OPPORTUNITIES TO CREATE WEALTH

SECTOR PARTNERSHIPS BRINGING WEALTH TO FARMERS IN DROUGHT PRONE AREA OF TANZANIA

Sisal plant: Photo courtesy of Oxfam

TABLE OF CONTENTIntroduction 4

Smallholder sisal business model 4

Why Kishapu? 5

Why sisal? 5

The process 6

Community organization and group formation 7

Sisal leaf production, intercropping and nurseries 8

Local supply and market demand 9

Overall value chain upgrading 9

Lessons from rope making groups 10

Lesson from price fluctuations 10

Effects on the overall chain and market overview 11

Reflections and the way forward 12

Sisal, scientific name (Agave sisalana) is a plant that yields a stiff fibre traditionally used in making rope and it grows in areas with very little rainfall. The term sisal refers either to the plant or the fibre, depending on context. Fibre is extracted by a process known as decortication, where leaves are crushed and beaten by a rotating wheel set with blunt knives, so that only fibres remain, thereater water is used to wash away the waste parts of the leaf. The fibre is then dried, brushed and baled ready for export. Three years after planting a farmer can start harvesting the mature

Introductionleaves. Harvesting, if done well, can be done for over fifteen years. Harvesting the leaves can be done whenever there is demand for the product and a need for money. Besides leaves, the plant also produces a pole (with flowers which develop into bulbils) that is used in construction of roofs. In short sisal is a low input, climate (change) ready risk reducing and flexible crop that can generate income whenever the farmer needs it most. In Tanzania, sisal is usually grown along the coast in large plantations.

Oxfam in Tanzania works in Shinyanga region, in the Western part of the country. Shinyanga Region includes the drought prone Kishapu District, where sisal is traditionally used as natural hedge to demarcate farm plots, and at the same protect them from grazing livestock. Some farmers would use the leaves to make ropes for home use or to sell on the local market. A few processors with stripping machines, also called raspadoras, are present

in the area but they had few buyers who were also buying too little. Besides the limited supply, the large distance to the large processing industry at the coast and the inferior roads further restricted the trade. Even with the demand for sisal fibre increasing, the constraints for starting trade were still too large.

In 2009 Oxfam together with Katani Ltd., a large sisal processor from Tanga started a project to organize local supply of fibre. Different local entrepreneurs were helped with money from Oxfam and technology and training from Katani Ltd. to produce large enough quantities to enable trade with the factories in the traditional sisal processing industry close to Tanga. Katani pledged to buy all fibres supplied at world market prices. Farmers were organised to enable the transfer or the required technology and information. They would initially generate income by harvesting the leaves of their existing hedge sisal plants before the newly planted sisal would mature. They were trained in sisal agronomy, nurseries were established, and improved seedlings

Smallholder sisal business model

were supplied. A brushing machine was supplied to a local entrepreneur to upgrade the raw fibre supplied by the raspadoras, and women groups were trained to make ropes with a new hand rope maker.

This business model for linking smallholder producers with commercial companies focused on the underutilised production capacity of sisal in Kishapu. The project has forged a connection between a large sisal fibre processor ‘Katani Ltd.’ on one side and the farmers of Kishapu district, on the other. The large underutilised source of hedge sisal in Kishapu, enabled rapid start-up of the project in an area where due to climatic constraints the opportunities for other agricultural development are limited.

More than half of the people in Tanzania live below the poverty level, with Kishapu district being among the poorest areas of the country. Among the most important reasons for this poverty are harsh weather conditions (less than 700 mm average annual rainfall) and increased variability of weather due to climate change. These unfavourable weather conditions often result in crop failure and food shortage. Furthermore, due to lack of investments by government and private sector, markets for agricultural produce or value addition are scarce. This lack of investment also results in weak

industries and few enterprises that potentially could bring an income generating opportunity other than agriculture in the rural areas. Lack of investment by the government in essential services such as education, coupled with a traditional emphasis on education of boys rather than girls, results in high illiteracy rates of women, and absence of women in market systems and other profitable niches in agricultural value chains.

Why Kishapu district?

Why sisal?Sisal has traditionally been grown along hedges in Kishapu to demarcate farm boundaries, and to produce fibre ropes during lean times to supplement incomes. It is one of the only crops that thrive under the climatic conditions of Kishapu, being a drought resistant perennial crop that requires virtually no external inputs after planting. In addition, the leaves used for fibre production can be harvested throughout the year and for roughly a ten-year period, without killing the plant itself. This trait allows farmers to harvest

whenever the need for additional income is highest. It a product that is harvested, sold and processed by both women and men. The above qualities would make sisal the perfect crop to produce for the farmers of Kishapu, was it not that there was virtually no market. Before the project commenced the opportunities of actually selling the sisal leaves were very slim. Sporadically traders would come and buy processed fibres from the few processors, but demand and prices were unreliable.

