smallholder agric-food systems gets...

VOLUME 5 / ISSUE 3 MK1 800 / US $ 5.30 July - September 2020 AGRI-MALAWI MAGAZINE

Smallholder farmers’ challenges addressed 10

Farmvest launches growspaces16

AIP to drive food security efforts 6

Smallholder agric-food systems gets boost

3 Agri-Malawi Magazine | www.agri-malawi.com

July - September 2020

No need to re-invent the wheelLet’s adapt to changing agriculture landscape Contents

Editorial Note

Move small farmers from archaic farming methods : ................4

Cover Story

Smallholder agric-food systems gets boost : ................5

News

AIP to drive food security efforts : ................6Better dietary options for healthier children : ................8Hemp to replace tobacco production : ................8EUS outbreak reported in Mchinji : ................10Smallholder farmers’ challenges addressed : ................10

Insight

Malawi sets stellar example with push for food security : ................12-13

Business,Companies & Markets

Farmvest launches growspaces : ................16Meyn helps aspiring poultry processors in Africa : ................17 Regional News

Vertical farming, new normal disrupting food supply chain : ................20COVID-19 impact on agriculture: assessment of recovery efforts : ................21-22

Technology News

Farmers adopt agriculture technologies to improve yield, efficiency : ................23

ADVERTISERS INDEX

PublisherEvans Mumba

General ManagerArnold Chinyemba

Acting EditorAndrew Maramwidze

Associate EditorIan Barnes

Editorial Contributor(s)Esnala Banda

Potipher TemboObert SimwanzaJeffrey Sinkamba

Sam PhiriChilopa Kasoma

RECAPO IFC

POLYOAK 5

FES 7 & 9

SEEDCO 11

HAZERA 14-15

MAIIC 18

STANDARD BANK 26

MULAWE 27

COMBINED CARGO OBC

Subscription & [email protected]

Hazel Mukwamba

Graphics and ProductionsMerlin Wilson (Pty) Ltd

Advertisement SalesThomas Phiri

Denise MudawarimaJoseph Nyirenda

Doris LikondeDon Chulu

Nkosilathi MudiyiMusa Chigiji

Michael MondolokaJoshua Chibwe

BLANTYRE

Contact Us:

4th Floor, City Boutique,Haile Selassie Avenue,

Blantyre, Malawi

Postal Address: PO Box E317,

Blantyre, Malawi

Tel: +265 88 255 5643Email: [email protected]


July - September 2020Editorial Note

Move small farmers from archaic farming methods

Editor: Andrew Maramwidze

mallholderfarmersarean importantpieceinthecountry’s agriculture puzzle and attain-mentoffoodsecurity.

With the globe facing looming food se-curityissues,thesmallholderfarmersareand have always been stakeholders notbeleftbehind.

Yes,wecannottalkfoodsecuritywithoutinputsfromthesmallscalefarmers.They

S

needtobeincorporatedineverystep,asthe country takes baby steps initiativestowardsbeingselfsufficient.

For subsistence farmer to feed his/herhousehold and supply extra to neigh-boursisastartingpoint,towardsbeingaselfsufficientanation.

More smallholder farmers should betagged along in improving the country’sagric-foodsystems.

Newsofafive-yearDevelopmentofSmartInnovation through Research in Agricul-ture (DeSIRA) project expected to scaleupoperationsofsmallholderfarmers.

It is indeedhigh time thatwemoveoursmallscalefarmersfromarchaicmethodsof farming to themodernwaysofdoingthings,which is likely togivethemmoreyieldswithlesslabourinput.

Remembermostofthesmallholderfarm-erscomefromthevulnerablemembersofourcommunitiesandcanonlychangethenarrativeontheirproductivityandharvestthrough some cash injection and skillstransfer.

So the gesture by the European Union

(EU)tofinanceDeSIRAprojecttothetuneof €6.3 million towards addressing thechallenges in the local smallholder ag-ric-foodsystemsiswelcome.

Wehopetheprojectwillachieveitsgoals,thoughutilisingclimate-smart,integratedtechnological options, adapted to localconditions and the farmers’ realities tospurfarmers’fortunes.

However, the new system should notcompletely erode some of the culturalmethods,whichcouldhavebeenusedtopreserveourcropvarietiesandseeds.

Though we welcome hybrid plants andseeds,someofthemtakeawaytheorigi-naltasteofcertainproduce;wehopeau-thoritieswillengageofsmallholderfarm-ersinbalancingclimate-smart,integratedtechnologicaloptionsandtraditionalval-ues.

It’satrickysituationbutasolutionneedsto be found and help reach the desiredyieldsandproductivity.

Remember to share comments, letters and opinions with us.

Enjoy the read!



sgovernmentsheightensfood securityefforts,thelocalfarming communityisexpectedtobene-fitfromafive-yearDevelopmentofSmartInnovation through Research in Agricul-ture(DeSIRA)project

Theproject seeks to improveproductiv-ity,profitabilityandsustainabilityofagri-cultureandfoodsystemsinanumberofcountriesacrosstheglobe.

FinancedbytheEuropeanUnion(EU)tothetuneof€6.3million,theinitiativealsoseekstoaddressthechallengesinthelo-calsmallholderagric-foodsystems.

The project intends to utilise cli-mate-smart, integrated technologicaloptions,adaptedto localconditionsandthefarmers’realitiestospurfarmers’for-tunes.Despiteagriculturebeingoneoftheleadingeconomicmainstayforthecoun-try, theDirectorofAgriculturalResearchServices (DARS), Dr. Wilkson Makumbahasbemoanedthat thesectorstill faces

Smallholder agric-food systems gets boost

A

Cover Story

several production challenges, resultingfromadverseclimaticconditionssuchasrecurrent droughts and floods, decliningsoil fertility,desertification,andoutbreakofpestsanddiseases.

“The sector accounts for 30 percent of Gross Domestic Product (GDP), gen-erates more than 80 percent of the na-tional export earnings and more than 80 percent of our population depends on agriculture for food, income and em-ployment,”saidMakumba.

It is against this background that DeSI-RAprojectwasdesignedto improvetheclimatechangeadaptationofagriculturaland foodsystems inMalawi through re-searchanduptakeof integratedtechno-logicalinnovations.

According toMakumba, the project ob-jectivesaredirectlyalignedwiththegov-ernment’s research priorities to addressclimate change and build sustainableresilienceasset-outinMalawi’sNational

Agricultural Policy (NAP, 2016) and Na-tionalAgriculturalInvestmentPlan(NAIP).

DeSIRAproject isalsoexpectedtocon-tributetounderstandingoftheopportuni-tiesandconstraintsforuptakeofintegrat-edtechnologyoptionsbyfarmersthroughsocio-economic analysis of barriers toadoptionaswellastheavailableopportu-nitiesandconditionsrequiredtoincreasetechnologyuptake.

C

M

Y

CM

MY

CY

CMY

K

PPK024-7.pdf 1 2018/08/31 12:38


July - September 2020News

gricultureauthoritiesforecasta bounty6.8millionmetrictonsof maize for the 2020/21 growingseason.

The anticipated harvest is on the back-dropoftheministryofagriculture’sAfford-ableInputsProgramme(AIP)programmetargeting4.2millionsmallholderfarmers.

Lobin Lowe, Minister of Agriculture toldmedia that theAIP is targetingallsmall-holder farmers with the aim of enablingthe country to attain food security athouseholdandnationallevelsandreducepoverty.

“The programme will increase access to quality and improved farm inputs such as fertilizers and maize seed,”saidLowe.

According to Lowe, smallholder farminghouseholds in thecountryareestimatedat4,279,100andeachsmallholderfarmerwillbeentitledtoaccessone50kgbagofUrea,one50kgbagof23:10:5+6S+1.0Zn

AIP to drive food security efforts

A (NPK) and either one pack of 5kg hy-bridmaizeseedoronepackof7kgOPVmaizeseed.

“Farmerswillbebuyingone50kgbagofeither urea or NPK atMK4, 495.00 andbuy maize seed pack at MK2, 000.00,”saidLowe.

Thefertilizerbeingofferedtofamersintheprogramme isenough foranacreor0.4hectares.

Meanwhile at national level, theMinistryexpects that 1.7million hectareswill beplantedtoimprovedmaizeseedandbothbasalandtopdressingfertilizersapplied.

“About 6.8 million metric tons of maize will be realized. If we subtract the 3.2 million metric tonnes, which is nation-al food requirement, 10.7 percent of the production to postharvest losses, 220,000 metric tonnes for industrial use and 217,000 metric tonnes for Strate-gic Grain Reserve replenishment, then

the country will produce excess maize of about 2.48 million metric tonnes of maize. This excess ladies and gentlemen will be available for export,”saidLowe.

Hesaidfarmerswillbeaccessingcheapinputs from both public institutions andprivate companies which will be givencontractstoretailthefarminputstofarm-ers.

