Private Standards Innovation Fund€¦ · Regional Standards Programme (RSP) for the Department for International Development (DFID) in Southern Africa from 2006 to 2010. The objective

Helping Southern African agri-business meet international standards

Private Standards Innovation Fund

MAKING MARKETS WORK FOR THE POOR

The Private Standards Innovation Fund is a project of the Regional Standards Programme

ComMark would like to thank and express our appreciation to the following organisations which are partners of The Private Standards Innovation Fund:

The Department for International Development (DFID) South Africa

The Marine Stewardship Council

Mack Multiples

The World Conservation Union (IUCN)

Twin Trading

Freshmark

Afla-Guard

National Agricultural Marketing Council

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ents

Design, compilation and printing: www.intothelimelight.co.za

tableof contents

Introduction

Meet the partners

The Marine Stewardship Council

Mack Multiples

The World Conservation Unit (IUCN)

Twin Trading

Freshmark

Afla-Guard


Frequently asked questions

How to apply for funding

Case studies

2

4

4

6

8

10

12

14

16

18

15

19

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Our fundThe Private Standards Innovation Fund was set up by the RSP to help Southern African agri-business firms meet the range of private standards international buyers require.

The Innovation Fund awards grants to regional producer groups, private firms, industry associations and agencies to assist them to overcome specific certification or standards issues that prevent them from supplying high-value, formal markets such as international and regional supermarket chains. The fund aims to identify opportunities to increase exports of specific products where standards compliance can significantly enhance market access and raise producer incomes.

By promoting compliance with these increasingly stringent quality and safety

ComMark has been engaged to implement the

Regional Standards Programme (RSP) for the

Department for International Development (DFID)

in Southern Africa from 2006 to 2010.

The objective of the RSP is to help SADC* countries

and firms meet international food quality and

safety standards for agri-business products.

requirements, the Innovation Fund is hoping to enhance the demand for Southern African products.

The Fund also encourages commercial entities to experiment with creative solutions to overcome the barriers associated with standards compliance by providing them with a financial incentive to offset some of the associated risks and costs.

To date the Fund has awarded over R16-million to seven organisations.

In the next section we will introduce you to our seven partners. This is followed by a series of frequently asked questions about the Fund and some guidance around how to apply for funding.

The goal of the RSP is to reduce poverty in the region by increasing incomes of those engaged in the agricultural and fishing industries. The RSP seeks to do this by promoting improved private standards compliance, leading to an increase in exports, higher levels of commercial production, employment creation and raised productivity.

introducing...

...the Private Standards Innovation Fund

2

* Southern African Development Community

MSC is a custodian of a standard for sustainable and well-managed fisheries. Currently approximately 7% of the world fisheries are MSC certified.

what areprivate standards?

Private food safety and quality standards in developed countries have become a global phenomenon. These voluntary standards are product and production process requirements set by the buyers of agriculture and food products. They operate alongside compulsory public regulatory systems – but in terms of market access and access to the shelves of the leading supermarkets in the rich countries they are virtually mandatory. As a result, countries in Southern Africa face increasing constraints in exporting their food products to markets in Europe and the US. In order to ensure continued access to these important export markets, producers have no alternative but to make the necessary investments to comply with the requirements of private food safety and quality standards. While these standards are a constraint, they also represent an opportunity for Southern African firms to distinguish themselves as high quality, reliable suppliers that are able to meet and exceed the food safety, environmental and social standards set by their buyers.

Meeting private standards is a challenge for Southern African firms for a number of reasons. First, there are a large number of different standards schemes, such as GLOBALGAP and Fairtrade, as well as firm-specific standards such as Tesco’s Natures Choice. Secondly, the scope and stringency of these different schemes constantly change and increase. This requires producers to have ongoing access to information about private standards requirements and continuously make investments in standards infrastructure and systems. For smallholder producers, these costs are especially prohibitive. The graphic below outlines the constraints that smallholders face in meeting standards and demonstrating compliance through certification.

why are they a problem?

Continued access to

export markets means that

producers have no choice

but to comply with the

requirements of private food

safety and quality standards.Cons

trai

nts f

acin

g sm

allh

olde

rs

Low levels of education make it hard to understand and adopt the requirements of private standards

Technical assistance is needed to improve quality, safety, productivity, management, record-keeping and hygiene practices

Moving from a production to a market-oriented mindset can prove challenging

The high supervision and monitoring costs of certification are often prohibitive

‘These private voluntary standards are likely to continue

to increase in scope and stringency, just as public

regulations in food safety and traceability increase.’

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st

The potential exists to improve the share of the market for sustainable seafood that Southern African countries account for. We believe that MSC certification can help those countries to secure that improved market performance.

The Marine Stewardship Council (MSC) is

an international, independent, non-profit

organisation which works to reverse the continued

decline in the world’s fisheries. The MSC harnesses

consumer purchasing power to promote

environmentally responsible stewardship of the

world’s most important renewable food source.

The MSC has developed an environmental

standard for sustainable and well-managed

fisheries. It uses a product label to highlight

environmentally responsible fishery management

and practices. This enables concerned consumers

to choose seafood products which have been

independently assessed and labelled.