Initially the bottleneck in the value chain was the conversion of leaves into fibre. So, in the early stages of the project establishing sufficient processing capacity locally was the main activity. To achieve this, so called, “raspadora machines” were provided to entrepreneurs in Kishapu. Raspadoras decorticate the sisal leaves, separating the soft fleshy leaf tissue from the tough fibres. After sun drying the fibres they can be stored indefinitely without jeopardising loss of quality. However, assessing the quality of fibres is only possible after the removal of impurities by another process, namely “brushing”. Officially only after brushing and quality assessment of the fibres their price can be set. At the start of the project, Oxfam and Katani agreed to do the brushing of fibres in Tanga. Oxfam, together with its partners, selected 15 local entrepreneurs that would be given a raspadora on loan basis. For the first phase, at the end of 2010, the five best entrepreneurs were selected to receive a raspadora. After signing contracts with Katani, the first five entrepreneurs received the raspadoras, worth six million Tanzania shillings . Also a working capital, of two million Tanzania shillings was provided. The contract stated that all fibre would be transported to Tanga by the processors and after determining the quality, the profit would be transferred to their bank account. In February 2011, all five processors started operations.

Parallel to the upgrading of processing capacity, farmers were encouraged to join groups to create a stronger supply

The Processbase of leaves. Group formation would enable a more rapid dissemination of knowledge and technology and would enhance access to financial services. The groups were trained on understanding group dynamics, management and savings and lending structures, group management and business skills. Some groups also received training on sisal production.

Groups of farmers and some individual farmers were trained on seedling production. This included bulbils collection, nursery establishment, planting of seedlings and bookkeeping. Four women groups were trained to produce ropes with low-tech rope making machines. In 2012, they received a rope-making machine from Oxfam on a half loan, half grant basis. Because of the lack of brushing capacity in Kishapu, a decision was made to support a local women entrepreneur to get involved in brushing of fibres to enable local price determination. She received business and technical training on how to operate the brushing machine and wrote a business plan. The machine was delivered to her on loan basis and she financed part of the business with her own money.

The last goal of the project was to create more activities that would add value for women in Kishapu. Therefore an opportunity for four women groups to take up rope making as a commercial activity was created. All four groups were given training on rope making and bookkeeping. Finally, a manual rope-making machine on half grant, half loan basis was provided.

Farmers in Kishapu processing sisal using locally made raspadora machine. Photo: Courtesy of Oxfam

Directly after initiation of the project, group formation was encouraged by explaining farmers the benefits of organising themselves in groups for this project. Since farmers in Kishapu already had a long history of working in groups and thus were familiar with the benefits, many of them were willing to join new groups or incorporated existing groups into the project. In other projects in neighbouring Districts, Oxfam had good experience with organising farmers in ‘SILC’ groups: Saving and Internal Lending Communities. It was decided that

Community organization and group formation

the SILC approach would be an easy way to mobilise and engage farmers in the sisal project, and motivate farmers to continue their group work on (bi) weekly basis.

Farmers from Igaga B group processing sisal at their local plant in Kihanda in Kishapu.

Photo: Courtesy of Ralph Roothaert

In 2012, still sufficient sisal was available, although the first signs of leaf shortages were observed. To increase the supply of sisal leaves, farmers were encouraged to plant sisal as a cash crop (initially intercropped with another annual crop such as green gram) at the start of the project. However, since sisal requires three years to mature before the first (small) harvest, newly planted sisal is not productive yet and therefore its effect on the supply base cannot be measured yet. In addition, the strategy was less successful than expected. This was largely due to severe drought over the past three years, which negatively affected seedling survival. Nevertheless, the interest of farmers for sisal

production was not the problem. In 2010, in total 34 sisal nurseries had been established (on 10.8 Acres by 178 trained farmers (47% female). On 8 acres intercropping was attempted, but due to drought all crops died, including some of the sisal.

By April 2013, 60 nurseries were established, about half of them being operated by groups and the other half by individuals. The seedlings from these nurseries were transplanted to 210 different farms , mostly individual farms and some group farms. Group sisal farms tend to be a bit bigger, about 1 acre, while the individual sisal plots are half an acre on average.