TheAIPhasreplacedtheFarmInputSub-sidy Programme (FISP) which that wasselectingabout900,000 farmers toben-efitfromfarminputs.

LowesaidtheFISPwasmarredwithalotof challenges such as suppliers buyingcoupons from desperate farmers; con-tractsbeinggiventosupplierswhocouldnotperformtopeople’ssatisfaction;andvery few farmersbeing targeted inavil-lage,whichledtofarmerssharingthein-puts.



ver16,000people,including youngchildren,havebenefited from‘CareGroups’inthecoun-try’svillages,thattrainpeopletopreparenutritiousmealsusinglocalproduce.

A2018integratedsurveybytheNationalStatistical Office ofMalawi listedDedzadistrictamongthosewiththehighestmal-nutritionratesinMalawi.Ironically,Dedzais one of themajor production hubs forlegumessuchasbeansandgroundnutinMalawi.

The district is also popular for cerealssuchasmaize,aswellasrootandtubercropssuchas Irishpotato. Itwasnotedthatmanyfarmersinthedistrictproducemost of their crops for sale, using onlymaizeandvegetablesfortheirowncon-sumption.

ItisagainstthisbackgroundthattheMa-lawi Seed IndustryDevelopment Project(MSIDP)consortiumstartedworkingwithsmallholder farmer groups in Dedza, tonotonlyhelpthemsecuretheirharvests,butalsotointroducethemtonewfeeding

Better dietary options for healthier children

O systemsthatwouldenhanceutilizationofsuchcrops.

In partnership with government’s Nutri-tion Coordinating Committees, the proj-ect adopted the government-approvedapproach of the ‘Care Group’ model totrain communities on different diets thatincorporate crops like groundnut andbeans in their recipes. In 2019 alone,16,974 households were reached withnutritiontraining.

ThisefforthasnowgrownbeyondDedzadistricttootherpartsofthecountry.

Juliana Maliro, 57, from Mpenda villageinDowadistrictsharesaninterestingsto-ryabouthergrandson,Robert,whohadbeeninandoutofhospitalsforthemostpart of his young life. His parents weretoldthattheboywasconstantlysickbe-causehewasmalnourished.Theydidnotknowwhat todo,as they thoughtnutri-tiousfoodwastooexpensive.

The worried grandmother took Robertintohercareandfedhimadietbasedon

a recipeshehad learnt fromawomen’scaregroupinhervillage.

“After noticing how dire the situation was, I started feeding my grandson with this new porridge made from maize, beans and groundnut flour, and within a month, I saw a big change.”shebeams.

The InternationalCenter forTropicalAg-riculture(CIAT),throughtheMSIDPtrainscaregroupsonhowtopreparenutritiousrecipes using locally availablematerials.InDowa,CIATcollaborateswiththeRhe-maInstituteforDevelopment,anongov-ernmental organization that servespoor,vulnerableandmarginalizedcommunitiesaroundLumbadziinthedistrict.

Through Rhema Institute, CIAT hastrained 18 care group leaders, includingJuliana,whosegroupiscalledThandizo,on different food recipes that are basedon locally available commodities. SomemembersofThandizohavestartedsmall-scalebusinessessellingdoughnutsmadewithrecipesthatCIATintroduced.

gricultureinvestor,IbrahamAziz hasunveiledafifteenmillionUS dollars package for productionofindustrialgradehempinthecountryinpartnershipwithLesterInternationalfromtheUnitedKingdom.

Azizwants the country to look for alter-natives to survive, as the major foreignexchange earner tobacco is under at-tackfromraginganti-smokingcampaignaround the world, championed by theUnitedNations(UN).

Hesaid industrialhempindustryhasthepotentialtoturnaroundtheeconomicfor-tunesofthecountrywithinthenextfore-seeablefuture,ifsubstantialinvestmentismade to cultivate the crop andproducefortheexportmarket.

“This is the reason why we have brought in Lester International into the country because they are experienced investors in agriculture and particularly the indus-trial hemp sub-sector with an impeach-able track record spanning many coun-tries in the world.”

Hemp to replace tobacco production

A“Weknowthatwiththemonboardasourpartnersweareset tobenefit immense-lyfromtheirexperienceinareassuchasinnovation in green house technology,whichwehopewillcascadedowntoaddvalue toourprocessesandalsohelpusestablish and grow the industry here inMalawi,”saidAzizi,addingthatLesterIn-ternationalissettopumpin$15,000,000as an initial capital with plans to investmorewithintheshorttomediumterm.Azizi said his organisation will use thesmallholder farming business model toproduce the industrial hemp in order tohelpempowerlocalfarmersthroughval-ueadditionwithinlocalisedvaluechains.

“We will train the farmers; provide them with loans for farm inputs and buy the hemp from them at good prices so that they enjoy uplifted lives through the eco-nomic ripple effects coming as a result

of them playing an integral part in the growing and production of the hemp.”

In February this year, parliament ofMa-lawi approved the Cannabis RegulationBill, which legalized the cultivation, pro-cessingandmarketingofindustrialhempina landmarkdecisionwhichset theal-lowableTHC(thechemicalthatgivesyouthehigh),levelatafull1.0percent,there-byallowingthecountrytojoinagrowingnumberofcountriesaroundtheworldthathavelicencedthecultivationofindustrialhemponacommercialscale.

Thepassingof theCannabisRegulationBill led to theestablishmentof theCan-nabis Regulatory Authority (CRA) whichwillberesponsibleforlicensingandregu-latingmedicinalandindustrialhemppro-grammesinthecountry.



uthoritiesattheministryofagriculturehaveannounced asuspectedoutbreakofEpizooticUlcerative Syndrome(EUS)inMchinjiDistrict.ThelatestreportfromUnitedNation’sFAOshowsthatprelimi-nary investigationsconductedso far, indicate that thediseasehasaffectedalmosttheentiredistrictofMchinjiandaninfinitenumberoffishisathighrisk.Secretary for the Ministry of Agriculture, Irrigation and WaterDevelopment,GrayNyandulePhirisaidthediseasehassofarspreadtootherwaterbodieswithinMchinji.

PhiriaddedthatEpizooticUlcerativeSyndrome(EUS)isahighlycontagious fungal disease thatmostly affects freshwater fishandhasverydevastatingsocio-economicconsequenceswhichincludedisruptionofnaturalaquaticspeciesdiversityasaresultofmassivefishmortalitiesandreducedlivelihoodofsubsistenceandcommercialfishermen.

Hesaidauthoritiesarecurrentlyworkingtirelesslytocontainthediseaseandwillcontinueupdatingthegeneralpubliconthesit-uationfromtimetotime.

Meanwhilethesouthernregioncontinuestoregisterthehighestproportionofhouseholdsrelyingonthemarket(purchase)asthemainsourceoffood,currentlyestimatedat54percent,having

rivatepublicpartnership(PPP)betweenWorldFood Programme(WFP),governmentandthecountry’s developmentpartnersisworkingtostrengthenthelive-lihoodsandformalmarketopportunitiesofsmallholderfarmers.

The initiative dubbed Smallholder Agriculture Market Support(SAMS)istoaddresstheconstraintsfacedbysmallholderfarm-erssuchaspostharvestlosses,financialmanagementandmar-ketaccess.

In addition, providemarket information to farmers, facilitatingtrainingoncooperativegovernanceandagribusiness,andcre-atingmarketaccess.

According toWFPsomeof theSAMSactivities follow impactpathwayssuchascreatingstabledemand(buyers), fromWFPandotherquality-orientedbuyers,otherinstitutionalbuyersand

EUS outbreak reported in Mchinji

Smallholder farmers’ challenges addressed

A

P

increased from27percent in the firstweek ofMay,” said thereport.According toFAOapproximately 21percentof house-holdsinthesouthernregionhavebeenclassifiedinPhase3ofreducedcopingstrategyindex,whichisafivepercentincreasefrom16percentinthefirstweekofMay2020.The UN organisation further said one in five households isadoptingnegativecopingmechanismforsustainability.Andthemost affected districts include Phalombe,Chikwawa,MulanjeandMangochi.Likewise,thesamesituationhasbeenregisteredinNkhotakotadistrictlocatedinthecentralregion.Inaddition,theproportionofhouseholdsclassifiedasPhase3basedonreducedcopingstrategyindexinthenorthernregionhasdroppedfrom14percenttothecurrentestimateof7per-cent,whileinthecentralregion,thishasdroppedfrom15per-centto10percent.Meanwhiletheaveragepriceofmaizeintheweekending19JulywasestimatedatMK170.01perkilogram.“Comparing with the first week of May, an eight percent in-crease was observed in the average price of maize from MK 161.20/kg to MK 170.01/ kg. Districts in the southern region continue to record higher prices while districts in the central region continue to record lower prices.”

privatecompanies,encouragingsmallholderfarmerstoinvestinagriculture.Anotherelementwillbe inclusiveaggregationsys-temssuchasfarmerorganizations(FOs)andcooperativesthatempowersfarmerstoworktogethertobuildcollectivebusiness-es,increasingtheirbargainingpowerandaccessquality-orient-edmarkets.

