MASSMART UPDATE GROU

P MASSMARTUPDATE

PUBLISHED OCTOBER 2012

The South African environment

South African agriculture is a mixture of both a world-class agricultural sector consisting of commercial farmers, estimated to be just over 30,000, and an underdeveloped agricultural sector dominated by anywhere in between one and two million smallholder farmers (TechnoServe primary and secondary research on SA farm landscape). Most lack the skills and resources to participate in the commercial agricultural environment.

The government, through its various programmes, has identified three key challenges in agriculture in South Africa: firstly, job creation; secondly food security; and thirdly reduction of poverty through rural development.

Ezemvelo

The word “Ezemvelo” derives from the words “mvelo” which means nature, and “eze” which means collective items deriving from a thing or place (in this instance nature). In essence “Ezemvelo” means something originating from nature.

Massmart launched Ezemvelo, its Direct Farm Programme, in November 2011, to develop and diversify its local sourcing capacity in fresh produce. “Through Ezemvelo Massmart

and its customers will receive a higher quality product while farmers receive a steady, increasing income stream,” says Mncane Mthunzi, Massmart Supplier Development Executive.

The programme will work with smallholder farmers in South Africa, to enhance their capacity in order to provide them with access to markets. In developing working models and solutions to assist smallholder farmers, Massmart will leverage and be driven by its core competencies, namely providing route to market, providing off-take agreements, and providing training programmes.

An initial selection of fresh produce has been prioritised as these can be competitively produced by the smallholder farmers. These include tomatoes, cabbages, onions, butternut, pumpkin, sweet potatoes, potatoes and fruit.

Massmart aims to source between 35% and 45% of its fresh produce requirement from mainstream commercial farmers in South Africa and up to 30% will be targeted to come from small- to medium-sized farmers. We hope that this integrated approach will support the development of the agricultural sector as a whole, where all farmers have a significant role to play in meeting the food needs of the country.

Sustainable agriculture is a key strategic initiative to drive affordability, quality and safety of food for our customers; enable security of supply; and reduce adverse environmental impacts. To achieve these goals, Massmart-Walmart is implementing a model for direct farming which helps smallholder farmers get off the ground and into the markets.

Direct Farming is a Walmart programme enabling the sourcing of fresh produce directly from farmers to our stores. It was created by Walmart to bring more locally grown food into Walmart’s supply chain. Walmart operates direct farm programmes in markets where it can actively source fresh produce from local farmers.

Massmart’sDIRECT FaRm PRogRammE - EzEmvElo

Samual Phasha and his employees harvested their first season of tomatoes for Massmart, in August

The flagship project was launched in Ofcolaco, Limpopo, at the beginning of August

WhAT FArMErS SAy

Farming on 28ha of communal land in Ofcolaco, near Tzaneen, seventy-year-old Jamila Mogodi says the Ezemvelo project has opened up opportunities for smallholder farmers. She started farming full time in 2003 after she retired as a nurse, and has 7ha under irrigation. “I also received a tractor which was donated to me by the Limpopo Department of Agriculture,” she says. She grows green beans, butternuts and tomatoes. Before the Massmart deal, she sold her produce through local vendors and the Johannesburg Fresh Produce Market.

Thirty-seven-year-old vegetable farmer, Samual Phasha, also farms on communal land in Ofcolaco and currently grows butternut and tomatoes for Massmart. With access to 167ha of land, Phasha currently has 5ha under irrigation. “I would like to expand and irrigate more land,” he says. “With an opportunity like this, I think I’ll soon be able to do that.” Phasha says that working with Massmart and TechnoServe has helped him improve his farming methods and manage his finances.

how does Massmart define SMAllholDEr FArMErS?

Small or marginal farmers are those farmers with ownership or access to up to 5ha of land. Medium farmers are those with ownership or access to 5 to 20 ha of land. These two categories of farmers are the main targeted beneficiaries of the Ezemvelo Direct Farm Programme. We are, however, also considering those with more than 20ha who want to participate in our Direct Farm Programme.

The Supplier Development Fund, established by Massmart to assist developing South African suppliers, in particular, any small- to medium-sized enterprises (SME), aims to support smallholder direct farm activities for a five-year period. The objective is to make inclusive sourcing an ongoing and sustainable feature of all commercial direct farm procurement activities in South Africa.

Ezemvelo will be rolled out on a national scale, intersecting with those areas in South Africa where there are concentrations of smallholder farmers who have the potential to grow fresh produce and to be integrated into commercial markets. There will also be a significant focus on the inclusion of women farmers in all our direct farm activities.

As fresh produce is a fairly new area for Massmart, the first step was to start building the fresh produce sections in the company’s Game, Makro and cambridge Food stores.

Massdisounter’s division Game has successfully launched 17 new Game Foodco stores in South Africa, with plans to move into Namibia. Foodco is essentially a ‘store-within-a-store’, offering a selection of fresh foods. Masscash, which includes Cambridge Food, and Masswarehouse, which includes Makro, are also important channels for fresh produce.