Sisal leaf production, intercropping and nurseries

Farmers in Kishapu at a nursery learning more on sisal growing. Photo: Courtesy of Ralph Roothaert

1 A nursery of 1 acre has about 32,000 plants. Most nurseries are about 0.5 acre in size.2 A sisal farm needs about 1600 plants per acre in a system of double sisal rows with an intercropping space of 3.5 m between rows.

Before the start of the project, there was only limited trade in sisal fibre in the Kishapu area. Katani Ltd. had not bought fibre from the area for years. In September 2010, 15 processors were trained (14 man, one woman). Later on an additional five woman got training. In December 2010 five processors (most experienced entrepreneurs) were selected (4 man, 1 woman) to receive a raspadora and start up their business. They organised themselves in an association. Oxfam’s partner SIDO provided two processors with a 2.5 million shilling loan each. In February 2011 the raspadoras were given out and the processors were able to notch up production immediately. One month later a (ten ton) truck could be filled with fibre for Katani Ltd. Two processors were twice as productive as the others. They ran out of working capital because they had to wait for the other three to be able to fill up a truck and sell their product to Katani.

Then different things happened in close sequence. Firstly, sisal fibre sent to Katani generated relatively low returns in comparison to the local prices. This was due to the transport cost, low grading and high losses during brushing. Different buyers had come to Kishapu to buy unbrushed fibre. In September 2011, two processors were reported to have acquired more raspadoras, while others continued working with the supplied raspadoras. Katani considered this unacceptable and withheld payment of the last delivery.

Local supply and market demand

All processors had obtained higher loans for working capital from SIDO and were starting to increase production. Many of the machines were reported to run for up to 24 hours a day. Large quantities of fibre were sold to other buyers. The production is by far higher than expected in the business model. For example in May 2012, Mboje enterprise by far the smallest of the processors and was producing 4.5 tons a month, while others could produce between 40-50 tons a month. In the original plan on estimated a maximum of 4 tons month per raspadora.

During the first 12 months of operating the raspadoras, there was a grace period whereby processors could supply fibres to Katani without loan repayments being deducted from the fibre price received. The moment the grace period expired and loan repayment started kicking in, processors were not so keen anymore to supply to Katani, because Katani would automatically deduct some percentage of their income from fibres as stipulated in the individual contracts.

No fibres had been supplied to Katani in 2012. As a result, five new processors who were waiting to receive their loan and machine could not start before the situation with the old processors was solved. New loan agreements have been written with less exclusivity of sales to Katani. However they still include a minimum monthly delivery to Katani of 2 tons.

Overall value chain upgrading

Lessons from rope making groupsOxfam identified an opportunity to upgrade the local value chain that specifically helped women. From another region in Tanzania, rope making machines were bought. These manual rope makers enabled the speeding-up of the fully manual rope making considerably and enabled making of stronger ropes. Four women groups were trained on how to use rope-making equipment. From each of the four groups a delegate had been on a rope makers learning journey. The plan was that the women groups would contribute part of the cost of the machines from their savings, supplemented by a grant from Oxfam.

Things did not go according to plan. In 2012, only 20-30 ropes per group had been made while very few ropes had been sold. Due to a management oversight, the machines were handed over to the groups before they had made their payment. Subsequently, the Oxfam value chain advisor has found it very difficult to collect the money from the groups. Another unfortunate effect was that in the absence of own investment, there was no economic drive for the women group to make these machines productive.

From the value chain analysis and the current problems with Katani it was concluded that having a brushing machine in Kishapu would be a great advantage. Officially the fibre needs to be brushed before the quality and price determination. Brushing the fibres would enable the processors to check the quality of their fibres before supplying them to Katani and would enable them to make a better informed decision about the sales. In addition, the women in the rope making groups reported that they were struggling because they had to hand brush all the fibres. The brushing machine would greatly benefit them. In July 2011, a woman entrepreneur

was identified who would like to own a brushing machine; she was considered loan-worthy. In December 2011, SIDO provided the brushing machines entrepreneur loan and the machine was supplied in March 2012. After some starting-up problems the machine worked, but there was no market and the brushing machine stopped operations. There is currently no local premium for brushed fibre. The processors have access to market that does not demand brushed fibre but unbrushed. Local traders are buying the fibre unbrushed and therefore they take the risk of receiving a bonus or loss after brushing.

Lessons from rope making groups

Lessons from price fluctuations

Oxfam identified an opportunity to upgrade the local value chain that specifically helped women. From another region in Tanzania, rope making machines were bought. These manual rope makers enabled the speeding-up of the fully manual rope making considerably and enabled making of stronger ropes. Four women groups were trained on how to use rope-making equipment. From each of the four groups a delegate had been on a rope makers learning journey. The plan was that the women groups would contribute part of the cost of the machines from their savings, supplemented by a grant from Oxfam.

