FAO – NAMC Linking Farmers to Markets The role of the NGO ;  an Agri business perspective CHEETAH PAPRIKA  Mark Terken  St...
Presentation Outline <ul><li>Introduction and background </li></ul><ul><li>Strength & weakness of the 3 groups;  -  Agri b...
Strength & Weakness  Agri buss / Cheetah <ul><li>STRENGTH </li></ul><ul><ul><li>Excel in product and market knowledge </li...
Strength & Weakness Small holder farmers <ul><li>STRENGTH </li></ul><ul><ul><li>Committed to farming </li></ul></ul><ul><u...
Strength & Weakness  NGO or  Project <ul><li>STRENGTH </li></ul><ul><ul><li>Resources; people, transport, crop finance </l...
 
ENTERPRISE <ul><li>Definition; </li></ul><ul><li>organized business activities aimed specifically at growth and profit </l...
Differentiate ‘ENTERPRISE’ from activities or organizations which do require continued support <ul><li>Many local or inter...
WARNING <ul><li>ENTERPRISE  requires to provide goods or services;  </li></ul><ul><ul><li>to a market or client which is w...
 
CHEETAH LIMITED <ul><li>Private company established in 1995 </li></ul><ul><li>Exporting Paprika and Chilli products from Z...
Key Economic Factors for Cheetah as a business <ul><li>Volume  > 500,000 kg dry paprika per country </li></ul><ul><li>Can ...
International Competitors Competing for Market Issues Issues Issues Issues Issues Issues Socio-Economics CHEETAH Competito...
THE CHEETAH MODEL <ul><li>Field days  </li></ul><ul><li>Group formation or group / group leader support </li></ul><ul><li>...
Contracting Systems used by Cheetah <ul><li>Direct through own extension network system, smallholder groups and commercial...
Direct <ul><li>Strength </li></ul><ul><li>Close collaboration with farmer groups </li></ul><ul><li>Intensive training per ...
Trader <ul><li>Strength </li></ul><ul><li>Little risk for Cheetah </li></ul><ul><li>Operate in remote, non viable areas fo...
NGO’s and other dev. Partners <ul><li>Strength </li></ul><ul><li>Rapid expansion of commodity volume </li></ul><ul><li>Pot...
 
Evolving Cheetah model <ul><li>From group contracting (1 per group) to individual farmer contracts </li></ul><ul><li>From ...
Improvements required on Cheetah model <ul><li>Create greater efficiencies; concentrate farmer groups  </li></ul><ul><li>S...
How to promote trust <ul><li>Be an industry leader for a number of years </li></ul><ul><li>Be visible & transparent </li><...
How to avoid input diversion <ul><li>Train farmer in crop budgets and make him understand that fertlizer and agro chemical...
How to avoid side selling = WISH LIST FOR FARMER <ul><li>Buy at Farm gate </li></ul><ul><li>Offer highest price </li></ul>...
Clusa Zambia <ul><li>+ Vast amount of resources; management, extension staff, extension equipment, support office, trainin...
Care Mozambique <ul><li>+ Strong driver in developing new products in Nampula </li></ul><ul><li>+ Understand requirement f...
POTC, Zambia <ul><li>+ Vast amount of resources: Management, Extension, Large fleet, Group formation & training, High leve...
Cordaid Malawi <ul><li>+ Base line study in place </li></ul><ul><li>+ Focal analysis of business proposition; product, mar...
Zatac Zambia <ul><li>+ Understanding of markets </li></ul><ul><li>American Consulting firms require vast farmer numbers to...
Recommendations to NGO <ul><li>Be realistic;  know the farmers, infrastructure & transport, markets and your own capacity ...
Recommendations to NGO  cntd <ul><li>HAVE A CLEAR JOINT EXIT STRATEGY  </li></ul><ul><li>Make farmers stick to the annual ...
What to do <ul><li>Know products (agronomy + production costs + quality specs), markets & price and logistics  </li></ul><...