The projectwill also provide household-level support, helpingfarmersproducemorehigh-qualitycrops, reducepost-harvestlosses,improvegenderequality,andstrengthenshouseholdnu-trition.

Thecreationofaconduciveandenablingenvironmentthroughinvestments in strengthening market systems for smallholderfarmersandthegovernment’sfoodbasedprogrammesisanoth-eraspect,theSAMSinitiativewillzoomintopotentiallycreatingavibrantandinclusiveagriculturaltradeinruralareas.


July - September 2020Insight

upportingsmallfarmersin Africawouldboostnutrition, stimulate rural economies andtackletradedeficits.

IsMalawishowingAfricathewaytoagri-culturalreform?Thoughtiny,itistheonlyAfricancountrydeliveringonthecommit-mentallAfricancountriesmade in2014— to spend at least 10 percent of theirnationalbudgetsonagriculture.

SotheneglectedAfricanfarmerusesfarless fertiliser and irrigation— just morethanthreepercentofcultivated landun-derirrigationvstheglobalaverageof21percent—thanfarmerselsewhereintheworld. And they face deeper infrastruc-tureobstacles,suchaspoorroadandrailaccess tomarkets,andalso lowaccesstofinancing,saysJakkieCilliers,founderandnowchairoftheInstituteforSecurityStudies(ISS)inPretoria,inhisnewbookAfricaFirst!:IgnitingaGrowthRevolution.

Theresultoftheneglectofagriculturehasbeenlowercropyields, largeagriculturaltrade deficits,malnutrition and low ruralincomes.

ThoughagriculturalyieldsinAfricaareim-

Malawi sets stellar example with push for food security By PETER FABRICIUS

S proving,thegapwiththerestoftheworldiswidening.Average tonnesperhectareare now about 3.7, vs about seven inSouthAsiaand12inSouthAmerica.

AndCilliersnotesthatAfricahadalargeaverageagriculturaltradedeficit(theval-ue of imports minus that of exports) ofabout$100bnin2018,whichwasexpect-ed to rise tomore than $330bn-plus by2030.

This growing deficit is aggravated bypost-harvestwastageof foodcrops, thehighest in theworld.Andtheoverallag-riculturaltradedeficitsaggravatefoodin-securityandmalnutrition.

For instance, when Kenya shifted frombeing a net exporter of about 1%of itsfooddemandbetween1970and1990,tobeinganetimporterofabout5%offooddemandbetween1997and2013,theav-erage Kenyan’s calorie intake droppedfrom about 2,300 a day — the recom-mendedamount—toonly2,000aday.

This calorie-deficient diet is a driver ofundernutrition and stunting, which cancontributetoavarietyofhealthproblemsthatforcechildrentofallbehindorwith-

draw from school, Cilliers says. And soheproposesadifferentapproach toag-riculture:forAfricancountriestoreturntobasics;tosupporttheirsmallholder,sub-sistencefarmerssotheycangrowstapleindigenous foodcropssuchascassava,cowpea and yam mainly for domesticconsumption, using traditional farmingmethods, rather than cash crops, with“sophisticated”methods.

“In order to capitalise on the benefits of having an educated and healthy popu-lation there needs to be an unwavering emphasis on self-sufficiency, as well as on productivity improvements,” Cilliers says in the chapter titled “Wanted: A Revolution in Agriculture”.

That,heargues,willsolvethecontinent’sfundamental problem of food insecuri-ty andpoornutrition, sendingbetter-fedchildrentoschoolto learnmoreandac-quire the necessary skills to drive eco-nomicgrowth.

Theriseinfarmers’incomeswillstimulateruraleconomiesandcreateupstreamanddownstreambusinessescentredonfarm-ing. And so he models an “agricultural revolution” scenario in which African



governments would intervene by boost-ingaveragecropyields from thecurrent3.7 tonnes/ha to 5.5 tonnes/ha in 2030and6.2tonnes/hain2040;increasingthearea of land under cultivation by cropsandthe landunder irrigationeachby10percentbetween2020and2030;andcut-tingpost-harvestlossesby15percent.

The impact would be “impressive”, Cil-lierssays,includinganadditional440-mil-liontonnesofallfoodsby2040comparedtothecurrentpathforecast.Averagecal-ories per person a day would rise from2,600in2018tomorethan3,000in2040,meaning 3.5-million fewer malnourishedchildren.

Economically, the scenario would boostGDPpercapitabyanextra$260andre-ducethenumberofextremelypoorAfri-cansby128-million.

Michael Aliber, head of agricultural eco-nomics at the University of Fort Hare,generally agrees with Cilliers’s analysis,including the way he grounds the cur-rent stateof agriculture in historical andgeophysical realities — which includesCilliers’sassessmentofAfrica’sgenerallypoorsoilanditsexperienceofbothArab

andEuropeanslaveryasmajorinhibitorsofagriculturaldevelopment.

ItclearlyisagoodthingforAfricangov-ernmentstoboostagriculturalproduction,but is itnecessarytoaspiretoself-suffi-ciency,asCilliersproposes?

Asheisfullyaware,aclassictradetheo-ristwoulddisagree,noting thenotionof“comparative advantage”, sayingcoun-tries should produce whatever they canproducemost efficiently, and import therest.

Fewcountries globally are self-sufficientinfood.Mostwouldprefertodevotetheirtime,energyandintelligencetoproducingandexporting, say computer chips, andusethelargerevenuesfromthosetoim-portfood.

AsCilliersshows,Africa’sbasicproblemofa largeandgrowingagricultural tradedeficit is notnecessarily addressedonlybyfocusingonstaples.

Thedeficitislargelytheresultofthewide-ly lamentedphenomenon thatAfricaex-portsmainlyraw,unprocessedagricultur-alproducts(andothercommodities)and

soearnsrelativelylittleinforeigncurrencyforthem.

InthecaseofKenya,growingmoreofitsownfoodwouldreducefoodimportsandtherefore,allelsebeingequal,reducethetradedeficitandalsoincreasecaloriein-take. But the deficit could and arguablyshouldbeaddressedalsobyaddingval-ue to cash crop exports such as cocoaand cashew nuts, as Cilliers also sug-gests, noting howAfrica produces 45%of the world’s cashew nuts yet exports90%ofthatcropforprocessingabroad,andproduces70%of theworld’scocoabeansbutisresponsibleforlessthan1%ofchocolateexports.

Theoretically, if Africa could correct thatimbalance—ascountriessuchas IvoryCoastandGhanaarestartingtodo,Cil-liers says, by processing more of theirowncocoa—itwouldclosetheagricul-tural tradedeficit and earnmoremoneythatcouldbeused for imports.Butper-haps, the global market is simply notworkingforthiscontinentandsoithas,attheveryleast,toavoidhungerandstarva-tionbygrowingitsownfood.

*Fabricius is a consultant to the ISS.


July - September 2020Business,Companies & Markets

outhAfricanandZimbabwe- basedAgriculturalInvestment Firmhas announced today thatthey will be expanding into Zambia bylaunchingGrowspacesitsUrbanFarminginitiativethataimstosetupandrunpro-fessionalurbanfarmsinZambia.

Inlightofrecentglobaleventscausedbythe coronavirus that has caused majordisruptions in the localandGlobalFoodSupply chains, Farmvest has taken upthe initiative to help meet the growingdemandsof freshproduceby theurbanpopulationandthegoalistohaveprofes-sionallyrunurbanfarmsclosetoallmajorcitiesinthenextfewyears,thiswillhelpalso reducedemandon rural farmers tofocusonmorelucrativecashcropsAccording to the WHO because of thefast-growing urban Populations a lotof people living in cities are not able to

Farmvest launches growspaces

S accessFresh,Healthy,andOrganicpro-duce.ThereisagrowingnumberofcasesofdiseasesrelatedtobaddietandeatingfoodswithtoomanychemicalsandPes-ticides.“We aim to only grow organic food using Biofertilizers and natural nutrients at our urban farms, the big focus is on healthy, affordable, and natural produce. We will be contracting growing Produce on behalf of individuals, retailers, and restaurants and we will also have secure allotment spaces available for people to come and grow their own food.”

“In lightof recentglobalevents, there isnowagreateremphasisforpeopletoliv-ingandmaintainingahealthy lifestyle.Alotofdiseasesarecausedbypoordiets.Wewant tobringaffordableandhealthyfoodtothemassesandbylaunchingtheurban farms we believe that that’s the

firstStep”–MichaelMatopeFounderofFarmvest.Farmvest is planning on launching thefirstGrowspacesUrban Farm in Lusakaonthe1stJune2020andhasalreadyse-curedthelandsome20kmfromtheCBD.

