Creating a Local Creating a Local Competitive Advantage for Competitive Advantage for Agriculture in Lukhanji Agriculture in Lukhanji

Results of the PACA Exercise17 - 24 November 2003

Part 1: IntroductionPart 1: Introduction

What is Participatory Appraisal of What is Participatory Appraisal of Competitive Advantage (PACACompetitive 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

What is the objective of PACA?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)

What have we been doing? 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

Part 2: DiagnosisPart 2: Diagnosis

Main findingMain 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

The current structure of The current structure of agricultural development in agricultural development in LukhanjiLukhanji

Land Agric

Water Labour District

Local ...Zweledinga

Vukani

Engojini

Shiloh

Nyana

Tylden

Bold Point

Macbride

Kei

Delindlhala

Merino

Agriculturalprocessors

Distributionchannels

Whitefarmer

Whitefarmer

The current structure of The current structure of agricultural development in agricultural development in LukhanjiLukhanji 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

Emerging farmers, irrigation Emerging farmers, irrigation projectsprojects

Commitment to development Incomplete business plans No clear perception of viable products and

distribution channels.

What about livestock farming?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!

Commercial farmers, Commercial farmers, Agricultural businessAgricultural 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.

Current agricultural development Current agricultural development approach in Lukhanji: A value approach in Lukhanji: A value chain perspectivechain perspective

Production(if it actuallytakes place) ?Inputs

????

Processing?

Value-added?

Distribution?

Business plans andemerging farmers’ statements are vague

about products and distribution!

Future agricultural development Future agricultural development approach in Lukhanji: A value approach in Lukhanji: A value chain perspectivechain perspective

Conventionalproduction

Inputs

High-valueproduction(tunnels)

Inputs

Organicproduction

Inputs

Direct salesWholesale

RetailValue-added,e.g. cutting +

packaging

Direct salesWholesale

Value-added:processing

Future agricultural development Future agricultural development approach in Lukhanji: How to get approach in Lukhanji: How to get there?there?

Conventionalproduction

Inputs

High-valueproduction(tunnels)

Inputs

Organicproduction

Inputs Value-added,e.g. cutting +

packaging

Direct salesWholesale

Direct salesWholesale

Value-added:processing

Retail

Main success factors of emerging Main success factors of emerging agriculture in Lukhanjiagriculture in Lukhanji

Main success factors of emerging Main success factors of emerging agriculture in Lukhanjiagriculture in Lukhanji

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

The conventional approach to The conventional approach to address these challengesaddress 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?

Our alternative: Our alternative: An unconventional approachAn unconventional approach

Find underserved marketsthat your product can serve

Never plantwhat you haven’t

soldApproach customer

Get confirmed order

Obtain working capital Approach bank or public

finance institution

Joint venture with commercial farmer: capital + know-how -- land + labour

State clear demand foragricultural extension

Get inputs

Now plant and care!

Who willchampion

this?

The desirable structure of The desirable structure of agricultural development in agricultural development in LukhanjiLukhanji

Land Agric

Water

Labour

DistrictLocal

...

Zweledinga

Vukani

Engojini

Shiloh

Nyana

Bold Point

Tylden

Macbride

Kei

Delindlhala

Mhlungisi

Distributionchannels

Comm.farmer

Comm.farmer

Comm.farmer

Agriculturalprocessors

Farmers’Assns.

Why have networking between Why have networking between irrigation schemes, agricultural irrigation schemes, agricultural projects, emerging farmers?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

Summary of diagnosisSummary 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

Part 3: ProposalsPart 3: Proposals

Proposal 1 for local municipalityProposal 1 for local municipality

Monthly meeting of LED officer with other support agencies and government departments– update on evolution of promotion and

support activities.

Proposal 2 for local municipalityProposal 2 for local municipality

Establish a telephone hotline for information on government support– entry point to coordinate inputs from

government departments and parastatals.

Proposal 3 for local municipalityProposal 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.

Proposals for local GTZ facilitatorProposals 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.

Proposals for government Proposals for government agenciesagencies

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

Proposal 1 for irrigation schemesProposal 1 for irrigation schemes

Irrigation schemes are irritation schemes– Change name to Agribusiness Start-ups.

Proposal 2 for Agribusiness Start-Proposal 2 for Agribusiness Start-ups (formerly: irrigation schemes)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

Proposal 3 for Agribusiness Start-Proposal 3 for Agribusiness Start-ups (formerly: irrigation schemes)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.

Proposal 4 for Agribusiness Start-Proposal 4 for Agribusiness Start-ups (formerly: irrigation schemes)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.

Proposal 1 for local championsProposal 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.

An example An example

Proposal 2 for local championsProposal 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

An exampleAn example

Proposal 3 for local championsProposal 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

André Myburg’s canning André Myburg’s canning operationoperation

Proposal 4 for local championsProposal 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.

Proposal 5 for local championsProposal 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

Next steps 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

PACA TeamPACA 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