Dr Oluyemisi Oloruntuyi Marine Stewardship Council Mountbarrow House 6-20 Elizabeth Street London SW1W 9RB United Kingdom Tel: + 44 (0) 20 7811 3300Fax: + 44 (0) 20 7811 3301Email: [email protected]

Our projectWith growing consumer concern about the state of fisheries resources and the impacts of fishing on aquatic ecosystems, seafood retailers worldwide are incorporating sustainability standards into their seafood purchasing policy. As a result they are increasingly requiring environmental certification labels such as the MSC’s blue ‘fish-tick’ to appear on the seafood products they sell.

Increased demand for environmentally labelled products has introduced constraints for fisheries that are seeking to build reliable commercial relationships with retailers in importing countries. If they are unable to comply with best international practice for sustainable fishing, they risk being excluded from this market.

Only two developing countries have fisheries that have achieved MSC certification

– which means that if Southern African fisheries can gain this recognition they have a huge opportunity to take advantage of an important and growing market.

Achieving MSC certification can lead to increased income for successful fisheries. The economic benefits for producers are real, if certification is used to help shift production into an environmentally friendly segment of the market. Access to these markets could lead to improved returns for certified products.

With large numbers of people dependent on fisheries for their livelihood it is also vital to ensure that the resource on which these communities depend does not become depleted.

This project helps Southern African fisheries become more effective players in the changing international seafood market

The best environmental choice in seafood

The Marine Stewardship Councilmeet our partners

4

The potential exists to improve the share of the market for sustainable seafood that Southern African countries account for. We believe that MSC certification can help those countries to secure such improved market performance.

innovationperspective

This project shows Southern African food producers that environmental labelling and standards certification can be used to differentiate them as suppliers and facilitate access to high-value niche markets. Increased access to new markets can help fisheries to spread their risk because of the increased number of points of sale and the diminished effect of exchange rate fluctutations. Regional fisheries also benefit from the added value that is generated from access to more diversified and discerning markets.

Greater awareness of the region’s fisheries among established seafood retailers, food service providers and purchasers should result in increased opportunities for the region.

Growth in the number of MSC-labelled products: March 2000 to July 2007 Cost sharing in the case of the MSC intervention

ComMark funding contribution – 75%

MSC funding contribution – 25%

Concerns about the state of the environment has encouraged the development of a number of eco-labelling schemes. Eco-labels make it easier for consumers to choose green products. They indicate that the product has been sourced in a way that avoids detrimental effects on the environment. All eco-labelling is voluntary, and is awarded by an impartial third party. It demonstrates that a product or service meets certain environmental criteria.

discussion eco-labels

South Africa

Namibia

Mozambique

Tanzania

Angola

beneficiarycountries

‘The MSC certification programme offers fisheries the tools to gain access to the rapidly growing market for sustainable seafood.’

The key feature of this project is that it has allowed the MSC to establish its first operational base in a developing country. From its office in Cape Town, the MSC provides the region with the following services:

Increase awareness in the region of how MSC

certification can be used to gain preferential

market access.

Work with partners to develop strategies

and action plans for fisheries to begin the

assessment process.

Develop local certification capacity.

Promote MSC products from Southern Africa

amongst international businesses.

Stimulate demand for products from the

region.

The project has the target of increasing MSC-certified fish sales from Southern Africa from 60,000 tons to 70,000 tons by 2010.

roll out of the project

5

The commitment of several large

retailers in the US and Europe

to 100% MSC-certified or other

sustainable sources has increased

the size of the market for certified

seafood products from around the

world, including from fisheries in

the target countries of this project.


Mack Multiples Ltd has been in existence since

1874. Over time the company has grown and

evolved from a market stall in Covent Garden

to the largest privately owned supplier of fresh

produce in the UK. Mack Multiples currently

sources fresh fruits, salads and vegetables from

over 60 countries around the world and its clients

include all the major multiple retailers as well as

the food service sector.

Robert HooperM & W Mack LimitedTransfesa Road, Paddock Wood, Kent, TN12 6UTTel: + 44 (0) 18 9283 5577Fax: + 44 (0) 18 9283 1255Email: [email protected]

Our projectBecause small-scale farmers are often not able to demonstrate that they comply with the required standards demanded by their buyers, they miss an important opportunity to earn income from growing and marketing horticultural products aimed at the export market.

This project has established a producer marketing organisation (PMO) to develop the export market for Fairtrade-certified baby corn from Zambia. This project assists small-scale farmers with the administrative, technical and other competencies they need to be able to meet food quality and safety standards, as well as other market requirements.

What makes this project unique is that it is a joint venture between Mack Mutiples and small-scale Zambian farmers. If this initiative is successful, it will pave the way for similar programmes in other countries and with other products.

The initiative sees Mack Multiples moving along the value chain and assuming a market co-ordination role, showing that not only growers but also importers such as Mack Multiples can benefit if they assume an active developmental role. It is anticipated that this project will result in an increase in Zambian baby corn exports of 560 tons per year, translating into an improved gross margin of £900 per hectare for the 300 to 500 participating farmers.

