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Enabling Growth and Raising Producers Incomes in the Cotton Sub-sector : Lessons and Experience from the Central Corridor of Tanzania

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Enabling Growth and Raising Producers Incomes in the Cotton Sub-sector :

Lessons and Experience from the Central Corridor of Tanzania

Alain Cuvelier | Maja Rüegg | Ajuaye Sigalla

May 2011

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TABLE OF CONTENTS

List of abbreviations 5Acknowledgements 7Executive Summary 8

1. Introduction 10

2. Interventions and achievements 12 BioRe 13 BioSustain 14 MSKSolutionsLimited 16 Oridoy 17 Bariadi 18 Commonachievementsinthemarketsystem 22 Commonachievementsinpovertyreduction 23

3. Analysis and lessons learnt 25 Privatesectorinvestment 25 Farmers’Organisations 29 Fairandtransparentpriceforallstakeholders 30 Promotingtrustandlastingrelationshipsforwin-wincollaborations 33 Accessto,andavailabilityofservicesforproducers 37 Asystemicview–planningandimplementingM4P 39

4. Challenges 40 Sustainability 40 Facilitatingsystemicchanges 41 Gender 42

5. Conclusions and recommendations 43

6. Annexes 44 Annex1:Comparisonbetweenthefiveinterventionsinthecottonsub-sector 44 Annex2:M4Papproach 50

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LIST OF ABBREVIATIONS

DALDO DistrictAgricultureandLivestockDevelopmentOffice

FFS FarmerFieldSchool

FAO FoodandAgricultureOrganisation

FO Farmers’Organisation

KIMAHA MaswaOrganicFarmers’Association

LGA LocalGovernmentAuthority

M4P “MakingMarketsWorkforthePoor”

MKUKUTA NationalStrategyforGrowthandPovertyReduction

PPP Private-PublicPartnerships

RLDC RuralLivelihoodandDevelopmentCompany

SACCOS SavingsandCreditCooperativeSociety

T Tonne

TZS TanzanianShillings(Approximately1USD=1500TZS)

TCB TanzaniaCottonBoard

WRS WarehouseReceiptSystem

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ABOUT THE RURAL LIVELIHOOD DEVELOPMENT PROGRAMME (RLDP)

The Rural LivelihoodDevelopment Programme (RLDP)is an initiative of the Government of Switzerland andsupported through theSwissAgency forDevelopmentandCooperation(SDC).ThemainconcernofRLDPisthehigh rural poverty in the Central Corridor of Tanzaniawhich ismanifestedbyvery low incomesandfrequentfood shortages including lack of reliable/sustainablemarkets and employment. The programme aims atmakingmarketsystemsworkbetter for thewelfareofruralproducersapplyingthe‘MakingMarketsWorkforthePoor’approach(M4P).Theprogrammeiscurrentlyaddressingmarketconstraintsinsixsub-sectors,namelyCotton,Sunflowe,Dairy,Rice,Poultryandruralradio.

RLDP is jointly managed by two Swiss InternationalNGOs, Intercooperation and Swisscontact. It isimplementedthroughtheRuralLivelihoodDevelopmentCompany (RLDC), a non-profit organisation that hasbeenestablishedin2005.En

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ACKNOWLEDGEMENTS

The authorswould like to thankDerek Georgeand Susan Lyaro for their contributions to thisdocument as well as Kate Schoenmakers forediting.

The authors would also like to thank all ofRLDC’s partners and stakeholders, includingfarmers,farmersorganisations,theGovernmentof Tanzania and private enterprises,within thecotton sector who have contributed to thedevelopment of this document through thesharingoftheirexperiences.

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EXECUTIVE SUMMARY

ThisdocumentintendstoshareRLDC’sexperiencesandlessonslearntinthepromotionofthecottonsub-sectorintheCentralCorridorofTanzania.Italsooffersaperspectiveonhowthe“MakingMarketsWorkforthePoor”(M4P)strategy can be applied to improve the livelihoods of project beneficiaries.FiveinterventionswerecarriedoutbyRLDC,allwiththeaimofimprovingthelivelihoodsofsmallproducersandcontributingtotheeconomicgrowthofthesub-sector:

• fourof the interventionswere inpartnershipwithprivate companiesfocusing on improving the collaboration between them and theproducers (core transaction) and the provision of services to theproducers(supportingfunctions);

• one in collaboration with a District Local Government Authority andthe Tanzanian Cotton Board, emphasising on improving the businessenvironmentfortheproducers.

All interventions contributed to the creation of win-win situations. Theproducers could improve their access to information, knowledge, inputs,marketandotherservices,whichultimatelycontributedtogenerateadditional

incomesand,ontheotherhand,throughfurtherinvestinginthesub-sector,the processors could enhance their business while the public sector couldbecomemoreeffectiveinestablishingpartnershipwiththeprivatesector.

Thisevidence-basedlearningexercisehighlightedarangeofaspectsthatarecrucialinpromotingthecottonsub-sectorandincreasingincomeofproducers.

Oneofthemainconclusionsistheutmost importanceofprovidingservices,particularlyintermsofinputs,farmimplements,training,storageorcontroloftheproducts(weight,quality).Amongtheproducers,theprovisionofservicesboostedthecottonproduction,productivity,andqualityofproducts.Onthebuyers’side,itcontributedtosecuringaccesstoproductsofincreasedquantityandquality.Theadoptionofcontractfarmingsystemsreinforcedproductiveandfaircollaborationbetweenproducersandbuyers.

Itwasalsoshownthatfacilitatingandsupportinginitiativesfromtheprivatesectorcanpromotethegrowthofthesub-sectorbenefitingbothproducersandbuyers.Theprivatecompanies realised that theyhad interest in further

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investing in their businesses, instead of simply purchasing products fromthe farmers. These investments covered not only “hardware” (ginnery,warehouses,etc.),butalso“software”(extensionservices,inputsdistributionsystems,etc.).

RLDC’sexperiencehasbeenthatsharingvisionandfosteringtrustbetweenstakeholders requires constant and open communication, a long-termcommitmentandclearlydefinedroles.Trustrelationshipbetweenproducers,privateandpublicactorsremainsacriticalfactorforthedevelopmentofthesub-sectoratalllevels.

Thesystemofpricingremainsachallengingissueinordertodevelopthesub-sector.ManyofthepartnerstookthepricefixedbytheTCBasareference,generallyaddingapremiumonit.Despitethisbonus,thepriceproposedtothefarmersremainedfarbelowthemarketprice,ledtoproblemsofside-sellingorsimplydiscouragedfarmerstocultivatecotton.Itwasalsonoticedthatsecured

marketforthebuyersledtounfairpriceforthefarmers,whilehighandunfaircompetitionwoulddiscourageprocessorsinvestinginthesub-sector.

The formation of farmers’ organisation greatly facilitated the collaborationbetweenfarmersandbuyers,particularlyforthedistributionofinputsandtheprovisionofadvisoryservices.Butthelevelofownershipoffarmersontheirownorganisationgenerallyremainedlow.

In conclusion, it canbe said that theM4Panalytic frameworkguidingRLDChasproventobeusefulinthestrategicassessmentandplanningphase,andhas resulted in successful innovative interventions. However, the role asmarketfacilitatorhasbeenverychallengingtocommunicate,andsomeoftheinterventionsdidnottriggergenuinesystemicchange,whichisquestionableinregardtosustainability.Ontheotherhand,marketfacilitatorlikeRLDCremainshighlydependentonother,contingentfactorscompletelybeyonditscontrol,suchasthehighlyvolatileworldmarketpricesforlintcottonaswellasclimate,inparticularepisodesofseveredrought.

Meeting with farmers

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N

BURUNDI

KENYA

UGANDA

DRC CONGO

ZAMBIA

MOZAMBIQUEMALAWI

TANGA

Dar esSalaam

MANYARALushoto

Same

Mwanga

Rombo

Monduli

Ngorongoro

Serengeti

Musoma RuralUkerewe

Magu

Mwanza

Kwimba

Bariadi

MaswaMeatu

Kishapu

ShinyangaUrban

Shinyanga Rural

Kahama

Bukombe

Kibonda

Kasulu

Urambo

Nzega Igunga

UyuiTTabora urbanTabora Rural

Sikonge

Kigoma Rural

Nkasi

Sumbawanga Rural

Sumbawanga Urban

Chunya

Mbarati

Manyoni

Singida RuralKondoa

Dodoma Urban

Dodoma Rural

Iringa Rural

Iringa Urban

Mufindi

Njombe

Ludewa

Dodoma Rural

Mpwapwa

Liwale

Tunduru

NamtumboSongea Rural

Songea UrbanMbinga

Kilwa

RufijiMafia

Kisarawe

Kibaha

Bagamoyo

Mkuranga

KinondoniIlala

Temeke

MkoaniMahonda

Zanzibar

Chakechake

PEMBANORTH; SOUTH

UNGUJANORTH;

SOUTH & CENTRAL;TOWN & WEST

Wete

Mtwara urban

Mtwara Rural

TandahimbaNewala

Masasi

Nachingwea

RuangwaLindi Urban

Lindi Rural

Kongwa

Singida Urban

Iramba

Mbozi

Rungwe Makete

Ileje

MbeyaUrban

MbeyaRural

Mpanda

Kigoma Urban

Ilemela

Nyamagana

Geita

Sengerema

Musoma RuralTarime

Muleba

Buk UrbanobaKaragwe

Ngara Biharamulo

Bukoba Rural

Bunda

Karatu Arusha

Aru Meru

Simanjiro

Kiteto

Mbulu

Babati

Hanang

Hai

Korogwe

HandeniPangani

TangaTanga

Moshi

Kilindi

Kilosa

Mvomero

MorogoroUrban

Morogoro Rural

Kilombero

Ulanga

Muheza

KILIMANJARO

ARUSHA

MARA

MWANZA

SHINYANGA

SINGIDA

TABORA

KIGOMA

RUKWA

DODOMA

IRINGA

MOROGORO

PWANI

LINDI

MTWARARUVUMA

MBEYA

KAGERA

1. INTRODUCTION

CottonisthesecondlargestagriculturalexportproductinTanzaniawithover80% of cotton produced in Tanzania being exported. The financial volumeearned from the export of cotton amounts annually toUSD 115million1. Asa cash crop, cotton represents amajor source of income and employment,offeringeconomicopportunitiesto500,000ruralhouseholdsandassuchwasselectedbyRLDCasatargetsectortoimproverurallivelihoods.

Mostproducersaresmallholderswhoownbetween0.5to10acresandgrowmostly in rain-fed areas2.Main production areas encompass the Regions ofMwanza, Shinyanga3, Singida, Mara, Kagera and Tabora. According to theTanzania Cotton Board (TCB), production has tripled in three years from44,000t in the 2006/07 season to 124,000t in the 2008/09 season.Howeverproduction can drastically change from year to year depending onweather(drought)andthevolatilityoftheinternationalmarketprice.4

AninitialassessmentbyRLDCofthecottonvalue-chainshowedthatseveralconstraintshadtobeaddressedinordertounlockthepotentialsofthesub-sector.Theseincluded:

• limitedaccessofproducerstoinputsandservices,• lowproductivityandqualityofcotton,• strongvolatilityofpricesinlocalandinternationalmarkets,• competitivebusinessenvironment,• weakorganisationoffarmers’groups,• lackofaccesstoginningfacilities,and• Lackofaccesstocredit.

TheDistrictsinwhichRLDCinterventionstakeplacearehighlightedinthemapofTanzania.

Thoughthecottonmarketwasliberalisedin the nineties, the sub-sector remainsquite strongly regulated by the TCBwho determines the price floor of seedcottonandissuespermitstoseedcottonbuyers and traders. There are howeverseveral opportunities to boost the sub-sector.Thenationalstrategyforpovertyreduction and the agricultural policyare favourable to the transition fromsubsistencetocommercialproduction.

1 Source:TCB2 Source:TCB3 ThenewlycreatedRegionofSimiuhasalsotobeconsidered4 Source:TCB

“As a cash crop, cotton represents a major

source of income and employment, off ering

economic opportunities to 500,000 rural

households”

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ThestrategydevelopedbyRLDCfollowstheM4P5approach.ItaimstoaddressconstraintsandtogenerateopportunitiestobenefitstakeholdersinthecentralcorridorofTanzaniaonalllevelsandincludesthefollowingelements:

• Promoting the establishment of contract farming systems betweenproducersandbuyers

• Improving access to advisory services and inputs for producers bypromotingpublic-privatepartnerships

• Strengtheningfarmers’organisations(FOs)inordertoenhancecapacitytocollaboratewithpublicandprivateactors

• Promotetheproductionoforganiccottonasaneconomicopportunity• Promotecollaborationbetweenlocalgovernmentauthorities,TCBand

privatesector.

ThisdocumentintendstosharetheexperiencesofandlessonslearntbyRLDCanditspartners;itwillalsoofferaperspectiveonhowtheM4Pstrategycanbeappliedtothecottonsub-sectortoimprovelivelihoodsofprojectbeneficiaries.

Itfirstintroducesandcomparesthefivemajorinterventionscarriedoutinthesub-sector,developsthelessonslearntthroughthedifferentinterventionsinasecondstep,andconcludesbyelaboratingonchallengesandperspectivesforthefuture.

Thefiveinterventionsthatarepresentedinthisdocumentarethefollowing:• Collaboration with BioRe Tanzania Ltd (organic cotton) for the

strengthening of KIHAMA (Maswa Organic Farmers’ Association) inMaswaDistrict.

• CollaborationwithBioSustainTanzaniaLtdinthepromotionoforganiccottoninSingidaRegion.

• CollaborationwithMSKSolutionsLtdfortherevivalofcottoninNzegaDistrict

• CollaborationwithOridoyRuralCooperativeSocietyaimingatimprovingeconomicopportunitiesforfarmersinBabatiDistrict.

• CollaborationwithTCBandtheDistrictAuthoritiesinBariadiDistrictforcommunityqualityandweightcontrolcommittees.

5 M4Pisaquiterecentmarketdevelopmentapproachthataimsatmakesustainablechangesinmarketsystemsthroughafacilitationroleatthreelevelsofthesystems:coretransactionsbetweendemandandsupply,supportingfunctionsandrules(businessenvironment).OverviewonM4Pispresentedinannex2.

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2. INTERVENTIONS AND ACHIEVEMENTS

RLDCcottonsectorinterventionswereimplementedinthecentralcorridorofTanzania,focusingprimarilyonShinyanga,TaboraandSingidaRegions.Interventionswereselectedbasedonasub-sectorassessmentandsubsequentproposalssubmittedbyprivatesectoractors.Belowisanoverviewofthefivemajorinterventionscarriedoutwithanoutlineoftheoverallachievements.

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2.1 BIORE

BioReTanzaniaLtdwasfoundedin1994bytheBioRefoundationoftheSwisscompanyREMEIAGandiscreditedwithpioneeringorganiccottonproductioninShinyangaRegion.BioReconsiders itsdecision to supportorganic cottonproductionasbothabusinessopportunityandameanstoimprovethefarmers’livelihoods.Therationalbeingthatorganiccottonoffersa10%pricepremiumcomparedtoconventionalcotton.

