Mozambican Cashew Industry Analysis. Siddhant T. Mishra Whitney I. Martin

Transcription

1 Mozambican Cashew Industry Analysis Siddhant T. Mishra Whitney I. Martin August 2016

2 Executive Summary Global Market Context At ~3.2mn MT, global RCN production continues to grow at stable rate; Africa is ramping up and set to outgrow Asia Despite production expansion, Africa in infancy stage of processing while India and Vietnam process >90% of RCN Quality conscious markets such as EU & US collectively constitute one third of global kernel consumption These western markets projected to grow at 6% and reach ~350k MT by 2020, as global demand reaches 1.1mn MT As global demand outstrips supply, market kernel prices are expected to stabilize ~$3.5/lb, ensuring a healthy price for African cashew Both Asia & West Africa, which contribute majority of production, follow northern cycle, resulting in a ~15-20% premium for southern cycle RCN Strategic Context for Mozambique Annual commercialization stagnant in the range of 63-83K MT*; significant quantities attributed to unofficial exports At current level of support, aged trees and inefficiencies are projected to limit production at current levels Domestic processing is operating at ~70% utilization facing significant supply-side challenges; willingness to install additional capacity is low Growing kernel sales will require meeting western markets need for improved quality, traceability, and global certifications Cashew sector susceptible to certain uncontrollable risks and must plan for damage, but can actively lobby to combat risks around subsidies, availability of investment capital, and labor concerns Chemical subsidies and seedlings program burden consumes majority of Incaju budget, must be used efficiently to lift production Competitiveness Overview: Once a leading RCN producer, Mozambique accounts for <3% of African RCN; Tanzania has significantly outpaced Mozambique in East Africa Mozambique has the lowest quality RCN within Africa due to its old acreage and recurrent disease outbreak; lower RCN price parallels lower quality Total processing cost lowest in Mozambique due to cheaper RCN procurement prices; but poor quality results in lower kernel yields and subsequently one of the lowest top lines among African processors Domestic policies must support business players throughout value chain to protect against heavily protected players that command market Technoserve 2

3 Executive Summary Value Chain Assessment In the current scenario, 49% of the value in the chain is captured if cashew is processed domestically Large inefficiencies lie in the upstream value chain and processing; significant value lost as nearly 45% RCN not being processed in-country Interventions aimed at boosting production and processing in country, while reducing inefficiencies can unlock significant value Recommendations Seven key interventions focus on the transformation of production in Mozambique to better supply exporters and processors alike: 1. Producer groups to increase producer cohesion to increase efficiency, information symmetry, and their commitment to cashew over other crops 2. Vouchers to improve traceability and efficiency in distribution of subsidy, while laying the foundation for a private market 3. Research and development to plant new highly productive seedlings and eliminate disease for the long term viability of domestic RCN production 4. Training assistance to improve cashew production techniques through sustained commitment to cross-training within communities 5. Public Information system to improve communication, channeling feedback to government and price/care information to producers 6. Processor initiatives to increase volume of RCN processed in Mozambique to create more jobs and capture more value in-country 7. Lobby efforts to better position Mozambican cashew in global market while improving business conditions for processors and producers Proposed interventions are aimed at solving some of the critical gaps that today are faced by stakeholders across the cashew value chain Technoserve 3

4 Contents GLOBAL MARKET OVERVIEW MOZAMBIQUE S MACROECONOMIC OVERVIEW BENCHMARKING ANALYSIS CASHEW VALUE CHAIN OVERVIEW STRATEGIC PLAN FOR STAKEHOLDERS

5 At ~3.2mn MT, global RCN production continues to grow at stable rate; Africa is ramping up and set to outgrow Asian output Africa is growing at 4x the rate of Asia Most of growth is attributed to the Ivory Coast and Benin; Mozambique is losing market share 3500 RCN Production by Geography (k MT) CAGR 1800 Africa RCN Production by Country (k MT) CAGR % 11% % 3% 5% 7% 9% % % % 0 0 Asia Africa Latin America Ivory Coast Tanzania Nigeria Other African Nations Guinea-Bissau Benin Mozambique Source: Multiple sources; Technoserve analysis Technoserve 5

6 Despite production expansion, Africa in infancy stage of processing while India and Vietnam process >90% of RCN Asia ~2938 Quantity of RCN Processed (k MT, 2015) East African Nations ~47 West African Nations ~ % share in processing 52% 39% 1% 0.2% 0.2% 1.1% 0.5% 0.5% 5.1% Notes: All values are approximate figures calculated based on inputs of multiple stakeholders across processing sector Source: Multiple sources; Technoserve analysis Technoserve 6

7 Quality conscious markets such as EU & US collectively constitute one third of global kernel consumption (~755k MT in 2015) Assumptions Values have been calculated based on 2013% consumption share of countries Average kernel conversion ratio has been assumed to be 23.5% Asia 409k MT 2015 Kernel Consumption Americas 159k MT EU 87k MT Other 102k MT % share Per capita kg / year** 40% 8% 2% 2% 1% 1% 19% 2% 4% 3% 1% 1% 1% 1% 2% 10% *Others category has been created as country values reported by INC did not match overall Kernel consumption; the difference has been considered as Others ; **2013 figures Note: INC reports India s kernel consumption at 50,005 MT for 2013 which is too low; his has been corrected to 2,50,000 MT as reported by every other source Technoserve 7 Source: International Nut Council; International Trade Centre; Lit. Search

8 Thousands These western markets projected to grow at 6% and reach ~350k MT by 2020, as global demand reaches 1.1mn MT Kernel Consumption, MT 600 Forecasted CAGR ( 15-20) 500 IND 10-12% US ROW EU ME AU 4-6% 6-8% 3-5% 6-8% 4-6% India America Europe Middle-East Australia Others Major trends up to 2020 EU & US markets are expected to grow and retain their overall consumption share at ~30% While India, US & EU remain robust markets, Middle-East (fall in oil prices), Russia (depreciation of Ruble) and China (slowing economy) markets may experience slowdown in kernel consumption India will continue to dominate the global kernel consumption, poised to consume ~50% of all kernels by 2020 With prices of all other nuts falling (including almonds), cashew kernel prices may remain within same range for coming years Technoserve 8 Note: Kernel consumption figures are approximate values calculated based on inputs of multiple stakeholders; forecasts calculated based on current growth rate of each region Source: International Nut Council; International Trade Centre; Lit. Search

9 As global demand outstrips supply, market kernel prices are expected to stabilize ~$3.5/lb, ensuring a healthy price for African cashew Quantity of RCN, k MT 4500 Forecast Africa Market - Average Kernel Price, $ / lb $4.00 Forecast 4000 $ $ $ $ RCN Production Consumption $1.50 $1.00 Major trends up to 2020 Upward trend in Global Kernel Prices attributed to increasing demand supply gap Key markets for African kernel: US & EU expected to grow at a healthy rate of ~5% CAGR The African kernel price may see volatility attributed to how Vietnam (another leading supplier to western markets) performs As processing ramps up, Africa might offset the over-dependence of Western markets on Vietnamese kernel. Indian kernel will continue to mainly cater to domestic demand Technoserve 9 Note: Global demand projected on current growth in key markets; Production projected based on past growth rates in main producing regions; Kernel price projections based on TNS analysis Source: Lit Search, Cashew Info, Stakeholder Interviews, Technoserve Analysis

