One World No Hunger Initiative

Transcription

1 One World No Hunger Initiative Global Programme Green Innovation Centres for the Agriculture and Food Sector Nigeria Linking producers and processors through business model innovation the GIZ contract farming approach Lagos, 23 rd November, 2017 CHANI OTUTEYE 1

2 Brief introduction on CF and how it has been implemented in Nigeria by the GIZ/GIAE team. Introduction 2

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4 Definitions CONTRACT FARMING Contract farming covers a range of contractual partnership between growers and partner companies for the production of commercial agricultural products. Contract farming (CF) is defined as forward agreements specifying the obligations of farmers and buyers as partners in business. Legally, farming contracts entail the sellers (farmers ) obligation to supply the volumes and qualities as specified, and the buyers (processors / traders ) obligation to off-take the goods and realise payments as agreed. 4

5 Needs of producers Access to inputs and markets Access to non-financial services Access to financial services Increases in productivity Reduction pre-/post-harvest losses Assured payments Stable revenues Needs of off-takers Regular and reliable procurement (timing, volume, quality) Access to arable land as alternative to land acquisition Good reputation (e.g. social responsibility/ inclusive business model) Needs of both, producers and off-takers Reduction of production and market risks Reduction of price risks Reduction of transaction costs One possible solution among others: contract farming 5

6 What is an inclusive business model? Inclusive business model The integration of poor social groups into the activities of a company as suppliers, intermediaries, staff or consumers forms integral part of the company s strategy for the benefit of all. Promise for producers - Market access risks reduced - Know-ledge & technologies imparted - Income increased; livelihood improved Promise for both - Unit production costs reduced - Unit transaction costs reduced - Post-harvest losses reduced Promise for buyer - Procurement risks reduced - Product quality/ traceability assured - Access to (high-end) markets improved win-win but only if the inclusive business model is well planned and managed 6

7 Business obj. Business/ gvt/ donor obj. Secondary business/ primary gvt/ donor obj. Objectives of CF as an inclusive business model 1 st level objective: a viable CF business model CF business models need to be economically & financially feasible: - appropriate CF business model - realistic CF business plan - efficient CF management based on economic, risk and financial analysis of (i) alternatives to CF and (ii) alternative CF business models 2 nd level objective: a sustainable CF scheme CF business models need to be: - economically viable (1 st level objective) - socially equitable (e.g. gender equity, youth integration, networks) - environmentally durable 3 rd level objective: an inclusive CF scheme CF schemes need to: - sustainable (2 nd level objective) - match situations for incl. business models Source: Will, 2013 Presented By: CHANI OTUTEYE Page 7/12

8 Overview of the 5 contract farming models informal intermediary multipartite centralised nucleus estate Usually seasonal/ annual agreements, often verbal, between smaller firms or traders and farmers. Firm subcontracts intermediary (e.g. farmer group, trader) to interact with/ to contract farmers. Besides buyer and farmers also involved: public, NGOs and other partners (e.g. finance institutions). Firm (often large processor) having strict supply requirements contracts farmers (often large farms). (Large) firm with own estate (production/ demonstration) contracts farmers for volume/ flexibility. and transitional forms of CF models and modes of operations Source: adapté de Technoserve,

9 Overview of the 5 contract farming models informal intermediary multipartite centralised Nucleus estate and often transitional forms of CF models and modes of operations More intensive coordination required Reduced procurement risks for buyers Increased investment costs for buyers Source: adapté de Technoserve,

10 GIAE Objective GIAE Project VRS CF CF as inclusive business model Objective Innovations in small holders farm holder farm businesses and up and down stream agribusinesses in selected rural regions have improved income for smallholder farming enterprises, employment and regional food supply Integrate poor sections of the population either as customers or as suppliers with viable business modules and by so doing to increase the economic and social benefit for all business parties involved Alleviate poverty Increase revenue generation of SHFs Improve upon livelihood Capacity building Increase productivity Together: improved livelihood of the smallholders farmers 10

11 CONTRACT FARMING The Opportunity Contract farming as inclusive business model offer a wide range of advantages to smallholders including the following: Secured market Access to inputs & machinery services Risk minimisation Technical training and advisory services Contracts used to secure financing 11

