Download TechnoServe`s experience in making markets work for

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.
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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.
• .
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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
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Business Solutions to Poverty
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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..
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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
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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
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Provision of Technical Assistance
On Farm
Support
Off-site
Training
Access to
experts
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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)
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…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.
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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
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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
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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
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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.
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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
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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%.
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Female
41%
50
Male
Female
Male
59%
40
Male
30
Female
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0
KZN
North West
Limpopo
Mpumalanga
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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
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Questions??
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