CHEETAH PAPRIKA CREATING MARKETS TRAINING PEOPLE AND  EMPOWERING COMMUNITIES ZIKOMO MARK TERKEN  VALUE CHAIN SPECIALIST
Upcoming SlideShare
Loading in …5
×

Contract Farming & Market Linkages in Africa, The role of NGO's - a Private Sector perspective, Cape Town 6 Oct 2009

3,351 views

Published on

A private sector perspective of the roles that NGO's play in the market linkages of small farmers to Agribusiness in Africa.

Published in: Business, Technology
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total views
3,351
On SlideShare
0
From Embeds
0
Number of Embeds
35
Actions
Shares
0
Downloads
186
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide
  • Lessons learnt; Have an Exit strategy in place Keywords: Medium – Long term vision Sustainability Trust NGO’s and Farmers need to be realistic about price understand that the ‘market’ is the Factory gate of the Client (agri business) and not the Farm gate Distinguish Sustainable Business Development from ‘Doing Good’ Understand Farmers drivers and conditions (are farmers .. farmers?) Understand Agri buss drivers and conditions, (the agri buss value chain; farmer, farmer group/co-op, trader, agri bussiness, food ingredient industry, food industry, wholesale, retail) Ensure that farmers and agribusiness understand each others business and constraints The NGO to Have detailed knowledge of agriculture and local farming systems select only viable commodities (agronomy, man level, input level, quality requirements, storage/transport impact) Have vast resources; management &amp; extension, and possibly inputs (or link to micro finance unit) Limit the target no. of farmers or farmer groups in relation to the resources (manpower and budgets) available Target realistic added value, now and in future Select realistic logistics What does a farmer need to be / do / have in place True Farmer; Understanding of product, market, farming, ‘management’ &amp; 3 yr plan &amp; committment Suitable soils, rain &amp; rotation Training on specific product (agronomy, harvest + ph handling) Labour, equipment &amp; timely delivery of essential inputs Appropriate husbandry, harvest, &amp; ph handling (+storage &amp; cash)
  • 3 rd largest spice 100 000 ton $.2b market 50% international trade Supply of high quality paprika products for export markets (other food ingredients) System of innovative contract farming (long term provide seeds, training to farmers) Advanced technology TQM Food ingredient industry Spain
  • 3 Tier Finance + Inputs / Extension / Ag buss finance
  • Contract Farming & Market Linkages in Africa, The role of NGO's - a Private Sector perspective, Cape Town 6 Oct 2009

    1. 1. FAO – NAMC Linking Farmers to Markets The role of the NGO ; an Agri business perspective CHEETAH PAPRIKA Mark Terken Stellenbosch, 6 Oct 2009
    2. 2. Presentation Outline <ul><li>Introduction and background </li></ul><ul><li>Strength & weakness of the 3 groups; - Agri business, NGO & farmer </li></ul><ul><li>What is an enterprise / agribusiness </li></ul><ul><li>Cheetah paprika and contract farming </li></ul><ul><li>5 examples of co-operation with NGO & projects; Clusa, Care, POTC, Cordaid, Zatac </li></ul><ul><li>Recommendations </li></ul>
    3. 3. Strength & Weakness Agri buss / Cheetah <ul><li>STRENGTH </li></ul><ul><ul><li>Excel in product and market knowledge </li></ul></ul><ul><ul><li>Long term vision – Focus on sustainability </li></ul></ul><ul><ul><li>Understand farmer skills and 3 rd party missions </li></ul></ul><ul><ul><li>Strong in agronomy, extension materials, production cycles and training </li></ul></ul><ul><ul><li>Individual, well defined one page contracts with farmer </li></ul></ul><ul><li>WEAKNESS </li></ul><ul><ul><li>Occasional delay in payment to farmer </li></ul></ul><ul><ul><li>Extension & Procurement on ground not always in line with company rules </li></ul></ul><ul><ul><li>Control over transparent grading </li></ul></ul>