12 CONTRACT FARMING IN NIGERIA Project Description Context GIAE/AFC Nigeria in the course of its work observed the inability of most producers/ producer groups and GIAE partner processors to formally establish formal contract as result of the following; General lack of knowledge of both Producers and Processors on contract farming as an inclusive business model that improves their business. Poor skills and knowledge in design of viable contract farming arrangements. Both parties in the past have not operated using contracts; they have relied on the good will of each other. Poor Producer selection and sensitization procedures on the part of Processors etc. 12

13 Project objectives CONTRACT FARMING IN NIGERIA Establish the Existence of contracts and type of relationship between actors- Strategic Sessions Understand the processes,content of contract agreement among parties involved Strategic sessions & training Whether CF is being practiced as an inclusive business model by all the parties involved - Training Lead the negotiations and signature of off-take contracts between rice offtakers and Producers, clarifying roles, targets and timelines of all parties B2B 13

14 CONTRACT FARMING IN NIGERIA Project Implementers GIZ/GIAE /AFC Contract farming scheme project CF PARTNERS 14

15 CONTRACT FARMING IN NIGERIA Project Beneficiaries In Nigeria, Contract specifications Partners capacities are built, Partners negotiate, develop, sign and implement offtake contracts with small-holder maize, Producers receive inputs, technical training and advisory services provided and financed by their off-takers. The FBO members commit to deliver set quantities of maize to the off-takers, according to pricing mechanisms defined in the contracts. 15

16 CONTRACT FARMING IN NIGERIA Actors involved GIZ/GIAE/AFC Processors Producer Groups/ FBOs Farmers 16

17 Contract Farming-CF Purpose of CF: Contract farming (CF) offers the opportunity to develop a business relationship for both purchasing companies and suppliers Progress so far: Oct Training of processors on CF basic principles in Abuja and Ibadan-total of 60 trained June 2017 Basic CF training of 30 would be experts on CF process (across the VCs) as part of the qualification process Innovations (4) to increase productivity & income of smallholders identified in a participatory approach 4 innovations to increase productivity & employment in VC enterprises identified in a participatory approach 17

18 Contract Farming-CF Progress so far: August 2017 :CF ToT I professional qualification process for Nigerian experts- 15 trainees involved as part of the 3 stage process Sept :CF ToT II professional qualification process for Nigerian experts- 14 trainees involved as part of the 3 stage process Sept. 2017: Training of 96 producer groups and officials in rice VC on basic CF principles (Godilogo, Mikap & Beguwa) Innovations (4) to increase productivity & income of smallholders identified in a participatory approach 4 innovations to increase productivity & employment in VC enterprises identified in a participatory approach 18

19 Contract Farming-CF Progress so far: Sept. 2017: B2B session held for partner processor companies; Mikap and Godilogo. 78 actors participated; 14 fin. Institutions, inputs dealers & Devt. Org/EAs each, 26 producer groups and 3 media practitioners Oct. 2017: Stakeholders meeting with CF partners. Over 20 Partners committed to sign MoU with GIZ/GIAE to be linked to Producer groups, investors etc. Nov. 2017: CF strategic session with Saro; Training of 30 producer groups and officials in rice maize VC on basic CF principles; B2B session held for partners in maize value chain in Zaria including Saro Innovations (4) to increase productivity & income of smallholders identified in a participatory approach 4 innovations to increase productivity & employment in VC enterprises identified in a participatory approach 19

20 How is it being implementing? Trained the Processors (Management) on Contract Farming Trained Producers on FBS and Other GAP trainings Strategic Sessions with Processors Trained Producers & Producer groups on CF B2B Strategic Sessions with all Parties in the CF scheme Negotiations and signature of off-take contracts among Parties 20

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22 Contract Farming-CF Purpose of CF: Contract farming (CF) offers the opportunity to develop a business relationship for both purchasing companies and suppliers Progress so far: Oct Training of processors on CF basic principles in Abuja and Ibadan-total of 60 trained June 2017 Basic CF training of 30 would be experts on CF process (across the VCs) as part of the qualification process Innovations (4) to increase productivity & income of smallholders identified in a participatory approach 4 innovations to increase productivity & employment in VC enterprises identified in a participatory approach 22