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«Making money farming in Manica Joseph Hanlon & Teresa Smart j.hanlon 21 May 2013 I earn more from my pigs than from my ordinary salary, a ...»

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Small farmers or big investors?

The choice for Mozambique

Research report 2

Making money farming in Manica

Joseph Hanlon & Teresa Smart

j.hanlon@open.ac.uk

21 May 2013

"I earn more from my pigs than from my ordinary salary," a prominent academic told us. Others

have left government and private jobs for commercial farming. In stark contrast to a research visit

seven years ago, some Mozambicans now see that money can be made from farming. In Manica

province there are probably several hundred small and medium commercial farmers (often called "emergent farmers").

There are two keys to the growth in the number of emergent farmers. First has been hands-on management and step-by-step progress. Even the academic tends his pigs every morning before he goes to work. Second has been outside support, often linked to contract farming.

But two groups are failing. So far no large foreign agricultural investors have succeeded in Manica.

Prio Foods, with 24,000 ha and €6 million investment, was the latest to fail, in January -- following the trail blazed by Sun Biofuels and others. Pouring in money and smart foreign managers has not, so far, been a recipe for success. The other group who are not productive are the elites who grab high quality land along the main roads and do not use it.

A few hundred small and medium commercial farmers is tiny compared to neighbouring Zimbabwe.

But it reflects a change in attitude, and perhaps the neighbour's influence, with some of the new farmers going to Zimbabwe for meetings or to buy supplies. It also reflects a growing culture of planning and reinvestment. As we note below, there are huge problems of lack of capital and limited support for small and medium farmers. But the growth of emergent farmers is significant, and could point a way forward.

Manica province is one of Mozambique richest agricultural areas. But wars with white ruled South Africa and Rhodesia from 1976 to 1992 hugely disrupted agriculture and commerce. Policy in the post-war period was that farming was for the private sector and that state intervention would disrupt the market. There were short term interventions by aid agencies, but the lack of consistent and structured support meant post-war farming recovery was slow.

No outside solution

The problems confronting agriculture and poverty reduction seemed overwhelming and intractable:

insecure markets, inadequate inputs, little technical assistance, and no credit and investment. The first response from government and others was to attract foreigners with skills and capital. After Zimbabwe's land reform in 2000, Mozambique welcomed white farme

–  –  –

The first problem is attitude. One of the remaining white Zimbabweans said "big companies with their expatriate culture simply don't understand. They think they can buy success." A Mozambican farmer said you cannot start big. "You have to grow slowly with the business and the farm. It takes time." Another comment was that US and European investors have a fundamentally racist and neo-colonial attitude – that white experts can fly in and do things which Mozambican farmers are incapable of doing.

The second problem is much lower support than was offered to farmers in the past, and is not specific to Mozambique. The Economist recently (13 April 2013) reported that of 18 white Zimbabwean farmers who settled in Nasawara state, Nigeria, seven years ago at the invitation of the then governor, only one family is still there. The survivor, Bruce Spain, explained: “There’s just no organised marketing here. No marketing boards, nothing – in Nigeria you’re on your own. In Zimbabwe you knew what your pre-planting price was – and the government guaranteed to buy what you grew. There are no support structures…In Zimbabwe you’d send a soil sample to the fertiliser company and they’d tell you what sort would be best. There’s nothing like that here.” And there is no credit so it is hard to find investment capital. In our 2008 book Do Bicycles Equal Development in Mozambique? we wrote a chapter "The Manica Miracle is Over" which pointed to Zimbabweans failing in Manica for exactly the same reasons. And two of the white Zimbabwean farmers remaining in Manica made the same point: In colonial Rhodesia "there was 20 year credit at 3% interest for irrigation and other infrastructure, and 5 years credit for machinery. There is nothing like that here in Mozambique." Indeed, policy favours foreign investors over domestic small and medium companies; UNCTAD's Investment Policy Review for Mozambique calls for "reform of fiscal policies which currently favour mega-projects." (UNCTAD/PRESS/PR/2013/14 2 May 2013) Nevertheless, at a Manica province investment conference in South Africa (Notícias, 29 April 2013), the investors said Manica would need to offer even more incentives if they expected foreign investment.

Struggling against a climate in which white Zimbabwean farmers and European investors fail, and which South Africa investors say is unattractive, it is all the more remarkable several hundred Manica commercial farmers are succeeding. In the rest of this paper, we show how it has happened, point to important changes over the past six years, and highlight ways forward.

Manica's emergent farmers Peter Waziweyi, known to everyone simply as "Senhor Peter," has 80 ha and his main crop is litchis – and litchi seedlings for other farmers. His profit last year was over $30,000, and he now has two tractors. He is a Mozambican with a business degree from the University of Zimbabwe. He later worked for an NGO in Chimoio, but in the late 1990s took up farming in Catandica. Now, he says, "I am a businessman; I want profit and income". Sr Peter is founder of the Catandica Emergent Farmers Association, which now has 10 members.





Jaime Time Chilumbana had 30 hectares near Catandica on which he produced maize seed, which gave him a profit of almost $10,000. This year he has switched to 10 hectares of soya and 10 ha of maize seed, which should give a similar profit. With his profits he has invested in a maize mill and opened a small rural shop.

Antonio Xavier had worked on a state farm in the 1980s but after the war obtained land near Sussendenga and began growing tomatoes for sale in Chimoio and Beira. He realised that tomatoes sold for five times as much in Beira as in Sussendenga, and that if he joined with other producers they could profitably hire a lorry to go to Beira to sell their crop. Seven years later, the association Siwama is a collection of 53 associations with more than 1000 members. And Xavier is both president of Siwama and the largest farmer, with 70 ha of maize, soya, tomato and cattle.

