1. Creating a Local Competitive Advantage for Agriculture in Lukhanji Results of the PACA Exercise 17 - 24 November 2003

2. Part 1: Introduction

3. What is Participatory Appraisal of Competitive Advantage (PACA ® )? Participatory Appraisal of Competitive Advantage Involve local stakeholders Motivate local stakeholders to take an active role in an LED initiative Transfer know-how to local stakeholders and businesses Do a quick scan of the local economy Assess and refocus ongoing local economic development activities Identify strengths, skills, talents and opportunities Identify business and LED opportunities

4. What is the objective of PACA? Identify, with a rapid appraisal, the main strengths and weaknesses of the local economy and its main sectors (duration: 1 - 2 weeks) Identify options for practical activities to strengthen the competitiveness of firms -- Criteria: –feasible with local resources –quickly implimentable (starting next week) –quick, visible results (with 3 - 6 months)

5. What have we been doing? Kick-off workshop on 14 November 2003 From 15 to 18 November 2003: –Seven mini-workshops with between 10 and 40 participants –Ten interviews

6. Part 2: Diagnosis

7. Main finding Agricultural development in Lukhanji has not moved forward as quickly as it should do –even though the funds and the economic opportunities are there The main problems are –lack of commitment by beneficiaries by support structures =vicious cycle –fragmentation among support structures

8. The current structure of agricultural development in Lukhanji LandAgric WaterLabourDistrict Local... Zweledinga Vukani Engojini Shiloh Nyana Tylden Bold Point Macbride Kei Delindlhala Merino Agricultural processors Distribution channels White farmer White farmer

9. The current structure of agricultural development in Lukhanji Government: –Top-down approach –Little coordination between departments and province-district-local –Looking at “beneficiaries”, not at “customers” –No management of expectations –Beneficiaries find it hard to understand who in government is responsible for what / can provide what

10. Emerging farmers, irrigation projects Commitment to development Incomplete business plans No clear perception of viable products and distribution channels.

11. What about livestock farming? Livestock farming is predominantly a wealth- building activity only some farmers have made the transition to full commercial cattle farming mostly, the livestock is the savings account livestock is sold if the owner needs cash livestock farming is predominantly not a commercial activity among emerging farmers –with the large number of cattle, access to funds is not a bottleneck for development!

12. Commercial farmers, Agricultural business Commercial farmers: Informal support to emerging farmers / irrigation schemes exists Explicit willingness to help No coordination of support Established farmers are most busy when emerging farmers need most support! There must be a benefit for both sides! Agricultural business (processors, sellers): Looking for reliable suppliers Markets for products are available Reliable and consistent supply is the bottleneck.

13. Current agricultural development approach in Lukhanji: A value chain perspective Production (if it actually takes place) ? Inputs ???? Processing? Value-added? Distribution? Business plans and emerging farmers’ statements are vague about products and distribution!

14. Future agricultural development approach in Lukhanji: A value chain perspective Conventional production Inputs High-value production (tunnels) Inputs Organic production Inputs Direct sales Wholesale Retail Value-added, e.g. cutting + packaging Direct sales Wholesale Value-added: processing

15. Future agricultural development approach in Lukhanji: How to get there? Conventional production Inputs High-value production (tunnels) Inputs Organic production Inputs Value-added, e.g. cutting + packaging Direct sales Wholesale Direct sales Wholesale Value-added: processing Retail

16. Main success factors of emerging agriculture in Lukhanji

17. Access to markets Working capital Skills Market information Access to product inputs.

18. The conventional approach to address these challenges Access to markets Working capital Skills Market information Access to product inputs  Government must organise market access  Government / development finance institutions must provide working capital  Dept of Labour must provide training  Government must set up an information system  Seeds and implements must be provided by Dept of Agriculture How long do you want to wait for this to happen?

19. Our alternative: An unconventional approach Find underserved markets that your product can serve Never plant what you haven’t sold Approach customerGet confirmed orderObtain working capital Approach bank or public finance institution Joint venture with commercial farmer: capital + know-how -- land + labour State clear demand for agricultural extension Get inputs Now plant and care! Who will champion this?

20. The desirable structure of agricultural development in Lukhanji LandAgric Water Labour DistrictLocal... Zweledinga Vukani Engojini Shiloh Nyana Bold Point Tylden Macbride Kei Delindlhala Mhlungisi Distribution channels Comm. farmer Comm. farmer Comm. farmer Agricultural processors Farmers’ Assns.

