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THINKING beyond the canopy
Mozambique and land investments:
Sugarcane business models in Northern Maputo
Filipe Di Matteo, MSc. - Utrecht, July 8, 2015
THINKING beyond the canopy
Case studies
LIFFE Options Project
Duration Phases I, II & III: Nov 2013 – Dec 2015 Approach: identify different types of business models and their effects on local sustainable and equitable development Locations: Maputo province (sugarcane); Gurue district (soya) Business models: nucleus-outgrowers (sugarcane); nucleus-outgrowers; sourcing
Xinavane Sugarmill (AdX); Maragra
THINKING beyond the canopy
General Investment Information
Dataset of 482 investments, compiled
from CEPAGRI and CPI, between 2002-13
211 had status confirmed (43,9%)
Limitations to obtain national-level data
Maputo, Manica and growth corridors as
hotspots
Active (original
investor) 30,1% (145)
Active (new investor)
1,7% (8)
Failed 4,2% (20)
Cancelled 3,1% (15)
Halted 1,2% (6)
Starting up 3,5% (17)
Unknown 56,1% (271)
Status of investments in dataset
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0
10
20
30
40
50
60
0
1.000
2.000
3.000
4.000
5.000
6.000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Nu
mb
er
of
inve
stm
en
ts
Inve
stm
en
t p
led
ge (
in m
illio
n U
S$)
Investment pledges Number of investments
Europe 66,8%
Other sub-Saharan
Africa 19,3%
Domestic 7,7%
Asia 4,7%
North America
1,4%
South America 0.05%
Other 0.03% Other
1,0%
South America
1,0%
North America
2,4%
Asia 8,9%
Domestic 17,8%
Europe 28,8%
Other sub-Saharan
Africa 40,1%
Investment intensity, by region of origin of lead investor – by number (left) and value (right) (n=416)
Investment pledges 2002-2013
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Early Findings – Sugarcane in Maputo
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Background
Colonial period – 1910s-1960s
Independence and civil war
Privatization
AdX and Maragra land use and needs to expand production
AdX - 13,000+ ha
- 2,400+ smallholders
in about 3,300 ha
- About 2,000 ha other contractors
Maragra - 6,000+ ha
- Variable number of smallholders and other contractors
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Social, economic and land use dynamics
Sugarcane production requires land in scale. Thus, reorganization of space.
Formation of associations through different funding methods.
Inclusion of associations: selection criteria.
Business models functioning.
Result: Profound changes in social and land use dynamics. Limited and conditioned economic benefits.
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Business model scheme
Sugarmill Government
Associations
Community
Independent producers
Logistic company
Finance Grants/loans
Repayments/ guarantees
Land
Support
Farm Block
Land titling Promotion of sugarcane Support in land consultations
NGOs
Support in formation
Land Members Labor
Land Labor
Land Labor Input application
Land preparation Block supervision Irrigation infrastructure/ labor Harvesting
Sugarcane
Sugarcane
65% profits deducted from inputs and debt Inputs on credit Technical support
Labor
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Challenges and positive impacts
Positive Impacts • Employment generation: each association between 20-40
workers
• Higher income for smallholder producers: up to 2.7x annual income of a salaried (minimum wage) worker. Much higher values compared to non-participant community members.
• Land titles: as a pre-condition, to make part of the scheme promotes land titling.
• Ability to reinvest money and time: participants are able to reinvest capital in sugarcane or other activities. Low time consumption allows other livelihood activities.
• Food security: high perception of better food security; new fields developments foresee irrigation for food crops.
Challenges to overcome • Community employment: Dissatisfaction of local communities
with employment generation and wages.
• Income conditioned to debts: Great part of the profits is retained to pay debts with financial institutions and inputs offered on credit
• Land issues: ability to opt in the system, but not to opt out; Increasing competition for land; land conflicts.
• Communities’ social dynamics: capture of benefits by community members; inclusion vs. exclusion.
• Food security: the other side of the coin.
• Offering alternative livelihood options: population still very dependent on agriculture as sole means of survival; strong ties with South Africa.
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“We are the boss now” – Member of Macuvulane 1
A successful example
Association received a grant from the African Development Bank;
200 ha belonging to the association: 193 ha of sugarcane;
Has built a shop and an educational center for adults;
Possesses tractors, irrigation sprayers, fertilizer and herbicide sprayers;
Has established a credit institution and a communal saving fund (6%);
Profited in total USD 4,8 million since its establishment
(first campaign: 2005-2006);
Employs annually around 40 community members;
Challenges: control their produce transportation logistic
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Early lessons
THINKING beyond the canopy
1. Form of financing is essential to observe early positive outcomes. Communication must follow up to meet expectations.
2. Importance of the scheme in promoting land titling, but attention must be paid to intra-community social dynamics and displacements.
3. Income growth is slow and oscillates, but very positive in comparison to income of non-participants.
4. The business model and expansion strategy adopted by the sugarcane sector in northern Maputo did not solve the challenges of involving large numbers of smallholders and reorganizing their land in scale. It transferred the issues.
5. Smallholders showed initiative to promote their own growth in the relationship with the companies, meaning that there is space to work the challenges presented by this type of business models.