Inline with Farmvest model they haveopened up the possibility for people tobecome investment partners and havealready received significant amounts ofinterest from people who are looking toinvestFarmvestisfinalizingtheprocessofreg-istrationwithrelevantauthoritiesinZam-bia,theyarealsointalkstosecurefurthersitesinMajorcitiesthroughoutthecoun-tryandhopetohelpshapethefutureofurbanfarminginZambia


July - September 2020Business,Companies & Markets

heglobalCOVID-19pandemic hashadatremendousimpact onhumanhealthandtheecon-omyworldwide.Poultryprocessingspe-cialist Meyn is eager to help recoverhuman health and global economy bysupporting aspiring poultry processorsand farmers in Africa to professionalizetheir business to achieve higher levelsof hygiene, efficiency and increase theirprofit.“Whether it concerns farmers willing totake the first steps into processing, ex-pansionof existingprocessingplants orexploring theopportunitiesof increasingyield, we are more than happy to helpachieve their ambitions,” saidMilan vandeBeek,areasalesmanageratMeyn.

Meyn helps aspiring poultry processors in Africa

T Meynisreadytohelpsmallandbigfarm-ersestablishafacilitycapableofprocess-ing 1.000 birds per hour to expandingtowardsanastonishing15.000birdsperhour.

“Our strength is treating each ambition individually, look for customized solu-tions, match opportunities in the local market with business potentials and continuously develop concepts and solutions to help and improve this indus-try,”saidvandeBeek.

Oneof themost recently launchedcon-ceptsofMeynistheirLEAPconcept:Lowinvestment,Expandable,(semi)Automat-ic Processing allows poultry processorstoprofessionalizepoultryprocessingwitha(semi)automaticconcept.

At the start, only minimal investment isneeded,afterwhichprocessorscangrowalongwiththeirmarketandexpandtheirplant accordingly. The concept has al-ready proven to be highly successful inAsia.

LEAP allows both independent profes-sionals as well as small businesses tostep into the untappedmarket of (semi)automated processing. Especially nowCOVID-19 has put the existence of thealready contentious wet markets underincreasedpressure.

The main theory that the beginning ofCOVID-19couldbetracedbacktoawetmarketinWuhan,China,startedaglobaldiscussion. Especially after earlier out-breaksofSARSandInfluenza,thisfoundtheirrootsonsimilarwetmarkets.

Global health organizations are puttingmoreandmorepressureonlocalauthor-ities around the world to regulate theseso-called wet markets. Close contactbetween humans and animals demandsfor further professionalization, improvedratiosofhealthandsafetyandmanage-abilityofthepoultry,meatandfishtrade.

Meyn wants to simplify taking thesenecessary steps towards automation.Aspects involved in automation such aslogistics, electricity,water usageandfil-tration,allmightbealittleoverwhelmingatthestart.

Together with various partners such asChore-Time for livestock handling andNijhuisforwatertreatment,Meynoffersacompletepackageofknowledge,experi-enceandsolutionstoguidetheway.

“At Meyn we think beyond the steel. We stand side by side with processors to identify their potentials and help them develop their plant accordingly.”

Our support does not stoponce a con-ceptisrealized.Wewillcontinuesupportaprocessorbyprovidingnecessaryspareparts,service,trainingofstaffandprovid-ingvaluablebusinessadvice.Weseeour-selvesmoreasconsultants,asadvisors.

Onlythenwecanhelppoultryprocessorsreachtheirhighestpotential,”saidvandeBeek


July - September 2020Feature

AIICisanewlyestablished DevelopmentFinancial Institution(DFI)inMalawi.Itfocussesonfinancingdevelopmentproj-ects that contribute towards Malawi’sindustrial development. This is donethrough the promotion of commercialprojects using either its own funds orco-financing with other development fi-nancepartners.

MAIICservesasacatalystforspearhead-ing private sector development, job andwealthcreation.Itsvaluepropositioncen-tres on leveraging its own resources tomobiliseexternalfundingfortransforma-tional,high-impactlocalprojectsacrossarangeofsectors.

MAIIC was incorporated in November2018 under the Companies Act (2013)asaprivatecompanywithstart-upequi-tyfromtheGovernmentofMalawiwhichholds20percentequity in thecompany.ThebalanceofequityisheldbyCDHIn-vestmentBank, and additional investorsareexpectedoverthenext12months.

MAIICisapubliclimitedliabilitycompanythatmay,induecourse,belistedontheMalawiStockExchange.TheBoardofDi-rectors consistsmainly of private sectorrepresentativesandtwoex-officiomem-bersfromtheGovernment,andtheMan-agingDirector.

Initsfirsttenmonthsofoperation,MAIICsuccessfullymobilised total financing ofMK10.3billionfor localprojects.This in-cludesownresourcesfromMAIICcapital

Malawi Agricultural and Industrial Investment Corporation (MAIIC)

M (MK2.8billion)andfundingfromexternalpartners,amountingtoUS$10million.

The ability to effectively package bank-ableprojectsforexternalinvestorsisthekeysuccessdriver.Inaddition,theWorldBankhascommittedtoprovideafurtherUS$14milliontoMAIICbeforetheendoftheyear,specificallytosupportSmallandMediumEnterprises.

Intermsoftargetsectors,MAIICfocussesbroadlyonagricultureandmanufacturing.

It has five business areas to propel in-cludingAgricultureandAgro-Processing,Manufacturing,Energy,MiningandInfra-structure. MAIIC has three funding win-dows: start up or venture capital trans-actions of less than US$100k (MWK75million), medium scale investment win-dowofnotmorethanUS$1m(MWK750million) and large transformational infra-structureprojects,ofoverUS$10m.

As part of its developmental mandate,MAIIC will expand national productioncapacity by investing in irrigation infra-structure, promoting large-scale com-mercialfarmingandpromotingvaluead-dition toanumberof crops.MAIICalsoprovidescapitalandtechnicalassistanceto agro-processors that seek to expandtheirproductionlevelsthroughsmallhold-erout-growerschemesorcooperatives.

Since operations began in September2019,MAIIChasproventobeastrategicfinancial institution through its provisionoflong-termpatientcapitalwithanaver-

ageloanperiodof5years.Suchfundingisscarceinthelocalmarket.MAIICservesitsclientsthroughawiderangeoffinan-cialproductsandservicestoincreaseac-cesstocredit.Theseincludedebt,equity,quasi-equity,mezzanineandguarantees.

By the end of July 2020, MK1.2 billionhad been disbursed to three business-es in tourism, seed production and ed-ucation, for their business expansion,capital expenditure and working capitalrequirements. Seven additional invest-mentsareexpectedtodisbursebySep-tember2020,inagro-processing(cheeseand cassava flour), aquaculture,microfi-nance institutions, and lightmanufactur-ing. These investments will support thecreationofmorethan500jobs, increasethe income of thousands of smallholderfarmers, stimulate import substitution,generatetaxrevenues,andpromotelocalcommunitydevelopment.Althoughaneworganization,MAIIC is quickly becomingakeyplayerinMalawi’sdevelopmentare-na.Itisstronglycommittedtopromotingyouth entrepreneurship, gender and so-cial inclusion, climate smart agriculture,innovation,andtechnology.

MAIIC receives loan request on an on-going basis, through its offices based at Gowa House, City Centre or through the official e-mail address: [email protected].

Interested applicants are supposed to submit documents which are advised on request, supported with a completed loan application form.



hetraditionalsupplychainfor freshproduceisnotoriously complexandopaque.IntheUS,about35percentof theproduceonsu-permarket shelves is imported, with therestcomingfromCaliforniaandFlorida.

Currently,theaverageitemtravelsabout2,000 miles to reach stores, taking upto two weeks to get there and passingthroughseveralmiddlemenalongtheway.

Notonlydoesthismeanthatproduceinstoresoften losesqualityand freshness,butitalsoriskscontamination.Hundredsofpeople in theUShavebeenhospital-isedover the last fewyears followingE.coli outbreaks stemming from contami-natedproduce.Vertical farming could help overcomethese problems. It is a process wherecrops are grown indoors under carefullycontrolled environmental conditions, en-abling growth for 365 days a year, withyieldshundredsoftimeshigherthantra-

Vertical farming, new normal disrupting food supply chain

T ditionalagriculture.Bysettingupverticalfarms in and aroundmajor urban popu-lation centres, companies could signifi-cantlycutthedistancetravelledandtimetaken for produce to reach consumers,cuttingoutmanyofthemiddlemeninthesupply chain, with local farmers directlysupplyingretailersorconsumers.However, growing produce indoors us-ing artificial lighting and environmental controls is not cheap and vertical farm-ing companies charge a premium for their produce – Bowery Farming kale re-tails for $3.99 for 4.5 oz in New York City Whole Foods, about three times more per lb than Whole Foods Organic baby kale.Couldthepotential forsupplychaindis-ruption help vertical farms reach priceparity with conventional agriculture? Isthis even the right approach, when ver-tical farmsaregrowingaproductclearlysuperiortoconventionalproduce?

