ILLOVO SUGAR (MALAWI) LIMITEDILLOVO SUGAR (MALAWI) LIMITED
Emergence of global agri-food chains Emergence of global agri-food chains to support small scale farmersto support small scale farmers
The Malawi case studyThe Malawi case studyPresented by Njabulo Zwane Presented by Njabulo Zwane
4-64-6thth October 2010 October 2010Kampala UgandaKampala Uganda
1. Activating Africa’s agricultural Potential
1. Activating Africa’s agricultural Potential
• AGRA (2009) – most producers are small holder farmers, cultivate small plots, crop productivity low
• Yield increasing innovation as a major source of growth • Increased use of fertilizers, seeds and irrigation• Horizontal land expansion and increased yields effects
and emergence of global agri-food chains will activate intensification and value adding opportunities
• AGRA (2009) – most producers are small holder farmers, cultivate small plots, crop productivity low
• Yield increasing innovation as a major source of growth • Increased use of fertilizers, seeds and irrigation• Horizontal land expansion and increased yields effects
and emergence of global agri-food chains will activate intensification and value adding opportunities
2. Commercializing agriculture and farm typologies
2. Commercializing agriculture and farm typologies
• Small scale farmers drive agriculture where commercialisation is complex and difficult
• Commercial farms respond to technical innovation and market response
• Large volumes are produced cost effectively in a competitive global market and lower transaction costs
• Mixed mode farming typology operates in African agriculture where large and small scale agriculture coexist and supports mobility of small producers to higher income
• Action directed at production consistency and quality maintenance require innovation
• Small scale farmers drive agriculture where commercialisation is complex and difficult
• Commercial farms respond to technical innovation and market response
• Large volumes are produced cost effectively in a competitive global market and lower transaction costs
• Mixed mode farming typology operates in African agriculture where large and small scale agriculture coexist and supports mobility of small producers to higher income
• Action directed at production consistency and quality maintenance require innovation
3. Agri-food business transformation and African Agriculture
3. Agri-food business transformation and African Agriculture
• The emergence of globally competitive agri-food value chains over the past 15 years due to the expanding global demand for food and fiber; changing consumer preferences; world wide deregulation of agricultural business and technological innovation
• changes include shifts to supply/value chain management and coordination governed by trust and longterm contracts.
• Trust and relationship management are becoming the important drivers of sustainable agribusiness
• The emergence of globally competitive agri-food value chains over the past 15 years due to the expanding global demand for food and fiber; changing consumer preferences; world wide deregulation of agricultural business and technological innovation
• changes include shifts to supply/value chain management and coordination governed by trust and longterm contracts.
• Trust and relationship management are becoming the important drivers of sustainable agribusiness
3. Agri-food business transformation and African Agriculture
3. Agri-food business transformation and African Agriculture
• Relationship management characterized by local sourcing of raw products to sourcing in wider regional and global markets. More consideration on ethical and environmental concerns.
• The sourcing of raw products from farmers is increasingly directed through contracts and long term arrangements. Farm producers now become “ members of the food business team” .
• Relationship management characterized by local sourcing of raw products to sourcing in wider regional and global markets. More consideration on ethical and environmental concerns.
• The sourcing of raw products from farmers is increasingly directed through contracts and long term arrangements. Farm producers now become “ members of the food business team” .
4. Changing investment opportunities4. Changing investment opportunities
• Investing in wholesale market type infrastructure, where the emphasis was on providing access to producers of raw materials to the next the value chain, is shifting to the development and consolidation of the full value chain.
• Investments, focused on agribusiness extension to participating producers, and on processing and retail functions and its supporting mechanisms, are now becoming the new drivers of business opportunities in the food system.
• Investing in wholesale market type infrastructure, where the emphasis was on providing access to producers of raw materials to the next the value chain, is shifting to the development and consolidation of the full value chain.
• Investments, focused on agribusiness extension to participating producers, and on processing and retail functions and its supporting mechanisms, are now becoming the new drivers of business opportunities in the food system.
5. Small holder and agri-food business transformation
5. Small holder and agri-food business transformation
• Producers, linked to agri-food value chains, are generally found to be better off due to price and quality considerations and due to sustained long term value prospects.
• Companies/super markets however generally prefer to source from larger/medium scale operations, rather than from smallholders due many considerations, including high transactions costs, problems with volume and quality consistency and delivery
• Producers, linked to agri-food value chains, are generally found to be better off due to price and quality considerations and due to sustained long term value prospects.
• Companies/super markets however generally prefer to source from larger/medium scale operations, rather than from smallholders due many considerations, including high transactions costs, problems with volume and quality consistency and delivery
5. Small holder and agri-food business transformation
5. Small holder and agri-food business transformation
• Where smallholders dominated the agrarian structure, as in many African situations, business companies tend to source from localities where the requisite non- land assets such as irrigation, farm equity, farmer associations/producer cooperatives, access to transport and communication systems were put in place.
• Does the evolving supply chain dominated agri-food system therefore agitate against smallholder agriculture?
