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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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Matanuska ripens the bananas and exports, mainly to Zambia. Clyde-Wiggins assumed the domestic market would work that way. But it did not. Instead he discovered the women traders preferred to come to him, and choose and cut their own bananas. The banana "stem" contains up to 20 "hands" of bananas – consumers normally buy a "hand" in which each banana is a finger. But Clyde-Wiggins found that he had 40 or more traders coming to the farm each day, and demanding to choose and cut their own stems and take responsibility for ripening. He sells bananas at the farm gate at Mt 5/kg, and the traders can sell for Mt 10/kg or more, The economics are good, even for the ingrowers. He estimates that it costs $10,000/ha to set up a plantation and then $5000/ha/year to maintain it – bananas need daily water and fortnightly fertiliser. A banana tree takes 19 months to mature, which means the set-up costs are substantial.

But the banana tree will produce for 8 years. Production is about 60 tonnes/ha which at Mt 5/kg is $10,000/ha, which gives a profit of roughly $4000/ha. Initially, Frutimanica system allocated 0.5 ha per farmer, but the best farmers have shown they can do more.

The women traders coming to the farm have already had an unexpected impact on the ingrowers.

The traders choose which banana they want, and they choose the fatter bananas from the farmers who have best managed the water and fertiliser. The others complain, but Clyde-Wiggins stresses that commercial farming is for the market, which decided. A harsh lesson, but being learned by the best of the new farmers. The plan is to move the 9 ingrowers on his land to become outgrowers on 7 Data in the baseline survey is inconsistent and admits that in some cases yield reports may be exaggerated. This is our guess based on an interview and the baseline survey.

Making money farming in Manica - Joseph Hanlon & Teresa Smart - 8 neighbouring land, and extend the irrigation system to include them, expanding at the rate of 15 hectares per year. More ingrowers would then be taken on, slowly expanding the production network.

Meanwhile, Manica is one of the best places in the world to produce litchi, but it has a very short season, only November and December. By coincidence, this is the period when banana production falls in Manica (but not in Nampula, which produces all year). So the two crops go together. ClydeWiggins already has 1000 trees, and – again totally unexpectedly – traders wanted to come and pick their own litchis. At Mt 35/kg, the price is low compared to Mt 90/kg in Maputo, but profitable for the farmer.

So far litchi production is entirely for the local market, but with a growing number of producers and higher volumes, European companies are now expressing interest. Bananas and litchi underline the importance of a local market before trying to export. Once systems are working, the best fruit can go for export, the next quality for the local market, and damaged fruit can be pulped and used for juice. Producing purely for export is much more difficult and riskier.

Xicocha Antonio Manjate is a former Semoc manager and is now a university teacher with a 400 ha farm, Xicocha, which he is developing as a base for in- and out-grower contract farming for soya and hybrid maize. He ploughs, provides seed and buys the production. He is using animal traction for ploughing, seeding, and weeding. He charges Mt 2400 ($80) per hectare for ploughing.

Manjate points to two keys to success. His experience at Semoc taught him to control costs. And he stresses the need to make friends with his neighbours, which means he does not need guards and does not have thefts.

Panda Farms Lukman Hassam comes from an Asian-origin trading family, and he started trading in oil and oilseeds for his father's oil press. His father also has a farm, and Lukman decided to produce his own oilseed. He has 36 larger outgrowers (with more than 5 ha) and 150 smaller ones. His main products are soya, sesame, and sunflower. Jaime Time Chilumbana, cited above, is one of his large outgrowers.

Lukman produces seed on Panda farm and supplies seed and some ploughing to contract farmers (charging only Mt 1250/ha - $40), sprays for contract sesame growers, and lends money to pay for day labour (ganha-ganha). Hassam does not charge interest to his outgrowers. His working capital is provided by a Mt 500,000 ($16,000) soft loan – interest is only 12%, one-third of what is normal for farm loans in Mozambique.

Soya is known to be highly profitable. Sesame can also be very profitable, but it is a difficult crop with precise timing for harvest and drying. Sesame sells for Mt 30/kg and production is about 700 kg/ha. With a sale price of Mt 21,000/ha and production costs of Mt 5000/ha, it can earn substantial profit is harvested and dried correctly. However sunflower had proved less profitable because the oil content of locally available seeds is too low.

Tsetsera Johan Furie, one of the three remaining white Zimbabweans, is a pig farmer with his own butchery in Chimoio, where he says he sells 1 tonne per week. He has only recently started with contract farming and now has a separate building with 8 pig pens, each of which can hold 20 pigs. Each is managed by a different person, who receives 20 weaned piglets. Furie then sells the fully grown pigs from his butchery. So far this is an "ingrower" project, with people selected by the local chief.

Furie stresses that management is key, and admits that the chief's pigs are better than his. The next step is for these ingrowers to become outgrowers with 80 pigs each, spaced in such a way that there will be a steady flow of pigs through the butchery. There is an issue, however, of whether local production can compete with cheaper imported pork from South Africa.

9 Making money farming in Manica - Joseph Hanlon & Teresa Smart Markets and value chains Another key aspect of the work of AgDevCo and the Beira corridor has been building markets and

value chains. It is working with:

• Moz-Agri, to become a major goat processor, with a $150,000 abattoir built on a five year loan. Electricity reaches the farm because of a Danish rural electrification project. It currently slaughters 220 goats a week and sells 8 tonnes of frozen meat per month to a Maputo trader. So far, all goats are bought from the surrounding community, although it is beginning to also raise its own goats. Kalahari Red goats have been introduced to raise the breeding stock in the community, which has also been taught how to fatten and select the right young goats. Three local producers have also became large goat traders, selling to Moz-Agri.