In order to secure theprocurementof organic cotton in ShinyangaRegion,BioReadopted thesystemofcontract farming whereby itprovided inputs6andextensionservices7tofarmers.BioReandfarmersalsoagreedonapricefixedby the TCBwith the additionof a premiumof 10% for organic cotton.Contract farmingusually stipulates that inputsareprovidedona loanbasis,however,inordertosecurethepurchaseofcotton,BioReoptedforasysteminwhichthecostofinputsforthenextseasonwouldbedeductedatthetimeofbuyingtheseedcotton;implementswereprovidedforfree.

OneofBioRe’smajoractivitieswastomakesurethatcottonwaseffectivelycultivatedinanorganicmanner.Thisrequiredintensivemonitoringofindividualfarmers, culminating in anofficial certificationprocess. The requirement forstrictmonitoringprovedtobecostlyandwhenagreementshadbeenreachedwith 1,750 producers, BioRe reconsidered the extension of activities. BioRetookstepstohelpdevelopacommercialFOwhichwouldberesponsibleforall internal aspectsoforganic cottoncultivationunder the contract farmingsystem,aswellastheprocessoforganiccertification.ItwasagreedthatBioReshouldbuyabulkamountfromthenewFOratherthanfromindividualfarmers.KIHAMAwasthencreatedinMay2008andhastodayatotalnumberof605producers.TheextensionservicesoriginallyofferedbyBioRearenowprovidedbyleadfarmerswithinKIHAMAthatworkonavoluntarybasis.

An overview of contract farming

Contract farming can be defined as agricultural production carriedout according to an agreement between a buyer and farmers, whichestablishesconditionsfortheproductionandmarketingofafarmproductorproducts.

Typically, the farmer agrees to provide agreed quantities of a specificagricultural product. These should meet the quality standards of thepurchaserandbesuppliedatthetimedeterminedbythepurchaser. Inturn,thebuyercommitstopurchasetheproductand,insomecases,tosupportproductionthrough,forexample,thesupplyoffarminputs,landpreparationandtheprovisionoftechnicaladvice.

Bothpartnersengagedincontractfarmingcanbenefit.Farmershaveaguaranteedmarketoutlet,reducetheiruncertaintyregardingpricesandoftenaresuppliedwith loans inkind, throughtheprovisionof farminginputssuchasseedsandfertilizers.Purchasingfirmsbenefitfromhavingaguaranteedsupplyofagriculturalproductsthatmeettheirspecificationsregardingquality,quantityandtimingofdelivery.

Source:FAO,ContractFarmingResourceCentre,www.fao.org/ag/ags/contract-farming

6 Inputs:includestheprovisionofseedsandpesticides7 ExtensionServices:includestechnicaltraining,coachingandadvisoryservicesoncottoncultivation

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The collaboration between RLDC and BioRe began in late 2009 in order toboost KIHAMA as an independent organisation. Initial support provided byRLDClastedtwomonthsandconcentratedonthemanagementofaninternalcontrolsystemtoensurethatcottonisproducedunderorganicpractices.ThisinitialinterventiondidnotaddressorganisationalissuesanditisthereforenotsurprisingthatoneyearlaterKIHAMA’sorganisationaldevelopmentremainsweak,stillheavilydependingonsupportfromBioRe.

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The lack of good communication and understanding between KIHAMA,individualfarmersandBioReisapossiblereasonforthefailureofKIMAHAtomovetowardsIndependence.This isevident inthefactthatsomemembersofKIHAMAarenotevenawareof theAssociation,andsomeof the leadersthinktheyareagentsofBioRe,ratherthanKIHAMA.Inturn,BioReisnotusedtoworkingwithanFOanddoesnotyethavethecapacitytoensureasharedvisionandmutualunderstanding.WiththerenewaloftheBioReandKIHAMAcollaboration in2011,andwiththecontinuedsupportofRLDC,the issuesofweakorganisationalstructurewillbeaddressedandaninstitutionspecialisinginorganisationaldevelopmentwillsupportKIHAMA.

AnotherchallengefacedbyBioRewasensuringdeliveryofcottonasagreeduponwithfarmers.Forexample;in2009/10BioRepurchased650toforganiccottonfromthe1,750individualsmallholdersand690tfromKIHAMA’sfarmers,belowtheplannedprocurementquantity.Thiswasaresultoffierceandunfaircompetition in Shinyanga Region which provoked considerable side-sellingbytheproducerscontractedtoBioRe.Thecompanytriedtoofferincentivestoproducersbyproposinganevenhigherpricethantheprevailingoneatadailybasis,andauthorisedthemtosellupto20%oftheirproductiontootherbuyers.Thisshort-termmeasureensuredasmallsupplyofcottonbutdidnothelpto improvethealready low leveloftrustbetweenproducerandbuyer.Asatrust-buildingmeasure,BioReplanstostrengthenpersonalrelationswitheach farmer thathasnotcompliedwith thecontract inorder toavoid side-sellinginthenextseason.

2.2 BIOSUSTAIN

BioSustainwasfoundedin2006asanorganiccottonbusinessinSingidaRegion.ManycottonproducersinSingidaRegionhadabandonedthecropinthelate1990sbecausetheyfoundthatthebuyers(primarycooperativesocieties)werenolongerreliable.Anotherreasonwhymanycottonfarmersabandonedthecropwasbecauseexternalbuyerswerehesitanttoconductbusinessdueto

thepoorroadinfrastructureintheRegion.BioSustain’sobjectivewastoinvestintherevivalofcottonproduction inSingidaRegionthroughthepromotionoforganicproductionmethods.Theyoungcompanyexperiencedaslowstartin the 2007/08 season and into the following season andwas able to onlypurchaseameagretotalof115tofseedcotton.However,duringthe2009/10season volumes grew rapidly and the company bought cotton from 3,500farmers(about3,400menand100women)in20villages.BioSustainexpectstoincreasethisnumberto5,000farmersand4,000tofcottoninthe2010/11season.

BioSustainstartedcollaborationwithRLDCin2007withtheaimtostrengthenBioSustain’s relations with smallholders. Since the beginning of theircollaboration,RLDCandBioSustainhaveworkedtostrengthengroups,investinextensionservicesandpromoteagronomicpractices.

BioSustainacknowledgesseveralfactorsforthesuccessofthe intervention.This includes the heavy investment by BioSustain in holding awarenessraising meetings to explain to farmers the advantages of organic cottonproduction, including environmental benefits and price premium. AnotherimportantelementofbusinesssuccesswastheestablishmentofwarehousesincollaborationwithRLDC.Finally,adistinguishingcharacteristicofBioSustainisitsgoodrelationswiththeLocalGovernmentAuthority(LGA)atDistrictlevelaswell in theRegional government. Initially promoted by RLDC, BioSustainstrengthened these relations further by their commitment to invest inorganic cotton production and to run the ginnery in Singida town. Despitethesuccessof thepastharvestyear,BioSustaindoes facesomechallenges.One such challenge is the lackof competition resulting from theexclusivityagreement.Thepricepaidtocottonproducersisrelativelylowandthisresultsinmanyproducersfeelingundervaluedandunderpaid.AnotherchallengethatBioSustainfacesistheavailabilityofextensionservicesandfarmimplementsforallproducers.

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After having done my PhD in Germany in the framework of the textile industry I decided to come back to Tanzania in 2006 and revive the cotton business in the Singida region. My objective was actually to promote the cultivation of organic cotton, which I saw as an opportunity to contribute to the local socio-economic development and the welfare of the population. Since I was new in the business, I implemented the model developed by BioRe: the establishment of a contract farming system where I provided seeds, technical advisory services, training on organic fertilizers and bio-pesticides to the farmers, and where the farmers would sell their production to BioSustain at a predefined price.

“I saw the cultivation of organic cotton as an opportunity to contribute to the local socio-economic

development and welfare of the population”

Reviving cotton production in Singida:

Dr. Riaz Haider, Executive Director of BioSustain

Reviving the cotton cultivation in Singida has been rather challenging. Many cotton producers were previously members of primary societies that accessed loans from ginneries, but never paid back the money. As a result, the ginneries went bankrupt and closed. When I shared my project idea with the local authorities, I was more than welcomed. I also invested a lot in discussing with community leaders. I felt that I had to develop good and strong relationships with communities and producers to make my business sustainable. This was also necessary to make them understand the principle of contract farming where trust between partners is the foundation of the system.

The first activities went quite well, but soon I realised that the extension workers I was working with could jeopardise the whole system. The chosen extension workers were lead farmers who had good technical capacities, but not always the right attitudes in delivering the services to the farmers. There were delays in delivering inputs, or in the quality of advisory services to the producers on organic cotton cultivation. This created tensions between the producers and BioSustain. I learned that the selection of extension agents is crucial and has to be done carefully with the communities, on the basis of common understanding.

My business is growing year by year. I first had to secure a sufficient level of organic cotton production to access an improved export market. That was facilitated by the provision of services to the producers. An important success factor was the establishment of warehouses where producers could store their cotton, which greatly facilitated the marketing of products. Galvanised by the expansion of my business, I decided to invest in the rehabilitation of a ginnery. This cost me a lot, including the burden of interest I have to pay to the organisations that provided me with loans, but I am sure that it was a good decision.

“An important success factor was the establishment of warehouses where producers could store their cotton, which greatly facilitated the marketing of products.”

To sustain my business, I also heavily invest in building relationships with local authorities and the Tanzanian Cotton Board. They appreciate the fact that BioSustain contributes to the economic development in the region. This helped me secure exclusive buying rights for cotton products in Singida region. I also invest in maintaining a good relationship with the communities, and take time to visit and discuss with them. The commercial relationship that BioSustain has with farmers is established either individually or with groups. In the future, I think that it would be easier to work only with groups, but it would require them to strengthen their organisational capacities.

Challenges faced by BioSustain in reviving cotton production in Singida:

Dr. Riaz Haider, Executive Director of BioSustain

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2.3 MSK SOLUTIONS LIMITED

MSK Solutions Limited is a cotton ginning and export company that wasstarted in 2005 and works mainly in Mwanza Region. In 2009 MSK beganworkingtorevivethecultivationofcottoninNzegaDistrictinordertoincreaseitsproduction.Cottonhadbeenpreviouslycultivatedintheareabuthadbeenabandonedbecauseofthemismanagementofprimarycooperativesocietieswhoactedasthesolebuyersauthorisedtobuyseedcottonfromfarmersandwhooftenneglectingtopaythem.InDecemberof2009MSKstartedtoreceivesupportfromRLDCtoimplementitsnewprojectinNzegaDistrictwhichwastoworkwith1,850cottonproducers,eachagreeingtocultivatecottonon2to3acres.

In collaboration with RLDC, MSKagreedtoadoptthecontractfarmingsystem. With the help of RLDC, thecompanyalsoworkedcloselywiththeLGA in regard to project supervisionanddistributionofinputsthroughthevoucher system. Extension serviceswereprovidedsimilarlytoBioSustain.Theleadfarmers(extensionworkers)received a commission from MSKbased on the quantity of inputsdistributed or cotton sold. The farmerswho could not afford buying inputswereprovidedwithloansbyMSK.Thecompanyalsoconstructedawarehousetohelpfacilitatebetterstorageandqualityofthecottonproduced.

TherevivalofcottoncultivationnotonlyprofitedMSKbutalso the farmersinvolved in the production. Farmerswere able to generate new sources ofincome, which encouraged other producers to join the project. From theseason2010/11thenumberofproducersinvolvedintheinitiativeamountedtoaround4,000.FortheDistricttherevivalofcottonproductionalsobroughtabenefitintermsofnewlevies.

MSK motivated us in 2009 to resume cotton production after we had abandoned it for many years. There are several reasons why we decided to plant cotton: First, there is no other cash crop in this area. Also, we saw that the price of cotton got a bit better compared to previous years, and finally we were motivated by the fact that MSK promised to provide us with a ready market and immediate cash payment at the time of selling our cotton to them.

Things we received from MSK were seeds, pesticides, training and finally the market outlet. But we also face some challenges. For example, there is only one spraying pump and one power tiller available. We would also like to have access to fertilisers.

Farmers from Mbogwe village sharing their experiences working with MSK Solutions

Revival of cotton production in Nzega:Voices of farmers from Mbogwe village

While the new system has produced some success, MSK also faced somechallenges,generallycreatedthroughalackoftrustandcommunication.Onemainchallengefacedwasside-selling.UnlikeBioSustain’sstandardpracticeofformalisingarrangementswithproducersusingwrittencontracts,agreementsbetween MSK and producers (63 groups) were concluded verbally. AnadditionalproblemMSKfacedwasobtainingaloanfromthebankintimetopurchasecottonfromfarmers’groups.Thiscreatedsome issuesatthetimeofcottonprocurementandsomegroupssoldtheirproductstootherbuyers.Despitetheproblemofside-selling,fortheseason2009/10,MSKwasabletoprocure72tofseedcottoninNzegaDistrictalone.

“The revival of cotton cultivation not only profited

MSK but also the farmers involved in the production.

Farmers were able to generate new sources of

income, which encouraged other producers to join the

project.”

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2.4 ORIDOY

Oridoy Rural Cooperative Societywas established in 1996 in Babati District,Manyara Region. The society started with 20 members and continued toincreaseuptothecurrentnumberof90members.TheCooperativealsoworkswith a network of about 700 independent ‘non-member’ cotton growerswith whom it has established informalcontracts.

The members and non-members ofOridoybenefitinvariouswaysfromthecooperative society, including inputson credit basis, advisory services, andstorage facilities. Oridoy also acts as aguarantorforrentingtractors.Membersof Oridoy have additional advantagessuch as accessing financial loans forinstancetobuypumpsprayers.

Oridoy is working to expand cottonproduction in BabatiDistrict byworking to increase the number of farmersproducingcottonandthecottoncropyield,aswellasmakingcottonproductiononeoftheimportantincomegeneratingactivitiesintheDistrict.

CollaborationbetweenOridoyandRLDCstartedintheproductionseasonof2008/2009.Themainobjectiveoftheprojectwastoincreasecottonproductionandtheyieldperacreusingstate-of-theartandimprovedagriculturalpractices.Thesocietyisnotonlyexpectingtogetmorecottonbutalsocottonofbetterqualityandfarmersareexpectingtogetadequateservicesincludingreliableinputsupply.Theprojectcontinuedwiththeextensionoffiveto15villagesinthe2009/2010season.

“Oridoy works beyond a normal FO and has evolved

into a real collective enterprise. It gins the cotton in Moshi and then sells it to

an export company in Dar es Salaam. It is remarkable to

see that such an organisation can organise the whole

process from the production to selling of cotton.”

Todatetheprojecthasbeenasuccess,particularlyintheareasofextensionservices. Lead farmers trainedon extension services have been capacitatedto provide services to other farmers on a voluntary basis. One warehousehasbeenconstructedatMwadavillageandonecollectioncentreatMayokavillagetoenhancebuyingofcottonandenablestorageofcotton.Atthetimeofharvesting,thecotton isweeklytransferredfromthecollectioncentretothewarehousewhichismanagedunderaWarehouseReceiptSystem(WRS).Whilenot yetofficially registered, this allowsOridoy to access loans fromabank inorder topay theproducers.Against the receiptsof farmers’ cottonstorageinthewarehouse,thebankprovidestheloans,andproducerscanbepaid2-3weeksaftertheyhavestoredtheirproducts.