Setting the standard for the fresh produce industry

The benefits for producers of complying with standards are long term and include productivity gains, reduced wastage, worker safety and environmental benefits.

Mack Multiples

6

‘The highlight of our involvement in this programme is bringing secure incomes to hardworking growers, with all the social benefits that will accrue to rural areas.’


This initiative demonstrates how importers can realise benefits by investing further down the value chain.

The project has enabled Mack Multiples to creatively

allocate resources towards developing the technical

capacity of smallholder farmers to ensure that they

are able to comply with standards.

By showcasing the economic benefits of a strategy

such as this, other importers operating at the end

of the supply chain may be inspired to become

more involved in the sustainable development of

their supplier base.

This project has facilitated the establishment and operation of a producer marketing organisation that is able to provide its suppliers with the following services:

Aiding small-scale producers to access the

growing UK market for value-added baby

corn.

Establishing an affordable mechanism

between growers and retailers that allows

Fairtrade and private supermarket standards to

be embedded in the supply chain.

Providing appropriate extension, input finance

and audit processes linked to market access.

Ongoing project activities include:

The provision of technical support to

participating farmers.

Securing and maintaining the services of a

packhouse.

The establishment and implementation of a

transparent product grading system.

Securing retail contracts.

Providing input supply credit (accessed via a

commercial credit provider).

What a PMO offers its stakeholdersAiding small-scale producers to access the growing UK market for value-added baby corn.

The establishment of an affordable mechanism between growers and retailers that allows for the embedding of Fairtrade and private market standards.

The provision of appropriate extension, input finance and audit processes linked to market access.

Supply chain and stakeholders for value-added produceProduct quality model centred on PMO

Stakeholder profit share (% of final value less costs)

Value markets promotion

Packaging & branding for African & EU market

Bulk packagingGrowing

Importers risk heavy fines from retailers for non-delivery. As an importer, Mack Multiples is thus exposed to a high level of risk should this project not deliver its intended volumes or quality. Adequate technology transfer, linked to strong management of the business unit (the PMO), is crucial to the success of this project. The correct choice of PMO manager is a critical factor in ensuring delivery, therefore Mack Multiples’ identification of the right person for the job is not negotiable. On the other hand, the PMO manager must have empathy with the growers as smallholders should have the ability to register their concern about the implementation of harvest times and quantity and quality processes, amongst others, in order to effect real change.

discussion risks of non-delivery

Zambia

‘We are very aware of our impact on the communities in which we operate and we are keen that this should be positive.’

Mack Multiples funding contribution – 50%

Cost sharing in the case of the Mack Multiples intervention

beneficiarycountry


Collaboration partners

Local producers

Joint venture

PMO

Distribution of products

End markets ComMark funding

contribution – 50%

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IUCN (the World Conservation Union) promotes

the conservation of ecosystems and biological

diversity, and the sustainable use of natural

resources. The Natural Futures Programme

is an IUCN Southern Africa and Phytotrade

Africa project which seeks to enhance market

opportunities to develop community-based small

and medium enterprises (SMEs) in the natural

products sector.

Kristy FaccerNatural Futures Programme3rd Floor, North Wing 1067 Arcadia Street, Hatfield, PretoriaTel: + 27 (0) 12 342 8304Fax: + 27 (0) 12 342 8289 Email: [email protected]

Our projectGlobal demand for natural products is increasing and this provides more opportunities for trade from the region.

However, this sector is faced with the emergence of official and private standards – which could pose both an opportunity and a major challenge. This programme operates at a variety of levels: it intervenes at a policy- making level by promoting an understanding of the economic benefits associated with compliance and it develops the skills necessary for smallholders to participate successfully in the economy.

A lack of responsiveness to standards and certification compliance could still threaten the emergence and sustainability of this sector in key markets. The Natural Futures Programme therefore makes systemic, market development interventions that aim to assist the creation of a pro-poor Southern African natural products sector.

This intervention demonstrates a sustainable business model that includes large numbers of poor, isolated rural producers and multinational firms working towards a single economic objective, with both environmental sustainability and the livelihoods of the poor enhanced.

The natural products sector offers significant opportunities for poor rural communities with access to natural resources. Sustainable harvesting and adherence to Fairtrade principles can help enterprises to access the growing market for natural products. Growth in the trade of natural products offers economic and employment opportunities

for income generation, especially in infertile areas where few

other options are available to local people.

natural products = natural profits

Natural product collection and processing is generally led by female household members. Involvement of these women in the natural product supply chain can result in increased household incomes, livelihood diversification and opportunities for cash trade.

The World Conservation Union

‘These businesses are exceptional. They yield huge social and environmental returns, but they are not valued in the formal commercial market and so our challenge is to enable them to compete in that market. This approach should be increasingly seen as a window for making development sustainable.’

8


Participation in the market leads to

discussion what are natural products


Southern Africa

Cost sharing in the case of the IUCN intervention

‘There is proven potential for natural products to contribute significantly to economic growth and income diversification, particularly in rural economies.’


