Presentation on theme: "Feasibility Study of the Cotton Value Chain Revival Subprogram (CVCRS) for Mozambique República de Moçambique Ministério da Agricultura Instituto do Algodão."— Presentation transcript:
Feasibility Study of the Cotton Value Chain Revival Subprogram (CVCRS) for Mozambique República de Moçambique Ministério da Agricultura Instituto do Algodão de Moçambique
The Projects 2 14 projects were designed to implement the CVCRS. The projects concentrate on cotton production. IAM is the main driver for CVCRS implementation. Significant capacity building is required. Ref Nr TitleDuration - Years Total Budget (in USD) 1- Development of a Cotton Research center of Excellence (Result 1.1) 1035,975, Development of a Seed Cotton System (Result 1.2) 310,487, Establishment of Communitarian Input and Services Suppliers (Rural Traders)(Result 1.3) 7946, Technology Transfer and Training of Extension Officials and Producers (Result. 1.4) 1024,428, Development of Advanced and Commercial Cotton Producers and Farmers (Result 1.5) 103,040, Increase the capacity for land preparation (tillage) (Result 1.5) 1010,402, Environmental Management, Decent Work and Compliance with Health Standards (Result 1.8) 105,448, Development of a National Fiber Classing System (Result 2.1) 63,580, Development of a System for Collective Cotton Trade (Result. 2.4) 103,169, Development of Agrarian Insurance and a Mechanism for Stabilization of Seed Cotton Price (Result 2.5) 105,010, Promoting Cotton Processing for Hospital Use (Result 3.1) 31,190, Promotion of Artisanal Textiles (Result 3.1) 102,314, Capacity Building to IAM, AAM and FONPA (Result. 4.3) , Financing Facilities for the Cotton Value Chain (Cotton Financing) 102,400,000 TOTAL118,275,183
CVCRS Economic Feasibility - Impacts 3 For the CVCRS we have calculated the contribution of the program to: Gross Domestic Product (value added to the national economy); Impact on capital formation; Employment creation (new jobs - person years): o construction phase; o operational phase – skilled, semi skilled and unskilled. Poverty alleviation.
CVCRS Economic Feasibility 4 Impact indicators of CAPEX expenditureTotal impact Impact on Gross Domestic Product (GDP)US$ 1,5 billion Impact on capital formationUS$ 2,75 billion Total impact on employment66,957 jobs Impact on skilled employment12,541 jobs Impact on semi-skilled employment24,719 jobs Impact on un-skilled employment29,696 jobs Developmental impact for the programme: (Total impact = sum of direct, indirect and induced impacts)
CVCRS Economic Feasibility 5 Combined impact Total impact US$ (million) Agriculture Manufacturing28.62 Financial and business services63.31 Commerce Total Economy GDP impact by sector: Impact Income (US$ million) Low income households229.1 Medium income households431.3 Potential poverty alleviation: Developmental impact for the programme: (Total impact = sum of direct, indirect and induced impacts)
Project 1 - Development of a Cotton Research Center of Excellence (CIMSAN) 6 Project implementation will address the main causes of low cotton yield namely: o Poor cotton seeds; o Poor soil management; o Poor cotton pest control. Research Sections to be CreatedResearch Topics to be Tackled Cotton Breeding Breeding Techniques Cotton Amelioration Cotton Varieties Purification and Maintenance Adaptive trials Varieties Zoning Transgenic Cotton Cotton Agronomy and Business Economics Soil Management Planting Techniques Farming Systems Seeds Preparation Agro business Cotton by Products Plant Protection Investigate main cotton insect protection techniques Investigate on main cotton diseases protection techniques Investigate on main cotton weeds protection techniques Investigate on most effective and economic pesticide combinations
Project 1 - Development of a Cotton Research Center of Excellence (CIMSAN) 7 This is a non income generating project: The total budget for the project over 10 years is US$ 35,975,862; Project success relies on attracting the right personnel. Higher remuneration than current Government salary scales may be required. Impact may increase budget to US$ 59,675,832. This is a pivotal project that drives the impacts for all other projects. Staff Number of Persons PhD Researchers15 MSc Researchers14 BSc Researchers21 Service Agents30 Total80
Project 2 - Development of a Cotton Seed System 8 Project implementation will provide timely quality certified seed to farmers, thus increasing their yields. A seed company must be established by private sector: o 5 production units in cotton producing regions; o Genetic material to be provided by Cotton Research Center of Excellence; o Company will focus on seed multiplication, ginning, seed preparation and distribution; o Distribution of seeds directly and/or via rural traders.