Oridoy works beyond a normal FO and has evolved into a real collectiveenterprise.ItginsthecottoninMoshiandthensellsittoanexportcompanyinDaresSalaam.Itisremarkabletoseethatsuchanorganisationcanorganisethewholeprocessfromtheproductiontosellingofcotton.

Despitethesuccess,therearestillsomechallengestotheOridoysystem.TobecomeamemberofOridoy,thecandidatehastobuyatleast5shares(TZS10,000each).Todate,Oridoyhasdisbursedadividendtotheirmembersonlyonce. Though having promised to share the profits a second time in 2008,they cancelled the process due to the international economic crisis. Theynowhave aplan to share thedividend from2011 andwill includemeasurestopayapremiumonthecottonpurchasedin2010.Theplanisalsotosharethebenefitbetweenmembersandnon-members,whichraisessomequestionsconcerningthebenefitsofjoiningOridoy.Forexample,whyshouldindividualspaymembershipfeeswhenmembersandnon-membersalikereceivesimilarbenefits?

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We believe that Oridoy has experienced several successes in the last two years. One success is that we can now store cotton in a warehouse, which protects it from rain and sunlight. A second success is that we have been able to motivate other farmers to join and are now working in 10 more villages. Furthermore, the trainings on agronomic practices that have been Imparted by 20 lead farmers have resulted in improved yield. We also see that cotton producers started to construct their houses with bricks and to cover them with corrugated iron sheets. This shows us that they are able to improve their livelihoods thanks to cotton production.

Our future plans include the offi cial registration of the warehouse under a WRS in order to access bigger loans. We also intend to start paying allowances for the lead farmers who provide extension services, but we are not sure when that will be possible.

Achievements of Oridoy cooperative and way forward:A word from Oridoy board members

8 Source:LocalGovernmentAuthorityofBariadi&TCB

2.5 BARIADI

Bariadi District produces 20% of the cotton in Tanzania,making it the “topDistrict” for the sub-sector. However, production has declined since the1980s, when the District contributed up to 40% of the national production.Many stakeholders still dependoncottoncultivationas it contributesup to80% of household incomes, and 80% of District revenues8. Considering theeconomicimportanceofthesub-sectorfortheDistrict,theTCBandtheDistrictCouncilapproachedRLDCin2010requestingsupportinaddressingtwomainconstraintsthatwerefacedbythecottonsub-sector.

Thefirstconstraint,whichdirectlyaffectedthecottonproducers,wascheatingby buying agentswhowere using tamperedweighing scales. Though somecompanies (e.g. BioRe) have their own buying agents and use scales thatarecheckedbytheofficialWeightandMeasuresAuthority,manybuyersandginners hire external agents paid by commission per kilo of cottonbought.Often wanting to increase their earnings, they tampered the scales, fixingthemtoindicatealowerweightthantheactualtothefarmers.Forthelatter,thelossofearningcanrepresentupto40%ofwhatcouldhavebeenpaid.

Cotton crops are graded in two categories (Ar and Br) and the low qualityof cotton produced in Bariadi was the secondmain constraint. The qualityofcotton isaffectedbyseveral factorssuchas lateharvesting,harvestwithforeignmatters,dirtyharvestingtoolsandpoorstorageamongstothers.Themain problemof quality is actually the contamination of cotton by farmersthemselves. Knowing that the buying agents generally cheat them, farmersadd foreignobjects to their products suchaswhite sand,water and salt toartificiallyincreasetheweight.

Asaresultofthesepracticeseveryone,apartfromthebuyingclerks,islosing:theproducersdonotgettherightpricefortheirproductsandthebuyersandginnersdonotgettherightquality.Inordertoreversethisloss-losssituationto

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awin-winone,inApril2010theTCB,DistrictCouncil/LGAandRLDCpilotedtheestablishmentofa“villagecottondevelopmentcommittee”.Theresponsibilityofthecommitteewastochecktheweightoffarmers’productswithstandardweighing scalesbefore theygo to abuyer. In thiswayproducers knew theexactweightoftheirproductandthecommitteecouldensurequalitycontrolbycheckingwhetherthecottonhadbeencontaminated.

Despitethesesuccesses,therewereseveraldrawbacks:

• Itwas initially thought that farmersshouldpay for receiving“controlof weight services”. However, because of time pressure, and dueto thepilotingaspectsof the intervention, itwasdecided toprovidethe committeememberswith anallowance (TZS 2,000perday)paidbyRLDC.Inthefuture,thisapproachwillberevisedinrelationtothesustainabilityoftheintervention.

• The second problem encountered in the interventionwas related tosocial issues. Through their work, the members of the committeesintroducingthemselvesas“TCBCommittee, felt“empowered” inthecommunity.ThisraisedtensionswiththeVillageChairmanandExecutiveOfficer,who felt that theywere key and equally important actors inthevillage.Toappeasethetensionandavoidconflicts, itwasdecidedthatbothof themwouldalsoreceiveallowancesaskeyactors in theintervention.This,obviously,wouldcreatemorechallengesinregardtosustainability.

• In some cases, farmers continued to contaminate the cotton. Sincecommitteememberswererelativeorfriendsofthem,theyoccasionallyrelaxtheirstandardswhencheckingtheproduce.

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Thanks to the Bariadi project, compared to last year, we could increase the sale of our product. Before, when we came with our cotton, the buyers told us that the load of our ox cart corresponded to 7 to 8 bags [of 90kg each]. Now that the weight of our cotton is checked by the control committee, an ox cart load corresponds to 10 bags. This is an important increase. Many of us have a production equivalent to at least two cart loads; the additional incomes generated through the system amounts to a minimum of TZS 200,000. We understand that now we have to develop an ownership on the system, so that it can continue working in the long run.

Benefits of village cotton development committees for farmers:Voices of farmers from Ikungulyabashashi village

AvillagecottondevelopmentcommitteeforfarmersinBariadi

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At the beginning of the season 2010-2011, aworkshop was organised and attended byfarmers’representatives,LGA,TCBandginneryworkers inorder to share theexperienceofthe pilot intervention. They concluded thatthe interventionwasasuccessandcouldbereplicated in new villages of the District ofBariadi.ThepilotinBariadishowedthatwitharelativelymodestbudget(TZS50,000,000),the intervention could benefit more than26,000producers.Atthelevelofaproducer,the cost of the intervention (including thefunctioningofvillagecommitteesandoflocalpartners for monitoring) amounts to TZS2,500; this corresponds to the price of lessthan5kgofseedcotton.Thisamountcouldeasilybeprovided inkindbyeachproducer,thereby contributing to the sustainability ofthesystem.Unfortunately,theworkshopdidnot raise the issue of sustainability and thefinancialsupportsystemremainsthesame.

Further discussions will therefore be heldon how the intervention could be madesustainable. Different ways have alreadybeen identified such as organisationaldevelopment and strengthening of FOs,contributions from the private sector (ifquality of cotton improves), Human andInstitutionalDevelopmentatdifferentlevels,and payment made by farmers for controlserviceoncommercialtransaction.

The Bariadi initiative is a very good project that directly benefited our company. Apart from a few people that still continued to contaminate their produce, the cotton producers of the villages covered by the project have stopped the practice of adding water and sand to increase the weight. After ginning cotton from both the project area and the non project area, it is really easy to recognise the two different sources of cotton: the bales from the project area are white and bright, while those from the non project area are reddish. The increase in the quality of cotton is obviously an advantage for us on the market: we can have a better price and attract more buyers. We were also able to increase our production of cotton oil, since the cotton seeds are not wet because farmers have stopped adding water. When the seeds are dry, the processing performances are higher, and we can extract more oil.

The farmers have also understood the advantages of the system. After having checked the weight of their produce with the control committee, they go to all buyer agents in the village. When they come to our agent, since we use weight scales that were controlled by the Weight and Measures Authority, they find that what is weighed corresponds to what was checked by the control committee. They then decide to sell to our company. This is also an advantage for us, since we can procure more cotton than before.

Personally, I would encourage the project to expand to new villages. Since the farmers benefit from the system, I think they should in the future financially contribute to it. The project should accordingly better inform them on the potential profits from which a very small portion could contribute to making the system sustainable.

Mr Mombasa Gweso, Cashier at NGS Ginnery, Bariadi town

Benefits of village cotton development committees for the buyers:

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2.6 COMMON ACHIEVEMENTS IN THE MARKET SYSTEM

Theachievementsinthecottonsub-sectorwillbesummarisedaccordingtotheM4Pframeworkthatdividesthemarketsystemintocorefunction,supportingfunctionsandrules(seediagramintheannex2).

2.6.1 COREFUNCTION

• Cottonsupplyincreasedduetotherevivalofcottonproductionthroughcontract farming in Nzega District (MSK purchased 109t from 1,850farmers in 2009/10, its first season of operation) and Singida Region(BioSustain purchased 2,900t (organic and in conversion) from3,500farmersin2009/10season,afterhavingstartedoperationsin2006).

• Implementingpartnershave injected fundsatdifferent levels of the value chain to improvethe market system. Investments vary frominputsupply(seedsandpesticide),implements(spraying pumps and tractors), establishmentof extension services systems, establishmentofstoragefacilities(warehousesandcollectionpointsofvariedcapacity),andprocessingfacility(ginnery).

• Cotton farmers have improved access to inputs and implements duetoprovisiononcreditbasisaspartofcontractfarmingarrangements.Consequently,farmersareencouragedtoincreaseacreageandtimelyplanting.

• Expansion of organic cotton farming (BioSustain purchased 2,750torganiccottonin2009/10andBioRe690tfromKIHAMAfarmers).

• Improved market access for 6,650 small cotton producers throughOridoy,MSK,BioSustainandBioReinterventions.

• Buyershaveassuredavailabilityofcottonsupply• Goodqualitycottonproducedasaresultofimprovedskillsinagronomic

practicesinbothorganicandconventionalfarming.

2.6.2 SUPPORTINGFUNCTIONS

• Improved availability of local advisoryservices: 85 lead farmers have beentrained on improved agronomicpractices inordertoprovideextensionservicestotheirfellowfarmers.Twenty-seven Farmer Field Schools (FFS) havealsobeenestablished.Farmersconsideraccesstoextensionservicesoneofthemost importantfactorscontributingtoincreasedyieldsandthereforeincome.

• Public extension services are activelyinvolvedinprovidingadvisoryservicestosmallholders.

• New and improved services are available, such as organic farmingpracticesandcertification,andcontrolofweight(andtoalesserdegreequality)incommercialtransactions

• ReducedlevelofcheatinginweightduetotheinterventionwithBariadiLGA and TCB benefits up to 20,900producersin33villages

• Implementing partners gainedcreditworthinesstofinancialinstitutionsand hence have been able to accessloans.ForexampleBioSustainwasabletoaccesscreditfortherehabilitationofaginneryinSingida.

• Storage facilities are available andimprove the quality of product,transparencyincommercialtransactionsandaccesstofinanceagainstwarehousereceipts.

“Improved market access

for 6,650 small cotton producers...”

“85 lead farmers have been trained on improved agronomic practices in order to

provide extension services to their fellow farmers.

Twenty-seven Farmer Field Schools (FFS)

have also been established.”

“Reduced level of cheating in

weight due to the intervention with

Bariadi LGA and TCB benefi ts up to 20,900

producers in 33 villages”

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2.6.3 RULES(BUSINESSENVIRONMENT)

• Contract farming, which was promoted byRLDC,hasbeentakenupbyTCBwhowantstomakethismodeofcollaborationbetweencottonproducersandbuyerscompulsoryonanationallevelfrom2011onwards

• District authoritiesare supportiveof cottonpromotionprojectsbecausetheyhaveseena rise in levyearningsdue toan increase incottonproductionasaresultofadoptionofimprovedagronomicpractices

• Private-publicpartnerships(PPPs)havebeenestablished for inputdistribution,extensionserviceprovisionandcontrolofunfaircompetition

• Moreconduciveenvironmentbecauseofvisionbuildingandincreasedcollaborationbetweenstakeholders

2.7 COMMON ACHIEVEMENTS IN POVERTY REDUCTION

Unlikeothercropsthataresoldoverafewmonths,cottonispurchasedwithinashorttimeframebybuyers,providingsignificantone-timerevenuestofarmerswhichcanbeeitherutilisedforbuildingassets,reinvestinginotherproductiveactivities,orotherhouseholdsneeds.

2.7.1 ACHIEVEMENTSINRELATIONTOSMALLHOLDERS

• Improved access to inputs, technical advice, storage facilities andimplements as a result of contract farming and mutually beneficialcollaborations.

• Increasedproduction(upto10-20acres)andyields(upto1t/acre)due

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tobetteraccesstoinputs,implementsandtechnicaladvice.

• Reductionintransportcostsandimprovedaccesstomarketsthroughcontractfarmingrelationships.

• Creation of new opportunities throughcashcropsandincreasedeconomicactivityduetotherevivalofthecottonsub-sector(MSKandBioSustain).

2.7.2 ACHIEVEMENTSINRELATIONTOLIVELIHOODS

Increasedhouseholdincomeshaveledtoimprovedlivelihoods. Access to a new disposable incomemeans that farmers can improve their generalliving conditions, replacing thatched roofs withcorrugated tin, or building entirely new houses.They are also able to invest in the future of theirfamiliesthroughincreasedaccesstoeducationandhealth care. Farmers can develop a new sense offoodsecurity,using theirnew incometonotonlyprocure new agricultural tools, inputs, assets andland,but also to start newcrops, purchase cattleandstartentirelyneweconomicactivities.Farmersarealsoabletofreethemselvesofanypersonaldebtandbeginsavingincometosecuretheirfuturelivelihoods.

Improved individual livelihoodshavealsobenefitedwholecommunities.Theincreaseinwealthhasmeantthatindividualfarmersareabletoreinvesttheirearnings in local institutions, for example helpingwith the rehabilitation oflocal schools, investing in community health care centres or buildingwatertankstoensuresafe,cleandrinkingwater.

“Private-public partnerships (PPPs) have

been established for input

distribution, extension service

provision and control of unfair

competition”

“Increased production (up to 10-20 acres) and yields (up to 1t/

acre) due to better access to inputs, implements and

technical advice.”

“improved livelihoods have also

benefi ted whole communities with

the investment in community

health care, clean water and local

schools...”

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We are men and women farmers from Ngole village and some of the women are head of households. We have been producing cotton already before starting collaboration with Oridoy, but decided to join the cooperative because there are several advantages for us being registered with Oridoy. Now we receive seeds and pesticides on loan basis and have easier access to spraying pumps and tractors. Furthermore, Oridoy sometimes provides interest-free cash loans and we get trainings on agronomic practices throughout the season. Oridoy then buys the cotton at the end of the season, so we can be assured of the market outlet. Since there is no warehouse close, Oridoy comes to pick up the cotton at our homes.

