TOPICS

Livestock and Rangeland, Rural Finance

SOLUTION TYPE

Financing Scheme, Knowledge Exchange

REGION

East and Southern Africa

"The beef value chain finance initiative complements our efforts towards reducing poverty, ensuring food security and creating opportunities for rural farmers, especially women and youths. We are ready to support farmers in the region, as it is our mandate to support rural areas in accessing such initiatives."

Antonio Rota, Lead Global Technical Specialist, Livestock, IFAD

BACKGROUND

Eswatini's cattle production has limited ability to compete with the import products, due to high local grain costs, ban on growth promoters, and limited market access. The resulting low cattle price further discourages the cattle market. These problems form a vicious cycle along the production chain, aggravating rural poverty in the country

WHAT’S INVOLVED

Knowledge sharing and knowledge management

Knowledge management activities occurred throughout the implementation process of the project. Trainings on feeding and feed resources have been provided to smallholders across the region. Multiple field days for knowledge sharing on fattening cattle have also been organized. Knowledge has been generated and disseminated both in the field and within IFAD through conferences and reports.                            

Capacity and institution building

The project raised the capacity of value chain actors to produce and deliver a value-added product. It included working with existing groups of smallholders, supporting infrastructure and systematically training producers, households and cattle traders. The project also delivered necessary equipment and feedlots to the local communities.

 

EXPLORE THIS SOLUTION

The Innovative beef value chain finance initiative and development scheme in Southern Africa can offer:

  • a tested financial instrument for smallholder producers and traders to enable value addition in cattle system; and
  • a viable cattle value addition mechanism that is coordinated with market requirements

 

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Countries involved

Eswatini, South Africa

Project partners

IFAD, International Livestock Research Institute (ILRI); Swaziland Water and Agricultural Development Enterprise (SWADE)

Project dates

2013 – 2018

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Summary

Smallholder cattle production in Southern Africa, especially in dryland grazing areas, is inefficient and often generates little income. Low capital further constrains smallholders’ ability to purchase animals and associated equipment. By delivering a tested financial product to the private sector and a scalable model to development actors, the innovative beef value chain development scheme facilitates smallholders' access to working capital, improving food security and incomes through diversification and risk reduction. 

Challenge/Problem

Southern Africa’s smallholder cattle production often lacks capital and efficiency, facing problems in every link of the value chain. This situation is particularly exacerbated in Sewatini (former Swaziland), where grain-based feedlots for cattle fattening are dominated by South African producers, causing high prices for Swazi feed resources. The country's production has limited ability to compete with the import products due to high local grain costs, a ban on growth promoters and a lack of marketing efforts. Meanwhile, the market access of most smallholders is mediated by traders who often sell poor-quality cattle outside the formal slaughter channels. The resulting low and unpredictable cattle price further discourages the purchase and production of feed and limits the attention to husbandry and animal health. These problems form a vicious cycle along the cattle production chain, aggravating rural poverty in the country.

While a number of projects have been addressing these issues in the region separately, a comprehensive solution to facilitate access to working capital, establish partnerships to promote diversification and add value in commodities is necessary in Southern Africa, particularly in Eswatini. The existing knowledge-sharing platform for cattle marketing neither addressed all the actors in the value chain, nor foresaw important market-based initiatives, such as contract linkages between quality, price and timing of delivery. 

Solution

Launched in 2013, the innovative beef value chain finance initiative and development scheme in Southern Africa aims to improve livelihoods from cattle production and marketing by making them more sustainable. Implemented by the International Livestock Research Institute (ILRI) in Eswatini, the objectives of this programme are to:

  • provide smallholders with a viable cattle value-addition mechanism that coordinates with market requirements;
  • design and demonstrate effective financial instruments and suitable products for enabling smallholder value addition in cattle systems; and 
  • generate and disseminate knowledge, and encourage its uptake, throughout Southern Africa.

Both smallholder producers and rural traders are targeted. The project aims to increase producers' off-take, reduce financial vulnerability and decrease management uncertainty, as well as to provide specialist fattening operations, diversification and employment. Providing traders with access to finance will remove a key constraint for these “market makers” in dealing with smallholder producers.

The programme includes three components: capacity- and institution-building; value chain finance product development and testing; and knowledge management. To build capacity among smallholders, the programme establishes traders' and producers' groups to collectively improve market access and facilitate interaction between producers and certified traders. The project also delivers feedlot construction and training on cattle feeding to support production. Meanwhile, the programme cooperates with governments to design and test contracts between different participants in the cattle production chain and to deliver a financial instrument. In addition, the programme focuses on communication and knowledge management including outcome mapping, information and experience exchange with projects in neighbouring countries, and regional conferences.

The project links to existing IFAD projects and other related projects in the region that support and seek to scale up value chain upgrading for smallholder livestock, adding value by improving the enabling environment and encouraging private-sector involvement. Moreover, by influencing livestock off-take, the project links value addition to managing the natural resource base.  

Results: 

  • Five groups registered as farmer companies were established around a functional mini-feedlot (Sukumani-Ngonini Investment, Nxutsamlo Investments, Tikane Investment, Sekuyakhona-Ngoni Investment and Singeni Investment), while one group of traders (Khazas Investment) was established to implement a low-risk fattening scheme facilitated by an advance of working capital.
  • Nedbank, having been selected as the ideal financial project partner, provided farmers with access to a broader suite of banking services at a rate of prime +1% (about 10%). In addition, a collateral waiver was provided for the participating farmers.
  • The project established a grass-based fattening system, adding value to by-products of the sugar industry (such as molasses and maize stovers), and other residues and cultivated forages (like poultry litter). The Feed Assessment Tool (FEAST) was implemented in 2014 to assess the availability and use of local feed resources. An assessment on forage usage for fattening was conducted, and guidance was given to farmers who already engaged in non-cereal based fattening.
  • The farmer companies had a collective turnover of over USD$140,000.
  • Multiple conferences were held during the implementation period for knowledge exchange. All of them were welcomed and have been heavily reported in local areas. 

Lessons Learned/Potential for replication

  • Engaging the Government of Swaziland during the project design phase would have supported better identification of key interventions and partners, as well as existing knowledge, to contribute to project design and implementation.
  • Feed had been under-emphasized in the original project design, and management of this component needs to be strengthened. Commercial feed, inferior quality feed and varying mixes are not profitable, as they increase cost and affect animals’ performance. Access to irrigated land is needed to ensure balanced rations for animals over time,
  • Personnel mobility within partner institutions may cause programme delays.
  • Communication between the project manager and local partners is critical for successful implementation, as the programme heavily relies on multiple local partners. Given its cost, hiring technical field staff is not viable.
  • The limits of traders’ knowledge in the technical and financial aspects of beef fattening need to be addressed on an ongoing basis. 

Next Steps

  • All but two farmer companies indicated they will continue with the cattle fattening business, albeit with modifications. Singeni is already negotiating with Eswatini Meat Industries for a model that will include loan feed with a promise to sell back finished cattle. Tikane has already started mobilizing feeder stock.
  • Buyers are committed to continuing to work with farmer companies if issues of trust are addressed.
  • NEDBANK committed to continuing to support the farmer companies. All loan accounts remain active with Singeni, Tikane, Sekuyakhona-Ngoni and Nxutsamlo continuing enquiries on how to structure the relationship beyond the project. 

 

Last update: 10/01/2019