1st Call for Proposals – Projects Approved by the Executive Board
New guidelines for the Operations of the Common Fund for Commodities for the period 2013-2015 were approved by the Governing Bodies in 2012 which mandated the Secretariat of the CFC to invite proposals for funding for commodity development through an open call for proposals. First call for proposals was initiated in October 2012 and the proposals received meeting the criteria specified were reviewed by the Consultative Committee of the CFC. The Executive Board of the CFC in its meeting held in April 2013 approved nine proposals ranging from warehouse inventory credit, micro-leasing to commodity branding on the recommendations of the Consultative Committee. Brief summary of the proposals approved is given below.
1. Integrated Food Management System – Regionalizing Warehouse Inventory Credit through Commodity Exchange: Overall cost USD 900,000; CFC - loan USD 400,000
The project connects farmers in remote areas with the local stakeholder-owned commodity exchange using affordable communications technology. Grain stored in rural community warehouses would be reported and available for purchase via the exchange. This will facilitate price transparency at regional markets and increase the availability of information on quantity and quality of staple food grains available to the local market. The costs of running the system would be covered through service fees, input supply and marketing services to farmers in the remote areas. The project foresees two pilot sites to be set up as "proof of concept", one each in Malawi and Zambia to demonstrate the feasibility of the model to regional financiers. The project will be implemented by partners with a known track record in their specific fields of expertise.
2. Micro Leasing in Commodity Value Chains: Overall cost USD 290,000; CFC - loan USD 145,000
The project will provide lease finance for small entrepreneurs and cooperatives in agricultural commodity value chains who seek to invest in processing equipment and machinery, irrigation facilities or other movable assets. The target group represents 95% of all Tanzanian businesses. Micro leasing is a new financial product in Tanzania and provides access to medium term finance for clients with no or very little collateral. Regular loan financing access is difficult for these entrepreneurs as they frequently do not have the required assets acceptable as collateral by regular financial institutions. The lease financing to be made available will be exclusively for investments in agricultural value chains in the range between USD 2,000 – USD 10,000.
3. Solagrow PLC: Commercial Farm Expansion: Overall cost USD 6.255 mln; CFC - loan USD 1,100,000
Solagrow provides seed potatoes supplemented by seeds from other crops and mechanization services to organized outgrowers and other small farmers. In addition the company produces quality food crops for local and for export markets on its own nucleus farms. For outgrowers collective marketing of produce is offered on a voluntary basis. Solagrow’s main shareholder is the Netherlands based Cornerstone Foundation. Important commercial partners include traditional established seed companies like HZPC, Popvriend seeds, Beyo Zaaden and van der Bildt Zaaden (Solagrow acts as sales agent and/or multiplies seeds on contract basis). Recently Heineken Ethiopia contracted Solagrow for supply of malting barley. Public partners include the Dutch Ministry of Foreign Affairs, Wageningen University and the Dutch Development Organization SNV. The company works closely together with the Ethiopian Institute of Agricultural Research (IAR) for release of new Ethiopian potato varieties and introduction of new multiplication technologies.
The Fund’s contribution to the project will be used to equip three recently allotted additional nuclei farms of 200 hectares each in Ethiopia that will produce seed potatoes and other crop
4. Organic Tea Marketing and Production Development for Smallholders in Shuangjiang Ethnic Minority Autonomous County of China: Overall cost USD 2,571,429; CFC - equity USD 900,000
The organic tea market expanded quickly in China due to the increasing awareness of its good impact on health and environment. Established in 1999, YSMT is an established tea company concentrating on tea planting, processing, marketing and R&D for new products. YSMT collects fresh tea leaves from smallholders in and around the county, processes into black and Pu’er tea and then markets tea in China and overseas. It has around 20,000 contracted smallholders in Shuangjiang minority county. YSMT is in the top 100 tea enterprises, and top 10 Pu’er and black tea producers in China. YSMT is now focusing on organic tea production and marketing. YSMT was one of the partners in an earlier tea project supported by CFC in China, whereby the experiences with the tea producers in Yunnan and YSMT were most positive.
CFC and China Yunnan Shuangjiang Mengku Tea Co.Ltd (YSMT) will set up a joint venture(JV) to conduct market promotion, production and training activities to develop organic black and Pu’er tea originating from Shuangjiang and neighbouring counties. The target markets are in Beijing, Tianjin and Kunming.