For us, there were two important changes as a result of these arrangements. First, thanks to the trainings we received, we saw our yield increasing from 300-400kg per acre to currently 800kg per acre (2009/10 season). Second, now we do not have to pay for transportation of cotton to the place of sales anymore, so our costs were reduced. At present, our impression is that cotton production is more profitable than other crops.

We used the additional income that we got from these improvements for constructing better houses, paying for school fees and other household needs. Some of us also invested the money in other economic activities, notably a restaurant and a clothes shop. We are convinced that in the long run the earnings from cotton production can reduce poverty here.

Advantages of a strong cooperative society for cotton producers:Voices of Oridoy registered farmers from Ngole Village

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RLDChasgainedagreatdealofexperience through the implementationofeachindividualinterventionandthisexperiencehasresultedinlessonslearntforthefuture.Severalessentialissuesarehighlightedandanalysedbelow;inparticular,lessonslearntfromtheinteractionswithprivateandpublicsectorinvestment, the development and sustainability of FOs, price differentialsand market competition, open and honest collaborations and stakeholderrelationships,accessandavailabilityofservicesandinputsandtheadaptabilityof theM4Papproach.Gender issueswere raised throughout theanalysisofeach intervention, however RLDC strategy currently does not address thisissueandassuchitwillbediscussedfurtherinthechallengessection.

3.1 PRIVATE SECTOR INVESTMENT

Threetypesofprivatesectorinvestmentsin the cotton sub-sector have beenexperienced in RLDC interventions:investments incottonproductionmeans,investments in storage facilities andinvestments in processing facilities. Allthree types of investments are essentialto the promotion of the cotton sub-sector and can create value for bothproducersandbusinesses.Duetoitsclosecollaborationwiththeprivatesector,RLDChasbeenabletoencouragesomeoftheseimportantinvestmentswithitsinterventionsinthecottonsub-sector.It should also be born in mind that the revival of cotton production and/or the introductionoforganicproductionmethodsrequirean investment intime spent on building trust relations and generating long-term visions. Insome cases, investment also needs to be made in protection frommarketcompetition.Theseissuesarediscussedintheirrespectivechapters.

“It should also be born in mind that the revival

of cotton production and/or the introduction of organic production

methods require an investment in time spent on building trust relations and generating long-term

visions.”

3.1.1 INVESTMENTINCOTTONPRODUCTION

3.1.1.1 PRODUCTIONMEANS:INPUTSANDIMPLEMENTS

Most smallholders face difficulties inmobilising the necessary cash at thebeginning of and during the productionperiod, the reason being that cottonproduction requires substantialinvestmentinagriculturalinputsandfarmimplements.Tofacilitatesuchinvestment,RLDC encouraged partners to adopt acontract farmingmodelwhich can include theprovisionof inputs and farmimplements.InthecasesofBioSustain,OridoyandMSK,inputsareprovidedon a credit basis, meaning that the initial investment is shouldered by theprivate sector.Oridoy alsoprovides farm implementson a loanbasis,whileBioReandBioSustainletfarmersusetheseimplementsforfree.Itissometimesthecasethatfarmersexpectpartnerstoinvestmoreinfarmimplementssuchassprayingpumpsandtractorsbutarenotthemselvesalwayswillingtopayforsuchservices.Itisthereforenecessarytobuildthecommercialawarenessofproducersinorderforthemtounderstandtheneedtopayforservicestofacilitateinvestmentsthataresustainableandmeetdemand.

3.1.1.2 EXTENSIONSERVICES

Extension and advisory services are essential for increasing production andproductivityandultimatelyforreducingpoverty.However,theestablishmentofanextensionservicesystemthatensuresavailability,qualityandproximityofservicesiscostly.Thegovernmentisunabletobearthesecostsandeffortsalone.Therefore,theprivatesectorneedstoinvestinserviceprovision.Suchinvestmentsincludetraininglocalserviceproviders(leadfarmers),allowances,

“Extension and advisory services are essential for

increasing production and productivity and

ultimately for reducing poverty.”

25

andimprovingtransportfacilities,amongothers.WhilemostofRLDCpartnerssee the importanceof such investments, the day-to-day running costs havenot yet been internalised: BioRe andOridoy rely on voluntarywork by leadfarmers,whileBioSustain,MSKandBariadiLGA/TCBextensionworkersreceiveallowancespaidbyRLDC’sfinancialcontribution.

3.1.2 INVESTMENTINSTORAGEFACILITIES

Investment in storage facilities was an element in three out of the fiveinterventions. In total, 6 warehouses were constructed, in which TZS79,500,000 was contributed by RLDC and TZS 27,500,000 contributed bypartners. The analysis of the experience shows thatwarehouses constituteimportant linksbetweenprivateenterprisesand farmers.The fact that theyareallinactiveuseisasignthatarealneedhasbeenidentifiedandaddressedbytheintervention.Mainadvantagesofinvestinginstoragefacilities,bothforfarmersandenterprises,includethefollowing.

Forfarmers:

• Improved storage conditions –collaborationswithBioSustain,MSKandOridoyhaveshownthataccesstowarehousesresultsinfewerriskstoharvests, includingpostharvestlossesinvaluefrombadweatherandinappropriatestorageconditions.Farmersalsoappreciatebeingabletostoretheirproduceoutsideoftheirprivatehomes.

• Improved selling conditions – warehouse storage facilities result inimprovedcottonqualityandquantitybeingacknowledgedbybuyers,makingtransactionsmoretransparentandhonest.

• Improved transport options – locally situated warehouses result inreducedtransportcosts,inturnhelpingtoreducetheoverallproductioncostsoffarmers.

• Improved market relations – storing cotton in a buyer’s warehouseresultsinamoresecuremarketconnectionforproducers.Italsohelpsto foster trust between buyers and producers. For example, MSKfarmersinMbogwevillagereporttobemoremotivatedsincetheyhavethewarehouse.

Forbuyers:• Improved produce quality – by providing a secure and protected

storagefacility,buyerscansecurebetterqualitycotton.• Reduced transaction costs – groupstorageofproduceinthewarehouses

providethebuyerwithasingletransactionpoint, reducingcoststhatwouldbeincurredthroughindividualproducerpick-ups.

• Assured supply – warehouses involve the buyer from the beginning,givingthemuptodatemarketknowledgeandassuringthemofastablesupply.Thus,warehousescanactascommitmentdevices.

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Theresultsshowthat investinginasimplemethodsuchasastoragefacilitycan hold important benefits for producers and enterprises. However,warehousescanserveasmorethan juststorageandbuyingpoints.UnderaWRStheycanalsofacilitateaccesstofinancialservices.ThiswastheobjectiveintheinterventionwithOridoycooperativesociety.However,experiencehasshownthattheWRSisquitecomplextoimplement,andOridoystilllacksthenecessarycertificationforthewarehousetoserveasaguaranteependingthefulfilmentofconditions.Thusthewarehousehasnotyeteasedtheirdifficultytoaccessbiggerloans.

Another critical point is the long-term financing and investment in storagefacilities. From the farmers’ side in particular, there is a need for morewarehouses. Building and renovatingwarehouses can be costly;with RLDCsupport, some of the interventions were able to create storage facilities,howeverthereisuncertaintyastowhetherpartnerswillcontinuetofinancetherehabilitationand/orconstructionofwarehouseswithoutRLDCsupport.OnewayforRLDCto increasetheprobabilityof long-terminvestment instoragefacilitieswastoproposesimplemethodstoencouragereplication.IntheMSKintervention,forexample,renovationofoldwarehouseswasfavouredoverofbuildingnewones.MSKfinancedonewarehousewiththeirownfundswhileRLDCfinancedtwo.

ItshouldalsobenotedthatthewarehousesconstructedinRLDCinterventionsare owned by buyers. It would be more beneficial for producers to haveownershipthemselvesoverthewarehouses.Inthisway,theywouldalsobeabletotakefulladvantageoftheWRS.However,sincetheyusuallydon’thavethecapacitytoinvest,thishasnotyetmaterialised.

How the warehouse receipt system works

Warehouse receipts are a part of the broader term of inventory

finance whereby the inventory of a commodity or asset serves as

the guarantee. AWRS provides both secure storage and access to

credit tothevaluechainactor that ‘owns’ the inventory–usuallya

commodity.Forexample,aproducer, traderorprocessorcanstore

graininacertifiedpublicorprivatewarehouse,receiveareceiptfor

thedeposit,andusethestoredcommodityascollateralagainstaloan

fromalendinginstitution.Becausethesecommoditiesarestoredin

alicensedwarehouse,thereceiptprovesboththatthecommodities

arephysically inthewarehouseandthattheyaresafeandsecured.

Thisreceiptformsthecollateralbasisofthecollateralforfinancing,

whereas in traditional lending, the underlying collateral is only a

secondary source of repayment that needs to be mobilised when

somethinggoeswrong.Incollateralizedcommoditylending,itisthe

firstsourceofrepayment.

Warehousereceiptsareusedextensivelyaroundtheglobe.Atypical

WRS involvesamanagedwarehouse that issues receipts for stored

commodities,theownerofthestoredcommoditywhoacquiresthe

receipttouseascollateral,andafinancialinstitutionthatacceptsthe

receiptascollateralandprovidesloansagainstthereceipt.

Source: Miller, C. and Jones, L. (2009), Value Chain Finance in Agriculture:

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3.1.3 INVESTMENTIN PROCESSINGFACILITIES

Toinvestinprocessingfacilities,enterprisesneedvision,goodbusinessskills,savings and access to loans. Among the RLDC interventions, BioSustain’srehabilitationofaginnery inSingidaremainstheonesubstantialexampleofprivate sector investment with very little RLDC financial contribution. Thisimportant investment is intended to increase capacity and profit by valueaddition.At the same time, it also has thebenefit to act as a trust-buildingmeasure,with farmersseeing thebuyerasmore reliableandcommitted,asillustratedbythewitnessstoryfromSambaruvillage.

“To invest in processing facilities,

enterprises need vision, good business

skills, savings and access to loans.”

Thisexample shows thatRLDCsupportcanencourageprivatesectorinvestmentwithoutsubstantial financial contribution, butthrough improvement in competitivenessand development of the capacity of thepartner. Also, RLDC can facilitate access tofinancial services by acting like a reference,asinthecaseofBioSustain.

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3.2 FARMERS’ ORGANISATIONS

3.2.1 ADVANTAGESOFFARMERS’ORGANISATIONS

Inallfiveinterventions,experiencehasshownthatFOspresentadvantagesforbothproducersandbuyers.9

At the buyers’ level, FOsenableenterprisesas well as actors from the public sectorto easily reach a critical mass with lesseffort and fewer resources in terms ofinput distribution, purchase of product,capacity building, and organisation ofFFS. It is also easier to identify groupswillingtocollaborateinthefieldofcottoncultivation promotion than to identifyindividual farmers. The FOs also helpbuyers to reach an increased number offarmers through member relationshipswith other producers in the community.Forexample, thecreationofKIHAMAbyBioReallowedthemaccessto600additionalindividualfarmers,leadingtoareductionintheirtransactioncosts.FOscancontributetobuildingtrustbetweenthefarmersandthebuyer.Italsoeasestheflowof informationfromfarmerstoenterprisesontopicssuchasinput requirements, production and perception on services offered. Buyersalsofinditeasiertobuyinbulkfromakindof“onestopcentre”.

3.2.2 OWNERSHIPANDSUSTAINABILITYOFFARMERS’ORGANISATIONS

ApartfromthecaseofOridoy,ownershipoffarmer’sorganisationsstillremainsweak.Thegroups supportedbyRLDC interventionsweremostly formedbyactorsfromtheprivatesectorinordertoeasetheirsystemofserviceprovisionandproductpurchase.Whileinterestedinbeingapartofthesegroups,mostproducers in theRLDC interventions did not develop any groupownership.Producer-formedgroupswereofteninitiatedbyproducerseitherhavingahighdegreeofsocialrecognitioninthecommunityornaturalleadingabilitiesbutlackingorganisationalcapacities.Producer-ledgroupsoftenstillrelyonoutsidesupport andcannotbe sustainedby theirowncapacityand resources.Asaresult,thiscouldjeopardisethesustainabilityoftheinterventions.Forexample,whileBioRefacilitatedthecreationofKIHAMAwithavisionoftriggeringthe

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At the producers’ level, FOshelpfarmerstoworktogetheronaspecificissueasagroupatlarge,ratherthanasindividualswith specific agendas. This can helpfarmers to share a common view onhow to collaborate with the privateand public sectors in order to improvecottonproduction.

Farmers also have more bargaining power and decision making powerregardingissuesthatconcernthemwheninagroupratherthanasindividuals.Forindividuals,beinginagroupcanfacilitateaccesstotrainingandcoachingservices, to the provision of inputs and farm implements and to improvedmarkets.

“being in a group can facilitate access to

training and coaching services, to the provision

of inputs and farm implements and to

improved markets.”

“FOs...ease the fl ow of information from

farmers to enterprises on topics such as

input requirements, production and

perception on services off ered. Buyers also fi nd it easier to buy in bulk

from a kind of “one stop centre.”

9 Farmers’Organisations(FOs)differfromfarmergroupsinthatorganisationshavebeenpurposelyformedandcreatedwiththepurposeofincreasinggroupproductionandoutput(forexampleOridoyandKIHAMA).Farmergroupsarelooselyformedandhavedevelopedbytheinformalgroupingofindividualfarmers.

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creationofanindependentorganisation,buttherewasnotenougheffectivesupportanditfailedtoevolvetowardsitsplannedvision.

3.2.3 STRENGTHENINGFARMERS’ORGANISATIONS

The sustainability of each intervention relies partly on the strength ofindividualFOs.SetasidetheOridoycase,whereastrongFOexistedpriortothe intervention, little was done to encourage the growth and strength oforganisations. This was in part due to limited private sector investment inincreasingthecapacityofFOs(thoughsomementionedthatstrongFOsgreatlyfacilitatetheirwork),ora lackoftherelevantcompetenciestoinvest.SomestakeholdersstilldonotperceiveFOsaskeydriverstowardsthedevelopmentofthecottonsub-sector,butseethemsolelyasrecipientsofinputs/adviceandprovidersofproducts.

Although the Oridoy intervention shows a good level of initiative andorganisation,theystillneedsupportinordertoimprovethewaytheyfunction,aswellastoaddressgovernanceissues.DifferentapproachesforstrengtheningFOswillbetestedfortheseason2010/11.Theyincludetherecruitmentbybuyersofcompetentstaff toleadandworkcloselywiththefarmers,assistingthemingroupformation/groupstrengthening(inthecaseofBioSustainandMSK)andtheuseofservicesfromspecialisedorganisations(inthecaseofBioReandKIHAMA).Acombinedapproachcouldalsobeadopted, inwhichbuyersarecoachedinorganisationaldevelopmentbyaspecialisedinstitutionandtheninturncoachFOs.

