12/03/2014
Sunflower Value Chain Development in Tanzania:
The case of SHADECO in Village Based Contract
Farming Arrangement in Iringa Region -Tanzania
A PRESENTATION AT MULTI-STAKEHOLDER CONFERENCE ON
AGRICULTURAL INVESTMENT GENDER AND LAND IN AFRICA.
CAPETOWN- RSA, 5-7 MARCH 2014
Enock A. Ndondole, CEO
SYNOPSIS
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About SHADECO LTD
Introduction
Agriculture and Gender
SHADECO’s Business Model-Contract Farming
Lessons learnt
What must be included/Recommendations
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About SHADECO
• Background
- SHADECO an acronym of Southern Highlands Agricultural
Development Company Limited.
• Address: Kibwabwa Industrial Area, PO Box 2457 Iringa,
Tanzania. Email: [email protected].
-Established in 2008, Certificate of Incorporation No. 64588
- A private company, Employs 12 people.
• Products - Sunflower edible oil
• Services
- Offer crushing services
- Supply and distribution of agricultural inputs
INTRODUCTION
• Sunflower is one of the main cash crops in semi-arid areas of
Tanzania including selected districts of Iringa region.
• About 8 million smallholder farmers are involved in sunflower
production in Tanzania
• Domestic demand for edible oil stands at 350,000MT second
after fossil fuels in foreign exchange consumption
(RLDC, 2010 and TEOSA, 2012).
• Tanzania has a history of state controlled business and
marketing of agriculture commodities.
• Private sector in the agriculture sector is rudimental.
• Processing sector is just unfolding –small and medium
processing units are emerging. Women are the majority
involved in processing of sunflower oil.
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Agriculture and Gender
• The sector employs over 80 per cent of the workforce. It
contributes around 28 per cent of the GDP and 30 percent of
the export earnings.
• Agriculture is an important sector due to its potentiality to
reduce poverty.
• Women produce about 70 per cent of all food crops.
• Land is an important asset but-most women don’t have
access and control over it.
• Gender inequalities -responsible for poverty among women
and underperformance of the agricultural sector.
Issues
• Women play major role in rural economy but to a large extent
denied access to resources.
• Marketing structure for sunflower is based on farmers
producing first and start looking for the buyers.
• A number of middle men exist who take advantage of
uninformed farmers on sunflower market.
• Sunflower producers do not benefit from engaging in sunflower
production as a business.
• Farmers do not participate in price setting for sunflower seeds
• Farmers are using outmoded seeds and poor agronomic
practices leading to low production and seeds of poor quality.
• Existing processing units do not get enough supplies for
processing, hardly reach 60% of installed capacity.
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Village Based Contract Farming Arrangement: The
case of SHADECO in Iringa Region
• In 2012 SHADECO in collaboration with SNV-Tanzania, IFAD
funded MUVI programme introduced Village based contract
farming arrangement of inclusive business model.
• The objective was to institute structured market for sunflower
seeds in Tanzania.
• Contract farming can be understood as a firm lending inputssuch as seeds, fertilizer, credit or extension services to a
farmer for exclusive purchasing rights over a specified crop. It
is a form of vertical integration within agricultural commodity
chains so that the firm has greater control over the production
process and final product’’ Martine Prowse (2012).
Village-Based Contract Farming Model
Source: SNV Tanzania.
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• Covering in 10 villages of Iringa
• Engaging in Contract Farming arrangement with 371 farmers
out of whom 111 are women. Farmers are organised in 30
producer groups.
• The contract includes:
– Resource-providing contracts, commonly known as
embedded services i.e seeds, fertilizer, extension services,
loan.
– Production-management contracts, where the firm
(SHADECO) stipulates and enforces conditions of
production.
– Producers actively participate in price setting through
producer Groups involved in collective bargaining.
SHADECO and Producers meeting
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LESSONS LEARNT
Results
• Sunflower production has increased from to 8-10 bags per
acre of 65kg each.
• Farmers access to structured and reliable market
• Sunflower seeds price has increased from TZS 30,000 to
40,000
• Farmers income has increased substantially from an average
of TZS 120,000 to 320,000 per acre.
• Producers are now engaged in sunflower production as a
business
• District Council has now integrated promotion of sunflower in
their Council plan.
Contract farming-Improved cultivation of sunflower
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Challenges
• The supervision costs are high and not recoverable/can not be
costed into the final product.
• Most farmers do not honor their contractual obligation,
SHADECO managed to get only 50% of projected produce.
• Side selling is the major constrain as the crop has multi
buyers.
• The village leadership and group leaders being partners in
this arrangement do not assist to enforce the contract.
• Distortion of the market price by other buyers to disrupt the
contract arrangement.
• A number of development policies and legislations
(agriculture, land etc.) in regard to women and rural poor but
implementation remains a challenge.
• Weak producer group leadership
• Communication problems among the group
members/farmers.
• Lack of trust - farmers believe SHADECO or any other buyer is
there to rip them off.
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What must be included/Recommendations
• Domestic Policy to create enabling environment for producers to
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link with processors, Council planning to integrate the crop in their
council plan to provide for example extension services.
Producers actively participate in price setting through collective
bargaining (producer Groups).
Contract farming arrangement needs a third party to overseer the
arrangement, as mediator.
Women are better compared to men in honoring their
commitments, special focus be put on them as change agents
Leadership skills for the producer groups and Councilors for
Council resource allocation, especially sunflower CESS.
Review gender laws for women property ownership and economic
democracy policies (voice and participation of stakeholders)
Build capacity skills at grassroots in management, governance,
transparency and accountability.
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