Things did not go according to plan. In 2012, only 20-30 ropes per group had been made while very few ropes had been sold. Due to a management oversight, the machines were handed over to the groups before they had made their payment. Subsequently, the Oxfam value chain advisor has found it very difficult to collect the money from the groups. Another unfortunate effect was that in the absence of own investment, there was no economic drive for the women group to make these machines productive.

The price of sisal in the area has increased for all parties concerned. For farmers the initial price was between TSH 250 and TSH 300 per kilogram of unbrushed fibre. At the end of 2011, after increased competition between the processors, it jumped in some areas over night from 250 to 350. Thereafter it increased to between 450, - and 500,-. Many of the processors reported a price of 500, - , the farmers reported 450,- .

However, this price increase has been compensated by the increase in price for the processed goods. Starting in 2010 (pre-project) at TSH 400, it rose to a rather stable TSH 1200 in 2012. The effective price Katani was paying at the time of the conflict was TSH 880 per kilogram of unbrushed fibre. The price was slightly higher than the price paid locally, but included the cost of transport and the high loss of brushing.

At that moment the local price was TSH 1100 per kilogram.

Furthermore, Katani paid for the lowest grade of fibre. Reports suggest that the quality of fibre was higher at that moment. However, in 2012, the quality was dropping, probably due to the high demand, which resulted in the limited quality requirements from market that will take anything.

Oxfam has stimulated stakeholder discussion and conflict resolution. In total four meetings on communication and conflict resolution have been organised; the first in 2010, the second in 2011, the third beginning 2012 and the last at the end of 2012. Central in all four meetings was communication between the stakeholders and conflict resolution during the last meeting.

3 Farmers receive their money after the leaves are processed they also are required to help process the fibres. The farms bring the leaves to the raspadora and hang the unbrushed fibres to dry in the sun. After drying they bring them to a weighing scale. After which they receive their money.

The effect on this project on the value chain and the actors in the value chain is significant. Overall, the structure of the market changed a few times with new players entering and local entrepreneurs following the lead of the supported processors. In supply of sisal we also see some unexpected outcome. Individual smallholders have contracts. Some of the farmers have started creating non-formal contracts, sometimes timing the delivery and checking the price. Furthermore, the competition over the leaves has driven up the price for farmers. Nursery farmers are expected to increase the production of seedling since price and demand are likely to rise.

With regards to expansion of availability of other services we have seen the following: SIDO is supplying the local raspadors with additional working capital. The amount is significantly higher than in the first year. A local mechanic is building raspadoras at a fraction of the cost of those from Tanga (see box). Brushing facilities are now available in Kishapu and different rope making groups have started production. Three phases of development can be distinguished in the value chain.

(1). First, the market with fragmented and limited buying and volatile prices. Then the market created with the aid of Oxfam is part of the value chain. With one large buyer and sufficient processing capacity production is increasing, where the processors need to bring their goods to Tanga at own risk and expense.

(2). in the next phase, multiple buyers come in to buy unbrushed fibres in Kishapu

(3). finally the value chain incorporates all and more value is added by vertical integration of the activities brushing and rope making into the chain.

Effects on the overall chain and market overview

Reflections and the way forward

• • • “After the introduction of 5 Raspadoras by Oxfam and processors started to process sisal leaves, the market became available. We came up with the idea of making our own Raspadoras, some people laughed at us and said we couldn’t, but we managed. (…) Finally we saw that we are capable to do this activity. After doing some calculation we saw that we can make these machines at low cost. Ultimately we got customers for the machine and others are still coming. We have orders for five more machines.” Mr. Kende, entrepreneurial mechanic who builds raspadora machines of high quality at a minimal price.

The project has generated a serious smallholder sisal industry in Kishapu District within a few years. It is generating significant incomes for producers and processors. Incomes from sisal production have doubled for smallholder producers. Incomes for processors have increased many folds. There is still a lot of hedge sisal underutilised in Kishapu and neighbouring districts. Scaling out the approach through stimulating more processors in new areas will benefit more farmers.Linking producers to commercial markets through a commercial sisal company has given the

initial boost. Although the initial loan model did not work out as well as planned, it did attract additional players in the sisal market, stimulating production and processing even more. Engaging with major buyers will still be an important approach for any future scaling up, as well as capacity building of producers and processors, to enable them to interact and negotiate with other actors in the value chain in an empowered way. We also see the development of a local commercial brushing facility which, if it develops properly, will boost local production even further.

Simplified overview of the projects beneficiaries and the support they received from Oxfam

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