riddell report final for distribution - the giin · produced by philip j. riddell on behalf of the...

EXECUTIVE SUMMARY While the demand for food and other agricultural commodities continues to increase globally, supply

from traditional producers and traditional regions is not projected to keep pace. Increasing concern

about future food scarcity and the opportunity to boost agricultural production in agriculturally-viable

land in Africa to meet food needs has attracted a surge of investment interest and activity. This new

context creates risks and opportunities. Increased investment in African agriculture can bring macro-

level economic development benefits and livelihood improvement for millions living in rural areas.

Conversely, large-scale land acquisitions may result in local people losing access to critical resources on

which they depend and can accelerate irreversible natural resource consumption.

“Impact Investing in Commercial African Agriculture” draws on a literature review as well as qualitative

interviews with key informants to outline opportunities to invest in African agriculture in a socially and

environmentally beneficial manner. This report provides investors with an understanding of the

emerging opportunities and key considerations when making high-impact investments in and across the

agricultural value-chain, in addition to some of the common paths to avoid.

This report looks closely at environmental considerations for the impact investor, as well and social

considerations including institutional arrangements that incorporate smallholder farmers. The report

also surveys the opportunity for the impact investor in several African countries that have been targeted

for the availability of land and water, the extent of the enabling environment, and promising production

or market prospects.

Produced by Philip J. Riddell on behalf of the Terragua Group of the Global Impact Investing Network,

this study received core funding from the Rockefeller Foundation, Aquifer Limited, Capricorn Investment

Group LLC, Lundin for Africa, and Passport Capital.

Table of Contents

PART ONE - THEORY ..................................................................................................................................... 5

1 BACKGROUND AND INTRODUCTION .................................................................................................. 6

2 THEMATIC ISSUES ............................................................................................................................. 13

PART TWO - PRACTICE ............................................................................................................................... 26

3 LOOKING FOR IMPACT AND THE SEARCH FOR BEST IN CLASS ......................................................... 27

4 TARGET COUNTRIES .......................................................................................................................... 46

5 CURRENTLY ON THE TABLE ............................................................................................................... 70

6 CONCLUSIONS AND RECOMMENDATIONS....................................................................................... 78

REFERENCES ................................................................................................................................................ 80

1

IMPACT INVESTING IN COMMERCIAL AFRICAN AGRICULTURE A study undertaken on behalf of the Terragua Group and funded by:

• The Rockefeller Foundation • Aquifer Limited • Capricorn Investment Group LLC • Lundin for Africa • Passport Capital Copyright Designation: This work is licensed under a Creative Commons copyright that allows the copying, distribution and display of this material if credit is given to the authors.

Philip J Riddell Geneva

June 2009 [email protected]

2

Contents

Contents ....................................................................................................................................................... 2

PART ONE - THEORY .............................................................................................................................. 5

1 BACKGROUND AND INTRODUCTION ................................................................................... 6

1.1 Background ............................................................................................................................. 6

1.2 Why Invest in Agriculture? Why Africa? Why Now? .................................................... 7

1.3 This Document ..................................................................................................................... 10

2 THEMATIC ISSUES ...................................................................................................................... 13

2.1 The Importance of Scale ...................................................................................................... 13

2.1.1 Scale and Social Impact ............................................................................................... 13

2.1.2 Scale and Environmental Impact ............................................................................... 14

2.2 Investment ............................................................................................................................. 17

2.2.1 Theme 1: Crops and Markets ...................................................................................... 18

2.2.2 Theme 2: Conditionalities and Determinants of Success ........................................ 18

2.2.3 Theme 3: Freehold, Leasehold, Partnership, Rental and Outgrowers .................. 19

2.2.4 Theme 4: Sunk Costs .................................................................................................... 21

2.2.5 Theme 5: Irrigation Versus Rainfed ........................................................................... 22

2.3 Enabling Environments ....................................................................................................... 23

PART TWO - PRACTICE ........................................................................................................................ 26

3 LOOKING FOR IMPACT AND THE SEARCH FOR BEST IN CLASS ................................. 27

3.1 Social Impact ......................................................................................................................... 27

3.2 Environmental Impact ......................................................................................................... 29

3.2.1 Enhancement ................................................................................................................ 29

3.2.2 Mitigation ...................................................................................................................... 32

3.3 Model Deals .......................................................................................................................... 38

3.3.1 Contract Farmers .......................................................................................................... 38

3.3.2 Nucleus Estate and Outgrowers ................................................................................ 39

3.3.3 Landlord/Labourers .................................................................................................... 40

3.3.4 A Pause for Thought .................................................................................................... 40

3.3.5 Partnerships .................................................................................................................. 41

3.3.6 Commercial Estate or Venture ................................................................................... 41

3.3.7 Objectives Matrix ......................................................................................................... 42

4 TARGET COUNTRIES .................................................................................................................. 46

4.1 Selection Criteria .................................................................................................................. 46

4.2 Countries Selected ................................................................................................................ 46

4.2.1 Ghana ............................................................................................................................. 46

4.2.2 Lesotho........................................................................................................................... 49

4.2.3 Malawi ........................................................................................................................... 51

4.2.4 Mali ................................................................................................................................ 53

4.2.5 Mozambique ................................................................................................................. 54

4.2.6 Senegal ........................................................................................................................... 57

4.2.7 Sierra Leone .................................................................................................................. 58

4.2.8 Tanzania ........................................................................................................................ 61

4.2.9 Zambia ........................................................................................................................... 63

3

4.3 The Ones That Got Away .................................................................................................... 65

4.3.1 Angola ............................................................................................................................ 65

4.3.2 Cote d’Ivoire ................................................................................................................. 66

4.3.3 Ethiopia .......................................................................................................................... 66

4.3.4 Kenya ............................................................................................................................. 66

4.3.5 Liberia ............................................................................................................................ 66

4.3.6 Sudan ............................................................................................................................. 66

4.3.7 Uganda .......................................................................................................................... 67

4.3.8 Zimbabwe ...................................................................................................................... 67

4.4 Bertelsmann Transformation Indices ................................................................................ 67

5 CURRENTLY ON THE TABLE ................................................................................................... 70

6 CONCLUSIONS AND RECOMMENDATIONS ...................................................................... 78

REFERENCES: .......................................................................................................................................... 80

A1 TERMS OF REFERENCE AND CONSULTATION ITINERARY ........................................... 83

A1.1 Terms of Reference ........................................................................................................... 83

A1.2 Consultation Itinerary ..................................................................................................... 84

A2 ANNOTATED BIBLIOGRAPHY................................................................................................. 85

A3 A BRIEF INTRODUCTION TO THE SYSTEM OF RICE INTENSIFICATION .................. 101

A3.1 The System ...................................................................................................................... 101

A3.2 Claimed Benefits ............................................................................................................ 101

A4 A BRIEF INTRODUCTION TO THE SUSTAINABLE SUGAR INITIATIVE ..................... 104

A4.1 The Initiative ................................................................................................................... 104

A4.2 Claimed Benefits of ISS ................................................................................................. 105

A5 GHANA COUNTRY DOSSIER ................................................................................................. 106

A5.1 Local Consultants ........................................................................................................... 106

A5.2 Consultations .................................................................................................................. 106

A5.3 Material Collected: ......................................................................................................... 106

A5.4 Next steps for the Impact Investor .............................................................................. 107

A5.5 Key Contacts ................................................................................................................... 108

A6 LESOTHO COUNTRY DOSSIER .............................................................................................. 109

A6.1 Local Consultant............................................................................................................. 109

A6.2 Consultations .................................................................................................................. 109

A6.3 Material Collected .......................................................................................................... 110


A6.5 Key Contacts ................................................................................................................... 110

A7 MALAWI COUNTRY DOSSIER ............................................................................................... 111


A7.2 Consultations .................................................................................................................. 111



A7.5 Key Contacts ................................................................................................................... 114

A8 Mali Country Dossier .................................................................................................................. 116


A8.2 Consultations .................................................................................................................. 116



A8.5 Key Contacts ................................................................................................................... 118

A9 Mozambique Country Dossier ................................................................................................... 119

4

A9.1 Local Consultants ........................................................................................................... 119

A9.2 Consultations: ................................................................................................................. 119



A9.5 Key Contacts ................................................................................................................... 121

A10 SENEGAL COUNTRY DOSSIER .............................................................................................. 123

A10.1 Local Consultant......................................................................................................... 123

A10.2 Consultations: ............................................................................................................. 123

A10.3 Material Collected: ..................................................................................................... 124

A10.4 Next steps for the Impact Investor .......................................................................... 124

A10.5 Key Contacts ............................................................................................................... 124

A11 SIERRA LEONE COUNTRY DOSSIER .................................................................................... 126


A11.2 Consultations: ............................................................................................................. 126



A11.5 Key Contacts ............................................................................................................... 127

A12 TANZANIA COUNTRY DOSSIER ........................................................................................... 128

A12 TANZANIA COUNTRY DOSSIER ........................................................................................... 128


A12.2 Consultations: ............................................................................................................. 128



A12.5 Key Contacts ............................................................................................................... 129

A13 ZAMBIA COUNTRY DOSSIER ................................................................................................. 130


A13.2 Consultations .............................................................................................................. 130



A13.6 Key Contacts ............................................................................................................... 131

5

PART ONE - THEORY

6

1 BACKGROUND AND INTRODUCTION

1.1 Background

The Terragua Group, a working group of the Global Impact Investment Network, on behalf of which this study has been undertaken, emerged from a joint research project of the Rockefeller Impact Investing Collaborative1. The study’s point of departure is Terragua’s belief that:

• elevated commodity prices (that are expected to remain so for the foreseeable future) • permanent demographic changes in food supply and demand dynamics coupled with

• political reform, • the resulting self determinacy2 and • underutilized land, water and labour resources in certain African countries

together justify a fresh, but nonetheless critical look at agricultural sector investments in the region.

None of this would be considered controversial in most interested fora: however, the institutional investors comprising the core of the Terragua Group also belief that a socially and environmentally aligned investment model makes additional sense in the context of African agriculture. This view is supported by experienced social sector actors aiming to inform and direct the investors’ investment decision making process. Accordingly, to rationalize further, and indeed to add a strategic element to this point of view, the group has commissioned this study in order to synthesize accumulated research, knowledge and experience on what it means to invest in agriculture in a socially and environmentally beneficial manner. The result is therefore targeted at capital providers with interests in African agriculture both for economic reasons and from a desire to effect social impact. Although expert investors, they have limited knowledge of the context and history of similarly minded efforts in African agriculture and so by means of this study hope to acquire a more comprehensive understanding of the paths to avoid and of the emerging opportunities beyond agricultural production (for instance in infrastructure development and market chain added value) before placing their own capital in high-impact investments in Africa. The study, has therefore been predicated on:

1 The Rockefeller Impact Investing Collaborative is a network of socially-oriented institutional investors that first convened at

the Rockefeller Foundation’s Bellagio conference centre in October 2007. It is currently composed of representatives from institutions such as the Rockefeller Foundation, Skoll Foundation, Google.org, EKO Asset Management Partners, Sainsbury Family Office, Good Energies, Helvetica, Capricorn Management, New Island Capital, Generation Investment Management, B-Lab, Wolfensohn & Company

2 As evidenced - for instance - by nationally produced Poverty Reduction Strategy Papers and UNFCCC communications along with radical and innovative new policy frameworks in increasing numbers of countries and a general toning down in most cases, of post-colonial rhetoric – see section 2.

7

• an agenda that combines commercial objectives with a desire for a socially and environmentally aligned investment paradigm

and

• the existence of increasingly enabling policy frameworks and good governance in selected countries.

As such the study is intended to demonstrate a new model for sustainable investments in Africa that will not only:

• generate an acceptable financial return on investments

but will also

• generate a positive social impact in an environmentally responsible or even beneficial fashion.

1.2 Why Invest in Agriculture? Why Africa? Why Now?

First, it should be understood that there is nothing new about commercial investment in sub-Saharan agriculture. Fortunes have been made and continue to be made in the sector by local and foreign investors alike in various combinations of production, supply and/or market chain activities and with a variety of investment models including joint venture partnerships, leases, new build, contract farming and public private partnerships. Fortune Global 500 for instance, published in 2007, showed that of the 49 corporate giants defined in the list as being active in agro-industries, 25 are active in Africa. Similarly The Africa Report 15th edition (Feb-Mar 2009) shows that of the top 500 African multinationals 48 are involved either in the food or agro-industrial sectors. Some of the corresponding investments have been socially and environmentally exploitative others not so. Either way, some of the big players, seeing a new potential for commercial investments are returning to, or are expanding in the region with open cheque books! To understand why this is so, it is useful to look at the prognosis for global food security. Until recently, most of the world’s food has been eaten by those that produce it. Yet with economic diversification and rural urban migration, the ratio of food producers to food consumers would fall significantly even if the global population stabilizes around current levels. The global population is not stable however. It continues to expand and is doing so while typical major food producing regions are approaching the maximum that they can produce for the regional and world markets3. Furthermore no massive new productivity gains are expected soon, at least not along traditional R&D trajectories, while the existing challenges are further nuanced by the fact that a very significant number of the new “non-producers” will join the urban poor whose cash-strapped governments already struggle to secure affordable food supplies. Finally, to make things even worse, climate change related challenges such as glacial melt, rising sea levels and unsuitable or unreliable weather are expected to reduce the amount of food that traditional producing areas can grow - while bio-fuel cropping will compete with food crops for the remaining natural resources.

3 India for example is looking to increase its national rice harvest by 5 million tonnes, but all of this is for the domestic

market, while in both India and China (for example) prime agricultural land is being allocated to factories and other commercial uses!

8

Put another way, demand for food and other agricultural commodities will continue to increase while the ability of traditional producers and traditional regions to meet that demand will decrease. It is self evident therefore that i) the resulting gap cannot be filled by smallholder farming and hence ii) that there is a pressing need for new production models and new producing areas. Simple demographics suggest that such new production models will include commercial enterprises, while its vast underutilized natural resource base and large underemployed populations suggest that sub-Saharan Africa will be one of the new producing areas. In fact, with the right mix of enabling policy and appropriate investment models, there is no reason why the region could not become the most important food producing region in the world. With all this in mind, it is also worth noting that development theorists and practitioners alike are increasingly tending to agree that the role of the international financial institutions and bi-lateral development agencies should be concerned more with institutional capacity building, policy and legal framework reform and the construction of bulk service infrastructure, leaving the private sector to invest in the production/value chain (of any sort). The same experts also tend to agree that cheap food has been a thing of the past and that the world should brace itself for sustained higher prices. These and other issues are explored more fully below but for now it should be clear that not only is food/agro-industrial production in Africa going to become a major opportunity for the international investor in commercial agriculture, it could also be a very profitable opportunity: and especially so where market chain added value is possible. This should be self-evident, but it is nonetheless realized that readers of this report are as likely to represent not only the commercial investment but also the grass roots development constituency. Accordingly it is stressed that none of this should be taken to say that the struggling smallholder should be abandoned! On the contrary, the pressing need to build their capacity, to provide them with effective, accountable services and to improve their socio-economic connectivity will continue for many years to come. Innovators and practitioners working to these ends are therefore to be commended and empowered. Furthermore in fact, as will be seen, even this study which has been undertaken on behalf of commercial investors will demonstrate that best practice as far as social impact is concerned is likely to comprise some sort of alignment of smallholder and commercial interest in the form of outgrower programmes. Indeed, examples of this modality are already proving their worth in many parts of the region in question. Examples moreover, will be provided showing how small farmers can make sustainable shifts to profitable commercial production on the same small plots that barely provided a living under subsistence models. In other words for the food security strategist, it is not a case of either commercial food production or perseverance with smallholder modalities ; but rather a case for both; and there is a considerable nexus between them. There is also the matter of the non-farm poor whose numbers are increasing in relation to the small farmers. In addition to affordable food, they also need employment opportunities and in most of Sub-Saharan Africa, this needs economic diversification. Classic economics tells us that

9

economic diversification needs markets, while markets need trade goods. As argued by FAO [Riddell et-al 2006] there is considerable potential for regional agricultural trade between sub-Saharan countries; although the quantities required are unlikely ever to be produced by smallholders. Or, as argued by the then Director General of the Swiss Agency for Development and Cooperation when hosting the presentation meeting for an evaluation of the International Fund for Agricultural Development “…economic growth is impossible without a strong agricultural sector”4. However, moving on we have already noted that Africa has vast undeveloped natural resources (in terms of land and water) and underemployed, expanding populations. As such, in addition to having general potential in terms of global food security, it also has particular potential in terms of commercial agricultural production5. But is it not conventional wisdom that Africa is also associated with instability, failed investments, deteriorated or inadequate infrastructure, corruption and the like? What has obviated or mitigated the risks that these entail, sufficiently to bring experienced investors back and to attract a whole gamut of new ones? The answer has several facets. The first concerns the self determinacy that has characterised national policy making in many sub-Saharan countries in the wake of the World Summit on Sustainable Development – in particular in respect of the Poverty Reduction Strategy Papers (PRSPs). Although these may have been a lost opportunity in that typically they tended to reflect perceived donor interests (usually education, health and hygiene) while ignoring productive investments (such as irrigation, market chains and power stations) [Maxwell 2005], they did at least cut the umbilical chord between the development partners and the client governments and encourage the development of more responsive, home grown and pragmatic policy frameworks. Some countries moreover are developing a new round of PRSPs that do reflect the need for investments in production. Second is the improved governance that is beginning to characterise many of the countries in the region. Regimes are democratising and becoming more accountable and transparent. Institutions are being restructured and are shifting to a service orientation, often decentralised or even devolved, while policy and legal framework reform is opening up hitherto closed, controlled economies for increased private sector participation, which in most cases is being actively encouraged. Typical instruments for this include tax incentives, one stop shops for investors, the removal of price controls, open currency exchange and 100% repatriation of both debt repayments and net profits for the foreign investor. Third, but so far not so well developed is government investment in essential infrastructure which typically includes bulk irrigation water supply; improved transportation and communication or improved energy supplies.

These facets are not in evidence everywhere in the region of course, and in some countries they are emerging singly or slowly. But where at least the first two are working well then the new paradigm that results is already enabling attractive investment frameworks within which major

4 Consultant’s paraphrase 5 Adequate land, water and labour will be shown to be key determinants of success in commercial agriculture.

10

commercial players can formulate and implement successful large scale investments with the full support of government, and in full and confident conformity with crucial social and environmental imperatives. In addition, the same paradigm is also restoring general comfort levels in the community of development partners. This introduces the possibility of donor supported Public Private Partnerships (PPPs) where national policies provide the appropriate space. In the case of a large irrigation scheme for instance, such PPPs might include government funded bulk service infrastructure (as per facet three above). Fourth, is the somewhat surprising fact that where the enabling environment has been put in place, certain African countries have performed as well as the so-called Asian Tigers – Figure 1 refers. This document is strongly predicated therefore on the likelihood of identifying and the desirability of investing in African Lions! But in addition, there is also a cross-cutting and pivotal fifth facet.

When this writer was engaged on contract to the IFC’s Africa Project Development Facility6 (APDF), conventional wisdom had it that commercial investments in African Agriculture had generally to be targeted at high value horticulture. Thus everyone involved talked about the search “…for the next kiwi fruit…7”. But now, given shifting food production and consumption dynamics coupled with higher commodity prices, we no longer need to look for the next kiwi fruit. Basic food production now offers equally attractive investments opportunities as will be seen below.

1.3 This Document

In accordance with the Consultant’s Terms of Reference (Annex 1), which require the Consultant to guide the Terragua members toward “a more comprehensive understanding of the paths to avoid and of the emerging opportunities beyond agricultural production (e.g., in infrastructure development and rural agriculture processing) as they seek to place their own capital in high-impact investments in Africa” this document continues as follows: Chapter 2: “Thematic Issues” represents a basic “primer” for the potential impact investor in terms of the way the nature of impact changes with scale8; lessons that can be learned from the

6 1987-1989 7 A hitherto “exotic” fruit which had recently enjoyed massive expansion in the European fresh fruits sector. 8 In the sense not of investment size, but rather the perspective, ie household, district, nation or region (in the social sense) or

farm, catchment, landscape or river basin (in the environmental sense)

Figure 1 Lions and Tigers

Growth Index

Years since “taking off”

Source: The Africa Report N° 16, April and May 2009

11

recent history of commercial investment in sub-Saharan agriculture and the type of national policy and regulatory framework that might be considered enabling. Chapter 3: “Looking for Impact and the Search for Best in Class” proceeds from the thematic issues and considers in more detail the type of social and environmental impact that the Terragua investor would be looking for at the applicable scale. Investment models which have the potential to represent “best in class” are then suggested. However, because examples of full-on, comprehensive “best-in-class” are somewhat elusive, model deals proposed at the end of the chapter are to an extent synthetic in that they combine relevant features gleaned from a broader sample of actual investments that each have some helpful feature or another. The chapter closes with a simple objectives matrix. Chapter 4: “Target Countries” begins by explaining the selection of the target countries with respect to their potential for the large commercial investor with a social and environmental agenda. It then goes on to provide simple overviews of each of the countries selected, before explaining in a third section why certain other countries, that might have been considered, were not. Finally, the selections and rejections are submitted to a retro-active Multi-Criteria Analysis using Bertelsmann Transformation Indices. Happily, the results of this are highly consistent with the selections and rejections. Although not required by the Terms of Reference, a simple list of potential deals is presented in Chapter 5 “Currently on the Table”. Chapter 6: “Conclusions and Recommendations” which is self explanatory. The Main Text is supported by Annexes as follows: Annex 1: “Terms of Reference and Consultation Itinerary” the contents of which are also self explanatory Annex 2: “Annotated Bibliography” ditto Annex 3: “A Brief Introduction to the System of Rice Intensification” which provides a very concise summary of a radical new way to increase the total factor productivity of rice. Although on first consideration, this material may seem perhaps to have a more technical and specific emphasis that is out of synch with the rest of the document, it has been included because irrigated rice production is almost certain to be a major investment focus. Given therefore, the intensive water use associated with “traditional” irrigated rice, and the desirability of i) reducing demands on a region’s water budget; ii) reducing the investment costs associated with those withdrawals; and iii) the commercial possibilities and environmental benefits that could accrue to the commoditisation of saved water, the SRI alternative is offered to the reader in the context of best practice. Annex 4: “A Brief Introduction to the Sustainable Sugar Initiative” which does the same for sugar and for much the same reasons. If, as seems increasingly likely and indeed desirable

12

subject to certain caveats9, sugar production will expand as a regional bio-energy feedstock it is essential that the potential investor is aware of improved production technologies. Annexes 5 - 13: each of which comprises a dossier for each country. To the greatest extent possible10, each dossier: • identifies the local consultant(s) engaged for the study

• identifies the parties consulted • lists any useful material collected in the field • suggest next steps for the potential investor • identifies key contacts

9 See TAKAVARASHA, UPPAL and HONGO, 2005 10 Information was easier to source in some countries than others

13

2 THEMATIC ISSUES

2.1 The Importance of Scale

In this context, “scale” can be thought of in terms of the changing nature and scope of the view through a camera lens as it zooms away from the household farm to encompass first the nation and then the region in which it is placed (and eventually the entire world of course). With this concept understood it is important further to understand that the nature of desirable social and environment outcomes are very much related to the scale of the view in the lens. One effect of this is that in the absence of suitable external mechanisms, a desirable impact at one scale might compromise or limit the achievement of a similarly desirable impact at another. The importance of this seeming paradox should be self evident to the potential investor looking for beneficial social and/or environmental impact: hence the two following sub-sections, which attempt to resolve the paradox in the context of agricultural or agri-business investment.

2.1.1 Scale and Social Impact

The variation of social impact with scale is illustrated by the dimensionless heuristic comprising Figure 2.1 where for this purpose, social impact is thought of in broad brush terms of food security and livelihood choice (a more complex definition will be introduced later, in §3.1).

It shows that at the global level, there is no food security alternative to self-sufficiency – no amount of economic activity will allow us to purchase food from elsewhere in the cosmos (at least not for the foreseeable future). In other words, the need for food self-sufficiency increases with scale. In theory however, the closer one moves to the household level the more options there should be for securing food security by means of diversified livelihoods. As PJ O’Rourke said [1995] “….there are

a lot of landless people in Manhattan, but they don’t all graze their goats in Central Park”. The challenge for the social investor is therefore to turn theory into practice, so in section 3.3 we will see what this means in terms of investment models. But for now we need to take a closer look at why this is important: in other words, why by itself, household food self-sufficiency is not an ideal outcome: not least because the uninformed social impact investor might think that it is.

Figure 2.1 Scale and Agriculture Sector Food Security Solutions

14

First, any social impact strategy predicated on household self sufficiency ignores the fact that not everyone is a food producer. More general social impact therefore calls for interventions that not only increase the food supply at the regional and global level; but also access to it by the landless poor at the household level in both the rural – and increasingly important – urban areas. Secondly, the achievement of sustainable increases in smallholder food production continues to prove difficult and expensive and any efforts to that end incur the risk of hitting diminishing returns, thereby increasing the opportunity cost of development finance that could be directed at increasing the possibility of market chain added value, agriculture based trade and hence economic diversity. For the foreseeable future, this suggests the need for a fuzzy grey area between development and commercial objectives so that each constituency can mutually enforce the agenda of the other. Thirdly, and for similar reasons, household food self-sufficiency has a high social development cost. Money spent in its pursuit, may be more usefully allocated to the creation of wider employment opportunities. In an agricultural sector and as already reflected in the Malian and Senegalese policy frameworks (see section 4.2), such opportunities could include commercialized outgrower models; farm labour which would be perceived by the labourer as risk mitigating (and could be combined with household cropping components) or non-farm labour in the input supply, or added value chains. Fourthly, self-sufficiency even up to national level, may be (grossly) inconsistent with comparative advantage the mobilisation of which would contribute to trade based market development; increased demand for labour and new skills; economic growth and hence broader food security [Riddell et-al 2006 ibid, and Riddell 2008 - see also text box 1]. Allocation of development finance to sub-optimal production systems is clearly inconsistent with the allocation of finance according to opportunity cost. For all these reasons the Global Water Partnership articulates the opportunity thus: “national food security through regional self-sufficiency”. The social impact investor is therefore urged to look at the bigger picture as the food production paradigm shifts from peasant based systems towards commercialized models of one sort or another.

2.1.2 Scale and Environmental Impact

Scale is a crucial determinant with respect to water use and allocation. It can safely be assumed that the readers of this report are aware of the looming water crisis and the need to use this precious resource wisely. What may not be clear to them however, is that saving water at the point of use, in the absence of any mechanism for wise reallocation of the saved water, can be counterproductive in terms of the environment and access to water by the poor. This is because when water is saved at the point of use, there is a temptation to reinvest

Text Box 1 Anyone standing on a dockside in the Indian state of Kerala in the early 1990s might have been surprised to see high value horticultural produce (principally chilies) being offloaded from Kenyan ships. A few years prior to that, parts of central Kenya had embarked successfully on its horticultural revolution with a very significant improvement in the circumstances of those involved. At the same time, Kerala which had a comparative advance in a vast range of high value products was pursuing a policy of rice self-sufficiency, which was no-doubt perceived as being politically expedient.

However, it would have made far more economic and environmental sense to have exported high value produce and import rice paid for by the proceeds!

15

the saved water close to where it has been saved. This of course reduces the amount of water remaining in the environment, thereby compromising both the environmental services and the economic potential of mobile water. As made clear in a pivotal paper by Keller, Keller and Seckler [Keller et-al 1995] mobile water has similar properties to capital in that it displays a multiplier effect, and as explained by Cai, Ringler and Rosengrant [Cai et-al 2001] mobile water is available to more people, including especially the poor who can use it for both domestic and productive purposes which themselves could be diversified. Their research indicates a strong correlation between high economic water use efficiency, poverty alleviation, and the environment - a true win-win-win scenario. This is not least because as the second example shows below, mobile water is productive water because inter-alia, it increases the possibility for non-consumptive use (such as capture fisheries, laundry, amenity, hydropower, navigation and effluent transport). Thus economic efficiency can be thought of as the total returns at basin level on an investment of water, as a percentage of the return that would accrue to a single investment of the same amount of water at its highest opportunity cost. With this in mind, and with reference to Figure 2.2, it should be obvious that physical water use efficiency, which is an indicator of the productivity of water at a single point of use, is a building block of economic efficiency, NOT an alternative measure – it is a means to an end, and not the end in itself. Several examples serve to illustrate this principle (the relevance of which to the impact investor will be explained below). Two describe success stories and the third, a potential failure. Example 1: Egypt

Physical water use efficiency in the Egyptian irrigation sector runs at around 30%, which although commensurate with the global average, is nonetheless much lower than it could be. However, the smart use of drainage run-off from the irrigated fields means that a significant proportion of the water can be re-used (as per Keller et-al’s multiplier effect). As result, the economic efficiency of water use between the Aswan High Dam and the Mediterranean, has been estimated at some 230%, perhaps the highest in the world [Allen 2000], it will be self-evident that on the way down, it provides opportunities in addition to agriculture for multiple non-consumptive uses (the most economically important of which in this particular case is probably navigation).

Example 2: Indonesia Water from the Jatiluhur dam flows past an area of paddy fields on its journey to the nation’s capital some 70 km to the North West. Groups of farmers have permits to use specified

Figure 2.2 Scale and Water Use Efficiencies

16

amounts of water from the river, but by increasing their physical water use efficiency have become able to produce the same amount of rice using less water. The water saved is not however, used to irrigate an increased area but rather is left in the river and allowed to flow onward to the capital where it is used for the soft drinks industry which pays the farmers for the water used. This already increases the economic efficiency of the ”right-in-use” 11. On the way down however, the higher flows in the river results in increased capture fishery yields increasing further the economic efficiency while introducing additional beneficiaries (the fisher folk). This is an excellent example of how the economic allocation of water in a rights based water market can increase the livelihoods of collateral users (who are usually the poor).

