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3/12/2014 TechnoServe's experience in making markets work for emerging farmers in South Africa How innovative projects are learning by doing in real time Erika Schutze Monitoring and Evaluation Manager, TNS –South Africa TechnoServe’s mission • To work with enterprising people in the developing world to build competitive farms, businesses and industries. • Our success is measured by increased financial benefits for these enterprising people: changes in revenues of farms, businesses and industries, and new jobs and wages that are created. • This contributes to decreased poverty and increased resilience. 1 1 3/12/2014 Strengthening Market Systems by Addressing Market Failure • We work with individuals and businesses to address market failures – the constraints that prevent a market system from operating efficiently. • These constraints may include lack of skills, technologies, availability of information, market linkages, access to finance, infrastructure, governance or policies. We address market failures in three ways: • 1) Develop capacity. TNS focuses on developing the technical and business capacity of farms and businesses - to improve their productivity, efficiency and competitiveness. • 2) Promote market connections. We coordinate among market participants and connect emerging businesses and farms to capital, markets, networks, suppliers and qualified labour. • 3) Improve the business environment. We encourage self-sustaining economic activity by addressing the policies, information and incentives that help markets function better. • . 2 Theory of Change informs project design, goals A Market System Direct Market Players: Producers, buyers, sellers, consumers Suppliers of Supporting Goods and Services: Input suppliers, service provider, financial institutions Entities that Influence the Business Environment: Government, infrastructure providers, industry associations Business Solutions to Poverty Technoserve | 3 2 3/12/2014 Business Solutions to Poverty Technoserve | 4 Strengthening market systems • A market system is the network of buyers, sellers and other actors that come together to trade in a given product or service. • The strength of the market system is measured by the behaviour of the various market actors such as the adoption of technologies and best technical and business practices, accessing capital, founding a business and building contractual relationships. Positive changes in behaviour are what create increased revenue and new jobs • The participants in a market system include: ̶ Direct market players – producers, buyers and consumers who drive economic activity in the market ̶ Suppliers of supporting goods and services such as finance, equipment and business consulting ̶ Entities that influence the business environment such as governments (or policy-makers), regulatory agencies, infrastructure providers and business associations • TNS focuses on market systems that have ̶ 1) a clear opportunity – an unmet demand for a product or service, ̶ 2) the potential for inclusive growth, benefiting the poor in their roles as producers, entrepreneurs, employees, or consumers ̶ 3) the potential for scale – making substantial differences to significant numbers of families.. 5 3 3/12/2014 TNS M4P Approach • Recruitment of programme participants involves selection • Tailor the technical assistance (3-tier approach) • Matched funding and sourcing of financial services critical • Value chain development 6 Recruitment and Selection • TechnoServe believes that the selection process is vital in determining what stage of growth farmers are at, and what intervention they require. • Within ‘pro-poor’ space, segmentation is needed • Stringent selection criteria • Detailed farm evaluation scan (physical conditions and infrastructure, social conditions) • Identification of ‘entrepreneurial’ farmers who are ready to expand and start up operations suitable for commercialising • The standard selection process focuses on the 5 livelihoods assets/capitals; ̶ Natural Capital ̶ Physical Capital ̶ Human Capital ̶ Financial Capital and ̶ Social Capital 7 4 3/12/2014 Provision of Technical Assistance On Farm Support Off-site Training Access to experts 8 3-tier approach to technical assistance • The three tiers of farmer support model, is based on the understanding that when farmers are recruited into TNS farmer support programmes, they are often at varying stages of growth along the journey to full commercialisation • Farmers need different things at different times, so accessing TNS services is not linear • TNS approach is to provide support specifically to address human capital, financial capital and social capital gaps. The tools TNS uses are: ̶ Technical Assistance (TA) support, to address skills, and technical competence issues (Human Capital) ̶ Access to Markets (A2M) brokerage, which is about leveraging new relationships with end markets for the farmers products. (Social Capital) ̶ Access to Finance (A2F) brokerage which is about creating opportunities for farmers to access relevant financial services for their businesses and develop