IUCN funding contribution – 57%

The Natural Futures definition of natural products includes those that:

Are plant-derived, as there is a

growing market for non-animal

products.

Occur naturally – which means

they are indigenous, as this has

biodiversity value.

Are sustainably harvested from the

wild, or are organically cultivated

in their natural environment.

(Cultivated products are included

as this may be the best way for the

poor to benefit, and because it is a

strategy to address biodiversity loss

and environmental sustainability.)

Benefit the poor, with a rural focus (although it is acknowledged that there may be urban environments where products fit the above definition).

This project demonstrates how standards can be used as a mechanism to catalyse an infant industry and ensure that the benefits of improved market access are captured by the poor.

This sector has relatively few market entry barriers and offers a unique cash income opportunity to some of the poorest of rural – and often female – individuals and is unmatched in its potential to provide rural areas with a long-term sustainable economic growth opportunity. This opportunity can, however, only be realised if the buyer of natural products from Southern Africa have confidence in the integrity of the product and that can only be achieved if the sector is able to demonstrate compliance with standards.

The Natural Futures Programme operates at a variety of levels to enhance market opportunities for the natural products sector. Specific standards issues this project addresses include:

Works with large certification organisations to

ensure that smaller rural producers are able

to meet the requirements, that certification

systems are applicable to the sector and that

the process is community and small-scale

producer friendly.

Raises awareness of standards and increases

certification readiness by documenting best

practices and providing individual support.

Assesses and documents the health and safety

risks facing the sector.

Assists partners with applications and HACCP*

training and certification.

Assists natural products enterprises to meet

quality testing requirements.

Identifies safety, sanitary, Fairtrade and health

requirements and trains community producers

to comply with them.

econ

omic

bene

fits

66,000 primary producers of raw fruit each earning US$80 per year.2,300 (SMEs) extracting seeds each earning US$3,000 per year.30 large-scale oil pressing processors each earning US$600,000 per year.Total value of the industry R18-million per year.

Producing 15,000 tons of baobab oil involves

environmental benefits

social benefits

Benefits of the natural products trade

Revenues depend on a reliable supply of the natural resourcesThis encourages


Maintenance of healthy

ecosystems

Implementation of proper management

practices

Rehabilitation of previously

degraded areas

Sustainable use of the resource

Increased health, nutrition and food security. Increased average incomes in the region.Reliance on and preservation of traditional knowledge.Increased social and financial capital.Empowerment of women.


* Hazard Analysis and Critical Control Point

9

Twin Trading

Twin is a charity which seeks to enable smallholder

farmers in less developed countries to access

value-added export markets. Twin Trading, a sister

company, trades 100% Fairtrade – certified food

products from these farmers and works to open

up value-added markets through brands that are

co-owned by producers. Twin and Twin Trading

work with around 40 producer organisations

from Latin America, Africa and India. These

organisations produce a range of commodities,

including coffee, cocoa,

fruit, nuts and sugar.

Andrew EmmottTwin & Twin Trading Third Floor, 1 Curtain RoadLondon, EC2A 3LTTel: + 44 (0) 20 7375 1221Fax: + 44 (0) 20 7375 1337Email: [email protected]

Our projectGroundnut production has historically been a successful way for small-scale farmers to earn their livelihood. However, increased concerns around healthy eating have led to changes in food regulations, which have isolated smaller producers who are unable to meet these exacting standards.

Aflotoxin in groundnuts are a particular problem for small-scale producers seeking to access retail markets, but there are also tight standards and controls on food hygiene and labour conditions in processing facilities. The loss of export markets in countries such as Malawi from the 1970’s has had a significant impact on producer incomes and can only be reversed if market constraints are addressed. For example, Twin work to enable producers to export groundnuts that meet the EU maximum permissible level of aflatoxins which is 4ppb.

The US, China and Argentina have been able to adapt rapidly to retailer standards and have dominated the global groundnut market for the past 20 years. However, over the past two years, exports from both the US and China have reduced to the point where both these countries will potentially become net importers in 2008. As a result, the market potential for

African countries that meet retail market requirements is significant, although production has to be commercially viable – which is another challenge for any organisation working in this sector.

This project aims to facilitate necessary training and develop understanding and monitoring of production standards to increase producer and their associations’ capacity to meet export requirements. This will result in increased market access and improved incomes for Southern African nut farmers and their families. Twin sees the potential for 10,000 to 20,000 producers to access value-added supply chains over the next three years. In addition to increased income opportunities through greater market access, the minimum Fairtrade price and premium will have a significant effect on the value of exports.

In 2007 Twin set up Liberation Foods CIC as the latest of its string of companies co-owned by producers. Liberation is the world’s first 100% Fairtrade nut company (see the photos below of its first branded range of products). The producers, including farmers in Malawi and Mozambique, have a 42% stake in the business through an international nut producers co-operative.