10 Both Asia & West Africa, which contribute majority of production, follow northern cycle, resulting in a ~15-20% premium for southern cycle RCN Regions Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Asia Vietnam, Philippines, Thailand, India, Sri Lanka West Africa I Ghana, Benin, Burkina, IVC, Togo, Mali, Nigeria West Africa II G. Bissau, Guinea Conakry, Senegal and Gambia East Africa Tanzania, Mozambique, Kenya, Madagascar Latin America Brazil & Others Crop Cycles Northern Crop: Feb - Sept (8 months) Southern Crop: Oct - Jan (4 months) Major trends About ~83% RCN production comes from the northern crop as West Africa and Asia both follow the northern cycle Brazil, one of the larger southern cycle producers, is increasingly catering to domestic demand and witnessing stagnancy East Africa, due to its off cycle production and proximity to Asia commands a significant premium for its RCN In current state, Asian processors willing to pay ~15-20% premium for African RCN as Indian market is protected and can negotiate higher kernel prices Source: Technoserve Analysis; ACi Report Technoserve 10

11 Contents GLOBAL MARKET OVERVIEW MOZAMBIQUE S MACROECONOMIC OVERVIEW BENCHMARKING ANALYSIS CASHEW VALUE CHAIN OVERVIEW STRATEGIC PLAN FOR STAKEHOLDERS

12 Annual commercialization stagnant in the range of 63-83K MT*; significant quantities attributed to unofficial exports Total annual commercialization ~75-80k MT with ~30k MT being processed domestically Annual Commercialized RCN (k MT) Processing Regional/Domestic Consumption** 63 Exports (Official & Unofficial) Major trends Annual RCN commercialization around 80k MT which is estimated to be 70% of the total national output Majority of commercialization comes from Northern provinces- Nampula, Cabo Delgado and Zambezia 22-27k MT RCN traded/exported through informal channels 72 Majority of RCN exports through informal channels to avoid 18% export duty Annual Estimated RCN Exports (k MT) Most of commercialized RCN from North; Other regions consume RCN domestically Commercialized RCN by Region (k MT) Official Exports Unofficial Exports South Central North *Annual commercialization excludes informal market volumes within the country **Regional/Domestic Consumption: The calculated quantity is based on Deloitte & Touche (1999)- Majority of this quantity is held back due to lack of market linkages and sold informally Notes: Informal trade statistics are not published, values stated are based on interviews with industry stakeholders. Only commercialized RCN taken as given. Technoserve 12 Source: Official Govt. Publications (Incaju); Literature search; Stakeholder Interviews- Processors and Producers; Primary Research; Technoserve analysis

13 At current level of support, aged trees and inefficiencies are projected to limit production at current levels Annual Commercialized RCN (k MT) K 69K Forecast 2020 Best case based on: Improved efficacy of current govt. subsidies As expected yields from new trees Sustained planting efforts nationally Worst case based on: Average-low efficacy of govt. subsidies Lower than expected yields from trees Sporadic planting campaigns The forecast takes into account yield rates ( ), annual seedling adoption rates, lifecycle of old trees, aggregate number of total and productive trees among other factors Key reasons for stagnancy in production As of 2016, the total number of cashew trees are estimated to be ~40mn, although only ~20-23mn are productive Majority of trees are old- 25+ years old and are experiencing declining yields and are susceptible to diseases The lack of access to chemicals and diseases further impacting yields; The government chemical program only sufficient for ~10% trees Replanting, mainly aided by subsidies at current levels marginally offsets trees going out of production Lack of management practices (pruning, spraying etc.) Snapshot on Mozambique s RCN quality Only 59% trees remain productive, of which many trees are old and declining in productivity Low kernel out-turn ratio (43-46), lower than African and global average Marginal land acreage Limited access to inputs Average yield/tree: 3.05 kgs Assumptions: *Yield rates, level of adoption of seedlings, extent of chemical treatment based on field visits and stakeholder interviews Notes: Since official statistics for informal trade are not published, values stated are based on consensus of key stakeholders. Only commercialized RCN taken into consideration Technoserve set 13 Source: Official Govt. publications (Incaju); Literature search; Stakeholder Interviews- Processors and Producers; Primary Research; Technoserve analysis

14 Market Share 2016* Domestic processing is operating at ~70% utilization facing significant supply-side challenges; willingness to install additional capacity is low Current installed capacity can process greater volumes provided with adequate supply Issues with RCN procurement, financial liquidity, labor laws & weak infrastructure handicap processing RCN Processing Capacity*, MT 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 14,000 12,000 10,000 8,000 6,000 4,000 2, K 24.2K 31.5K 34.0K 33.2K 41.9K 46.6K * Utilized capacity Total No. of Jobs Created* Idle capacity Difficulties in RCN procurement Reliance on informal trader networks Compete with illegal exporters Poor road networks in key provinces No regional markets Lack of affordable finance High collateral required for financing Liquidity issues to finance operations Labor laws & infrastructure High rates of absenteeism ~50-60% Inflexible labor laws Disrupted power supply Quality issues Low kernel out-turn ratio Inconsistent RCN packaging After 2008, the processing sector has undergone consolidation and has 4 dominant players 15%, Korosho 18%, Caju Ilha 4%, Others 31%, Olam 32%, Condor *Total No. of Jobs Created: The figure reflects total no. of jobs created as per government mandate- Processors estimate 50% absenteeism. Based on visits to processing plants Notes: Since official statistics for informal trade are not published, values stated are based on consensus of key stakeholders. Only commercialized RCN taken into consideration set Source: Official Govt. publications (Incaju); Literature search; Stakeholder Interviews- Processors and Producers; Primary Research; Technoserve analysis Technoserve 14

15 Millions Growing kernel sales will require meeting western markets need for improved quality, traceability, and global certifications Mozambique losing 40% of potential revenue from exporting RCN rather than kernel Majority of kernel export customers in US, only filling 2% of US demand $120 $100 Low delta because RCN export price unusually high that year ($1,300 vs. $880 before and after) Mozambique Kernel Export US Imports $80 $60 $40 $20 South Africa; 19% Europe; 26% North America; 51% Mozambique 2% Vietnam, India, Brazil, etc 98% % RCN Exported $0 Lost Revenue (mn) Current Revenue Potential Revenue 39% 47% 9% 14% 11% 9% $45 $4 $22 $47 $23 $24 India s predominant method of home-based processing does not meet safety standards, exposes workers to corrosive and toxic liquid (cashew nut shell liquid) Western markets interested in: organic products, fair working conditions, traceability, recall mechanisms, allergen control, raw and finished product testing, programs (environmental, sanitation, food defense, audit, code of conduct training), HACCP, GMP Note: Potential revenue calculated considering loss of export tax on RCN as well as weight of RCN lost in processing. Source: Incaju, RONGEAD for ica, Technoserve Analysis Technoserve 15