the appropriate relationships. (Social and Financial Capital) 9 5 3/12/2014 …3-tier continued Tier 1 Farmers • These farmers require, and access all the TechnoServe offerings, (TA, A2M, & A2F) at the same time. These are typically farmers receiving full support from TechnoServe programmes. Tier 2 Farmers • These farmers typically are in programmes at the early stage of their development, and these farmers receive Technical Assistance (TA) from our business advisors, and also receive markets facilitation, (A2M). In this instance TechnoServe is not actively involved in brokering finance for these farmers. Tier 3 Farmers • These are what we could call light touch farmers, where we are not providing any formalised technical assistance, and access to finance, but rather benefit from our markets facilitation (A2M). Farmers will move between the tiers in the life of the projects as their needs and TNS capability changes in the particular site. 10 3-tier approach to technical assistance Selection Support Success Optimal Production TA Tier 1 Farmer Tier 2 Farmer A2F access to market facilitation Tier 2 access to technical and market support Tier 1 accesses all services Financial Resilience A2M Tier 3 Farmer Tier 3 Formal Market Participation TA A2F A2M On-farm advisory and offsite training Access to grants, dev. and commercial finance Formal contracts, local trading platforms Competitive Businesses Prod Mark R/c Sustainable Jobs 11 6 3/12/2014 Access to finance • Sectoral Funds that increase access to productive access Interest Free Finance • Input finance supplied by target markets and ED funds • Commercial facilities based on track record developed Grant Finance Full Commercial Finance 12 Match funding to lifecycle of the farm • Minimal amounts of funding are not enough to help a farmer • High input costs and farmer waits 2 – 3 months before earning money on harvest • Micro-finance interest rates are not in tune with this cycle and more suitable for vendors who earn money every 2 weeks • Commercial loans offer lower interest with longer payback period • Proper record keeping practices to prepare farmers for loan application process (eg: Pastel accounting, management companies) • Access to finance ̶ 1) grants ̶ 2) developmental finance ̶ 3) Mix of grants and developmental finance ̶ 4) Commercial finance ̶ 5) Credit guarantees 13 7 3/12/2014 Access to alternative marketing platforms A Value Chain Solution for the Emerging Farmer E-Fresh, Non Profit Company Central Business Unit Support License Services Fee Technical and Financial Support AgriHub, Pty Retail Sales Local Produce Sales Crop Payments Emerging Farmers Commercial Farmers Legend Financial Product Services Access to new marketing platforms – E-Fresh • The system consist of a cluster of agri-hubs managed by a CMU which consolidate and consistently supply branded fresh produce, at fair prices, to retail, informal traders and to feeding schemes: With Farmers: Whose production is consolidated according to market needs; Who have access to a place where their products can be assembled, packed and distributed; Whose produce will be branded. Who will receive TA And Retail: That will have a central place to purchase produce produced by black farmers; That can contribute to consolidated development. Local and “Bakkie”traders: Who will have a central place to purchase produce for local distribution and exports. The Local Community: Where entrepreneurs can develop farming related businesses; Who will have job opportunities; Who will benefit, since they will pay less for fresh produce in general. 15 8 3/12/2014 E-Fresh Value Chain Vision To be the most consistent, efficient and fair consolidated distributor of fresh produce in and from rural Southern Africa to end users Philosophy The market comes to us-we do not go to the market Markets “Bakkie” traders, local traders, commercial packhouses, retail, hospitals, correctional services and feeding schemes Goals (1) Always have what the customer is looking for, at fair prices (2) Buy from local, emerging, commercial, and traditional farmers as much as possible (3) Build entrepreneurship on all levels (4) Create a strong brand The Result (1) Retail is able to improve BEE scorecards but still buy at a centralised location (2) A consolidated structure is created that could stimulate the development of the agricultural sector (3) Entrepreneurs who are responsible for developing the enterprise at all levels (4) Food security in rural communities 16 Gender in farming in South Africa • Reaching women is vital to achieving TNS' vision. Women have less education and access to inputs and capital necessary to grow a business. With similar access to productive resources in the agriculture sector, for example, women could increase farm yields by 20-30%. 60 Female 41% 50 Male Female Male 59% 40 Male 30 Female 20 10 0 KZN North West Limpopo Mpumalanga 17 9 3/12/2014 Succession – young adults are shying away from farming in favour of moving to cities so women are the farmers of the future by default Men are economically oriented to wage earnings, leaving women in rural areas in South Africa 18 Questions?? 19 10