‘I am very proud of selling my groundnuts [through this programme]. I would very much hope the relationship with Fairtrade will continue so that as many Malawians as possible could benefit. Farmers in our country desperately need a fair price for their crops and security for their future and that of their families. I hope other crops as well as groundnuts will be sold on Fairtrade terms in order to boost our country’s economy.’ Rosemary Kadzitche, Malawi

Capturing the product earlier in the supply chain, processing appropriately and maintaining the quality through the supply chain are necessary to meet EU standards.

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The Twin intervention is working to improve the ability of smallholder farmer organisations in Malawi and Mozambique to meet export and food quality standards for regional and international retail markets. Producers will benefit from increased sales and increased market access. The project aims to:

Improve the quality of exported nuts to meet

EU buyer specifications.

Develop new markets with increased value

and volume to producers.

Establish a groundnut processing facility with

one of the farmer organisations participating

in the project.

Explore possibilities of increased investment to

scale up the processing facility.

These objectives are being accomplished through the following activities:

Providing training, as well as aflatoxin testing

and monitoring to support the future

development of a processing facility.

Refining methods and sampling procedures

through use of reference laboratories.

Preparing guidelines for aflatoxin testing.

Undertaking an aflatoxin suppressant trial (see

page 14 for further details).

If this intervention is successful, the spill-over effects for larger groups of producers will:

Stimulate investment in African groundnut

supply chains by other investors.

Show how appropriate technology and

systems can reduce levels of aflatoxin

contamination and increase the reliability of

agricultural produce.

Guarantee a reliable supply and so facilitate

longer-term retail contracts and investment in

large-scale processing facilities.

Promote the quality of nuts and the reputation

of regional producers, thereby increasing

trading opportunities.

Aflatoxins are naturally occurring carcinogenic toxins produced by a fungus called Aspergillus flavus or parisiticus.

Aflatoxin can colonise and contaminate grain before harvest or during storage. Host crops are particularly susceptible to infection by Aspergillus following prolonged exposure to high humidity or damage from stressful conditions such as drought, as these conditions lower the barrier to entry.

Crops which are frequently affected include cereals, oilseeds (peanut, soya bean, sunflower and cotton), spices and tree nuts.

Mozambique

Malawi



Twin Trading funding contribution – 42%

Cost sharing in the case of the Twin Trading intervention

‘Twin builds long-term relationships with co-operatives of growers and invests in strengthening their organisations to enable them to become independent and commercially viable.’

discussion aflatoxins

Peanut export volumes (‘000MT) between 1972 and 2000



11

Freshmark

The Shoprite Checkers group is the second largest

retailer of fresh produce in Africa. Freshmark, the

fresh produce procurement division of Shoprite

Checkers, supplies all Shoprite Checkers stores

with fruit and vegetables. Freshmark also sources

fruit and vegetables from the region and further

afield to ensure a wide variety and year-round

continuity of its main fresh produce lines.

Marianne van der Laarse of QC Fresh, on behalf of FreshmarkCnr William Dabs and Old Paarl Road Brackenfell 7560, South Africa Tel: +27 (0) 21-980-4000 Fax: +27 (0) 21-980-4050Email: [email protected]

Our projectHistorically, Freshmark sourced a significant amount of fresh produce from a large number of growers, including a number of smaller growers. However, increased consumer demand for food safety guarantees has forced Freshmark to re-evaluate its procurement strategy. Recently the company launched a Food Safety Programme which requires that all producers, regardless of size or location, comply with specific industry food safety standards. Unless Freshmark’s estimated 350 small-scale suppliers are able to meet these standards and the legal requirements in South Africa, they are in danger of being excluded from the Freshmark supply chain. This project is an attempt to avoid such exclusion.

Through this intervention, Freshmark actively works with its suppliers to ensure that they comply with the minimum food safety and quality standards it has; if in place, the project will develop the ability

of small-scale producers to comply with the food safety demands imposed upon them by retailers.

Improved compliance will stimulate the quantity and quality of supply from the smallholder sector. This is of particular importance to Freshmark’s regional suppliers, as it enables them to penetrate the South African market.

This intervention should also improve the net balance of trade between South Africa and the rest of the region by increasing regional exports. Increased demand is expected to come from South African, regional and European supermarkets.

‘Despite the current retailer trend of supply chain consolidation and category management, procuring from smaller suppliers is one way of maintaining and increasing their black economic empowerment (BEE) procurement commitments.’

Improved compliance to minimum food safety standards is of particular importance to Freshmark’s non-South African suppliers as it will assist them to penetrate the South African market.

12

In addition to scaling up an existing small-supplier standards development programme, Freshmark’s programme promotes compliance with food safety standards. It helps growers to organise themselves so that they can capture economies of scale and use their collective bargaining power to negotiate with Freshmark. Specific activities include:

Assisting 100 KwaZulu-Natal small-scale

farmers to comply with food safety standards,

securing their position as suppliers within the

Freshmark supply chain.

Establishing a project database.

Disseminating relevant information.

Establishing linkages between commercial

growers and smallholder farmers.

Implementing management software for

smallholder standards compliance.

Building standards compliance capacity.

Verifying the efficacy of the programme on a

regular basis.