3.3 FAIR AND TRANSPARENT PRICE FOR ALL STAKEHOLDERS

When promoting the benefits of engaging in the cotton sub-sector tostakeholders,animportantissuetoconsideristheprevailingpricingstructure.Thedefinitionofwhatisa“fair”priceforallstakeholderscanofcoursevary.Inthiscase,RLDC’sobjectivesofincreasingthecompetitivenessofthecottonsub-sectorandimprovinglivelihoodsofproducersentailsthatallstakeholders

areabletoatleastcovertheircosts:thecostsofproductionforproducersandthecostsofinvestmentforbuyers.Inthecentralcorridor,thepriceforseedcottondependsonthreefactors:

• TheminimumpricesetbyTCBbasedontheinternationalmarketprice.• The addition by some partners of a price premium, for example on

organiccottonandlong-termrelationshipguarantees.• Theinfluenceoflocalcompetitionandtheevolutionintheinternational

marketprice.

3.3.1 NATIONALGOVERNMENTREGULATIONSANDPRICEPREMIUMS

TheTanzanianGovernment,throughTCB,regulatesthecottonsub-sectorbysettingaminimumprice forseedcottondecidedbyastakeholdersmeetingatthebeginningofeachseason.Thispricefloorisbasedontheworldmarketpriceminusaverageexpensesandmarginateachlevelofthevaluechainuptotheproductionlevel(resultinginaTZS600/-perkgminimumfarm-gatepricesetbytheTCBin2009/10).Thevolatilityoftheworldcottonpriceputslocalstakeholdersinthecottonsub-sectorinasituationofhighriskandvulnerability.Inthecottonsub-sectorassessment,theregulatoryroleofthegovernmentonpriceissueshasnotbeenconsideredapriorityareaforRLDCinvolvement.AlessonfromRLDC’sexperiencesisthatthesuccessorfailuresofinterventionsinthecottonsub-sectorarestronglyinfluencedbyfactorsthatarebeyondthecontroloftheimplementerandthestakeholdersinvolved.

Asfarasorganiccottonisconcerned,usuallyapremiumispaidontheprice.

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However,thispricepremiumisnotfixedontheinternationallevel;itiseitherdecided by the buyers or negotiated between them and the producers.According to the joint web platform of the organic cotton communityworldwide (www.organiccotton.org), farmers usually receive an organicpremiumof10-20%.In2009/10,RLDC’stwopartnersinorganiccotton,BioReandBioSustain,paidapricepremiumof10%and5%respectively,withthelatterplanningtoincreaseitto10%in2010/11.

3.3.2 COMPETITIONANDMARKETEVOLUTION

Thissectionconcentratesontheissueoflocalcompetition,wherecottonpricesfluctuateatnotonlyatthenationalleveleachseason,butalsoduringthecourseoftheseasonandgeographicalwithinTanzania.InthefiveRLDCinterventions,importantpricedifferentialwereobserved. Thepricepaid to theproducersper kilogram of raw cotton from the 2009/10 harvest varied between TZS600/-(MSK,NzegaDistrict)andTZS1,200/-(BioRe,MaswaDistrict).Theprice

differenceputsanemphasisonthethirddeterminantsofprice–competitionandfluctuationsininternationalmarketprice.Asmentionedbefore,thelattercannotbeinfluencedbyRLDCanditspartners.

RLDCexperiencehas shown that thepresenceof cottonbuyers – and thuscompetition – is directly correlated to the concentration of production in agivenlocation.InShinyangaRegion,whereBioReandBariadiinterventionsarelocated,productionhasbeenhighformanyyearsandthuscompetitionamongbuyers is very high aswell. InManyara Region (Babati District), productionhas also been traditionally high but the remoteness and difficulty of accesshas naturally keptOridoy as the sole buyer in the area. The two remaininginterventions –MSK and BioSustain – are similar in that they both revivedcotton production in areas where cotton had been largely abandoned andthereforeproductionwaslow.

Generally it ispossibletoexpectthearrivalofotherbuyerswithanincreasein production. This did happen in MSKintervention areas which are easilyaccessible, leading to side-selling byfarmers under contract arrangements.However, in remote villages with highlevels of production, buyers sometimespass-by due to poor infrastructure andaccess.Thiscansometimesleadtonaturalprotection from competition, as in thecase of BioSustain. BioSustain has alsoensured that they will remain protectedin the future through their relationshipswith the local and Regional governmentauthorities.Thus,whenplanningandimplementinginterventionstargetingthepromotionofcotton,theconcentrationofproductionandtheeaseofaccesshavetobeconsideredcloselyasfactorsinfluencingthecompetitionsituation.

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Evolution of the world price for cotton, Source: Cotton Outlook,

http://www.cotlook.com

“...when planning and implementing

interventions targeting the promotion of cotton,

the concentration of production and the

ease of access have to be considered closely as factors infl uencing the

competition situation.”

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3.3.3 ADVANTAGESANDDISADVANTAGESOFCOMPETITION

RLDCexperienceprovidesevidenceofbothadvantagesanddisadvantagesofcompetitionforthepromotionofacottonsub-sectorthatbringsbenefitstoallstakeholders.

Therearetwoadvantagestocompetitionamongcottonbuyers.First,andmostimportantly,farmersgetbetterprices.Forinstance,farmerssupplyingorganiccottontoBioRe inasituationofhighcompetitiongotmore thanTZS 1,200/kgwhileintheprotectedenvironmentofBioSustainthemaximumpricewasTZS660/kg.Thisenablesfarmerstoimprovetheirlivelihoodsduetoincreasedincome.Secondly,competitionpromotesefficiency.Forexample,MSKlearntthateffortsshouldbemadetogetloansintimeforbuying;otherwiseproducerswillbetemptedtoselltothecompetition.AlsoBioRewasforcedtoestablishanefficient,modernprice trackingmonitoring system inorder toadapt thepriceofferedtofarmersonadailybasis.

Therearealsoseveraldisadvantagestocompetition.Companiesengagingincontractfarmingmayfindtheiragreementswithproducersdifficulttoenforceinthepresenceofhighcompetition,assometradersdonothesitatetoresorttounfaircompetitionpracticestoconvincefarmerstoselltothem.SometradershaveforinstanceluredBioRefarmersintoignoringtheircontractualobligationsand sell to them instead by promising a better price, but using temperedscalestoweighthecotton,whichleftbothfarmersandBioReworse-off.ThissituationwasnotedandaddressedbyRLDCwiththeBariadiintervention.Asaresult,RLDCdecidedtointegrateelementsoftheBariadi interventionintothe collaboration with BioRe and KIHAMA. A second disadvantage relatesto competition after a revival of cotton production, whichmay discouragethe initial investment for the necessary promotion efforts.MSK, BioSustainandBioReallconsideredunfairthatotherbuyerswouldreapthefruitsaftertheyhadheavily investedinpromotionactivities.Athirddisadvantageistheriskofside-selling in thepresenceofstrongcompetition,whichundermines

contract farmingarrangements.Forexample,asa resultof thecompetitionintheirareas,BioReandpartlyMSKcurrentlyhavemoredifficultiesinmakingcontractfarmingwork;conversely,BioSustainasasolebuyerhas little issuewithconvincingproducerstoselldirectlytothem.Competitioncanthereforehampereffortstointroducecontractfarmingarrangements,especiallyintheinitialphase,inthepresenceofunfaircompetitionand/orwhentrustislow.Given the disadvantages of competition for the promotion of cotton – isprotection an alternative? Especially considering that in situations of heavyinvestment to revive cotton production, enterprises actively seek to findprotection,limitingcompetitionfromnewlyarrivingbuyers.ThisisthecasewithBioSustain.Asadrawbackofsuchaprotectionfarmersfeelthatproductionis not profitable; when they hear about price differentials with other areaswherecompetitionisstrong,theyfeelcheatedbecausetheyonlygettheTCBminimumpricedecidedatthebeginningoftheseason,farlessthanthemarketpricepaidtoproducers inotherRegionsattimeswhenworldmarketpricesaresoaring.Thisagaincanhampertrustrelationswiththebuyerandleadtoproducersabandoningthecropforotheralternatives.

Does the facilitator have a role/responsibility concerning regulation ofcompetitionandprice?Sofar,RLDChasnotinterferedinthisissue,withtheexceptionoftheinterventionsaimingatreducingunfaircompetition.Asfarasprotectionisconcerned,theexperienceshowsthatitisbettertofacilitatetrustbuilding than to promote exclusivity. However, some temporary protectivemeasuresareusefultoencourageinitialinvestmentforpromotingorrevivingcottonproductionasacashcropopportunityforpoorfarmers.

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3.4 PROMOTING TRUST AND LASTING RELATIONSHIP FOR WIN-WIN COLLABORATIONS

Developing win-win collaborations between different actors of the cottonsub-sectorwasakeyaspectofthefacilitationroleplayedbyRLDC.However,positive and long-lasting collaborations between stakeholders require opencommunicationand trust.Therearevariousways inwhichstakeholderscanbuildtrust:throughplanning,sharingvisionsandgoals,opencommunicationand showing long-term commitment by investing in the cotton sub-sector.Investment in the cotton sub-sector has been discussed in section on“private sector investment”. this section will focus on the importance ofplanning,sharinggoals,opencommunicationandmutuallybeneficialcontractagreementsaswellasacloserexaminationofthebenefitsofcollaborationsbetweenvariousstakeholders.

3.4.1 LONG-TERMPLANNINGANDSHARINGOFVISIONANDGOALS

Inmany of the RLDC interventions not onlywere roles not clearly defined,buttherewasadistinct lackofsharedvisionandgoals, leadingtoproblemsof misunderstanding, misinterpretation and the impeding of interventionactivities.ThereactionofRLDCanditspartnerstothesechallengeshighlightarangeofpossiblesolutionstosuchsituations.

BioSustainexperiencedmisunderstandingswithproducerscausedbylackofinformationonmutualgoals.The lead farmers selectedbyBioSustain failedto communicatewith their fellow farmers and this resulted in poor servicedelivery and a lackof understanding for the collaborativegoals.MSK facedsimilar problems in the form of side-selling because they lacked liquidityat the time of buying, but also because they failed to share their vision ofnew incomeopportunitiesthatcouldbeprovidedwiththerevivalofcottoncultivation.However,MSKhascometogripswiththisproblem,improvingitscommunicationandrelationshipwithproducers,leadingtoastrengtheningofthecollaborationandimprovedtrustinthecompany.Collaborationssometimesrequirealong-termcommitmentinordertoproducerealinstitutionalchange.

Accordingly, partners should plan andagree not only on one agriculturalseason,butonatimeframethatallowsfor the necessary time required toreach the shared vision andmake anynecessary institutional changes. Forexample,itwasunrealistictosuggestthatKIHAMAcouldbecomeastrongandindependentFOinonlythreemonthsofcollaborationwithBioRe,havingonlytrainedKIHAMAleadersontheprocessforthecertificationoforganiccottonwithoutgivingthemtoolsandcapacityrequiredtostrengthenandsolidifytheirorganisation. Better planningmay have resulted in a longer timeframe thatcouldaddresstheinstitutionalissuesrelatedtothecreationofanorganisationlikeKIHAMA.

3.4.2 OPENCOMMUNICATIONANDMUTUALLYBENEFICIALCONTRACTS BETWEENPRIVATECOMPANIESANDPRODUCERS

Maintaining positive communication with all stakeholders is important tohelpdevelopandsustaintrust.Constantcommunicationcanhelptocalmanyfearsthatmayexist intermsofcontractuallyagreedactivities–forexampleside-sellingordelayedpayments.MSKunderstoodthiswellandtheirProjectcoordinatordoesnothesitate togo into thefield and keep regular contactwith FO, but there is more reluctance to comply with contract conditionswhere contact is notwellmaintained and there is a lack of communicationbetweenfarmersandbuyers,forexampleinremoteareas.This is illustratedby the different experiences of the farmers fromMsai and Sambaru – theformerhavinghadsustainedcommunicationswiththeirpartnerwhilethelaterexperiencederraticsupportandcontact.

“...positive and long-lasting collaborations between

stakeholders require open communication and trust.”

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The most important element of goodcollaboration between producers and buyersis the establishment of an agreement thatmentions mutual commitments such as theprovision on inputs and advisory and otherservices (e.g. storage facilities) and theexclusivity of sale. There are several differentways that contracts are established. Forexample, BioSustain signs contracts withindividual producers. BioRe signs individualcontracts with its “own” farmers, whilesigning a group contract with KIHAMA. MSKhas“verbalcontracts”withgroupsoffarmersbutwillformalisethemfrom2011,andOridoykeepsaninformalsystemwithindividualfarmers.

Despite thebenefits inherent incontractualagreements, theexperiencesofeach intervention show that the signing of contracts does not necessarilyguaranteethateachpartywill respect itscommitment.Problemspreviouslydiscussed,suchasside-sellingandlatepaymentsdooccurregularly.However,RLDChasnoticedthatthepresenceofstrongFOtendstostrengthencontractfarmingrelationshipsandhelpsavoidtheseissues.

Despite its strengthsandweaknesses, the contract farming system remainsan interesting means to develop mutually beneficial relationships betweenproducers and buyers. The TCB understands this and wants to make thismodalityofcollaborationbetweencottonproducersandbuyerscompulsoryonanational level from2011onwards.Overall,what the interventionshaveshownisthatwhencreatingtrustingrelationship,itisadvisabletostartsmall,producegoodresultsandtogethersetmoreambitiousobjectivesbasedonacommonvision.

For more than 15 ye ars we have cultivated conventional cotton. The market was never ensured and we had sometimes to struggle to sell our produces at reasonable prices. We were still sceptical when BioSustain presented us its project of organic cotton production, but

became convinced once we received training and inputs. BioSustain was always there at the time we had problems.

With the support received from BioSustain, we were able to enhance the productivity, for instance by sowing in rows and adopting improved cultivation practices. That encouraged us to increase the acreage of cotton production. For instance, our production passed from 500 to 1,000 kg. The premium given by BioSustain encouraged us to shift to organic cotton. However, the promised 10% in the contract are not yet reached. On the other hand, we are paid in due time. Because of the support provided by BioSustain, we should not sell our products to buyers offering a better price, but only to BioSustain.

“Due to this good collaboration, we encourage other farmers who still cultivate conventional cotton to shift to organic one”

We particularly appreciated that BioSustain invested in the construction of a warehouse in our village to store our cotton in good conditions. This helped us a lot. If in the past we could have sold our cotton to buyers offering better price than BioSustain, now it is sure that we will respect our commitment towards BioSustain, because we have realised the importance of their support in training and inputs. Due to this good collaboration, we encourage other farmers who still cultivate conventional cotton to shift to organic one.

In the village, there are still farmers producing conventional cotton. We think that we should try to convince ourselves rather than BioSustain to shift to organic cotton. Visits and exchanges between farmers should be more effective than mobilisation sessions

Experience of producers in close contact with BioSustain: The voices of farmers from Msai

“The TCB understands

this modality of collaboration

between cotton producers and

buyers by contract farming.”

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3.4.3 COLLABORATIONBETWEENTHEPUBLICANDTHE PRIVATESECTORS

Collaborations between various different stakeholders within the privateandpublicsectorisanimportantaspectinregardtothecreationofwin-winsituations and thepromotionof the cotton sub-sector.Asdiscussed above,positiverelationshipsbetweenproducersandcompaniesarevitalforsuccess.However,theimportanceofprivate-publicsectorcollaborationwasalsomadeapparent.