Verticalfarming:2020-2030,anewreportfrommarket intelligence company IDTe-chEx,exploresandcomparesthesupplychains and economics of conventionalagricultureandvertical farming, evaluat-ingwhethervertical farminghasafutureandidentifyingthekeyfactorsthatcouldleadtothesuccessoftheindustry.Toconnectwithothersonthistopic,reg-isterforTheIDTechExShow!USA2020,November18-192020,SantaClara,USA.

Presentingthe latestemergingtechnolo-giesatoneevent,withsixconcurrentcon-ferencesandasingleexhibitioncovering3D Printing and 3D Electronics, ElectricVehicles,EnergyStorage,Graphene&2DMaterials,Healthcare, InternetofThings,Printed Electronics, Sensors and Wear-ableTechnology.IDTechExguidesyourstrategicbusinessdecisions through its Research, Consul-tancy and Event products, helping youprofitfromemergingtechnologies.

Regional News



tatimewhenAfrica’sCOVID-19 caseloadwasatover300,000 cases and close to 10,000deaths, governments introduced severalcontainment measures like lockdownsand border closures to prevent furtherspread.

Thevirusandaccompanyingrestrictionshave greatly impacted livelihoods andbusinesses in both the government andprivate sector. Sectors like transport,travelandtourismhavebeenbadlyhitbyborderclosuresandrestrictionsonmove-ment.

This article specifically explores the im-pactonagricultureandlooksathowAfri-ca’sdevelopmentpartnersaresupportingeffortstohelpindividualsandenterprisesrecover.

WHY AFRICUTURE?

The restrictions imposed to preventspreadofthecoronaviruscauseddisrup-tionsinfoodchains,whichinturnposesatwinthreatofexacerbatingpovertyandhungerinvulnerablepopulations.Millionsof people in rural areas rely on subsis-tence farming for their foodandsupple-mentaryincome.

“Agriculture contributes 65 percent of Africa’s employment and 75 percent of its domestic trade. However, the rich po-tential of agriculture as a tool to promote food security and fight poverty is at risk from the effects of COVID-19,” formerAfrican leaders Olusegun Obasanjo andHailemariamDesalegnsaid inexplainingwhyCOVIDresponseshouldaddressag-riculture.

And yet several factors including locustinvasions,floodsandinsecurityinpartsofAfricahavecontributedtoagrowingfoodinsecuritycrisis.

Thankfully,anumberofAfricancountriesplaced agriculture in the essential ser-vicescategoryandmadeeffortstokeepborders,portsopenforcargo.

HOW COVID AFFECTED FARMERS

Measures takenbygovernments topre-vent the spreadof thecoronavirushaveaffectedtransport,whichinturnimpactsmanyotherprocesses inthefoodchain.

COVID-19 impact on agriculture: assessment of recovery efforts

A Access to markets be it to buy inputsor sell outputs has been heavily hit andfarmerssaytheyhavebeenforcedtosellproduceatgiveawayprices.

“Governments are rolling out large-scale campaigns against the coronavirus, and battle plans should include measures aimed at lessening the shocks to their food supply chains,”FAO’sChiefEcon-omist Maximo Torero Cullen recentlywarned.

The Food and Agriculture Organisation(FAO)warnedin2019thatupto250mil-lionpeopleinAfricaareconsideredtobeextremelyfoodinsecure.

Borderclosuresandrestrictionsnegative-lyaffectglobalfoodtrade.“Oneofeveryfivecaloriespeople eat havecrossedatleast one international border, up morethan50percent from40yearsago,”To-reroexplained.

Countries likeKenyawhichexportvege-tablesandflowerstotheEuropeanUnionarereelingfromreduceddemandfortheirproduce.

“Supply disruptions have been isolated;however,logisticsareunderpressureandcosts are being driven up by travel re-strictions,borderchecks,curfews,delays

causedbystaffshortages,andageneralreduction involume,”aMcKinsey reportsaidthismonth.

WHAT NEEDS TO BE DONE

FAO’sTorerobelievesgovernmentshaveasignificantroletoplayinhelpingsmall-holderfarmersrecoverfromtheCOVID-19disruptions.

“Temporary cash handouts for poor farmers are essential, as well as grant to restart production. Banks can waive fees on farmers’ loans and extend pay-ment deadlines.”

“Governmentscanduringtheemergencymake a point of purchasing agriculturalproductsfromsmall farmerstoestablishstrategicemergencyreservesforhumani-tarianpurposes.”

COLLABORATION AND INTEGRATION

MunuwhoalsoworkswiththeEconomicPolicy Research Center in Uganda saysataregionallevel,EastAfricancountrieshave donewell with policy implementa-tion.

“What they’vedone in termsofpromot-ingagricultureistrade,extendingmarketaccess, for instance in the East African

Regional News



communities, implementingthecommonmarketswhich allows freemovement ofgoods and services across thememberstates.” Uganda, Kenya, Rwanda andotherEastAfricannationshavealsocol-laborated in theirCovidresponse, jointlytacklingissuesliketestingoftruckdriversat border points and tracking of cargo/drivers.

AfDB’ssupportishingedonownershipofthe agricultural agenda by national gov-ernments.

“The other aspect that is critical is re-gional integration. More than ever sup-ply chains will need to be resilient to be able to provide nutritious food to Africa’s populations, hence regional coordina-tion is important to ensure that regional trade for food is enhanced, as well as, increased marketable surplus for value addition,” Todasaid.

AfDB’s COMMITMENT TO AGRICULTURE

AfricanDevelopmentBank(AfDB)issup-porting African governments and busi-nesses,withanaimoflesseningtheeco-nomicandsocialimpactofCOVID-19.

“There is also a framework that is be-ing developed for emergency oper-ations, called the FEED AFRICA RE-SPONSETOCOVID-19(FAREC)andthisincludes short,medium longer term op-tionstostructureoursupporttoRegion-alMember countries,” Atsuko Toda, thedirectorofAgricultureFinanceandRuralDevelopmentDepartmentatAFDBsaid.

“Supporting farmers tohelp themaffordinputsisaverygoodinvestment.ThatiswhytheBankisadvocatinginputsupportinouremergencyinterventions.”Through its Feed Africa strategy, AfDBhasbeensupportingcompanies like the

Moroccan phosphate company acrossAfrica, especially to increase thecapac-ityofproduction forOfficeChérifiendesPhosphates (OCP) to serve the Africanfertilizersmarket.

Specialconsiderationhasalsobeenmadeforcountriesfightingthepandemicalong-side pre-existing security headaches.A $20mgrantwas recently approved tosupport vulnerable communities in theSahel region (Mali, Burkina Faso, Niger,ChadandMauritania)wheregovernmentsare fighting extremists. Somalia’s Covidresponsehasalsobeensupportedbythebank with $2.6m, specifically to financewaterandsanitationprograms.

CHALLENGES

MartinLutherMunu,aneconomistattheInstituteforGlobalisationandInternation-al Regulation IGIR says Africa’s agricul-turalpoliciesareaffectedby inadequatepoliticalwilltoimprovethesector.

“Africa isnotavery integratedcontinentlike the EU where the common agricul-turalpolicyisverystrongandhasahugeresponsetothecrisis,”Munusaid.

“We have the 2014 Malabo declaration, where the AU members committed to allocate 10% their national budget to agriculture, but this has never been re-alised.”AfDB says lockdowns and other Covidmitigating measures also affected thespeedatwhich it could implementproj-ects,especiallywiththeprivatesector.

“Wehavetoalsokeepinmindthatit’sabigchange,everythingcameveryquicklyandveryrapidlyandreallocatingthefoodallocationwithinacoupleofweeks,rede-signingthewholestrategywithinacoupleweeksforthewholeyearinordertocopewiththecrisis,it’sbeenabigsuccessfor

the bank to do that,” Eren Kelekçi, thebank’sChiefofPrivateSectorandBlend-ed Finance Investment Agriculture andRuralFinanceDivisionsaid.

The Covid crisis has causedmany Afri-cancountriestotakeonevenmoredebt,allocatingborrowed resources tohealth,logistics and communication. Even be-forethepandemic,manyexpertswarnedagainst the scale of Africa’s debt andnon-governmental organisations havebeenpetitioning lenders to forgivesomeofthedebt.ManyofAfrica’slenderslikeChina however opted for debt relief, toenablecountriestoallocateresources inthefightagainstCovid.