Massmart will continue to source produce from commercial farmers while building smallholder farmers, particpating in Ezemvelo, as suppliers.

ofcolaco, limpopo – The Flagship Project

The flagship project was launched in Ofcolaco, Limpopo, in the first week of August 2012. This region was a ready fit for the launch as farmers were already well structured to fit into an aggregating model. Very importantly the climate there allows for the farming of vegetables even through the colder winter months. By the end of August, farmers participating in the Ofcolaco project delivered 3.5 tons of green beans. The Ofcolaco farmers are forecasted to deliver 949.5 tons of a variety of fresh produce (sweet potatoes, butternut, pumpkins, peppers, and tomatoes) by the end of their current harvest in December.

TechnoServe

Non-profit organisation, TechnoServe, has signed a three-year agreement with Massmart-Walmart to help run our flagship project in Limpopo, providing technical assistance and mentoring through its Agriculture Value Development and Food Security Programme. “In this way we help build agribusinesses that can create economic growth and food security in rural areas,” explains Mandla Nkomo, Agribusiness and Food Security Programme Manager at TechnoServe. The organisation also helps identify farmers for the project. Selection is based on available resources, primarily land and water, and the length of time the farmer has been in operation, says Nkomo. “Some farmers have invested enough time and money to clearly show their commitment,” he says. “Reasonable access to markets is another important factor.”

Apart from training, TechnoServe will also use bulk purchasing power to negotiate reduced prices from farm suppliers on supplies such as fertilisers, chemicals and equipment for the smallholder farmers.

Designed by Inklings Design Studio

Ramesh Subbiah receiving an award from the Minister for his efforts in launching Ezemvelo

Mncane Mthunzi, Supplier Development Executive and the Minister of Agriculture, Forestry and Fisheries, Tina Joemat-Pietterson

The future of Ezemvelo

The flagship project in Limpopo is set for a R15 million investment with the intention of taking farmers to up to nine harvests.

As well as providing the tools and training necessary for the smallholder farmers to become market ready, Massmart is also focused on providing the infrastructure necessary for delivering high-quality fresh produce.

Plans for a pack-house to be built, for the farmers in the Limpopo, are already underway. Once built, the farmers will receive training on pack-house operations and food handling. From here, the produce will be taken to Massmart’s central distribution point in City Deep and sent to our stores.

Massmart also plans to launch the programme in two other provinces in South Africa. Mooi River, in KwaZulu Natal, has been identified and is in the early stages of development. In-store training designed to educate farmers about customer choice and reasons for the selection of certain products, will also be implemented amongst the participating farmers.

Massmart hopes that through Ezemvelo smallholder farmers will gain greater access to market supporting the development of the agriculture sector in South Africa.

*To read more about Massmart’s Direct Farm Programme please refer to our other Group Updates.

Direct farming in Costa rica

A Massmart team led by Mncane Mthunzi, Group Supplier Development Executive, and Ramesh Subbiah, Integration Executive, hosted the Minister of Agriculture, Forestry and Fisheries, Tina Joemat-Pettersson, representatives from the Transvaal Agriculture Union, the African Farmers’ Association of South Africa (AFASA), the National African Farmers’ Union (NAFU) and Agri-SA, on a trip to Costa Rica in July 2012.

The purpose of the visit was to showcase Walmart’s Direct Farm model in Costa Rica, Tierra Fertil (The Fertile Land Programme). Smallholder farmers in Costa Rica have been trained and developed to supply fresh fruit, vegetables and cereals to Walmart’s local supermarkets in Costa Rica. During their time in Costa Rica the delegation visited farmers participating in Tierra Fertil. These farmers have shown substantial growth since joining the programme. They have increased their production, and subsequently their income, substantially. The key message that came from the trip was that the success shown in Costa Rica can be replicated in South Africa through the partnership and support of the government and other stakeholders.

Direct farming in India

Agriculture is still the backbone of India’s economy with more than 50% of the population still dependent on agriculture for their livelihood. However, low yields, lack of technical know-how, poor handling, too many intermediaries and poor market access are structural issues constraining smallholder farmers. Bharti Walmart launched the Direct Farm Programme in India in December 2008 in the state of Punjab. Currently the direct farm programme in India is engaged with more than 2,500 small and medium farmers across four states in India. The Direct Farm Programme trains small and medium farmers to adopt good agricultural practices in order to produce high quality, differentiated and safe produce. Farmers benefit from training as well as direct supply. The programme has also helped to cut down the number of intermediaries and improved the post-harvest handling of produce. In India, the Direct Farm Programme collaborates with the government and private organisations involved with research, education and rural development.

Bharti Walmart selects the farmers based on the current state of their farms, suitability of soil and climate and most importantly the willingness of the farmers to partner.