Example 3: Swaziland

Swaziland’s share of the Nkomati river waters is regulated by a Tripartite Agreement with South Africa and Mozambique. Unusually, it seems unable to use all of its share, the unallocated part of which is actually increasing as a result of physical water use efficiency on the irrigated sugar cane estates which dominate the nation’s agriculture and indeed economy. Downstream lies Mozambique’s capital Maputo which is running short of water, and the economically important prawn beds in the brackish margins which need a minimum though-flow of fresh water to maintain production levels. Allocated to urban supplies and the prawn farms, water saved in Swaziland would hugely increase the economic efficiency of water allocation in the basin as a whole. And would also benefit Swaziland by means of the cash that Mozambique is already willing to pay for additional water. Swaziland however, seems determined to reallocate its spare water to the agricultural sector, thereby reducing environmental stream flows and the economically advantageous reallocation of the water concerned. And this is despite a shortage of irrigable land and an excellent water law which recognizes the concept of the economic mobility of water.

In short, what this means is that physical water use efficiency gains are counterproductive unless they lead to gains in economic efficiency, gains which usually require a suitable reallocation mechanism (such as the Jatiluhur water market). For the subject matter specialist this raises complex issues concerning the economic mobility of water12, water rights, economic pricing of water and water markets, discussions about which are at the cutting edge of modern water management; and tend to be the inspiration behind water policy reformulation across the globe. But this is beyond the scope of this report, which is directed at the potential impact investor. Nonetheless, when such an investor has an interest in irrigated agriculture there are important financial implications. If for instance there is no possibility of financial gain accruing to water savings, then there is no benefit in installing expensive water measurement or control facilities. Downstream social, economic and environment benefits can be maintained by (usually) much cheaper drainage

11 A term which describes the water itself, the use of which is secured or protected by a right or permit. Where water is

associated with a resource price, this allows saved water to be commoditised to the advantage of the right holder – and society and the environment.

12 Just as water flows downhill physically, under the right conditions, in terms of use it can flow uphill to its most economically advantageous application. Its ability to do this is sometimes known as the economic mobility of water, a characteristic which is largely determined by the legal personality of water in the pertaining regulatory and policy framework.

17

channels that convey the water “wasted” in the fields back to the natural drainage system (cf the Egyptian example above). There can of course be a pollution problem arising from the use of farm chemicals; but this can often be solved by means of constructed wetlands which themselves may lead to additional social, economic and environmental benefits. On the other hand, where downstream competitors are prepared to pay for saved water, in other words, where there are functional water markets (official or otherwise), then considerable financial advantages are likely to accrue to investments in improved water management facilities that allow more precise measurement and distribution of water13 . The point of all this, is that when water allocation issues are considered at scale, it may not be incumbent on even the most environmentally scrupulous investor to compromise profitability by spending on unnecessarily sophisticated, expensive water management technology at the point of use.

2.2 Investment

It is fair to say that until around 20 years ago, with few exceptions, most effort in sub-Saharan Africa was being expended by international development agencies (both multi and bi-lateral) and was directed at increasing the productivity of the small holdings that dominated the sector. The exceptions included such initiatives as the International Finance Corporation’s Africa Projected Development Facility (APDF), which provided a project preparation and financial brokerage service to African entrepreneurs from all sectors. As far as agriculture was concerned, the APDF’s activities were largely (but not entirely) addressed at high value horticulture, or industrial crops. At much the same time, UNIDO was typically researching the investment needs for agri-businesses. The assumption was clear. Notwithstanding the large farms carried over from the colonial period and remaining largely in the hands of white farmers and producing bulk commodities, increased food production by smallholders was the widespread objective of the development sector. Typical strategies included institutional capacity building, the promotion of so-called conservation farming techniques and expanded irrigation services usually under participatory, farmer managed modalities. These were not always without success, but successes were nonetheless the exception not the norm. Irrigation expansion for instance was publicly funded, not because of demand for irrigated crops, but rather because of demand for irrigation itself [Abernethy 2001]. In other words it was for the means, not the end: and much of this was politically driven as was the drive for food self-sufficiency, which as we have seen usually represents an inefficient allocation of development finance. Equally, the much sought after yield increases were in most cases not forthcoming. In fact soil mining and poor maintenance of terracing (for instance) actually caused yields to continue declining, while smallholders continued their drift to the cities where they began to need food produced not by themselves, and not by the remaining small holders who were struggling to feed themselves and their families. Food import costs began to mount therefore and countries began to look for a more durable paradigm. Accordingly, the efforts of the development sector began to look in turn at the need for enabling environments in terms of strengthened, accountable public institutions; decentralisation and commercialised service delivery; recurring cost recovery and most significantly, the creation of

13 There may also be investment opportunities in the water markets themselves, as will be seen later in the report.

18

space and incentive at policy level to attract the private sector, not just towards high value and industrial agriculture, but also to the production of bulk staples and agricultural sector service delivery [Riddell 2007]. That is very much where things stand today with the result that there is a good selection of countries which represent a convincing combination of enabling environment and productive potential. They are introduced in section 4.2 below, while the question of the enabling environment is discussed more fully in section 2.3. The remainder of this section is concerned with a discussion of investment oriented themes that set the scene for the remainder of this document.

2.2.1 Theme 1: Crops and Markets

This theme begins by revisiting the point made at the end of section 1.2, ie that given shifting food production and consumption dynamics coupled with higher commodity prices we no longer need to look for the next kiwi fruit. Basic food production now offers equally attractive investments opportunities, especially if the added value is included (milling, bagging, and in the case of rice, parboiling). But more than that is the fact that where repatriation of profits is permissible (as is the case in all the countries introduced in section 1.2) then it is not necessary even to export, the domestic markets are robust enough to justify investment.

In Tanzania for instance, farm gate prices for rice are currently 73% of the global trade price according to a grower met with in the course of the country consultations14, while in Malawi, maize now makes more for the farmer than does tobacco. Figure 2.3 shows that high prices are expected to persist; but equally important is that

NEPAD/Technoserve [2004 cited in Warner et-al 2008] in turn confirms not only that domestic demand will remain strong, it is also expected to grow significantly even into the long term “…the anticipated rise in farmgate income from growth in retail urban African food markets in 2030 [will be] eight times (800%) that to be generated from export sales…”. This is especially beneficial given that domestic sales avoid the potential logistics difficulties often associated with exportation.

2.2.2 Theme 2: Conditionalities and Determinants of Success

Despite all of the foregoing material, it is necessary to sound a note of caution. This is because investment resources should not be thrown mindlessly at African agriculture without due consideration of the lessons that can be learned from the experience of others. These have been very well captured by in a recent study [Poulton et-al 2008] which concluded that:

14 Carter Colemen CEO of Kilombero Plantations Ltd in discussions with the Consultant. Potential

investors should however, satisfy themselves that this is still the case if and when they apply due diligence to their own investment proposals

Figure 2.3 Outlook for World Crop Prices to 2017 (index of nominal prices, 1996 = 1)

19

• The likelihood of commercial success is directly proportional to the investor’s control over the input supply and market chain. However, the study was largely based on the commercialisation of smallholder production. Typical smallholders are often the victim of rent seekers, such as middle men at the farm gate offering low prices on a take it or leave it basis, or uncoordinated service provision such as seasonal credit becoming available too late for fertilizer application etc. Since, on the assumption that the commercial investor will only invest where adequate degrees of control are possible, then the nature of the control needed will be identified during the due diligence or project design stage and built-in accordingly. And this is as true for outgrower programmes (see section 3.3) as well as commercial estates. In fact, the provision of farm inputs in a timely fashion, not only increases the likelihood of success, it also contributes very significantly to the social impact – to the extent that it should be considered mandatory in any outgrower programme.

• Water, land and labour should all be plentiful. At first glance this may be self evident, but as will be seen in the next sub-section, land however plentiful is not necessarily available in a straightforward fashion. Similarly, water may be plentiful but only on a seasonal basis, in which case trans-seasonal, or even trans-annual storage would be necessary. And even where this does not affect commercial viability (and might even add to it under certain conditions: for instance where there are functional water markets, water banks or where multi-purpose use is possible), the social and environmental costs may be considered too high by the impact investor. It is similarly the case with labour. Poulton et-al’s paper [ibid] makes it clear that the low costs of labour characteristic of many Africa countries is enough to offset the transaction costs, which tend to be higher than elsewhere. This has the potential to be exploitative, which would not be acceptable to the impact investor who wants to lift depressed socio-economic baselines, not exploit them!

To these can be added comparative advantage15 because whereas there may be a degree of political economy behind crops that are promoted by state extension agencies, the commercial investor will be generally interested in profitability. In the particular case of the Terragua investors, by definition, they will also be interested in social and environmental impact. But these are determined by the investment model, not crop choice. Nonetheless, given the commercial viability of basic food crop production (as demonstrated above) there is likely to be close nexus between crops that could be chosen for commercial reasons, with those chosen according to political economy. But this should not be taken too far. A very dry, but flat area currently growing say maize may have comparative advantage for rice if the soils are suitable and irrigation is possible; whereas a steeply sloping, but adequately watered area might not have.

2.2.3 Theme 3: Freehold, Leasehold, Partnership, Rental and Outgrowers

Land ownership in most African countries, including some of those selected in section 4.2 is a complex and hazardous issue. Ownership can be vested in:

• customary authorities such as chiefdoms;

15 Taken here to mean a suitable combination of physical conditions, production costs and market access.

20

• the communities living on it; • individuals • or indeed the state. In some cases the boundaries between these can be blurred; in others, national law and local customary law are difficult to reconcile, involving the would-be developer enmeshed in legal wrangles that can take years to resolve. Obviously unencumbered freehold ownership is best for the commercial investor, especially in the case of greenfield sites, where asset values increase dramatically as soon as the land is brought into productivity, especially if irrigation water use permits are subsequently allocated, and even more once it is equipped for irrigation, ditto road access etc. But where freehold is difficult to confirm, or indeed where it is not permissible in law, there are alternatives. The first alternative is a long lease, such as is the case in Tanzania where land can be leased for an initial 50 years, automatically extendable for another 49. With such long leases, where they can be transferred, asset values will increase, almost as with freehold land The second alternative is a partnership with the current freeholders. Here the key issue for the investor is how much of the equity, and hence control accrues to the partner who puts in the land - usually with low value if undeveloped – and nothing else. Clearly, the investor will want to avoid carrying all the risk associated with the commitment of development and operating costs in return for inadequate control of the venture and a reduced share of the profits. However, this danger can be rendered to an extent moot if the asset allocation arrangements (which will be determined by the equity arrangements with the local partner) are not mirrored by the revenue model. In other words although the long term asset value increase benefits will be allocated according to the share holdings, the production revenues can be split more in favour of the investor on the basis of how much of the asset he/she is responsible for operating. In other words, even if the asset is shared 50:50 for instance, if the investor operates it all, then the benefits of that operation should all accrue to the investor, with only a rent paid for the use of the local partner’s share of the real estate. And furthermore, if the local partner comprises a farmer group or cooperative (rather than an individual or single corporate entity), then additional social impact would occur if a labourer/landlord model (see below) could be applied on the area owed by the local interest. Added value assets applicable to the entire landholding (such as a rice mill) could furthermore remain vested entirely with the investor. The third alternative is simply to rent the land from the owner(s). While this precludes the possibility of asset growth accruing to land development, equipment and spatial integration, attractive business models are nonetheless possible, especially where added value – which could be kept entirely under the control of the investor – is possible. In addition, rental modalities introduce some interesting opportunities to increase social impact: the “Landlord/Labourer model” described in section 3.3 again refers. Finally, there is the possibility of contract farming, which in any case would be the approach adopted by the investor that is only interested in added value activities. According to both the literature and common sense however, added value only is a high risk operation. This is because satisfactory returns on the investment in added value facilities etc, are dependent on a minimum supply of raw material. It is best therefore that control over the production of this basic minimum remains with the investor. For this a nucleus estate is necessary. With that in

21

place the investor can then source additional raw material from either large farms under contract, or via socially impactive, smallholder outgrower programmes. In fact, the nucleus estate/outgrower model emerged in both the literature review and more particularly the country consultations as having the best potential for social impact – it is therefore covered in more detail in section 3.3. Again though, a word of caution is necessary. Simple smallholders from what can only, but regrettably, be called a peasant background are often tempted to side sell their produce, rather than sell it to the processor-investor. This would be irksome enough if it were only the availability of raw materials that is affected. But where ideal social outcomes are involved, the processor-investor will probably have provided farm inputs and extension advice to the smallholders. He or she would be entitled to expect a return on that investment. Although no specific references could be found in the literature, everyone with which this problem was discussed during the consultation visits agreed that commercialisation of the farmer’s mindset is a pre-requisite. This introduces the need for thorough rural facilitation during the scheme’s preparation and implementation stage. This can be the responsibility of qualified experts in the techniques involved; but as shown by the impressive success of the Pyrethrum Company of Tanzania Ltd, proactive engagement of the smallholders by well trained, conscientious field purchase agents can avoid the problem. A third, and more draconian approach would involve rigorous enforcement of contracts and making examples of persistent side-sellers16. However, another promising legal approach involves entering into contract with a group of farmers, not individuals on the assumption that social collateral outweighs individual temptation.

2.2.4 Theme 4: Sunk Costs

Related to the previous theme is the question of sunk costs. As a result of various factors including civil war, economic liberalization, devolution, poor institutional strategies and simple neglect it is possible to find highly attractive (often public) assets throughout the region, each of which, if rehabilitated and/or managed correctly could be rendered highly profitable. In some cases such assets might comprise perfectly adequate irrigation commands. Typically, these would have been implemented under inappropriate development sector strategies and simply await a better idea from the commercial sector. Interesting examples of these can be found in Tanzania, Malawi and Mozambique (for instance) and may justify a follow up inventorising study. In other cases they might comprise run down cocoa or palm oil estates, the rehabilitation of which might be catalysed simply by the availability of a new processing plant. Very promising examples of these can be found in Ghana and Sierra Leone for instance, and on a smaller scale in Lesotho, where a combination of poor rural facilitation and the arrival of a donor’s NTE date has resulted in the abandonment of a successful asparagus operation, the restoration of which would be particularly attractive due to the collapse of the South African asparagus sector next door. In yet more cases, these opportunities might be vested in already successful state farms that were sold off during historic processes of privatization and/or devolution. Several of these can be found in Tanzania, when after several years of operation, the first round of investors are now

16 It is possible in Senegal though, to insure against side-selling.

22

ready, and in fact are being encouraged by Government, to cash in and move on: but as going concerns, the sunk costs that they represent might be offset by their current asset value. Even so, changing market dynamics may mean that some of these may be worth a closer look, especially where the current owners are cooperatives among the members of which objectives may differ. Sunk costs are also embedded in certain kinds of Public Private Partnership, but this is more relevant to the next sub-section.

2.2.5 Theme 5: Irrigation Versus Rainfed

Irrigation is expensive in terms of both capital and recurring costs. But in some otherwise high potential locations it is essential, while in others if used correctly it obviously reduces risk and thereby justifies diversification away from low input/low output farming systems towards higher value systems. It also:

• allows production to be intensified thereby taking the strain off fragile environments while increasing environmental factor productivity;

• decreases the costs of service delivery and spatial integration by concentrating production • permits out of season production, and hence facilitates the supply of lucrative niche

markets

• increases yields and quality • depending on the level of investment and operational skill can reduce the right-in-use

element of a prior water right. Normally, the choice of whether to irrigate will depend on a variety of technical parameters; but investment decisions will usually be made – nonetheless and case by case - on the basis of financial returns and the reliability of the water supply. In an increasing number of countries, some of the costs have been, or will be shared by the Governments. Mali for instance has the Office du Niger which comprises a large irrigation command, run by a private sector service provider which makes its money from service charges. All the irrigator has to do is cover the costs of the field distribution system. Senegal is in the process of developing a similar model in the Senegal River delta, where investors are right now being invited to take up 100ha blocks past which public irrigation service is provided. This type of arrangement is kind of Public Private Partnership whereby in this case the costs of bulk service delivery are covered by Government in order to lever private investment in productive assets. A similar arrangement is under implementation in Malawi, where the Government with World Bank Support is bringing bulk irrigation water supplies to some 30,000 ha for the benefit of commercial investment at the field or production level. Also, Tanzania, Mozambique and Zambia are moving towards the provision of space at

Text Box 2 During the two years that this writer spent working on contract for the World Bank’s Africa Project Development Facility, assignments did not only concern the development of feasibility studies and business plans for potential agricultural entrepreneurs; but also loan re-negotiation proposals for farmers that took their only irrigation advice from those responsible for selling irrigation facilities. As such they incurred the risk of being persuaded to buy excessive capacity. Since over-irrigation reduces yields while costing more to buy and operate, instead of making more money, they were hemorrhaging it! Had they spent money on impartial advice before buying the gear, they would have made money from the outset.

23

the policy level for irrigation sector public private partnerships17 In each of these cases, space will become available not only for disaggregated public private partnerships (where the private player benefits from public sector bulk service delivery); but also for partnerships in productive enterprises; for private financing of public infrastructure goods and for the leasing of publicly funded bulk service infrastructure to operate on a for-profit basis etc. However, although such arrangements can reduce the capital cost of irrigation, there is the matter of dependence on outside service organizations which might fail! The investor should therefore beware; and the same is true where irrigation is provided for the use of outgrowers. Another risk for the novice investor is that of being exploited in the irrigation market place (see Text Box 2). It will be obvious that where irrigation comprises part of the sunk cost of a defunct, but potentially productive asset, investment in its rehabilitation is likely to be attractive.

2.3 Enabling Environments

Opinions differ about what makes an suitable enabling environment for investment. Some experts, such as Poulton [ibid] for instance, still apply the Washington Consensus, which assesses a country’s suitability in terms of its:

• fiscal discipline • redirection of public expenditure towards fields offering high economic returns and the

potential to improve income distribution

• tax reform • interest rate liberalisation • competitive exchange rates • trade liberalisation • liberalisation of FDI flows • privatisation • abolishment of entry and exit barriers • secure property rights But this has become discredited in recent years, not least because it is often associated with the neo-conservative agenda and the less favourable aspects of globalisation. Critics include significant public figures such as Henry Kissinger [2008] as well as highly regarded researchers such as Maxwell 2005 [ibid] and academic activists such as Stiglitz. Because the matter is so fiercely debated, we will keep it simple and focussed on the needs of the Terragua Impact Investors here. As far as investment in commercial Africa agriculture is concerned therefore, it is suggested that the following features characterise an enabling environment:

17 Although in the interests of candour it must be acknowledged that things are still very much at the process, not product

stage, especially in Mozambique where the draft policy intended to promulgate, inter-alia, precisely this, has yet even to reach the formal review stage. But that being said, a serious proposal from a major investor could massively catalyse the transition from process to product – especially in Tanzania where relevant examples already exist in the transportation sector.

24

• a functional democracy, because i) the impact investor would not want to be seen to be favouring or benefiting any residually rogue regimes on the continent; ii) if the process of government change is transparent, and demonstrably so, there are less likely to be hidden hazards in terms of political transition and iii) it is widely acknowledged that stable democracy is conducive to economic growth, stability and opportunity.

• the ability, with supporting mechanisms, to resolve contractual issues according to internationally recognized standards and procedures, because these represent a level playing field and a transparent game. Furthermore, acceptance of such standards and procedures are i) an indication of a regime’s acknowledgement of the need for objectivity and ii) evidence of its participation in the community of nations. And finally, it must be remembered that liability under such standards and procedures is incumbent not only on the investor and any contracted producers, but also where exporters are concerned, on those that undertake to buy those exports, thereby protecting the interests of sellers who in this case may include risk averse, hitherto subsistence farmers.

• transparent and straightforward access to land, because land is crucial not only as the basis of production, but also as a potential capital asset. There is a significant risk therefore, that once land values have been elevated; perhaps by land clearing or cultivation; the attachment of a water right; improved physical access, physical infrastructure or by the establishment of permanent crops (such as in sugar cane, cocoa etc), that spurious claims on the land might be made and supported by equally spurious or vague legal structures. Any investment model that is predicated, in particular on an early or medium term exit strategy will almost certainly require that access to land as an appreciating asset is securely held, regardless of whether that is by freehold, leasehold, rental agreement or partnership.

• the existence of an effective investment facilitation institution, ideally a one-stop shop. Unlike the preceding criteria, this cannot be described as a precondition, but rather as an advantage because when the nuts and bolts of business registration, tax exemption, partnership formation and land allocation etc are taken over by a unit designed to do just that, and furthermore with established linkages to the various government institutions that will be involved, the investor can get on with crafting and implementing the deal itself, hiring the best possible team to make it happen and undertaking convincing rural facilitation measures.

• straightforward company registration procedures, for much the same reasons as above. • the ability to repatriate capital and profits, which is absolutely crucial to the impact

investor because of the opportunity it opens up for crops targeted at domestic food security and import substitution. In the absence of an ability to repatriate capital and profits the investor has been historically locked into high value export or industrial crops. And even where basic foods can be exported, their bulk tends to introduce logistic nightmares. The ability to repatriate capital and profits is therefore commensurate with the ability to succeed in the local agricultural markets and as we have seen these are or will be huge in some cases.

• an effective commercial banking sector is crucial for several reasons, not least because available banks should be able to undertake international financial transactions in a straightforward and cost effective manner. That much is relevant to any type of investment involving overseas players, especially for instance where international letters of credit and the like are required for machinery procurement etc. But for the investor in agricultural production, effectiveness has two other dimensions. First is that the bank’s credit risk assessment ability and flexibility should be appropriate for an innovative

25

agricultural sector rather than safe and traditional cropping lines. When this is not the case, then ridiculously high interest rates are applied on non-traditional agricultural business. The second dimension is an ability on the bank’s side to understanding the importance of timing when it comes to seasonal loans, the reasons for which will be self-evident. There may also be institutional dimensions in bank effectiveness. Where outgrowers are encouraged or assisted to take responsibility for their own financing arrangements, mobile banking may be more appropriate while social collateral18, when correctly designed and applied may be a sound alternative to physical collateral. And an effective bank in this context will therefore be one that is able to innovate in like measure with the impact investor and any outgrowers involved in the business model.

• a functional transportation system is needed to ensure that inputs can be delivered to the venture safely and in a timely fashion; and so that produce can be shipped to the market at the right time and in good shape. Where high value is involved, the transportation system would probably have to include cold chains and reefer trucks as well as reliable roads, railways and ports. Of course, there will be much that the investor can do to take control of elements such as cold chains and the like, but it is the entire system from farm gate to market that must be reliable.

• tax and work permit incentives; like the one stop shop and straightforward company registration procedures these are advantages not conditions.

• policy space for commercial investment in the agricultural sector; because it is clearly essential that commercial investment is facilitated not frustrated by the prevailing policy framework. But for the impact investor in agriculture, it goes beyond that basic pre-requisite. For him or her, the ideal policy framework will include space for social and institutional innovations, while building service oriented public institutions and allowing producers more choice over their farming systems (as compared with the old style of target driven, commodity based self-sufficiency polices). Even better though, is if the policy framework facilitates or encourages such innovation and better still if it commits government to the proactive engagement of such things.

• secure property rights; the need for which is self evident not least because many agricultural investments involve significant lead times. The investor will want to be assured that the venture is still theirs once it reaches full productivity. And this does not just refer to real estate – it also refers to water rights. Some countries limit these to time horizons that may be less than investors’ comfort levels would like when considering permanent crops, as well as being potentially counterproductive when trying to allocate water on economically meaningful terms.

• the importance given to equitable social development and environmental sustainability by the government because the impact investor would rather support the agenda of a benign, well intentioned government rather than work against the agenda of the opposite type. This does not mean however, that the impact investor should be afraid to leverage advocacy opportunities and enhance capacity at the official level where governments commitment to these cross cutting values is nascent or could be improved or refined.

18 Or other innovative forms of collateral such as a water right, as has been suggested in Swaziland for instance.

26

PART TWO - PRACTICE

27

3 LOOKING FOR IMPACT AND THE SEARCH FOR BEST IN CLASS

3.1 Social Impact

Abernethy [1989] suggested five ideal social outcomes for (any sort of) agriculture sector intervention. They remain highly relevant 20 years later and therefore represent an excellent point of departure in this context. Thus:

Production and Productivity

This outcome is relevant to investment models that involve local farmers in the venture in some way. Production outcomes require that the investment provides both incentive and opportunity for local farmers to cultivate new land, on their own account, for the benefit of the venture as a whole, and/or that cropping intensities can be increased (perhaps by providing irrigation where there was none before, thereby allowing dry-season production). Productivity outcomes require that both the newcomers and existing participants benefit from service delivery and technical assistance from the investor, in such a way that their yields improve. These outcomes require some sort of contract farming/outgrower model.

Profitability

This outcome also concerns contract farming/outgrower models and speaks to the fact that increased production and productivity are meaningless unless they lead to improved livelihoods. Several tactics may be necessary to achieve profitability. We have already noted that the peasant farmer’s mindset has to be changed from a subsistence orientation to one which is more commercialised. This is not as difficult as might appear as several examples illustrate:

• In the mid 1980s poor farmers subsisting for instance on staple maize, along with some meagre tobacco production on the slopes of Mount Kenya, saw an opportunity in the emerging horticultural revolution that was taking place elsewhere in the country. Within a few years, farmers that had been scratching out a living, were driving their produce to market in their own trucks

• A short way to the south, Tanzanian farmers on the slopes of Kilimanjaro were catalysed into high value exporters by the efficient export facilities available at new international airport that had been constructed nearby.

• In Zambia, a combination of a commercial extension service provided by a farm input supplier, and an emerging market in the form of horticultural export freight consolidators catalysed farmers in a profitable shift to high value farming systems.

• In Botswana, certain woman have achieved significant increases to their household incomes via highly profitable cut-and-cut-again vegetables on irrigated blocks as small as a few square metres!

Each of these examples include elements of crop diversification and multiple cropping; but traditional crops can also be made more profitable with suitable training and reliable service delivery. This is important because it means that this same outcome can be

28

captured by the production of basic food commodities for which, as we have seen, robust markets are expected to pertain for the foreseeable future.

Equity

Again, this concerns contract/outgrower models and as posited by Abernethy requires that outgrower participants in the venture derive benefits from it on a fair basis. To this could be added the need to share any commercial success with any outgrowers in some way. This could be direct in the form of farm gate prices that reflect beneficial changes in the investors revenues (but of course these could go down as well as up); alternatively, profits could be shared, not in fiscal terms, but in terms of the provision of social goods such as community centres, dispensaries, schools and the like.

Sustainability

This is self-evidently an important outcome. If a conservative, risk averse farmer is persuaded to “commercialise” and participate in something that is not directly related to household food security, then the new system has to be durable. However, this outcome has broader ramifications for poverty alleviation, economic growth and indeed better use of environmental goods and services. Traditional farmers are most easily persuaded to change their practices, not by ivory tower hotshots, but by peers that have successfully made the change. Evidence for this can be found in countless evaluations of farmer field school and T&V19 programmes. Equally, even a temporary setback at one scheme can deter farmers from change for a generation. This obviously applies to contract farming/outgrower programmes; but it could also apply to commercial estates where farmers have been attracted by employment opportunities and attractive social amenities etc. Perceived unsustainability at one such estate might make recruitment at another very difficult.

Enhanced Quality of Life

For the outgrower, enhanced quality of life should automatically result, if the other outcomes are secured. For the estate worker however, the social impact investor will be keen to provide attractive social amenities or goods such as nice housing lines (which include home gardens); community centres; schools and dispensaries etc. So much is obvious, but on a broader scale the quality of life outcome can be registered in the community at large. The commercial venture could perhaps contribute to national food security, or diversify employment opportunities by providing trade goods that invigorate local markets. It could also help increase the economic mobility of water, which as was shown above, usually benefits the poor – but with this mind, it should be noted also, that the unwise exploitation of natural resources might compromise quality of life elsewhere. This risk might be manifested for instance in terms of wasted irrigation water; pollution by farm chemical run-off which could decimate capture fisheries while causing human health problems; or soil erosion leading to sedimentation of water storage points downstream or once again compromised fisheries etc.

19 Training and Visit

29

In seeking outcomes such as these it is important also, to be sensitive to gender issues which prevail strongly throughout rural Africa. Mention has already been made of the desirability of home gardens where housing lines are concerned. These are usually the responsibility of women, who can use them to add significantly to household livelihoods, or in some societies, to their own material well being. Either way, they can be empowering for women. As pointed out by Van Koppen [2001], a good gender strategy is also known to improve the overall performance of a given investment. This is especially so where outgrower schemes rely on so-called dual or female farms, such as can be encountered in East and Southern Africa, or where certain crops have gender ramifications – such as sorghum in Sierra Leone. Equally, in some cultures women not men are the landowners, or are responsible for incurring debt. The implications for the social investor will be obvious.

3.2 Environmental Impact

It is important to understand that agriculture impacts the environment in two ways. First, there is the way that land use change, land management practice and farming systems affect biodiversity and ecosystems services at the landscape level. This does not have to be bad. In areas where biodiversity and ecosystems services have been compromised by such factors as deforestation, over-grazing or soil-mining for instance (factors which are often associated with high levels of poverty), it is possible to restore them by introducing benign land use practices and farming systems that enhance baseline conditions. In addition, there is also the matter of climate change. For certain crops, innovative practices can reduce greenhouse gas emissions or increase carbon sequestration. Second, the production and/or processing of most crops is associated with some sort of environmental hazard in terms for instance of chemical pollution, soil loss or compaction, reduced environmental stream flows and biodiversity. In every case these hazards can be offset, minimised or mitigated. The “impact investor” will want to maximise environmental enhancement while minimising or mitigating environmental hazard. Options for achieving this are discussed in the following sub-sections.

