RURAL LIVELIHOOD DEVELOPMENT PROGRAMME (RLDP)

RURAL LIVELIHOOD DEVELOPMENT PROGRAMME (RLDP) BRIEF ON PROJECT IMPLEMENTATION SUNFLOWER SECTOR 2006 2012 Prepared by: Braison M Salisali Sunflower Sector RLDC October, 2012 1 P a g e

Introduction The Rural Livelihood Development Programme (RLDP) is an initiative of the Government of Switzerland and supported through the Swiss Agency for Development and Cooperation (SDC). The main concern of RLDP is the high rural poverty in the Central Corridor of Tanzania, which is manifested by very low incomes and frequent food shortages including lack of reliable/sustainable markets and employment. The programme aims at making market systems work better for the welfare of rural producers applying the making markets work for the poor approach (M4P). The programme is currently addressing market constraints in three crop sub-sectors, namely cotton, sunflower, rice. Also the program addresses cross cutting themes across the crop subsectors, these are poultry gender and livelihood, rural advisory services and rural radio. RLDP is jointly managed by two Swiss International NGOs, HELVETAS Swiss Intercooperation and Swisscontact. RLDP is implemented through the Rural Livelihood Development Company (RLDC), a non-profit organisation that has been established in 2005. RLDP wound up its phase II/III (2008 2011) in March, 2012 and phase IV has started 1 st April, 2012 which will last until March, 2016. The overall budget for the second phase was CHF 11 million and targeted 80,000 rural household along the central corridor. The actual outreach at the end of the phase was 102,250 rural households. RLDP in this phase plans to spend CHF 9.99 Million with estimated outreach of around 500,000 Households. Phase one of RLDP was implemented between 2006 2008 and the focus were on market linkage before the approach changed to M4P in 2008. Sunflower Sector The sunflower sub-sector represents one of the key agricultural sectors in Tanzania s economy. Sunflower oil contributes about 40% of national edible oil requirement, up from less than 20% in the past three years with the remaining 60% being imported; Sunflower is adapted for growing in the rather dry conditions of the Central Corridor (CC) where RLDC operates. 61% of the country sunflower production is in the Central Corridor, this is equivalent to 267,274 farmers. There about 438,153 sunflower farmers in the country who engage in sunflower production. The crop is an important source of income to poor small-scale farmers in the CC due to its drought resistant nature and low investment needed. Furthermore, because of health advantage the sunflower oil is having in comparisons to other edible oil like palm oil, the crop demand has been on the rise since RLDP started its interventions in 2005.RLDP interventions on the sector has boosted production and markets for both sunflower grain and sunflower oil. Sunflower by- product (seed cake) is used as animal feed and has a very good market in neighboring countries like Kenya and Uganda.. Good performance of livestock sectors in these countries has also contributed to the high demand of sunflower seed cakes and ultimately high demand for sunflower grown from the Central Corridor. 2 P a g e

Despite the increased sunflower production and the enhanced contribution of the sub-sector to the national economy and small-scale farmers livelihoods, the sub-sector is still facing a lot of challenges/constraints which are holding it back to realize its potential. These constraints are; Lack of proper agronomic practices and low access to quality seeds. Lack of reliable markets for producers. Poor oil quality and marketing strategies by processors, Lack/inadequacy of working capital for processors. Processors insufficient understanding of the market system, hampering their efficiency and ability to exploit the available sector opportunities. Recognizing this potential in improving livelihoods and welfare of poor households, RLDC has been operating for the past five years in six regions of the Central Corridor to help sort out the challenges facing the sunflower sub-sector for further growth and meaningful impacts to farmers livelihoods. RLDP interventions in the sunflower sub-sector used various entry points: at business environment level with the support of a regional and national apex associations; with producers for production of quality declared seeds (QDS) and certified seeds, and with sunflower oil processors improvement of sunflower production and sales through contract farming, improving processing capacity through financial linkages and improving processors marketing competitiveness through proper branding, packaging and attaining the levels of quality standards set by TFDA and TBS. RLDP Sunflower Subsector Interventions The following are the five interventions which have been devised by RLDP to address the systemic constraints identified. 1. Seed production and Marketing For the past four years RLDC has been trying to improve accessibility and availability of improved seeds in order to improve productivity and quality of sunflower produced. This aims at improving producers competitiveness through promotion of production and marketing of both certified seeds by companies and Quality of Declared Seeds (QDS) by small scale farmers as described below; Certified Seeds In 2008/09 RLDC worked with a seed producing company called STRAD Company Limited which was working with farmers groups, comprised mostly women in Kongwa district. The company managed to produce a total of 22.2 tons of sunflower certified seeds which were sold in the Central Corridor regions 3 P a g e

Quality Declared Seeds (QDS) This intervention aims at improving production of sunflower quality seeds distribution and marketing of the same. Local Government Authorities (LGAs) through district authorities have been involved in Quality Declared Seeds (QDS). QDS are quality seeds which are produced by trained small scale farmers under supervision of LGAs quality seed experts in order to sell to their fellow farmers under a certain restricted area. The main objective has been to ensure improved seeds are easily available at affordable prices to farmers, and this was the reason for RLDC to collaborate with Local Government Authorities (LGAs) in Singida and Dodoma regions build capacity of few farmers in seeds production and marketing and later on sell them to their fellow farmers at affordable prices. RLDC has been facilitating trainings, supervision and certification of seeds. For the past three years RLDC has worked with 6 LGAs in Dodoma and Singida regions in 2008/09 (76 QDS farmers producing 42 tons) and 2009/10 (148 farmers producing 60 tons) and in 2010/11 and 2011/12 the sunflower sector has worked with only 2 district councils from Singida region, namely Singida Rural and Iramba. A total of 144 and 132 QDS farmers were supported in the two districts of Singida and Iramba in 2010/11 and 2011/12 crops seasons respectively producing a total of 20 tons and 40 tons of QDS respectively. The above two seeds intervention which were supported by RLDC in the past four years have managed to add a total of 184.2 tons of improved seeds to sunflower farmers in the Central Corridor and this has been able to reach about 18, 420 1 sunflower farmers. 2. Improving production and sales of sunflower through Contract farming (CF) After piloting Contract Farming with one Partner Company and faced a number of challenges. RLDC learned some lessons; the biggest challenge was lack of trust and poor relationship among farmers and processors. RLDC believed CF was a proper vehicle to solve the underlying sectors constraints and therefore need to be pushed forward in order to improve the performance of the subsector.. This lead RLDC to test contract faming through action learning with 19 processing companies AL is a continuous process of learning and reflection, supported by colleagues, with an intention of getting things done. Through AL individuals learn with and from each other by working on real problems and reflecting on their own experiences. AL is based on the relationship between reflection and action. From the above description RLDC identified AL as an ideal tool to work with a number of sunflower oil processors on the introduction or improvement of contract farming. The sharing of experiences and learning results were meant to coach participants to go through the difficult time of introducing contract farming properly The aim was to bring private companies (most of them processors) together to share experiences, exchange challenges and recommendations in adopting contract farming for securing adequate raw materials for their factories while securing market access for producers and improving sunflower 1 One sunflower farmers is assumed to cultivate an average of 2 acres and one acre do use 5kg of improved seeds 4 P a g e

quality and yields through access to quality seeds, improved agricultural practices/skills and extension services. Furthermore, the intervention has been used to take up the progress made in production of Quality Declared Seeds (QDS) production and to back up the lobbying efforts at the business environment level as well as the financial linkage intervention. 3. Financial Linkage Collateral Management system with CRDB Bank Since RLDP started its operation in 2005, RLDC has been working with sunflower farmers and processors in the central corridor for the sake of improving the sector s market systems. The activities ranged from improving sunflower production at farmers level, improving standards and markets for processed sunflower oil as well as linking processors/buyers and farmers. Once production was successfully raised processors were failing to absorb the produced sunflower because of lack of working capital. Most of our processors are small scale and lack assets that would qualify as bank loan collateral, so most financial institutions were shying away from giving them loans for working capital. During 2010/11 crop season because of the massive promotion that was done by processors following action learning program in contract farming, through our facilitation and collaboration between CRDB bank and small sunflower processors, the bank came up with an innovative way of grouping processors together and use their stocks of seeds as collaterals for loans. The arrangement is called collateral management system. The way it works is that the processors hire both a warehouse and a collateral manager to manage stocks on behalf of the bank and the bank provides an overdraft loan to processors. The bank releases the loan on instalment basis after assurance from a collateral manager that the previous instalment stocks have been received in a warehouse, this goes on until the entire approved loan amount allocated to a particular processor is exhausted. After all the stocks have been bought and deposited in the warehouse, the arrangement is reversed. The collateral manager releases the stocks in instalment to processor for processing and sales of processed sunflower oil. The revenue from the sale of the processed oil allows the processors to pay back the previous instalment of seeds. A collateral manager will be releasing stocks after assurance from the bank that the processor has deposited money equivalent to seed stocks that have been released earlier under the last instalment. The arrangement will continue until all the stocks have been exhausted and all the sales have been deposited to the processors bank account. During all this time the bank will be deducting the loan as agreed with a processor and by the time a processor is using the last stocks the bank will have recovered all of the approved loan. This arrangement did help 43 sunflower processors from the central corridor to access the facility with loans amounting to TShs 5.6 Billion provided to processors as working capital, and this had a massive impact to sunflower prices as it rose by 100% in comparison to the year before (from average of TShs 25,000 to TShs 55,000/= per bag). RLDC did facilitate the linkage, loan management training and costs for collateral manager for the first year as it was the first time the arrangement was been introduced. The arrangement was carried out in Dodoma Municipal, Kondoa-Dodoma and Babati Manyara 4. Improvement of Oil Quality and Marketing of Sunflower Oil 5 P a g e

This intervention aims at improving sunflower oil competitiveness so that processors can penetrate lucrative markets like supermarkets and export markets, especially in the East African community. Processors have been supported to build their capacity on quality issues in order to enable them meet the requirements to be certified by Tanzania Bureau Of Standards( TBS) and Tanzania Food and Drugs Authority,(TFDA) and some of the processors are in process of marking their products with bar codes. CEZOSOPA (Central Zone Sunflower Oil Processors Association), which is an apex association for central zone processors was established in 2007 with a RLDC facilitation to protect members interest, thus from linkage with various stakeholders, advocacy and overall sectors coordination. The association is based in Dodoma. Since its establishment, CEZOSOPA has worked with RLDC in a number of interventions like improving the quality, aquistion of barcodes, TFDA certification, TBS certification,, and branding and packaging of sunflower oil.also RLDC worked on lobbying for better business environment. The association has also been helped to acquire a purifier, an equipment which was bought to test if it can purify sunflower oil into better quality than the case is now. The purifier has already been installed to one of the association members and the testing is being done to see if it will save the purpose. Furthermore,last year RLDC in collaboration with CRDB surpported a study tour to 8 sunflower oil processor from CC (Singida Municipal, Dodoma Municipal, Kongwa Babati and Kondoa) who visited India and China to look for a more latest and efficient sunflower oil processing technology. The visit was also meant to learn on how sunflower oil bussiness is done in those two countries for the sake of changing their altitude and improve their enterpreneural capacity. A number of sunflower oil machinery manufacturing were visited in the two countries. Generally, the tour was very successful some processors have started placing orders for pressing machines, to date 3 processors has already orderd theses 2 from Singida, and 1 from Babati, the machnes are foreseen to arrive in October 2012. ;other processors have shown indication to also buy new pressing machineries and small scale sunflower oil refineries. 5. Building Capacity for Apex Association TASUPA stands for Tanzania Sunflower Promoters Association, which is a newly established nation apex association for sunflower stakeholders (producers, reseachers, seed suppliers and processors). It has been established with the objective of bringing all sectors stakeholders together to stimulate its growth. The association has been registred last year; efforts are now being made by its members to make it a full fledged association. The association is currently run by interim secretariat which is made up of members from Morogoro, Dodoma, Singida and Manyara regions. RLDC is planning to facilitate its capacity buiding in order to make it more vibrant for the sectors growth and link it with other regional apex associations. The consultant has already been engaged and started the work on the second week of September, 2012. 6 P a g e

Overall Sector Achievements: RLDP interventions have tackled four of the five systemic constraints mentioned above and these achievements can be grouped into two categories, achievements related directly to the intervention and those which are related to other sector changes Achievements Directly Linked to the Intervention 1. Improved productivity to producers due to adoption of proper agronomic practices, improved extension services and improved access to quality seeds. Producers productivity have increased through contract farming by 67%, one acre is now producing 6 bags up from 3 bags per acre Collaborations were established between processors and local government authorities (LGA) on the provision of extension services to producers. Processors are interested on sunflower grains grown out of QDS and certified seeds than normal seeds because of their high oil content and started investing by their own initiative into the emerging QDS production, which was initially facilitated by RLDC in partnership with LGA. For instance, two processors in Iramba and Kongwa are now working with 15 QDS farmers where they have supported them with seeds starter packs and traction costs for 42 acres 2 worth TZS 1.43 Millions ($892.5) About 13,500 producers households were reached by 9 processors who were facilitated by RLDC through CF last year (this is equivalent to 67,000 farmers or 25% of the producers in the CC),even more considering the other 10 processors in the AL programme and this year about 21,000 farmers will be reached through 13 processors who are working with RLDC in Singida, Dodoma and Manyara 2. More reliable markets for producers. Market for sunflower from producers has improved dramatically where the prices paid per bag of sunflower more than doubled last year when collateral management system was introduced. The average price per bag was TZS 55,000/= which is up from average price of TZS 25,000 per bag, an increment of more than 100% and this year it has started with about TZS 30,000 to 35, 000 per bag 3. Improved access to working capital for processors. Processors became trustworthy for accessing buyers credits from a major bank through a collateral management system and individual loans, 8 out of 19 processors in AL program are among of the processors who have acquired loans totalling to TZS 5.6 Billions (about $ 3.5 Millions) as a working capital (4 participated in collateral management system and 4 got 2 1 acre costs TZS 25,000/= for traction and TZS 9000 for starter pack seeds 7 P a g e

individual loans). This amount was outside the processors own capital and it resulted into buying excess of 57 MT from 4600 sunflower small scale farmers. The financial injection contributed to a price spark and other banks started showing interest in working with sunflower oil processors. Achievements related to other sector changes 1. Processors better understanding of the market system, improving their efficiency and ability to exploit the available sector opportunities. Processors attitudes has changed and they are motivated to exchange information and learn from each other, as well as working together, which was not the case before. They appreciate the importance of establishing trust relationships with farmers. The program has helped me a lot in opening up my mind especially in implementing contract farming effectively, because before this program I didn t have any idea on how to work with farmers in a trustful way and how this trustful relation could improve things the way they are happening now Rosemarina Jima - Managing Director - Songela Investment Company Limited Iramba, Singida. 2. Improved Financial Services for the Sector There has been an improved financial services for sunflower sector where 39 additional processors (not in the AL programme) crowded into the collateral management systems. These are among of the 43 processors who acquired loans totaling $3.5 M (TZS 5.6 billions) through collateral management system. This new financial product adapted to sunflower sector is now available in the market and another bank has showed interest to crowd in the product. The interventions has also attracted some financial institutions like PASS, OIKO Credit, TIB, Stanbic Bank to venture into subsector 3. Private Sector Investment in Seed Production Processors are interested on sunflower grains grown out of QDS than normal seeds because of their high oil content and started investing by their own initiative into the emerging QDS production, which was initially facilitated by RLDC in partnership with LGA. For instance, one processor is working with two QDS farmers where he has supported them with seeds starter packs and traction costs for 42 acres 3 worth TZS 1.43 Millions ($892.5) 4. Active participation in improving business environment Processors became more active in lobbying for improved business environment and boosted the establishment of the national producers and processors association, TASUPA (Tanzania 3 1 acre costs TZS 25,000/= for traction and TZS 9000 for starter pack seeds 8 P a g e

Sunflower Promoters Association). The idea to establish a national sector apex association was conceived during AL Program and the association was officially registered 6 months later in May 2011 and up to know they have convened two meetings for more members sensitization. Establishment of TASUPA has drawn strong interest from other processors who are outside the Central Corridor. In 2009/10 CEZOSOPA with a support from RLDC managed to lobby for suspension of introduction (by a government through TBS) of single standard (refined standard) to all edible oil produced in the country rather processors were allowed to have two standards (virgin and refined) which are allowed in East Africa Community Countries. Furthermore, through TASUPA, CEZOSOPA and TEOSA, this year RLDC helped them technically to write a lobbying paper which was presented to National budget planning task force in March, 2012 at the Ministry of Finance. The paper that resulted into reinstatement of 10% tariff to all imported edible oil including palm oil Lessons Learnt: The AL tool is useful for creating an environment for dynamic uptake and collaboration (rather than competition). The meetings provided a space for real business talk and were thus useful for private companies. Sector level change is a long-term process that can be facilitated by - Designing interventions with various entry points and taking into account different levels (producers, private sector, public sector) - Sequencing interventions in time - Choosing the right market actors able to influence others Coordination and collaboration with various stakeholders like Government, Private sector, NGOs, Researchers, Business Member Organizations and Development partners are inevitable in making things work the way are supposed to work 9 P a g e