The importanceofprivate-publiccollaboration is illustratedby theexampleofBioSustain,thatunderstandsthenecessityofkeepingRegionandDistrictAuthoritieswellinformedoftheirproject,includingtheirintentiontocontributeto the socio-economical development of the sub-sector. Besides regularmeetings, the company also sends the authorities quarterly reports. Thisstrategy,whichwasencouragedandfacilitatedbyRLDC,helpedBioSustaintoreceivesupportfromtheDistrictAgricultureandLivestockDevelopmentOffice(DALDO) in the form of promotion of the project by agricultural extensionagentsatvillagelevel,trainingof leadfarmersandproducers,monitoringoftechnicalactivitiesandhelpindistributinginputs.Throughagreementssignedat the Regional and District level, the LGA favoured BioSustain to becomethesolebuyer in theRegion.Thisexclusivity isa signof recognition for theinvestmentsmadebyBioSustainforpromotingthecottonsub-sectorinSingidaRegion.Howeversuchamonopolypositionshouldnotbepermanent,asitisinthelongrundetrimentaltotheinterestsoftheproducers.

Ona local level,workingwith thevillageofficersalsoallowedBioSustain tokeeptrackofdecisionsandagreementsmadewithfarmers,helpingthemtoconsolidatewhatwasagreedintheoriginalcontracts.Thepurchaseandtherehabilitationof the ginnery in SingidabyBioSustainwas also facilitatedbythenetworkcreatedbythecompanywithdifferentgovernmentauthorities.

When BioSustain came for the fi rst time here, we appreciated the project they proposed: cultivation of organic cotton, payment in cash at the time of selling seed cotton, provision of seeds and pesticides on a loan basis – something that we could not get before. However, they came here only two times, and we did not trust them too much.

They just told us to use the seeds and pesticides that were distributed, and to shift from conventional cotton to organic cotton. In the past, we had bitter experience with buyers coming here, taking our products and never paying us. Accordingly, if we could produce cotton on 5 acres, we decided to plant only 2 acres since we do not know too much about BioSustain. In addition, when we came to know that in Shinyanga the cotton was paid up to the double of what BioSustain proposed, this did not much encourage us. Recently, we were informed that BioSustain had rehabilitated a Ginnery in Singida. This time, we realise that we have a partner that invests in the cotton business, and we are very much satisfi ed about it.

Experience of producers in intermittent contact with BioSustain: The voices of farmers from Sambaru

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In addition, government partners of BioSustainand MSK mentioned that the collaboration withthe private sector allowed them to better performtheirjobthroughtheprovisionoffinancial(e.g.fieldallowances) and material (e.g. motorcycle) means.Private-public collaborations also help farmers; inthe case of MSK, the farmers expressed that theybenefited from the collaboration between thecompany and DALDO through increased access topesticidesandseedsatasubsidisedprice.

Collaborations between the private and publicsectors can includedifferent typesof stakeholders.For example, the caseofOridoy showshowwell astrong FO can collaboratewith the LGA to benefitfrom training and other services provided by theagriculturalextensionagents.TheinitiativetakeninBariaditoorganiseofworkshopattendedbyfarmers,LGA, TCB, ginners and cotton buyers in order toaddress the misunderstandings between extensionagentsandproducers is anotherexcellentexampleofamulti-stakeholderapproachthatwillcontributeto establishing an enabling business environment.The participants developed a common vision onhow the pilot intervention should be improved forascalingupanddecidedthatasteeringcommittee,includingrepresentativesfromdifferentparties,willregularlymeetandmonitorhowthereplicationofthepilotinitiativeisimplemented.Thoughitistooearlytojudgehoweffectivethiscommitteewillbe,itisapositiveinitiativeaimedatsustainingandimprovingtheintervention.

Mr Msafiri works for the agricultural extension agency of Singida. Though being a livestock specialist, he has a good knowledge of BioSustain activities as Senior Officer.

As a government organisation, we are always challenged to provide services in response to the many

demands from farmers. We appreciate that companies from the private sector, like BioSustain, also offer additional resources such as extension agents, fertilisers, seeds and pesticides. They assisted us to train the farmers on the cultivation of organic cotton, which is an excellent economic opportunity for the producers, and is environment friendly.

Since everything is recorded by BioSustain regarding the production of organic cotton, we collaborate with them to establish our agricultural statistics in terms of farmers’ needs, distribution of seeds, fertilisers and pesticides, number of bags produced and acreage, etc.

“The collaboration with the private sector allowed us to establish a win-win situation”

The collaboration with the private sector allowed us to establish a win-win situation. We eagerly proposed our field colleagues to help develop the capabilities of their extension workers. By rehabilitating a ginnery in Singida, they will contribute to boost the cotton production in the region. When we go together in the field, we speak as a sole body. This is I think what we can call a real private-public partnership.

“This is I think what we can call a real private-public partnership”

The importance of functional collaboration between public and private sector:

Interview with Mr Msafiri, DALDO

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3.5 ACCESS TO, AND AVAILABILITY OF, SERVICES FOR PRODUCERS

Oneofthemostsuccessfulapproachestakeninallfiveinterventionsistheprovisionofservices.RLDC interventionshaveproventhataccess tovaried inputsallowsfarmers to improvetheproduction,theproductivityandthequalityofcotton,aswellasimproveaccesstomarkets.Forproducerswhogenerallyhavelimitedaccesstotheseservices,theprovisionofinputsisvitaltocropsuccess.Withoutsuchinputs,theproducerswouldbeunabletofarmacashcroplikecotton.Buyersalsounderstandthatfinancially investing intheprovisionofserviceshaspositiveeconomicreturnsandwillcontributetothegrowthoftheirbusiness.BasedonRLDCinterventions, itcanbesuggestedthattheprovisionofservicesconstitutesleverageforthedevelopmentofthecottonsub-sector.

3.5.1 ACCESSTOINPUTSANDFARMIMPLEMENTS

Different approaches were used by RLDC partners in the provision of inputs and farmimplements.OridoyandBioSustainprovideinputsonaloanbasis,deductingthecostofinputsatthetimeproductsarepurchased.BioRedeductsthecostofinputsinadvanceofthenextseason from the previous years’ payment as ameasure to secure itsmarket. Farmers notwilling to continue the collaboration with BioRe are reimbursed.MSK’s collaboration withLGAforthedistributionofinputsmeansfarmershavetopaycashforlargelysubsidisedinputs(vouchersystem).MSKalsoallowedfarmerswhowereunabletoaffordinputsandimplementsthe opportunity to access loans. The company contributes for instance amaximumof 50%towardsthecostsoftractorservices.Thetwofirstapproaches(loanbasis)havecontributedtowardsbuildingatrustingrelationshipandwin-winsituationsbetweenfarmersandbuyers,while MSK’s cash payment approach resulted in thedevelopmentofarelationshipwithlesstrust, leadingto problems of side-selling (despite their facilitationof inputs and implements for poorer farmers). MSKhas acknowledged that andnowprovides seeds andpesticideonaloanbasisforfarmerswhocannotaffordtopayforthem,andhasofferedtolend50%ofthecostoffertilisertofarmers.

“...the provision of services constitutes leverage for the development of the cotton

sub-sector.”

I am a member of Oridoy and was selected in my hamlet to be a “zone trainer”. I received training on good agronomic practices in cotton production from an LGA extension offi cer so that I can myself train my fellow cotton producers in the hamlet I live in. Five FFS were also established here in Babati district, each grouping 30 cotton farmers. I give my trainings to one of these groups of 30 and then visit their farms individually. Some of them also come to see me for advice. Personally, I also volunteer for providing these extension services to some more farmers than the 30 that were assigned to me.

I do not get any money for these trainings, advice and coaching on agronomic practices. I am motivated by the vision of seeing people improve.

Local service providers: An emerging potential

Julius Karatu (Oridoy lead farmer)

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3.5.2 ACCESSTO,ANDPROVISIONOF EXTENSIONSERVICES

Throughout the initiative, RLDC has put anemphasis on the facilitation and provisionof extension services for farmers. Extensionservices are provided in addition to inputsin order to ensure best practice and correctusage.

In theRLDC interventions, extension serviceswere provided to producers through trainedlead farmers (called extension workers) butalso extension officers from GovernmentAgencies (e.g. LGA ward extension officers).Lead farmers were selected from thecommunity primarily by the partners and theextensionofficers.Becauseofalackofcriteriafor the selections, many of the lead farmerswere unmotivated and failed to understandboth the project itself and their role withinit. BioSustain faced such issues and had toselect new lead farmers for the upcomingseason. The extension workers of BioRe andOridoyeagerlytookuptheirrolesdespitethecommitment involved because they wouldbenefit from both training and a new foundsense of prestige within their communities.LikewiththecaseofBioSustain, it ispossiblethat this initial enthusiasmwill fade over thecourseoftheirrole–generatinganimbalancebetween the benefits they receive and thetimetheycommit.

Amongstthefiveinterventions,theleadfarmersofBioRe(KIHAMA)andOridoyworkedonavoluntarybasiswhile thecommunitypeople involved intheinterventions of BioSustain, and Bariadi receivedan allowance largely subsidised by RLDC. MSKis anexception, the lead farmersbeingpaidonacommissionbasisbythecompany.ApartofBioRe,The extension workers of LGA involved in theinterventionsalsoreceivedanallowancesubsidisedby RLDC – causing concerns about sustainability.Therefore,itisquestionablewhethertheywillkeepthe system alive once the phase out from RLDCis concluded. In all cases, a solution could be forfarmers topay for services.ThisapproachwillbetriedinthecaseofBariadiintervention.

Despite these problems, the availability and theeffectiveness of advisory services improved.However,thelong-termqualityofserviceremainsachallengeandmeasuresneedtobetakeninorderto control the quality of services (e.g. feed-backfromfarmers)andtokeeptheskillsandknowledgeofextensionworkersregularlyupdated.

3.5.3 ACCESSTOLOANS

Of the five interventions only Oridoy providedcash loans to its members. Loans given duringtheproductionseasonare thenrepaidduringthesellingseason.Intheotherinterventions,someoftheproducersweremembersofSACCOS,andcouldaccessloanservicesindependentoftheirpartners.

Our organisation selected the extension workers amongst lead farmers. In order to provide quality extension services, those were trained by BioRe with support from RLDC in seeds and bio-pesticides distribution, mixture of bio-pesticides and the 10 steps that are necessary for organic cotton production. Each one of them is now distributing inputs and providing training, advice and coaching in 2 hamlets to between 35 and 75 farmers. They are in close contact with these farmers, so they know about their needs. It is good to notice that they like their job as extension workers that they do as volunteers. However, a challenge they face is transportation between the individual farms.

Local service providers: An emerging potential

Musa Sahini, Executive Secretary, KIHAMA

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Despiteaccesstoloansbeinganimportantfactorofproduction,suchactivitiesrequirespecificprofessionalcompetenciesandorganisation.Accessto loanswasthereforenotaddressedbyRLDCoritspartnersdespiteitbeingacommonconcern for producers. In the future, RLDC and its partners could facilitatelinksbetweenFOsandmicro-finance institutionsand/orpromoteself-savingtogetherwiththeprocessofFOsstrengthening.

3.6 A SYSTEMIC VIEW – PLANNING AND IMPLEMENTING M4P

RLDCused theM4P approach for assessment of the cotton sub-sector andplanning of interventions. The experience has shown, however, that theimplementation of interventions does not automatically lead to systemicchanges and that the facilitation rolewas difficult to communicate. In turn,innovation has proven to be a valuable asset when approaching systemicchange.

3.6.1 IMPLEMENTINGM4P

In relation to the “doughnut concept” (see diagram in annex 2), theinterventionswereundertakenatallthreelevels:• Supportfunctions(e.g.inputsandskillsdevelopment,loans,controlof

weightandqualityofproducts)• Core transactions (e.g. establishment of contract farming between

producersandbuyers)• Business environment (e.g. collaboration between stakeholders in

Bariadi(PPP),influencingpolicymakerstorenderthecontractfarmingsystemcompulsory)

Whileinterventionshaveachievedimprovementsinstakeholderrelationshipsandlivelihoods,thechangesonasystemiclevelarestilllimited.Assuch,theydidnotworkon thewholemarket system,but ratherwith individualactorswithin thesystem. Itwouldhavebeenbetter tomaintaina systematicview

in case parallel interventions done in the same geographical area wouldprovideadditionalbenefitstostakeholders.Forinstance,theintroductionoftheBariadimodel intheareawhereBioReworkswouldhavepreventedthelatterfromsufferingfromunfaircompetitionandensuredtherightreturnonitsinvestment.ThislearninghasbeenincorporatedintothenewcollaborationwithBioRein2010/11.

3.6.2 COMMUNICATINGTHEM4PAPPROACH

Whiletheinterventionshelpedtofacilitatecommunicationandunderstandingbetween different stakeholders, RLDC found it difficult to explain to theirindividualinterventionpartnerstheiroverallroleasamarketfacilitator.RatherthanseeingRLDCasasourceforadvice, informationandtechnicalsupport,intervention partners assumed RLDC was acting solely as a donor whoprovidedadditionalfundstorunactivitiesthatwouldincreasetheirbusinesses.TherewerealsoissuesincommunicatingtheoverarchingM4Pgoalofpovertyreductionforsmallholders.Althoughitwasclearlystatedintheagreements,the concept was not explicit in the implementation of the activities. Thisdidnotreallyaffecttheprojectactivities,but loweredthe importancegivento the changes that RLDCwanted to achieve and themonitoring of thosechanges.Thelackofunderstandingintermsoffinalachievementsalsomeantthat interventionswereautomatically renewed fromone season toanotherwithout addressing sustainability issues, in particular failing to address thegradualphasingoutofRLDCsupport.

3.6.3 THEIMPORTANCEOFINNOVATION

Market perspectives should also include innovation as an important factorof changes and improvementof livelihoods for the small farmers. TheM4Papproachisalreadyaninnovationanditattractedtheinterestofbothprivateandpublicsectors,allowingthecreationofPPPswhichresultedinsuccessful

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and encouraging results at the differentstakeholder levels.Technical innovationssuchasorganic cotton, improved agricultural practices,and theprovisionofnewservices suchacottonweight control, were well received by farmerswho benefited through additional incomes andnew economic opportunities. The promotion ofleadfarmers–afairlynewconcept–wassimilarlyappreciatedbytheproducers,whoenjoyednewaccess to advisory services. Methodological orinstitutional innovations, such as the contractfarmingsystemandthecreationofcontrolvillagecommittees, also provided new advantagesfor the farmers. The innovative aspects ofthe interventions, including the simplicity ofinnovations,alsocontributedtotheirreplication:for example the BioRe system adopted byBioSustain, and the expansion of the BariadimodeltothewholeDistrict.

4. CHALLENGES

Whiletheinterventionsprovedtobesuccessfulinvariousways,thereremainsomeimportantchallengeswhichneedtobeaddressedinfutureprojects.ThethreemainchallengesRLDCfacedaretheissueofsustainability(financially,organisationallyandenvironmentally),theissueoffacilitatingsystemchangethroughtheM4Papproachandaddressinggenderissues.Thesechallengesrepresentareasthatneedtobebetterintegratedintotheoverallprojectapproaches;belowisareflectiononthesechallengesandthevariousopportunitiesavailabletoaddressthem.