• Where smallholders dominated the agrarian structure, as in many African situations, business companies tend to source from localities where the requisite non- land assets such as irrigation, farm equity, farmer associations/producer cooperatives, access to transport and communication systems were put in place.
• Does the evolving supply chain dominated agri-food system therefore agitate against smallholder agriculture?
6.Economic management: trade, policies, partnerships and good
governance
6.Economic management: trade, policies, partnerships and good
governance• For agriculture to achieve in the African context,
policies and governance need to be supportive. These include trade and domestic support policies for agricultural renewal as well as macroeconomic reform, public-private partnerships, investments in infrastructure and research, development support by the public sector, and general good governance practice.
• Public-private partnerships (PPP’s) are an important to increase financial, human, and social capital in agriculture and rural areas, with government providing an appropriate enabling environment for private initiatives to develop.
• Good governance practices are important to ensure that the above are implemented in an accountable, transparent, and responsible manner.
• For agriculture to achieve in the African context, policies and governance need to be supportive. These include trade and domestic support policies for agricultural renewal as well as macroeconomic reform, public-private partnerships, investments in infrastructure and research, development support by the public sector, and general good governance practice.
• Public-private partnerships (PPP’s) are an important to increase financial, human, and social capital in agriculture and rural areas, with government providing an appropriate enabling environment for private initiatives to develop.
• Good governance practices are important to ensure that the above are implemented in an accountable, transparent, and responsible manner.
Illovo Sugar (Malawi) LimitedCurrent Social Impact
Illovo Sugar (Malawi) LimitedCurrent Social Impact
The Malawi Sugar Estates provide services for employees and the surrounding communities
• 13 000 children attend estate schools
• 4 400 houses are provided for employees
• 12 medical clinics provide healthcare for employees and dependants (Approximately 70 000 people)
• 25 000 patients a month visit the clinics
• Free potable water, electricity and sewerage are provided
The Malawi Sugar Estates provide services for employees and the surrounding communities
• 13 000 children attend estate schools
• 4 400 houses are provided for employees
• 12 medical clinics provide healthcare for employees and dependants (Approximately 70 000 people)
• 25 000 patients a month visit the clinics
• Free potable water, electricity and sewerage are provided
Illovo Sugar (Malawi) LimitedCurrent Social Impact
Illovo Sugar (Malawi) LimitedCurrent Social Impact
• 5 643 people were counselled and tested for HIV/AIDS last year. 1 957 people are on the company wellness programme and anti retroviral medicines are being issued to 2 144 employees and people from surrounding communities
• 10 500 employees (over 60 000 dependents). 2nd largest individual employer after Government of Malawi
• Fortification of sugar – Vitamin A
• 5 643 people were counselled and tested for HIV/AIDS last year. 1 957 people are on the company wellness programme and anti retroviral medicines are being issued to 2 144 employees and people from surrounding communities
• 10 500 employees (over 60 000 dependents). 2nd largest individual employer after Government of Malawi
• Fortification of sugar – Vitamin A
Community Trust Farm (CTF)Community Trust Farm (CTF)
• Rural social and economic development through sugar cane agriculture• Raise and manage income and technical assistance for Lower Shire communities• Establishment of a 300 hectare irrigated sugar cane farm
• AECF grant - $ 1 500 000• Illovo and business partners - $ 1 500 000
(Cash/Goods/Skills/Services) • Support expansion initiatives – secure cane supply / managed by Illovo • Long-term cane supply agreement with Illovo’s Nchalo estate• Establish appropriate legal project vehicle (Trust/Charity) to optimise tax benefits
• Rural social and economic development through sugar cane agriculture• Raise and manage income and technical assistance for Lower Shire communities• Establishment of a 300 hectare irrigated sugar cane farm
• AECF grant - $ 1 500 000• Illovo and business partners - $ 1 500 000
(Cash/Goods/Skills/Services) • Support expansion initiatives – secure cane supply / managed by Illovo • Long-term cane supply agreement with Illovo’s Nchalo estate• Establish appropriate legal project vehicle (Trust/Charity) to optimise tax benefits
Community Trust Farm (CTF)Community Trust Farm (CTF)
• Establish appropriate legal project vehicle (Trust/ Charity) to optimise tax benefits• CTF Trust to manage income generated for re- investment into community initiatives• CTF Trust would be a conduit for financial, technical and market development
• Small and Medium Enterprise development• Smallholder agribusiness• Health• Education • Infrastructure development
• Sustainable model which could be replicated in Malawi and rest of Africa
• Establish appropriate legal project vehicle (Trust/ Charity) to optimise tax benefits• CTF Trust to manage income generated for re- investment into community initiatives• CTF Trust would be a conduit for financial, technical and market development
• Small and Medium Enterprise development• Smallholder agribusiness• Health• Education • Infrastructure development
• Sustainable model which could be replicated in Malawi and rest of Africa
Thank you
We are very proud to be involved in the Malawian economy. Thank you