Project 2 - Development of a Cotton Seed System 9 This an income generating project: Three alternatives were investigated; Preferred alternative is Commercial investment propagating own seed: - Better return on investment: o Total investment of US$ 10,487,369. o Cumulative cash flow after tax over 10 years is US$ 22,6 million. o Breaks even in year 3. o Internal Rate of Return (IRR) is 54.8%. o Net Present Value (NPV) discounted at 10% over 10 years is US$ 7.76 million.
Project 3 - Establishment of Communitarian Input and Services Suppliers (Rural Traders) 10 Project implementation will establish a community based input supply system to meet the growing demand. Project will identify and select rural traders (300) according to the criteria already defined by IAM; Extensive training will be given (e.g. Business planning, proper use/handling of agricultural inputs); Credit facilities to be made available; Linkages with agricultural input suppliers; Rural traders association established.
Project 3 - Establishment of Communitarian Input and Services Suppliers (Rural Traders) 11 This is an income generating project: IAM would require US$ 946,000 for training courses, operating costs and consultancies (setup costs); Rural Traders: o Each will require approximately US$ 118,300 for fixed and moveable assets; o Cumulative cash flow after tax over 10 years is US$ 236,700; o Breaks even in year 1; o Internal Rate of Return (IRR) is 35.46%. o Net Present Value (NPV) discounted at 10% over 10 years is US$ 91,822. Total credit requirements of US$ 68,228,350 (capital, operational expenditure and input costs).
Project 4 - Technology Transfer and Training of Extension Officials and Producers 12 Project implementation will provide training facilities (cotton knowledge centers) and implement the curricula on integrated cotton production (ICP). Will work cooperatively with the concessionary companies' extension networks. Cotton Knowledge Center (CKC): o 1 Main CKC located in Nhamatanda (Sofala). o 20 District CKC. o 40 Auxiliary CKC (2 per district). o 2000 cotton farmer field schools (cffs).
Project 4 - Technology Transfer and Training of Extension Officials and Producers 13 This is a non income generating project: The total budget for the project over 10 years is US$ 24,428,238; Effective extension services including training is essential for achieving the primary goals of the program – improved yield and quality. Elements Total US$ Infrastructure (Construction) 7,786,092 Moveable Assets (Equipment) 6,857,739 Operating Costs 8,100,092 Training courses 427,575 Consultancy fees 1,256,740 Total 24,428,238
Project 5 - Development of Advanced and Commercial Cotton Producers and Farmers 14 Project implementation will result in total cotton production from advanced farmers increasing from 1% to 50% of total production. Three possibilities for the advanced farmers based on farm area: o Type A (10 to 50ha): 15 to 35 farmers o Type B (51-120ha): 1 to 110 farmers o Type C (>121ha): 3 to 50 farmers Land tenure will be secured. Agronomy packages were designed by IAM. Extensive training will be supplied (e.g. ICP, Agribusiness). Target best performing farmers and agricultural graduates.
Project 5 - Development of Advanced and Commercial Cotton Producers and Farmers 15 This is an income generating project: IAM would require US$ 3,040,000 for training costs, operating costs and consultancies (setup costs). Different budgets per farmer but all are assessed as viable: Investment through private sector credit providers estimated at a maximum of US$ 83,106,317 by year 10. Elements Type A Type B Type C Break evenYear 4Year 1 Cumulative cash flow over 10 years US$ 812,847US$ 1,222,168US$ 3,472,847 IRR21%49% 96% NPV (at 10% over 10 years)US$ 93,545US$ 438,357US$ 1,553,549
Project 6 - Increase the capacity for land preparation (tillage) 16 Project implementation will provide the means to shift from manual to draft animal and mechanized cotton production. Draft animal use will be expanded where appropriate. Several regions of Mozambique already have the culture of using draft power. The country’s agricultural machinery dealers will be encouraged to import, test, select and supply the most appropriate machines and implements. Machinery parks and mechanization contractors will be established.
