants are capital
intensive hence extra care is needed
in operation and management to
prolong the life span
Why Capacity Building?
• The majority of machinery and
plant owners and the operators
who manage the equipment
have limited knowledge and
technical know how
• Therefore skilful and
knowledgeable operators should
be employed to operate and
manage agricultural machinery.
• The machinery owners as
managers require analytical skills
to understand the business in all
its perspective in order to make
it profitable
• Hence the need for compressive
training at all levels of the value
chain

17. Training in What and for Whom
• Machinery and plant owners to be
trained in technical, business ;
entrepreneurship financial
management
• Selection of appropriate machines
• An entrepreneur the manager/owner
should always seeks new
opportunities, while looking for
improved, more efficient and
profitable ways of managing the
current business.
• Location specific hands on tailor
made short training programmes
should be prepared and conducted to
tractor operators to include
operation, routine and preventive
maintenance, proper setting,
adjustments and operation of major
tractor control systems such as Draft
and Position Control System;
• Agro processors owners and operators
to be trained on: operation,
maintenance, main adjustments,
Hygiene and food safety, Good
Manufacture Practices
• Maintenance mechanics or technician to
be trained on technical aspects covering
the main components and systems, their
functions and operation; adjustments;
operation, maintenance and
management
• Special structured short courses to train
small scale industries and artisans on
fabrication and manufacturing
techniques; material sourcing and
pricing products and quality
• Training, Research and Extension
institutions: curriculum revision, client
oriented research, cross border
collaboration networking and
partnerships and new innovative
technology transfer
• Training of GAP and Climate smart
agriculture technologies across the value
chain including policy makers

18. Needs for Operator Training

19. Machinery Hire Service as a Business Enterprise
• A machinery hire service is a
business that utilizes machinery to
provide services for crop production,
harvesting, post-harvest operations,
processing, transportation and
marketing.
• As a business enterprise it should
make money by selling services at a
profit while protecting the natural
environment
• Managing a hire service business
means looking after a hire service
from a business perspective.
• It is a process of ensuring that
activities and tasks are completed
effectively and efficiently. This means
doing right things (effectiveness)
and doing things right (efficiency).
• Good relations with customers
Selection of Machinery
• The selection of machinery is
affected by the power
requirement, size, machine
performance; market potential,
support services, purchase price,
running costs and cash availability
or cash flow and other financial
considerations.
• First conduct a simple market
survey to find out who are the
current and potential customers
are, how many there are and
what is the volume of work.
• Determine at what cost your
enterprise is able to provide the
services based on the calculated
annual machinery costs
• Finally conduct a financial
including a loan analysis where
loans are applicable

20. Financial Empowerment
• Facilitation in investment from the
financial sector through loans, credits,
subsidies and other instruments is
needed throughout the entire value
chain.
• Governments are advised to create a
supportive environment, facilitating
viable and sustainable businesses that
can offer affordable mechanization
inputs and services across the agrifood
value chains
• Financial institutions should be able to
commercially lend to the farmers and
the farmers be able to borrow and pay
back
• Tailored and sustainable subsidies
should be considered especially where
they can catalyze the initial procurement
of mechanization
• In many countries where mechanization
has occurred, financial support has been
provided to farmers through credit or
direct grants to procure machinery and
equipment from public institutions e.g.
India, China, Bangladesh, Pakistan,
Brazil, Thailandi, Malaysia, Vietnam
Public Private Partnerships enhance capacity of
private sector
• Research institutions and Universities
partnering with private sector
• International Research Centres such as CGIAR,
IRRI, CIMMYT involving farmers and
manufacturers
• UN International Organizations such as UNIDO
collaborating with manufacturers to establish
operator training centres in Liberia, Zambia,
Ethiopia and Morocco and FAO-implemented
CA Scaling-up Project (CASU) in Zambia
• NGOs e.g. Kilimo Trust partnering with millers
and cooperative societies in consortium
approach through matching grants; ACTN &
CFU in networking and promoting CA
• Private companies supporting farmer initiatives
e.g. Hello tractors I and PIA in Nigeria and
Kenya; MYAgro in Mali and Senegal ; NWK in
Zambia and others
• Government/private sector e.g. Nigeria where
agricultural equipment hiring enterprises
(AEHEs) have been established

21. Success story on PPP – Transformation of the Value Chain: A case of a
processor – RGL in TZ
16 December 2019 21©Kilimo Trust
2016 – 3 yrs working with KT
Achievements 2014 2019
Farmers 500 7,217
Storage Capacity (MT) 5,000 15,000
Aggregation centres 10 60
Processing Capacity
(MT/day)
150 220
Vol. of paddy aggregated
(MT)
17,000 26,000
Growth in regional markets
(MT)
1,000 6,000
• Mainly toll miller
• No relationship with SHFs
• Limited access to finance
1995 2014 – started working with KT
2016
From
To

22. Transformation New Kakinga Mills from 10 tons/day to
120 tons/day maize milling plant in Kakinga Uganda

23. Financial Empowering
Mechanization Platforms
• Provide forum for actors to share experiences
and information and play a lobbying and
advocacy role to the government for issues like
training, credits, taxes, levies, subsidies etc.
• CFU is spear heading the establishment of
tractor tillage service cooperative societies, one
has already been registered WAWAZAKI CO-
OPERATIVE SOCIETY LTD
The Role of the Government
• Creating an enabling policy and regulatory
environment
• Strengthening farmers’ capacities to make
informed decisions by generating and
disseminating knowledge and information
• Establishing procedures for delivery of training
and capacity building
• Consumer protection through quality control of
equipment and support service provision
• Safeguarding environmental concerns through
sustainable land management
• Training of Trainers and extension
• Kick-starting mechanization-related enterprise
development and farmer empowerment though
PPPs
• Supporting the development and dissemination
of appropriate mechanization technologies
through PPPs
Training Approach and Who to
Train
• The training to be conducted by
competent facilitators conversant with
mechanization and business management.
• The training should be participatory giving
more time to the hire service providers to
contribute and share their views
• Group discussions should be encouraged
in smaller groups to enable them to
analyze the topics.
• Practical sessions should be emphasized
and the hire service providers should be
trained in the field with their physical
participation in operation and adjustment
of different machines and implements.
• A visit to a nearby farm or workshop to
learn more on operation, repair and
maintenance of the equipment together
with business management will be an
added advantage to the trainees.
• Adult learning principles to be adopted so
as to create the correct learning
atmosphere.

24. Greetings from an Entrepreneur in Ntara, Uganda

25. I THANK YOU