4.1 SUSTAINABILITY

4.1.1 FINANCIALSUSTAINABILITY

RLDC’scontributionmostlycoveredcostsrelatedtoawarenessraising,mobilisationoffarmers’groups,extensionservices,establishmentofdemonstrationplots,FFSactivities,strengtheningFOs,supervisingandmonitoring,andorganisingmeetingsandworkshops(“software”activities).InspecificcasesRLDCalsocontributedto“hardware”(e.g.constructionofwarehouse).Thepartnersgenerallycontributedby recruiting additional “project staff”, providing input distribution systems, investing in processingfacilities(e.g.ginnery)orotherinfrastructure,andstrengtheningFOs.

Thelevelofrespectivecontributioncanvaryaccordingtotheinterventionstrategyorthepartner.Fortheseason2010-2011,therespectivecontributionamountedtoaround50%for“softwareactivities”.ThecontributionofRLDC falls to20%when investmentsbypartnersare taken intoaccount, forexample.theimprovementofaginnery(BioSustain,MSK).Incontrast,thecaseofBioReresultedinarelativelyhigh contribution (94%) as a result of the sole focus onKIHAMA; but,when compared to the otherinterventions,theactualamountinvestedinKIHAMAisquitelow.

As a general rule, RLDC fixed its level of contribution inpartnerships with the following gradual exit strategy: 70%in thefirst year, 50% in the second year and 30% in the thirdyear or in case of replication. In practice this strategy wasnot systematically applied. In most cases the reduction ofRLDCsubsidieswasduemoretobudgetconstraint(withtheincreaseinthenumberofinterventions)ratherthanmotivatedbyarealexitstrategy.Thelattershouldbedevelopedcarefullyto ensure that thefinancial capacitiesof partnersmatch thevision established for the sub-sector; this will help to avoid

“Technical innovations such

as organic cotton, improved

agricultural practices, and the

provision of new services such a

cotton weight control, were well

received by farmers who benefi ted

through additional incomes and new

economic opportunities.”

“partners are not accustomed to budgeting

for their own funds for these activities, generating a risk that they will not be considered at the time of

RLDC exit.”

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Itwillalsobeachallengetomaintainthequalityofinformationandknowledgeprovidedthroughtheadvisoryservicesandtoensurecontinualdevelopmentofskills.Withoutup-to-dateinformation,producerscouldadapttheirpracticestoease theirworkload to thedetrimentof yield. It is thereforeessential toensurethatregularupdatesandinformationtransferstakeplace.

Finally, the sustainability of interventions in the cotton sub-sector is alsojeopardisedbythevolatilityofinternationalmarketprice.Ifthelattersuddenlydropstoacriticallevel,likein2009,alleffortsmadeforthepromotionofthesub-sectorcouldbeatriskwiththefarmersdecidingtoshifttoanothercrop.

4.1.3 ENVIRONMENTALSUSTAINABILITY

ApartfromRLDCs’supportofthecultivationoforganiccotton,environmentalsustainabilityissueshavenotbeenspecificallyaddressed.Thiscouldremainachallengeinthesensethatifnotconsidered,RLDCcouldsupportagriculturalpracticesthatareharmfulfortheenvironment.

4.2 FACILITATING SYSTEMIC CHANGES

M4Pbeinganewapproach,the implementingactionsthatbringchanges inmarketsystemsarestillinanexperimentalphase.

Applying the M4P concept and bringing about changes within the systemremains a challenge. RLDC actions didnot always have a systemic approach,butweredevelopedbasedonstrategicinterventions in thecottonsub-sector.However,therewasintenttopromotesystematic changes even though theinterventionswerelimitedtoaspecificaction – for instance the promotionof the contract farming system. If the

theabandoningofactivitiesatthetimeRLDCphasesoutduetoashortageoffunds.

Duetoissuesoffinancialcontrol,thepartnershipsareestablishedinsuchawaythatRLDCcontributeseither100%or0%ofeachindividualactivitycostwithinan implementation. For instance, although paid by the partners, extensionservicescostsareentirelysubsidisedbyRLDCthrougha100%contributiontothis activity. Thismeans thatpartners arenot accustomed tobudgeting fortheir own funds for these activities, generating a risk that theywill not beconsideredatthetimeofRLDCexit.

Therehasalsobeenan issuewithaccountability andaccess to information.Thoughtherespectivecontributionsaresettledinthecontract,RLDChasnotbeenabletomonitorthepartner’sactualfinancialcontribution.

4.1.2 INSTITUTIONALSUSTAINABILITY

The institutional sustainability constitutes another challenge for RLDC.Collaborationswithpartnersaregenerallyestablishedonashort-termbasis–oftenrelatedtoacropcultivationseason–andrenewedfromyeartoyear.AsaresultthereisalackofclarityonRLDC’sexitstrategyinthecollaborationandonhowthepartnerswillensuresustainabilityoftheinterventionbygeneratingallnecessarycapacitiesandresourcesbeforethewithdrawalofsupport.InthecaseofBariadi,thecommitteescreatedforthecontrolofweightandqualityofcottonwerewellconceived,butlittlethoughtwasgiventotheirlong-termviability without the support of RLDC. More generally, the local extensionservicesthatwerecreatedconstitutekeyfactorsforsub-sectordevelopment,however if nothing isplanned for their institutional sustainability, there is arisktheywillcollapseinthefuture.ThisisalsotruefortheleadfarmersthatarecurrentlypaidthroughthesupportofRLDCaswellasforthevolunteerswhoareprovidingadvisoryservice.Apossiblesolutiontoaddresstheseissueswouldbeforproducerstopayforadvisoryservices;howeverthisconstitutesahugechallengeinitselfduetothefinancialcapabilitiesofthefarmers.PerhapsthiscouldbefacilitatedthroughthestrengtheningofFOs,anareawhereRLDChasstilltoprogress.

“[the M4P approach] remains a good tool for developing vision and strategy, encouraging interventions to work

through the development of specifi c partnerships and

activities.”

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systemic approach is still a theoretical concept, it remains a good tool fordevelopingvisionandstrategy,encouraginginterventionstoworkthroughthedevelopmentofspecificpartnershipsandactivities.

Ifthechallengecanbeputatthelevelofsystemicchanges,atleastinpractice,RLDC was able to promote effective collaborations between stakeholdersof the cotton market system that lead to win-win situations and a localimprovementofthesub-sector.However,regardlessofwhetherRLDCplaysafacilitationroleindevelopingthevisionsforinterventions(forinstanceintheBariadiexperience),thereremainsthechallengeofinternalisingthefacilitationrole,ensuringthatpartnersunderstandtheroleofRLDCasnotbeinglimitedtothatofadonor.4.3 GENDER

gendermainstreaming.AssuchRLDChasnotparticularlyconsideredgenderinitsinterventions,butithastrackedtheinvolvementofwomen.Incomparisontothe33%ofwomeninvolvedacrossallfiveagriculturalsectorspromotedbyRLDC,thecottonsub-sectorinterventionsengagerelativelyfew.Whilewomendo take careof cotton-related tasks, theyareusuallynot theoneswhomakedecisionsoverproductionandsales.Infact,somewomenincommunitieswherecottonisproducedcomplainthattheirlackofcontroloverincomeearnedfromcottonproductionhindersspendingonaspectsconducivetopovertyreduction,suchashealthandeducation.

Thequestionofwhoshouldberesponsibleforgendermainstreaminginthecurrentfiveinterventionsremainstobeaddressed.Inthenewcollaborationsforthe2010/11season,RLDCfacilitatedpartnerstomainstreamgenderissuesintheiractivities,explainingthatinitiativestakenbymarketfacilitatorscouldlead toamore sustainablechange towardsequalopportunities forwomen.However, RLDC experience shows that gender-related issues are not apriority for partners in their commercial relations; for private sector actorsto show interest, the issue needs to be connected to improved productionandproductivity.Furthermore,prevailinggenderrolesneedtobetakenintoaccountwhendesigningprojectinterventions.Meetingsinthecontextoftheinterventionshouldtakeintoaccountthevarioussocial-culturalnorms.Also,female serviceprovidersmayfind it easier to approach female farmers andvice-versa.

It is possible that co-facilitators would be better placed to facilitate theinclusion of gender mainstreaming in intervention activities. However, thiswould represent an increase in the cost of interventions and also producethe risk that the actions are unsustainable after the co-facilitator pulls out.An alternative option may be the collaboration with LGA’s communitydevelopmentdepartment,butthishasnotyetbeentestedbyRLDC.

TheM4PapproachthatguidesRLDCinterventionsdoesnotprovidetoolstomainstreamgendernordoestheprivatesector levelof interventionallowaplatformtodealwiththe issues(asopposedto interventionsatcommunitylevel). Consequently, human and financial resources were not allocated to

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5 CONCLUSIONS AND RECOMMENDATIONS

Thisevidence-basedlearningexercisehighlightedarangeofaspectsthatarecrucialtopromotethecottonsub-sectorandincreaseincomeofproducers.

One of the main conclusions is the utmost importance of providing services,particularly in terms of inputs, farm implements, training, storage or control oftheproducts(weight,quality).Thepromotionofsuchservicescontributedtothedevelopment ofwin-win situations between producers and buyers. Among theproducers,theprovisionofservicesboostedthecottonproduction,productivity,and quality of products. On the buyers’ side, it contributed to securing accesstoproductsof increasedquantityandquality.Theadoptionofcontract farmingsystems reinforced productive and fair collaborations between producers andbuyers.

Itwasalsoshownthatfacilitatingandsupportinginitiativesfromtheprivatesectorcanpromotethegrowthofthesub-sectorbenefitingthemainactors–producersandbuyers–intermsofadditionalincomeandbusinessdevelopment.Theprivatecompaniesrealisedthattheyhadinterestinfurtherinvestingintheirbusinesses,instead of simply purchasing products from the farmers. These investmentscovered not only “hardware” (ginnery, warehouses, etc.), but also “software”(extensionservices,inputsdistributionsystems,etc.).

Furthermore, theexperience revealed that theprivate sectorhas also to investin spending time to establish a trust relationship with producers and otherstakeholders.Forthatpurpose,thereisaneedtodevelopacommonvisionandunderstandingonwhattoachievejointly,andtoclarifytherolesandcommitmentsof stakeholders towards this vision and in the long-run. In this regard, thecollaborationbetween theprivate andpublic sectors, and the establishmentofPPPs,provedtobebeneficialtoallstakeholders;benefitsincludeenhancedaccessofproducerstoinformation,trainingandlocaladvisoryserviceprovision,improvedaccesstoinput/outputmarkets,investmentinthesub-sector,etc.

The system of pricing remains a challenging issue in order to develop the sub-sector.ManyofthepartnerstookthepricefixedbytheTCBasareference,addinga premium of 5 to 10%. Despite this bonus, the price proposed to the farmersremained far below themarket price, led to problems of side-selling or simply

discouragedfarmerstocultivatecotton.Thisissuewouldhavetobeaddressedbytheconcernedstakeholders,includingTCBandbuyers.

The formation of FOs greatly facilitated the collaboration between farmersand buyers, particularly for the distribution of inputs and the provision ofadvisory services. On the other hand, the level of ownership of farmers ontheirownorganisationremainedlow.Littleattentionhasbeenpaidinthefieldof organisational and institutional development, which should lead to bettercapacitiesofnegotiationpower,beingabletodefendandrepresenttheirinterestbutalsotakingamoreactiveandcommittedroleinthesub-sectordevelopment.

Partly due to theM4P approach, gender issueswere insufficiently addressed.Thecottonsub-sectorbeingtraditionallyamalestronghold,challengesremainonhowRLDCcanpromotegenderequalitiesinwaysthatareacceptableintheprevailingsocio-culturalcontext.

The sustainability of the interventions supported by RLDC remains anotherchallenge.ThereisalackofclarityonRLDC’sexitstrategyandonhowthepartnerswillensuresustainabilityoftheinterventionbygeneratingallnecessarycapacitiesandresourcesbeforethewithdrawalofsupport.

The experience made by RLDC with facilitation based on the M4P approachhasshownthattheapproachisagoodtoolfordevelopingvisionandstrategy.However, implementation of interventions does not automatically lead tosystemicchanges.RLDC’sfacilitationrolewasdifficulttocommunicate.Inturn,innovationhasproventobeavaluableassetwhenapproachingsystemicchange.

TheexperienceofRLDCshowedthattheinterventionsinthecottonsub-sectorhavebroughtaboutchangesinthemarketsystemandgeneratedbenefitforthedifferent stakeholders.However, two critical factors complexly outside all thestakeholders’controlposeamajorthreatandcouldjeopardiseorevenruintheeffortsmade.Thevolatilityofpriceofcottononthe internationalmarket,andtheweatherconditions(drought)caneasilydiscouragefarmerstoplantcottonfromoneseasontoanother.Forexample,inavillagesupportedbyBioSustain,70farmersoutof75gaveupcottoncultivationfortheseason2010-2011duetothelowrainfall.