    4. 4. Strength & Weakness Small holder farmers <ul><li>STRENGTH </li></ul><ul><ul><li>Committed to farming </li></ul></ul><ul><ul><li>Once a product / system works for him or her, he or she will stick to it </li></ul></ul><ul><ul><li>Eagerness to learn and improve </li></ul></ul><ul><li>WEAKNESS </li></ul><ul><ul><li>Education poor, lack of expertise and will sign any ‘contract’ </li></ul></ul><ul><ul><li>Hear say is the norm rather than being factual </li></ul></ul><ul><ul><li>Farming by default, rather than by choice & ability </li></ul></ul><ul><ul><li>Lack of a ‘3 year vision’ </li></ul></ul><ul><ul><li>Generally late in preparations, spending minimal effort </li></ul></ul><ul><ul><li>Diversion of inputs for cash and to known crops </li></ul></ul><ul><ul><li>Will sell to highest bidder versus sticking to contract </li></ul></ul>
    5. 5. Strength & Weakness NGO or Project <ul><li>STRENGTH </li></ul><ul><ul><li>Resources; people, transport, crop finance </li></ul></ul><ul><ul><li>Training farmers </li></ul></ul><ul><ul><li>Knowledge and operational at rural level </li></ul></ul><ul><li>WEAKNESS </li></ul><ul><ul><li>Subjective; sentiments close to farmers </li></ul></ul><ul><ul><li>Selection of commodities and farmer groups not based on realistic business opportunities </li></ul></ul><ul><ul><li>Lack of understanding of business, markets & logistics </li></ul></ul><ul><ul><li>Project term (short) / project manager focus </li></ul></ul>
    6. 7. ENTERPRISE <ul><li>Definition; </li></ul><ul><li>organized business activities aimed specifically at growth and profit </li></ul><ul><li>a new, often risky, venture that involves confidence, initiative and cash </li></ul>
    7. 8. Differentiate ‘ENTERPRISE’ from activities or organizations which do require continued support <ul><li>Many local or international NGO supported projects or activities </li></ul><ul><li>Most humanitarian work </li></ul><ul><li>Relief programmes </li></ul><ul><li>Charities </li></ul><ul><li>Many donor projects and other public sector interventions </li></ul><ul><li>ACTIVIES DEVELOPED WITHOUT THE UNDERSTANDING OF </li></ul><ul><li>LOCATION OF PRODUCTION IN RELATION TO LOCATION OF MARKETS </li></ul><ul><li>SUPPLY SCHEDULE, VOLUME AND QUALITY REQUIREMENTS OF BUYERS / PROCESSORS </li></ul><ul><li>TRUE VALUE (AND PRICE VOLATILITY) OF COMMODITIES </li></ul><ul><li>REAL COST OF PRODUCTION OF GOODS OR SERVICE </li></ul>
    8. 9. WARNING <ul><li>ENTERPRISE requires to provide goods or services; </li></ul><ul><ul><li>to a market or client which is within reach of the enterprise </li></ul></ul><ul><ul><li>supplied in volumes, of a specified quality and per schedule as determined by the client </li></ul></ul><ul><ul><li>produced and delivered at price higher than the cost of production (= for profit) </li></ul></ul><ul><ul><li>offered at a competitive price (your client has to earn with the goods or services supplied) </li></ul></ul><ul><ul><li>on a growth and sustainable basis </li></ul></ul>
    9. 11. CHEETAH LIMITED <ul><li>Private company established in 1995 </li></ul><ul><li>Exporting Paprika and Chilli products from Zambia, Malawi and Mozambique to European Food Ingredient industry </li></ul><ul><li>after establishing agronomical suitability and international competitiveness </li></ul><ul><li>Operating an out grower scheme for the supply of raw materials; dried and graded paprika </li></ul><ul><li>Exports peaked in 2003 exporting 2,500,000 kg dry paprika </li></ul><ul><li>Offering up to 20,000 Smallholder farmers </li></ul><ul><ul><li>An alternative cash crop with growth opportunities </li></ul></ul><ul><ul><li>Contracts with Guaranteed market, regional sales points </li></ul></ul><ul><ul><li>Price stability, based on US$ </li></ul></ul><ul><ul><li>Credit arrangement on Quality Seed and Agrochemicals </li></ul></ul><ul><ul><li>Improved agronomy </li></ul></ul><ul><ul><li>Training and extension services inclusive of materials </li></ul></ul>
    10. 12. Key Economic Factors for Cheetah as a business <ul><li>Volume > 500,000 kg dry paprika per country </li></ul><ul><li>Can only sell Quality as determined by it’s client </li></ul><ul><li>Need to supply clients on contracted monthly delivery schedule </li></ul><ul><li>Competitive purchase price, to be able to compete on global markets </li></ul><ul><li>Can this be achieved with smallholder farmers in a complex and demanding social, political and economical environment and where rainfall is a determining factor? </li></ul>
    11. 13. International Competitors Competing for Market Issues Issues Issues Issues Issues Issues Socio-Economics CHEETAH Competitors Export Market Employees Structure CEO Extension and Procurement Sales and Marketing Finance and Admin Quality Control Productions & Operations Distribution Processes Politicians Govt Zimbabwe Peru India China Brazil SA US Spain
    12. 14. THE CHEETAH MODEL <ul><li>Field days </li></ul><ul><li>Group formation or group / group leader support </li></ul><ul><li>Dollar based pricing </li></ul><ul><li>Pre-season agreements – guaranteed minimum price and market – written one page contracts </li></ul><ul><li>Seeds & agrochemicals on part credit </li></ul><ul><li>Extension materials (crop budgets, agronomy manual, crop cycle news letters) and training </li></ul><ul><li>Provision of packaging materials </li></ul><ul><li>Crop collection and depots close to farmers </li></ul><ul><li>Feed back </li></ul>
    13. 15. Contracting Systems used by Cheetah <ul><li>Direct through own extension network system, smallholder groups and commercial farmers </li></ul><ul><li>Traders </li></ul><ul><li>NGO’s, projects and other collaborating partners; Care, Clusa, Potc, IDE, Zatac, World Relief, World vision, Cordaid, Hivos, Copperbelt initiative, SFAP, etc.. </li></ul>
    14. 16. Direct <ul><li>Strength </li></ul><ul><li>Close collaboration with farmer groups </li></ul><ul><li>Intensive training per farmer group </li></ul><ul><li>Control over quality and quantity </li></ul><ul><li>Weakness </li></ul><ul><li>High overhead costs per kg </li></ul><ul><li>Management intensive </li></ul><ul><li>Short term employment requirements </li></ul><ul><li>Cash payments in fields – risks </li></ul>
    15. 17. Trader <ul><li>Strength </li></ul><ul><li>Little risk for Cheetah </li></ul><ul><li>Operate in remote, non viable areas for Cheetah </li></ul><ul><li>Weakness </li></ul><ul><li>Intermediate Buyers </li></ul><ul><ul><li>Short term advantage  Farmer may be neglected especially during seasons of low pricing </li></ul></ul><ul><li>Unreliable - limited supply security even with contract in place </li></ul>
    16. 18. NGO’s and other dev. Partners <ul><li>Strength </li></ul><ul><li>Rapid expansion of commodity volume </li></ul><ul><li>Potential for good quality and budget yields because of input finance </li></ul><ul><li>Central training of NGO’s extension staff </li></ul><ul><li>Sub-contracting procurement – absorption Extension and procurement costs </li></ul><ul><li>General reduction of high transaction costs </li></ul><ul><li>Weakness </li></ul><ul><li>Temporary Do Good motivation – rather than ensuring sustainability of value chains </li></ul><ul><li>Subsidizing business costs – unfair competition </li></ul><ul><li>NGO’s vulnerability to political and other external pressure </li></ul><ul><li>Unknown agendas & plans, especially on exit </li></ul>
    17. 20. Evolving Cheetah model <ul><li>From group contracting (1 per group) to individual farmer contracts </li></ul><ul><li>From mass recruitments to selected group formation and selection </li></ul><ul><li>From supply of seed and packaging materials on full credit basis to down payment system by farmer </li></ul><ul><li>From contracting and extension services provided by Cheetah personnel to provision of these services by empowered groupleaders, Cheetah personnel having role of coordination and technical training of group leaders </li></ul><ul><li>Reduction of company overheads by providing income to group leaders, who receive income based on seed sales / contracts, credit recovery and crop volumes / grading </li></ul>