16 Cashew sector susceptible to certain uncontrollable risks and must plan for damage, but RISK FACTOR IMPACT MITIGATION A WEATHER Variation in temperature and timing of rainy season can shorten length of harvest Drought affects productivity of trees Investment in new trees which can produce earlier in the season would extend the harvest into October and September Incaju could develop better models for predicting crop output based on weather and conditions anticipated B DISEASE A number of fungi (like powdery mildew) afflict Mozambican trees, some incidence of pests Preventative care in the form of cleaning, sanitation, and chemical treatment can reduce risk by 40-50% These lessen production, lead to death of trees, and can spread if not managed correctly Research being done to create new varieties resistant to these types of diseases C CURRENCY EXCHANGE RATE When metical is weak, chemicals will cost more, export tax will be worth less, suppliers demand dollars, but export surrender requirement demands 50% of sales be converted to meticais Better for banks and processors if loans are provided in dollars protects against currency fluctuations and matches income denomination to debt Business Solutions to Poverty Technoserve 16 Source: Stakeholder interviews, US State Department 2015 Investment Climate Statement, The Noun Project (graphics)

17 can actively lobby to combat risks around subsidies, availability of investment capital, and labor concerns RISK FACTOR IMPACT MITIGATION D GOVERNMENT SUPPORT Currently Incaju supported in large part by general government funds, Change in political power and administration s focus could damage industry permanently Bad policy can kill infant enterprises, especially within processing industry Government requires clear context and information on global market and levers to take timely action Careful consideration for how to deliver aid/subsidies which reach intended recipients (producers/processors) E FINANCING Lending done in meticais has become unaffordable for small players Make use of the funds available through Sida through 2018 Dedicate resources to supporting producers in attaining fair lending F LABOR Inconsistent attendance and high turnover increases training costs Health issues and sanitation concerns has deleterious effects on quality of output Worker and food safety compliance will improve working conditions Use technology to make job sustainable Examine compensation and expectations of roles with highest turnover Business Solutions to Poverty Technoserve 17 Source: Stakeholder interviews, Mid-term Performance Evaluation of the USAID-funded Loan Portfolio Guarantees through the Development Credit Authority Activity, The Noun Project (graphics)

18 Chemical subsidies and seedlings program burden consumes majority of Incaju budget, must be used efficiently to lift production Largest expense is chemical treatments for pests covering only 10% of trees, little spent on research Incaju Budget 2015 Largest programs are hitting their targets, but production has not seen lift expected Target is to repopulate 10-15% cashew trees, offer training and loans for pruning, treating, harvesting and planting Research $0.1mn, 2% Other $1.0mn, 18% Chemical Treatment $2.2mn, 41% Commercialization $0.9mn, 17% 2015 Actuals Produced 3.5mn seedlings Distributed 1.7mn Pruned 1.7mn trees, Treated 5mn Seedling Production $1.2mn, 23% 31k farming families benefited 85k farming families benefited Funded by 18% tax on RCN exports ($2mn in 2015), general government budget, and grants 2016 Targets Produce and distribute 4.2mn seedlings Treat 5mn cashew trees Business Solutions to Poverty Technoserve 18 Source: Balanço 2015 Incaju, Incaju Budget Documents, The Noun Project (graphics)

19 Contents GLOBAL MARKET OVERVIEW MOZAMBIQUE S MACROECONOMIC OVERVIEW BENCHMARKING ANALYSIS CASHEW VALUE CHAIN OVERVIEW STRATEGIC PLAN FOR STAKEHOLDERS

20 Once a leading RCN producer, Mozambique accounts for <3% of African RCN; Tanzania has significantly outpaced Mozambique in East Africa 800 RCN Production & Exports by Country (k MT, 2015) 700 RCN Production RCN Exports Exports > production due to cross border trade from neighboring countries Guinea- India Ivory Coast Vietnam Tanzania Nigeria Benin Senegal Moz'bique Bissau Production Exports % RCN Exported 0% 95% 0% 98% 96% 97% 113% 134% 41% Source: Multiple sources; Technoserve internal database Technoserve 20

21 Mozambique has the lowest quality RCN within Africa due to its old acreage and recurrent disease outbreak; lower RCN price parallels lower quality Pounds / 80 kg RCN Price ($/ MT) RCN Price ($ / MT, factory door) 1700 RCN Quality RCN Price Guinea- Bissau India Vietnam Senegal Tanzania Benin Ivory Coast Nigeria Moz'bique RCN Quality RCN Price $932 $1,622 $1,504 $1,077 $1,208 $1,057 $876 $875 $ Notes: Quality value depicted is an approx. value Source: Stakeholder interviews; Technoserve analysis Technoserve 21

22 Total processing cost lowest in Mozambique due to cheaper RCN procurement prices. 100% 90% 80% 70% Total Processing Costs (per MT) $2036 $1856 $1681 $1589 $1574 $1550 $1437 $1431 $1339 4% 2% 6% 6% 5% 5% 5% 5% 5% 8% 8% 9% 11% 11% 9% 16% 15% 13% 11% 9% 14% 15% 19% 16% 20% 21% 19% 60% Income tax 50% Financial Variable 40% 30% 80% 81% 72% 68% 59% 68% 61% 61% 66% Fixed RCN Cost 20% 10% 0% India Vietnam Tanzania Senegal G.Bissau Benin IVC Nigeria Moz'bique Technoserve 22 Notes: Figure assumes plant in third year of operation using 83% of its capacity Majority of the nations do not levy income taxes on new enterprises except Guinea-Bissau, Senegal & Vietnam Source: Technoserve analysis

23 but poor quality results in lower kernel yields and subsequently one of the lowest top lines among African processors Kernels produced (MT) Revenue ($ / MT of RCN processed, FOB) 640 Kernel Output, MT Revenue, $ / MT Guinea- India Vietnam Bissau Tanzania Senegal Benin Ivory Coast Moz'bique Nigeria Kernel Output, MT Revenue, $ / MT $2,170 $1,858 $1,746 $1,736 $1,729 $1,638 $1,617 $1,581 $1,514 Kernel Yields 24.1% 23.3% 23.9% 23.1% 23.2% 22.0% 21.9% 21.3% 20.4% Kernel Price / kg $8.92 $7.83 $7.49 $7.69 $7.63 $7.63 $7.58 $7.62 $ Note: RCN processed 2,500MT assumed Source: Technoserve analysis Technoserve 23