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Annex 1: Comparison between the five interventions in the cotton sub-sector

Conventionalororganiccotton

Provisionofseeds

Provisionoffertiliser

Provisionofpesticides

Distributionofinputs

Farmimplements:sprayingpumps

Farmimplements:tractorservices

Cashloanstoproducers

Organic(andconventionalcottoninconversion)Yes,onloanbasis-solesupplyerNo,butprovisionoftrainingonbiofertiliser

Yes(biopesticides),onloanbasisVillageinputcommitteesincollaborationwithleadfarmers

Yes,serviceprovisionfreeofcost,butinsufficientquantity

No

No

1

2

3

4

5

6

7

8

Organic(andconventionalcottoninconversion)

Yes,againstinputpremiumNo,butprovisionoftrainingonbiofertiliser

Yes(biopesticides),againstinputpremiumBioReExtensionofficers;KIHAMAhaveappointedtheirownextensionteamandtheyhandledistrbutionofinputsPumpsareownedbyBioReandareprovidedtothefarmerswiththeassistanceofBioReownextensionofficers.BioReprovidessolopumpstoKIHAMAvillagesandunderscrutinyoftheirownextensionteamtheyaredistributedtofarmersasandwhenrequiredOxendrivenfarminplements-ox-weeder,ripper,ridgeravailableineachbiorevillageofficesYes,interestfreeloansgivenbioRefarmers

Conventional

Yes,oncashpaymentorcreditYes,offerextendedtoFOtofinance50%offertilisercostonloanbasisconditionaluponpaymentforother50%byfarmers.Nottakenuponalargescalebecausefarmerslackcapital.Yes,oncashpaymentorcreditLeadfarmerswithassistanceofWardextensionofficers

Yes

Yes,onpartialloanbasis

No

Conventional

Yes,onloanbasis

No

Yes,onloanbasis

LeadfarmerswithassistanceofWardextensionofficers

Yes,onloanbasisforindividualmembers

Yes,guaranteesforrentingonloanbasisorcashpayment

Cashloansaregiventofarmersamongthe88

Conventional

No

No

No

TCB

No

No

No

Criteria BioSustain# BioRe MSK Solutions Ltd Oridoy TCB & Bariadi LGA

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Criteria BioSustain# BioRe MSK Solutions Ltd Oridoy TCB & Bariadi LGA

Extensionservices

FFS

ICS(organiccotton)

ProvisionofbagsforseedcottonOtherservices

Contractfarming

Yes-Collaborationwith10LGAextensionofficers-Trainingof22leadfarmers-Provisionofallowanceforleadfarmers-Provisionoftransportfacilities

4

Yes(2staffandleadfarmers)Lentfreeofcost

Provisionofcertificationservice

Yes,butnotsystematisedPricenotfixed(clausestatesthatTCBprice

9

10

11

12

13

14

contractedformorethan3years.BioRehavenotyetintroducedloansforKIHAMAfarmers,butarelookingatthepossibilitytosupportthemalsoinnearfutureYes-Trainingof15leadfarmers-Provisionoffreeinputsfordemoplotstoleadfarmers-Provisionoftransportfacilitiestoextensionteam-Provisionofextensionservicesbyownstaff4(eachvillageofKIHAMA)Yes(ownstaffandleadfarmersforKIHAMA)BioReowncottonbags

Provisionofcertificationservice,farmers’groupstrengthening(KIHAMA)

Yeswithindividual“BioRefarmers”andwithKIHAMAasorganisationPricenotfixedbuta

Yes-Collaborationwith25Wardextensionofficers-Trainingof55leadfarmers-Provisionofcommissionsandtransportfacilities

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No

MSKownbags

GroupformationMSKSolutionsLtdYes(writtencontractswithgroupsfromseason2010/11)

PricenotfixedbutbasedontheminimumpricesetbyTCBServiceswerenot

Oridoymembersonly

Yes-CollaborationwithWardextensionofficersfromthe4wardsthatcomprisethevillagestheyworkwith-Trainingof20leadfarmers

5

No

Lentfreeofcost

Yes,butnotformallyPricebasedonTCBServicespre-definedinmeetingsbutnowrittenagreements

LGAextensionofficersfromseason2010/2011

No

No

Nobags

Weightandqualitycontrolserviceby33villagecontrolcommittees(100in2010/11)Collaborationwithgovernmentofficers(4LGA,1TCBinspector,1weightandmeasuresauthority)Yes

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Criteria BioSustain# BioRe MSK Solutions Ltd Oridoy TCB & Bariadi LGA

StrengthofFOs

Groupstrengtheningactivities

Numberofproducers

Percentageofwomenamongproducers

Numberofvillages

plusorganicpremium)Someservicesarepre-definedatthestartofthecontractssomeareprovidedasneedsarise

WeakornogroupsYes,willdofromseason2010/11on1,188

3,245

3,500

5,000

4%4%7%30%

2203163

15

16

17

18

19

premiumof10%ontheprevailingmarketpriceServicespre-definedforfarmerswhoareincontractwithBioReandnopredefinedserviceswithKIHAMARatherstrong-KIHAMA:605members,ratherstrongoverallstructure,butweaksub-groups-Otherfarmers:15BioRerepresentatives,groupsaroundformanagingrelationwithBioReYes,since2009

KIHAMA:540BioRe:1,983KIHAMA:605BioRe:1,742KIHAMA:605BioRe:2,0513.5%(KIHAMA)3.5%(KIHAMA)3.5%(KIHAMA)3.5%(KIHAMA)

4(KIHAMA)4(KIHAMA)4(KIHAMA)

pre-definedinwrittencontractsinseason2009/10butdoneforseason2010/11

Veryweakornogroups63villagegroups(season2010/2011)withfarmersinnogroup.

Yes,willdofromseason2010/2011onwards

n/a

n/a

1,853

4,000

n/an/a7.50%Morethan10%

n/an/a3363

Strong88members612registredfarmers

No

290(225M&65F)

380(303M&77F)

702(549M&153F)

1,009(670M&339F)

23%21%22%34%

551015

33villagecommittees(season2009/2010)100villagecommittees(season2010/2011)

No

n/a

n/a

21,400

171,900

n/an/a26%30

205205205(33BACODEP)205(100BACODEP)

2007/08

2008/09

2009/10

Target2010/112007/082008/092009/10Target2010/112007/082008/092009/10Target2010/11

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Criteria BioSustain# BioRe MSK Solutions Ltd Oridoy TCB & Bariadi LGA

20

21

22

23

24

25

Totalacreage(acres)

Volumeofproductionseedcotton(tonnes)

Averageyieldperproducers(kg/acre)

No.ofcollectioncentres

No.ofWarehouses

WarehousesunderWRS

2,7001,2504,45014,500

115115

2,750organicand150conventional4,000

300350450400

65

35

141

200

None

None

5atGinnery

6atGinnery

0

6,40010,0009,075

KIHAMA:302,113BioRe:3,600,815KIHAMA:714,350BioRe:3,006,400KIHAMA:1,200,000BioRe:4,900,000325380380

4

4

4

n/a

4

4

4

1

n/an/a4,0008,500

3,800(withoutNzega)4,000(withoutNzega)

1,000(withoutNzega)&100inNzega10,000

300300300500

55outsideNzega(Theydidn’tbuyinNzegayet)111outsideNzega(Theydidn’tbuyinNzegayet)15inNzegaand68outsideNzega25inNzegaand75outsideNzega7atGinnery(outsidethereisnowarehouse)14atGinnery(outsidethereisnowarehouse)14atGinnery(outsidethereisnowarehouse)14atGinnery(outsidethereisnowarehouse)0

8431,200736(Duetoweather)1850

545900

170

485

Ranges150-700500

5

5

5

5

2owngodownsinBabati

Rent1godowninMoshi

1

167,200182,300135,000171,000

57,70051,600

33,200

400,000

350280250Notdeterminedyet

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

n/a

2007/082008/092009/10Target2010/112007/082008/09

2009/10

Target2010/112007/082008/092009/10Target2010/112007/08

2008/09

2009/10

Target2010/112007/08

2008/09

2009/10

Target2010/11

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Criteria BioSustain# BioRe MSK Solutions Ltd Oridoy TCB & Bariadi LGA

Transportationtobuyingpost(godown/collectioncentre)

Timingofpayment

OwnginneryoroutsourcedAccesstocreditforbuyingAccesstocreditforinvestmentCollaborationwithgovernment

Memberofcottonbuyerassociation(TCA)

Individualtransportationtobuyingpoint(godown/houserented)

Cashonthespot

Own

Yes

Yes

-vouchersystemforseedprovision-MoUwithRegionand3Districtsforexclusivityasbuyer-Selectedassolesupplyerofcottonseeds-Extensionservices-GoodcollaborationwithTCB(permit,exchangeofinformationoninputneedsatsub-villagelevel(seeddemandinventory),participationintrainingsofferedbyTCB)Yes

26

27

28

29

30

31

32

Individualtransportationtobuyingpoint(godown/houserented)

Cashonthespot

Outsourced

Yes

No

BioRehasnotyetbeenabletoaccessthesubsidiesfromgovernmentandthushadtopayfromownfunds

Yes

Individualtransportationtobuyingpoint(godown/houserented)

Cashonthespot

Own

Yes

Yes

-Vouchersystemforseedsandpesticidesprovision-Extensionservices-Governmentisrepresentedinsteeringcommittee-GoodcollaborationwithTCB(licence,inputs,CottonQualityCertificate(CQC)TestingofLintsQualityatTCB,UkiriguruLaboratory)-TractorsforhiringtofarmersatNzegaDistrictCouncil.

Yes

Individualtransportationtobuyingpoint(godown/houserented)ifpossibleCollectionatproducers’houseifroadispassableandgodowntofaraway2-3weekslateragainstreceiptOutsourced

Yes(fromCRDBbank)

No

-UseVouchersystemforseedandpesticidesprovision-Extensionservices-GoodcollaborationwithTCB(licence,inputs)

No

n/a

n/a

n/a

n/a

n/a

-TCBrepresentativestationedlocally-TCBpromotesinterventionsinthevillages-LGAprovidedcertifiedweighingscales-Collaborationwithgovernmentofficersforcontrolservices(4LGA,1TCBinspector,1weightandmeasuresauthority)

n/a

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Criteria BioSustain# BioRe MSK Solutions Ltd Oridoy TCB & Bariadi LGA

33

34

Price(TZS/kg)

Competition

n/a

630basedonTCBprice(600TZS/kg)plus5%organicpremium

TCBplus10%organicpremium(2010/2011)

No,firstlybecauseofremotenessandabsenceofproduction,andnowsecuredexclusivity

n/a

360+80(subsidyfromgovernment)minus5(inputsubsidytokihamafarmers,allcottoninconversion)Startoftheseason:600forcottoninconversion,plus10%fororganiccottonplus15(seedsfornextseason).ButbecauseofhighcompetitioninShinyanga,pricewentupto1,200TZS/kg.1,600TZS/kg+organicpremium70TZS/kgplus15TZS/kgreservedasinputpremiumYes,high

TCBPrice

450(TCBPrice)

600(TCBPrice)

Opentopaymin.1500TZS/kg

Moderatebecauselowlevelofproduction,butcouldincreasewiththeincreaseofproduction

n/a

450(TCBPrice)

600(TCBPrice)

No,becauseofremotenessofarea

300-400

360-500

600-1200

>1000

Yes,high

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2008/09

2009/10

Forecast2010/11

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THEM4PAPPROACH10

TheM4Papproachaimsatdevelopingmarketsystemssothatthey functionmore effectively, sustainably andbeneficiallyforpoorpeople,buildingtheircapacitiesandofferingthemtheopportunitytoenhancetheirlives.

M4Pisanapproachtodevelopmentthatprovidesguidancenot only on understanding of the poor inmarket systems(analysis)butonhowtobringabouteffectivechange(action).Analysisshouldidentifytheunderlyingconstraintsimpinginguponmarketsystemsandconcentrateonaddressingthese.

Its focus is on developing market systems, assessed withrespecttodifferentmarketfunctionsandplayers,publicandprivate,formalandinformal.ThissystemiccharacterofM4Pdefinesmanyofitsmostimportantfeatures.

The reason forM4P’s focusonmarket systems is clear.Bybringingaboutchange in themarketsystemswithinwhichpeople liveandwork it ispossibletoeffectsubstantialandlastingchange thatcan impactonmanysustainably ratherthanafewtemporarily.

Markets for land, labour, raw materials, capital, goodsand services are all different but they share the same keyelements. In practice, all market systems can be viewedthrough the same lens consisting of different sets offunctionsandplayers(seefigurebelow).

MARKET PLAYERS

RULES

COREFUNCTION

(delivering and resourcing different functions)

Information

R&D

Coordination Relatedservices

Infrastructure

Skills & capacityGovernment Private sector

SUPPORTING FUNCTIONS

Informal networks

Informal rules& norms

Not-for-profit sector Representative bodiesLawsStandards

Regulations

Membershiporganisations

SUPPLY DEMAND

Setting and enforcing rules

Informing and communicating

10 Extracted from“Asynthesisof themakingmarketswork for thepoor (M4P)approach”apublicationby theUKDepartment for InternationalDevelopment (DFID)andtheSwissAgency forDevelopmentandCooperation(SDC),2008”.

Inanymarketsystem,therearethreemainsetsoffunctions–core,rulesandsupportingfunctions.

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CORE

This isthecentralsetofexchangesbetweenproviders(thesupply-side)andconsumers(demand-side)ofgoodsandservicesat theheartofanymarket.Exchangeisconventionallythroughmoney,butcanbethroughnon-financialaccountability (say in government-provided services) or through informalquidproquoarrangements(insocialorbusinessnetworks). Inmostmarketsystems,theprivatesectorcanbeseentobethemainprovider.

RULES

Theseacttoshapemarketoutcomesandgovernparticipationandbehaviourinmarkets. Rules include informal rules or norms, formal rules or laws andotherstandardsandcodesofpractice.Formalprovidersofrulesarecommonlygovernments or membership organisations. Rules are essentially a non-commercialorpublicorcollectiveroleinmarkets.However,theirenforcement(often the most problematic issue) can involve private sector players (forexample,ininternationalfoodqualitystandards).Informalrulesaregenerallyaproductoflocalcultureandvaluesystemsandpracticesandinvariablydefinetheextenttowhichformalrulesareaccepted.

SUPPORTINGFUNCTIONS

A rangeofother functions support the coreexchangeandhelp themarkettodevelopandgrowincluding,forexample,consultationprocesses;researchand development (R&D); information; and capacity development and co-ordination. The nature of these, and who provides them, varies from onecontexttoanother.Labourmarkets,forinstance,mayrequireinformationonmarkettrends,vacancies,availableskillslevelsandthelegalframework–whichisoftenbestprovidedbygovernment.Employmentagencieslinkingsupplyanddemandmightbebestprovidedbytheprivatesector,whiletrainingislikelyto

involvebothpublicandprivateorganisations.Coordinationinspecificskillsanddisciplinesisalwayslikelytoinvolvegovernmentandbusinessorprofessionalassociations.

SustainabilityisaprimeconcernofM4P.Thismeansconsideringnotjusttheexistingalignmentofkeymarketfunctionsandplayersbuthowtheycanworkmoreeffectivelyinthefuture,basedontheincentivesandcapacitiesofplayers(government,privatesector,associationsetc)toplaydifferentroles.

M4Prequiresthatagenciesandgovernmentsplayafacilitatingrole.Asexternalplayerstheyseektocatalyseothersinthemarketsystem(whilenotbecomingpartofitthemselves).Forgovernments,exceptwheretheyareplayinglonger-termroleswithinthemarketsystem,andagencies,facilitationisinherentlyatemporaryrole.

Finally,asanoverarchingframeworkM4Pdoesnotnecessarilyreplaceotherspecific methodologies and tools but provides a transparent and multi-disciplinaryframeworkwithinwhichtheycanbeutilisedandadaptedinordertoaddresstheirlimitationsandsoenhancetheirefficacy.

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Thisdocumentisthefirstofaseriesaimedatsharingtheexperienceof,andthelessonslearntby,theRuralLivelihoodDevelopmentProgramme(RLDP).Itistheproductofa“capitalisationofexperience”process,meaninggivingavaluetotheexperiencemade,whichcanalsobecalled“evidence-basedlearning”.Whilereleasing this publication, the objective is to inform relevant development organisations and partnersaboutwhatworkedandwhatdidnot intheframeandcontextofRLDPinterventions.Certainly,atthetimeofpublishingthisdocument,thingsarealreadychanginginthefieldoratpolicylevel.Buttheaimistokeeptheinstitutionalmemoryofwhatwasdone,aswellastosharetheexperience.Thisdocumentwillbefollowedbyothersinthecomingmonths.Theywillcoverissueslikeruralcommercialradio,contractfarming,qualityseeds,collectioncentres,etc.

Softcopiescanbedownloadedfromthiswebsite:www.rldc.co.tz

Rural Livelihood Development Company (RLDC)

2nd floor, NBC Building, Kuu Street

P.O. Box 2978, Dodoma

Tanzania, East Africa

Tel: +255 26 2321455, Fax: +255 26 2321457

Email: info@rldc.co.tz | Website: www.rldc.co.tz

May2011