    18. 21. Improvements required on Cheetah model <ul><li>Create greater efficiencies; concentrate farmer groups </li></ul><ul><li>Select farmers with greater potential and grow the ability of the farmer </li></ul><ul><li>Create a better understanding by the contracted farmers of the annual agreements in relation to product quality, grading, price and payment modalities </li></ul><ul><li>Ensure consistent payment within 1-2 week after purchase </li></ul><ul><li>Empower Group leaders to become Entrepreneurs </li></ul><ul><li>Provide higher level of inputs provided that credit recovery rates increase to acceptable levels (> 80%) </li></ul><ul><li>Grow farmer volume from 50 - 100 kg paprika to 250 - 500 kg </li></ul><ul><li>Government to assist in agreements enforcing, reduce side selling / side buying activities, support genuine businesses and not the ones affiliated to politicians </li></ul>
    19. 22. How to promote trust <ul><li>Be an industry leader for a number of years </li></ul><ul><li>Be visible & transparent </li></ul><ul><li>Develop open Farmer, Group, NGO and Agri buss Extension staff relationships, create feed back and discuss </li></ul><ul><li>Offer a 2 way purchase agreement which is fully understood and agreed by farmer </li></ul><ul><li>Pay within 7 days of product delivery </li></ul><ul><li>Agree on grade & weight at time of transaction, not afterwards with results from central factory </li></ul><ul><li>Host field days & carry out regular cycle training </li></ul>
    20. 23. How to avoid input diversion <ul><li>Train farmer in crop budgets and make him understand that fertlizer and agro chemicals applications are essential to achieve budget yields </li></ul><ul><li>Monitor, monitor, monitor </li></ul><ul><li>Ensure that farmer applies at appropriate rates and times and let him experience the reduced losses and maximum yields over a period of 3 years </li></ul>
    21. 24. How to avoid side selling = WISH LIST FOR FARMER <ul><li>Buy at Farm gate </li></ul><ul><li>Offer highest price </li></ul><ul><li>Cash payment </li></ul><ul><li>Offer all inputs; seed, fertilizers, chemical, packaging </li></ul><ul><li>Offer training & materials </li></ul><ul><li>Be lenient in product grading </li></ul><ul><li>The above is a BIG LIST a very costly package and not so ‘real world’…. </li></ul>
    22. 25. Clusa Zambia <ul><li>+ Vast amount of resources; management, extension staff, extension equipment, support office, training, input provision and distribution </li></ul><ul><li>+ credit management business in house </li></ul><ul><li>+ solid development over 3 yrs </li></ul><ul><li>+ farmers well trained in paprika agronomy (and horticultural production in general) </li></ul><ul><li>+ farmers trained in borrowing and repayments </li></ul><ul><li>no clear exit strategy in place </li></ul><ul><li>sell out to Bimzi / Enviro oils due to political pressure in year 3, system collapses </li></ul>
    23. 26. Care Mozambique <ul><li>+ Strong driver in developing new products in Nampula </li></ul><ul><li>+ Understand requirement for solid agri buss partner </li></ul><ul><li>+ Vast amount of growers instantly; 5000 </li></ul><ul><li>+ Extension systems + hardware availability </li></ul><ul><li>Farmer density too low, transaction cost for the agri business is too high </li></ul><ul><li>Climate & soils not optimal for the crop, should have been tested </li></ul><ul><li>Cheetah had too few resources in place for quality extension network and logistical support (inputs in – product out) </li></ul>