• Cervejas de Moçambique (SAB Miller) to buy maize for Chibuku beer and cassava for Impala beer.

• Tropigalia, Mozambique’s largest distributor of branded food products, to sell high quality honey under its Gourmet brand.

• Sumo+Compal, a Portuguese company8, which on 22 May 2013 opened its €8 million factory in Boane, near Maputo. It packages fruit juice made entirely from imported concentrates. The plan is to create a pulp plant, perhaps a portable plant which could be brought to producers in season, and produce pulp which would have a much lower volume and longer shelf life, and could be shipped to Boane to replace imported concentrate.

• SóSojà, which produces soya milk and yogurt. Lucas Mujuru is a former Coca Cola employee and has received assistance in 2009 from Adipsa (a now closed NGO) and AgDevCo now to buy machinery. To improve marketing, he buys plastic bottles and packaging materials in Zimbabwe. And he is supplied with soya by his own farm, and now a network of outgrowers.

Money, machinery and time Lack of money and machinery are the biggest constraints for the new small commercial farmers. It is obvious they are undercapitalised and cannot find finance. AgDevCo's mix of loans and investment range from $50,000 to $400,000 and there is no equivalent source of domestic finance for agriculture. Start-up costs are high. ECA picked a place close to an electricity line, but the connection still cost $36,000. Irrigation costs several thousands dollars per hectare and a small dam can cost $100,000. Meeting modern food hygiene standards requires relatively expensive processing machinery and environmental conditions. Tree crops such as litchi, mango and macadamia nuts require three years before they begin to be productive. AgDevCo shows what can be done, but it remains small. Many other countries have land or agricultural banks providing long term subsidised credit, and it is hard to see how domestic commercial agriculture can develop in Mozambique without such finance.

Serious commercial farming will require mechanical ploughing to allow expansion of area and irrigation to deal with variable rainfall. Both need money and technical support that is not available.

Tractors are currently so expensive that only a few farmers can afford them. Power tillers are increasingly used in other countries for ploughing and weeding and at $5000 cost much less than four-wheeled tractors which cost $15,000 and up. The World Bank in a recent report on Tanzania9 notes that "Mechanization plays a critical role in agriculture commercialization" and that the number of tractors is actually falling in Africa, while it is increasingly sharply in Asia. It points to a Tanzanian government programme with farmer groups that in two years provided 3,562 power tillers and 169 tractors to groups which paid only 20% of the cost.

8 90% owned by Sumol Comal Portugual, which is in turn controlled by Refrigor. The other 10% is held by Mozambican companies Soico (O Pais, STV) and Tropigalia (both, in turn, run by Portuguese entrepreneurs settled in Mozambique for more than a decade).

9 Agribusiness Indicators: Tanzania, World Bank, November 2012.

Making money farming in Manica - Joseph Hanlon & Teresa Smart - 10 But the answer is not simply to hand out tractors, because it is difficult to find spares and mechanics. In places like Catandica and Sussendenga there is a need for a service and repair centre. It also might be more sensible to offer contract ploughing. In a classic chicken-and-egg problem, the private sector will not move in because there is no market because there are so few tractors, so groups do not buy tractors and tillers because they cannot be maintained. Providing the start up finance and initial subsidy for the first couple of years would be an ideal project for an aid agency.

Animal traction is common in Manica and this could be expanded, but again needs training and veterinary services. And irrigation is more than just handing out a few pumps – it is teaching people how to manage water, and having someone who can repair pumps and motors. Diesel irrigation is too expensive, so there is a need for electricity connections. And there is no long term low interest credit for tillers, tractors, pumps, and electricity lines. Undercapitalised small commercial farmers simply cannot find the money to expand.

With government and most donors still reluctant to support small commercial agriculture and small agribusinesses as part of the value chains, big foreign investment may seem the easy way to promote agricultural development, because foreign investors are expected to bring everything with them. But they expect very high rates of return, create relatively few jobs, and in Manica province large scale foreign farm investment has so far consistently failed. In contrast, there are several hundred small commercial or emergent farmers in the province and the number is increasing. The expansion is largely in response to better markets and contract farming opportunities.

Mozambique's staple food crop maize is not profitable for small commercial farmers (in contrast to neighbouring Zimbabwe), so emergent farmers are producing soya, sesame, sunflower, bananas, litchi, pigs, goats, cattle, rabbits and other commodities.

Filipa Carvalho Serfontein, the Mozambican partner of Moz-Agri, points to the failure of the foreign investors that want to start big and move quickly. She stresses that the lesson of the successful farmers is that "you have to grow slowly with the business and the farm. It takes time and you need to work closely with local people."

So the question for government and donors is: Does Mozambique keep looking for foreign investors, in the hope that some will finally get it right? Or do they support the small commercial farmers who are showing that they know how to make money farming? Support for smaller Mozambican commercial farmers is not easy – it will be complex and many new farmers will fail.

But in a climate in which South Africa investors demand even more incentives to invest in Mozambique, is it time to looks more closely to emergent Mozambican farmers who can make better use of such incentives?

Making money farming in Manica - Joseph Hanlon & Teresa Smart - 11

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