3.2.1 Enhancement

Impact agriculture can enhance the environment in three ways.

Restoration of Degraded Land and Watershed Services

Land degradation is frequently encountered in areas characterized by smallholder farming or livestock activities. Problems are caused by overwatering, soil mining, excessive tillage and overgrazing, resulting in water logged soils; or fragile soils that are easily and often eroded; gulley formation, infertility, poor moisture holding capacity and excessive run-off and hence downstream flooding and sometimes fatal landslides. These problems can be solved and environmental services can be restored by the adoption of appropriate land management and cultivation practices. The impact investor, and where appropriate, his or her outgrower network, can for instance:

30

• Implement a soil amelioration programme that restores nutrients and most importantly organic material, which increases soil moisture holding capacity, and where aeration is also practiced, microbial biodiversity will increase, which in turn increases fertility; the same practice increases infiltration rates and restores run-off to natural levels. The available technologies are widely and copiously described in the literature and will already be well known to any qualified project manager of the kind likely to be engaged by the impact investor

• Establish terraces, which also increase infiltration rates while retaining soil • Plant trees which have multiple benefits as follows:

− again binding of soil, especially if planted along the contours − significant increase in the profitability of outgrower models, while providing

fuel, building materials and green fertiliser/fodder etc

− reduction of evapotranspiration by a combination of shading and reduced advective energy20

• Install drainage where soils have become waterlogged, leach where necessary and apply ameliorants such as farm yard manure, lime or gypsum ect as appropriate.

Obviously, these measures will not only restore environmental services at the landscape level, they will also increase the productivity of the land in question and the profitability of farming systems adopted. An excellent of how this works can be seen in the upper reaches of the Yangtze River in China’s Yunnan Province. There, vast hillsides have been restored with a combination of reforestation and high value agro-forestry farming systems. What makes this so particularly relevant here, was that it was all funded by commercial investments under legislation that required investors to implement production models that guaranteed household income increases of at least 300% for the indigenous communities!

Intensification of Production

Much of the agricultural sector in sub-Saharan Agriculture is extensive in nature. This is largely due to the need to achieve adequate levels of production from low yields. It is self evident that the problems listed above are spread wider than necessary under extensive farming practices, thereby increasing their negative impact at landscape level. Low yields arise for a variety of reasons, including low technical capacity, poor husbandry, unaffordable inputs (re: fertility and pest management), post harvest losses and a lack of irrigation (which in addition to its obvious benefit also permits vertical intensification by allowing dry season production). As will be made clear in § 3.3, there is clearly a lot that the impact investor working with outgrowers can do to alleviate these problems. The benefits will not only be manifested in terms of increased productivity, and elevated socio-economic baselines but also better returns on the allocation of environmental goods.

Carbon Sequestration and Reduction

The first two enhancements are obviously concerned with enhancing the environment on which the agriculture venture is directly situated. But there are other, broader

20 A complex integration of the factors which cause evapotranspiration.

31

environmental problems which may have a solution in the agricultural sector, global warming is one of them. The allocation of natural resources to biofuel has proved controversial, and for good reason. This however, does not invalidate the potential, especially as the possibility of taking second generation technology to scale approaches. As argued convincingly by Takaravasha et-al [2005] where there is no competition for productive resources (land and water), as is the case in the SADC region, a well designed bio-fuel strategy can have significant poverty alleviation and food security benefits. Also, as is demonstrated by the Canoverde sugar plantation in Brazil - at 48,000 ha the largest organic farm in the world - bio-energy production is highly consistent with environmental management objectives at farm level, while being highly profitable. In addition, cutting edge work underway in India confirms that sustainable sugar cane production for the bio-energy sector has great potential for outgrower production. Another approach to reduce global warming is carbon sequestration. While reforestation of any sort helps here, on the assumption therefore that every little helps, the production of cocoa has a lot to offer. While researching options for the restoration of roosting sites for birds migrating across central America, sites that had been decimated by deforestation in favour of coffee plantations, the Smithsonian institute identified the cocoa tree as being particularly ideal. Not only does it contribute to sustainable biodiversity, it also has high carbon sequestration characteristics, while its high level of leaf drop, contributes to the accelerated production of rich humus and surface mulching21. Its relevance here will be obvious, but is worth repeating because the crop is so exciting for the impact investor:

• It is trading at an all time high, due to falling production in traditional growing areas, a situation that is not expected to change any time soon

• Demand for chocolate continues to increase, not just because of rising demand among non-traditional consumers (China and India), but because it is now recognised as a health food

• The outgrower can interplant it beneficially amongst other crops which it shades and fertilises

• The outgrower can take a first harvest within the first year which is unusual for arboreal crops

• The outgrower can add value before the product leaves the farm gate • Waste products can be recycled as fertiliser, fuel, alcoholic and other beverages and

chemicals

• There are vast areas either of derelict cocoa trees waiting to be redeveloped or with excellent potential for new planting in some of the target countries – of which more below.

21 These characteristics should not be taken to indicate that cocoa is always beneficial. The Smithsonian study was predicated

on cocoa’s potential when inter-planted with coffee. Indeed as Clay points out [Clay 2004], the crop is potentially hazardous from an environment point of view. Nonetheless, as will be seen Clay also agrees that where properly grown, the crop can be environmentally beneficial, therefore in view of i) its aptness for social impact as indicated in the bullet points; ii) its high commercial and added value potential it is included in this document as an attractive crop. Clay’s own recommendations for its environmental mitigation will be presented in the next section.

32

There are finally, cross cutting benefits of environmentally restorative agricultural investments. These include biodiversity at the landscape level, human well being, basin welfare and restored environmental services.

3.2.2 Mitigation

Almost every agricultural activity faces the possibility of environmental hazard, and some of these are cross cutting. These concern soil management in terms of structural integrity and fertility; water management; pollution and biodiversity.

• Environmentally responsible soil management involves the adoption of tillage techniques that prevent erosion, compaction and excessive soil surface evaporation. These techniques will not only include the tillage technique itself, but will also include contour based operations (including planting). At the same time, aeration should be encouraged in order to maintain microbial biodiversity which itself contributes to soil fertility. It is also essential to maintain organic content as this improves both structure and moisture holding capacities; and if organic fertilisation is practiced22 microbial activity is also enhanced to the benefit of the growing crop: as some say “feed the soil, not the plant”. Another way to preserve soil fertility is to practice rotations, ideally involving at least one leguminous, ie nitrogen fixing crop thereby reducing dependence on artificial fertiliser (while adding to the profitability). Finally, farm machinery should have wide tyres to reduce the risk of surface compaction and hence excessive run-off.

• The need for sound water management applies as much to rainfed as to irrigated agriculture and in fact is essential if the most is to be made of scarce rainfall. Appropriate measures include terracing; agro-forestry (because of reduced advective energy once again), trash lining and mulching. Where irrigation is involved, environmental stream flows should be maintained in all cases. However, the need for expensive flow monitoring and control is decided on the basis of whether or not it is better only to maximise return flows (achieved by a good drainage system) or to minimise abstractions at source and/or if a particular farming system depends on precise water management. In these cases, then monitoring and control facilities should be installed at source as well as at appropriate locations throughout the distribution system. There are proprietary systems for doing this, available at various levels of unit cost, but this document is not an appropriate vehicle for recommending particular brands. There is also a risk of excessive encroachment on natural water courses – but this is usually addressed in local regulations, in which case the impact investor will observe them rigorously. Finally, it should be recognised that in some cases, soil health will be dependent on leaching. In such cases, the leaching requirement, which will be additional to the evapotranspiration requirement can be assumed to be part of the water right (if applicable), unless any return flow mechanisms via the root zone are understood and adequate.

• The usual causes of pollution are farm chemical run-off; the disposal of untreated farm or agro-industrial waste (especially into the natural drainage system) or “dirty” agro-processing. These problems can be mitigated by a variety of techniques, the first of which will be accurate dosing with respect to agro-chemicals. However, where run-off is inevitable or unavoidable, it is possible to construct artificial wetlands between the edge of the farm and the natural drainage system: and these often introduce biodiversity

22 Despite the attractiveness of the idea, it is not always feasible to do this.

33

benefits. Polluting waste should not be dumped in the water course, unless the operator has a permit to do so. Such permits are usually issued on the basis of absorptive capacity of the stream which in turn is based on a certain minimum flow. It is also possible to re-cycle certain process wastes or use them for financial gain.

• The importance of preserving microbial biodiversity in the soil has already been stressed. But it is desirable also, to preserve general biodiversity to the greatest extent possible, or even to enhance it wherever possible. In fact, some experts claim a link between biodiversity and general environmental services at catchment or watershed level [Harris 2001]. Ways to preserve or enhance biodiversity include agro-forestry, eco-islands (on large schemes), minimising use of pesticides and maximised use of integrated pest management systems; non-encroachment of natural water courses (once again); non-compromise of spawning or migratory routes; non-compromise of gene-pool integrity (which is often caused by habitat fragmentation, especially aquatic).

So much for generic environmental mitigation measures. The remainder of this section suggests crop specific measures for a selection of the crops that are likely to be of interest to the impact investor23.

Cocoa

As usually produced, cocoa is environmentally hazardous in terms of:

• Habitat conversion; because there is a tendency to expand into virgin areas when the productivity of existing stands falls away, usually after 25 years or thereabouts, this risk is exacerbated where small producers are involved due to their inability to finance intensive production.

• Forest degradation; because of i) reduced floral substrates that are associated with the increased shade; ii) seemingly contradictory overall loss of foliage; iii) reduced vigour of native trees taking root after the introduction of cocoa; and, iv) reduced sedentary biodiversity.

• Soil degradation, in terms of erosion during the early years of estate plantation and a general loss of fertility over the longer term

• Polluting practices with respect to waste product disposal; for instance one tonne of cocoa pods is associated with ten tonnes of waste that has to be disposed of correctly.

However, despite these hazards cocoa production is not going to stop expanding for the foreseeable future – hence its significance as an opportunity in two ways for the impact investor. First there is an opportunity to demonstrate how the crop can be produced in an environmentally responsible fashion without any commercial compromise – Clay suggests for instance that sustainable production can actually increase productivity by up to 40%. Secondly, the more that demand can be satisfied sustainably, there is less demand to be satisfied unsustainably. And Clay goes further. Not only does he confirm that sustainable production can be highly productive, having drawn his readers’ attention to the hazards, he goes on to state that “…..experience and research have both demonstrated that sustainable shade cocoa production provides habitat to important forest and

23 The Consultant is particularly indebted to Clay [ibid] for much of the material involved here.

34

migratory bird and mammal species. Sustainable shade cocoa production can play a strategic role in the preservation of forests, forest remnants and forest corridors……..”. How then can the impact investor mitigate the environmental hazards and unlock the potential benefits? Well, there are several ways to do this: • Rather than abandoning existing stands when they tire, it is better to replant and to

do so with new varieties that are easier to maintain while producing greater yields, in some cases considerably so. Typical new varieties are much better adapted for instance to open sun production than traditional varieties, and hence are ideally suited to the restoration of existing, but tired plantations.

• Re-cycle the waste products. Pods for instance can be made into compost, and where the right organisms are used, the result can even be returned to the cocoa groves without incurring infection risk. Pods can also be ground into cattle feed or used as fuel24, they can also be processed to produce theobromine, which is not also an essential component of chocolate but also has pharmaceutical applications

• Improved husbandry techniques, such as pruning and integrated pest/disease management

• Organic certification, the financial costs of which can offset the increased labour costs usually associated with the practice

• Interplanting with other taller, but equally commercial crops such as rubber, and more significant in the context of this study, oil palm.

Maize

This crop, which is crucially important for food security and which presents significant opportunities for commercially facilitated, pro-poor productivity increases is associated with the following environmental hazards:

• Habitat conversion, which is mostly of concern in developing countries, because elsewhere any expansion of the areas planted to maize are associated with corresponding decreases in the areas planted to other crops (although increasing use of large machinery does lead to reductions in micro- or niche- habitats such as hedgerows). In developing countries however, increasing populations coupled with low yields lead to extensification and hence habitat loss. This is especially prevalent in the southern African region where demand still far outstrips supply.

• Soil erosion and degradation; due to excessive tillage, inadequate replenishment of organic material and general nutrient mining.

• Excessive use/poor management of agricultural chemicals; but this is generally not a problem in developing countries where the generally low yields are directly related to low input use. For the commercial investor looking for maize based outgrower deals, the package will include capacity building and seasonal support for sustainable chemical usage.

• Although maize is usually grown under rainfed conditions, unremitting demand means that it is increasingly grown in areas where irrigation (supplementary or full on) is required. Equally, climate change in some areas is rendering rainfed production increasingly unreliable causing producers to consider supplementary

24 As the use of cocoa pods as an additive at a US coal fired power station recently showed.

35

irrigation in areas where it has hitherto not been necessary [Riddell and Manyatsi 2003]. Poor irrigation designs and practices of course disrupt natural environmental services.

• Associated with irrigation, is water pollution whereby not only agro-chemical runoff or leachates pollute surface and groundwater respectively, but also sediment can be i) washed away causing not only a problem in the field but also downstream, or ii) where fine soil is washed deeper into the soil, causing problems with hard pan formation.

• Finally, there is cross pollination from genetically modified varieties, but this, like agro-chemical is not yet a major concern in areas of interest here.

Luckily there are easily accessible measures that the impact investor can adopt or disseminate to solve or avoid these problems.

• Habitat conversion can be minimised by increasing productivity of existing maize areas, while by way of acknowledging that the need for new areas will be unavoidable if demand is to be met, the effects of habitat conversion can be reduced or mitigated by developing non-pristine areas, or by the use of eco-islands where large areas are concerned.

• Soil degradation can be addressed or reversed by the adoption of reduced or minimum tillage, contour farming, the use of terraces or trash lines, the reintroduction of organic material and intercropping with legumes, which themselves would have commercial value. There are also the advantages of rotations, which increase the overall productivity, while reducing the need for nitrogen applications if leguminous. Where irrigation is affordable (financially and environmentally) the rotations can be intra-annual, and if a higher value crop is adopted for the rotation, it could subsidise the costs of irrigation without compromising household food security (which would be achieved by the maize crop, which itself would yield higher under irrigation) [Riddell et-al 2006].

• The productivity of water (rainfall or irrigation) can be increased, and hence demand for it decreased, again by terracing and increasing the organic content of the soil and by the strategic planting of trees.

Oil Palm

This crop is of potential relevance here, not necessarily because of rising demand accruing to its usefulness as a source of biodiesel, but rather because of its suitability for outgrower production and the fact there is tremendous potential in West Africa to rehabilitate existing, but abandoned estates in a sustainable, commercially viable and poverty alleviating fashion. The reported environmental hazards are usually described with reference to the vast plantations in Indonesia and Malaysia where they have replaced large areas of pristine tropical forest with immeasurable biodiversity and watershed costs. The same is unlikely to be so true of the areas of interest in West Africa, especially as the opportunities there largely concern the rehabilitation of existing estates. The reported problems are nonetheless as follows:

• Habitat conversion; which is only relevant to new large mono plantations (as per the SE Asian examples). Where the crop is grown in Africa, it has tended to be a

36

traditional household crop, planted as part of a more diverse farming system. Elsewhere, in the region, habitat conversion is historic, and the challenge now is to make good on the environmental investments and restore as much of the environmental services as possible along with the oil palms themselves (and we have already noted the potential for intercropping with cocoa).

• Air pollution associated with pre-conversion forest burning (the “brown cloud over Asia” as the result has come to be known25)

• Habitat threats to endangered species, especially megafauna, of which the only possibility of relevance here might be elephants. Although these creatures are perfectly happy to live with oil palm estates, they can become a nuisance in that they eat the young shoots.

• Soil erosion, which is usually associated with planting or replanting estates. As such it will be relevant here; but can be avoided as will be shown.

• Because their predators such as snakes are often killed off by estate workers, rats tend to thrive in oil palm estates where they become voracious eaters of the oil rich palm seeds. Application of rat poison incurs the risk of killing of a wider spectrum of fauna.

• Although oil palm is not a particularly demanding crop, a modicum of fertiliser has to be applied to maintain productivity over time. Excessive application not only wastes money (the crop does not need too much), it can also cause pollution.

Fortunately, since this document is not promoting new plantations of oil palm in environmentally sensitive areas, the first three of these hazards are of minimal to nil relevance here. Soil erosion may be a hazard either during rehabilitation or replanting of existing estates; but can be mitigated by the correct use of machinery and contour based operations, and this is as important with respect to the stacking of cut palms as it is to the orientation of new stands. Rats can be controlled by natural predators, thus snakes should not be killed, while the introduction of other predators such as owls has been demonstrated as successful (while representing a biodiversity benefit). Finally the risk of farm chemical pollution can be mitigated by precise dosing, which in any case increases the profitability, or where appropriate by integrated pest management, which also increases the profitability while adding to biodiversity.

Rice

Like maize, rice is an unavoidable opportunity for the impact investor. Sub-Saharan Africa’s productive potential is colossal, not only in terms of expected demand in traditional rice producing areas such as India and China for which Tanzania and Mozambique are well situated as suppliers, but also in the region, especially West Africa where demand far outstrips supply, even while India and China still export the commodity. Equally, demand at the global level is expect to require an additional

25 http://en.wikipedia.org/wiki/Asian_brown_cloud

37

125,000,000 tonnes of milled rice per year by 203026 and much, if not most of that could come from sub-Saharan Africa. The main environmental hazards are as follows:

• Despite the considerable biodiversity that the wetland rice habitat can represent, this has been compromised somewhat by the application of the farm chemicals associated with the so-called green revolution.

• The same chemicals can also result in the pollution of the natural water course, and this is especially so where water is distributed on a field to field basis, which builds up concentrations, rather than via canals and drains.

• Pesticides are particularly troublesome in that many of them bio-accumulate, eventually threatening human health.

• Methane emissions from flooded rice fields are a major contributor to green house gasses

• As grown traditionally, irrigated rice is a major consumer of water, to the extent that production increases on the scale anticipated, will probably be unaffordable in water resource terms

Fortunately a revolutionary production system is able to mitigate many of these hazards in an integrated fashion. It is known as SRI, or System of Riz Intensification, which in general terms is capable of reducing water consumption by around 60% while increasing yields per hectare by at least 20% (and sometimes a great deal more). Although difficult to retro-fit to existing large scale systems, it is ideal for new build such as those that could be implemented in Sub-Saharan Africa. The website http://ciifad.cornell.edu/sri/ refers, as does Annex A3. The multiple benefits of SRI can be further enhanced i) by laser levelling, which also increases both physical water use efficiency and yields per hectare (and is particularly beneficial in these regards where traditional flooding rice is either unavoidable, or appropriate for locally specific reasons); and ii) by integrated pest management.

Soybeans

Soybeans are interesting here for four reasons. The first is their obvious value to the smallholder as a cash crop that can be intercropped with other basic food crops. Second is their nitrogen fixing property which reduces the need for artificial fertilisers for follow-on crops. Third is the potential that their biomass represents in terms of green manure or fodder supplements; while fourth is the considerable added value that they represent to the commercial investor; especially in East Africa where they enjoy high demand for processing into poultry feed. Despite their desirability however; soybeans do invite environmental hazard but in this context they are more or less generic, as are the mitigating measures – so no additional commentary is necessary at this point.

26 Figures verbally quoted by experts at FAO in the context of a global validation process for SRI (introduced in the main text),

this is equivalent to an increase in producing area of around 50 million ha!

38

Sugarcane

Sugar cane is also likely to be of particular interest to the impact investor because of its aptness for outgrower production where it has potential both as a mono crop or as part of a broader farming system. It is however a notoriously hazardous crop from an environmental perspective for the following reasons:

• Habitat loss, for which the crop is thought to be the most responsible of any at the global level, with entire regions such as the Caribbean, SE Asia and South America badly affected.

• Soil Erosion and degradation; which is largely to the destructive land preparation and practices usually associated with the crop

• Pollution of both water and air, both from the crop production and harvesting (in particular the burning of sugar cane leaves, ostensibly as a snake management measure); and from processing where by products such as molasses have high biological oxygen demand when dumped into the rivers, along with dust and other airborne pollutants accruing to the processing.

Yet despite this, the world’s largest organic farm is a vast sugar estate in Brazil (Canoverde, mentioned above) where a complex integration of improved land management, integrated pest management, water course restoration and the establishment of eco-islands has had a massive beneficial impact on this hugely successful commercial venture, the offtakes of which are not only sugar, but also include ethanol and biodegradable plastic products. Also, as shown by Mayer and Schulz [2003] the application of ISO standards to sugar cane in South Africa has also had impressive results. In addition innovative production techniques, as with SRI for rice, not only address most of these problems, they also increase overall profitability to very significant extents. These are known in some quarters as the Sustainable Sugar Initiative [Gujja et-al 2009] and are summarised in Annex 4. In addition, recent processing innovations have led to zero emission processing and the use of some waste products, such as press mud as a soil ameliorant or for processing into wax. And of course there is no need to dump the molasses into the environment. It can be processed profitability into a cattle feed supplement, rum or specialist chemicals; it can also be used to produce yeast, as another soil ameliorant or even for binding unpaved farm roads.

3.3 Model Deals

The question of land holding concepts was discussed in § 2.2.3. This section picks up the theme by examining what sort of institutional arrangements comprise appropriate or potential deals for the impact investor. Five such arrangements are considered. It will be obvious that some are dependent on particular land holding concepts; while others are not. The section closes with a simple objectives matrix.

3.3.1 Contract Farmers

Contract farming is relevant to the investor that is only interested in processing or similar added value opportunities. Under this arrangement, the investor would enter into contracts with independent growers to supply the raw material (such as sugar, cocoa, pyrethrum

39

whatever..). The growers could range from large private estates to small outgrowers, and usually where such farmers lack capacity or sophistication, the impact investor would fill the gap with a seasonal and timely package of technical assistance, finance and inputs. The danger with this is that there would be no control over the minimum needed for the process chain to break even and amortize any debt involved in its establishment. And a disadvantage is that, although revenues could be highly satisfactory, the prospects for capital asset growth is limited as compared say, to bringing undeveloped land into productivity. The next model solves this problem.

3.3.2 Nucleus Estate and Outgrowers

Under this arrangement, the investor (who may, or may not have added value interests) farms a central estate, but has a contractual arrangement with outgrowers to increase the amount of the commodity to be traded or processed. Again, the outgrowers could range from large private estates to small outgrowers, and as above where such farmers lack capacity or sophistication, the impact investor would fill the gap with a seasonal and timely package of technical assistance, finance and inputs. It is also possible that the investor might install an irrigation system that not only serves the nucleus estate; but also the outgrower, depending on their levels of contiguity with the nucleus estate. The literature review and stakeholder consultations confirmed that this (along with the next model) are likely to represent best in class for the impact investor because of the massive potential impact on the productivity and livelihoods of small outgrowers who are ordinarily denied access to the factors of higher productivity, such as credit, inputs, technical expertise and better markets (the nexus with Abernethy’s ideal social outcomes described above will be obvious). The combination of improved access to better inputs and markets has been shown in some cases for instance to increase smallholder yields by as much as 400% and incomes even more27. The concept is perhaps most developed, or at least most comprehensively described with respect to the forestry sector, but the principles nonetheless are transferable to other agricultural sub-sectors. The concept is evaluated and the principles are explored in detail in FAO/CIFOR 2002 section 14 of which28 comprises an effective specification for a nucleus estate/outgrower programme based on the actual example of a community forestry programme in South Africa. By way of a simple summary, the key components of a successful outgrower model are:

• clearly understood institutional arrangements (in terms especially of how the outgrowers are organized and/or represented in the agreement, ie as individuals, corporate entities or farmer groups for instance)

• durable, clearly understood and adequately enforced contractual arrangements that define the roles and expectations of both parties, ie the commercial entity (nucleus estate and/or processor) and the outgrower(s)

• capacity building and service delivery (for instance assistance in obtaining water permits, husbandry advice, credit and market access/consolidation) by the commercial entity for the outgrowers

27 See for instance http://www.springfieldagro.com/afcott_outgrower.html 28 Prepared for the publication by Rory Mack of LIMA

40

• and where appropriate, actual management of the outgrower farms by the commercial entity, to one degree or another (but this is more relevant to the next model, described in section 3.3.3)

Another reported benefit of this model is that the private sector can be a better conduit for development support29. But perhaps of more interest in this context, is that under the nucleus estate/outgrower arrangement there is a capital asset with growth potential in the form of the nucleus estate. This of course depends on the nature of the land holding involved. But where some sort of title is involved, it is reasonable to postulate that the rate of asset growth is likely to be dependent, in part, on the success of its outgrower programme, especially if the outgrowers themselves farm land included in the investor’s title.

3.3.3 Landlord/Labourers

Under this arrangement, small holder farmers rent their land to the investor (who may also have a nucleus estate). This allows the smallholders to benefit from an economy of scale in terms of mechanized operations, while providing tighter control over the husbandry of the crop. Additional benefits also revert to the “landlords” in the form of laboring wages and potentially, a share of the results (Abernethy’s equity outcome refers). The best way to describe this arrangement is to use Lesotho’s proposed block farms as an example. Here, fragmented, overworked family plots are consolidated, pro-rata, into 20 ha blocks and farmed as single units intended for maize with possibilities for a second crop where irrigation is feasible. Farmers are rewarded with labouring wages and 20% of the harvest. This works well because baseline maize yields are abysmal at around 500 kg/ha, against a reasonable potential of say 4,000-5,000 kg/ha under a more productive farming system. 20% of the potential yield represents an increase in productivity of around 200% in the farmers eyes. Thus, as well as cash incomes, their household food security is doubled in a way that leaves the investor with a healthy surplus to mill, bag and take to the market. And of course, if this arrangement facilitates the production of a second, cash crop the benefits increase in everyone’s favour – even if the second crop can only be achieved on a portion of the area. Lesotho’s block farms remain however, at the concept stage (and as such of potential interest here). To see how it actually works on the ground, we could look at Africa Invest’s approach in Malawi, where a landlord/labourer model, using consolidated blocks is already working well commercially, even with merely modest yield increases [Phiri 2007].

3.3.4 A Pause for Thought

So far, the models have all involved the participation of the community in some form or other. Before proceeding to consider the other two models which do not, or at least do not in the same way, there are a couple of cross cutting issues relating to community oriented deals that can be usefully captured at this point. One concerns risk and the other, opportunities for environmental impact.

29 http://www.agricbank.com/PressRelease/Outline_of_some_national_agricul.pdf

41

A widely reported risk in such cases concerns side-selling as already mentioned. In other words, where the investor has advanced goods to the outgrowers (ie finance, farm chemicals, irrigation service) there is a risk that come harvest time, the outgrower sells to a third party offering more cash, or more immediate returns. Three approaches mitigate this risk:

• Rigorous enforcement of contract law – but this rarely happens • Robust, prior social facilitation, either by qualified experts, or by the purchasing agents (in

the case of contract growers). A good example of this would be the Pyrethrum Company of Tanzania Ltd, which claims that a rigorous programme of community contact by its purchasing agents has completely obviated any temptation to side-sell on the part of its contracted producers.

• Arrangements that link the investor not with individuals, but with groups such as farmer cooperatives. If one member of the group then side-sells, then the entire group loses its benefits for the next season. This form of social collateral has been found to work well almost everywhere that it is applied.

As far as the environment is concerned, all three of these models present excellent opportunities for an engagement at the environmental level. In Lesotho for instance, the fragmented land holdings that have potential for consolidation into block farms are situated in highly degraded catchments. The investor therefore has a clear opportunity to operate the block farms in a way that restores environmental integrity along the lines described in section 3.2. Similarly, the International Conservation Union (IUCN) is eager to see inhabitants of the buffer zones around Mozambique’s national parks engaged in productive, but sustainable agricultural activities. This is an ideal opportunity for the impact investor interested in nucleus estate/outgrower or labourer/landlord models. Similar opportunities will be encountered all over the region.

3.3.5 Partnerships

As anticipated here, a partnership deal would be one whereby a local asset holding entity makes it available on an equity basis to an investor that could render it productive, or more so by a combination of technical expertise, investment capital and working capital. The asset might be land, an added value chain or a combination of both; and the entity might be a community, a corporation (a cooperative or company for instance), an institution (perhaps the government or a parastatal) or an individual. Any such partnership would then be established and operated under the appropriate national legislation and usually avoids land holding difficulties as we saw in § 2.2.3. Social benefits would accrue to improved quality of life for farm workers; increased employment opportunities in both farming and value added activities; national or regional food security and, under the right circumstance accelerated economic growth through increased trade and marketing. Where needed, environmental enhancement would accrue to restorative land use practices and the wise use and allocation of natural resources along the lines suggested in § 3.2.1 above; while it can be assumed that the impact investor will ensure that all environmental risks associated with a particular farming system, are adequately mitigated.

3.3.6 Commercial Estate or Venture

42

Finally we get to the simple commercial estate which simply describes a situation where the investor holds 100% of the operation, be it a farm, a value added chain or both. Where land is involved, tenure could be freehold, leasehold or a simple rent. Social and environment impacts would be the same as for a partnership deal.

3.3.7 Objectives Matrix

The matrix presented below as Table 3.1 is indicative, not exhaustive and is included only to give the reader a sense of how different deal types relate to different cropping sectors and certain environmental objectives; and perhaps more importantly to provide a framework for any follow-up discussions. It will be seen that the differences between the deal types are subtle and generally concern the environmental objectives and location specific added value or peripheral benefits.

43

Table 3.1 Objectives Matrix

TYPE OF DEAL

PRODUCTION OBJECTIVE SPECIAL ENVIRONMENTAL OBJECTIVES

Basic Food Commodities

High Value Food Industrial Crops Catchment

Restoration

Buffer Zone Management

Contract Farmers

type of crops

• rice

• maize

type of crops

• soybean

• sesame

• high value horticulture (HVH)

type of crops

• sugar

• cocoa

• oil palm

Contract farmers will be by definition, established operators and are unlikely to be located on degraded land. Nonetheless, that does not mean that their operations will necessarily be environmentally wise, in which case it may be possible to incentivise improved practices by means of premium prices or some sort of certification.