    24. 27. POTC, Zambia <ul><li>+ Vast amount of resources: Management, Extension, Large fleet, Group formation & training, High level of input provision, crop collection </li></ul><ul><li>+ Created production of 140,000 kg quality paprika after only 3 year period </li></ul><ul><li>Over extending credit to farmers </li></ul><ul><li>Transferring NGO contract price, this meant a farm gate price 20-25% above real market value price (nice for farmers but not sustainable) </li></ul><ul><li>No long term agreement in place – year to year negotiations uncertainty for Cheetah </li></ul><ul><li>No MOU detailing an exit strategy in place, basically 4 years work and a lot of capital (public funds) lost… </li></ul>
    25. 28. Cordaid Malawi <ul><li>+ Base line study in place </li></ul><ul><li>+ Focal analysis of business proposition; product, market, business, finance requirements </li></ul><ul><li>+ Value Chain approach; </li></ul><ul><li>Extension, Inputs – Micro finance, Trade finance </li></ul><ul><li>+ Let the partnering Agri bussiness be the leader / driver of the development </li></ul><ul><li>+ Clear contracts and financial means in place </li></ul><ul><li>- Requires more monitoring of extension results and micro finance management + credit recovery </li></ul>
    26. 29. Zatac Zambia <ul><li>+ Understanding of markets </li></ul><ul><li>American Consulting firms require vast farmer numbers to succeed in winning tenders for the running of value chain programs </li></ul><ul><li>Interventions not very clear </li></ul><ul><li>It is unclear what value the farm as well as the agri business interventions have created </li></ul><ul><li>Most resources will go to the Consulting firms, not to the intervention with the farmer (training, inputs, logistic support) </li></ul>
    27. 30. Recommendations to NGO <ul><li>Be realistic; know the farmers, infrastructure & transport, markets and your own capacity and means </li></ul><ul><li>Separate ‘Doing Good’ from ‘Creating Sustainable Farming’ </li></ul><ul><li>Carry out check on feasibility of product & logistics </li></ul><ul><li>Know product cycles and price volatility </li></ul><ul><li>Adjust your support to the commodity and the agribuss relative to the investment made and volumes in the past traded by the agri business </li></ul><ul><li>3 YEAR MOU BETWEEN NGO & AGRI BUSS, the MOU is supported by annual work plans </li></ul><ul><li>Smallholder support; extension, input provision, logistics are very costly – ensure that strong management & budget (people, transport, logistics & inputs) are in place and really relate to the number of farmers or farmer groups supported </li></ul>
    28. 31. Recommendations to NGO cntd <ul><li>HAVE A CLEAR JOINT EXIT STRATEGY </li></ul><ul><li>Make farmers stick to the annual contracts; it is a one year marriage </li></ul><ul><li>Drop loosing products as well as short term farmers and agri business </li></ul><ul><li>Ensure that farmers invest from own resources & savings, even when it is a small contribution. Farmers need real risk, realistic opportunities, hard work and commitment to succeed !! (this counts for all of us..) </li></ul><ul><li>NGO’s are responsible for money being well spent; establish base lines before interventions and measure value created to both the farmer and relevant partners in the value chain </li></ul><ul><li>Stay out of creating ‘the competition game’… </li></ul>
    29. 32. What to do <ul><li>Know products (agronomy + production costs + quality specs), markets & price and logistics </li></ul><ul><li>Envision realistic goals for over a 5 year period </li></ul><ul><li>Understand the drivers of both farmer and agribusiness equally well </li></ul><ul><li>Adjust the farmers numbers and work program to management, staff and resources available </li></ul><ul><li>Work out and deliver on a clear 3 year MOU + exit strategy with the Agri business party </li></ul><ul><li>GOOD LUCK SUPPORTING FARMERS, GROUPS, AGRI BUSSINES AND YOURSELF </li></ul><ul><li>SO ALL BECOME WINNERS !!!!! </li></ul>
    30. 33. CHEETAH PAPRIKA CREATING MARKETS TRAINING PEOPLE AND EMPOWERING COMMUNITIES ZIKOMO MARK TERKEN VALUE CHAIN SPECIALIST

    ×