24 Processing Exports Policy Domestic policies must support business players throughout value chain to protect against heavily protected players that command market Less risk and better business policies exist in competing countries* MOZAMBIQUE INDIA VIETNAM Construction permits Starting a business Getting electricity 18% RCN export tax No export tax on kernels Currently, no RCN imports Import taxes Illegal imports growing Producer prices regulated 40% tariff on imported kernels* Discourages RCN export with 20% tax Imports have 25% tax, 5% sales tax 840k tons in 2015 Enforcing contracts Ivory Coast Mozambique Getting credit Vietnam India Mix of domestic consumption and exports Hard to track volumes in informal market 0% export of RCN Large domestic market for kernel range (25%-45%) Kernels retail for 20-25% premium domestically* 0% export of RCN, exported 300k tons in kernel Domestic production only covers 50% of what is processed Political Risk Direct Investment Short term Med-long term Transfer risk India Vietnam IVC Moz bique % of formal production processed A few small secondary processors >100% processing Export kernels and fully processed/ packaged nuts to other markets 1000 processors 40% of world s capacity (1.2mn) 2/3 imported from Cambodia and Africa (Ivory Coast) Note: *Ease of doing business ranks all countries according to established metrics the values in the figure display each country s rank Source: Delcredere Ducroire; World Bank Ease of Doing Business; Sampat 2001; UNCTAD 2001; World Bank Study Technoserve 24

25 Contents GLOBAL MARKET OVERVIEW MOZAMBIQUE S MACROECONOMIC OVERVIEW BENCHMARKING ANALYSIS CASHEW VALUE CHAIN OVERVIEW STRATEGIC PLAN FOR STAKEHOLDERS

26 Retail price of whole kernels In the current scenario, 49% of the value in the chain is captured if cashew is processed domestically Mozambique s Cashew Value Chain, 2015 Value added at each stakeholder level Selling price* Value added* $3.60 $4.25 $7.38 $8.50 $11.50 $ $3.60 $0.65 $3.13 $1.12 $3.00 $3.50 $25.00 *per kg Domestic value add 49% Foreign value add 51% Technoserve 26 Notes: Producer Prices shown are kernels per kg (Assumption: Kernel yield is 20% of RCN); Farm Gate prices as reported by key processors; Retailer prices based on key retailer reported shelf prices Source: Primary research; stakeholder interviews; Technoserve analysis; Incaju

27 Gaps Description Value Add (per MT RCN) Abroad (40-45%) In-Country (40% RCN) End Customer Large inefficiencies lie in the upstream value chain and processing; Significant value lost as nearly 45% RCN not being processed in-country As-Is Value Chain (2015) x% Value w/in country Producers Traders Processing / Exports 55% 8% 37% Producer Small trader Large trader Domestic Processor Large trader Secondary Processing (Negligible) Exporter Export Duty** Foreign Processors Producers $750 USD Crop protection, Harvesting, Spraying Pruning Traders $ USD* Field logistics, transport (port/factory), Bagging Domestic Processors $500 USD Warehousing, processing, labor, infrastructure, admin, customs etc. Exporters $100 USD** Customs, warehousing, loading, admin etc. Secondary Processing (Negligible) Roasting, seasoning, marketing etc. 1mn households Most smallholder producers Dependent on govt for chemicals & seedlings Aged trees & low yields No access to inputs Govt. subsidy not sufficient/effective No aggregation No price information Lack of technical skills licensed traders Inconsistent pricing across country High operating costs due fragmented market No effective tracking of RCN Hoarding- illegal channels No economies of scale Undue leverage on price due to information symmetry Domestic Processors Compete with exporters for RCN, high labor and infrastructure costs Exporters Illegal trading to avoid taxes Domestic Processors Volatile annual procurement, high operating costs, quality concerns Exporters Lack of monitoring, illegal exports Negligible volume from Sunshine & Africanut Little knowledge of markets, experience, marketing strategy Lack of financing options & low willingness to invest *Trader Margins: Based on interviews with processors and stakeholders; **Exporters Value: Based on the assumption that export & import duties were paid; Based on import price of RCN in India; **- India is the biggest imported of RCN- No import duty is added to Mozambican exports as Mozambique is among the LDC (Least Developed Countries) Index and is exempt from import taxes in India Technoserve 27 Notes: Percentages for each channel based on average annual commercialization of RCN (`80k MT); Value share based on 2015 (as reported by key processors) Source: Primary research; Stakeholder interviews; Technoserve analysis

28 Abroad (10%) In-Country (70-75% RCN) End Customer Interventions aimed at boosting production and processing in country, while reducing inefficiencies can unlock significant value Ideal To-Be Value Chain (2020) Interventions Producers Traders Processing / Exports Trader Secondary Processing Producer Producer Groups Domestic Processors Exporters Export Duty* Foreign Processors TRAINING ASSISTANCE PROCESSORS ASSISTANCE PUBLIC INFO. SYSTEM PRIMARY SECONDARY R&D INVESTMENT DIRECT MARKET LINKAGES VOUCHER BASED SUBSIDY Value Chain Vision 2020 In 2016, the Mozambican cashew value chain suffered from significant challenges: production throughput was low, low economies of scale, poor backward linkages, multiple layers of trading, low levels of processing and inefficient subsidies. This Industry Strategic Plan aims combat these challenges and proposes the following critical interventions: Formation of Producer Groups Voucher System for Subsidies R&D Investment Training Assistance Public Information System (PIS) Processor Support (Primary & Secondary Processing) Lobby Efforts Notes: Percentages for each channel based on average annual commercialization of RCN (`80k MT); Value share based on 2015 (as reported by key processors); *- India is the biggest imported of RCN- No import duty is added to Mozambican exports as Mozambique is among the LDC (Least Developed Countries) Index and is exempt from import taxes in India Technoserve 28 Source: Primary research; Stakeholder interviews; Technoserve analysis

29 Contents GLOBAL MARKET OVERVIEW MOZAMBIQUE S MACROECONOMIC OVERVIEW BENCHMARKING ANALYSIS CASHEW VALUE CHAIN OVERVIEW STRATEGIC PLAN FOR STAKEHOLDERS

30 Seven key interventions focus on the transformation of production in Mozambique to better supply exporters and processors alike GOAL Ensure long term Mozambique cashew production growth and align with target markets. Improve quality of national RCN output while capturing more of the value chain within the country. Intervention Objective Impact Benefit Realization Effort Criticality Producer Groups Vouchers R&D Training Assistance Public Information System Processor Initiatives Lobby Efforts Increase producer cohesion to increase efficiency, information symmetry, and their commitment to cashew over other crops Improve traceability and efficiency in distribution of subsidy, while laying the foundation for a private market Plant new highly productive seedlings and eliminate disease for the long term viability of domestic RCN production Improve cashew production techniques through sustained commitment to crosstraining within communities Improve communication, channeling feedback to government and price/care information to producers Increase volume of RCN processed in Mozambique to create more jobs and capture more value in-country Better position Mozambican cashew in global market while improving business conditions for processors and producers Very High 2+ years High Very High Very High 2+ years High Very High Very High 5+ years Low High High 1+ years Moderate High High 2+ years Moderate Moderate Moderate 2+ years Low Moderate Moderate 1+ years Low Moderate Business Solutions to Poverty Technoserve 30

31 Producer Groups Targets, Description & Assessment Groups Target Objective Increase producer cohesion to increase efficiency, information symmetry, and their commitment to cashew over other crops Target Issue Lack of aggregation, high costs of procurement and weak last mile coverage in extension services Description Commercialization, extension, information dissemination and subsidy programs suffer from significant inefficiencies as producers continue to be isolated stakeholders. Incaju will have to document such groups and assist new implementation partners in avoiding replication of efforts and establishing microentrepreneurs who can drive and sustain these groups. Incaju, along with implementation partners, will have to identify high potential clusters, develop micro-entrepreneurs and organize producers into groups. The approach will be to create model producer groups, hand over operations to trained micro-entrepreneurs and then scale efforts nationally. Aggregation Centralized point of transaction for traders and processors Economies of scale in procurement and quality segregation at source Extend processors support directly to producers (materials to improve storage, etc) Training Extension Hub for information exchange and announcements Input Distribution Greater control on inputs distribution Enable adoption of voucher systems and measure efficacy Supplemental production Increase ground nut planting to improve soil quality Juice and process cashew apples at community level Assessment Metric Benefits Metric: Impact: Very High Benefit Realization: 2+ years Beneficiary Stakeholder: Producers (Primary) Traders, Processors, Incaju (Secondary) Effort Metric: Level of Effort: High Mobilization Horizon: 2 years Responsibility: Incaju, Dept. of Agriculture, Implementation partners Criticality: Very High *Scale Definition: Impact, Effort, and Criticality Scale: Low/Moderate/High/Very High; Benefit Realization: Earliest measurable impact; Mobilization Horizon: Minimum time to operationalize key features/pilot Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: The Noun Project (graphics) Technoserve 31

32 Producer Groups Effort, Benefits & Impact Groups CURRENT BARRIERS Organization of producers at scale does not exist Lack of producers database Lack of business education in communities Identification of microentrepreneurs Lack of management resources Isolated village networks EFFORT REQD. Database Create credible producers database Identify pilot clusters Capability Identify & train micro-entrepreneurs for clusters Identify warehousing & utllities Mobilize Communicate & operationalize producers into groups Develop market linkages Maintain records on group creation POSSIBLE APPROACH Building mobile extension database (Commcare etc.) Training extension to microentrepreneurs Tie-ups with state warehouses Use PIS to mobilize producers Link processors Hand over group documentation to Incaju STAKEHOLDER Incaju (1-2 years) Implementation partner; Microentrepreneurs Incaju Implementation partner & Incaju BENEFITS Economies of scale for procurement Better turnout for trainings Greater levels of commercialization Better post harvest handling Increased processors support to producers Reduced hoarding, improved nut availability throughout season Improved pricing coordination IMPACT # groups created & documented # producers organized RCN volumes traded via groups # transactions done with groups Training attendance in groups $ value support extended by processors RCN price throughout country Case Studies* Past efforts in organizing producers in Mozambique include: NCBA CLUSA: In partnership with Oxfam- producer cooperatives and trading companies were established in Northern Mozambique IKURU- Producer co-operatives in Nampula & Zambezia providing extension and harvest services, and access to inputs Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: *: LINK 1, LINK 2, The Noun Project (graphics) Technoserve 32

33 Technoserve uniquely positioned to assist in creation of producer groups through local micro-entrepreneurs Groups As a part of developing producer groups, implementation partners can develop micro-entrepreneurs, who can make these producer groups profitable and sustainable in the long run. Once identified, these entrepreneurs will be trained on agronomic practices, business practices and community engagement. These entrepreneurs will assisted in managing identified producer groups. Community Engagement Managers Training in Business Training in Agronomics Pilot Area for Tested & New Interventions Hone ability to engage and organize local communities Establish business relationships with other stakeholders - producers, traders, processors, & exporters Modules designed specific to aggregation, accounting and cash management Develop value add practices such as quality evaluation, segregation and packaging Detailed training modules on cashew specific practices - spraying, pruning etc. Training modules in other complimentary crops such as groundnut, soy and mango Centralized large plots provide space to store inputs, plant new seedlings, and test other crops Distribute inputs from trusted sources in local villages Preferred Outcomes Micro-entrepreneurs will find success in their business endeavors, serving as an example and motivation for other local producers Training provided to microentrepreneur will result in improved business and agriculture practices in their area More producer groups will be created Production and quality will increase in areas where there are microentrepreneurs More micro-entrepreneurs will enter the space and act as community leaders Technoserve Experience TechnoServe (TNS) has partnered with large corporations, multilaterals and governments to provide life changing support in a variety of settings. TNS s entrepreneurship experience extends to East Africa, Latin America & India. In 2015 alone, TNS s work benefited more than 4,000 businesses (62% women-led) in the developing world, generating $33.8 million of incremental revenue attributed to its intervention. Having been involved in the Mozambican cashew value chain since 2000, TNS understands the realities in country and has effective ground presence to identify entrepreneurs for the intervention. Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: The Noun Project (graphics) Technoserve 33

34 Vouchers Targets, Description & Assessment Vouchers Target Objective Improve traceability and efficiency in distribution of chemicals, while laying the foundation for a private market for inputs Target Issue Full subsidy cannot be sustained nor scaled, distribution currently has many inefficiencies as well Description Vouchers will better enable Incaju to reach producers directly with the chemical subsidies and improve their ability to track progress and productivity. These methods are preferred among large donors. This system can then serve as a platform for seedlings, other crops and subsidies in the future. A private market for chemicals will be a more scalable and efficient approach to cashew treatment, but this cannot be achieved overnight. Vouchers enable producers to get the chemicals they require with minimal government intervention and investment. Currently producers are overcharged by provedores using in-kind payments, SMS vouchers will enable Incaju to better communicate fair practices. Leveraging CommCare, Incaju can distribute vouchers in a few select regions to test the concept and refine the process, then work to scaling it nationally. Once implemented, a price can be introduced which slowly increases incentivizing the entry of private companies to provide the chemicals directly to producers. Phased Approach Phase I: Pilot in Cabo Delgado (greatest demand) and Nampula (greatest need) Phase II: Scale nationally Phase III: Introduce private market adjusting the pricing of vouchers in phased approach Assessment Metric Benefit Metric: Impact: Very High Benefit Realization: 2+ years (dependent on scaling) Beneficiary Stakeholder: Producers (Primary) Incaju & Chemical Companies (Secondary) Effort Metric: Level of Effort: High Mobilization Horizon: 1-2 years (for pilot) Responsibility: Incaju, Dept. of Agriculture Criticality: Very High Key Components Voucher design Distribution model Redemption model Business Solutions to Poverty Notes: Approach finalized in consensus with Technoserve and industry stakeholders Source: The Noun Project (graphics) *Scale Definition: Impact, Effort, and Criticality Scale: Low/Moderate/High/Very High; Benefit Realization: Earliest measurable impact; Mobilization Horizon: Minimum time to operationalize key features/pilot Technoserve 34

35 Voucher program designed to consider components necessary for a representative pilot and scalable solution Vouchers Voucher design Paper Telecom based recharge Digital ID SMS Internet based In-house with Incaju Distribution model Hybrid approach with implementation partner Outsourced with implementation partner In-house with Incaju Redemption model Hybrid approach with provedores & implementation partner Outsourced with implementation partner Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: The Noun Project (graphics) Technoserve 35

36 Voucher design SMS pilot offers scalable solution with greatly increased traceability, digital IDs provide more benefits at greater cost Vouchers Paper Low start up costs Telecom based recharge Digital ID SMS Internet based Moderate ability to track Difficult to transfer Low servicing cost Low monitoring cost Easy to track Difficult to transfer Low servicing cost Low monitoring cost Moderate ability to track Moderately difficult to transfer Low servicing cost Moderate monitoring cost Moderate initiation cost Low servicing cost Low monitoring cost Hard to track Easy to transfer Effort and cost increase with scale Expensive to monitor Moderately expensive to begin program with Telecom company Rely on technology provider Very expensive to begin program, print and distribute cards Only moderately positive in most aspects Easy to transfer Hard to track Moderate initiation costs Producers have limited experience Detail Provides a costefficient, simple, flexible way to issue vouchers. Upon issuance a message will be sent to the recipient and issuer. To redeem voucher, producer can bring SMS or provide phone number/id card it was issued to. Incentivizes producers to provide updated information about trees and contact information in exchange for chemical vouchers. If budget allows (potentially with grant from Sida), digital ID cards can be created and issued for greater traceability and control. Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: The Noun Project (graphics) Technoserve 36

37 Distribution model Vouchers Distribution of vouchers should be done with trusted partners with a focus on increasing direct distribution to producers Method Benefits Detail In-house with Incaju Use current infrastructure / network similar to today, but distribute vouchers to be redeemed by producers to increase traceability and monitoring capabilities Closest to current state Ease in monitoring Stakeholders familiar with this process Incaju should take control of and leverage CommCare database. Past experience and current networks can be used to ensure success of pilot and roll-out. Hybrid approach with implementation partner Outsourced with implementation partner Identify implementation partner for the annual distribution of vouchers annually. The maintenance of the database and target beneficiaries done collectively All stakeholder buy-in Leverage current procurement models Improves traceability Elect an implementation partner to Efficiency choose those who should receive Accountability for success & the vouchers - distribute, collect, and tracking test efficacy of new system Better expertise / experience Should producers not be enrolled or need to update their information in CommCare, there will be an enrollment period for them to provide this information. Incaju will need to verify the data and update producers information before issuing the vouchers. Districts selected for the pilot should isolated enough to avoid circumvention of voucher pilot. Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: The Noun Project (graphics) Technoserve 37

38 Redemption model Vouchers Hybrid redemption approach leverages current strengths and improves accountability and traceability In-house with Incaju Hybrid approach with provedores & implementation partner Method Use on-ground government capabilities to facilitate delivery of chemicals for vouchers Government continues to buy chemicals via contract to store in their own warehouses. Implementation partners are selected for last mile delivery of inputs and facilitate the receipt of vouchers Benefits Direct control Warehouses could be leveraged for additional materials for other crops or trainings to improve communication/support for producers Accountability in last-mile delivery Leverage government warehousing capability Detail Until private market is developed, chemical companies have little incentive to build out infrastructure. Department of Agriculture and Incaju can use joint spaces to store chemicals and other materials for producers and producer groups. The pilot should include districts from Cabo Delgado and Nampula to test the two distribution methods to provedores and producers. Outsourced with implementation partner Agrifocus and/or implementation partner to distribute chemicals directly to producers as specified by vouchers Smooths transition to private market by establishing network for scaled operations More efficient SMS code provided to distribution agent which is noted and validated against central system before issuing the chemicals. Receipt provided for both parties Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: The Noun Project (graphics) Technoserve 38

39 SMS Voucher Pilot Details Effort, Benefits & Impact Vouchers CURRENT BARRIERS EFFORT REQD. POSSIBLE APPROACH STAKEHOLDERS Lack of reliable producer information Geographically disbursed recipients Illiteracy among target population Different distribution models in CD vs elsewhere Validate & update data included in CommCare database Identify warehouses for chemicals to be stored Send vouchers via SMS Redeem vouchers Announce voucher system for 3-4 districts in Cabo Delgado and Nampula Allow remaining producers time to enroll in CommCare, update requisite information Work with mobile provider to create secure distribution messaging Issue vouchers, require Agrifocus to collect and deliver Mozacaju / Commcare Incaju Producers Agrifocus Telecom provider BENEFITS Improved traceability Increased producers trust More value associated with chemicals Lays groundwork for transitioning away from subsidy More trees treated IMPACT # / % of vouchers issued and honored Volume of RCN produced / sold to exporters & processors # trees treated $ increase in producers willingness to pay Case Study* PSI Movercado Mozambique Initiated in 2012 to increase availability of medical supplies using SMS vouchers In 2014, Troca Aki had 4mn messages exchanged, 500k registered beneficiaries, and 200k commodities exchanged Beneficiaries need only validate encrypted code, goods can be distributed from any local store, money transferred directly to merchant for the purchase Call center provides support to beneficiaries and vendors for any questions and concerns Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: * Slides / Video / Analysis can be designed with Mezzanine, The Noun Project (graphics) Technoserve 39

40 In 5 years, plan to introduce a private market with multiple chemical providers to offer options and improved pricing for producers Vouchers Stages Pilot SMS voucher design (unless donor available to provide funding for digital ID cards) Hybrid distribution and redemption supplementing experience of Incaju with implementation partner expertise Roll out program nationally Assess success and limitations of pilot Assuming success, extend geographical reach Introduce ability to purchase chemicals along with voucher redemption Introduce private sector competition Enable more chemical companies to begin to sell Introduce price for producers to pay for chemicals Vision for the future FAO vouchers made fertilizer cheaper for farmers for two years, during which time they learned how to use it properly and witnessed firsthand how it improved their crops. Two years after the end of the voucher program, farmers who received the coupons had permanently changed their farming practices, using significantly more fertilizer, enjoying 15 percent higher yields, boosting food consumption by nine percent and increasing assets and savings by 20 percent more than the control group. Business Solutions to Poverty Technoserve 40 Source: Feed the Future, Vouchers and Insurance Help Smallholder Farmers Build Confidence in Agricultural Technologies, The Noun Project (graphics)