This is relevant to smallholder subsistence farmers, and not by definition contract farmers, who, if situated in a buffer zone can be expected not to rely on encroachment into the protected area. It is nonetheless possible that their operations will be environmentally unsound, in which case see previous column

added value opportunities

• milling and bagging


• soybean processing

• grading, cleaning and shelf packaging of HVH


• processing of sugar and its by-products

• processing of cocoa

• oil palm milling and industrial use of the oil

location specific added value or peripheral benefits

• there is a huge regional demand for rice in West Africa which could be grown in Mali, Senegal and Sierra Leona


• big demand for soybean based poultry feed in East Africa


• derelict oil palm and cocoa estates in West Africa that could be brought back into productivity

Nucleus Estate and Outgrowers

As for contract farmers

There is considerable scope for building catchment restoration objectives into this type of deal, and this would usually result in increased profitability and therefore a win-win scenario

This type of deal is ideal for buffer zone management agendae


• this is particularly relevant to Mozambique and possibly Tanzania

44


TYPE OF DEAL




Restoration


Landlord Labourers


As for nucleus estate and outgrowers

not relevant


• this is particularly relevant to Lesotho

Partnerships type of crops

• rice

• maize

• wheat

• barley

type of crops

• soybean

• sesame

• high value horticulture (HVH)

type of crops

• sugar

• cocoa

• oil palm

• cotton

It is not impossible that a potential partner might want to throw in some seriously degraded land, in which case there would be considerable scope for catchment restoration under this type of deal

not relevant


• milling and bagging


• soybean processing

• grading, cleaning and shelf packaging of HVH


• processing of sugar and its by-products

• processing of cocoa

• oil palm milling and industrial use of the oil

• cotton ginning, cotton seed oil, cotton seed cake



As for contract farmers, plus:

• There are considerable prospects for partnerships in West Africa, and to a lesser extent in Tanzania

• There is massive reported demand for Tanzanian finished cotton textiles

45


TYPE OF DEAL




Restoration


Commercial Estate

As for partnerships

It is possible to envisage a situation where a commercial estate is developed on degraded land in which case there would be considerable scope for catchment restoration under this type of deal

Not relevant

46

4 TARGET COUNTRIES

4.1 Selection Criteria

Target countries have been selected according to three sets of criteria:

• the availability of land and water (§2.2.2 ditto) • the extent of the enabling environment (§2.3 referred) • promising production or market prospects The countries selected by the application of these criteria are described in the next section which is followed by an explanation of why other “popular” candidate countries were rejected. At the request of those responsible for commissioning this study however, the country assessments are intentionally simple and limited to issues of direct interest to this study30. Therefore in accordance with the selection criteria the target countries are described merely in terms of the above criteria where it should be noted that:

• undeveloped irrigation potential31, taken from National Investment Briefs32 is used as a surrogate indicator of water availability, while unemployment rates are similarly used as an indicator of labour availability

• to the greatest extent possible, the extent of the enabling environment is assessed using the characteristics suggested in §2.3 and presented in a simple tabular form

• food security information, also obtained from the National Investment Briefs, is included in the assessment of production or market prospects because of i) the social impact of increased food crop production in both the national and regional contexts; and ii) the fact that such crops make commercial sense nowadays.

• If a specific type of deal is especially apt or desirable in a particular country, then it is included as such in the text dealing with the third criteria.

Annexes 5 through 13 provide more detailed information in terms of key contacts and the next steps that a serious investor should take; while a simple list of potential deals is presented in Chapter 5. This chapter closes by using Bertelsmann Transformation Indices to assess the reliability of the selection/rejection process. It confirms i) that the selected countries all score well, some exceptionally so; and ii) that those rejected, with a couple of exceptions, were rejected with good reason.

4.2 Countries Selected

4.2.1 Ghana

Key Resource Determinants

Ghana has a total estimated potential arable area of 20,388,000 ha of which the area considered to be potentially irrigable is 1,900,000 ha. Of these totals, less than 7,000,000 ha

30 Nonetheless comprehensive country assessments could be prepared on request from material already to hand. 31 By this is meant all kinds of agricultural water management, not merely formal irrigation 32 http://www.sirtewaterandenergy.org/en/nationalrepts.html

47

is thought to be cultivated in total, and less than 33,800 ha of this are currently irrigated. Land and water are therefore plentiful. As far as labour availability is concerned, the most recent estimate identified at the time of writing [Wikipedia33, which itself simply repackages data available in the CIA Factbook34] refers to the year 2000 when the unemployment rates was 11%. This suggests an adequate labour resource.

The Enabling Environment

See Table 4.1

TABLE 4.1 The Enabling Environment in Ghana

Characteristic As encountered

A functional democracy That this is the case is amply confirmed by recently concluded general elections which were extremely closely fought, yet with no violence and full acceptance of the results by the narrowly defeated incumbent party

The ability, with supporting mechanisms, to resolve contractual issues according to internationally recognized standards and procedures

Ghanaian business law is consistent with international standards and is based on a framework of legislation relating to business activity, copyrights, patents, trademarks, disputes and labour relations. Ghana subscribes to a number of international conventions on industrial and intellectual property, including the World Bank’s Multilateral Investment Guarantee Agency (MIGA). There are numerous public sector agencies as well as private legal, business consulting and accounting firms, which can provide expert guidance on doing business in Ghana.

Sanctity of contracts ensures respect for commercial rights and obligations. Damages are compensatory, not punitive, and an independent court system ensures equitable protection of rights. Mediation, arbitration and other forms of dispute resolution are routinely used. Three courts relevant for present purposes are the Land, Commercial and Labour Courts set up as Divisions of the High Court to deal with land, commercial and labour disputes.

Transparent and straightforward access to land (whether freehold, leasehold, rent or partnership)

Access to land in Ghana is effectively limited to partnership deals and leases with a 50 year limit.

The existence of an effective investment facilitation institution, ideally a one-stop shop

The Ghana Investment Promotion Centre (GIPC), which in any case the foreign investor must register with, is a one-stop shop and able to facilitate exploratory missions, arrange joint ventures with local players etc, guide the investor through the local bureaucracy etc

Straightforward company registration procedures Very straightforward, the GIPC is obligated by law to issue a foreign investors certificate within 5 working days and to ensure that an investor’s local company registered with the Registrar General’s Department also within 5 working days so long as all documents are in order

The ability to repatriate capital and profits 100% repatriation of net profits, and forex loan repayments

An effective commercial banking sector International banks are well represented in Ghana, including those widely associated with agriculture and agri-business in sub-Saharan Africa

A functional transportation system Moderate

33 http://en.wikipedia.org/wiki/List_of_countries_by_unemployment_rate 34 https://www.cia.gov/library/publications/the-world-factbook/index.html

48

TABLE 4.1 The Enabling Environment in Ghana


Tax and work permit incentives Importation of capital machinery is generally tariff free

Policy space for commercial investment in the agricultural sector This is encapsulated in the Government’s broad policy principles which inter-alia require it to

• …..partner private sector and civil society in policy implementation, and review.

• ……. pursue pluralism in service delivery for increased access.

• ….. foster an enabling environment for the provision of key infrastructure (irrigation, roads, storage, and energy) and information, by the private sector and where necessary provide such infrastructure.

• …… foster an enabling environment for the enforcement of laws and regulations.

Secure property rights Since freehold is not possible, this is not particularly relevant, leases and partnerships are nonetheless secure in law

The importance given to equitable social development and environmental sustainability by the government

This is encapsulated in the Government’s national development framework objectives for the agricultural sector which include the following:

• Improved growth in incomes. • Sustainable management of land and environment.

And its broad policy principles which inter-alia require that:

• All policies and programmes will be designed from a gender perspective, enabling the government to work towards greater gender equality in the agriculture sector.

• Investments in the sector will be scientifically based and environmentally sustainable and considered on the basis of economic feasibility and social viability/sustainability

Promising Production or Market Prospects

Although Ghana was one of the first countries in Sub-Saharan Africa to reach the first Millennium Development Goal of halving rates of hunger in the country, it still imports 49% percent of its cereal requirements, and a significant proportion of the population (the “other half”) remains hungry. In addition, despite an important emerging agro-processing sector, the country still imports more than 70% of the required raw materials. Nonetheless, it is the home of a “best-in-class” outgrower project in the form of the Volta River Estates Ltd [Agodzo and Blay 2001, but still valid], which produces pineapples for the European market. These factors - along with the wide range of both food and industrial crops which can be produced in Ghana - are alone enough to make it an attractive destination for the impact investor; but it is impossible to close this section without taking a look at Ghana’s potential for cocoa, which as we have already seen has considerable potential in terms of both social and environmental impact. Cocoa remains Ghana’s largest export commodity despite efforts to diversify agricultural exports. The key strategy for the development of the sector has been the promotion of high technology package of improved hybrid seed, a set of fertilizer, pesticide and fungicide recommendations and improved husbandry practices. In addition, since 2001,

49

farmers have been supported with credit for the acquisition of fertilizer, and there is a cocoa disease and pest control programme funded from a cocoa tax. A comprehensive development policy for the cocoa value chain is in place and special incentives are available for local and foreign entrepreneurs willing to invest in the processing of cocoa. The objective is to increase the proportion of cocoa processed locally from 20% in 2002 to 50%. With this in mind, it should be noted that Ghana is also suitable for coconut, oil palm and rubber each of which Clay [ibid] recommends as intercrops for cocoa.

4.2.2 Lesotho


Lesotho has a total estimated potential arable area of 550,000 ha of which the area considered to be potentially irrigable is 13,000 ha. Of these totals, less than 340,000 ha is thought to be cultivated in total, and of this less than 2,300 ha are believed currently to be irrigated. At first glance these may be thought of as being not particularly exciting. However, of the area currently cultivated, a considerable portion is grossly under productive and therefore represents a considerable opportunity for the social impact investor interested in an outgrower or labourer/landlord model. Equally, although the potentially irrigable area is small, Lesotho’s high altitude and hence its reduced pest and disease threat make it an ideal location for high value horticulture and the like.

As far as labour availability is concerned, the most recent estimate identified at the time of writing refers to the year 2002 when the unemployment rates was 45%. This suggests an adequate labour resource.


See Table 4.2

TABLE 4.2 The Enabling Environment in Lesotho


A functional democracy Lesotho is a constitutional parliamentary monarchy in which the monarch has no executive or legislative powers, and can in any case be deposed by a so-called “college of chiefs”. The bicameral parliament is elected democratically. The last election took place in February 2007


The Government guarantees timely access to courts of law for the settlement of labour and commercial/contractual disputes, while additionally the country is a member of MIGA.


Freehold of agricultural land would not seem to be possible, and lease negotiations are reportedly time consuming. However, partnerships and landlord labourer type deals are acceptable AND, the Ministry of Trade is actively committed to the promotion of nucleus estate operations and hence to rectifying the land holding difficulties.

50

TABLE 4.2 The Enabling Environment in Lesotho



The Lesotho National Development Corporation (LNDC) was created by Act of Parliament to facilitate economic growth and development in Lesotho. LNDC sees its main role in this regard as promoting Lesotho as an attractive private sector investment location for both foreign and local investors. Inter-alia as such it provides the following services on a one-stop shop basis:

• The procurement of all permits and licenses • Provision of assistance in company registration

It can also take equity positions in projects considered to be of strategic interest at the level of the national economy; and even provide financial support to potential investors, but on a selective basis

Straightforward company registration procedures The process is straightforward and can be facilitated by the LNDC


An effective commercial banking sector International banks are well represented in Lesotho, including those widely associated with agriculture and agri-business in sub-Saharan Africa

A functional transportation system Lesotho is well connected to South Africa by both road and air, however most roads in the hinterland remain unpaved.

Tax and work permit incentives There are wide range of tax and similar incentives on both inputs and outputs; but at present, each investor has to negotiate a specific package. This is expected to become more formalized in the near future.

Policy space for commercial investment in the agricultural sector It has to be said that the LNDC has mainly focused itself on manufacturing and agro-processing, and not so far on agricultural production. However, this should not be taken as a indication of a lack of interest. In fact the need for a reliable production base is seen as essential for the agro-processing sector. In addition, the current Agriculture Sector Strategy calls for the “encouragement “ of the private sector in both production and agricultural sector service delivery.

Secure property rights Since freehold is not possible, this is not particularly relevant, leases and partnerships are nonetheless secure in law


Food security, poverty alleviation, sustainable environmental management/conservation and improved income distribution comprise four of the six agricultural sector development goals.


Although not so badly off in terms of food insecurity as most of the Southern African region, and indeed sub-Saharan Africa as a whole, 25% of the population are still reportedly under-nourished. One reason for this is the very low prevailing yields in maize, the main staple food. There are therefore significant opportunities for commercial intervention, and the Government’s proposed block farms, a kind of landlord/labourer deal, have excellent potential in this regard. In addition, Lesotho is ideal for the production of high value produce for both the fresh and canned markets for both regional and more remote markets (ie Europe with which Lesotho enjoys functional airfreight links – to the extent that some South Africa producers

51

close to the border, find it easier to export their produce via Maseru, than taking it directly to Johannesburg’s Oliver Tambo International Airport). Two crops that have been identified as having particular potential are seed potatoes, the quality of which could be excellent due to Lesotho’s high altitude; and asparagus. The latter is attractive because the South African asparagus sector has reportedly collapsed due to labour disputes within the sector, and the fact that an abandoned canning factory is available right now. It failed not because of a lack of viability, but rather because of unreliable supplies which collapsed when the donor driven smallholder producer programme ended. For the commercial player interested in taking control of the asparagus production, this would be worth a closer look and would be ideal for a nucleus estate/outgrower model. In addition, there are some 2,500 ha already equipped but not used for irrigation, these may have commercial potential under the right operational arrangements. Finally, Lesotho’s membership of the Southern African Customs Union, suggests the possibility exports into the regional market.

4.2.3 Malawi


Malawi has a total estimated potential arable area of 6,759,000 ha of which the area considered to be potentially irrigable is 400,000 ha. Of these totals, less than 2,800,000 ha is thought to be cultivated in total, and less than 112,900 ha of this are currently irrigated. Land and water are therefore plentiful. And as with Lesotho, there will also be opportunities to increase the yields on areas already cultivated, either by means of an appropriate outgrower or landlord/labourer model or, as was ascertained to be possible during the consultation visit, by purchasing underproductive land to farm on an estate basis. As far as labour availability is concerned, the most recent estimate identified at the time of writing refers to the year 2002 when the unemployment rates was 45%. This suggests an adequate labour resource.


See Table 4.3

TABLE 4.3 The Enabling Environment in Malawi


A functional democracy The country’s multi-party democracy is fully functional


The government acknowledges that investors require an acceptable forum for the resolution of disputes that cannot be settled amicably. Accordingly parties to disputes are able to take international arbitration measures. To this end the Country is a member of both the International Centre for the Settlement of Investments disputes and (ICSID) and MIGA.

52

TABLE 4.3 The Enabling Environment in Malawi



The Government has set a high priority to the facilitation of easy access to land for investment purposes. However, a foreign investor can only obtain land under a leasehold arrangement that normally runs for 50 years.


The Malawi Investment Promotion Agency is a one stop shop established to promote and facilitate foreign investment.

Straightforward company registration procedures The company registration process is somewhat attenuated, taking 39 days, but is a well regulated process that can be facilitated by MIPA


An effective commercial banking sector International banks are well represented in Lesotho, including those widely associated with agriculture and agri-business in sub-Saharan Africa

A functional transportation system Almost 50% of the country’s roads are paved, and furthermore there are six airports with paved runways.

Tax and work permit incentives There is a wide range of general incentives, plus additional incentives for certain sectors, one of which is high value horticulture.

Policy space for commercial investment in the agricultural sector Agriculture and agro-processing are one of Malawi’s four development priorities and the private sector is actively encouraged to participate

Secure property rights Since freehold is not possible, this is not particularly relevant, leases and partnerships are nonetheless secure in law, as are water rights for irrigators. However, the latter, having only five years duration may not be compatible with the length of time necessary to achieve an acceptable return on investment.


The country’s economic growth strategy is predicated – inter-alia – on the need to strengthen the connectivity of small farmers to the economy at large, to increase food security and to manage natural resources, especially water in a sustainable but productive fashion.


Malawi has a very high level of malnourishment with an estimated 35% of the country going hungry. This - given the high prices paid for maize, the basic staple, along with low baseline yields and demonstrably successful outgrower and landlord/labourer investments – suggests that Malawi has high potential for the impact investor. Furthermore, in addition to maize, the government is also promoting increased wheat production, which may also represent a sound commercial option. Add to this the promotion and additional incentivisation of high value horticulture, which can be intercropped with maize (and rotated with wheat), then the attractiveness of a closer look is further increased. Irrigation is almost certain to be required however, but as shown above there is plenty of undeveloped potential (as well as under-productive assets that may be available). It is interesting therefore to note that the Government is currently developing 30,000 ha of new irrigation in the Lower Shire valley with World Bank help. Although it was not possible to discuss this with the relevant World Bank official who was on leave at the time of the country consultations, the government’s director of

53

irrigation confirmed that the serviced area would be available to private investors. Furthermore, this being a government initiative, the water right may not be limited to a five year horizon.

4.2.4 Mali


Mali has a total estimated potential arable area of almost 30,000,000 ha of which the area considered to be potentially irrigable is 2,200,000 ha. Of these totals, only just over one third is thought to be cultivated at all, and less than 300,000 ha of this is currently irrigated. Land and water are therefore plentiful. As far as labour availability is concerned, the most recent estimate identified at the time of writing refers to the year 2004 when the unemployment rates was 30%. This suggests an adequate labour resource.


See Table 4.4

TABLE 4.4 The Enabling Environment in


A functional democracy Mali is a stable pluralistic democracy


Mali is a member of MIGA and has ratified both the convention creating ICSID and the Treaty establishing the Joint Arbitration court of the OHADA35.


So long as any residual customary rights have been dealt with correctly and the relevant local authority has approved the transaction, the foreign investor, so long as a company has been registered, may buy, own or sell land


The National Centre for Investment Promotion (known locally as API) is a one stop shop charged with attracting foreign investors to three strategic sectors, agriculture being one of them, with particular emphasis on rice and wheat (as a way to diversify away from cotton). In addition to this agency, there is also the Programme Compétitivité et Diversification Agricole, which is intended to provide extra facilitation to investors able to take advantage of the potential for job creation in the value chain of diversified agricultural production

Straightforward company registration procedures So long as the business is eligible under the country’s investment code it takes only 30 days to register a company

The ability to repatriate capital and profits 100% repatriation of capital and net profits, but only in the currency in which the incoming investments were made

An effective commercial banking sector The country has 12 local and international banks,

A functional transportation system Mali is adequately connected by both road and rail to the port cities of Dakar, Nouakchott and Conakry, and also has six international airports as well as river and railway communications

35 OHADA is a system of business laws and implementing institutions adopted by sixteen West and Central African nations.

OHADA is the French acronym for "Organisation pour l'Harmonisation en Afrique du Droit des Affaires", which translates into English as "Organization for the Harmonization of Business Law in Africa"

54



Tax and work permit incentives There is a wide range of tax incentives on inputs and outputs sometimes into the long term depending on the nature and location of the investment (in the case of agricultural processing for export, the venture enjoys zero-rated corporation tax for 30 years!)

Policy space for commercial investment in the agricultural sector The country is already characterized by a thriving commercial agriculture sector, with both domestic and international players

Secure property rights There are no limits on ownership or equity on projects financed by foreign investments


There is a clear nexus between the policies regarding poverty alleviation and private sector led growth, especially in the agricultural sector. Particular emphasis is placed not on household, or even national self-sufficiency, but rather on the creation of employment in the value chain (as is reflected in the very considerable tax incentives). As far as environmental considerations are concerned, Mali is a signatory to several international agreements while requiring all players in the agricultural sector to confirm with an extensive regulatory framework and to facilitate the implementation of all necessary control mechanisms with respect to their investments.


Mali has made significant progress with respect to food security since its National Food Security Strategy was formulated in 2000. There remains significant demand for increased local food crops; but wisely however, the government sees agriculture driven economic diversification rather than national self-sufficiency as the most appropriate way to solve the problem – the relevance of §2.1.1 will be immediately clear in this regard. To this end therefore; substantial tax and other incentives are offered to investors interested in agricultural production and transformation, especially in the rural areas. Similarly (though not quite so spectacularly) government is encouraging alternatives to the country’s overwhelmingly dominant cash crop: ie cotton. Two other factors also confirm Mali’s attraction as an investor’s target country. One is its proven access to high value horticulture markets; while the second is the Office du Niger36. This is a large area serviced by privately operated irrigation infrastructure. Of its estimated total potential of around 1,000,000 ha the area so-far developed, only 60,000 ha is reckoned to be irrigated. Government is actively streamlining access to land (for large or small investors) within the Office du Niger command area, and is reportedly using World Bank funds to expand the service coverage. All this, plus highly favourable comments from experts from the headquarters of the UN’s Food and Agriculture Organisation37, confirm Mali’s excellent potential for the impact investor in commercial agriculture

4.2.5 Mozambique

36 http://www.office-du-niger.org.ml/ 37 Met with on two occasions during the course of this study, the second time in the company of Terragua’s representative.

55


Mozambique has a total estimated potential arable area of 62,336,000 ha of which the area considered to be potentially irrigable is 3,072,000 ha. Of these totals, less than 4,700,000 ha is thought to be cultivated in total, and less than 113,000 ha of this is currently equipped for irrigation. Land and water are therefore plentiful. And furthermore, of the area equipped for irrigation, much is currently defunct, and represents as such a good opportunity for the investor willing to invest in rehabilitation, and perhaps irrigation service delivery to outgrowers and/or contract farmers (as well a nucleus or other kind of estate). As far as labour availability is concerned, the most recent estimate identified at the time of writing refers to the year 1997 when the unemployment rates was 21%. This suggests an adequate labour resource.


See Table 4.5



A functional democracy Mozambique has a functional democracy with the most previous election having taken place in 2008


The country is a member of MIGA and OPIC; but also has signed reciprocal investment protection agreements with a range of countries including the USA, UK, Denmark, France and Italy etc


Although all land is vested in the State, legislation enacted in 1979 acknowledges various different kinds of occupancy and protects occupants’ rights be they communities, companies or private individuals. That the National Land Register is under the control of the Ministry of Agriculture confirms the importance of allocating land for agricultural purposes. Foreign investors have free access to land on a leasehold basis so long as they are incorporated and registered in the country. Such leases run for 50 years with automatic rights of extension for an additional 50.


The Investment Promotion Centre (IPC) is a functional one-stop shop and represents the main entry point for any foreign investor. However, for the investor interested in agriculture, there is also the Agriculture Promotion Centre (CEPAGRI), which is actually the first point of entry for the sector. Both agencies provide a free of charge service covering business registration, work permits etc and tax incentives.

Straightforward company registration procedures Although company registration is facilitated by the IPC, the investor is advised to engage a separate lawyer, as the bureaucratic steps are apparently complex.

The ability to repatriate capital and profits 100% repatriation of net profits and forex loans

An effective commercial banking sector International banks are well represented in Mozambique, including those widely associated with agriculture and agri-business in sub-Saharan Africa

A functional transportation system The transportation system is improving, but would be difficult to describe as ideal just yet. This would suggest that the production of perishables would be ill advised. Cereals and industrial crops would not be similarly constrained however.

56



Tax and work permit incentives There is a wide range of such incentives

Policy space for commercial investment in the agricultural sector The entire policy framework as it pertains to agriculture is predicated on the need to attract commercial investment in agriculture. That this is working, is confirmed by the huge interest that has already been confirmed, not just by investors from the regions, mainly from South Africa and Zimbabwe, but also from investors around the world. The new irrigation policy and strategy, in the final stage of promulgation specifically provides both space and opportunity for the commercial sector in both production and service delivery.

Secure property rights The legal framework recognizes and secures the leasehold and water rights that the foreign investor would require.


The current policy framework for agriculture and natural resource allocation is predicated on the need for greater social connectivity and commercialisation


53% of the population are currently classified as undernourished in Mozambique, a situation which did not change much since the beginning of the 1990’s when it was bench-marked under the World Food Summit until the beginning of the current decade when the situation began slowly to improve. However, in the specific case of Mozambique (and as will be seen, Tanzania), it is valid to consider food security in the regional and extra-regional context. This is because it has potential to supply not only its own food security needs, but also those of food insecure small Indian Ocean island states. In fact, social impact compatible deals are understood already to be under negotiation to that end38. But in addition, as has already been noted, economic diversification in South and East Asia suggests the emergence of a major cereals market in those regions, particularly India and China. This represents an unprecedented investment opportunity. And this is why some 13,000,000 ha of land have already been applied for by outside investors39. This is not a cause for concern however, because the same source confirmed that of this total only 500,000 ha involves capitalized bids. In addition to basic food crops, Mozambique’s land and water resources make it suitable also for industrial and bio-fuel cropping. The latter furthermore, would not be controversial in the specific case of Mozambique because of its vast resource base. In fact as convincingly argued in a recent SADC study [Takaravasha et-al ibid] bio-fuel production in Mozambique, in the context of a regional bio-energy policy, would increase food security. Finally, it may be of interest to recall the specific opportunities for outgrower programmes in the buffer zones of Mozambique’s national parks as recommended to the Consultant by the Climate Change Project Coordinator at the IUCN country office.

38 Verbal discussions with the Managing Director of Africa Invest 39 According to the Director of the IPC.

57

4.2.6 Senegal


Senegal has a total estimated potential arable area of 13,260,000 ha of which the area considered to be potentially irrigable is 500,000 ha. Of these totals, less than 2,600,000 ha is thought to be cultivated in total, and less than 150,000 ha of this is currently irrigated. Land and water are therefore plentiful.

As far as labour availability is concerned, the most recent estimate identified at the time of writing refers to the year 2007 when the unemployment rates was 48%. This confirms an adequate labour resource.


See Table 4.6

TABLE 4.6 The Enabling Environment in Senegal


A functional democracy Despite some limited questions about the 2007 elections, Senegal has a functional democracy


Senegal is a signatory of MIGA


Although land is accessible in Senegal, its appropriation is a complex process for the foreign investor, not least because land allocation decisions are decentralized.. Fortunately, assistance in this regard is one the APIX’s mandated functions (see next row). Equally, partnerships deals can avoid this problem. APIX actually maintains a register of landholders looking for investors


The Agency for the Promotion of Investment and Infrastructure (APIX) is a highly efficient and well equipped one-stop shop that can handle all of processes necessary to get a venture off the ground, including tax breaks and the like

Straightforward company registration procedures APIX guarantees to have an investor’s company registered within 48 hours

The ability to repatriate capital and profits 100% repatriation is permissible

An effective commercial banking sector International banks are well represented in Mozambique, including those widely associated with agriculture and agri-business in sub-Saharan Africa

A functional transportation system Senegal is extremely well connected to international markets for high value and processed agricultural exports. It would also be well connected with the regional cereals market if it ever moves into surplus production (of rice and maize in particular)

Tax and work permit incentives There is a wide range of incentives available to the commercial investor

Policy space for commercial investment in the agricultural sector The sector is already characterized by extensive and successful commercial investment in a wide variety of crops, processes and scale. The current policy framework moreover calls for accelerated and facilitated increases and an impressive, detailed and comprehensive set of briefing material is easily available.

58

TABLE 4.6 The Enabling Environment in Senegal


Secure property rights Secure once in place40


Like Mali, Senegal sees agricultural diversification and value chain employment creation as essential paths towards social development. In fact the all important “Great Agricultural Offensive for Food and Abundance” GOANA is predicated on the assumption that “Only a modernized and more productive agriculture can break the vicious circle of persistent dependence on imports of basic food staples and contribute fully to the economic growth and social development of the country”. Equally, the country is committed to environmental sustainability and requires a high level of environmental management from private sector players.


Notwithstanding its success in attracting and retaining wide ranging investment in commercial agriculture, Senegal remains food insecure in terms of basic cereals and tremendous commercial opportunities abound for rectifying this situation. Rice and maize are the most important of the cereal commodities, and the production potential is vast. In fact, Senegal (and as will be seen below, Sierra Leone) is well situated not only to meet its own cereal needs (which also apply to the animal feeds sector); but also those of the region41 and eventually North America and Europe. Opportunities also continue to exist in high value horticulture and agro-processing, with existing processer/exporters looking for large new sources of produce while the Government, through the almost completed 2,500 ha of irrigation service on the delta of the Senegal River makes clear its commitment to engage and enable the private sector:

• family farms (less than or equal to 2 ha individual, or to be consolidated into blocks up to 20 ha)

• small to medium enterprises (20 ha to 20 ha in size); and • large commercial blocks (20ha to 100ha and essentially targeted at export crops,

fresh or processed). This type of arrangement is absolutely ideal for nucleus estate/outgrower models, and would benefit from Senegal’s highly developed export facilities and capacity.

4.2.7 Sierra Leone


Sierra Leone has a total estimated potential arable area of 4,229,000 ha of which the area considered to be potentially irrigable is 807,00 ha. Of these totals, less than 690,000 ha is thought to be cultivated in total, and less than 156,000 of this is currently irrigated. Land

40 None of the commercial players met with identified this as a concern, even though some have been active in the sector for

many years. 41 Nigeria for instance, imports some 20% of all the rice traded internationally!

59

and water are therefore plentiful. Recent years of civil war moreover, have meant that much of the land already cultivated is run down and in need of fresh investment. Although labour shortages have been reported, the Consultant was informed by one expert42, that this is more a reflection of a lack of cash for wages rather than a lack of willing labour.


