securing rural livelihoods through inclusive business models(ibms) lessons from uganda

Ministry of Agriculture, Animal Industry and FisheriesVegetable Oil Development Project – Phase II

1

Securing Rural Livelihoods Through Inclusive Business Models(IBMs)Lessons from Uganda

26th -27th April 2013

Presented by: Connie Magomu MasabaProject Manager

At the PAP/EALA Seminar in Kigali, Rwanda

Inclusive Business Models (IBMs)

involve close working partnerships with smallholder farmers and communities,

share value among the partners.

Include smallholder farmers in mutually beneficial business relationships with clear enforceable agreements

Ministry of Agriculture, Animal Industry and FisheriesVegetable Oil Development Project-2

2

Recent developments in the agric sector

Increasing interest in Agriculture by Private sector- FDI and local entrepreneurs Governments slowly increasing investmentSome banks getting interested in lending to sector

Ministry of Agriculture, Animal Industry and FisheriesVegetable Oil Development Project

3

Role of Smallholder farmers

The approximately 500 million smallholders are main investors in agric. in developing countries. Smallholders support a third of the global population,produce up to 80 per cent of food in t developing world.


4

Smallholder needs for effective contribution

secure land and natural resource rightsbetter access to inputs, technical expertise,agro-processing and other off-farm opportunities,Financemarkets.Effective Partnerships /involvement in Agric. business


5

Inclusive Business Models- a Ray of Light

Also referred to as responsible investments Recognize role of smallholder farmers as active partners in agribusinessMutually beneficial and sustainable partnerships make good business senseTake into consideration social, environmental and economic soundness of investments


6

Characteristics/properties of effective IBMsOwnership

Voice

Risk

Reward


7

Uganda - Oil Palm Development as an IBM

PPP with smallholders as effective partnersFunded by IFAD, GOU, Private sector partner (Bidco) and farmersNucleus estate/Outgrower scheme modelImport substitution effort- Palm oil most imported agricultural product in Uganda (USD 177 million in 2011)


8

Uganda- Oil Palm Devt.Oil Palm highly productive,- 4tons of oil per Ha per year harvested monthly so giving farmers high and steady incomes over 25yearsProject meets the needs of the smallholder farmers to effectively contribute to developmentGovernment has effective role in the partnership with farmers and private sector partner


9

Establishing the partnershipAgreements in place with secured interests of all partnersTransparent process of getting private sector partner- advertised the tenderSensitization and involvement of the communities from start of projectOwnership, voice, risk and reward clearly exhibited in partnership


10

Ownership:Farmers own 10% of investment and Private sector own 90%Farmers own their own plantations (3,500 ha) while Private sector owns 6,500 ha of oil palmsOver 1500 farmers participating as smallholders with about 600 women farmersSome farmers supported to acquire land for production


11

VoiceWith 10% shareholding, farmers have 2 positions on the board of the agribusinessFarmers represented on the Oil Palm pricing committeeFarmers represented on the services cost panelFarmers organised in farmer organisation with leadership democratically elected right from grassroots (units, to blocks to district level)Hold an annual general meetingFarmers consulted on issues that affect them, before implementationWomen take at least one third of the leadership positions


12

Risk SharingPrice fluctuation due to changes in international prices. Prices tagged to international price and determined thru a pricing formula- farmers aware.Farmers access loans for production that are recovered from their sales. Risk on non performance secured by group guarantee arrangementsPrivate sector absorbs palm oil market risk- has to buy all farmer produceGovernment absorbs risks of failure of oil palm performance due to natural causes


13

Risks cont’dFarmer lands not security for loan hence confident of their land- plantation is security in itselfFfb inspector stationed at the mill to ensure no unwarranted rejections of farmers produceDemand for palm oil still high in the region and currently met by importsFarmers get import parity price


14

RewardIncreased incomes for farmers(USD150 per acre per month for mature plantations Assured of a market for producePricing formula assures farmers of a good price for ffbValue addition (mill and refinery in place for processing)Access to technical know how, improved seedlings and inputsImproved road network (750 km of road network)Employment creation (2000 employed on nucleus estate, 500 in farmer gardens and over 1500 directly as farmers


15

Reward Cont’dIncreased investment in agricultural sector through FDI (USD 120 million)New income generating activity hence less dependency on lake and forestsFarmers have a say in decisions around price and servicesFarmers in some cases receive services from nucleus estate- land clearing, planting, managementTax income for government form new industry- Refinery and mill


16

Impacts of ProjectEarly results

Improved land rights Increased incomesCreation of employmentimproved infrastructure facilities and services


17

Lessons Learnteffective partnership between rural smallholders and the private sector possiblegovernments play a positive role choice of the business partners- must have a heart for the rural peopleinclusion of smallholders in all decision-making processes importantbuilding partnerships takes time


18

Role of Parliamentarians In IBMsEnsuring a conducive business environment for both the investors and the farmersLegal framework that supports IBMs/PPPsMonitoring of activities to ensure win win situation for all the players in the businessFacilitate confidence building among the partnersSupport efforts that bring investments into the Agricultural sectorSupport joint venture with Government as an active investor in the interim, then Government can divest its shares


19

ConclusionBusiness models that support local farmers are more promising and make good business senseFarmers have proved to be highly dynamic and responsive to market forcesSuccess of IBMs depends on the level of ownership, voice, risk-sharing and benefit-sharing between partnersRequires sustained support by a range of service providers (government, civil society, private sector)


20

Finally,

Rural people should be:

part of the solution for global food security

a priority for governments, the international development community and any other investors.


21

securing rural livelihoods through inclusive business models(ibms) lessons from uganda

Documents

animal industry

rwandaministry of agriculture

sectorministry of agriculture

effective partnersfunded

good business sensetake

sustainable partnerships

private sector fdi

agric sector