The project is intended as a cooperative joint venture between the Common Fund and a Chinese tea producing and marketing company (China Yunnan Shuangijang Mengku Tea Co. Ltd (YSMT). The focus will be on market promotion, production and training activities to develop organic black tea and Pu-er tea, targeting three major urban consumer markets (i.e. Bejing, Tjianjin and Kunming).
5. Commodity Branding (Windward/Shell Foundation): Overall cost USD 1.6 mln.; CFC grant USD 475,000
The project aims at developing consumer brands for two specific commodities, namely sugar originating from Mozambique and India, targeting the USA and EU markets, and pineapple from Ghana, targeting the EU market. Windward Strategic ltd is a branding specialist for traditional commodity-based products. It is partnering (inter alia) with the Shell Foundation to develop enterprise-based solutions for development problems. The proposed CFC support focusing on sugar and pineapple, forms part of a larger programme on commodity branding. ED&F Man, the largest global integrated sugar trader, is to be the first licensee of the developed sugar brands while for pineapple a Ghanaian medium sized producer, Gold Coast Fruits, will be the first licensee. It is expected that this project will be an important step in the process of adding value to traditional agricultural commodities by looking at options for practical “de-commodification”.
6. Revitalisation of the Coffee Industry in Yemen: Overall cost USD 3.9 mln ; CFC - grant of USD 250,000
The proposal was formulated at the request of the government of Yemen and has a focus on increasing the productivity and efficiency of the coffee sector in Yemen, which should result in higher and more stable incomes for the coffee producers. In addition, the project is expected to result in higher quantum of good quality coffee through higher productivity and through increasing the number of coffee producers by providing them with a sustainable means of income, with returns higher than from the production of qat.
The CFC funding for this project is conditional upon the confirmation of co-financing being available for the balance of funds required.
7. Partnership with the Africa Agriculture and Trade Investment Fund (AATIF): CFC - convertible loan USD 2 mln
KfW (the German Development Bank acting for the German Ministry for Economic Cooperation and Development/BMZ and on its own account) is the initiator of AATIF and an investor (USD62 mln C-Shares and USD26 mln in B-Shares). Deutsche Bank AG has been selected as the Investment Manager of the Fund and also invested USD26 mln in B-Shares. This is complemented by smaller investments by private sector entities and church organizations.
AATIF provides tailored financing directly to companies and indirectly via intermediary investment companies/financial institutions who are engaged in agricultural value chains. AATIF, as an Impact Investing Fund, seeks to realize the potential of Africa’s agricultural production, manufacturing, service provision and trade for the benefit of the poor. ILO acts as an independent Social and Environmental Compliance Advisor. AATIF is complemented through a Technical Assistance Facility (managed by the CFC), that provides grant funding for projects to strengthen the developmental aspects of individual investments.
8. SME Agribusiness Development in East Africa: CFC - convertible loan of USD 520,000
The Fund will provide meso-level financing to SMEs in agribusiness in East Africa. Financing will be provided as loan, from USD 65,000 to USD 650,000, average loan size USD200,000. Four main type of loans are envisaged: (i) input finance; (ii) crop finance; (iii) farm investment; (iv) company investment. Financing to SME in local currency, at commercial rates ~18-20% pa, up to 60 months.
9. Identifying growth opportunities and supporting measures to facilitate investment in commodity value chains in landlocked countries: CFC - grant USD 335,000
The United Nations has identified landlocked developing countries as a unique group requiring special attention in international development cooperation because of their particular vulnerable profile. Most LLDCs also fall in the category of vulnerable commodity dependent countries. Commodity dependence is a widespread condition in LLDCs, which aggravates the challenges and requires special measures to achieve sustained growth and resilience to global market volatility.
The project targets the identification of needs and feasible development instruments suitable to the conditions of landlocked commodity dependent developing countries (LLDCs). The studies to be made will be undertaken by local consultants in the LLDC’s. The information and experiences recorded in the local studies will be analysed to determine common and special features of commodity driven development in different LLDC’s. The outcomes will be presented to and discussed in the review of the Almaty Programme of Action in a dedicated side event on commodity dependence.
The project will be supervised by the International Lead and Zinc Study Group (ILZSG), on behalf of all International Commodity Bodies.