AfDBbelievesthateffortstorelievegov-ernmentsoffinancialstrainthroughitsin-terventionswouldgoalongwayinhelp-ingthemmanagetheirdebtobligations.

“From the private sector perspective, it is not something we not are looking at confidently. We might read just the cash flow projections and ease a little bit in terms of payment deadlines maybe,”Kelekçisaid.

The World Health Organisation has ad-visedcountriestoworktowardslearningto livewith the coronavirus. Thismeansthat governments must draw long-termplanstocushionaffectedindividualsandcommunities.

Restrictions on movement and travelmust be steadily lifted so farmers canhaveuninterruptedaccesstomarkets.

EffortsofpartnersliketheAfricanDevel-opment Bank (AfDB) to provide financ-ing and inputs like fertilisers to cushionfarmers who risk losing their produce,incomesand life’sworkbecauseof fac-tors likecoronavirus,floods, locustsandinsecurityamongothers.


July - September 2020Technology News

orethanfourmillionpeoplein Malawi,Mozambiqueand Zambiahavelearnednewagri-culturetechniquesthrougharegionalag-riculturalproject,supportedbytheWorldBank and has introduced 367 technolo-giestofarmers

Forthepastthreeyears,AubreyKabud-ula, a farmer from Maseya Village, hasbeengrowingrice,maizeandbeansusingalternatefurrowirrigation.

With this technique—where half of theplantrootisirrigatedwhiletheotherhalfis inadrysoil—heand175membersoftheNanzolo Irrigation program, are abletofarmmorethan60hectaresoflandus-inglesswaterthanthecommonfloodingmethod.

“Thistypeofirrigationhasenabledustogrowdifferentcrops,threetimesayear,”saidKabudula.

“Each time I grow maize, I have been able to harvest more than 1500kgs which I use to feed my family and sell some and get money for other house-hold needs.”

While agricultural productivity has in-creased in recent yearswithin SouthernAfrica, persistent climatic shocks havemadeithardforfarmerstorealizeenoughfoodtolastforthenextfarmingseason.

TheAgriculturalProductivityProgramforSouthernAfrica(APPSA),aregionalpro-gramforMalawi,MozambiqueandZam-

Farmers adopt agriculture technologies to improve yield, efficiency

M bia,wasthereforeestablishedtoincreaseavailabilityof improvedagricultural tech-nologies.

Aftersevenyears,therehavebeensignif-icantchanges,withmorethan4.6millionpeople benefiting from the project in allthethreecountries. InMozambique,onemillionbeneficiarieswere reached,whilethe project reached about 1.3million inZambia,andnearly2.4millioninMalawi.

The program has released and madeavailable to farmers367 technologiesofwhich66havebeendevelopedundertheproject.InMalawi,tworicecropvarieties,13maizehybrids,sixbeanvarietiesandsixagronomicpracticeshavebeendevel-opedandmadeavailabletothefarmers.InMozambique,17newtechnologiesarein use while Zambia produced 22 newtechnologies.

FarmersatLifuwuRiceirrigationprograminSalimadistrict inMalawihavealreadystarted to use one of the new rice vari-etiesknownasMpheta.Thisvarietyma-turesearlyenabling farmers toplant thecroptwiceinayear,increasingtheiryield.“My life has improved becausewe nowgrowthe rice twice inayearandrealizemoremoneywhichweuse tobuy food,supportourchildrentogotoschoolandalsoimproveourownlives,”saidBizwickMkoma,aricefarmer.

CyprianoMwale, a PhD student in agri-culture,isdoinghisresearchonmaizeva-rietiesthatareresistanttostrigaatChit-edzeResearchStationinLilongwe.

“There are more than 130 striga resis-tant maize varieties that we have re-searched and produced, and we have so far released 30 resistant varieties of maize which farmers are planting in their farms,” said Mwale. “We need to integrate varieties that are resistant, have high yield and have all the neces-sary nutrients.”MorevarietiesareyettobereleasedastheresearchprogressesatChitedzeResearchStation.

Atotalof98studentshavebenefitedfromtheprojectbystudyingatdifferentlevelsofeducation,bachelor’sdegree,mastersandPhDinallthethreecountries.Amongthese, 25 were from Mozambique, 52fromZambiaand21fromMalawi.

Blessing Botha, World Bank Task TeamLeader forAPPSA,saidtheprojectsup-ported a wide range of long-term inter-ventionsintheagriculturesector.

“Thetechnologiesdesignedandpromot-ed under this project -for example cropvarietiesthatarehighlyproductive,resis-tanceortoleranttovariouspestsanddis-eases, improvednutritioncropssuchasironandzincbeansarerelevantbecausethey respond to the emerging needs intheagriculturesectoracrossallthethreecountries,”Bothasaid.

Scaling upof the new technologies andknowledge sharing also helped facilitatethecrossboardersharingofbettercropvarieties and opened markets for localseedproducersforexport.



hisisthesixthoutofseven articlespublishedbyACEto mark15yearsofoperationandcele-bratingtheregulatorylicenserecentlyacquiredfromtheRegistrarofFinancialInstitutions.

ThisarticlewillfocusonWarehouseReceiptFi-nance,pleasereadarticle3forotherelementsof the Warehouse Receipt System. As men-tionedinarticle1,theWarehouseReceiptSys-temwas established to enable ACE to guar-antee sellers’ performance on an Exchangetradedcontract.Therewas,however,anotherelementwhichbecametheabsolutemaindriv-erofvolumeonthewarehousereceiptsystem–finance!

ThefirstACEwarehousereceiptwasissuedbyFarmersWorldin2011toLawrenceChikhasu,asmalltraderwhodeposited14.5mtofmaize.Mr Chikhasu immediately requested financesohecouldgoandbuymoremaize.Nobankswereonboardat this time,soACE,eager toshow thepotentialof theWarehouseReceiptSystem,scrapedwhatlittlefundsACEhadanddisbursed MKW 261,000, being 60% of themarketvalue.MrChikhasumanagedtoaggre-gateatotalof40mtandsoldabouthalftotheWorldFoodProgrammeonaBVOauctionandtheotherhalftoaprivatesectorbuyer,earningaprofitof18%afterstorageandfinancecosthadbeensettled.

Only6receiptswere issued in2011,butwithanaverageprofitof30%,everyonewasveryexcited. All made money - the warehouseoperator, the financier, ACE, and the traders.The fundamentals had been proven and allagreedtocontinuethefurtherdevelopmentoftheWarehouseReceiptSystem.A task forcewasestablishedwithsupportfromtheUSAIDSouthernAfricaTradeHub to create a set ofregulations which could attract finance fromthe banks. ACE saw good support and par-ticipation from FCB (then FMB), NBM, CDH,OIBM and Standard Bank and in June 2012theACEWarehouseReceiptRulesandRegu-lationswereadopted.Bythen,thefirstreceiptsof the 2012 season had already been issuedandthedepositorswereliterallyscreamingforfinance.

Nobankcame forward– thiswasmost frus-tratingandsomethingACEhadnotanticipatedafter the support creating the ruleset. Againdesperatetofurtherdevelopthesystem,ACEdugdeepandgatheredMWK5millionwhichACEofferedtothebanksasafirst lossguar-anteeforthereceiptfinance.FCBagreedandofferedMWK20millionreceiptfinanceagainstACE’s first loss. That was the beginning ofWarehouseReceiptFinanceinMalawi.

Themodalitywascalled “haircutfinance”,asthebankwouldtakeahaircutandonlyfinanceaproportionofthecommodityvalue.Thede-fault haircut inMalawiwas 70%. The haircutwas actually meant to be very flexible andchangedependingonmarketprices,commod-ityand timeofyear.Thisdifferentiationnever

really materialised and a standard haircut of70%wasapplied.Despite2012alsobeingagood year with average profit of 25%, morebanksdidnotcomeonboard.FCBdidincrease its finance gradually and didn’t re-questafirstlossguaranteeanymore.Thecon-cernwaspricerisk.Beingexposedtotheag-riculturalmarketwasnotnormalbusiness forbanks–theyarenormallyexposedtotreasurybillsandbigbalancesheets!

The2014electiongave a hint to howunpre-dictableandvolatilemarketscanbe.Withtheelection coming up ADMARC started sellingmaize at about half of the market price andmaize prices came tumbling down. This dy-namic does not suit the Warehouse ReceiptSystem and maize depositors got stuck andonaveragelost20%thatyear.Incomparison,traderswithpeareceiptsmadeaprofitof20%thatyear.ACEnowhaditsfirstsystemic lossontheWarehouseReceiptSystem,causedbyGovernment market interventions. The onlypositive element from this situation was thatthe70%haircutwasenough riskmarginandbank finance was not at risk – all haircut fi-nancewassettled.

Eventhoughfinancewassettled,thesituationcertainlydidn’tbringmorebanksonboard.