–  –  –

There is no typical emergent farmer. Many are older and have experience as workers in other sectors, but some are young and some are recent graduates from the new agricultural training institutions. Manica borders Zimbabwe and there is extensive movement across the border;

experiences of, and attitudes toward, small scale commercial farming in Zimbabwe seem to have had some influence.

And there is no single crop. Emergent farmers we interviewed were growing soya, seed (maize and soya), litchi, bananas, vegetables, pigs, and goats.

Undercapitalisation and lack of credit is obvious. There are a few tractors. South of Chimoio, near Sussendenga, animal traction is quite commen; north of Chimoio near Catandica, animal traction is used much less and most land preparation is done by hand (with a hoe – enxada – and often with hired labour), even of quite large farms.

Siwama Special note should be made of Siwama, the association based in Zembe, south of Chimoio, mentioned above. It groups 53 associations with more than 1000 members, and which is important at four levels. Some of its members are emergent farmers, the association itself is a producer, by bringing together large and small farmers it is creating important collective marketing power, and it has come into conflict with large investors.

Only founded in 2006, the association is largely for marketing and input supply. It sells maize and soya from its members to Abel Antunes for chicken feed, and to the World Food Programme. This year it has an Mt 530,000 ($18,000) loan from Banco Oportunidade for working capital, so it can pay cash to its members.

Siwama's main project now is promoting soya production, with the assistance of Technoserve. It is producing seed for its members and offering the seed and fertiliser on credit. Last year it expanded seed production too fast. Threshing soya had traditionally been done by hand which takes a long time, and the unthreshed seed was affected by a fungus which reduced germination. So Siwama bought a thresher, to use first for its own soya, and then for members. It has also bought pipe and pump to irrigate the seed production. Siwana seems to be learning from its mistakes and staying together.

Siwama explicitly encourages farmers to increase their size, and prioritises larger farmers with seeds, equipment and marketing.

In an era in which government and many donors implicitly prioritise large foreign investment, Siwama represents an alternative. And because it is working in an area with good land, it has twice

been harmed by large foreign investors:

• LAND CONFLICT: Siwana wants to expand its seed production and 45 ha just south of Sussendenga had been identified; Siwama was in the process of obtaining the occupancy licence (DUAT) and actually began planting last year, when suddenly the land was instead allocated as part of a 183,000 ha package for the Portuguese company Portucel to plant trees to make paper bags for Europe. There was no public discussion about the alternative uses of this land, nor about allocating good farmland for trees.

• FAILURE OF INDIRECT SUPPORT: Using aid money to support large investors to work with Mozambican farmers is part of the strategy of several donors. AgriFuturo is a USAid project in Mozambique and one of its flagship programmes was to work through a large Portuguese investor, Prio Foods, to support it to work with emerging farmers. Farmers, particularly Siwama members, with more than 10 ha, were to be assisted by Prio and Technoserve for mechanisation and planting. But Prio collapsed and some USAID funded Making money farming in Manica - Joseph Hanlon & Teresa Smart - 3 machinery is still locked up in a Prio warehouse. Siwama showed its power on the ground by forcing a collapsing Prio to plough some land before its final demise. Would it not have been more productive for AgriFuturo to have simply funded Siwana? Why did it need a foreign agribusiness as intermediary?

Finally, Siwana points to an important exception in Manica aid history. It is interesting how few of the aid projects that we saw in our 2006 visit made any impact or left any trace. One exception was a USAID-funded joint project of three US NGOs, ACDI/VOCA, CLUSA and TechnoServe. Siwama president Antonio Xavier said it was these three NGOs that first taught them how to calculate costs and determine if they were making profits, which he underlines as absolutely central to their progress, The NGOs then helped them form the association. Finance Committee head Rui Calcov, himself a former textile mill worker who now has 50 ha, pointed to the importance of the joint project sending six of their people on a visit to successful associations in Nampula province.

Siwama is not the only successful association in Manica. Many international NGOs have tried to organise groups, often failed because they were organised in isolation, in the belief that organisation itself is good. But where groups have a clear benefit because they are linked to markets and value chains, more become viable.

Everything is missing For the would-be emergent farmer, the challenges are daunting. Markets are lacking and prices low. The farmer carries all the risk of weather and uncertain markets. Inputs are expensive and hard to find. There is little technical support. And there is no rural credit, either for infrastructure such as irrigation, or for inputs such as fertiliser. Government policy has been to support large outside investors, who are expected to bring everything with them – markets, technology, inputs, and money. In such unpropitious circumstances, it is remarkable that there are several hundred emergent farmers in the province.

Two fiscal problems also face farmers. The government has kept the Rand exchange rate low (currently Mt 3.2 = Rand 1) because most Maputo food is imported from South Africa and when the rate was allowed to appreciate and food prices rose, there was a riot – but the low exchange rate makes it very hard for Mozambican farmers to compete with South African imports. This is linked to the other issue – Mozambique is still so poor that the price of food is what matters and the number of people who will pay extra for higher quality is very small. Thus there are very few niche markets for more expensive products.

Contract farming has been used in Manica since 2000, and could be an important answer to some of these constraints. Under contract faming, a contract company agrees with individual producers or a group that the company will provide inputs, technical assistance, and sometimes ploughing, on credit. The farmer, often known as an "outgrower", must sell their crop to the contract company, which then deducts the costs of the inputs and services. But, most importantly, it is a guaranteed market.

Key to the contract relationship is shared risk. The contract company spreads its risk across hundreds of producers and needs to invest substantially less than if it produced the crop itself. But the contract company provides credit and a market, which reduces the risk for the producer.

In Mozambique, contract farming has been used for decades in cotton and since 2000 for tobacco.



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