21. Why have networking between irrigation schemes, agricultural projects, emerging farmers? Capacities of government agencies are limited, demand exceeds supply of support New producers need to source additional supporters –Know how is available in all projects and schemes pooling it helps everybody –Commercial farmers state an explicit interest to support new farmers they must also gain from giving support

22. Summary of diagnosis We need a different, much more business- and opportunity-driven approach to agricultural development in Lukhanji! We need much more interaction, based on partnership, between the various players to share know-how to avoid duplication and fragmentation

23. Part 3: Proposals

24. Proposal 1 for local municipality Monthly meeting of LED officer with other support agencies and government departments –update on evolution of promotion and support activities.

25. Proposal 2 for local municipality Establish a telephone hotline for information on government support –entry point to coordinate inputs from government departments and parastatals.

26. Proposal 3 for local municipality LED Fora in wards: –move from LED Fora (with no clear focus and objective) to LED Business Meetings organise topical input (speakers) provide for networking opportunity amongst businesses adequate place to flag business- creation / start-up opportunities.

27. Proposals for local GTZ facilitator Workshop with irrigation schemes –stimulate exchange and joint learning between irrigation schemes Build joint-venture relationships between commercial and emerging farmers –create clear win-win for-profit relationships.

28. Proposals for government agencies Change in terminology –ban the term “beneficiary” –introduce the term “customer” change the mindset from social assistance to business relationship with clear expectations and commitments on both sides Dept. of Agriculture: Quickly assess the potential for berry production and other crops that may still be planted in this season

29. Proposal 1 for irrigation schemes Irrigation schemes are irritation schemes –Change name to Agribusiness Start-ups.

30. Proposal 2 for Agribusiness Start- ups (formerly: irrigation schemes) Define your demand for support much more specifically –narrow down your product range –prepare a proper business plan yourself know what you want to achieve -- and what you realistically can achieve –increase your volume and quality to create a market presence –identify the specific demand for know- how and inputs

31. Proposal 3 for Agribusiness Start- ups (formerly: irrigation schemes) Reassess the viability of pivot irrigation –in favour of low-tech manual systems pivot irrigation is not very efficient pivot irrigation is costly to maintain.

32. Proposal 4 for Agribusiness Start- ups (formerly: irrigation schemes) Develop a vision of step-by-step upgrading –phase 1: simple products for local markets, surplus for canning –phase 2: value-added -- packaging for commercial markets –phase 3: organic production for high- value local and export markets.

33. Proposal 1 for local champions Tunnel and shade-cloth opportunity -- Business model: –Joint-venture between commercial farmer and members of a local community –More, better quality product –Longer growing seasons –Better utilisation of limited space –More effective use of water and nutrients –Income shared between both sides.

34. An example

35. Proposal 2 for local champions Market franchise opportunity -- Business model: –Franchise with established processors and mature business model vegetables fruit –Brand potential with national chains –Networking and sharing of information –Better price and market leverage Colin Mitchell willing to guide a champion

36. An example

37. Proposal 3 for local champions Connect production and processing opportunity -- Business model: –André Myburg is looking for specific inputs for his canning operation –Broker to link André and producers identify surplus production, not necessarily of A grade, but with scale promote consistent, reliable production assist producers charge an outcome-based fee

38. André Myburg’s canning operation

39. Proposal 4 for local champions Weekly farmers’ market opportunity -- Business model: –fee-based model for organiser of market responsible to manage and advertise it –local producers sell home-industry and niche agricultural products, not basic staples.

40. Proposal 5 for local champions Incubation potential (e.g. on Harrison Farm) -- Business model: –Commercial farmer provides training and guidance to emerging farmers –Profit on crop shared –Emerging farmer allocated own land in the following season –Cycle continues –Farmer supported by Depts. of Agriculture and of Labour

41. Next steps Way-forward workshop with Champions: –Tuesday, 10:00, Sports centre PACA follow-up workshops –to assess results and energise the process –end of January

42. PACA Team external: Jörg Meyer-Stamer Colin Mitchell Conrad Jardine local: Tienie Terblanche Beau Mtati  jms@mesopartner.com  cm@mesopartner.com  jardine@gtzpsdp.co.za  072 / 207 1729  083 / 960 6752