See Table 4.7, but before doing so, given Sierra Leone’s unique post-war situation and understandable lack of sophistication, it is necessary to provide some introductory comment. This is because when compared to the other countries selected for the study, Sierra Leone cannot demonstrate the same level of enabling environment. This however, should be seen not as a constraint but rather as an opportunity to get in on the ground floor and influence the country’s development trajectory by example and by the demonstration of successful agricultural investment models. In fact, it is very fair to say that Sierra Leone strikes the newcomer much as Tanzania did in the mid 1980’s. It is now one of the African Lions! And now is the time to look favorably on Sierra Leone. That being said, here is the table:

TABLE 4. The Enabling Environment in Sierra Leone


A functional democracy As the brutal civil war recedes into history, Sierra Leone has established itself as a functional democracy


Sierra Leone is a signatory of MIGA


Although formal processes remain un-established, there are vast land resources waiting, or available for commercial development. This includes i) community land which would typically be made available freely by the communities if they could benefit in some way; ii) large abandoned private estates (usually cocoa or oil palm ); and iii) privately occupied estates looking for capital and expertise. Other than partnership deals, land is available to the foreign investor on a leasehold basis, with leases lasting typically from 22 years in the West of the country where title is clearly defined to 50 years elsewhere, where title is less clear.


The Sierra Leone Investment Promotion Centre is a nascent, but already functional one-stop shop

Straightforward company registration procedures There are no real barriers to company formation (and the field is already filling up with potential investors in this regard, but not all in the agricultural sector).

The ability to repatriate capital and profits Technically, it is possible to repatriate 100% of these. For the time being however, this is only possible via Forex auctions. This potential hurdle can be cleared however, by the local purchase of exportable commodities – diamonds being the obvious one, subject to security if course. Diamonds however, carry an export tariff of 3% of their value. Exported commodities can of course be sold offshore – but that would not be consistent with the social desirability of meeting local food security needs.

42 Mark Thomas, Director for Rural Development at NathanEME, the consultants responsible for implementing Britain’s DfID

funded commercial sector strengthening initiative for Sierra Leone.

60

TABLE 4. The Enabling Environment in Sierra Leone


An effective commercial banking sector International commercial banking services remain reluctant to lend to the agricultural sector as of now, but this can be expected to change as investment picks up.

A functional transportation system Transportation facilities are limited. Less than 10% of the highway system is paved for instance and only one of the countries airports has a paved runway and access to it is somewhat “idiosyncratic”. Sea transport for exports is available, but expensive due to so-called diversion costs for ships making their way past Sierra Leone to elsewhere. This problem could reasonably be expected to disappear once export loads reach critical mass

Tax and work permit incentives These exist, but are so far discretionary in that arrangements are negotiated on a deal by deal basis with the relevant government departments

Policy space for commercial investment in the agricultural sector The entire policy and regulatory framework is in a state of flux and is one of many competing tasks faced by government in this period of transition from chaos to stability. At present, and as confirmed by everyone consulted on the matter, the situation right now really allows every player to create their own micro-policy and property rights on a deal by deal basis, in discussion with government. For the right investor, this is a tremendous opportunity

Secure property rights



Although something of a wild card, Sierra Leone has been included in this study because everyone consulted prior to country selection insisted that it should be. As one person said “everywhere you dig in Sierra Leone, you find a bone”. This sentiment was confirmed repeatedly, hence Sierra Leone’s selection. Right now it is highly food insecure, despite its massive natural resource base and underemployed labour. For the commercial investor, it is effectively ground zero and the potential is immense. Food security is obviously of major interest, and rice is the obvious crop (although uniquely among the countries studied, there is also great demand for sorghum). Like Senegal however, there would be huge regional and global demand for rice grown in Sierra Leone (as well as possibly maize), and now is the time to start. Notwithstanding this, some commentators suggest that real food security and poverty alleviation in Sierra Leone is more likely to result from employment creation in the high value and added value sub-sectors (cf Mali and Senegal). With this in mind therefore, it is relevant that palm oil and cocoa have very high commercial potential, not least because of the large areas of abandoned or underproductive land already planted to these crops. But in addition, high value horticulture and certain industrial crops, notably sisal, are also reported as having both commercial and social impact. In fact some players have already begun operations along these lines. It is also interesting therefore, that the local brewing industry, with significant regional market potential has begun to experiment, with demonstrable success with outgrower models for sorghum production. Sorghum is the traditional ingredient for typical regional beers and is especially interesting in this regard because it is a crop that is

61

usually grown by women. Whether or not beer production has social impact may be one thing, but the social impact on the women sorghum outgrowers cannot so far be doubted. Finally for the commercial investor is the dire shortage of processing facilities. Rice mills are of pressing concern; even for current levels of production. Despite donor driven programmes that are providing small local mills, commercially oriented commentators repeatedly refer to the need for large capacity mills. And the same is true of oil palm pressing and processing facilities. For all these reasons and for the right kind of investor, Sierra Leone is up for grabs!

4.2.8 Tanzania


Tanzania has a total estimated potential arable area of 65,000,000 ha of which the area considered to be potentially irrigable is 22,000,000 ha. Of these totals, less than 10,400,000 ha is thought to be cultivated in total, and less than 250,000 of this is currently irrigated. Land and water are therefore plentiful. Unemployment rates in general are reported to be around 20% overall, but 40% for the country’s youth.


See Table 4.8

TABLE 4.8 The Enabling Environment in Tanzania


A functional democracy Tanzania has a long standing, highly functional democracy


The country is a member of MIGA and ICSID; but also has signed reciprocal investment protection agreements with a wide range of countries


Foreign investors can hold leases for up to 99 years, or via the Tanzania Investment Centre (TIC see next row) can enjoy derivative freehold title – but this reportedly time consuming


The TIC is a one stop for foreign investors and can assist with company registration as well as with the establishment of tax incentives, access to land and the identification of local partners etc

Straightforward company registration procedures Tanzania is the leading FDI destination in the East Africa region and furthermore, is ranked in the top ten reformers in the World Bank’s “doing business in” 2007 report. This confirms the IC’s claims with respect to straightforward company registration procedures

The ability to repatriate capital and profits No restrictions

An effective commercial banking sector International banks are well represented in Tanzania, including those widely associated with agriculture and agri-business in sub-Saharan Africa

62

TABLE 4.8 The Enabling Environment in Tanzania


A functional transportation system Tanzania’s transportation sector is a government priority, and great progress has been, and continues to be made with respect to trunk roads although much of the country’s roads remain unpaved. Even so, that the country is usually food secure is considered to result from its transport sector’s ability to move large quantities of food from surplus to deficit areas in a timely fashion. For the export of bulk staples, there are two main deep water and/or lighter ports, Dar es Salaam and Tanga, with a smaller port in Lindi in the South of the Country. Piracy off the Horn of Africa is currently threatening the security of some routes likely to begin from Tanzania.

Tax and work permit incentives There is a wide range of such incentives for investments in the agricultural sector.

Policy space for commercial investment in the agricultural sector Tanzania is committed to increased commercial participation throughout the economy, but with special emphasis placed on agriculture. Both the Agricultural Sector Development Programme and the Irrigation Policy and Strategy (currently being finalized) provide specific space for the private sector both as producers and service providers. The National Irrigation Development Fund moreover, is being established specifically to finance (on a target 1:3 basis) Government participation in Public Private Partnerships, again in terms of both production and service delivery, especially bulk water service delivery for the irrigation (and other sectors).

Secure property rights; The security of land rights is confirmed by the longevity and success of existing commercial operations in the agriculture sector, some of which are very large. But also of interest are the emerging water rights in the context of the current Water Policy which calls for the economic pricing of water and increased mobility of water. This will make water rights, which are rigorously assessed before issuance, and secure in law, valuable financial assets which can be commoditized with respect to the “right-in-use” (§2.1.2 referred).


Tanzania has long been associated with a commitment to equitable social development. This goes back to early successes with grass roots education and decentralized health care, and more lately decentralized governance and public service delivery and can currently be seen in the process of customary water right registration which is pro-poor best practice in a water economy. Equally, the prevailing regulatory framework, development objectives and public investment programmes are highly predicated on the need for the restoration and sustainability of environmental services across the board.


Despite a poor food security situation at the beginning of this decade, at the time of writing, the country is described as generally food secure43. This is largely due to good results from the most recent harvest. However, climate variability means that this favourable situation is not guaranteed year after year, but it should also be noted that ongoing, country wide improvements to road infrastructure and telecommunications by the Government and the private sector, have facilitated the movement of food crops and

43

http://www.fews.net/docs/Publications/tanzania_2008_05_final.pdf

63

livestock from surplus to deficit areas. In addition, traders are able to share market information more quickly and more cheaply than in past. Another aspect of the domestic food supply which could be of interest here, is that as the economy continues to diversify, so do consumer tastes. Consequently Tanzania is a significant importer of rice, and as was shown earlier offers high farm gate prices to encourage increased local production. Given the large area of undeveloped land with potential for rice, the crop represents an excellent opportunity for the commercial investor. And this is not just due to the strong local market, but also i) the potential Asian market as we saw above in the section on Mozambique; and ii) the possibilities of growing the rice under SRI (Annex 3 refers). If a venture is issued a water right on the assumption that rice would be grown in a traditional wetland system44, the use of SRI would save water for trading in the water markets called for in the current water policy. Tanzania is also very attractive for high value horticulture (including spices as well as fruits and vegetables) or industrial cropping and has good capacity for the implementation of sustainable outgrower programmes. There are also several off the shelf deals looking for investors, and among these may be some of the state farms, privatized in the mid ‘90s and now looking to be sold-on or further developed by their current owners. Its diverse undeveloped potential, good governance, long standing commercial agricultural sector, enabling legislation and strategic regional location together suggest that Tanzania is of particularly high potential for the impact investor.

4.2.9 Zambia


Zambia has a total estimated potential arable area of 56,727,000 ha of which the area considered to be potentially irrigable is 523,000 ha. Of these totals, less than 5,300,000 ha is thought to be cultivated in total, and only 255,000 of this is currently irrigated. Land and water are therefore plentiful.

As far as labour availability is concerned, the most recent estimate identified at the time of writing refers to the year 2000 when the unemployment rates was 50%. This suggests an adequate labour resource.


See Table 4.9

TABLE 4. The Enabling Environment in Zambia


A functional democracy Zambia is a functional democracy

44 and any such right could be assumed to be environmentally sound, given the country’s tight regulatory and integrated

water management paradigm

64

TABLE 4. The Enabling Environment in Zambia



The country is a member of MIGA and furthermore, its Development Act of 2006 provides investors with facilitated access to international arbitration in the case of dispute


The government is actively facilitating the expansion of land under commercial investment models, in order to revitalize the agricultural sector. To this end it has (so far) identified eight farm blocks each of which is intended to have one central commercial block of around 10,000ha surrounded by multiple smaller commercial farms of 1,000 to 5,000ha and outgrower farms from 30 to 300 ha. Leaseholds for foreign investors run for 14 years and 99 years respectively. In traditional land an initial 14 year lease is given with a possibility to extend to 99 years. In state land one can obtain a straight 99 year lease


The Zambia Development Agency (ZDA) is a one stop shop for the foreign investor and can help with all aspects of company registration, establishment of tax incentive status and can facilitate access to land and joint venture opportunities

Straightforward company registration procedures Reportedly these are straightforward when facilitated by ZDA

The ability to repatriate capital and profits No restrictions

An effective commercial banking sector International banks are well represented in Zambia, including those widely associated with agriculture and agri-business in sub-Saharan Africa

A functional transportation system The country has an extensive road network, a high percentage of which is paved. These roads link Zambia with other countries in the region.. There is also a functional rail link to Dar es Salaam with its deep water port facilities.

Tax and work permit incentives There is a wide range of such incentives.

Policy space for commercial investment in the agricultural sector The policy landscape is highly favourable in this regard, and furthermore, the commercial sector has thrived for many years and continues to attract large scale players, including 30,000 ha worth of Zimbabwean exiles in recent years. At the political level however, there is a detectable gap between sound commercially oriented agricultural policies and those speaking of neo-colonialism with a vested interest in resisting foreign investment45.

Secure property rights These are reportedly secure.


The government has demonstrated its commitment to equitable social development both at the policy level and in practical terms in the implementation of its development agenda. As such it was one of the pioneer countries for conservation farming.


Zambia has a very high level of food insecurity with an estimated 50% of the population remaining undernourished. This is largely due to a prevailing dependence on rainfed production, which is becoming increasingly compromised with climate change. But there are opportunities to address this, both by means of irrigation and improved farming

45 Unofficial comment from a member of a WB scoping mission in country during the Consultant’s visit.

65

systems. A combination of the chaos in Zimbabwe next door, and Zambia’s enabling environment has already led to a new round of successful commercial investment in basic food production in recent years. This, along with the very low levels of basic food production in neighbouring countries (especially Zimbabwe and the DRC) suggests the possibility of a regional market at some point. Zambia also has a thriving sugar sector, one which continues to attract foreign investment. Interestingly, the literature consistently concludes that Zambia is set to benefit however the European and North American niche markets and domestic subsidy structures are dismantled. As such it is possibly unique in this regard. Another interesting feature of the Zambian sugar sector are the best-in-class examples of outgrower programmes that can be seen, such as the Nakambala and Kaleya outgrower businesses. Kaleya in particular could be described as a thoroughly modern and highly profitable cooperative which outsources many of its service requirements to outside contractors. It also has a good example of a constructed wetland to deal with polluted farm run-off. Zambia is also established as a successful supplier to the European high value horticulture markets, and for this can demonstrate other examples of successful outgrower programmes run by specialist airfreight consolidators. Opportunities therefore abound in all three sectors, basic food security both nationally and potentially regionally; industrial cropping and high value. Finally, the government is eager to establish public private partnerships in both production and service delivery. To this end a Public Private Partnership Policy is in the process of being promulgated46.

4.3 The Ones That Got Away

The countries featured in the preceding section do not comprise all those that commonly feature in analyses or discussions of this sort. This section provides brief explanations as to why other countries of potential interest have not been included at this stage. Before proceeding to the specifics however, it is important to note that time and budgetary restrictions also limited the number of countries that could be selected, so the selection was not only made on technical grounds, it also involved pragmatism and a degree of subjectivity. This means therefore, that the following countries should not necessarily be ignored. If any should prove to be of special interest to a particular investor, then it would be possible to undertake additional studies.

4.3.1 Angola

Angola recently announced its intention to attract $5 billion worth of investments in commercial agriculture; and according to various sources, this invitation is being taken up in part – at least by Lonrho, which is seeking 50,000ha on which to grow rice for the domestic market. But Lonrho is a robust player with many years of experience, sometimes controversial, of the sector in Sub-Saharan Africa. However, both media analyses and consultations undertaken for the purpose of this study indicate very high local transaction costs, operational difficulties and pervasive corruption.

46 Unfortunately it was not possible to obtain a copy of this in time

66

4.3.2 Cote d’Ivoire

Despite its vibrant agricultural sector and to extent its regional dominance in the high end part of the sector, Cote d’Ivoire was not included for three reasons. One had to do with time limitations; the second with unresolved tension between the north and south of the country; but more importantly, the consultant is completely unfamiliar with this particular country. A simple process of triage therefore caused it to be excluded at this stage.

4.3.3 Ethiopia

Ethiopia has vast potential for the commercial investor in agriculture and almost made it to the final selection. However, that potential is situated mainly in the lowlands along the Sudanese border, in areas of very low population density and poor physical connectivity with internal markets. This points towards either industrial crops, or crops that could be exported via Sudan. Production of these could be shown to have both environmental and social benefits in that the demand for labour would ease pressure on the increasingly fragile highlands, on which the majority of the population barely manage to subsist. But then the overall political climate could scarcely be thought of as enabling, while unresolved trans-boundary water allocation issues in the politically charged Eastern Nile basin47 also suggest caution. However, it was only after considerable thought that the country was eventually excluded from the study.

4.3.4 Kenya

Kenya has a successful and long established commercial agricultural sector, characterized by players ranging from small farmers producing high value horticulture on plots as small as 1 ha, to large mixed estates in the tens of thousands of ha. And there is room for more. But the prospects for mitigating climate risk by means of irrigation are limited: less than 2% of the potential arable land remaining undeveloped is considered irrigable by FAO. This being the case and given the vast and less risky potential elsewhere in SSA, coupled with high levels of corruption, unsettled politics and once again, time constraints48, Kenya has been excluded from this study.

4.3.5 Liberia

Liberia was originally included in the list of countries for consideration because of robust new policy initiatives targeted at the reinvigoration of its agricultural sector. However, discussion with various parties, including FAO, confirmed that conditions for investors in Liberia remained challenging. The same sources suggested that, in terms of a wild card, Sierra Leone would be very much more interesting and attractive.

4.3.6 Sudan

There is little doubt that Sudan has vast undeveloped agricultural potential, but irrigation is essential and any allocation of water that is not regulated by the Nile Waters Agreement of 1959 would not only cause Egypt to cry foul, but also would not be consistent with environmental impact investment. This situation can be expected to ease in the medium term, but even so, there is also the political dimension, which remains inconsistent with the social values that the

47 The Consultant has recently been advising the three governments in the Eastern Nile basin on new institutional

arrangements for trans-boundary water allocation and development. 48 It was nonetheless the Consultant’s intention to assess Kenya during his participation at a Terragua et-al meeting in Nairobi

(week ending the 4th April 2009), but after due consideration, all concerned felt that his time would be better spent in Mali and Senegal, than Kenya.

67

Consultant assumes to characterize the Terragua investor. In addition, anti-American feelings run high, while banking connectivity with the “outside” world is extremely limited. In short, although there are certainly opportunities in Sudan, for now they would not be recommended for the impact investor.

4.3.7 Uganda

Despite its potential for the commercial investor in agriculture and agri-business, Uganda’s potential for political insecurity is simply too great, given the enabling environments and high potential elsewhere, to justify its inclusion in this study. Its democracy is highly compromised by the President’s determination to remain in office49, and by his appointment of family members to delicate positions for which they have no competence. Added to this is the military’s reach50 and influence in many corners of the economy and it is easy to recognize the ingredients of another African meltdown. This is confirmed by the view on the streets of Kampala where the scuttlebutt abounds with fears of forthcoming strife. With so many more favourable possibilities, this is not the place for investment right now.

4.3.8 Zimbabwe

Despite its vast potential, Zimbabwe’s current political situation is simply too fraught for it to be considered as an attractive investment target. However, once the political situation stabilizes, an investors’ feeding frenzy can be expected. Not yet though, and there is simply too much interesting potential elsewhere, at least as far as this study is concerned. Worth watching though!

4.4 Bertelsmann Transformation Indices

The technical approach originally intended for this study included a country selection process based on a participatory multi-criteria analysis (MCA) that would have been facilitated by the Consultant. This obviously did not happen; so the target countries were selected in a different way. It is nonetheless possible to “retro-fit” an MCA as follows. The Bertelsmann Transformation Index (BTI) can be thought of as a twin-faceted MCA that provides an indication of a developing country’s political and economic transformation status on the one hand; and how its leaders are managing the shift towards democracy and a market economy on the other. These are the so-called “status” and “management” indices respectively. They permit a useful quality assurance analysis with respect to country selection (and indeed rejection). The Status Index’s overall result represents the mean value of scores for the dimensions “Political Transformation” and “Economic Transformation.” The mean value is calculated using the exact, unrounded values for both these dimensions, which, in turn, are derived from the ratings for the five political criteria51 (based on 18 indicators) and seven economic criteria52 (based on 14 indicators).

49 “….Uganda’s first family is becoming more entrenched than ever in the formal power structure with the appointment of

President Yoweri Musveni’s wife Janet to the post of Minister of State for the troubled Karamoja district…” The Africa Report N° 16 April-May 2009

50 “...Many Ugandan’s anticipate the de-facto enthronement of the eldest Museveni son, Lieutenant Colonel Muhoozi Kaineragaba as the most obvious successor……Kaineragaba was appointed commanding officer of a new special forces unit in 2008” The Africa Report (ibid)

51 Statehood, Political Participation, Rule of Law, Stability of Democratic Institutions, Political and Social Integration

68

The Management Index evaluates management by political decision makers while taking into consideration the level of difficulty. The Management Index’s overall result is calculated by multiplying the intermediate results accruing to four criteria53 with a factor derived from an evaluation of level of difficulty which takes into account the structural constraints on political management. The level of difficulty comprises an integration of six indicators that together evaluate a country’s: structural conditions, traditions of civil society, intensity of conflicts, level of education, economic performance and institutional capacity. It is interesting to see what the 2008 BTI had to say about the countries selected for study, and about those that were rejected. Figure 4.1, therefore presents the achievements for the selected countries in terms of their status and management indices as percentiles globally (125 countries) and in Africa (40 countries).

Table 4.1 Bertelsmann Transformation Indices for Selected Countries

Source: http://www.bertelsmann-transformation-index.de/11.0.html?&L=1

Unfortunately, Lesotho is not included in the BTI analysis, but for the others, it can be seen that in global terms, for each of the indices (except Sierra Leone’s Status index), all of the countries exceed the 40th percentile. It will be immediately clear however, that this is somewhat fatuous,

52 Level of Socioeconomic Development, Organization of the Market and Competition, Currency and Price Stability, Private

Property, Welfare Regime, Economic Performance, Sustainability 53 Steering Capability, Resource Efficiency, Consensus-Building, International Cooperation

69

as this study is limited to Africa only. Thus, when the indexes are considered only in the Africa context we see that:

• all of the eight selected countries exceed the 50th percentile • seven of the eight lie at or above the 60th percentile for both indices • six lie at or above the 70th percentile for at least one index • five lie at or above the 80th percentile for at least one index; and • two lie at or above the 90th percentile for at least one index. This is reassuring enough with respect to the country selection, but is even more so when it is considered that of the others lying above the 50th percentile some (Mauritania and Tunisia) are not situated South of the Sahara, while others (such as South Africa, Namibia and Botswana) have very limited potential. If these were removed from the analysis, the selected countries would lie even higher in percentile terms. It is equally reassuring to apply the same analysis to the rejected countries (as per §4.3):

• only two of the eight rejected countries exceed the 50th percentile for at least one index • six lie below the 40th percentile for at least one index • four lie below the 30th percentile for both indices • four lie below the 20th percentile for at least one index • three lie below the 10th percentile for at least one index.

It is fair to proceed on the assumption therefore, that although another researcher might select a different suite of countries, the suite selected here is defensible for the purpose of this study.

70

5 CURRENTLY ON THE TABLE

Table 5.1 lists the investment opportunities that were identified during the country consultations. It will be seen that there is a wide variation in status and the amount of information that is available. Nonetheless, each of the table’s entries represent genuine opportunities that could be acted on, or investigated further with immediate effect.

71

Table 5.1 Available Deals

COUNTRY NAME OR DESCRIPTION TYPE OF DEAL AVAILABLE

STATUS SIZE POSSIBLE CROPS ADDED VALUE POSSIBILITY

Ghana Kumawu Traditional Area Partnership, current leaseholder needs capital and technical expertise

Land held on a 60 year lease, currently rainfed, but with some potential for irrigation

Over 10,000 ha Cocoa Oil Palm Fruits Vegetables Livestock

Tomato processing

Osu Wem near Asutare, Greater Accra

Leasehold and/or partnership, current landowner (traditional authority) needs capital and technical expertise

Farm house with irrigation/livestock reservoir in place along with pumping facilities

Around 1650 ha Rice Vegetables (ie tomato, capsicum) Livestock

Tomato processing Rice milling and bagging

Bakpas, near Adidome, Volta Region

Water available for irrigation

Around 835 ha

Gomoan Duranpong Central Region

Partnership, current leaseholder needs capital and technical expertise

Water available for irrigation

Around 85 ha Pineapple Cassava

Probably too small for in-situ processing; but may have outgrower potential

Bawjawse/Nsabaah, Central Region

Leasehold and/or partnership, current landowner (traditional authority) needs capital and technical expertise

Around 400 ha Cassava Vegetables

Hohoe Around 2000 ha Rice Oil Palm

Rice milling and bagging Small scale oil pressing

Tagrimac Sunflower, Ghana Ltd

Partnership Going concern, which produces sunflower seed but has no processing equipment of its own, is looking for a partner to finance same in the sum of $10 million. Business plan available

Around 2500 ha in multiple plots

Sunflower Edible oil and biodiesel

72



Tom Oil and Fat Processing Ltd

Partnership Going concern needs equity partner to finance rehabilitation, upgrading and expansion of existing processing facility and to expand production base. $65 million sought

Around 87,500 ha Rapeseed Oil palm Cotton ‘seed Jatropha Shea butter

Edible fats and biodiesel production, blending etc

Pajar Integrated Farms Ltd Partnership Going concern seeks to modernize peanut paste production and is looking for $90,000. Feasibility study available

Ayigyinamma Royal Farms Ltd

Partnership Going concern seeks to expand processing of maize, cassava, soybeans and groundnuts . $250,000 sought

Kasena Nankana Vegetable Oil Mills

Partnership Start up is looking to develop a nucleus estate/outgrower oil seed production and processing venture. $500,000 sought

4ha (nucleus estate) plus existing outgrowers on over 3125 ha

Oseboba Grain Milling Company Ltd

Partnership Start up is looking to finance the completion of grain processing machinery in an existing factory, and initial working capital. Business plan available. $715,000 sought.

Lesotho Asparagus production Commercial production of asparagus for which Lesotho has a comparative advantage for both the fresh and canned markets, nucleus estate/outgrower model recommended

Unused cannery in place No specific limit, depends on business plan

73



Block farms Labourer landlord Government policy and some block farms exist already, but these need a complete makeover, especially in the institutional sense

Multiple 20 ha blocks Maize, high value rotation

Miscellaneous high value horticulture

Commercial estate or nucleus estate/outgrower

Potential only, high irrigation potential

No specific limit, depends on business plan

Fruits Vegetables Seed potatoes

Grading, pre-packaging of fresh produce Canning

Malawi No specific deals were identified during the mission. Nonetheless it is known that Africa Invest is inviting equity capital investments to finance expansion. It is also known that 30,000 ha of irrigation is being developed in the Lower Shire Valley, with public bulk service infrastructure being constructed with the assistance of the World Bank. According to the Director of Irrigation Service, it is intended that commercial players will be invited to take up blocks of land in the command area where they will be responsible for the distribution systems.

Mali Flex-Mali Partnership Successfully horticultural exporter seeks finance to expand and add value to its operation and needs infrastructure, packaging facilities and operating capital (to purchase more produce). Neither budget nor business plan available as yet

Ets Yaffa Partnership Successful horticultural exporter (25 years in operation) seeks finance to expand into fruit juice extraction and dried fruit. Needs around $ 700,000 but there is no business plan as yet

There is also vast potential to invest in primary production, especially in the area served by the Office du Niger as discussed in the main text

Mozambique The institutional landscape in Mozambique is not conducive to the rapid identification of potential deals. Instead, a more focused, longer mission would be required. But the country’s vast potential for a wide range of food and industrial commodities, its strategic location with respect to both the regional and Asian markets and the huge interest already expressed by a wide range of potential investors in the country, more than justify a more detailed closer look.

74



Senegal Development of Senegal’s Agricultural Markets

Blocks of equipped irrigation areas in the Senegal River Delta are being offered to international investors

The irrigation infrastructure is almost complete and investors are being invited to take up the blocks at the time of writing.

20-100 ha blocks are available to foreign investors

High value horticulture (fruit and vegetable)

Grading and packaging Canning Juice extraction Dried fruits

Eager market!

Générale Alimentaire Africaine54

Partnership Going rice production and milling concern wishes to expand rice production to and needs funds for land purchase, equipment and working capital

Up to 10,000ha, with double cropping potential

Rice, with possibilities for alternative rotations

Milling and bagging

Grands Domaines du Senegal

Partnership This large going concern with excellent control of export logistics and EU market access seeks investors to increase the production base

To be decided High value horticulture (fruit and vegetable)

Primarily for export

Master SN Partnership Existing producer wishes to intensify by increasing cropping intensities and improved irrigation

65 ha High value horticulture Dried fruit and graded beans

Miname Export SA Financing support (Euro 1,173,000)

Successful going concern wishes to establish two mango processing units

Not applicable Not applicable Not applicable

SOCAS S.A. Partnership55 Going concern (grain milling and tomato processing), open to any partnership suggestions that allows expansion, especially in terms of maize/tomato production rotations

To be decided Maize Tomatoes

In addition, APIX (see Annex 10) has a pipeline of projects awaiting investors, while additionally, the Ministry of Agriculture would welcome Public Privet Partnerships in irrigation service delivery

54 In the interest of transparency it should be noted that the owner of this venture is the husband of the local consultant engaged for the study. 55 But it is possible that the entire business may be available for purchase

75



Sierra Leone Marika Enterprises Partnership Successful going concern, palm kernel oil and by-products thereof, worth $10 million seeks investment of $17 million to expand and further diversify operation

Marika Enterprises Partnership nucleus estate and outgrower

Going concern see above, has 3000 of potential rice land, needs investors to develop, provide operating capital, technical assistance and milling facilities.

Tanzania Dakawa Cooperative Rice Farm56

Partnership 2000ha of a potential 000ha have been equipped for irrigation, but need rehabilitating. Cooperative members are ready to do this on their own account, but seek a partner to develop the balance, finance working capital and provide management services/technical assistance

3000 ha, plus a share of revenues from the original 2000ha

Rice with the possibility of a high value rotation

Milling and bagging of rice (there is a large rice milling lying un-used close to the scheme) Grading and packaging of any high value rotation

56 In the interest of transparency it should be noted that the Consultant is a share holder in a corporate entity considering this deal.