41 R&D Investment Targets, Description & Assessment R&D Target Objective Plant new highly productive seedlings and eliminate disease for the long term viability of domestic RCN production Target Issue Low quality RCN, inconsistency in new seedlings productivity, gaps in agronomic practices Description The Mozambican cashew lags significantly in quality when compared to cashews from other regions. The acreage is old and susceptible to disease. Incaju has made significant progress in R&D of seedlings but these efforts need to diversified. R&D investments in setting up regional nurseries with local varieties, chemical selection, and elimination of old disease host trees should be made. R&D investments towards adapting global practices into the Mozambican context need to be further emphasized Local Seedlings Establish local regional nurseries to improve timing and transport of seedlings Identify and grow local high yield varieties adaptable to local environment Create micro-nurseries in producer groups Chemicals Selection Assessment Metric Benefits Metric: Impact: Very High Benefit Realization: 5+ Years Beneficiary Stakeholder: Producers (Primary) Processors (Secondary) Effort Metric: Level of Effort: Low Mobilization Horizon: 0-1 years Responsibility: Incaju, Dept. of Agriculture Criticality: High Benchmark chemical options for cashew treatment Identify most cost effective chemical options for the national program Elimination of Trees Quantify impact of disease and acreage age on production to help producers identify which trees to eliminate Develop minimal effort techniques for elimination of trees *Scale Definition: Impact, Effort, and Criticality Scale: Low/Moderate/High/Very High; Benefit Realization: Earliest measurable impact; Mobilization Horizon: Minimum time to operationalize key features/pilot Notes: Interventions designed in agreement with industry and Technoserve stakeholders Source: The Noun Project (graphics). Technoserve 41

42 R&D Investment Effort, Benefits & Impact R&D CURRENT BARRIERS Low visibility on productivity of govt. seedlings No measured impact of chemical treatment High instance of diseases Land stress in few provinces (ex: Nampula) Lack of options for chemical selection EFFORT REQD. Local seedlings Identify high yield local varieties Establish regional nurseries Chemical selection Benchmark other chemical alternatives Calculate price premium for organic Establish link between chemical treatment & productivity Elimination of trees Identify old diseased trees Establish practices for elimination POSSIBLE APPROACH Study through IIAM Establish nurseries via producer groups Commission study to benchmark chemical treatment in other cashew producing countries (especially Tanzania) Develop practices manual for identification & elimination of old diseased trees STAKEHOLDER Incaju IIAM Producer groups Dept. of Agriculture Incaju Dept. of Agriculture Incaju BENEFITS Local resilient varieties Risk diversification on seedlings High yield new acreage Reduction in powdery mildew disease Renewed acreage Better chemical treatment IMPACT # of local varieties studied # of region specific nurseries # chemicals evaluated # of old trees eliminated # studies in seedling & chemical R&D commissioned and published Case Studies* In Tanzania, sulfur dust is used to control powdery mildew in cashew trees. The government commissioned a detailed program to develop best practices (time, quantity, levels) and educate producers to avoid unwanted effects of chemical treatment and maximize the yield improvement through effective treatment**. Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: * LINK, The Noun Project (graphics) Technoserve 42

43 Training Assistance Targets, Description & Assessment Training Target Objective Improve cashew production techniques through sustained commitment to cross-training within communities Target Issue Significant gaps in agricultural best practices, and inability to cope with old & diseased acreage Description Despite cashew s long history in Mozambique, producers today are grappling with an old & diseased acreage. Yields are at an all-time low. Cashew, as a marginal land crop, is often ignored and producers are unaware of best practices. Training extension is critical to educate producers on agronomic practices and new planting and incorporate the culture of efficient chemical treatment. At a national level, a well trained extension force needs to be assembled that can be leveraged by Incaju and various other implementation partners to provide extension and consistent trainings. Standardization of training material and archiving research is equally important. All implementation partners can then focus on extension and not replicate efforts for creating training material. Agronomic Practices Detailed and centralized catalogue on cleaning, pruning and soil management Identifying early indicators for flowering, harvesting, disease outbreak Selection and application of chemical treatment Planting Seedlings Assessment Metric Benefits Metric: Impact: High Benefit Realization: 1+ years Beneficiary Stakeholder: Producers (Primary) Incaju (Secondary) Effort Metric: Level of Effort: Moderate Mobilization Horizon: 0-1 year Responsibility: Incaju, Implementation partners Criticality: High Training and education on developing micro-nurseries Best practices for planting and nurturing new trees Business Knowledge Training on basic commercialization Training on business dynamics, benefits of aggregation, and producer rights *Scale Definition: Impact, Effort, and Criticality Scale: Low/Moderate/High/Very High; Benefit Realization: Earliest measurable impact; Mobilization Horizon: Minimum time to operationalize key features/pilot Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: The Noun Project (graphics) Technoserve 43

44 Training Assistance Effort, Benefits & Impact Training CURRENT BARRIERS Few quality extension agents No standard literature for extension Low attendance in trainings Lack of business sense Sporadic training coverage Low consistency in trainings EFFORT REQD. Develop a sizeable national trainers workforce Standardize extension material and literature Incorporate communication prerequisite for hosting trainings Incorporate modules on basic commercialization and business Identify and set zones for training Mandatory reporting on training extension POSSIBLE APPROACH Document all extension agents trained by all implementation partners Mandatory material compliance & reporting with Incaju Develop business modules for training of trainers Implementation partners to be assigned specific regions for extension to avoid overlaps STAKEHOLDERS Incaju Implementation partners BENEFITS Consistency in extension Improved extension coverage Effort reduction in training of trainers No duplication of efforts by implementation partners Better training material IMPACT Areas covered by extension Reduction on time spent to identify, train, and re-train extension agents Increase in training attendance # of extension reports # of updates made on extension literature and material Case Study* MozaCaju has been instrumental in providing training extension in the northern provinces of Cabo Delgado, Nampula and Zambezia. Detailed trainings through a wide network of trainers covering all critical aspects- cleaning, pruning & chemical treatment. Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: * LINK, The Noun Project (graphics) Technoserve 44

45 Public Information System (PIS) Targets, Description & Assessment PIS Target Objective Improve communication, channeling feedback to government and price/care information to producers Target Issue Significant information and knowledge gaps at the producer level (pricing, govt. programs/policies, training schedules etc.) Description The Public Information System (PIS) will be a national communication tool targeted towards eliminating information gaps at the producers level. The PIS will enable producers to make more informed decisions and help in developing a connection between the producers and government authorities. Based on a central annual schedule of government programs (trainings, chemical and seedlings), crop seasons, procurement seasons- producers will receive information relevant to their area. The information will be relayed in region specific languages primarily through radio and reinforced through mobile based SMS and training programs. Timelines Relay schedule for Incaju or Implementation partner training extension programs Relay timelines for spraying, harvesting and trading seasons RCN Price Reference Long Term: 3- year forward looking reference prices Short Term: Real time price alerts during the buying season Program Knowledge Assessment Metric Benefits Metric: Impact: High Benefit Realization: 2+ years Beneficiary Stakeholder: Producers (Primary) Processors (Secondary) Effort Metric: Level of Effort: Moderate Mobilization Horizon: 0-1 years Responsibility: Incaju, Dept. of Agriculture Criticality: Moderate Information broadcasts on government schemes, rights and practices Introduction of new schemes such as vouchers Grievance Redressal Area specific alerts on Incaju and sprayer contacts Complaint helplines for reporting illegal sales, hoarding etc. Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: The Noun Project (graphics) *Scale Definition: Impact, Effort, and Criticality Scale: Low/Moderate/High/Very High; Benefit Realization: Earliest measurable impact; Mobilization Horizon: Minimum time to operationalize key features/pilot Technoserve 45