This initiative demonstrates how a comprehensive small-scale supplier development programme can be used to enhance competitiveness. The programme also shows how a development programme of this kind can assist those in the retail sector to achieve black economic empowerment targets. If other retailers follow suit by investing along the supply chain, greater numbers of small-cale farmers will gain improved access to retail markets regionally and internationally.

The programme also encourages retailers to use established commercial relationships with their larger suppliers to leverage mentoring support for small-scale producers.

Southern Africa

discussion the rise of supermarkets


Cost sharing in the case of the Freshmark intervention

‘Freshmark procures and distributes fresh produce from nine distribution centres to more than 440 Checkers and Shoprite supermarkets and Checkers Hyper stores.’


Freshmark funding contribution – 49%



In the developed world, supermarkets have been a feature since the 1930s; however, their role as the primary marketing channel for food products – and fresh produce in particular – was only established in the 1990s. Currently, 80% of the food sold in developed countries is marketed via large, multinational supermarket chains. This trend is rapidly being diffused to developing countries and has had a fundamental impact on the way food is sourced from suppliers and producers. The procurement catchment area of these chains has shifted from local or national suppliers to international suppliers. In addition, rather than relying on a general wholesaler to supply them with product, supermarkets have switched to using specialised wholesalers, this has reduced the number of market entry points for agricultural producers. To guarantee product volumes and quality, these specialised wholesalers have moved from spot market transactions with producers to implicit long-term contracts. These are seen as necessary to enforce the private standards supermarkets demand from their suppliers.


1�

Afla-Guard™

Afla-Guard™ treated fields should consistently provide farmers of stock peanuts and shelled peanuts with significantly reduced concentrations of aflatoxin, compared to untreated fields.

Afla-Guard™ is a product registered in the US as a

biological soil treatment for agricultural use, and is

effective in reducing or controlling the formation

of aflatoxin in peanuts. The owner of the rights to

Afla-Guard™ is Circle One Global, which focuses on

market development in the US but also carries out

very promising research work with Afla-Guard™

on other crops such as maize. In South Africa,

Afla-Guard™ is marketed by a start-up company,

AGCP. ComMark funding enables producers in the

SADC region to benefit from this technology by

providing the resources to enable Afla-Guard™ to

be registered in Southern Africa.

Jacob RaathAfla-Guard Crop Protection SA (Pty) Ltd. (AGCP SA) 5 Villa Mynhardie, Duiker AvenueCenturion, 0157, South AfricaTel/Fax: +27 (0) 12 663 5554Email: [email protected]

Our projectThere are a number of plant protection products that farmers can use to help them meet food safety standards. However, before any product can be used in the production process, it must be shown to be both effective and safe under local conditions in order to be registered.

Product trials can be expensive and unless input suppliers are convinced that the size of the market justifies the expense, they are reluctant to make this investment.

Afla-Guard™ is such a product, and the aim of this project is to demonstrate that Afla-Guard™ is effective in limiting or preventing the formation of aflatoxin on groundnuts during production under Southern African conditions. Field trials are under way, and if positive, their results will support the registration and early commercial availability of Afla-Guard™ to Southern African producers. This intervention could also support efforts to register and market the product in Malawi, Zambia, Mozambique and Zimbabwe.

‘Any solution to the problem of aflatoxin formation will contribute to improved market access, guaranteed incomes, risk minimisation and new investment levels in the production and processing of groundnuts in the region.’

Demonstration that Afla-Guard™ is effective and that the risk of aflatoxin formation could be minimised, together with initiatives to increase access to markets and technology, would mean that peanut production could play an increasing role in Southern African agricultural production, especially for small-scale producers in areas with marginal rainfall.

Solving or controlling the aflatoxin problem will increase SADC small-scale producers’ access to markets, in particular when more rigorous aflatoxin regulations are introduced.

Cost sharing in the case of the Afla-Guard™ intervention

Afla-Guard funding contribution – 39%


This project will demonstrate that the Southern African input-supply market is large enough to justify the investment in product registration. This will improve the availability of products aimed at helping farmers meet international food quality and safety standards.


Southern Africa


Collaboration partner

14

innovation

The objective of this project is to pilot a small-grant scheme that will provide emerging farmers with the means to lower the costs associated with private standards certification.

The NAMC is a statutory body established

to advise the Minister of Agriculture and the

South African agriculture industry on matters

relating to the marketing of agricultural

products. One of the focus areas of the NAMC’s

Market & Economic Research Centre has been

private standards and the extent to which

this limits small farmers’ access to high-value

supply chains. .

Andre JoosteNational Agricultural Marketing Council4th Floor, Meintjiesplein Building 536 Schoeman Street, Pretoria South Africa Tel: +27 (0) 12 341 1115Fax: + 27 (0) 12 341 1811Email: [email protected]

Our projectThere are a number of emerging farmer groups in South Africa that can be classified as ‘export-ready’. However, these groups lack the required private standards certification that international buyers and local supermarket chains demand, which limits their ability to maximise the returns from their production.

At the end of the pilot phase, the NAMC will evaluate the success of the programme and if warranted, leverage funds to significantly scale up the project.