76



Madibira Smallholder Rice Farm

Partnership 1500 ha nominally functional out of a potential 6000ha, under the management of the local smallholders. Needs a new institutional concept, plus development and working capital. Opportunities also for a small dam under a public private partnership57.

Up to 4500ha Rice Milling and bagging

Mpanga - Ngalimila Irrigation Project

Labourer/Landlord Large, undeveloped, but high potential area, with plentiful water for irrigation available subject to satisfactory agreement with local community

32,000 ha Rice

Maize

Milling and bagging

Undefined outgrower programmes

outgrower NCERA (see Annex 10) has a network of up to 50,000 farmers already sensitized to the potential benefits of outgrower schemes

Not applicable Subject to local comparative advantage

Concept rather assumes that the crops involved would all have some sort of added value potential.

In addition:

• “the word on the street” is that some of the state farms privatized under a roiling programme beginning in the mid ‘90s may soon be back on the market. Some of them have considerable potential for the commercial investor

• The National and Prison services also have considerable land holdings with investment concepts already in place. However, their potential interest to the social impact investor is likely to be limited, so they have not been considered here. There is nonetheless to hand, a summary dossier of the National Service opportunities.

Zambia So far un-named projects Partnership, nucleus estate and outgrower

Prime land in the north looking for investors

7000 ha immediately available, expandable to 150,000 ha

Sugar Wheat Coffee Ranching

Sugar processing (including ethanol) Wheat milling and bagging

57 Which, subject to due diligence and environmental considerations, may make excellent commercial sense in Tanzania in view of the expected water markets called for in the

current Water Policy.

77



Western Cashew Industries Ltd

To be decided Existing cashew production and processing concern seeks finance to expand processing capacity, including both central and satellite facilities

Not applicable Not applicable Not applicable

In addition:

• the Government (on paper at least) is inviting investors for large scale core farms (10,000 ha) , commercial outgrower estates of 1000 to 5000 ha) and small outgrower farms (30 to 300 ha) on eight Farm blocks distributed around the country.

• Government is also inviting investment in sugar cane and sugar processing (refined sugar and ethanol) and is about to construct basic connectivity infrastructure to the areas concerned

78

6 CONCLUSIONS AND RECOMMENDATIONS

Although specific investment decisions will be made on the basis of detailed feasibility and sensitivity analyses, it is reasonable for the reader to conclude, as others have done, that sub-Saharan Africa represents an excellent opportunity for investment in agriculture and agri-business/processing. For the impact investor, it is recommended that the type of investments involved should include:

• those that contribute to food security at the national and regional level, based ideally (but necessarily exclusively) on intensification through increases in small outgrower productivity in the first instance

• the production of industrial crops that have potential for small outgrower production, added value and environmental enhancement (as for instance, in mixed or agro-forestry systems for instance)

• high value horticulture having potential for small outgrower production, especially those with on-farm added value potential in the form, for instance of grading, packaging or even processing (such as sun-drying for instance)

The institutional arrangements will be defined by a combination of investor philosophy, local precedents and legal frameworks; and where irrigation is concerned, the ideal investment is likely to involve sunk cost assets or some sort of public private partnerships (but not exclusively so).

Deals that have collateral environmental benefits, such as catchment restoration or sustainable buffer zone exploitation, will be especially interesting; but the impact investor will want every deal to be predicated on sustainable exploitation of the natural resources, regardless of the physical baseline.

Bio-energy deals need not be rejected outright, but would have to be subject to additional considerations beyond the usual feasibility studies and impact assessments. These considerations would revolve around the question of whether or bio-fuel production interferes with or enhances food security prospects within the region in question. There may also be opportunities i) to participate in public private partnerships in, say irrigation service delivery or water market infrastructure and operation, Tanzania, Mozambique and Zambia are, or can be expected to become, particularly interesting in this regard; or ii) to take advantage of publicly funded service infrastructure such as the irrigation services being developed in Malawi and Senegal, or those already existing, as in Mali’s Office du Niger. Potential deals abound throughout all the countries considered, but may be characterized by a regional bias that favours large scale cereal production, and possibly sugar in East and Southern Africa, not least because of the potential market that Asia is expected to become for rice (and possibly maize) grown in the region, especially in Tanzania and Mozambique. In West Africa

79

there is likely to be more of an emphasis on high value horticulture because of the well established bulk58 connections to the European market; oil palm and cocoa because of comparative production advantages and existing sub-sectors; and of course crops relevant to regional food security – mainly rice.

58 As in sea freight, rather then airfreight which characterises the high value trade from East and Southern Africa

80

REFERENCES:

Abernethy 1989: “Performance Criteria for Irrigation Systems”. International Conference on Irrigation Theory and Practice Abernethy 2001: “Enabling Environments, Financing Mechanisms and Equitable Access to Irrigation” IWMI, FAO and CTA Agodzo and Blay 2001: “A Case study of the Volta River Estates Limited in Ghana”; IWMI, FAO and CTA Allen 2000: “The Middle East Water Question – hydropolitics and the global economy” I B Taurus Cai, Ringler and Rosegrant 2001: “Does Efficient Water Management Matter? Physical and Economic Efficiency in the River Basin” International Food Policy Research Institute Clay 2004: “World Agriculture and the Environment” Island Press FAO/CIFOR 2002: “Towards Equitable Partnerships Between Corporate And Smallholder Partners: Relating partnerships to social, economic and environmental indicators”. Gujja, Loganandhan, Goud, Agarwal and Dalai 2009: “Sustainable Sugar Initiative: improving sugarcane cultivation in India”; WWF and the International Crops Research Institute for the Semi Arid Tropics Harris 2001: “Water, Science and Society” Deakin Lecture at the 2001 Melbourne Festival Keller, Keller and Seckler 1996: “Integrated Water Resource Systems, Theory and Policy Implications” International Water Management Institute Kissinger 2008: “An End of Hubris”; essay in the Economists “The Year in 2009 Maxwell 2005: “The Washington Consensus is Dead! Long live the Meta-Narrative!”; Overseas Development Institute, UK Maher and Schulz 2003: “An Environmental Management System for Sugarcane in the Noodsberg Area of South Africa”; proceedings of the African Sugar Technology Association NEPAD/Technoserve 2004: “Partnerships for Agribusiness Development, Agricultural Trade and Market Access: a concept note” O’Rourke 1995: “All the Trouble in the World”; Vintage Canada

81

Phiri 2007: “Comparative Analysis of Potential Economic Impact of Alternative Agricultural and Rural Development Models: The Case of Africa Invest and Civil Society Organizations in Malawi”; Private Publication by Africa Invest Poulton, Tyler, Hazell, Dorward and Kydd 2008: “ All Africa Review Of Experiences With Commercial Agriculture: lessons from success and failure” Riddell and Manyatsi 2003: “Water Use Challenges and Opportunities in the Swaziland Agricultural Sector”; un-published paper prepared with FAO funding during preparation of the Swaziland Common Ag Sector Policy Riddell, Westlake and Burke 2006: “The Demand for Products of Irrigated Agriculture in Sub-Saharan Africa ”; FAO Water Report N° 31 Riddell 2007: “Public Private Partnerships To Finance, Construct And Operate Irrigation Systems: a discussion document”; FAO Riddell 2008: “Irrigation Projections Analysis”; issues paper commissioned by FAO for the 2008 High Level Conference on Water for Agriculture and Energy in Africa: The Challenges of Climate Change Takaravasha, Uppal and Hongo 2005: “Feasibility Study for the Production and Use of Biofuel in the SADC Region”; Southern Africa Development Community Van Koppen 2001: “Gender Analysis for Improved Irrigation Performance”; IWMI, FAO and FAO Warner, Kahan and Lehel 2008: “Market Oriented Agricultural Infrastructure: appraisal of public-private partnerships” FAO

82

PART THREE - ANNEXES

83

A1 TERMS OF REFERENCE AND CONSULTATION ITINERARY

A1.1 Terms of Reference

The Terragua Group is seeking a consultant to produce a synthesis of the accumulated knowledge of the history and best practices for investments in African agriculture. The Group seeks to demonstrate a new model for sustainable investments in African agriculture that generate a financial return and simultaneously generate positive impact on local communities and the environment.

At the core of the Group are institutional investors who believe that a more socially and environmentally aligned model for their investments makes economic sense within the context of African agriculture as well as experienced social sector actors who aim to inform and direct the investors’ investment decision making process. The Terragua Group spawned out of a joint research project of the Rockefeller Impact Investing Collaborative59.

The Group seeks a consultant to assist in producing a document which synthesizes the accumulated research and knowledge on what it means to invest in agriculture in a socially and environmentally beneficial manner. The ideal candidate already knows the history and scope of existing literature and can spend the bulk of the consultancy synthesizing literature and interviewing relevant players.

The audience for the report will be capital providers with interest in African agriculture for both economic drivers and a desire to effect social impact. These investors have limited knowledge of the context and history of similarly minded efforts in African agriculture. They are typically expert investors but novices on Africa. The investors are seeking a more comprehensive understanding of the paths to avoid and of the emerging opportunities beyond agricultural production (e.g., in infrastructure development and rural agriculture processing) as they seek to place their own capital in high-impact investments in Africa.

The document should include: I. An overview of investments in African agriculture over the past twenty years

highlighting lessons learned from past experience II. A synopsis and analysis of specific “best in class” opportunities for pro-social and

environmental agriculture investments. III. A synopsis and analysis of specific “minimum” target for social and environmental

impact in investments. IV. A visual display of the various efforts that have spanned the continuum between III

and IV. V. The report will conclude with:

a. Concrete steps investors can take to implement a portfolio of impact investments in Africa agriculture

b. An annotated bibliography of relevant source material c. An overview of priority contacts for further assessment and implementation of

targeted investments.

59 The Rockefeller Impact Investing Collaborative is a network of socially-oriented institutional investors that first

convened at the Rockefeller Foundation’s Bellagio conference center in October 2007. It is currently composed of representatives from institutions such as the Rockefeller Foundation, Skoll Foundation, Google.org, EKO Asset Management Partners, Sainsbury Family Office, Good Energies, Helvetica, Capricorn Management, New Island Capital, Generation Investment Management, B-Lab, Wolfensohn & Company

84

Beyond academic literature, the document should also be informed by interviews with relevant contacts within non-governmental organizations, government agricultural ministries, private sector firms, and other informed parties.

A1.2 Consultation Itinerary

Consultation missions were undertaken as follows:

2008 6th November FAO Headquarters, Rome, Italy

2009 9th January FAO Headquarters, Rome, Italy

16th – 20th February Tanzania

20th – 24th February Zambia

24th – 27th February Malawi

1st – 4th March Mozambique

4th – 6th March Lesotho

12th – 17th March Ghana

17th – 20th March Sierra Leone

20th – 21st March Ghana

27th March London, UK

30th March – 1st April Mali

1st – 3rd April Senegal

85

A2 ANNOTATED BIBLIOGRAPHY

The Study’s Request for Proposals called for an “Annotated Bibliography of Relevant Source Material” as one of the deliverables. Entries in the bibliography presented below fall into two categories. The first comprises texts that have actually been rigorously studied specifically for the purposes of this study while the second involves either texts with which the consultant was already familiar, or general reference texts of relevance to the study (such as technical compendia as opposed to thematic commentaries/analyses). Entries are presented by author in alphabetical order. Thus:

Author(s) ABERNETHY

Date: 2001

Title: ENABLING ENVIRONMENTS, FINANCING MECHANISMS AND EQUITABLE ACCESS TO IRRIGATION

Publisher: IWMI, FAO and CTA

Comments: This paper was presented at the regional seminar “Private Irrigation in Sub-Saharan Africa: private sector participation and irrigation expansion”. After arguing that publicly funded irrigation has been largely an end in itself, rather than justified in terms of production and profitability, the paper posits that irrigation investment that responds to demand for irrigated produce, not irrigation services, is more like likely to succeed. It then goes on to consider the institutional and financial arrangements necessary for three kinds of private investments in irrigation:

• takeovers of public assets, and the subsequent operation, maintenance and management thereof

• new build schemes • service provision to existing schemes (public or private) However, it seems to concentrate on private investment as an alternative to publicly funded smallholder production rather than large commercial models. As such and although interesting, it is of limited relevance here. It does nonetheless sound some relevant warnings:

• long term water rights are essential (which is self evident) • too many subsidies may actually work against the interests of the

commercial investor (which is less self-evident, but is valid because if incentive/subsidy structures attract too many players, then the value of output may go down!)

Author(s) AGODZO AND BLAY

Date: 2001

Title: A CASE STUDY OF THE VOLTA RIVER ESTATES LIMITED (VREL), in Ghana


86

Comments: This paper was presented at the regional seminar “Private Irrigation in Sub-Saharan Africa: private sector participation and irrigation expansion”. Although short, it is an extremely relevant and highly professional paper, of interest not only in the context of target countries; but also “status-in-class”. After introductory material describing the estates and the socio-economic context in which they are located, the paper refers to an interesting debate about the relevance of what might be called “traditional” performance criteria (food security and poverty alleviation), and refers to the work of Charles Abernethy who had earlier proposed a suite of monitoring parameters of more value to the socially and environmentally responsible private investment. These parameters are:

• Production and productivity • Profitability • Equity • Sustainability and the

• Enhancement of quality of life.

The paper then proceeds to evaluated VREL in terms of these parameters. The result suggests that VREL has characteristics consistent with potential “best-in-class”.

Author(s): NOT SPECIFIED

Date: 2008 (?)

Title: Attracting Investors to Africa Public-Private Partnerships

Publisher: World Bank

Comments: This publication is not limited to the agricultural sector and is more targeted generically towards government institutions trying to attract private sector participation. As such the document effectively comprises (and in fact is sub-titled) a project preparation guideline. Even so, it provides valuable insight for the potential commercial investor in a public private partnership especially as regards governments’ likely perceptions and expectations of potential deals

Author(s) BALBO

Date: 2008

Title: SUSTAINABILITY IN ACTION: “Organic sugarcane”

Publisher: BALBO GROUP - Brazil

Comments: This (112 Mb!) PowerPoint presentation concerns the world’s largest organic farm – a rainfed sugar plantation in Brazil which certainly represents ‘best-in-class”, at least in environmental terms.

Author(s): BONAGLIA et-al

Date: 2008 a

87

Title: BUSINESS FOR DEVELOPMENT: promoting commercial agriculture in Africa

www.oecd;org/dev/publications/businessfordevelopment

Publisher: OECD

Comments: Although somewhat (but not entirely) oriented towards commercialization of indigenous agricultural operations in the region, this detailed and comprehensive treatment of the subject nonetheless provides an excellent analysis of the architecture of the African Agricultural sector and of the financial flows within it.

To do this it crafts agriculture into a framework comprising four components:

• bulk products • horticultural products • semi-processed products • fully processed products

Using this framework, the document looks at historic constraints and opportunities, examines the roles of large agro-processors (but strangely not primary producers) and donor activities. Most importantly and despite sounding various notes of caution (not least about the need for u/s and d/s investments), the document concludes unequivocally that there is a need and opportunity for commercial activity across all four of the above bulleted components. However, some of this activity is more relevant to domestic and regional markets rather than exports onto the global market – although as is argued in the Main Text, under certain conditions, domestic markets ca be equally attractive for the commercial investor.

The report is supported by 5 country case studies, see:

• Matsumo-Izadifar 2008 a and b (Mali and Senegal) • Wolter 2008 a and b (Ghana and Tanzania) • Bonagla 2008 b (Zambia)

Author(s) BONAGLIA

Date: 2008 b

Title: ZAMBIA: sustaining agricultural diversification www.oecd;org/dev/publications/businessfordevelopment

Publisher: OECD

Comments: This brief report comprises one of five background papers prepared in the context of Bonaglia et-al 2008 a. Although largely focusing on commercialisation of the small farmers, it confirms i) that there is a vast undeveloped natural resource potential and ii) that outgrower production models are already tried, tested and expanding in the country (with donor support, especially to capacity building along the value chain) – although scaling-up and side-selling challenges are noted. In addition the document provides a critical assessment of the key agricultural sector strategic development instruments (establishment of an enabling environment for commercial investment is a key policy objective for instance) and describes donor participation in the sector while providing cursory information about

88

the Zambia Development Agency which has been set up as a one stop shop for potential commercial players.

Author(s): Cai, Ringler and Rosegrant

Date: 2001

Title: DOES EFFICIENT WATER MANAGEMENT MATTER? PHYSICAL AND ECONOMIC EFFICIENCY IN THE RIVER BASIN

Publisher: International Food Policy Research Institute

Comments: This excellent paper provides a convincing, well reasoned speculation (based on modeling exercises) that there is a strong correlation between high economic water allocation efficiencies and overall basin welfare, not least in terms of access to water by the poor and increased environmental services.

Author(s): CHEESEMAN

Date: 2004

Title: ENVIRONMENTAL IMPACTS OF SUGAR PRODUCTION

Publisher: CABI Publishing

Comments: This book, which was commissioned by the World Wide Fund for Nature (under its Thirsty Crops Programme) is a highly detailed and technical consideration of the environmental impacts of sugar production from both cane and beets. After a brief history of the global sugar industry and an overview of its substantive contents, the book proceeds to take closer looks at sugar and:

• water consumption;

• water quality and aquatic ecosystems;

• terrestrial biodiversity;

• soils;

• atmospheric pollution

before closing with a helpful description of the beneficial uses to which bi-products from both cane and beet based processes can be put rather than merely discarding them for the environment to deal with. These practices are likely to define either best-in-class or potential best practice, not least because under the right circumstances they can add to an operators’ overall profitability.

Author(s) CLAY

Date: 2004

Title: WORLD AGRICULTURE AND THE ENVIRONMENT: a commodity by commodity guide to impacts and practices

Publisher: Island Press

Comments: This is an absolutely essential text for the environmentally responsible investor in agriculture. It presents a comprehensive review of the environmental risks associated with over 20 important agricultural commodities/products and suggests ways by which these risks can be avoided, reduced or mitigated. However, despite its great value, the text is of

89

greater relevance when planning actual investments than in the context of the Terragua study, which is really a scoping exercise at this stage

Author(s): EUROPEAN RESEARCH OFFICE, in collaboration with OXFAM UK

Date: 2001

Title: IMPLICATIONS OF THE REFORM OF THE EU SUGAR REGIME FOR SOUTHERN AFRICAN COUNTRIES: Part 2, reform of the EU Sugar regime, issues arising in EU/Southern Africa Sugar Sector Relations and Part 3, Country Profiles

Publisher: Not declared

Comments: Although possibly dated now (it does not for instance consider sugar in the context of bio-fuels), Part 2 of this document provides an interesting assessment of the possible effects on Southern Africa’s sugar and related added value enterprises, of the shift from the European sugar protocol arrangements (comprising the Sugar Protocol itself and the Special Preferential Sugar Arrangement) to the “Everything But Arms” window(the first phase of which is due to end in 2009). In doing so, in Part 3, it provides brief overviews of the national sugar sectors in Angola, Malawi, Mozambique, Mauritius, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. It is however, somewhat inconclusive in regional terms.

Author(s): FRANKEN with FAURES

Date: 1997

Title: IRRIGATION POTENTIAL IN AFRICA: a basin approach

Publisher: FAO (Land and Water Bulletin N° 4)

http://www.fao.org/docrep/w4347e/w4347e00.htm

Comments: Despite being in print for over 10 years already, this is an essential point of departure for any entity wishing to invest responsibly in agricultural water management. It essentially comprises a compendium of macro hydrological information concerning the availability and levels of exploitation of annually renewable water resources for each African country, along with estimates of likely water use by sector within those countries. Although it should be clearly understood that the document i) does not differentiate between water that is available on a run-of-river basis or that requires storage, and ii) makes no attempt to relate availability to scale60 – the document clearly confirms that freshwater is vastly under-utilised over much of the region.

Author(s): GOVERNMENTS OF SUB-SAHARAN AFRICAN COUNTRIES61,

Date: 2008

Title: NATIONAL INVESTMENT BRIEF(s)

http://www.sirtewaterandenergy.org/en/nationalrepts.html

Publisher: Not published other than on line

60 The closer one gets to the point of use, the greater the competition for water can become even in many countries

blessed with copious, unexploited resources. 61 Angola, Benin, Botswana, Burundi, Cameroon, Congo, Cote D’Ivoire, DR Congo, Equatorial Guinea, Gabon, Gambia,

Ghana, Guinea Bissau, Guinea, Kenyan Lesotho, Liberia, Malawi, Mali, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, Sierra Leone, Somalia, South Africa, Swaziland, Tanzania, Togo, Uganda, Zimbabwe

90

Comments: Series of documents prepared to support each government’s participation at the “High Level Conference on Water for Agriculture and Energy in Africa: the challenges of Climate Change.

The documents62 are useful in i) providing quantitative information about the agricultural/irrigation potential of each country; ii) food security; iii) agricultural exports; and iv) the relevant policy frameworks.

Author(s): GYAMI

Date: 2001

Title: COMMERCIAL IRRIGATED FARMING (in Ghana)


Comments: This paper was presented at the regional seminar “Private Irrigation in Sub-Saharan Africa: private sector participation and irrigation expansion”. It should be read in conjunction with Agodzo and Bley (also 2001).

The paper makes brief mention of the reasons why commercial (irrigated) farming has taken off in Ghana (notwithstanding its rather small scale – making the point that 400ha would be considered large scale in Ghana) while confirming that (at least in 2001) the opportunities remain largely un-seized. This is due to a suite of various constraints:

• High cost of capital, although that would not be an issue in the context of the Terragua study

• Accessibility of land; nonetheless, Government was reportedly in the process of establishing land banks to solve the problem.

• Low local technical and managerial capacity, although the paper states that this can be solved by in-house training programmes on the part of the investor.

• Poor connectivity – the high potential areas are not well served by transportation infrastructure.

• Inadequate marketing infrastructure – including non-existent or inadequate cold chains (the implications of this and mitigating options are well analysed in Poulton et-al 2008)

Author(s): KELLER, KELLER AND SECKLER

Date: 1996

Title: INTEGRATED WATER RESOURCE SYSTEMS, THEORY AND POLICY IMPLICATIONS

Publisher: International Water Management Institue

Comments: This excellent paper comprises a very useful discussion of the differences between local physical efficiency in water allocation and basin level allocative/economic efficiencies.

Author(s): MAGUIRE

Date: 2008

Title: THE FORTHCOMING LAUNCH OF THE AFRICA TRANSFORMATIONAL AGRI FUND

62 It will be seen that the website has similar documents for almost all African countries

91

Publisher: CRU Investment Management

Comments: This PowerPoint presentation introduces a new “faith-based” approach to investing in African agriculture – via a retail fund. It has both strengths and weaknesses. Its strengths concern a powerful justification for investing in African agriculture, in both large scale commercial enterprises and smallholder production (for which it suggests an interesting business model along the lines of the labourer/landlord model described in the Main Text). It furthermore provides some useful guidelines with respect to social impact investment while suggesting possible concrete steps towards making such investments.

However, it is somewhat flawed in various technical respects and should therefore be treated with a healthy degree of caution. For instance, its pronouncements about future food production centres is rather at odds with the emerging convergence of climate change projections; it seems predicated on national food security which is potentially costly in social development, economic growth and environmental terms (although it is politically cheap and a dead cert for attracting granny dollars!). Its estimate of the investments needs for achieving food security at the continental level is grossly inadequate when compared with other estimates (including that of the Blair Commission which it refers to from time to time). National food security really is a perverse objective in fact, especially given Africa’s pressing need for regional trade, and hence trade goods. Also, its unit cost and yield assumptions are very unreliable and in some cases inconsistent. Finally, it makes no pronouncement whatsoever of the natural resource implications.

Author(s): MAHER and SCHULZ

Date: 2003

Title: AN ENVIRONMENTAL MANAGEMENT SYSTEM FOR SUGARCANE IN THE NOODSBERG AREA OF SOUTH AFRICA

Publisher: African Sugar Technology Association (proceedings)

Comments: This paper describes a process approach for environmentally responsible sugar production by multiple, medium to large scale growers. Using the ISO 140001 standards, a framework approach is described for environmental policy at estate level. It covers:

• planning • implementation and operation • evaluation and corrective action • management review, and • continual improvement. The consultant has actually visited examples of the farms in question while on another assignment and suggests that, despite being mostly rainfed (a lot of sugarcane is irrigated in the region), the farmer association in question, would qualify as “best-in-class”, not only because of its environmental responsibility, but also because it has demonstrated that environmental practices lead to increased profitability (not least due to reduced machinery costs associated with contour based operations).

Author(s) MATSUMOTO-IZADIFAR

92

Date: 2008 a

Title: MALI: beyond cotton, searching for “green gold” www.oecd;org/dev/publications/businessfordevelopment

Publisher: OECD

Comments: This brief report comprises one of five background papers prepared in the context of Bonaglia et-al 2008 a. It describes a country with vast agricultural potential that has, until recently, been tightly locked into a single agricultural export, namely cotton. As a result of robust, but hitherto donor dependent sectoral investments in research and crop diversification however, exports have expanded to include rice and other crops that are already enjoying a healthy regional market, while higher value horticultural crops have already begun to penetrate the European market. This has been helped by good information resources and transport sector investments. Nonetheless, even though Government has been successfully promoting foreign investment the policy framework could be improved to further enable the environment. In addition the document provides a critical assessment of the key agricultural sector strategic development instruments and describes donor participation in the sector most of which is targeted at the value chain.

Author(s): MATSUMOTO-IZADIFAR

Date: 2008 b

Title: SENEGAL: making better use of agri-business potential www.oecd;org/dev/publications/businessfordevelopment

Publisher: OECD

Comments: This brief report comprises one of five background papers prepared in the context of Bonaglia et-al 2008 a. It describes a country with significant undeveloped potential and an already successful commercial agriculture sector, with players ranging from household to large scale operators, with domestic, regional and global markets. However, there are many constraints on current and potential operations, principle among which is an excessive dependence on imported raw materials ( much of the agro industry involves processing) and a confusing and complex institutional landscape. Nonetheless, these constraints do not seem to compromise Senegal’s potential for the large scale foreign investor. Summaries of strategic financial flows/commitments and current donor activities in the sector confirm that efforts are being made to strengthen the enabling environment.

Author(s): MAXWELL

Date: 2004

Title: THE WASHINGTON CONSENSUS IS DEAD! LONG LIVE THE META-NARRATIVE http://www.odi.org.uk/resources/odi-publications/working-papers/243-washington-consensus.pdf

Publisher: Overseas Development Institute

Comments: The Washington Consensus has been promoted widely in the development literature, but has become increasingly mistrusted; it is even discredited by Henry Kissinger in his essay in the Economists “World in 2009”. Although short and with a couple of internal inconsistencies, Maxwell’s paper is the best critique of current development paradigms that the Consultant has

93

encountered. It is helpful (although not definitive perhaps) in the context of the Terragua study with respect to both social impact and target country selection.

Author(s): MOLDEN (ed)

Date: 2007

Title: WATER FOR FOOD WATER FOR LIFE: a comprehensive assessment of water management in agriculture

Publisher: Earthscan

Comments: In broad terms, this lengthy, comprehensive and beautifully illustrated book was intended to assess the state of water management over the last 50 years while making projects for the next 50. But it offers rather more than that. After an introductory section dealing with trends and projections, it goes on to consider such issues as the role of agricultural water management in poverty alleviation, the need for policy and institutional approaches, ecosystemic affordability and the productivity of water in agriculture. Having done so, it takes a closer look at thematic issues in terms of agricultural water management as it concerns both rainfed and irrigated regimes before making recommendations concerning the use of water for fisheries, livestock and a major bulk cereal commodity: namely rice. Its final two sections consider the need to protect land and water before calling for the location of agriculture in the broader space of integrated water resources management at the basin level.

Author(s): NAZIR and DESAI

Date: 2001

Title: KENANA, KINGDOM OF GREEN GOLD: grand multi-national venture in the desert of Sudan

Publisher: Kegan Paul

Comments: Although highly focused on limited aspects of a single investment – namely financing arrangements for the Kenana Sugar Project (the world’s largest irrigated sugar plantation), this book shows why perseverance, flexibility and time were determinant components in the crafting of the financing arrangements for what became and remains a hugely successful example of one kind of public, private agricultural partnership.

Author(s): PHIRI

Date: 2007

Title: COMPARATIVE ANALYSIS OF POTENTIAL ECONOMIC IMPACT OF ALTERNATIVE AGRICULTURAL AND RURAL DEVELOPMENT MODELS: The Case of Africa Invest and Civil Society Organizations in Malawi

Publisher: Private Publication by Africa Invest

Comments: Despite the doubts that were raised in the context of the Africa Invest prospectus (Maguire 2008 - doubts that are not necessarily obviated here), this document makes a potentially significant contribution to the debate on “best-in-class”. However, it is necessary to be clear about what the class is. This is very much to do with the commercialization of smallholder farming – but is

94

nonetheless highly convincing. Unlike Maguire 2008, its yield assumptions are reliable (but nonetheless reflect farm management and farming systems limitations which could be obviated).

There is also some helpful information about market chain added value.

It should be read in conjunction with the National Investment Brief for Malawi.

Author(s): PEACOCK and WARD (with GAMBARELLI)

Date: 2007

Title: INVESTMENT IN AGRICULTURAL WATER FOR POVERTY REDUCTION AND ECONOMIC GROWTH IN SUB-SAHARAN AFRICA http://www.fanrpan.org/documents/d00508/1-Agric_water_investments_World_Bank.pdf

Publisher: WORLD BANK et-al

Comments: This is the synthesis report resulting from the Collaborative Study into investment trends with respect to agricultural water management in Sub-Saharan Africa Study (AfDB, FAO, IFAD, IWMI and World Bank). As such and although very interesting throughout, it is inevitably targeted at the development practitioner and policy maker. Nonetheless, it draws considerable attention to the desirability and success of commercial investment in agricultural water management and unequivocally confirms that, for the commercial investor, scheme size is not relevant (as compared with public sector investment which tends to be more sustainable on smaller schemes). It is also very helpful on the determinants of success and suggests which sort of crops are the most likely to be profitable under irrigation, in particular its table 5.4 relates crop types to different types of investment in agricultural water management. The document also confirms the inevitably of rising demand for certain crops in terms of domestic demand, import substitution and export.

