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Value chains - built to last?

The project aims to bring more than 50,000 smallholders into the fruit value chain by 2014 (© The Coca-Cola Company)
The project aims to bring more than 50,000 smallholders into the fruit value chain by 2014
© The Coca-Cola Company

A value chain is only as strong as its weakest link. In recent years, many value chains have been forged through the facilitative efforts of research and development professionals. But when projects end and this support is withdrawn, the durability of a chain depends on every link or player being profitable. Supporting this profitibility through provision of assets, knowledge and skills to each player, is therefore a vital part of chain building. This, at least, is one of the 'lessons learned' by Project Nurture, which has strengthened value chains in Kenya and Uganda for improved smallholder production of mangoes and passion fruit.

Led by The Coca-Cola Company, the Bill & Melinda Gates Foundation and US-based development organisation, TechnoServe, the project has an ambitious target, aiming to bring more than 50,000 smallholders (at least 30 per cent women) into the fruit value chain by 2014. Coca-Cola aims to triple its global juice business by 2020, in part by expanding both the sourcing of fruit and the demand for its products in developing countries - hence its involvement.

Already the project has had significant success. As of July 2013, more than 51,000 farmers have been recruited to the programme, including more than 14,000 women, and their incomes have, on average, more than doubled through a combination of increased sales volumes and improved quality. Minute Maid Mango, sold in Kenya since September 2010, was the first Coca-Cola product in the country to use locally sourced fruit puree; a Ugandan version was launched in May 2011.

All the mango puree used to make the company's drinks for sale in Kenya, Uganda, DRC, Zimbabwe and South Africa is now supplied by two African processing companies - Sunny in Kenya and Allfruit EPZ in Uganda - and certified to the company standards through the project. The fruit is in turn supplied by small-scale farmers, such as the Kainja Mango Farmers Association in eastern Uganda. Sam Koole, chairman of the association, describes the amazement of group members that their local mangoes could have a profitable market. "Many farmers just didn't believe it was possible to all of a sudden sell their mangoes," he says. "It wasn't until they actually saw, with their own eyes, the people coming here to buy all our mangoes that they started believing."

Quick progress vs long term gains

The value chain has been strengthened through training of farmers (© The Coca-Cola Company)
The value chain has been strengthened through training of farmers
© The Coca-Cola Company

Running for just four years and finishing in 2014, Project Nurture has a short shelf life. But, given the long-term aspirations of the company for local sourcing of fruit puree, and the poverty reduction objectives of the Bill & Melinda Gates Foundation, building a sustainable value chain has been key. That aim has, however, been made more difficult by the need to achieve quick results - seen as essential to achieving the short term goal of doubling the fruit incomes of participating farmers within the life of the project and to motivating project partners to believe in what can be achieved.

Hence, while project partner TechnoServe has played a very hands-on role in building the value chain, through training of farmers, strengthening of farmer groups and establishment of market links, it has been equally concerned to build institutional capacity and incentives for the long term. Community extension service providers, for example, are being supported to set up as independent businesspeople, rather than TechnoServe contractors. Government extension officers have been invited to trainings on mango and passion fruit farming; affordable technologies for the ongoing delivery of information, such as text messaging, are also being explored.

Perhaps most importantly, TechnoServe has worked with large buyers, aiming to improve their capacity to engage directly with smallholders. Kenyan export company, East Africa Growers, for example, now provides market information, such as quality specifications and demand projections, as well as agricultural and business skills training to its smallholder suppliers.

Supportive environment

Strengthening the environment in which the value chain operates is another priority for sustainability. Acting as an intermediary, TechnoServe has brought in finance institutions to provide credit (Equity Bank in Kenya, and Centenary Bank in Uganda), and agricultural research organisations such as KARI (Kenya) and NaCRRI (Uganda), plus numerous small, independent nurseries, to supply improved seed varieties and seedlings. Exporters (such as East African Growers) and processors have also been brought on board, and expect to continue doing business with each other long after the project ends.

The incomes of 51,000 farmers have, on average, more than doubled (© The Coca-Cola Company)
The incomes of 51,000 farmers have, on average, more than doubled
© The Coca-Cola Company

But it is governments which have the leading role in creating an enabling environment, through setting tax rates, tariffs and standards and regulating the flow of goods across borders. Governments are largely responsible for infrastructure, including transport, water and energy, and in all these roles, have a significant impact on a value chain, shaping the economies in which the players operate and their incentives to do business together.

While the governments of Kenya and Uganda have been engaged in the project at several levels - including production of new passion fruit varieties, training of extension officers and strategic input via the project's steering committee - project partners believe that a deeper relationship between the partnership and government would have been advantageous. This could have included involvement in project design and early implementation stages, enabling the partners to understand the national priorities for the fruit sector, identifying how the partnership could help in achieving those priorities, and determining what role the government could take in the process.

As such, a government would be expected to assume responsibility, share risks and, in return, gain rewards as a full, entrepreneurial partner. Indeed, such levels of 'buy in' are needed from all the players, if a value chain is to thrive and prosper much beyond the lifetime of a facilitative project, and achieve long term benefits for individuals, businesses and national economies.

Date published: July 2013

 

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Inspiring analysis and good identification of limiting facto... (posted by: Bruce Michener)

 

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