46 Public Information System (PIS) Effort, Benefits & Impact PIS CURRENT BARRIERS EFFORT REQD. POSSIBLE APPROACH STAKEHOLDERS Limited communication capabilities No standard language of communication No centralized schedule for annual extension Limited technical capabilities (pricing, database mgmt.) Communication Establish effective communication channels Scheduling Region-based time plans for extension and subsidy distribution Technical Create dedicated teams for pricing, communications and database management Build relationships with radio channels, mobile networks, and SIMA* In-house annual scheduling of activities Leverage Dept. of Agriculture capabilities for pricing and database mgmt. Develop multi-lingual broadcasts Incaju Communication partners Incaju Dept. of Agriculture Incaju BENEFITS Eliminate/reduce price speculation Increase adoption of government programs Increase extension outreach Business awareness among producers Facilitate adoption of new government schemes such as voucher based subsidies IMPACT # helpline calls/grievances received Increase in training attendance # vouchers honored Farm-gate / RCN prices reported # messages broadcasted Case Studies* Past efforts in PIS include**: SIMA, Mozambique: Agricultural Information Market System alerts producers on prices via simple SMS short codes TEXTS, Malawi: Govt. of Malawi is using Esoko, a technical provider, to train producers on best practices via customized SMS services SMS Extension, Kenya: Sugar producers receive direct extension via SMS services Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: *- SMIA: Agricultural Market Information System (SIMA) *- LINK 1, LINK 2, LINK 3, The Noun Project (graphics) Technoserve 46

47 Processor Initiatives Targets, Description & Assessment Processors Target Objective Increase volume of RCN processed in Mozambique to create more jobs and capture more value in-country Target Issue Instability of RCN supply, labor availability, and currency exchange rate reduce processors willingness to expand capacity Description Volatile procurement, technological barriers, low worker turnouts and lack of global markets context are key issues faced my major processors. AiCaju (Processors Association) needs to step in and develop a more comprehensive scope to assist processing. Processors need to equip themselves to respond to critical needs from western markets- food safety, traceability and stable long term contracts. By collecting the global publications on industry trends, domestic processors can better align to compete against foreign processors. Secondary processing can succeed in niche markets. Story based marketing and increased traceability will provide opportunities with western markets to capture more value in country with cashews produced and packaged in Mozambique Primary Processing Comply with certifications: HACCP (Food handling), BRS (Food safety) and others Assess technological upgrades, especially in mechanization of de-shelling Develop AiCaju capabilities: technical assessment, markets overview etc. Provide a monthly update on global market dynamics Increase CNSL (by-product) processing (Significant bottom line impact ~9% profits) Invest in national level brand consistent across domestic processors Assessment Metric Benefits Metric: Impact: Moderate Benefit Realization: 2+ years Beneficiary Stakeholder: Processors (Primary) Effort Metric: Level of Effort: Low Mobilization Horizon: 1-2 years Responsibility: Incaju, Dept. of Agriculture Criticality: Moderate Secondary Processing Develop a consistent niche market with fair trade/organic/traceable product lines Establish forum for exchange of ideas and capacity building Assistance in connecting with retailers and branding Institutionalize kernel procurement from primary processors Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: The Noun Project (graphics) *Scale Definition: Impact, Effort, and Criticality Scale: Low/Moderate/High/Very High; Benefit Realization: Earliest measurable impact; Mobilization Horizon: Minimum time to operationalize key features/pilot Technoserve 47

48 Processor Initiatives Effort, Benefits & Impact Processors CURRENT BARRIERS EFFORT REQD. POSSIBLE APPROACH STAKEHOLDERS Low coordination among processors Limited AiCaju capabilities Lack of global context Technological obsolescence Poor market linkages Infrastructure inconsistencies Primary Processing Develop periodic newsletters for industry Assess technological upgrades Increase CNSL processing Lobby for labor law reforms Acquire int l certifications Secondary Processing Develop a forum for information exchange Develop backward linkages Identify and engage key retailers Summarize global publications (Cashew Info, Cashew Club, Int. Nut Council) Study CNSL processing & technological upgrades Develop roadmap for certifications Host sessions by successful secondary processors Develop retailer linkages Establish kernel procurement AiCaju AiCaju Incaju Third party stakeholders BENEFITS Improved understanding global context and alignment among domestic processors Up-to-date on kernel pricing Better visibility into certifications Increased willingness to upgrade equipment Improved RCN procurement Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: * LINK, The Noun Project (graphics) IMPACT Increase in average kernel prices # processing units certified on HACCP, BRS etc. Investment made in technological upgrades Volume of CNSL exported Increase in processing efficiency Volume of packaged fully processed cashew Case Study* The Cashew Export Promotion Council of India(CEPCI) Established by the Government of India in 1955, with active cooperation of the cashew industry to promote exports of cashew kernels Semi-autonomous association of all major cashew processors in India The CEPCI acts as lobbying front for processors, national information hub, accreditation & certifications and export assistance hub Technoserve 48

49 Lobby Efforts Targets, Description & Assessment Lobby Target Objective Better position Mozambican cashew in global market while improving business conditions for processors and producers Target Issue Labor laws have not adapted to accommodate the developing agriculture and processing industries Description Large volume of intermediaries are creating inefficiencies. Buyers are sitting on RCN supply to increase their margins, reducing available RCN for processors. Workers in processing have own sustenance farming that make it difficult to work 10 hour shifts consistently. Flexible shifts would allow producers to take care of additional responsibilities and provide processors with necessary labor. Currency requirements around foreign sales and dollar conversion to meticais squeezes processors during periods of high exchange rate volatility. Lack of available lending restricts ability to expand capacity. There is significant resistance against changing RCN export taxes. Incaju increasingly reliant on tax to operate. AiCaju In addition to working together to stay current and competitive in global market, AiCaju should focus on three areas to improve policy: separate agriculture labor laws to enable shorter shifts & improved productivity, ability to export RCN & kernel, increased trader & export oversight Incaju Use oversight capabilities to boost domestic efforts against foreign competition Partner with Indian government to better monitor illegal exports Cashew Committee Work together to address policy concerns of all parties, lobby government jointly Map the flow of commercialization together to see where foreign parties are extracting Business value from Solutions Mozambique, to Poverty plan together accordingly Notes: Approach finalized in consensus with industry and Technoserve stakeholders Source: The Noun Project (graphics) Assessment Metric Benefits Metric: Impact: Moderate Benefit Realization: 1+ years Beneficiary Stakeholder: Processors (Primary) All domestic stakeholders (Secondary) Effort Metric: Level of Effort: Low Mobilization Horizon: Unknown Responsibility: AiCaju, Incaju, Cashew Committee Criticality: Moderate *Scale Definition: Impact, Effort, and Criticality Scale: Low/Moderate/High/Very High; Benefit Realization: Earliest measurable impact; Mobilization Horizon: Minimum time to operationalize key features/pilot Technoserve 49