‘The goal of this project is to enhance the profitability of emerging farmers/exporters in South Africa through improving their access to international markets and/or local supermarket supply chains.’

Cost sharing in the case of the NAMC intervention

NAMC funding contribution – 38%


The objective of this project is broader than assisting producer groups with certification. For the NAMC it is an opportunity to come to grips with the practical side of certification and gives them the tools to address private standards at a systemic policy level.

Should governments subsidise private standards certification? What industry-wide products can be developed to reduce the cost of certification? How can government extension services support the certification process?

These are the types of questions and debates the NAMC is now able to lead on a policy level.


South Africa

beneficiarycountry


15

What do we mean by innovation?By innovation we do not mean sophisticated technological solutions – we are really looking for extraordinary solutions that creatively use market forces (supply and demand, etc.) to tackle problems associated with compliance in terms of private food safety and quality, and social standards. The Fund looks for creative approaches to increasing market access which can be replicated or serve as seed ideas to generate other programmes and projects. It is about creating an incentive for businesses to experiment with new ways of working which, if successful, could be replicated by other organisations or on a larger scale and become an example of best practice.

Why do we only fund standards projects?As part of the RSP, the Private Standards Innovation Fund focuses specifically on initiatives that tackle private standards problems. There are other funds available, both within the RSP and other ComMark programmes, which target other supply-side constraints.

What types of programmes do we fund?The Private Standards Innovation Fund generally awards grants for activities that support standards compliance in fresh fruit and vegetables, nuts and fisheries and have a duration of between one and three years. The Fund is open to Southern African producer groups, private firms, industry associations and agencies active in the agriculture and food processing sector facing a specific certification or agricultural standards issue that prevents them from supplying an identified regional and/or international market.

What are our funding criteria?Grant applicants must demonstrate:

How standards compliance can enhance

market access and raise the incomes of

poorer beneficiaries.

How the specific products can be traded

commercially and competitively on

sufficient scale to raise producer incomes.

That supermarkets are the primary target

market and the intervention will establish a

commercial link with this target market.

How the costs and risks in standards

development and compliance are currently

inhibiting investment.

How the proposed activities will have

spill-over benefits for larger groups of

producers.

Which countries are eligible?The Private Standards Innovation Fund works with partners in the following Southern African countries: Angola, Botswana, Lesotho, Madagascar, Malawi, Mozambique, Namibia, Swaziland, South Africa, Tanzania, Zambia and Zimbabwe.

Should I send the full application or can I send a concept document first?It is advisable to discuss your areas of interest with ComMark’s RSP staff before developing your application. On the basis of these discussions you should then submit a summarised outline of your proposal for pre-appraisal. This should save you from embarking upon a time-consuming proposal writing exercise, which may not be successful.

What can the Fund not be used for?Short-term consultancies, individual work-shops or specific visits, unless these are part of a larger programme with clear and measurable market development objectives.

We are really looking for extraordinary solutions that creatively use

market forces to tackle problems associated with compliance in

terms of private food safety and quality, and Fairtrade standards.

about the innovation fund

frequently asked questions

16

What is the monetary value of the grants?ComMark does not stipulate a maximum grant value. The grant is also not intended to cover all the costs and risks associated with innovation. Cost sharing is expected from all grant holders. Ultimately, ComMark seeks to match its input with the anticipated outputs. Returns on investment would include factors such as the number of beneficiaries and the level of impact upon their lives.

Who decides whether a project will receive funding?Ultimately ComMark’s Board of Trustees will approve your proposal; however, feedback and evaluation occur throughout a dynamic application process. ComMark’s Private Standards Fund managers are actively involved in the development of proposals that demonstrate interventions characterised by creative flair and innovation. This includes assistance around conceptualisation and investigation of grant opportunities, as well as assistance with the preparation of applications. Innovative proposals that conform to our development priorities and approach are submitted to the Board of Trustees for final selection. Funding is allocated at the discretion of the Board of Trustees.

How long does it take for us to approve a funding proposal?We work on a 90-day cycle, so you should be notified within three months of the submission of your proposal whether it has been accepted.

Grant applicants seeking over R1,500,000 are eligible for a Phase 1 grant not exceeding 10% of the total funds being requested.

Grantee discusses areas of interest with PSIF

Grantee submits two-page outline of proposal

PSIF assesses whether proposal conforms with its requirements

Proposal is rejected

Proposal is accepted

Grantee prepares a formal

application

PSIF assists with the application

Application is accepted by

ComMark’s Board of Trustees

Phase 1 grantees provide ComMark with detailed baseline data and a cost-benefit analysis of their proposal.

Implementation

Proposal is rejected

Proposal is accepted

Implementation

1�

ComMark does not publicly advertise for applications. Potential applicants should discuss their areas of interest with ComMark’s Private Standards Innovation Fund Managers and on the basis of these discussions, submit a summarised outline of their proposal for pre-appraisal. Once there is agreement that the concept proposal broadly conforms to the Fund’s development priorities and approach, ComMark will advise potential grantees to make a formal application. The Innovation Fund managers will work with potential grantees to investigate opportunities for grant assistance and will help them to prepare their grant applications.