Author(s): PENNING de VRIES, SALLY and INOCENCIO

Date: 2005

Title: OPPORTUNITIES FOR PRIVATE SECTOR PARTICIPATION IN AGRICULTURAL WATER DEVELOPMENT AND MANAGEMENT http://ideas.repec.org/p/iwt/worppr/h038088.html

Publisher: Unpublished background paper for the Collaborative Study into investment trends with respect to agricultural water management in Sub-Saharan Africa Study (AfDB, FAO, IFAD, IWMI and World Bank).

Comments: This document is intentionally focused on micro, small and medium enterprises, but is nonetheless useful because it looks not only at production enterprises but also commercial upstream and downstream service provision and includes Public Private Partnership (PPP) models. It also provides a degree of insight into the thinking of (and changes needed in) the development sector and “client” governments with respect to facilitating private sector participation including of co-funding or PPP options. Despite its development practice perspective, the document vests conditionalities on governments that are as relevant to the international large scale investor as they are to the indigenous micro, small or medium player. In other words,

95

the document is helpful in defining the characteristics of the enabling environment.

Author(s): POULTON, TYLER, HAZELL, DORWARD, and KYDD

Date: 2008

Title: ALL AFRICA REVIEW OF EXPERIENCES WITH COMMERCIAL AGRICULTURE: lessons from success and failure

Publisher: Not declared

Comments: This is a background paper for the Competitive Commercial Agriculture in Sub-Saharan Africa Study (FAO, World Bank). As such it is clearly targeted at the development practitioner, rather than the large commercial investor. Also, it is clearly nuanced towards commercialization of smallholders rather than the creation of space for the commercial investor. This seems to result in a subliminal suggestion that it is either one (ie smallholder commercialization) or the other (large scale commercial investment) and not both. At least there is little acknowledgment that there is room, even need for both. Another shortcoming (in the context of the Terragua Study) is that the case studies are concerned with commodities not schemes or deal types. Finally (on the negative side), there are some inaccuracies, internal inconsistencies and analytical limitations and the study is not always “in-sync” with the greater body of literature.

Even so, the study is very helpful in terms of:

• The relationships between marginal costs and returns/total supply chain investments

• Aspects of the enabling environment • Pre-conditions of success (although it seems not to note that the

commercial investor enjoys a degree of self-determinacy in their regard) • Aspects of social and environmental impact

Author(s) RIDDELL

Date: 2007

Title: PUBLIC PRIVATE PARTNERSHIPS TO FINANCE, CONSTRUCT AND OPERATE IRRIGATION SYSTEMS

Publisher: Unpublished

Comments: This a position paper prepared for FAO as part of its preparation for the 5th Session (February 2008) of ALAWUC (Agriculture, Land and Water Use Commission). It is targeted at Middle Eastern and North African countries and uses as its point of departure Tardieu and Préfol (see below). However, unlike their paper, this one is more concerned with analysing the drivers of demand for irrigation and drainage PPPs in the contexts of changing water management paradigms and climate change. It attempts, in part, to do so from the perspective of the private player. It also draws attention to the need for “smart” allocation of risk between the public and private players, something which has been largely ignored in the literature and in opportunist proposals from the private sector.

Author(s): RIDDELL, WESTLAKE and BURKE

96

Date: 2006

Title: DEMAND FOR PRODUCTS OF IRRIGATED AGRICULTURE IN SUB-SAHARAN AFRICA

Publisher: FAO (Water Resource Report N° 31)

Comments: This publication emerged from the Collaborative Study into investment trends with respect to agricultural water management in Sub-Saharan Africa Study (AfDB, FAO, IFAD, IWMI and World Bank). The principle objective of the overall study was to justify and catalyse reinvigorated investment in agricultural water management in the eponymous region. This particular document is more concerned with public than private investment (but see Penning de Vries, Sally and Inocencio, 2005 for more specific analysis of the commercial sector) and as such is concerned in part with conditionalities, economics and policy considerations. Nonetheless, its particular analysis and commentary with respect to crop selection; natural resource adequacy and regional trade have some relevance to the Terragua Study; while more broadly, the report would provide useful background reading for any large investor when discussing specifications for enabling environments with specific governments.

Author(s): TAKAVARASHA, UPPAL and HONGO

Date: 2005

Title: FEASIBILITY STUDY FOR THE PRODUCTION AND USE OF BIOFUEL IN THE SADC REGION

Publisher: SADC

Comments: Although i) this report is a tad repetitious, at least in the earlier chapters; and ii) is targeted as a socio-economic/import substitution strategy for the SADC regions, it is packed with useful information. Although much of it is perhaps more relevant to any follow on work the study provides an excellent and convincing defense of bio-fuels in the context of the food security debate.

In addition, it provides helpful advice on the enabling environment for bio-energy investments in the SADC region; suggests certain added value or peripheral investment opportunities and helps (albeit in a small way) to develop an understanding of the broader policy framework.

Finally, its third annex comprises comprehensive stakeholder interview notes (at least for RSA, Zambia and Malawi).

Author(s): TARDIEU and PREFOL, et-al

Date: 2005

Title: EMERGING PUBLIC PRIVATE PARTNERSHIPS IN IRRIGATION DEVELOPMENT AND MANAGEMENT

http://siteresources.worldbank.org/INTARD/Resources/PPPReportWSDP10final.pdf

Publisher: AGRICULTURE AND RURAL DEVELOPMENT, WORLD BANK

Comments: Originally Keynote paper at the 8th international seminar on participatory irrigation management, Tarbes, relevant to this study because its ToR call for an understanding of the “..emerging opportunities beyond agricultural production (eg, in infrastructure development….). The paper presents an analytical framework for understanding Public Private Partnerships in the

97

Irrigation and Drainage Sector and describes various models in terms of functionality and contractual arrangements. It is complemented by 21 interesting case studies.

Author(s): VARIOUS

Date: 2008

Title: THE AFRICA REPORT N° 12

Publisher: Jeune Afrique (August September edition)

Comments: This edition of the magazine has two relevant features. The first, on page 11 paints a fairly discouraging picture of export transaction costs (time and cash) in Sub-Saharan Africa, the other, on page presents a simple but convincing argument as to why commercial investment in African Agriculture is a good thing these days. It furthermore, has a call-out introducing the “Emergent African Land Fund”.

Author(s): VARIOUS

Date: 2008

Title: THE AFRICA REPORT N° 15

Publisher: Jeune Afrique (January and February edition)

Comments: This edition of the magazine has three relevant features. The first, beginning on page 24 presents an encouraging analysis of Africa’s agricultural sector in terms both of its short term potential with respect to national and regional food security and employment; and of its longer term potential with respect to agribusiness and global food supply.

The second which begins on page 56 considers agricultural commodities, including biofuels, in the context of the broader commodity markets at a time of financial uncertainty and concludes i) that demand will be strong and associated with high prices in the medium to long terms, and ii) that Africa has the potential to supply a “considerable part of the global demand”.

The third, which begins on 76 looks at agro-industry and concludes that although the current global downturn might depress the sector temporarily, a strong recovery can be expected by the end of 2010 and could be accompanied by new markets for African agro-industrial products, both in the region and elsewhere.

In addition, an interview with the president of Sierra Leone (starting page 38) is very much in line with consultations confirming the aptness of Sierra Leone as a target country in this study.

Author(s): VARIOUS

Date: 2005

Title: SUGAR AND THE ENVIRONMENT: encouraging better management practices in sugar production http://assets.panda.org/downloads/sugarandtheenvironment_fidq.pdf

Publisher: WWF

98

Comments: This paper, which was prepared in the context of WWF’s Thirsty Crops Programme, highlights:

• the environmental impacts of sugar production (both cane and beet) • the farming and processing practices that cause these impacts • better management practices that can be used to reduce the impacts to

“acceptable levels”.

It notes and describes in detail supported by many examples, the comprehensive nature of sugar’s environmental impacts, some of which are generic to agriculture, others specific to sugar cane or beet, and most of which have significant economic cost associations/implications. Nonetheless, the paper argues from hard examples, that environmentally sustainable production systems, can lead to greater profitability for the producer, while several of the processing byproducts can, if managed properly, themselves result in environmental benefits. However, widespread promotion and adoption of such practices, both as regards production and processing requires interventions at all levels from the producers at the grass roots to policy makers, regulators and planners at the sector’s apex. Despite some minor naiveties with respect to water management issues, the document speaks very directly to the question of “minimum” targets for environmentally responsible investments, and to an extent social impacts, in respect of a crop which will inevitably appear on most investors’ radar.

Author(s) VARIOUS

Date: 2003

Title: TOWARDS EQUITABLE PARTNERSHIPS BETWEEN CORPORATE AND SMALLHOLDER PARTNERS: Relating partnerships to social, economic and environmental indicators

Publisher: FAO/CIFOR

Comments: This document comprises the background materials, research papers and country papers from Indonesia and South Africa presented at a workshop jointly hosted by CIFOR and FAO in Bogor, Indonesia in May 2002. The workshop drew together participants from private sector corporations, NGOs, the research community and government representatives. Part I provides the background to the meeting, the conceptual framework of joint learning that underpins the development of equitable partnerships, and the synthesis of the experiences of workshop participants, papers and workshop deliberations. The synthesis is summarized in a framework entitled: Principles on mutually beneficial partnerships between corporate and smallholder partners - relating partnerships to social, economic and environmental indicators.

Although the document is limited to the principles, criteria and indicators of planted forest management partnership arrangements, in an institutional sense the text confirms an essential link between social, economic and environmental indicators and sustainable partnerships that are transferrable more generally in the agricultural sector.

99

Author(s) VAN KOPPEN

Date: 2001

Title: GENDER ANALYSIS FOR IMPROVED IRRIGATION PERFORMANCE


Comments: This paper was presented at the regional seminar “Private Irrigation in Sub-Saharan Africa: private sector participation and irrigation expansion”. Its subject matter is potentially important in the context of outgrower schemes using infrastructure provided by the commercial investor. There are two reasons for this:

1. gender issues can make or break an outgrower or smallholder scheme; 2. there are issues (concerning the differences between woman as farm

decision-makers and women as unpaid family labourers) that are important in terms of the need for partnerships with “farm decision-makers” for the private as well as public sector

In addition, there are social impact issues of a gender nature. So the paper itself proposes a gender performance indicator system that can be used to benchmark a community before any investment intervention; and thereafter to evaluate its aptness ex-post. The paper also makes the important point that because improving the lot of irrigating women is known to improve overall scheme performance, then a good gender strategy will increase the benefits to the investor. This is particularly importance because of the preponderance of dual or female farms (defined in the paper) in Southern and Eastern Africa. These areas are likely to be of significant interest to the Terragua investors.

Author(s) WARNER, KAHAN and LEHEL

Date: 2008

Title: Market-oriented agricultural infrastructure: appraisal of public-private partnerships

Publisher: FAO

Comments: Although this publication is clearly intended for the public sector in that it sensitizes with respect to the potential strengths and weaknesses of public private partnerships, it also offers a comprehensive guide also for the private place considering this sort of engagement. All in all, a very good treatment of the subject, not least because it includes a discussion of the risk sharing question, something that is not always readily apparent in scheme proposals.

100

Author(s) WOLTER

Date: 2008 a

Title: GHANA: agriculture is becoming business


Publisher: OECD

Comments: This brief report comprises one of five background papers prepared in the context of Bonaglia et-al 2008 a. It provides a useful diagnoses of the current state of agricultural sector commercialization; the nature and status of institutional landscape restructuring; the nature of the emerging policy framework and key political issues while providing strategic summaries of financial flows/commitments and current donor activities in the sector.

Author(s): WOLTER

Date: 2008 b

Title: TANZANIA: the challenge of moving from subsistence to profit


Publisher: OECD

Comments: This brief report comprises one of five background papers prepared in the context of Bonaglia et-al 2008 a. It confirms i) that there is a vast undeveloped natural resource potential and ii) that typical smallholder farmers are already shifting a portion of their farming systems to higher value cash crops – which bodes well for investors interested in outgrower models. In addition the document provides a useful critique of the key agricultural sector strategic development instrument (The Agriculture Sector Development Programme, although in this context it confuses the roles of development partners as compared with donors and does not seem to understand the role of the National Irrigation Development Fund). Considerable attention is paid to the challenges and opportunities facing the commercial sector while outlining what steps the government is taking to enable to local commercial sector (as compared to international players). The nature of the emerging policy framework and key political issues are described along with summaries of financial flows/commitments and current donor activities in the sector.

101

A3 A BRIEF INTRODUCTION TO THE SYSTEM OF RICE INTENSIFICATION

A3.1 The System

System Riz Intensification emerged in the 1980’s as a synthesis of locally advantageous rice production practices encountered in Madagascar by Fr Henri de Laulanié, a Jesuit who had been working there since 1961.

The method involves raising the seedlings in rich compost nurseries and transplanting them very early, certainly before 12 days after germination, but ideally at around 8 or 9 days. The seedlings, which are transplanted singly at a regular spacing typically from 25x25cm up to 50x50cm, are not pushed into the soil, but instead are simply laid on it. All this minimises transplant shock. Furthermore, the crop is grown under dry-foot conditions ideally (but not crucially) with organic fertilisation. This increases microbial activity within the root zone, and the microbes in turn provide energy in a way that benefits the growing rice plants. Except in areas naturally prone to flooding, the main productive advantage of wetland rice is that the inundation, which rice can tolerate (within limits!), prevents weed growth and therefore reduces the labour requirements. This advantage is lost when SRI is adopted. However, where there is competition for water, other factors become more important determinants and where poverty alleviation or food security are concerned the benefits of SRI, which are not variety dependent, become significant.

A3.2 Claimed Benefits

SRI, which has already been field tested in many parts of the world, has multiple benefits. Replicable yields increases in excess of 20% are not uncommon. Figure 1 presents the results of 186 field trials carried out recently in Andhra Pradesh, India. The chart shows yields obtained under the SRI plotted against yields obtained under traditional systems on adjacent control plots. It can be seen that the vast majority of trials resulted in increased yields. In fact the average yield increase - across a wide range of different varieties - was 25% with a standard deviation of 0.33. Furthermore, closer investigations confirmed that where yields were lower, farmers had not rigorously followed the SRI. We have already noted that the improved nutrient situation resulting from the increased microbial activity is one reason for these increases. However, improved tillering and stronger root systems also contribute, see figures 2 (tillering) and 3 (roots).

Next, and of particular relevance to this concept, these yields are obtained typically with around 50% less irrigation water. Thus it can be seen that a 25% yield increase and a 50% reduction in irrigation water requirements is equivalent to a 250% increase in the productivity of water. Not only does this reduce demands on the natural freshwater systems, it also:

• reduces canal size, and hence investment costs and servitude requirements of new irrigation schemes

• reduces the need for phased planting resulting from the need to rotate pre-saturation supplies, which in turn reduces pest damage

102

It has also been suggested that the method reduces greenhouse gases (wetland rice fields are major sources of these); but the literature is mixed on this, as the shift to organic fertiliser may neutralise the benefits accruing to dryfoot conditions.

But the list of benefits goes on:

• Where SRI is grown using water secured by a water right predicated on wetland rice and where there are functioning water markets63 the right holders can trade the saved water; if that is, it is decided not to reinvest the saved water on-farm.

• SRI rice has been found to resist lodging, which is proving beneficial in typhoon prone areas.

• Seed requirements are greatly reduced under SRI, thereby increasing the profitability of higher yielding, pest resistant hybrids.

• The quality of milled grain is reportedly improved in terms of less chaff and brokens, thus increasing its market value and hence the productivity of water and indeed labour once again;

• In some cases (Cambodia, India and Nepal for instance) shorter growing seasons have also been claimed, this too contributes to water savings and in some cases might increase profits by selling ahead of peak market supply.

Figure A3.1 SRI Field Trial Results for Andhra Pradesh

Figure 2 Tillering from one SRI Seedling – local variety

Figure 3 SRI and Non-SRI Root Systems

63 The Tanzanian Water Policy specifically calls for water markets, an early start there may therefore lead to opportunities

in the actual operation of the water markets!

103

SRI

NON SRI

104

A4 A BRIEF INTRODUCTION TO THE SUSTAINABLE SUGAR INITIATIVE

A4.1 The Initiative

Sugar is also a very important industrial crop, and is becoming increasingly so as the demand for bio-fuels increases. Although sugar itself currently faces fairly turbulent conditions due to the dismantling of subsidy structures and niche markets, several studies confirm that once the dust settles on these reforms international prices will be considerably higher than has historically been the case, with most producer countries able to benefit. Molasses, the major bi-product can be refined into ethanol, while research has confirmed that the press mud, which used to be discarded makes i) an excellent fuel that can be burned at the sugar mill, or ii) an excellent fertiliser and soil ameliorant that can be beneficially applied to the sugar fields. Also, the bagasse, itself a well known fuel, can also be used to make sustainable paper or packaging, while the tops of the cane provide a useful fodder for cattle (not forgetting that molasses too, has value as a cattle feed supplement).

However, under traditional planting methods, even high yielding sugar cane does not produce optimum returns to the grower. This is because typically some 10 tonnes of cane per hectare that could be used for sugar production is used to provide planting material for the next crop and its ratoons. It will be obvious of course that not every grower achieves high yields. In many cases low yields can be attributed to a combination of plant densities that are too high, and over-watering.

Similar to SRI, Intensified Sustainable Sugar (ISS) combines new planting methods, with wider spacing and better water management to increase significantly not only the cane yields, but also the amount of cane that can actually be processed from a given area of land.

The process begins at the planting stage. Traditional methods involve the planting of cane “sets” which are lengths of cane having typically from three to five nodes. It is these lengths of cane that are lost for processing purposes. There are also considerable cultivation requirements in the form of deep ploughing and furrows, and these cost money.

Now, each of the nodes contains a small bud. It is these in fact that sprout to form the next lot of cane Under ISS, instead of planting cane sets, the tiny buds are chipped away from the cane and placed in nurseries ready for transplanting after around 30 days. The parent cane can then be processed along with the rest of the harvest. Given that everything needed to produce and process the cane saved is a sunk cost (except for the extra labour and energy) revenues from its processing go straight to the bottom line!

The nursery stage alone has been found to reduce mortality rates while increasing the weight of the mature cane (and this is particularly important as will be shown below). But next comes the planting.

The first point to note is that the land preparation costs for planting the small, nursery raised shoots, are considerably less than for traditional cane sets. However, the important point here is that low yields are often due to excessive plant densities that affect the insolation

105

rates. Sugar cane, by the way, is the most efficient natural processor of sunlight known to science. Excessive plant densities that reduce insolation are therefore self evidently, counterproductive. But this is countermanded by farmer perceptions that more plants means more sugar. This is not the case, because it is the weight of individual canes, not the number of individual canes that is the determinant of productivity.

A4.2 Claimed Benefits of ISS

Thus, under ISS, planting spaces are intentionally wide, ideally around 1.8 metres between rows and between 10 to 12 cm between plants. This has multiple benefits:

• insolation rates increase dramatically • the quantity of planting material is reduced – further reducing cane wastage • land preparation requirements are therefore reduced – another saving • reduced competition for sunlight allows intercropping which not only increase

revenues per hectare, but if ground covering legumes are planted, as well as providing additional revenues, these reduce water requirements by providing a green mulch while fixing nitrogen in the soil, thereby reducing the need for inputs

• the larger spacing renders water saving technology more affordable and where pumping is concerned, this also reduces operating costs. With this in mind it is worth noting that in recent years, large commercial estates in Swaziland have been able to switch over to drip (from furrow) financed entirely from the seasonal cashflow accruing to the significant increase in productivity, and the reduced operating costs. Water savings of up to 40% over traditional application rates have been recorded when drip is applied to ISS.

The net result of all of this, are that for the low yielding farmers ISS results in larger numbers of tillers per plant, with stem weight increases typically of 250% to 300%. For the farmer that is already producing high yielding cane, the advantages are significant increases in profitability. Not only due to the increases in sucrose and molasses, but also in terms of press mud and bagasse.

Finally, under the correct conditions, ISS has been shown to facilitate an additional, financially viable ratoon, that further reduces the land preparation and planting costs.

106

A5 GHANA COUNTRY DOSSIER

A5.1 Local Consultants

George Sarpong [email protected]

assisted by

Godsway Banini [email protected]

A5.2 Consultations

DATE NAME POSITION CONTACT DETAILS

13th Mar Ghana Investment Promotion Centre Investment House 1 Gulf Street Airport West PMB Cantonments Accra +233 21 521 238/242 www.gipcghana.com

Edward Ashong-Lartey Director: business development [email protected]

Stephen Debre Senior Investment Officer: agribusiness [email protected]

Emanuel Fosu Forson Investment Officer:

Business development

[email protected]

16th Mar Trade and Investment Program for a Competitive Export Economy (TIPCEE) Ground Floor, Codemm House 1st Dzorwulu Crescent, West Airport PMT CT 330 Accra +233 21 775 350/775 790/774 453

Rosemary Addico Association Development Specialist [email protected]

Ministry of Food and Agriculture

PPMED

PO Box M37

Accra

Angela Dannson Assistant Director [email protected]

21st Mar Kumawu Traditional Area in Ashanti Region.

Nana Serwaah Amponsah Queen Mother +233 244 460678

+233 208 199211

A5.3 Material Collected:

• WINNING THE PROCESSING GAME: Ghana Horticulture October 2008, published by the USAID Trade and Investment Program for a Competitive Export Economy

• see also www.gipc.org.gh/publications.aspx for material concerning the Investment Promotion Centre.

107

A5.4 Next steps for the Impact Investor

The potential investor is free to visit the country for the purposes of identifying potential deals in terms of both the venture itself and possible partnerships. To this end the services of the Ghana Investment Centre can be involved as a facilitator or agent of introduction.

Once the investor is ready to proceed (on the basis it is assumed of a satisfactory feasibility and sensitivity analysis), it is necessary to prepare business plan and by law, to register with the GIPC. This itself requires that the following steps are taken:

1. The investor must incorporate a company at the Registrar General's Department. The department has five (5) working days to complete formalities if all documents are in order.

2. Comply with the GIPC Act 478 regarding minimum equity requirements, either in cash or in kind. In the case of a joint venture between a Ghanaian and a foreigner, the minimum capital requirement is USD$10,000; and USD$50,000 for a wholly owned foreign company.

3. Open a bank account in the name of the company and transfer the minimum equity requirement into the account. This transaction should be confirmed to the Bank of Ghana by the investor's local authorized dealer bank. Bank of Ghana in turn, confirms this transaction with GIPC for the company's registration purposes. To this end, individuals may carry physical cash into Ghana for investment purposes. However, the cash should be declared on Bank of Ghana Form T5 on arrival and subsequently deposited in a bank account within the shortest possible time. This transaction should be confirmed by the Dealer Bank and the Bank of Ghana. In the case of equity in kind (i.e. in the form of imported machinery, equipment and goods) all documents covering such imports should be in the name of the registered company and evidenced by the following, which should be submitted to GIPC for registration purposes:

• Bill of lading or Airway bill (original) • Destination (Ghana) Inspection Certificate. • Customs Bill of Entry (original) • Import Declaration Form (IDF) • Certified/Final Invoices. • Evidence of Capitalization - Form 6 from the Registrar General's Department.

Once these steps have been taken, the GIPC has 5 working days to complete the registration on the assumption that the application Form is in good order. The registration then entitles the Company to enjoy benefits such as:

• Quotas support to the Ghana Immigration Service; • Import duty exemption on certain equipment and machinery; • Assistance in getting certain utilities such as electricity, water and telephone; • Assistance in getting land; • Other support and recommendation to relevant Government Agencies and

departments for the required permit In addition, all enterprises must register directly with the Internal Revenue Service (IRS) and the Value Added Tax (VAT) Secretariat for purposes of fiscal obligations such as taxes, rebates, and exemptions. Enterprises must also register and obtain an environmental permit from the Environmental Protection Agency (EPA).

108

The venture can then begin.

A5.5 Key Contacts

Key institutions the foreign investor need to contact include the following:

• Ghana Investment Promotion Council (GIPC) • Registrar General Department • Ministry of Food and Agriculture: Policy Planning Monitoring and Evaluation Dept;

Statistics Research & Information Dept, Dept. of Crops Services

• Ministry of Trade and Industry • Ministry of Interior : Immigration Service • Ministry of Lands and Natural Resources : Lands Title Registry; Lands Commission;

Lands Valuation Board; Survey Department • Ministry of Justice and Attorney General : Private Legal Firms • Environmental Protection Council • Customs Excise and Preventive Service • Ministry of Local Government : Metropolitan/Municipal/District Assemblies • Traditional Leaders i.e Chiefs, Stool Heads • Department of Town and Country Planning • Ghana Export Promotion Council

In addition, a key individual is Mr George Sarpong, a distinguished lawyer with vast experience of both local land law, agricultural policy formulation, and as such engaged as local consultant for the purposes of this study

109

A6 LESOTHO COUNTRY DOSSIER

A6.1 Local Consultant

Stanislaus Motake [email protected]

A6.2 Consultations


5th Mar Ministry of Trade and Industry, Cooperatives and Marketing PO Box 747 Maseru 100 +266 2232 1559/2231 7454

Moeketsi Khoboko Deputy Director of Industry +266 5897 5379 (mobile)

[email protected]

Lesotho National Development Corporation

Kingsway Mall

Block A, Development House

Private Bag A96

Maseru 100

+266 22 312012

www.lndc.org.ls

Thakanyane Matsimane Research Officer +266 6306 3999

[email protected]

FAO 1st Floor UN House 13 UN Road PO Box 7588 Maseru 100 +266 22 315585 www.fao.org

Memed Gunawan FAO Representative +266 5885 2208 (mobile)

[email protected]

Mokitinyane Nthimo Assistant FAO Rep +266 5884 5647 (mobile)

[email protected]

6th Mar World Bank

UN House

13 UN Road

Maseru

+266 2221 70000

www.worldbank.org

Husam Abudagga Senior Country Officer [email protected]

110

A6.3 Material Collected

• SUBSIDIES IN THE AGRICULTURAL SECTOR: Policy Statement and Implementation Framework, May 2003, Ministry of Agriculture and Food Security

• AGRICULTURAL SECTOR STRATEGY: Statement of Policy and Strategy in the Agricultural Sector, August 2003, Ministry of Agriculture and Food Security

• LESOTHO FOOD SECURITY POLICY and strategic guidelines, April 2005, Ministry of Agriculture and Food Security

• LESOTHO AGRICULTURAL SITUATION REPORT, 2005/06-2006/07 (2008 Edition), Ministry of Agriculture and Food Security/Ministry of Finance and Development Planning

• NATIONAL ACTION PLAN FOR FOOD SECURITY: ten year plan 2007-2017, October 2006, Ministry of Agriculture and Food Security

• A PRACTICAL GUIDE TO DOING BUSINESS IN LESOTHO 2008/09, September 2008, Lesotho National Development Corporation

• LESOTHO REVIEW: an overview of the Kingdom of Lesotho’s economy, 2009 Edition, Lesotho National Development Corporation

• INVESTMENT OPPORTUNITIES IN LESOTHO, Not dated, Lesotho National Development Corporation


It will be clear from the Main text that investment opportunities in Lesotho are somewhat specialist in that they would involve relatively small scale deals, usually involving high value produce for processing or export fresh, or if not, small basic food production ventures. If this type of deal is of interest, then the next step would be to visit the country on a scoping mission. This could be facilitated by the Lesotho National Development Centre. But its capacity for the agricultural sector is limited due to the fact that its priority lies in other sectors. This will change however, due to the renewed interest in the agricultural sector. Once a deal is identified64 it will in any case be necessary to involve the LNDC if partnerships or access to land are involved. The next steps are then as follows all of which can be facilitated by the LNDC: 1. Register a company name with the Registrar of Companies, which will require at least

three suggestions for names 2. Once a name has been registered, company registration is necessary 3. If agro-processing is involved, may also be necessary for the investor to obtain a

manufacturing license; and it will be necessary to register any processing factory; but this would be after the next step, which is..

4. Registration with the tax authorities.

With all this done, the investment can proceed.

A6.5 Key Contacts

No specific key contacts were identified however, a good point to start would be to make contact with the local consultant, and together with him, to proceed to the LNDC. The local consultant is very much up to speed on where potential deals could be found.

64 Or several, which could be the case in any of the target countries

111

A7 MALAWI COUNTRY DOSSIER


Alex Phiri [email protected]

A7.2 Consultations


24th Feb Africa Invest Malawi Ltd PO Box X291 Cross Roads Lilongwe +265 179 5146

Tabitha Wood Chef de Bureau mailto:[email protected]

Lloyd Barker Director of Farming +265 820 3359 (mobile)

[email protected]

Barbara Lawes Community Development Manager +44 7746 815 495 (mobile)

[email protected]

Malawi Investment Promotion Agency Aquarius House PO Box 32 Lilongwe 3 www.malawi-invest.net

Aretha Kamwendo Senior Manager

Corporate Affairs

+265 1 770800 (land line)

+265 883 7582 (mobile)

[email protected]

Robins Mwanga Business Information Executive +265 1 770800 (land line)

+265 887 4644 (mobile)

[email protected]

Irrigation Department PO Box 30797 Lilongwe 3 +265 175 2122

Sandram Maweru Director of Irrigation Services +265 175 3873 (direct line)

+265 996 2015 (mobile)

[email protected]

Ministry of Agriculture Land Resources Conservation Department PO Box 30291 Lilongwe +265 178 5352/5048

John Mussa Director +265 887 6161

[email protected]

26th Feb Ngala Farm

27th Feb Ministry of Trade

Gemin House

PO Box 30366

112


Lilongwe 3

Clement Phanga Assistant Director of Industry +265 1077 0244 (land line

+265 837 1446 (mobile)

[email protected]


• “now that’s what I call TRANSFORMATION INVESTING “ (DVD), CRU Investment Management

• “INVEST IN MALAWI “(DVD), Malawi Investment Promotion Agency


The steps to follow will depend on the type of investment but some of the procedures are standard for all types of businesses. Hence, for sustainable investments in Malawian agriculture, in particular in irrigation supported commercial agriculture, special attention should also be paid to land acquisition and registration processes, water user rights, and environmental impact assessments among others. The key steps however concern the following:

1. Undertake a scoping mission (with which the Malawi Investment Promotion Agency

can help) 2. Land acquisition and registration (which it will be recalled can only be on a leasehold

basis for the foreign investor) 3. Once a lease has been offered, the applicant (for both serviced or unserviced land)

must accept the offer and pay the indicated charges. This includes the fee deposit required for the department of surveys to survey the land and prepare the deed plan that is requirement for drawing up a title deed to property. At this point, the applicant may proceed to prepare development plans using whatever professional help may be required.