Themainconcernthen,anditisstillthecasetoday, is that ACE needs to come upwith awaythatthebankscanhedgetheirexposure.Itwillbetheonlywaytoreallydevelopstructuredfinanceonthewarehousereceiptsystem.TheabilitytohedgeiswhatmakestheJohannes-burg Stock Exchange (JSE) so successful,However, Malawi price fundamentals just donotfollowtherestoftheworldandMalawicanthereforenotenjoythesafeguardsprovidedbytheglobalexchangesandthemarketisolatedtoMalawi is too small to recreate the instru-mentshere.ACEneededtobeinnovative.

In 2013 ACE went to Sunseed Oil (SSO), alargevegetableoilprocessorwhowasbuyinglarge quantities of soya. ACE said: “What isyourcostofstorageandwhat isyourcostoffinance?IfACE

takesthemarketpricetodayandaddyourowncarry-overcost to,say,5months fromnow–wouldyoutakeitatthatprice5monthsfromnow?”SunseedOil said: “Yes, butwewouldlike to store it ourselves.” And that was thebirthoftheACEforwardcontractforsoya.

When depositors delivered soya to SSO andgotawarehousereceipt,ACEwouldalsoissuea contract between the depositor and SSO,whereSSOwouldpaythecalculatedpriceandtakedeliveryatafuturedate.ACEwouldnowsendbothwarehousereceiptandforwardcon-tract to thebank and request finance for thedepositor.Thebankwoulddisbursetothede-positor and the bankwould be settled in fullwhenthe forwardcontractmatured. Ineffect,ACE had just swapped the price risk, of thevolatile agricultural market, with the balance

sheetofalargeroff-taker.Thiswaswhatbankshadbeenlookingforandappetiteforthistypeofreceiptfinancequicklymaterialised.

ThiswasanincrediblerevelationtoACE,vol-umes on the Warehouse Receipt System in-creased;tradeincreasedandmostimportantly,forthefirsttime,significantlevelsofcommis-sionwerebeing realised.ACEfirmlybelievedthat ithadfoundthecorecommercialmodel.Thiswasallgood.

However, ACE was also acutely aware thatforward contacts, although providing crucialmarket access, didn’t provide farmerswith amarketpremium.Theway the forwardpriceswas calculated, the seller was only receivingthe spot price as determined by the forwardbuyer.Whatwasneededwasmore competi-tionontheforwardmarketandACEexpectedthat one day, a buyerwould say: “I will taketheACEJanuarypriceplus1.”Thispremiumin the forward market would translate into apremium for the farmers in spot markets. Inotherwords,theincreasedliquidity inthefor-wardmarkets shouldpushprices in the spotmarket.ToACE’shugeregret,thisneverhap-pened.Thebanksreallyonlyapprovedforwardcontractfinance fromahandfulof large trad-ers.Not enough to create competition in theforwardmarket.

ACEalsolaunchedanunsuccessfulreceiptfi-nancemodality – bridge finance. In the earlyyearswheredepositorssawsignificantprofits,traderswerenaturallyexcitedandhungryforfi-nance.ACEgotmanyrequestsandmanysmalltradersdidn’thavecapitaltobringthefirstloadof commodity to warehouse. ACE came upwiththebridgefinancemodalitywhereACE,inthebeginningoftheseason,wouldadvanceto

ACE Warehouse Receipt FinanceFeature

24 25 Agri-Malawi Magazine | www.agri-malawi.com


the trader for the first 5MT andget the 70%whenthebankwoulddisburseafterdeposit.In2014,ACEtrainedandcertified23commoditybrokers,with thebridgefinancemodalitybe-coming a central component of the servicesthat theACEbrokerscouldoffer theirclients.Unfortunately, toomanybridgefinance recip-ients did not honour the modality, often de-positinglessthanwhattheyweresupposedtodeposit,whichcarvedout anyprofitsupfrontandsometimesmadethereceiptgointoloss,which meant bridge finance was not settledin full.ACEhad to stop themodalitywhen itbecame clear that undercutting the systemseemedbe thenorm, rather than justactionsfromafew.The2014maizecollapsealsoreal-ised lossesonthebridgefinancemodality. Inall,onecansaythatbadtimingcoupledwithanaïvebeliefandtrustintheACEbrokersandother recipientsputanend toACEbridgefi-nance.

By2016,ACEcouldwalkonwater:ThatyearACEdid 90,000mt of trade, 50,000mt on theWarehouse Receipt System, USD 12 millionin disbursed warehouse receipt finance andUSD 150,000 in realised commissions, justshyofbeingsustainable.Whatcouldpossiblegowrong?Well–aseriesofveryunfortunateevents,whichcouldmaybehavebeenantici-patedandmitigatedagainst if theyhappenedintheirownright,butwhentheyhappenedsi-multaneously, it looksa lot likeaBlackSwanevent.

Firstly, Indiastopbuyingpigeonpeas,acon-tracttoNFRAwhichwouldhavesavedallpeadepositorsnevermaterialised,pricesdropped80%andthemarketwasincompletecollapseanddisarray.

Severalbanks lostsignificantamountsonpi-geonpeafinanceandthatwastheendofthehaircutmodality.Acruderealisationofjusthowvulnerableagriculturalservicesandstructurescanbe.

Secondly,in2016,theGovernmenthadcalledforsignificantfoodaidandestimatedthatMa-lawiwasshort1millionmetrictonnesofmaize.Resourcesweremade available by DFIs andDevelopment Partners and by October 2016significantvolumeswerecontractedforimportfromMexico.InNovember2016,privatesectorflagged that market indications showed thattherewasnotashortage.ACEcalledformeet-ingstoraisetheflag,pushforGovernmenttoallowexportandtrytogettheFoodAidIndus-try to divert imports and switch to local pro-curement.

Privatesectorwasright, therewas indeedanoversupplyofmaizeandpriceswereinsteadydecline. Private sector was sitting on about100,000mtandADMARC thesame.Tanzaniawas short of maize and wanted to buy it allat veryattractiveprices.Government refusedandinsteadofexportingsurplusMalawimaizeto Tanzania, Malawi was importing Mexicanmaize–tounderlinetheabsurdity–theimportcamethroughTanzania!

Maize was carried into the new season withsignificantnegativeimpacts.Privatesectorre-

Feature

alisedhugelosses,ADMARCneededatmulti-milliondollarbailout,banksretractedfinance,nodemandmaterialisedfornewseasonmaizewhich saw the lowest farm gate prices ACEhadeverrecorded,andfarmerslostbillionsofkwachas.ItisaviciouscircleandtheeconomicimpactonMalawiwashuge,andyet itcouldhavebeensoeasilyprevented. It isastound-ingthatGovernmentrefusedtoexportexcessmaize,anditwasequallysurprisingtodiscoverthat the FoodAidmachinerywas completelyunequipped to recognise and respond to achanging situation on the ground. There is areal need to make sure this doesn’t happenagain.

Nearlyallvaluechainswereaffectedandmostwarehouse receipts made significant losses.Many private sector companies were strug-glingandbankappetite tofinanceagriculturewas nearly non- existing. Forward contractfinancedropped fromUSD12million toUSD0.5millionandthemodalitydidnotrecover.By2018financestartedpickingupagain.Howev-er, bankswere requestingACE to offermoretraditional collateral management services,ratherthantheforwardcontractmodality.ACEestablishedCommodityServiceLimited(CSL)tohandlethisnewdemandandfurtherdevel-op commodity and warehouse services inte-gratedwiththeWarehouseReceiptSystem.Inessence themodalitiesare thesame,but thepaperworkisdifferent.ACEseesthisdemandfor Collateral Finance as the latest phase intheWarehouseReceiptFinanceevolution.Itisgreatrelief toseewarehousereceiptvolumesand finance reaching 2016 levels again. Al-thoughthistime,ACEiswalkingwithcaution,notonwater!

AsignificantcatalystforACE’sabilitytofacil-itatefinance,developnewmodalitiesanden-gagewithbanks, is the regulatory frameworknow adopted in Malawi. The process wasstartedin2014bytheWorldBankGroupandonlyfinalisedwiththelicensingthisyear.Ithasbeenagreatprocesstohavebeeninvolvedin–greatdedicationfromtheMinistryofIndustry,TradeandTourism,theReserve

BankofMalawiandindustryleaders.Wehaveinternational experts exclaiming that MalawihasadoptedafirstclassregulatoryframeworkforcommodityexchangesandWarehouseRe-ceiptSystems. It isnowACEs job toconvertthisintofirstclassfinanceandriskmodalities.There canbe nodoubt as to the importanceof agricultural finance. Themore finance, themoreliquidity,themoredemandandthereforebetter farm gate prices. The state of agricul-turalfinance isdirectly related to thestateoftheagriculturalsectorasawhole.Butwhenitcomestoaccesstofinanceinruralareas,theanswerisnotthatclearcut.Accessingfinancealwayscomeswitharisk.Ifyouraddedvaluedoes notmatch your interest on the finance,thenyouwill bemakinga loss.Most agri-in-dustryparticipantshavedifferenttoolsattheirdisposal to navigate the risks. Rural farmers,ontheotherhand,donotandarethereforeleftexposedtothemarketforces.

