Natural Products Development for Export Markets

Thursday 25th November

The Southern African Natural Products Trade Association

www.phytotradeafrica.com

Background: Rural households & NTFPs/NPs

PhytoTrade Africa’s Approach Lessons Conclusion

• Agriculture alone may be unsustainable hence emphasis on other non-farming activities and need to pursue MDGs on poverty reduction and conservation

• Rural livelihoods often have wide livelihood portfolio• Low availability of capital, prone to risks, little formal

education• Characteristics of NTFP: Common pool resources;

requires minimal capital investments; can be safety nets; do not require high skill levels to bring into production

• The fit: the poor rely mostly on forest products

The story of PhytoTrade•Objective: to develop and market new natural products from indigenous plants to generate supplementary income for poor rural producers•Founded in 2001•Realised that there were many duplications of efforts across the region e.g. R&D, Marketing, Market Development•They realised that through systematic regional integration supply chain management and market development for Natural Products could become a possibility on a regional scale

Budget and Funding– Supply chain development 22.5%– Product R&D 28.1%– Market development 23.6%– Institutional development 25.8%

Sources of funding:– Donors (IFAD, UNCTAD-Biotrade, Kellogg Foundation, Ford Foundation, Hivos),

membership fees, services

Portfolio of products and pipeline

What we do and how we do it

Systematic approach to promoting positive social, environmental and financial impact on the rural poor:

Industry development Product development Market development Supply chain development

Industry Development As with any other trade associations PhytoTrade also promotes

the common interests of the producers in the natural products industry. However there are 2 key areas in which it differs from other trade associations:

1. It is operating in an industry which is entirely new to this region. Much of its work is therefore orientated to nurture and develop the industry, rather than servicing an already well established group

2. It has a clear development goal aimed at creating economic opportunities for poor rural people

Promote our member’s products and aims to industry, discuss the triple bottom line goals with industry, conduct consumer awareness raising campaigns, as well as assisting members by providing grants to assist specific trouble spots

Product development Pool collective resources to develop new products which multiple members can supply Use ‘Partnership strategy’ between PhytoTrade (representing its membership) and the private sector to leverage resources e.g. investment, Research and Development, regulatory knowledge and compliance The R&D process:

collation of all the secondary literature relating to the commercially relevant properties of a particular species generate and analyse samples from the region to verify the constituent components assess volumes and distribution of the raw material commission more advanced technical research on any specific commercially interesting properties develop product specifications, quality and sustainability standards

Market development

Closely linked to R&D/Product development activities Partners that engage in R&D activities become the eventual buyer of the product once it is developed and launched Once a product is launched then PhytoTrade’s role is to facilitate a stable and equitable trading relationship between the buyer and its members Through the London office PhytoTrade maintains permanent European representation and ensures it retains a visible profile and presence in its main market

Supply Chain development

PhytoTrade is a service provider to its members, ensuring that each one is equipped with the necessary skills and resources to do business in a global market.Support is given in quality control, production, processing technologies, business development, freight logistics, documentation, fair trade/organic certification. members are assessed for their adherance to export quality standards = Pre Qualified Suppliers assist members to achieve social and environmental certification e.g. Fair Trade and Organics.

Some products

Accredited Partners- To encourage industry to consider social and environmental criteria in the formulation of their products and through their supply chain

Case study: Baobab

- In July 2008 Baobab was approved by the EU Novel Foods Regulation (Regulation (EC) No. 258/97)

- This means that Baobab can now be legally sold in the EU as an ingredient for food and drinks

- It took PhytoTrade Africa 4 years to overcome this regulation

- Baobab is now being marketed in the EU. Many companies are experimenting with the ingredient

Case study: Baobab

• Adansonia digitata: Upside Down Tree, Monkey

Bread Tree.

• Long history in African culture and folklore.

• Traditional food and remedy, especially for

children, pregnant women and the elderly.

• Hard shell. Powdery pulp and fibres coat the

seeds.

• Lives for 1000 years or more.

• Abundant across southern Africa.

• Harvested by rural people.

• Packed full of Ca, Mg, K, iron

The Baobab Case. It’s Value Chain

The aim of all the PhytoTrade supply chains is to maintain as much value addition with the rural producer, and then within Africa whilst recognising high product quality levels

1. Rural Producer harvests the fruit2. Rural Producer cracks the fruit and remove the seeds/powder3. Rural Producer sells the pulp to their local factory (sometimes this factory is

owned by their association)4. The Factory further processes the products e.g. grades and sorts the

seeds from the powder5. The Factory sells this product to an industry recognised Manufacturer6. The Manufacturer adds further value e.g. Depectinized extract7. The Manufacturer sells to distributors8. The distributors sell to brand owners9. The brand owners manufacture their final product and sell to the consumer

Socio-economic impacts of baobab (Adansonia digitata) commercialization

- Illustrates that the Baobab trade helps to reduce vulnerability by raising their income

- Poverty is a shifting condition that with the right means can be reduced.

- Although if elements of their income are removed e.g. Baobab then vulnerability increases

Lessons• Internal Impact assessment• External assessments• Sustainable funding• Government support• Diversity strategy for local/export markets• Commercially oriented research• Be adaptive

Conclusions Through a co-ordinated and systematic strategy a natural products industry is being developed to benefit low income rural producers in Southern Africa To ensure that the trade is pro-poor and environmentally sustainable it has been essential to have a pro active trade association to push these principles along the entire value chain

Recommendations• Identify, synthesis and build on existing multidisciplinary• Package it in an attractive and fairly simple way for

evidence and outcome based planning• Engage policy to help push the agenda.• Have a system for impact assessments and be adaptive• Sustainable mechanisms to fund emerging research

demands