How standards compliance can enhance

market access and raise the incomes of

poorer beneficiaries.

How the specific products can be

traded commercially and competitively

on sufficient scale to raise producer

incomes.

That supermarkets are the primary target

market and show how the intervention

will establish a commercial link with this

target market.

How the costs and risks in standards

compliance are currently inhibiting

investment.

How the proposed activities will have

spill-over benefits for larger groups of

producers.

how toapply

applicationsmust demonstrate

producer groups

private firms

industry associations

relevant agencies

who

can

app

ly?

Formal grant applications will usually consist

of a completed application form signed by an

appropriate representative, including a summary

of the proposed initiative and accompanied

by attachments detailing the proposed design,

operations and intended impact.

Application process

funding

18

The natural products industry world-wide has grown exceptionally in recent years and Swaziland is no exception. In 2004 the not-for-profit company Swazi Indigenous Products was established and in 2006 it received support from the Natural Futures Programme for the development of systems to produce organically certified Marula oil. This certification translates into a 50% premium on prices of bulk oil sales to Europe. Harvesters are paid a percentage over and above that paid for conventional kernels when they produce them organically.

In 2005, Khelina qualified as an organic supplier. This entailed attending the company’s organic training programme and learning how to comply with the new systems and organic supply requirements. She now sources and supplies Marula from wild trees in the communal lands of rural Swaziland. She is familiar with the trees and fruits because of her experience in the local production and sale of Marula beer from the fruit’s flesh. Now she also collects the kernel inside the fruit’s nut, which is processed for the manufacture of cosmetic oil.

Marula certification in Swaziland

case study

Khelina Hluphekile Magagula is a 49 year-old divorced

woman. She has seven children and two grandchildren who

she is responsible for. Her involvement in Swazi Indigenous

Products earns her an income which helps her to support

her family.

khelina magagulamarula harvester

Rosemary Kadzitche has been growing groundnuts for five years to supplement the income she and her husband earn from a small shop they run from their homestead.

The Mchinji Association has helped subsistence farmers like Rosemary to get a fair price for peanuts which they grow to sell. This has meant that peanuts are increasingly being grown for more than household consumption.

Rosemary explains that peanut farming is hard work. “There are many practices which have to be followed to grow good quality nuts, including making ridges for the groundnuts, planting, weeding, a second

round of weeding and ‘banding’ – making higher ridges which give room for the peanuts to

grow. Harvesting, drying, shelling and grading are also hard work and we have to develop

special skills to do this. I get up at 5.30am, start farming at 6am and work until

11am. Then I go home for lunch. I start work again at 2pm and work until

5pm. Then I help my husband who works at the shop until

6pm when I go home and feed the children and do my housework.”

Poverty is the over-whelming reality in Rosemary’s village. Access to water, healthcare and education is very limited. With peanuts being the main source of income for many households, improved water supplies and markets for their produce provide a vital opportunity for farmers.

Fair prices for groundnuts in Malawi

Rosemary is 57 and is a member of the Mchinji Area

Smallholder Farmers’ Association. She lives with her

husband, two of her grandchildren – a girl of eight and a

boy of seven – and three nieces, the daughters of her sister

who has passed away. Their village is situated in the central

region of Malawi.

rosemary kadzitchefairtrade peanut farmer

Fairtrade has ensured a better, more stable and more reliable market for peanuts grown in the village. “The Fairtrade premium will help alleviate poverty in the area and it will improve the lives of the entire community when it is used to pay for more boreholes to be drilled. When we can dig more boreholes, we will have cleaner and safer water, fewer diseases and ultimately healthier and better lives,” explains Rosemary.

The Association will use the Fairtrade premium money to build field storage units so that it no longer has to rent premises for storing the peanuts. The new warehouses will be built to strict standards and ensure that the peanuts stored there are of the highest quality. The premium will also be used to fund training and to buy hand-shelling machines, which will increase productivity.

“Because of the introduction of Fairtrade in 2006, my groundnuts have been bought at a better price. This has enabled me to improve our living standards.”

Rosemary is secretary of the NASFAM Board, an organisation which works across Malawi uniting small-scale farmers. She therefore spends time meeting with farmers, hearing their concerns and presenting them to the Board. She encourages women to join the Association and take on leadership roles. Rosemary says that she sees herself as a role model for other women farmers. The Mchinji Association Executive Committee currently has four female members.

“I am very proud of selling my groundnuts to Fairtrade. I hope the relationship with Fairtrade will continue so that as many Malawians as possible can benefit. Farmers in our country desperately need a fair price for their crops and security for their future and that of their families. I hope other crops as well as groundnuts will be sold on Fairtrade terms in order to boost our country’s economy.”

case study

The Private Standards Innovation Fund

826 Government Avenue Pretoria, 0083, South Africa

Tel: +27 12 431 7900 Fax: +27 12 431 7910

www.commark.org

Documents

Private Standards Innovation Fund€¦ · Regional Standards Programme (RSP) for the Department for International Development (DFID) in Southern Africa from 2006 to 2010. The objective