ACE has an exhaustive dataset of all ware-housereceiptseverissuedonthesystemand

ACEaskedIFPRIiftheywouldbeinterestedindoingadetailedanalysisofthedata,toidenti-fyifcertainbehaviourswereleadingtolossesandotherstoprofit.ThebalancingactforACEis todeterminewhetherACEshouldpromoteaccess tofinance to rural farmersor if this istoorisky.ThehopewasthatIFPRIcouldcreatea set of rules, as in, ifmarket price for soyais less thanUSD350/mt then there is a 90%chancetomakeprofitifthefarmersstore,ac-cess finance and sell within 6months. IFPRIagreed to do the study, but our hope wasquickly squashed. The reality presented itselfmuchmorecomplexandcomplicated.PleasefindmoreinfoonIFPRIwebsitehere.

Clearly the 2014 and 2017 event explainedmostof the lossesexperiencedon theWare-house Receipt System, but there were alsoother losses. There is a negative relationshipbetweenthedurationofstorageandthereturnsthatthedepositormakes.Forexample,maizeandsoyastored lessthan180daysgenerallymadeaprofit.However,adurationoflessthan90dayswasthecaseforpigeonpeas.Itisalsoimportanttopointoutthatcostoffinancewasasignificantshareoftotalreceiptcost.Someofthesereceiptshadacostoffinanceashighas35%,itisgoodtonotethattodaythishascomebelow20%.TherearemanynuancestothisstudyandACEcanonlyrecommendthatreadersstudyitforthemselves.

What does stand out is that receipt financesometimes is not beneficial and can be veryrisky if themarketexperiencesexternal inter-ventions. Unfortunately, this is the reality. Ontheother hand, access to finance is also thetoolthefarmersneedtobeabletodelayasaleinayearwhere thepricesareextremely low,like 2017. But again, according to the study,even extreme low post harvest prices, doesnotmean the receiptwillmake a profit. ACEdoesbelieveinprovidingfarmerswithchoicesandaccesstofinanceisacrucialandimport-antelement,even if thechoice ishard togetright.Thebiggesttakeaway,however,standsoutevenclearer–Governmentneedstostopunhealthyanddetrimental interventions intheagricultural markets which have devastatingoutcomesforallvaluechainactors.



heCovid-19pandemichasdisruptedalmostallsectorsofhumanlife.Forapredominantlyagro-basedeconomylikeMalawi,oneofthepoorestcountriesintheworld,thepandemichascoincidedwithitsrain-fedagriculturalcalendar.Thismeanstheintendedseasonalyieldisexpectedtodrop.Thatwillontheflipsideaffectlivelihoods.

All themeasures imposed to curb the spread of the pandemic are likely toigniteaseverefoodsecuritycrisisduetoafallinagriculturalproductionandimports.Theeffectson thewholeagricultural valuechainwill also reflect inlossesinotherinterlockingindustriessuchasmanufacturingandretail.Beingaventuremainlyundertakenbywomen,agriculturestandstoloseoutmoreinagro-basedeconomiesinthesub-SaharanAfricacountriessuchasMalawi.

70percentofthecontinent’sagriculturallaborforcearewomen,meaningtheCoronaviruswillsimilarlytakeahugetollontheirlivelihoods.Mostofthesearesmallscalesubsistencefarmerswhoseprimaryconcernisconsumption.Formanywomenfarmerstheirhouseholdincomeislikelytobeaffectedbyothermicroandmacroeconomiceffectsbroughtaboutbythepandemic.

However, there is still hope for Malawian farmers especially those with or-ganized production andmarketing services. In 48 farmer organizations andcooperatives inMchinji,LilongweandMzimbasupportedbytheUNWomenthree-yearproject“Contributing to the Economic Empowerment of Women in Malawi Through Climate Smart Agriculture”some10,000womenfarmershavebeenequallyanxiousaboutthepandemicthoughtheyhavesomereliefalongtheway.Theproject,whichfocusesongroundnutsproduction,isbeingfundedbyStandardBanktothetuneofK340million.

Thisproject hasbeen foundedonUnitedNationsSustainableDevelopmentGoals.ItinparticularfocusesonSDG2–ZeroHunger,SDG5–GenderEqual-ityandSDG13–ClimateAction.OneofthecooperativesbeingsupportedisGwiritseCooperativeinNsaru,Lilongwe.Beingpartofthecooperativeoffers

somecushionon the impactonproductivity.ToGwiritseCooperativemem-bers, themajor distraction has only beenon failure to conductmeetings inbiggroupsasinthepast.GwiritseCooperativeManager,PytonNgwira,saysdespitetheCovidscare,thewomenfarmerswillstillbenefitfromtheiryieldasthecooperativehasalreadysecuredamarketfortheproduce.

“We won’t feel too much strain because we have already secured a market for our produce as a cooperative. For some weeks now we have been ag-gregating the harvest of our members. As we speak we have given receipts to around 30 farmers who have deposited their produce at the warehouse,”saysNgwirawhosecooperativehas242membersofwhich152arewomen.HepointsoutthatthepandemiccametoMalawiaftertheyhadalreadyundertakenallkeyactivitiessuchasplantingandweeding.

GwiritseCooperativeexpectsanaccumulativeharvestofaround250metrictons (250,000 kgs) of groundnuts for the 2019/2020 growing season.Whilethere ishopeinregardstoharvest,thesefarmers–despiteobservingsocialdistancingandhygienewhencarryingoutactivitiesatthecooperative–mightbeexposedtothevirusinotherplacesduetorespectivesocialbehaviours.InMalawi’ssocialandculturalcontext,womenareoftenresponsibleforthecareofchildren,thesickandelderly.SotheycouldbepronetoCovid-19exposurein theirhomesandotherplaces.“We keep reminding our members to ob-serve all the preventive measures wherever they go and adhere to measures put in place by local and national government,”saysNgwira.SuchmeasuresarealsobeingcoordinatedbyUNWomen toall thecooperativesunder theprojecttoensurethatallthewomenfarmersaresafefromtheoutbreak.

However,thesesuccessesstillexistwithinaneconomystillgrapplingtofeeditspopulation.AccordingtoGovernmentofMalawi,throughtheMalawiVulner-abilityAssessmentCommittee(MVAC)1.8millionMalawiansarealreadyonthebrinkoffacinghungerthisyear.TheCovid-19pandemicislikelytocompoundthealreadyexistingproblemoffoodshortageonnationalscaleanditaffectswomenandtheirfamiliesregardlessofwhethertheyareinacooperativeornot.ThelargerpictureisthatofwomeninMalawibeingmorestrainedfromeffectsofthepandemicandrequiringlonglastingsolutionstoamyriadofproblemstheyfacebothintimesofemergenciesandnormalcy.

T

COVID-19, impact on food systems and gender in Malawi

To access more information on financial solutions offered by Standard Bank please reach out to the nearest branch and/or relationship managers or call 242.

MULAWETriple refined vegetable cooking oil

TM

Sunseed oil Limited P.O.Box 340, Lilongwe, MW Tel :Central region: +265 998 824 469 Southern region : +265 999 123 444Northern region : +265 999 150 943 Email : [email protected] : sunseedoillimited.com

Triple refined vegetable cooking oil Soya De oiled Cake



MULAWETriple refined vegetable cooking oil

TM

Sunseed oil Limited P.O.Box 340, Lilongwe, MW Tel :Central region: +265 998 824 469 Southern region : +265 999 123 444Northern region : +265 999 150 943 Email : [email protected] : sunseedoillimited.com

Triple refined vegetable cooking oil Soya De oiled Cake

Physical Address: 137 Kidney Crescent

Chichiri, Blantyre 3,

Postal Address: P O Box 31588, Blantyre 3, Malawi

Tel: +265 212 464646, +265 212 464648

Email: [email protected]

Web site: www.combinecargo.mw

Freight forwarding | Customs clearing

Household & office removals | Warehousing

Transport logistic services

Combine Cargo Malawi Limited has over 25 years in the industry. It has a worldwide network of international agents and offices at all entry

borders into Malawi.

The natural way to transport goods to and from Malawi

Combine Cargo Malawi Limited has over 25 years in the industry. It has a worldwide network of international agents and offices at all entry

borders into Malawi. 0

5

25

75

95

100

© Arnold’s Designs, 2020 (Combine cargo)

Tuesday, 30 June 2020 09:44:50

smallholder agric-food systems gets...

Documents