4. A planning application must then be made to the relevant city council planning department. Both processes are necessary prior to the preparation, registration and insurance of the title deed to the applicant.

5. At this point physical implementation may proceed. However if bank financing is not required or other collateral is available, construction may proceed at the point when the land is beaconed or delineated by the department of surveys, and planning approval has been received. Land Development

6. Where necessary, a water rights acquisition process must be engaged. This will require

• An Environmental Impact Assessment (EIA) Report • A Lease agreement obtained through the process described above • A sketch of the area where the investments are going to be done. The sketch has

to indicate location of the land and the amount of abstraction that will be done and the seasonal demand for water.

• Indication or a sketch of the catchment area including the tributaries to the main river of concern. This information will assist in assessing water availability.

• The sketch has also to indicate the positions where other users (who) and how much they are already abstracting upstream. This information will assist in

113

assessing how much will remain before the demander starts abstracting. But this is demanded also to ensure protection of other Users’ Rights upstream.

• The demand of water downstream is also required since the user has to leave enough balance of water for others. Besides, the balance is supposed to be enough to maintain aquatic life.

• The area to be irrigated needs to be specified. 7. In addition, all prospective investors investing a minimum of US$50,000 are required

to obtain an Investment Certificate from MIPA. MIPA charges a non-refundable processing fee of US$200 and an issuance fee of US$800 for the Certificate. At this stage one could also apply for Business Residence Permits and Temporary Employment Permits, land and sector-specific approvals, licenses and permits. The whole company registration process requires 10 procedures, takes 39 days. The steps are as summarized in the following table:

STEP PROCEDURE TIME TO COMPLETE COST TO COMPLETE

1 Initiate a company name search 1 day MK50065

2 Submit application for a Certificate of Incorporation to the Registrar General, Ministry of Justice.

3-7 days if done in

person, 14 days by mail

MWK 1,000 +

MWK 100 for first

MWK 1,000 of

capital, and MWK

15 for every MWK

2,000 or part of

capital thereafter

3 Register for payment of income tax with the Malawi Revenue Authority

1 day if application is hand delivered

no charge

4 Obtain a company seal

3-4 days

MWK 19,000

5 File an application form to obtain a license from the Ministry of Trade and Industry

29 days including time of publication,

simultaneous with

procedure 4

MWK 400 Blantyre

City Assembly

6 Inspection of premises for the issue of the license 14 days, simultaneous

with procedure 5

no charge

7 Pay license fee upon approval of license and obtain license

1 day, simultaneous with procedure 5

MWK 200 – MWK

60,000 (Blantyre

City Assembly) and

MWK 35,000 –

MWK120,000

(Ministry of Trade

and Private Sector)

8 Apply for a registration of the workplace 28 days, simultaneous

with procedure 5

MWK 1,000,

depends on the

number of employees

65 Exchange rate about MK140 to US$1.00

114

STEP PROCEDURE TIME TO COMPLETE COST TO COMPLETE

9 Inspection of premises by the Occupational Safety, Health, and Welfare Department

7 days, simultaneous

with procedure 5

no charge

1066 Register for PAYE and fringe benefit tax with the Malawi Revenue Authority by mail

1 day (simultaneous

with previous

procedure)

no charge

Source: Doing Business in Malawi Report - 2009

A7.5 Key Contacts

The following table refers:

NAME OF ORGANIZATION ADDRESS TELEPHONE &EMAIL ADDRESS

Ministry of Trade and Private Sector Development

P.O. Box 30366, Lilongwe 3

Tel: (265) 1 770 244/ (265) 1 770 614. Fax: (265) 1 770 680 Email: [email protected]

Malawi Investment Promotion Agency (MIPA)

First Floor, Aquarius house, Private Bag 302, Capital City, Lilongwe 3

Tel: (265) 1 770 800/1 771 315. Fax: (265) 1 771 781 Email: [email protected]

Malawi Export Promotion Council (MEPC)

P.O. Box 1299, Blantyre,

Tel: (265) 1 820 499 Fax: (265) 1 835 429 Email: [email protected]

Malawi Confederation of Chambers of Commerce and Industry (MCCCI)

P.O. Box 258, Blantyre


Malawi Industrial Research and Technological Development Centre (MIRTDC)

P.O. Box 357, .


Reserve Bank of Malawi (RBM)

P.O. Box 30063, Lilongwe 3

Tel: (265) 1 770 600 Fax: (265) 1 772 752 Email: [email protected] Website: www.rbm.mw

Air Malawi Cargo P.O. Box 84, Blantyre

Tel: (265) 1 820 811/ 1 892 322. Fax: (265) 1 892 325 Email: [email protected]

66 Comment on Procedure 10: Promoters must file Form P1 (PAYE) and Form FBT1 (fringe benefit tax). On registering for

pay-as-you-earn (PAYE) tax, applicants are provided with the following forms: WTF1 (withholding tax certificate); WTF2 (summary of withholding tax); P9 (PAYE certificate of total emoluments and tax deducted); P10 (advice of employees tax deduction certificates issued); P12 (PAYE monthly deduction payment form; and P16.

115

NAME OF ORGANIZATION ADDRESS TELEPHONE &EMAIL ADDRESS

Central East African Railway Company

P.O. Box 5144, Limbe


116

A8 Mali Country Dossier


Maimouna Diallo-Seydi [email protected]

A8.2 Consultations


31st Mar Ministry of Agriculture Rue Mohamed V, BP 61 Bamako 00 223 20 22 2979/2785

Lansana Touré Technical Adviser

(rural development eng’ing)

00 223 20 23 1023 (mobile)

[email protected]

Boubacar Camara Chargé de Mission 00 223 20 22 2785 (mobile)

[email protected]

Agence pour la Promotion des Investissements (API) BP 1980 Bamako 00 223 20 22 9525/9526

Mansour Haidara Director General [email protected]

Assemblée Permanente des Chambres d’Agriculture du Mali (APCAM) BP 3299 Bamako 00 223 20 21 8725 [email protected]

M Abdoulaye Keita Technical Adviser 00 223 76 42 9272 (mobile)

[email protected]

El Hadj Tombola Official i/c livestock

Programme Compétitivité et Diversification Agricole (PCDA) 03 BP 228 Bamako [email protected]

Gangy Timbo Coordinator 00 223 66 71 7958 (mobile)

[email protected]

Seydi Fofana Private Sector and Commercialisation desk

00 223 76 49 3110 (mobile)

[email protected]

1st Apr Association Professionnelle Des Exportateurs de Fruits et Légumes Immeuble Barika Tigui BP 3007 Bamako 00 223 20 20 9998

Daouda Malinke Member and also :

Commercial Director of (FLEX-MALI)

an exporting company

00 223 66 74 4203/00 223 66 75 1291 (mobiles)

[email protected]

Association Malienne Des Exportateurs de Fruits et Légumes Centre du Secteur Privé Bureau 109 BP 1291 Bamako

117


00 223 20 21 8154 [email protected]

Bakary Yaffa President and also :

General manager of

Ets YAFFA

An exporting company

00 223 221 10788

00 223 76 31 7655 (mobile)

[email protected]


• AGRICULTURAL ORIENTATION LAW, September 2006, Ministry of Agriculture/National Assembly

• MALI, INVESTING TO BUILD: a good risk for investors, not dated, Malian Ministry for Investment promotion and SMEs

• MALI, INVESTING TO BUILD: invest in Mali, not dated, Investors Forum • PROGRAMME FOR COMPETITIVE AND DIVERSIFIED AGRIGULTURE, not dated,

Ministry of Agriculture


Once an interesting deal has been identified on the basis of a scoping mission, the first step for any investor is to involve The National Investment Promotion Centre of Mali (API-MALI) the objective of which is to assist investors in the implementation of their projects and in insuring that the proper authorizations to function are issued as needed. As a one stop shop, API has three main roles. These are to: • facilitate administrative procedures and business creation • issue or have delivered to investors all administrative acts necessary to create and/or

the authorizations to practice; • grant the benefits of different codes to encourage investment in accordance with the

legislation in force

Companies that are eligible for the Code of Investment receive a license in within twenty (20) days from the date of submission. The procedures for starting businesses now take place in sixty two (72 hours) within the one-stop window. The stages can be summarized are as follow:

118

A8.5 Key Contacts

The potential investor is strongly encouraged to make contact with the local consultant engaged for this study – she actually has a company specializing in assisting regional start ups. In addition, the following represent key local contacts:

AMELEF Association Malienne Des Exportateurs De Fruits Et Légumes) Malian Association of Fruit and Vegetables Exporters)

APCAM Assemblée Permanente des Chambres d’Agriculture du Mali) - (Permanent Assembly of Malian Agricultural Chambers)

API-MALI Created in September 2005, API-Mali objectives is to promote foreign and local investment in Mali, improving the business environment, stimulating the creation of SMEs and fostering partnerships between local and foreign companies. (Agence pour la Promotion des Investissements)

Ets YAFFA A private company that exports fruit and vegetable mainly to Europe

Ministère de l’Agriculture

Self explanatory

PCDA Agricultural Competitiveness and Diversification Programme PCDA established in 2006 to promote the food chain in Mali.

APELEF Association Professionnelle Des Exportateurs De Fruits Et Légumes) Professional Association of Fruit and Vegetable Exporters

FLEX-MALI A private company that exports fruit and vegetable mainly to Europe

119

A9 Mozambique Country Dossier

A9.1 Local Consultants

Manuel Alvarinho [email protected]

assisted by

Mario Chilundo [email protected]

A9.2 Consultations:


2nd Mar Confederation of Trade Associations Avenue 10 de Novembro, Recinto de Facim Maputo +258 1 311734/6 [email protected] www.cta.org.mz

Rui Gonzalez Agribusiness Sector Chairman [email protected]

The World Bank www.worldbank.org

Patrick Verissimo Senior Economist [email protected]

KULIMA Av Karl Marx 1452 R/C PO Box 4404 Maputo +258 21 430665/321622 [email protected] www.kulima.org

Domenica Liuzzi Coordinator General +258 823 127160 (mobile)

CEPAGRI Rua da Gavea N° 33 Maputo

Roberto Mito Albino Director +258 21 326550/300626 (land lines)

[email protected]

3rd Mar IUCN Mozambique Country Office Av Fernao Meloe Castro 23 PO Box 4770 Sommershield Maputo +258 2 490599/499547 www.iucn.org

Roberto Zolho Climate Change Project Coordinator [email protected]

Investment Promotion Centre

Rua da Imprensa 332 –R/C

Po Box 4635

Maputo

[email protected]

www.mozbusiness.co.mz

Rafique Jusob Director [email protected]

120


Emilio Momade Ussene

Agricultural Engineer [email protected]

ADIPSA

Rua C 46 B.Coop

Maputo

+258 21 413211

Abdul Adamo National Coordinator +258 8230 21102 (mobile)

[email protected]

Moçfer SA

Av 24 de Julho 370, E

Maputo

Arnaldo Ribeiro Executive Vice-Chairman +258 8430 41040 (mobile)

[email protected]

Also present at this meeting was Demmy Adesina of Aquifer/Terragua


• MOZAMBIQUE COUNTRY WATER RESOURCES ASSISTANCE STRATEGY: making water work for sustainable growth and poverty reduction, August 2007, World Bank

• BEATING THE ODDS, SUSTAINING INCLUSION IN A GROWING ECONOMY: findings and conclusions from the Mozambique Poverty, Gender and Social Assessment, 2008, World Bank

• MOZAMBIQUE IN FOCUS (DVD), Not dated, Investment Promotion Centre (in association with Standard Bank),

• FACTS ABOUT MOZAMBIQUE, not dated, Investment Promotion Centre • LEGISLATION ON INVESTMENT IN MOZAMBIQUE, not dated, Investment

Promotion Centre (in association with Ernst and Young)


Once a potential deal has been identified on the basis of a scoping mission, the first step should then be to proceed to the Agriculture Promotion Agency (CEPAGRI) for assistance in formulating the business proposal. Thereafter the assistance of the Investment Promotion Centre (CPI) should be sought, while engaging the services of a local lawyer to assist with company registration when the time comes. The steps are thus as follows: 1. Submit the business plan to the CPI. Preparation of the business plan has to confirm to

certain government procedures, especially for projects involving more than 10,000 ha. 2. These procedures have six parts, and concern:

• General information regarding the project proponent; • Investment description according to Law 3/93, of 24 June and its Regulations,

requires a demonstration that at least eight (8) of ten (10) Government investment goals have been satisfied (refer to the Law on Investment);

• Land use matters, in compliance with Law 19/97 of 1st October (Land Law) and its Regulations;

• Environmental matters, in compliance with Law 20/97 of 1st October (Environmental Law) and its Regulations, and the investment proposal should

121

contain the opinion of the Ministry for the Coordination of Environmental Action regarding the feasibility of the project;

• Social and Economic aspects; • Information regarding the operational plan (i.e. technical information regarding

the project; investment and financing plan; market for final products and business plan for 10 years);

3. CPI will later coordinate with the Centre for Agriculture Promotion (CEPAGRI) and the Environmental authorities at local and central levels for their approval while undertaking the assessment of the business proposal and drafts, to later negotiate the terms of authorization with the investors or their representatives, as part of the project’s approval process

4. Upon agreement between CPI and the Investors on the Terms of Authorization, CPI will submit the Project for approval by the relevant authority (Provincial Governor, Minister of Planning and Development, or the Council of Ministers)67.

5. Company Registration Process. Within the new Commercial Code, and complementary legislation, the procedures recently approved by the Mozambican authorities for business registration have been simplified. Some key aspects to consider include:

• Company name reservation at the Conservatory of Legal Entities' Registration; • Agreement on the company's draft Articles Association by the shareholders. The

company's Articles of Association should be reviewed by a registered notary;

• Open a bank account for the purpose of depositing the share capital. The necessary documents: Certified copy of the company name reservation certificate, Draft Articles of Association of the company, certified copy of the shareholders' identification documents.

• Formalize the company registration at the Conservatory of Legal Entities' Registration. Documents to be submitted include: Copy of the company name reservation certificate, company draft Articles of Association, proof of the bank deposit, and certified copy of the shareholders' identification documents.

A9.5 Key Contacts

In addition to Manuel Alvarinho, the local consultant engaged for the study, key contacts will include the following:

Government Agencies

• Centro de Promoção de Investimentos (Investment Promotion Centre) – CPI. Imprensa Road, N° 332 – R/C, P.O.Box 4635. Tel: +258-21313310/21313299/21313295; Fax: +25821313325 – Maputo. www.mozbusiness.co.mz. Key person: Rafique Jusob

• Centro de Promoção de Investimentos (Agriculture Promotion Centre) – CEPAGRI. Gávea Road, N. 33 – 1st floor. Tel: +25821326550/21300626/21307957; Fax: +25821427436 – Maputo.

67 For projects requiring less than 10,000 ha approval is done by the Ministry of Agriculture.

122

Key person: Roberto Mito Albino

Funding Agencies

• World Bank (WB) 1224 Kenneth Kaunda Ave, Maputo Tel: 258-21482323/21482300; Fax: +258-21 492893. Key person: Patrick Verissimo.

• ADIPSA (A Danida Project – Support to The Development of Private Initiative on the Agriculture Sector); Rua C, Bairro da Coop Maputo, Key person: Abdul Adamo.

Private Sector

• Confederação das Associações Económicas de Moçambique (Confederation of Trade Association) – CTA. Castanhada Road, N. 120. Tel: +258-21491914/21491964/21493089; Fax: +258-21493094 – Maputo. www.cta.org.mz Key person: Inocêncio Matavele

Non Governmental Organizations (NGO’s)

• IUCN. International conservation organization. Fernão Melo e Castro Ave., N° 23; P.O.Box 4770, Sommershield, Maputo- Tel: +258-21490599/21499547; Fax: +258-21490812. www.iucn.org. Key person: Roberto Zolho.

• TECHNOSERVE. They are involved in assisting poor potential entrepreneurs to build business and create income and as such could be useful with respect to the establishment of outgrower programmes Zedequias Manganhela Ave. N° 267; 5th floor, F6, Prédio Jat. Tel: 258-21326171/73; Fax: 258-21326166 Key person: Jake Walter

Individuals

• Rui Gonzalez, former chairman of the Agribusiness division of CTA, and senior advisor on the water resources management at Ministry of Public Works and Housing. e-mail: [email protected]

123

A10 SENEGAL COUNTRY DOSSIER


Maimouna Diallo-Seydi [email protected]

A10.2 Consultations:


2nd Apr Agency for the Promotion of Investment in Senegal (APIX S.A.) 52-54 Rue Mohamed V BP 430 Dakar 00 221 33 849 1761

Augustin Diouf Business Line Manager [email protected]

Organisation Nationale des Producteurs et Exportateurs de Fruits et Légumes du Sénégal (ONAPES) 28 Mermoz Extension Bordure VDN BP 22 986 Dakar 00 221 33 864 5439 [email protected]

Cheikh Ngane President [email protected]

Simon Agricultural Engineer

Soumaré Assistant

Programme de Développement des Marchés Agricoles (PDMA) Almadies Route du Mériden Président BP 22 579 Dakar 00 221 33 869 6262 [email protected]

El Hadji Amadou Wone Director

Générale Alimentaire Africaine VDN Mermoz Villa N° 5 BP 24 651 Ouakam Dakar 00 221 33 860 4470

Ibrahima Seydi Manager 221 77 644 0860 (mobile)

[email protected]

3rd April Grands Domaines du Senegal (GDS)

Almadies Te de Ngor Zone 13

Villa N°s 1 and 2

Dakar

221 33 961 9882

Olivier Girard Reydet General Manager [email protected]

Ministry of Agriculture Avenue LSS Building Administrative 3rd Etage Dakar 221 33 849 7191/849 7387

Ibrahima Diouck General Secretary [email protected]

124


Mamour Gaye Technical Adviser 221 77 638 2463 (mobile)

[email protected]

SOCAS S.A. 50 Avenue Président Lamine Gueye BP 451 Dakar 221 33 839 9021

Donald Baron Director General [email protected]


• INVESTORS’ BRIEFS, not dated, Ministry of Agriculture (Great Agricultural Offensive for Food and Abundance)

• INVEST IN SENEGAL, not dated, Ministry of Agriculture (Great Agricultural Offensive for Food and Abundance)

• INFORMATION BULLETIN ON FRUIT AND VEGETABLE EXPORTATION AND IMPORT SUBSTITUTION PRODUCTS , 2008, Ministry of Agriculture

• DEVELOPMENT OF 2500ha IN THE SENEGAL DELTA ZONE, not dated, Ministry of Agriculture (Great Agricultural Offensive for Food and Abundance)


Once a potential deal has been identified by means of a scoping mission the investor should proceed to the Agency for the Promotion of Investment and Infrastructure (APIX). Created in 2000, APIX is the first stop for foreign investors interested in establishing a business in Senegal. APIX’ objectives are to help investors to realize their investment project in Senegal, by providing them with a:

• One stop office where all administrative procedures for the certification to the Investment Code and to the status of a free export company, are centralized. This can be done in 10 days for the first and in 21 days for the second.

• Problem solving department whose purpose is to provide assistance to the investor with administration and in the solving of various problems, namely access to land.

• Investment Promotion Department made up of market managers, who will give relevant business information and provide support in the performance of projects.

• The follow-up and Documentation centre which is a source of information and also has an “aftercare” function – it also provides follow-up until the finalization of projects, in order to speed up its performance.

APIX is also linked to all the relevant institutions dealing with commercial agriculture in Senegal.

A10.5 Key Contacts

In addition to the local consultant (see A8.5), useful contacts will include: Public Institutions • Ministry of Agriculture, Livestock and Hydraulic

• APIX as mentioned Business Association • ONAPES (Organisation Nationale des Producteurs et

Exportateurs de Fruits et Légumes du Sénégal) which is one of

125

the Business associations of the major Senegalese fruits and vegetables producers and exporters

Development program

• PDMAS (Programme de Développement des Marchés Agricoles (The programme for the development of agricultural markets). PDMAS has been set up by the government in cooperation with the World Bank as an integrated programme for the development of agricultural markets aimed at accelerating growth within the agricultural sector and at contributing to poverty alleviation. PDMAS helps in set up an enabling environment for private investment by: − supporting the development of horticultural exports; − improving the conditions of market operation; − supporting the agribusiness producers and operators for

a better adaptation of products to the market; − developing private irrigation and land-related activities

Private • GAA (General African Food) which is a private company specialized in rice production in the Saint Louis area located in the North of the Senegal. GAA is also involved in agro pastoral activities with the Niacoulrab Farm near Dakar whose activities include farming, dairy farming and milk processing for the local market.

• GDS which is a company that is part of the “Groupe Compagnie Fruitière” a leading grower of fruit in the Africa-Caribbean-Pacific region partly owned by Dole (40 percent of company capital). GDS is producing off-season fruit and vegetables in the North of Senegal for the European export markets.

• SOCAS which is a Senegalese private company, subsidiary to 44% of MOULINS SENTENAC S. A. a flourmill company established in Senegal since 1944. SOCAS is a limited company and employs a hundred people while supporting more than 5,000 peasant families in the Saint-Louis region. SOCAS produces 10,000 tons of tomato concentrate en 2007. Its other products are tomato juice, green beans, onion seeds, dried tomatoes, canned vegetables, aromatic plants. To date, SOCAS exports 600 tons of fresh green beans and 300 tons of dried tomatoes by sea and air.

126

A11 SIERRA LEONE COUNTRY DOSSIER


None



18th Mar ManoCap

7 Spur Road

Freetown

www.manocap.com

Tom Cairnes Chef de bureau +232 76 766855 (local mobile)

+44 7866 317559 (UK mobile)

[email protected]

World Vision 39 Freetown Road, Lumley PMB 59 Freetown +232 22 234205/230725/233663

Tom Roberts Agricultural economist +232 76 715655 (mobile)

[email protected]

19th Mar Marika Enterprises 18 Garrison Street Freetown +232 227403/227010

Sahid Koroma Managing Director +232 76 301377

[email protected]

27th Mar NathanEME

3 Millharbour

London E14 9XP

United Kingdom

http://www.nathaneme.com/

Mark Thomas Director (Rural Development Practice) +44 (0)2075383111


• INVESTOR IN SIERRA LEONE, not dated, Sierra Leone Investment Promotion Agency


It is recommended that the potential investor first decides what kind of deal would be of interest in Sierra Leone, and thereafter to make a scoping visit. It would be very worthwhile making a detour to the offices of NathanEME in London, UK. They are on contract to the British government and charged with providing demonstrations of what the private sector can delivery in terms of social and economic development in Sierra Leone.

127

In country, a facilitated visit to the potential producing areas could then be made, before deciding on the nature and size of any interesting deals. On return to the capital, with or without the assistance of the Sierra Leone Investment Promotion Agency, the investor and/or any technical advisers should then enter into direct negotiations with the relevant ministry(s). As we saw in Main Text 4.7, deals are formalized on the basis of such negotiations. Discussions with NathanEME indicated that what government is looking above all else, are sound ideas from convincing investors. If that can be demonstrated successfully, the question of property rights etc apparently can be sorted out to everyone’s satisfaction.

A11.5 Key Contacts

Mr Oluniyi Robbin-Coker Special Adviser to the President on Foreign Investment 00-232-(0)76-633233 (it did not prove possible to Mr Robbin-Coker during the country consultations, but it did prove possible to discuss aspects of the enabling environment with him by telephone) Sunil Sinha or Mark Thomas NathanEME +44 (0)20 7538 3111 Sahid Koroma Potential partner for rice or oil palm deals +232 76 301377 [email protected]

128

A12 TANZANIA COUNTRY DOSSIER


Reginald Temu [email protected]



17th Feb Ministry of Agriculture Kilimo House PO Box 9192 Dar es Salaam

Mr Iddi A Shekabughi Economist

Private Sector and Investment Unit

+255 22 286 2078

[email protected]

Mr Mshama Jumanne Iddi Planning Department +255 22 286 2078

Mr Geoffrey Kireng Director of Extension

Extension Department

[email protected]

18th Feb Infenergy/kilombero Estates Ltd PO Box 23294 320 Toure Drive Dar es Salaam, Tanzania +255 22 260 0036 office

Mr Carter Coleman CEO

+255 784 154 617 mobile

[email protected]

Tanzania Investment Centre Shaaban Robert Street 9A&B PO Box 938 Dar es Salaam +255 22 211 6328-32 www.tic.co.tz

Mr Siegfried M Kuwite Research and Information Systems Manager

[email protected]

Ms Nakuala A Senzia Director – Investment Facilitation [email protected]

Mr Raymond P Mbilinyi Director – Investment Promotion [email protected]

19th Feb Pyrethrum Company of Tanzania (PCT) 208 Lukuledi Street – Regent Estate PO Box 8209 Dar es Salaam +255 22 277 2978

NCERA – Agricultural Development Cooperation Ltd 122 Kunduchi Industrial Cooperation Ltd PO Box 10221 +255 22 265 0850 Dar es Salaam

Widmel Mushi Executive Director of PCT

Direct or of NCERA

+255 754 261515 mobile

[email protected]

[email protected]

National Services HQ PO Box 1694 Dar es Salaam +255 22 278 0041

Major PM Lushika Director of Agriculture, Livestock and Fisheries

+255 786 082665

[email protected]

129


• TANZANIA INVESTORS’ GUIDES 2002: and beyond, March 2002, Tanzania Investment Centre

• AGRICULTURE IN TANZANIA, March 2002, Ministry of Agriculture, Food Security and Cooperatives

• PRIVATE SECTOR DEVELOPMENT STRATEGY FOR TANZANIA: final draft, not dated, economic and Social Research Foundation,

• TANZANIA INVESTORS’ GUIDES 2008: and beyond, not dated, Tanzania Investment Centre

• JKT FUTURE PROJECTS, Current, Tanzania National Service • PROCEDURE FOR OBTAINING TIC CERTIFICATE OF INCENTIVES, Current,

Tanzania Investment Centre


Once a potential deal has been identified on the basis of a scoping mission, the investor has two possibilities. One is to go it alone and register a company and enter into an arrangement with the local landowner directly, the other is to involve the services of the Tanzania Investment Centre (TIC) which is a one stop shop able to facilitate all of the steps necessary to implement the investment. This will involve the preparation of a feasibility study to include a clear statement of the project objective, information regarding the investor, details of both the foreign and local investment costs, sources of finance (including any loans – which must be detailed), sources of technology plus the usual financial and sensitivity analyses.

A12.5 Key Contacts

In addition to the local consultant engaged for the study, the following would be key contacts:

Mr Geoffrey Kireng Director of Extension Extension Department Ministry of Agriculture [email protected] Ms Nakuala A Senzia Director – Investment Facilitation Tanzania Investment Centre [email protected] Widmel Mushi Executive Director of PCT Direct or of NCERA +255 754 261515 mobile [email protected] [email protected]

130

A13 ZAMBIA COUNTRY DOSSIER


Henry Sicembe [email protected]

A13.2 Consultations


21st Feb Ministry of Agriculture

Henry Sicembe

22nd Feb Potential Local Partners

Mosterd Mugalla Entrepreneur with considerable ag. sector experience

+260 9777 8302/9676 83302 [email protected]

Friday Musukwa Associate of Mr Mugalla +260 9557 88448

FAO Viale delle Terme di Caracalla 00153 Rome Italy +39 06 570 55120

Tim Stephens Rural Infrastructure Engineer

Investment Centre Division

+39 346 6800120

[email protected]

23rd Feb Zambia Development Agency Privatisation House Nasser Road PO Box 30819 Lusaka +260 211 220177

Jessica M Chombo Manager, Investment Promotion +260 955 817525 mobile

Jessica@zda;org.zm

Private Sector Development

Ministry of Trade, Commerce and Industry

Ms Kayula Siyame Project Coordinator


None


Once a potential deal has been identified, which could be done with the assistance of the

Zambia Development Agency, or independently, it is then necessary to register with the Registrar of Companies and comply with the Companies Act No. 24 of 1995. The Company Act allows foreign companies to register with the Registrar of Companies as a foreign company within 28 days of setting up or acquiring an established place of business in Zambia. The established place of business of a subsidiary company

131

incorporated in Zambia is not recognized as an established place of business of the foreign company. The ZDA is able to assist with the all the necessary steps in its capacity as a one stop shop.

A13.6 Key Contacts

Key contacts for follow up visits would as far as the public sector is concerned be: Jessica M Chombo Manager, Investment Promotion Zambia Development Agency +260 955 817525 mobile [email protected] and for the private sector Mosterd Mugalla Entrepreneur with considerable ag. sector experience and deals to discuss +260 9777 8302/9676 83302 [email protected]