Project 6 - Increase the capacity for land preparation (tillage) 17 This is an income generating project: IAM would require US$ 9,760,000 for training costs, operating costs and consultancies (setup costs). Mechanization contractors (machinery parks) were evaluated: o Capital expenditure of US$ 538,416; o Cumulative cash flow after tax over 10 years is US$ 1,4 million; o Breaks even in year 1; o Internal Rate of Return (IRR) is 62.0%; o Net Present Value (NPV) discounted at 10% over 10 years is US$ 773,656.
Project 10 - Development of Agrarian Insurance and a Mechanism for Stabilization of Seed Cotton Price 18 Project implementation will result in the design and implementation of an agrarian insurance model based on a recently completed pilot. Minimize the loss of farmers’ income from climate and market shock. Develop a risk management mechanism for cotton. Develop a price stabilization mechanism for the seed cotton farm gate price.
Project 10 - Development of Agrarian Insurance and a Mechanism for Stabilization of Seed Cotton Price 19 This is a potential income generating project: The total budget for IAM over initial 3 years is US$ 5,010,000. Extensive further research is required before the private sector is invited to engage: o Climatic and market risks diagnosis and further training of the staff in risk management mechanisms; o Design and implementation of a national agrarian insurance model. o Design and implementation of an effective price stabilization mechanism for seed cotton. o Active fundraising for the project and adjustment of the country’s legal framework.
Project 11 - Promoting Cotton Processing for Hospital Use 20 Project implementation will result in the establishment of a cotton wool factory in the Dondo District (Sofala). Potential domestic and regional markets identified. Dondo identified as suitable location (e.g. Proximity to raw materials and markets). Availability of labour identified. Access to specialized international technical support for training and unit implementation to be identified. A full feasibility needs to be undertaken. This is an potential income generating project: Potential investors need to be identified. Investment facilitation will be provided by Government.
Project 12 - Promotion of Artisanal Textiles 21 This is a potential donor funded project. Project implementation will result in the establishment of artisanal, ginning, spinning, weaving and processing of cotton as well as the pressing of cotton seed for oil and soap. Prepare feasibility study and contract experienced agencies to: o Select and hire trainers; o Import ginning, spinning and weaving equipment. o Train cotton association members in craft processing. o Facilitate access to credit. o Facilitate selling crafted objects locally and regionally. Budget estimated at US$ 2,314,884 over 10 years. Estimated 100 artisans producing and selling crafts by year 3 and 500 by year 10.
Project 14 - Financing Facilities for the Cotton Value Chain (Cotton Financing) 22 Project implementation will create the facilities for fund raising, fund allocation, and overall financial control and reporting activities for program implementation. A permanent team within IAM Administration Department will be created to ensure: Identification of all potential sources of funding at national and international levels. Select and integrate all eligible activities into government annual budget proposals. Identify all projects or activities that may be eligible for donor funding. Faciltation of access to credit and micro-credit for all CVCRS potential entrepreneurs. Ensure that the funds are utilized correctly and adequately accounted for.
Project 14 - Financing Facilities for the Cotton Value Chain (Cotton Financing) 23 This is a fund raising and fund management project. Project budget for 10 years is: Elements Total US$ Operating Costs150,000 Internal Audits750,000 External Audits1,500,000 Total2,400,000
Concluding Remarks 24 The Programme Implementation document presents a “road map” for the CVCRS. All projects are interconnected but the projects related to the research, improved seed supplies and IAM capacity building are crucial to the success of the program. The costing and economical feasibility of the projects were evaluated, resulting in a positive assessment of the benefits that the total investments will produce for the economy of Mozambique. Requirement for CVCRS implementation will be US$ 118,275,183. Private sector total credit requirement for all projects is estimated at US$ 233,218,761. The contribution to GDP is estimated to be US$ 1.5 billion in the first 10 years of the project.
25 “Let’s revitalize the cotton industry”! Thank You! Instituto de Algodão de Moçambique Avenida Eduardo Mondlane, 2221, 1º andar Caixa Postal 806 Maputo Tel: /6 Cel: Technical Support: KPMG Auditores e Consultores SA Rua 1.233, Número 72C Bairro Central "C" Distrito Ka Mpfumu Maputo Mozambique Web: