Developing the rice industry in Africa - Inter-Réseaux · PDF file · 2015-06-10Developing the rice industry in Africa Ghana assessment July 2012. 2 ... East to source rice for key

Developing the rice industry in AfricaGhana assessmentJuly 2012

2

Agenda

A. Executive summaryB. Ghanaian rice market C. Investment case for Northern Region D. Northern Region partner analysis

1. Avnash's smallholder initiative2. Avnash's commercial model3. Recommendations

E. Investment case for Volta Region F. Volta Region partner analysis

1. GADCO's smallholder initiative2. GADCO's commercial model3. Recommendations

G. Next steps

3

A. Executive summary

4

• The Ghanaian rice market is increasingly dominated by high priced premium rice which is mostly imported– Premium rice captures 24% of national rice consumption and grew at a CAGR of 40% from 2006 to 2011 due to rising

urbanization and income– Ghanaian consumers are willing to pay a 113% price premium for imported rice in comparison to local rice – This premium rice consumption is mainly served by imports (with 85% of supply), and distribution is consolidated amongst

a few players (e.g., Finatrade and OLAM) with 60% market share

• The Northern Region is the country's top rice producer and is well placed to serve the largest rice market in Ghana– The Northern Region is the largest producer of rice in Ghana (37% of total production) and rice is the 5th most important

crop in the region with ~86k smallholder rice farmers– The region is well placed to serve the largest rice consuming region, Ashanti (22% total consumption), given rising

urbanisation and incomes– The region has the largest processing capacity in Ghana, including Avnash, Nasia Rice Mill, Lolandi, and Amsig; there are

also several additional rice players interested in investing in the region

• Avnash offers donors a good opportunity to quickly start working with smallholders to improve production and incomes– If the first Avnash mill is to reach 80% utilization1), it will need to work with up to 36k rainfed smallholders or 12k micro-dam

smallholders; given their plans to build 2 additional mills (of the same capacity of 500MT per day) in 2013, there is additional future potential

– Avnash plans to offer a package of inputs, training, and market access to increase smallholder yields and rice quality, and to buy paddy at market prices

– In doing so they expect to increase smallholder incomes by between 96% (rainfed farmers) and 153% (micro-dam farmers)

• Avnash’s need to work with a significant number of smallholders to break even, in addition to their financial strength and potential to scale to more smallholders (through 2 additional mills), make them an interesting potential partner– To break even (at 50% utilization1)) Avnash needs to work with at least 23k rainfed or 8k micro-dam smallholders to

process 84 MT per year– Avnash will operate the processing facility and act as a service provider to smallholders– Avnash has a strong presence in a wide range of business segments in Ghana and has experience working in other African

countries such as Nigeria

Executive summary

Source: Team analysis1) Assuming mill runs for ~12 hours a day and 250 days per year

5

• The Volta Region is also a major rice producer and is well placed to serve the largest rice markets in Ghana– The Volta Region is the third largest producer of rice in Ghana (16% of total production) and rice is the 4th most important

crop in the region with ~12k smallholder rice farmers.– The region is well placed to serve the two largest rice consuming regions, Ashanti (22% total consumption) and Accra

(17%), given rising urbanisation and incomes– The region has a number of commercial players in the rice industry, more so than in other rice producing areas, including

GADCO, Brazil Agro Investment, Prairie Volta and Wora Wora

• GADCO offers donors a good opportunity to quickly start working with smallholders to improve production and incomes in the Volta Region – GADCO plans to work with 15.4k smallholders to produce 42% of their paddy needs by 2020– This is an essential part of their strategic goal of capturing 12% of the market– They plan to offer a comprehensive package of inputs, training, processing and market access to increase smallholder

yields and rice quality. They will also offer a share of the revenue from the final product to increase farmer price.– GADCO expects to increase smallholder incomes by between 291%1) (rainfed farmers) and 361%1) (irrigated farmers)

• GADCO’s fully integrated business model, strong management team and key partnerships give market experts confidence that their commercial model will be successful– GADCO is working with Syngenta (to develop and obtain the best seeds and crop protection), Yara (to obtain fertilizer

tailored to their needs), Agropecuarian Foletto (to learn from their production and processing experience in Brazil) and Finatrade (to access their distribution network and market knowledge)

– GADCO will operate a commercial farm and processing facility and, in time, develop value-added food products

• Donors can help GADCO launch Copa Connect, support the scale up of Avnash’s smallholder production model, and help to create an industry association to represent the private sector’s interests.– GADCO requests start-up support to finalize the design of the Copa Connect smallholder model while Avnash requires

support in refining and scaling their smallholder proposition– In both cases, donors can underwrite the credit risk required to develop the input systems and business service provider

model for farmer training– Donors should also support the development of an industry association to give the private sector a stronger voice in policy

advocacy, R&D priorities, marketing, and good practice sharing

Executive summary (2/2)

Source: Team analysis1) Estimated increase in smallholder income does not include additional revenue share from GADCO's rice based food products – currently still in design stage

6

B. Ghanaian rice market

7

The Ghanaian rice market is increasingly driven by premium rice which is growing at 40% p.a., while the medium segment is shrinking at -4% p.a.

Source: OLAM, Interviews

National rice consumption in Ghana1)2)3) ['000 MT (%), 2011]

2834

VietnamPerfumed<5% broken

ThailandPerfumed<5% broken

120

34(4%)

770(100%)120

(16%)

LocalPerfumed<5% broken

100%

28(4%)

9

FA1S100% broken

61

89(12%)

US #2Non-perfume4% broken

82

82(11%)

US#4Non-perfume8% broken

407(53%)

9(1%)

28

Medium Segment>5%, 15%, 25% broken

185

223

PremiumGoodPoor • Urban market consumers

prefer imported rice due to perception of higher quality

- It is cleaner (no stones)

- Perfumed and low % broken

- Appearance (e.g., even color)

• Local rice must meet these characteristics in order to compete with imports

• Perfumed rice in particular is increasingly popular and now accounts for 81% of overall rice imports

• 48% of imported rice consumption is <5% broken

• 31% of imported rice consumption is perfumed and <5% broken

Increasing quality 1) Based on OLAM sales estimates; 2) Local production of milled rice was 278 MT in 2011 (assumes 40% paddy loss from processing); 3) Assumes 80% of local milled rice is in the Medium segment range, 10% Premium and 10% Poor

National rice consumption

Medium

LocalImport

+2%

National rice consumption CAGR 06-11[%]

-4%-17%

+3%

+40%

8Source: OLAM, interviews

This pattern is more extreme in urban markets

39(47%)

18(22%)

83(100%)

18(22%)6

(7%)

2(2%)

Imported rice market size by rice quality in Greater Accra and Ashanti1), 2011

Total imported rice consumption

Increasing quality

15(14%)

2(2%)

46(43%)

28(26%)16

(15%)

108(100%)

+40%

-17%

+3%

-4%

+2%

1) Based on OLAM sales estimates

FA1S Medium Segment US#4 US #2 Thailand & Vietnam

Kumasi rice market ['000, MT]

Accra rice market ['000, MT]

National rice consumption by quality CAGR 06-11[%]

Poor Medium Good Premium

9

Rising urbanization and income are driving rice consumption in Ghana - Ashanti and Greater Accra have the highest urbanization rates

18%

Upper East 15%

Upper West

Volta 27%

Northern 27%

Western 35%

Eastern 35%

Central 37%

Brong Ahafo 37%

Ashanti 53%

Greater Accra 87%

Percentage urbanization by region, 2000 [%] Ghana GDP per capita [USD], 1990-2010

Source: World Bank, USAID GRFS

1,625

946

655

201020001990

36% 44% 52%Urban population [%]

10

The national premium rice market is largely served by imports

Source: Interviews; OLAM

Imported and local domestic consumption of premium rice1) ['000 MT, 2011]

Local

154(85%)

28(15%)

Imported

1) Premium rice: Perfumed and <5% broken

11

• Perceived quality is a major factor in consumer purchasing decisions and is the main reason why consumers prefer imported rice

• The reputation of local rice is associated with poor quality and it is priced at the level of 100% broken rice

• Urban markets (such as Accra and Kumasi) consume 75% of total rice in Ghana (both local and import rice) yet they only consume ~20% of local rice

• Local rice is rarely found in supermarket chains, whose shelves are dominated by imported rice varieties

• There is a need to improve local rice quality in Ghana to compete with imports and to launch a marketing campaign to advocate for consumption the higher quality local rice1)

• Some importers, including Finatrade, buy local aromatic rice and repackage it for the local market

Consumers are willing to pay a price premium of 113% for imported Thai rice over premium local rice

Source: OLAM, Finatrade, Interviews 1) 2008 “Ghana Rice” marketing campaign led to increases in the reported purchase of Ghanaian rice

Market price of high quality milled rice in Ghana, 2012 [GH₵/50 kg bag]

LowHigh Average

FA1S (Perfumed 100% broken

Vietnam (Perfumed,<5% broken)

Thailand(Perfumed, <5% broken)

Local rice (Perfumed, <5% broken)

Ø 75

160

138

Ø 147

106

92Ø 96

88

77Ø 80

+113%

12

The rice distribution market is highly consolidated, with major rice importers such as Finatrade and OLAM dominating distribution channels

Source: Interviews

Finatrade

172(35%)

Total imported rice

492(100%)

Others (Imexco, City Investment Group)

148(30%)

Stallion

49(10%)

123(25%)

OLAM

Key players of imported rice in Ghana, 2011 ['000 MT (%)]

Finatrade and OLAM capture ∑ 60% of the imported rice market

13

Volta has the most commercial players in rice production, but is growing commercial interest in the Northern region

Source: interviews

1) Irrigation Company of Upper Region; 2) Will be operational 2012 end; 3) Includes government ownership, currently being taken over by Anvash; 4) WIENCO interested in the Eastern region

• GADCO• Prairie

Volta3)

• Brazil Agro-Investment

• Finatrade• OLAM• Stallion

• Avnash Rice Mill2)

• Large nucleus farmers (up to 300 Ha land)

• ICOUR1) • ICOUR1)

• Single mothers (parboiled rice)

• Avnash Rice Mill2)

• Nasia rice mill3)

• Lolandi3)

• Amsig Resources

• GADCO2)

• Prairie Volta3)

• Brazil Agro-Investment

Commercial players

• Aggregators

• Novel

Producer Market Processor• Industry is very fragmented with no major

commercial players - aggregators travel to Upper East to source rice for key markets (Kumasi)

• ICOUR offers a large pool of irrigated land (713 Ha) • Avnash plans to build a third mill in Bolgatanga to

export to Burkina Faso

• Developed production, processing and market industry with leading integrated commercial players along the chain

• Emerging interest of commercial players interested4) in expanding into the region for rice production, such as VEGPRO, Africa Atlantic, Stallion (joint venture with Asia Golden Rice)

VOLTA

NORTHERN

• More developed rice processing industry, but production and market is very fragmented with no major commercial players

• Avnash's mill is largest processor in Ghana (to be operational by 2012 end)

• Increasing number of smaller processors are setting up mills in Northern, e.g., Amsig

• Strong interest from Premium Food to enter; other interested players include GADCO

• Avnash plans to build a second mill in Northern

UPPER EAST

14

Ghana offers an attractive business environment

Source: World Bank

Sub-Saharan African country ranking2)

RANK COUNTRY

1 Mauritius

5 Ghana

7 Zambia

10 Ethiopia

12 Uganda

14 Tanzania

15 Nigeria

22 Mali

24 Burkina Faso

26 Senegal

34 Côte d’Ivoire

38 Niger

46 Chad

Global country ranking1)

RANK COUNTRY

1 Singapore

5 US

8 UK

20 Germany

30 France

36 South Africa

64 Ghana

68 Kuwait

88 Italy

92 China

121 Russia Federation

130 Indonesia

184 Chad

Ease of doing business country ranking, 2011

1) Ranked out of 184 countries; 2) Ranked out of 46 countries

15

C. Investment case for Northern Region

16Source: SRID, MoFA

Regional paddy production, 2011 [%, '000 MT]

Northern is Ghana's largest rice producer and GoG prioritizes the region for poverty reduction through boosting rice productivity

Ghana

Capital

UPPER EASTUPPER WEST

NORTHERN

BRONG-AHAFO

VOLTA

GREATER ACCRA

WESTERN

ASHANTI

EASTERN

CENTRAL

Upper East

EasternWestern

5%(21)

5%(22)

100%(464)

Northern37%(171)

24%(109)

16%(75)

8%(37)

Others1)

Volta

6%(28) Ashanti

1) Includes Central, Brong-Ahafo, Upper West and Greater Accra; 2) FASDP (Food and Agricultural Sector Development Policy) has announced rice as a priority food crop for food self-sufficiency; 3) 20% import duty and 16% of other fees

Government national policy: rice production

• Northern Region is a priority region for rice production due to its higher poverty and strategic importance in ensuring national food security2)

• Regional development plan, 2010 –2014, aims to improve earnings of crop farmers to reduce poverty

- Increase agricultural productivity (e.g., by 20% in south district) within the plan period

- Modernize agriculture through the development and adoption of irrigation schemes

• Key programs and policies for agriculture include

- Fertilizer, seed, machine subsidies

- Irrigation development

- Mechanization services

- Import tax of ~36%3) on milled rice

171) Assuming yield rises to 3.5 MT / ha from current average of 2.3 MT / haSource: MoFA

Rice is the fifth most popular crop in Northern Ghana

Production, 2011 ['000 MT]Cropping area, 2011 ['000 Ha]

79

127

125

131

1,333

224

193

2,006

861)171

Millet 55

Soyabean 60

Cowpea 63

Sorghum 71

Paddy 73

Cassava 89

G’Nuts 130

Maize 135

Yam 139

Major crops in Northern Region

7

0

13

10

28

35

11

126

51)11

Value, 2011 [GH₵ m]

18

As a result, knowledge of rice production is long standing in Northern Ghana, with ~86k active rice farmers

Source: Interviews, MoFA

Rice smallholders in Northern Region

• Currently there is a total of 86k3) smallholders growing rice in the Northern region

• In these regions rice is mainly produced on rainfed land

• Farmers typically produce rice in parallel with other crops - Maize is often grown as an alternative staple

- Farmers on irrigated land produce alternative cash crop (e.g., tomatoes, okra) in their second harvest

• Also, farmers typically have other jobs in addition to farming (e.g., shops, trading, cutting wood for charcoal)

“I have been farming rice all my life”

Rainfed farmers in the Northern Region, currently facilitated by ADVANCE programme

1) Agriculture includes, farming, forestry and hunting, 2) Latest figures available by MoFA; 3) Rice smallholders are defined as farmers that produce rice on an area ≤ 2.5 hectares

523 532

Northern

512

Volta Western Eastern

707

Ashanti

424

Upper East

242

61% 60%67% 57%72% 44%

Agricultural1) labour force by region, 20002) ['000]

~86k rice farmers in Northern

% of labour in agriculture

19Source: MoFA, State of Ghanian Economy

Therefore, rice is an important contributor of smallholder income in the Northern region

Smallholder income generation by major crops in the North1), 2011

90%

60%60%

90%

60%

Yam RiceCassavaGroundnutsMaize

• In Ghana, rice is a lower priority staple in comparison to other crops (e.g., maize), thus, rice is typically farmed for income generation

• In the North, rice farmers keep ~10% of rice harvested per Ha

• Key determinants of rice consumption: type of seed, market price and cropping area

- Jasmine 85 rice is mainly for income and is sold to main markets (e.g., Accra, Kumasi) as it generates a higher revenue, whereas local rice is preferred for consumption2)

- Higher market prices deter farmers from keeping rice for consumption

- Cropping area greater than 1 Ha reduces the percentage of rice kept for consumption as most of the additional land would be planted with Jasmine 85 which is produced for sale

1) Ordered by total cropping area; 2) Government subsidy on Jasmine 85 seeds have helped increased the production of jasmine perfumed rice which fetches a higher price than local rice; 3) Assuming 1 Ha planted for each crop

Total revenue per Ha [GH₵]1,3021,881

2,449

489

5,472

1,203 116 202 800 154Volume sold ['000 MT]

Share sold3)

[%]

20

Northern region has the largest processing capacity in Ghana (44% larger than Volta) and is able to support increasing paddy production

Source: Interviews

1) Assuming mill runs for ~12 hours a day and 250 days per year; 60% utilization 2) Plan to construct two mills in the Northern and Upper East; 3) Processes paddy for National Buffer Stock Company; 4) Includes government ownership, currently being taken over by Anvash; 5) Owned by MoFA; 6) Under construction

59968

85

Volta total capacity

+44%

Avnash Rice Mill 12)

Total capacity Amsig6)

3

Lolandi5)

5

Nasia Rice Mill3)4)

• Under construction; will be operational by 2012

• Premium quality machine (Buhler)

• Plans to build 2 additional mills in ~20132)

• Currently, operating at ~60% utilization

• Produces good quality rice

Currently operating at 50% utilization for NBSC3)

Machine capacity of major rice mills in Northern Region, 2012 ['000 MT/p.a.1)]

Under construction; will be operational by 2012

• In the Northern Region rice is typically parboiled before it undergoes mill processing due to the harsher weather conditions that dry paddy; mills will often do both

• Single Women Group is small scale rice parboiling organisation in the region

• Recently, there has been increasing investment (and interest to invest) in mills in the Northern Region, such as Amsig, Avnash and Premium Food (interest only)

21

If quality can be met, farmers on irrigated farms can produce rice competitively at 24% of the cost of imported premium Thai rice

266

108

324

79

13

377

679553 523

Bags

10

Post harvest

56

Harvest

75

Bird scaring

38

Cart-ing

Landed cost (FOB)4)

Duty (20%) and fees

47

377(42%)

Process-ing2)

Total cost per MT milled rice

Total cost per Ha1)

900

Total cost of milled rice

Trans-port3)

24%1,173(76%)

1,550

Margin (10%)

Irrig-ation

Trans-port5)

377(24%)

60

57

Land prep

60

40

Seed Fert-ilizer

48

Cropprotect-ion

50

Weed-ing

Total

1) Production cost for 1 harvest and assumes yield of 3 MT per Ha for irrigated fields; 2) Assumes paddy loss of 40% from milling; 3) Transportation of 1.8 MT milled rice from Northern to main markets; 4) FOB: Freight on Board, average price per MT: USD 900; 5) Transportation of 1 MT milled rice from Port (Accra) to main markets

Source: Interviews

Cost comparison of imported and local milled rice, 2012 [USD]

Total cost for 3 MT paddy

Total cost for 1.8 MT milled rice

Cost of 1 MT milled local rice on smallholder irrigated farm

We expect production cost to fall as efficiency improves and higher yields are achieved

Total cost for per MT milled rice

Cost of 1 MT imported premium Thai rice

•• Costs exclude farmer’s own labour and margins along the value chain

• Even allowing for margins, the industry should be able to compete with imported rice on cost if they can match its quality

22

If quality can be met, farmers on rainfed farms can produce rice competitively at 21% of the cost of imported premium Thai rice

266

324

283

59

569

900

21331

(21%

Post harvest

21

Total cost per 1 MT milled rice

Seed1)

331

53


Bird scaring

358

Trans-port4)

Harvest

26

Weeding

32

Cropprotect-ion

17

Fert-ilizer

540

Land prep

1,550

21%

28

Process-ing3)

Total

331(21%)

1,219(79%)

Bags Margin (10%)

47

Trans-port6)

Total cost per Ha2)

60

Duty (20%) and fees

Landed cost (FOB)5)

Source: Interviews

Total cost for 1.8 MT paddy

Total cost per MT milled rice Total cost for 1.08

MT milled rice

Cost of 1 MT milled local rice on smallholder rainfed farmCost of 1 MT imported premium Thai rice


Cost comparison of import and local milled rice, 2012 [USD]

1) Assumed seeds are recycled by rainfed farmers; 2) Production cost for 1 harvest and assumes yield of 1.8 MT per Ha for rainfed fields; 3) Assumes paddy loss of 40% from milling; 4) Transportation of 1.08 MT milled rice from Northern to main markets; 5) FOB: Freight on Board, average price per MT: USD 900; 6) Transportation of 1 MT milled rice from Port (Accra) to main markets

•• Costs exclude farmer’s own labour and margins along the value chain

• Even allowing for margins, the industry should be able to compete with imported rice on cost if they can match its quality

23Source: Interviews, OLAM

Distance and time from key producing rice regions and markets, 2012

UPPER EAST

NORTHERN

VOLTAASHANTI

Bolgatanga

Tamale

Kumasi

Aveyime91 km1hr

328 km5hr

780 km10hr

543 km8 hr

627 km8 hr

382 km5hr

1) One bag weighs 50kg (trucking providers charge per bag not per km); 2) Most rice production is in the Southern part of Volta

Producing region Distance [km]

Northern region enjoys the lowest transport cost to Kumasi

Kumasi

Northern(Tamale) 382

Upper East(Bolgatanga)

328Volta (Aveyime)2)

543

2.5

3.1

3.0

Main market

Cost to ship 1 bag1) [GH₵]

24Source: OLAM

Thus, Northern has good access to Ghana's major rice consuming markets which make up 29% of total imported rice consumption

Ashanti and Northern: ∑29% of national rice consumption

Regional rice consumption of imported milled rice, 20111) ['000 MT (%)]

9% 3% 5% 3% 5%3% 5% 6% 6%3% CAGR06-11[%]

• Rapid increase in urbanization and income aredrivers of the "rice diet transition" - Rice is popular in urban

areas as it is easy and quick to prepare

- Rising income has made rice more affordable

- Rising number of hotels and restaurants is fuelling demand for (higher quality) rice

• Greater Accra and Ashanti have the highest rice consumption due to higher urbanisation and income per capita

• Greater Accra and Ashanti are key storage points for rice distribution to other markets

• Rice produced in Northern is mainly absorbed by the Ashanti market


49(10%)

12(2%)

Upper East

83(17%)

Northern

36(7%)

Volta

45(9%)

Brong Ahafo

67(14%)

Upper West

35(7%)

Eastern

108(22%)

WesternAshanti

12(2%)

45(9%)

Greater Accra

492(100%)

Central


25

Major donor funded rice projects in Northern, 2012

Further, commercial players can leverage the numerous donor rice smallholder programs in the region to increase productivity

Purpose: 6k Ha of rainfed lowland developed to increase rice production by 16 MT milled rice per year for food security. Implemented by MoFADuration: 2009-2013 Fund: EU 13.8Target no. of smallholders: 2.5k farm families

Main funderProject detail

Purpose: Improve rice productivity and quality, strengthen supply chain relationships and processing capacity. Implemented by ADCI VOCA (ADVANCE program)Duration: 2011-2013No. of smallholder engaged: 2.1k

Purpose: To increase yield of rainfed lowland smallholders through 26 cost effective rice technologies Duration: 2009-2014

Source: Interviews1) Other initiatives include Single Mothers, World Food Program

Rice project1)

Rice Sector Support Project

ADVANCE rice program

Project for Sustainable Development of Lowland Rainfed Rice Production

26Source: Interviews

Fit with smallholder goalCompany Key strengthsOwnershipAttractive-ness

Strong Medium Low

Industry

Amsig resources

Buy paddy from smallholders for mill, interested in working with smallholders, currently working with ADCI VOCA

• Mill is still under construction • Launching smallholder initiative

100% private owned

Processing

Avnash’s model can be applied to other regions and partners

Avnash • Need to work with smallholders to break even

• Aim to source 90% of their paddy from smallholders and work with up to 36k small-holders1) 2)

100% private owned

• Experienced management team in rice • Strong financial health: internally funded

rice mill which cost ~US 18m• Have been able to secure a large volume

of land for nucleus farm • Operate rapidly and on track to complete

construction of mill in less than 1 year• Good relationship with the GoG and are

aligned with supporting their initiative to make Ghana self sufficient in rice

Production and processing

Nasia Rice Mill

Lolandi

No model to work with smallholders

Government owned

Government owned (MoFA)

Processing

Processing No model to work with smallholders

1) Rainfed farmers; 2) In 2013, the Avnash plans to construct 2 rice mills (500MT/day capacity) in Daboya (Northern Region) and Bolgatanga (Upper East)

Avnash is an attractive partner in the near term given their commercial need to work with up to 36k smallholders, experienced management team and financial strength

ICOUR Buy paddy from small-holders for own mill

713 Ha irrigated land - may be an attractive method for commercial players in the Northern Region to source rice from

Government owned


27

Government irrigation schemes in Ghana, 2011 [Ha]

Source: Ghana Ministry of Agriculture

Eastern

20(1%)

3,598(100%)

1,032(29%)

949(26%)

Brong Ahafo Central

59(2%)

Volta

606(17%)

Greater Accra

Upper East

154(4%)

Ashanti

65(2%)

Northern

713(20%)

Total irrigated land

In the Upper East, ICOUR allows rice processors to access ~6,000 irrigated smallholders

ICOUR has ~6,000 irrigated smallholders on 713 Ha of irrigated land

28

ICOUR irrigation scheme by location, 2012 [Ha]

Further, ICOUR has the potential to expand its irrigated land to 9k Ha


1) Land that is fully equipped with irrigated infrastructure (e.g., canals); 2) Developed land has undergone land preparation only and is being used to grow crops; 3) Land allocated for irrigation

852

1,197

2,294

2,490

3,840

6,798

468Vea

Tono


9,092

Potential3)

5,037

Developed2)

3,342

Irrigated1)

713

245

29Source: Interviews, Field visits

Road condition, 2012

• Main roads are sufficient for large scale truck movement

• Generally, roads leading up to ICOUR are in good condition as the infrastructure has been invested in by the government

• However, small portions of road leading up to ICOUR suffer from severe wear and tear (potholes) that will need repair

• Most rice from Upper East is transported to the Kumasi market

Northern Region - On the way to Upper East

Comments

Upper East – On the way to Bolgatanga

Near ICOUR – Navrongo Near ICOUR – Navrongo

Although main roads from Tamale (Northern) to ICOUR are generally satisfactory, the last leg roads are poor

30Source: Field visits

ICOUR irrigated rice fields, July 2012

31

D. Northern Region partner analysis1. Avnash's smallholder initiative

32

Avnash plans to help smallholders address challenges along the value chain

• Avnash will conduct R&D for inputs (e.g., seed, agro chemical), and best agronomic practices.

• These findings will be shared with the smallholders

• As more smallholders are engaged in rice farming, community associations can be developed to strengthen the producers’ bargaining power and voice

• The right good quality inputs will be provided to smallholders which they have difficulties accessing

• Jasmine 85 seeds will be provided which give higher yields as farmers currently recycle low quality seed

• Agro chemicals will be provided which improve paddy quality and protect against paddy loss to disease and pest outbreaks

• Mechanization for land preparation will be provided

• Agronomic training will be provided to help smallholder rice farmers achieve higher yields and quality paddy

• Machines and training for harvesting will be provided (e.g., combine harvesters to ensure rice is harvested at the right moisture content)

• Smallholders will have access to high quality processing, allowing them to benefit from higher market prices

Inputs Production Processing Market

Enabling Environment and Infrastructure

Infrastructure Business &finance environment

Industry bodies & sector policies

Research & extension services

Source: Avnash Interviews

• Water control management will be provided through micro-dams

• Smallholders have difficulties accessing finance to buy the right good quality inputs - such inputs will be provided by Avnash and need to be repaid in harvest

• Farmers have a guaranteed buyer of paddy at market price

Improved yield

Better quality

Improved yield

Better quality Increased price

Guaranteed market

Increased price

Improved yield

Better quality

Improved yield

Better quality

Improved yield

Better quality

33

Avnash smallholder model volume contribution1)2) [p.a.]

To break even (utilization 50%), Avnash will need paddy from ~23k rainfed smallholders to achieve 84k MT per year

Source: Avnash

1) Assumes machine capacity 500MT per day, operates 300 days a year and average yield of 3 MT/Ha per smallholder; 2) Plans to construct two additional rice mills in 2013; 3) Assumption excludes micro-dams or availability of 2 harvest per year

3632

2723

14

Utilization 60%

129Commercial9

Smallholder

Utilization 80%Utilization 70%

1149

45

999

Utilization 50%

849

Utilization 30%

549 105 120

75 90

No. of rainfedsmallholders3)

['000]

Paddy achieved ['000 MT]

34

Avnash smallholder model volume contribution1)2) [p.a.]

To break even (utilization 50%), Avnash will need paddy from ~8k micro-dam smallholders to achieve 84k MT per year

Source: Avnash

1) Assumes machine capacity 500MT per day, operates 300 days a year and average yield of 4.5 MT/Ha per smallholder; 2) Plans to construct two addition rice mills in 2013; 3) Assumes plans for micro-dams develop, thus allowing 2 crops per year

1211

98

5

Smallholder

Commercial

Utilization 80%

129

120

9

Utilization 70%

114

105

9

Utilization 60%

99

90

9

Utilization 50%

84

75

9

Utilization 30%

54

45

9

No. of irrigated smallholders3)

['000]


Avnash plans to construct micro-dams to irrigate the farm blocks when finances allow

35

Avnash paddy achievement through commercial and smallholder farming1), 2013-2015 ['000 MT]

By 2015, Avnash plans to achieve 168 MT (2 harvest p.a.) from its outgrower scheme through 19k micro-dam farmers

Source: Avnash1) Assumes 2 crop cycles and yield of 4.5 MT per Ha

Smallholder

Commercial

2015

177

168

9

2013

82

55

27

No. of irrigated smallholders['000]


19

6

36

Avnash smallholder initiative scheme spatial planning in the Northern Region, 2012

Avnash will act as a service centre through its nucleus farms to support smallholders within 15-20 km range from its nucleus farms, all within 100 km of its rice plant

Source: Avnash

Nucleus farms

Nucleus farms

Nucleus farms

Nucleus farms

Nucleus farms

Nucleus farms

Nucleus farms

Rice Plant Tamale

Daboya

Gushiegu

Degbila

15-30 km

Sankpala

YapeiSalaga

• Avnash have designed a plan based on its rice farming experience in India

• The model is similar to a service block as it operates through large nucleus farms, ensuring good provision to smallholders of inputs, mechanization and training

80-100 km

37

Avnash Daboya trial nucleus farm, 2012

Avnash Daboya trial, Outgrower, 2012

Avnash has begun development on the first of its nucleus farms in Daboya and is currently working with 1,000 smallholders

38

Impact on irrigated smallholder income1)2) [USD, p.a.]

Source: Interviews

471

449

239

890

471

449 239

1,360

890

897

Target incomePrice improvement3)

478

+153%

Increased production cost

941

Current income Yield improvement

2,250

Harvest 2Harvest 1

Avnash smallholder scheme can increase micro-dam smallholder income by +153% to USD 2,250 per year

1) Does not take into account opportunity cost of producing a different crop; 2) Micro-dam (irrigated) farmers can have 2 crop cycles per year; assumes yield of 4.5 MT per Ha; 3) Avnash plans to pay ~$100 per MT of paddy over the standard broker farm-gate price to ensure consistent and quality supply

39

Key assumptions for irrigated micro-dam smallholder income (1/2)

Source: Interviews

Area planted [Ha] 1Harvests p.a. 2Average paddy yield [MT/Ha] 4.5Market price for paddy [US/MT] 4261)

Smallholder income • Total MT of paddy [MT] 9• Total revenue for paddy [US] 3,834• Total cost for paddy [US] 1,584

Net income for paddy [US] 2,250

Area planted [Ha] 1Harvests p.a. 2Average paddy yield [MT/Ha] 3Farmgate price for paddy [US/MT] 326

Smallholder income • Total MT of paddy [MT] 6• Total revenue for paddy [US] 1,995• Total cost for paddy [US] 1,106

Smallholder income for paddy [US/p.a.] 890

BACKUP

Assumptions for irrigated smallholder income on Avnash smallholder scheme [USD]

Assumptions for irrigated smallholder without Avnash smallholder scheme [USD]

1) Avnash plans to pay ~$100 per MT of paddy over the standard broker farm-gate price to ensure consistent and quality supply

40

Key assumptions for irrigated micro-dam smallholder income (2/2)

Source: Interviews

Input Charge 1,166

Mechanization Charge (CAPEX) 179

Irrigation (Micro-dam) Charge 35

Training / Management / Overhead Charge 204

Total for paddy [USD] 1,584

Service charge for irrigation 25Land preparation

• Ploughing 63• Harrowing 50

Input• Agro chemicals

- Post emergence 60- Pre emergence 35- Fertilizer 216

• Seed 120• Bird scaring 75• Weeding 100• Harvesting 150• Threshing 75• Gathering 37• Packaging and bags 20• Carting 80

Total cost for paddy [USD] 1,106

BACKUP

Assumptions for irrigated smallholder income on Avnash smallholder scheme [USD, 2 harvest1)]

Assumptions for irrigated smallholder without Avnash smallholder scheme[USD, 2 harvest1)]

1) Area planted: 1 Hectare

41

Impact on rainfed smallholder income1)2) [US, p.a.]

Even if micro-dam planning is delayed, Avnash smallholder scheme can increase rainfed smallholder income by +96% to USD 565 per year

1) Does not take into account opportunity cost of producing a different crop; 2) Rainfed farmers only have 1 crop cycle per year, assumes yield of 3 MT per Ha Source: Interviews

408

299430

288277

Target income

+96%

288

565


Price improvementYield improvementCurrent income

42

Key assumptions for rainfed smallholder income (1/2)

BACKUP

Source: Interviews

Area planted [Ha] 1Harvests p.a. 1Average paddy yield [MT/Ha] 3Market price for paddy [US/MT] 426

Smallholder income• Total MT of paddy rice [MT] 3• Total revenue paddy rice [US] 1,278• Total cost for paddy rice [US] 713

Net income for paddy [USD] 565

Assumptions for rainfed smallholder income on Avnash smallholder scheme [US]

Assumptions for rainfed smallholder without Avnash smallholder scheme [US]

Area planted [Ha] 1Harvests p.a. 1Average paddy yield [MT/Ha] 1.8Farm gate price for paddy [US/MT] 326

Smallholder income• Total MT of paddy rice [MT] 1.8• Total revenue for paddy rice [US] 572• Total cost for paddy [US] 283

Smallholder income for paddy [USD] 288

43

Input Charge 583 Mechanization Charge (CAPEX) 61 Training / Management / Overhead Charge 69

Total cost for paddy [USD] 713

Key assumptions for rainfed smallholder income (2/2)

Source: Interviews

BACKUP

Assumptions for rainfed smallholder income on Avnash smallholder scheme [USD, 1 harvest1)]

Assumptions for rainfed smallholder without Avnash smallholder scheme [USD, 1 harvest1)]

Land preparation • Ploughing 33• Harrowing 26

Input• Agro chemicals

- Post emergence 17- Fertilizer 54

• Seed 2) 0• Bird scaring 26• Weeding 32• Harvesting 53• Threshing 21• Packaging and bags 21

Total cost for paddy [USD] 283

1) Area planted: 1 Hectare; 2) Seeds are recycled

44

D. Northern Region partner analysis2. Avnash's commercial model

45

Avnash’s vision is to help make Ghana self sufficient in rice

120

120

120

360

216

492

276(56%)

216(44%)

Total imported rice (2012)

44%

Avnash total paddy processed

Paddy loss (40%)

144(100%)

Total milled riceAvnash Rice Mill 3

Avnash Rice Mill 2

Avnash Rice Mill 1

Comparison of Avnash processing capacity and demand for imported rice1) ['000 MT/ p.a.]

Source:Interviews

At 80% utilization of 3 mills, Avnash is able to capture 51% of the imported rice market through local rice production1)

1) Assumes 80% utilization of 3 mills (each 500 MT/day capacity), operates 300 days per year and 40% paddy lossage through processing to milled rice and imported rice consumption does not rise from 2012

46

Avnash has started commercial production and is trialling smallholder production with 1k smallholders

• January 2012 - began construction of rice mill

• Expect mill to be on-stream by 2012 end

• Secured land for nucleus farm in Daboya

• Launched trial outgrower program with 1k smallholders of Daboya nucleus farm

• Developing detailed approach to work with smallholders

• Expand to 3 nucleus farms with 10k outgrowers each

• Aggregate paddy from outgrowers

• Build another mill in Northern Region and one in Upper East Region

• Expand to 10 nucleus farm with 10k outgrowers each

• Aggregate paddy from outgrowers

• Trial and scale production for new mills in Northern and Upper East Regions

2012 2013-15 2015-20

Current stage

Scale up smallholder production Scale up 2 new mills Construction of mill,launch of smallholder initiative

Source:Interviews

47

• Irrigation: infrastructure is limited, under utilized and poorly managed

• Port: Far away from port (Accra) which is alsoover crowded, delaying delivery of imported inputs (e.g., tractors, harvesters, spare parts)

• Poor road conditions: Branch roads from main roads are typically not tarmac, road floods during heavy rain making rice farms inaccessible

• Storage: Lack of storage facilities available –which are important due to harsher weather conditions

• Financial institutions:- Lack of financial services for

agriculture due to longer repayment times, higher default rates (due to side selling)

- When available, interest rates are very high (up to 100%)

• No insurance products available

• R&D: Lack of R&D in the local rice market

• Technical research: Not effectively disseminated

• Extension services: Insufficient numbers and existing officers are not always trained in the latest knowledge

• Industry bodies: Lack of industry associations means there is no collective voice for rice industry stakeholders

• Seed: Almost all seed used is uncertified recycled and low quality

• Fertilizer: Fertilizer is not adapted to soil needs

• Land: Risky to lease land due to tiered land tenure system

• Mechanization: - Government provision of

subsidised equipment discourages private sector involvement

- Spare parts and qualified workshops are not available

- Insufficient small scale machinery

• Farming as a business: Farmers do not consider rice production as a business and do not invest in it

• Low yields: Yields are 2 MT/Ha vs. best practice of 6 MT/Ha (10 MT/Ha in Brazil)

• Agrochemicals: Inappropriate and insufficient use of fertilizers, herbicides, pesticides

• Agronomic practices: Manual production practices (planting, protection, harvesting) and poor knowledge reduce yields and area planted

• Bags: Recycled and improper bags used, reducing rice quality

• Manual post-harvest practices (e.g., winnowing) reduce yield, lead to broken rice and increase foreign matter

• Small village mills are typically rundown, outdated and managed by under-qualified operators

• Parboiling adds to the total cost of processing rice, however it is conducted due to the region's dryer and more volatile weather patterns which make paddy vulnerable to over drying

• Mechanical processing is not always used as operators charge a service fee and do not cover transport cost of the paddy

• Consumer preference is for high quality rice (<5% broken, perfumed, straight mill) which current (smallholder) producers cannot deliver

• Reputation of local rice is poor• Farm gate price: farmers are often forced to

sell paddy at low farm gate price due to lack of market access

• Side selling is a common problem when working with smallholders

• Distribution market is highly consolidated (Finatrade and OLAM capture ~60% of imported rice market)

• Lack of market access for smallholders as road infrastructure leading to fields far from main roads are in poor condition

• Local rice market is small; imported rice makes up 60% of the market






Source:Interviews

In order to achieve this goal, Avnash must overcome a number of challenges along the value chain

48

• Use certified Jasmine seeds• Use correct blend of fertilizer • Established good relationship

with community chief for Daboya nucleus farm to acquire land and identify contract farmers

• Use mechanization for land preparation

• Hired rice experts to oversee rice production

• Use mechanization for planting and harvesting

• Use high quality mechanical mill

• Sell rice through agents to capture more margin on milled rice

• Complete processing facilities to ensure high quality output and satisfy the local demand for higher quality rice

• Will invest in micro-dams to allow 2 crops per year

• Will invest in storage facilities

• Has successfully financed the mill internally

• Is currently raising funds needed for its commercial operation






Avnash’s production model is designed to address the challenges in the value chain

Source: Interviews

• n/a • Avnash will conduct R&D for inputs (e.g., seed, agro chemical), and best agronomic practices

49

Avnash has started construction of their first processing plant that will be operational by end of 2012

Source:Avnash

Plant site Warehouse

Processing facilities inside containers

50

Recycled and improper bags are used, which reduces quality of the paddy

Source: Field visits

BACK UP: PRODUCTION

Cocoa bag used for paddy

• Paddy rice bags are available but are not often used by farmers because they are more expensive

• Proper quality bags that meet international standards should be used as they allow good paddy protection and quality assurance over a period of time

‒ Bags made for other commodities will not have the needed strength and durability for easy handling of paddy and will allow foreign matter to enter (e.g., rain which promotes decay)

‒ Other bags might not have been washed properly, leaving substances which may harm the paddy (e.g., chemical residues)

51

Parboiling in Lolandi and Amsig1) rice processing mill, 2012

Parboiling adds to total processing cost but is crucial in the Northern Region to reduce rice breakage due to harsher weather conditions

Source: Amsig, Lolandi

• Parboiling is conducted as it helps repair broken rice that has cracked due to harsher weather conditions in Northern

• Further, the hull of the rice is softened during the process, decreasing the likelihood of breakage

• However, there are challenges to parboiling:

- Parboiling increases total processing cost

- Increases turnover time

- Major rice consuming markets prefer straight mill

BACK UP: PROCESSING

1) Small rice processing mill in Northern Region with a capacity of 1 MT per hour or 3,000 MT per year (60% utilization rate, 250 days per year)

52

Manual post harvest processing reduced the quality of rice produced


BACK UP: PROCESSING

ICOUR: Women winnowing

• Manual winnowing involves throwing paddy into the air to allow the wind to blow away the chaff, while the heavier paddy grain fall back down for recovery

• This method does not sufficiently clean paddy and also allows foreign matter (e.g., stones, debris) to enter the paddy and reduce its quality

• Winnowing may also lead to overdrying of the paddy as the recovered paddy is left in the sun

53

Roads leading up to rainfed fields in the Northern Region are poor and vulnerable to flooding

Source: Interviews, Field visits

Tamale main road

Road condition

• Main roads are well developed; however, branch roads are in poor condition, especially those leading to rainfed farms

• During the rainy season, flooding tends to occur due to lack of canals for drainage

• Poor road condition causes longer transport times and higher risk of crop damage

Nyanpala flooding during rain

Comments

BACK UP: INFRASTRUCTURE

54

Storage is crucial in the Northern Region where weather is harsher and making paddy more vulnerable to over-drying


BACK UP: INFRASTRUCTURE

Lolandi: Paddy left in the sun will dry very quickly

Lolandi: Paddy is stored outside

55

Avnash Group ongoing and planned operations in Ghana, 2012

Avnash is a large conglomerate with experience and a strong footprint in Ghana and Nigeria

Source: Avnash

AVNASH GROUP(GHANA)

Agriculture Hospitality Real Estate Power generation

Brewery & Distillery

Renewable energy

• Rice plant and cultivation

• Edible oil plant and cultivation

• Soaps & Detergents

• Groundnut oil• Shea butter plant• Biscuits & cereals

• 3 Star Hotel, Tema

• 5 Star Hotel, Accra

• Resorts

• CREGL • CNG• Power

• Golden Beverage and Finance ltd

• Brewery• Distillery• Mineral water &

soft drink

BACK UP

Avnash also has an extensive presence in Nigeria, including agricultural investments

56

D. Northern Region partner analysis3. Recommendations for Avnash

57

Avnash plans to have one mill operational by 2012 and to begin construction of 2 further mills by 2013

2011 2012 2013 2014 2015 2016 2017 2018 2019

Mill 1

Design

Construction and nucleus farm pilotMill 3: Bolgatanga (Upper East)

Onstream

Construction and nucleus farm pilot

Mill 2

Ongoing operations

Ongoing operations

Mill 2: Daboya (Northern)

Expansion of remaining nucleus farms

Construction and nucleus farm pilot

Onstream

Mill 1:Tamale (Northern)Year

OnstreamMill 3

Ongoing operations



Source: Team analysis

58

• Implement (business service provider)

• Identify and select smallholder farmers

Donors are well placed to help Avnash address key smallholder issues (1/2)

Design ~3 month

Implementation <5 years

For first 3 nucleus farms1)

Scale >5 years

For other nucleus farms

Market

• Review performance of pilot • Evaluate performance to

understand challenges and find areas for improvement

• Review and refine current model and indentify new partners (where necessary)

• Review and refine distribution guideline/selection procedure

• Adapt to new nucleus farms

• Obtain inputs• Deliver inputs to

smallholders

• Roll out / implementation by NGO partners

• Train business service providers

• Identify and select smallholder farmers

• Review model for paddy collection

• Review business model

Collect paddy

• Review and refine training program

• Review and refine design of model farms and identify new model farmers

• Select pilot farmers• Review staffing model

• Review smallholder pricing model

• Review and refine model for rice grading

• Review and refine harvesting model

• Obtain inputs• Deliver inputs to

smallholders

Collect paddy

• Package and sell rice

• Pay smallholder farmers

• Review market performance

• Package and sell rice

• Pay smallholder farmers

• Review market performance

Items in BOLD are suitable for Donor support

ProcessingProductionInputs

1) After 3 nucleus farms, programme will move into scaleSource: Team analysis

59

Donors are is well placed to help Avnash address key smallholder issues (2/2)

• Review and improve land preparation model

• Design micro-dam

• Execute land preparation

• Build micro-dams

• n/a

• Indentify association members

• Develop association

• Run association • Underwrite start-up

cost

• Review financing model

• Review candidates• Review trainer

program and business model

• Review technical R&D and disseminate


• Build micro-dams on new nucleus farms (as needed)

• Provide finance Run association • Execute market research • Share technical R&D• Train the trainers

• Provide finance • Underwrite loss

(share risk of default)

• Provide insurance

• Execute market research

• Share technical R&D• Train the trainers





Items in BOLD are suitable for Donor support

Design ~3 month

Implementation <5 years

For first 3 nucleus farms1)

Scale >5 years

For other nucleus farms

1) After 3 nucleus farms, programme will move into scaleSource: Team analysis

60

E. Investment case for Volta Region

61Source: SRID, MoFA

Regional paddy1)

production, 2011 ['000 MT (%)]

Volta is Ghana's third largest rice producing region and GoG has indentified rice as a priority crop

Upper East

EasternWestern

5%(21)

5%(22)

100%(464)

Northern37%(171)

24%(109)

16%(75)

8%(37)

Others2)

Volta

6%(28) Ashanti

Capital

UPPER EASTUPPER WEST

NORTHERN

BRONG-AHAFO

VOLTA

GREATER ACCRA

WESTERN

ASHANTI

EASTERN

CENTRAL

GhanaGovernment national policy: rice production

• Rice production is a major development priority for the Government of Ghana3)

• Regional development plan, 2010 –2014, aims to improve earnings of crop farmers to reduce poverty

- Increase agricultural productivity (e.g., by 20% in south district) within the plan period

- Modernize agriculture through the development and adoption of irrigation schemes

• Key programs and policies for agriculture include

- Fertilizer and seed

- Irrigation development

- Mechanization services

- Import tax of ~36%3) on milled4)

rice

1) Rice from field after harvest, threshed and each grain is separated but still has outer husk and bran; 2) Includes Central, Brong-Ahafo, Upper West and Greater Accra; 3) FASDP (Food and Agricultural Sector Development Policy) has announced rice as a priority food crop for food self-sufficiency; 3) 20% import duty and 16% of other fees; 4) White rice with husk and bran removed

621) Assuming yield rises to 4 MT / ha from current average of 3.3 MT / haSource: MoFA

Rice is the fourth most important crop in Volta

1

5

5

49

63

427

98

1,660

161)75

Cowpea 2

Soybean 4

Sorghum 4

Cocoyam 6

Plantain 8

Paddy 23

Yam 27

Maize 54

Cassava 105

Production, 2011 ['000 MT]Cropping area, 2011 ['000 Ha]

Major crops in Volta Region

3

6

4

23

39

597

95

1,046

101)47

Value, 2011 [GH₵ m]

63

As a result, knowledge of rice production is long standing in Volta, with ~12k active rice farmers

Source: Interviews, MoFA

1) Agriculture includes, farming, forestry and hunting, 2) Latest figures available by MoFA; 3) Rice smallholders are defined by farmers that produce rice on an area ≤ 3 hectares

523 532

Northern

512

Volta Western Eastern

707

Ashanti

424

Upper East

242

61% 60%67% 57%72% 44%

Agricultural1) labour force by region, 20002) ['000] Rice smallholders in Volta Region

• Currently there are ~12k smallholders3) growing rice in Volta (mainly in the south)

• Farmers typically produce rice in parallel with other crops - Cassava, yam or maize is often grown as an

alternative staple - Farmers on irrigated land produce alternative cash

crop (e.g., tomatoes, okra) in their second harvest

• Farmers in Volta have other jobs in addition to farming (e.g., shops, cutting wood for charcoal)

“I have been producing rice for the last 13 years and I sell almost all of it to brokers who come at harvest time”

Smallholder (also school teacher) farming rice on Afife/Weta irrigation scheme, 2012

% of labour in agriculture

64Source: MoFA, State of Ghanian Economy

Therefore, rice is a key contributor of smallholder income in Volta

Smallholder income generation by major crops in Volta1), 2011

90

606060

PaddyYamMaizeCassava

• In Ghana, yam and cassava are the key subsistence staples; thus, rice is typically farmed for income generation

• In Volta, rice farmers keep ~10% of rice harvested per Ha

• Key determinants of rice consumption: type of seed, market price, and cropping area

- Jasmine 85 rice is mainly for income and sold to main markets (e.g., Accra, Kumasi), whereas local rice is preferred for consumption3)

- Higher market prices deter farmers from keeping rice for consumption

- If farmers grow rice on more than 1 Ha, they retain a smaller percentage for consumption

Volume ['000 MT]

1) Ordered by cropping area size; 2) Government subsidy on Jasmine 85 seeds have helped increased the production of Jasmine perfumed rice which fetches a higher price than local rice

Total revenue per Ha [GH₵]

996 59 256 68

1,232

5,897

6211,989

Share sold[%]

65

Regional government irrigation schemes in Ghana, 2011 [Ha (%)]


Greater Accra and Volta : ∑ 55% of irrigated land in Ghana

59(2%)

3,598(100%)

Central Eastern

20(1%)

Brong Ahafo

65(2%)

Ashanti

154(4%)

Northern

606(17%)

Upper East

713(20%)

Volta

949(26%)

Greater Accra

1,032(29%)


Rice production is supported by the fact that Greater Accra and Volta Regions have 55% of Ghana’s irrigated land

1)Volta Region is next to Greater Accra, allowng it easy access to Greater Accra's irrigated land

66Source: MoFA

• Yield: Irrigated production systems can achieve yield of 6 MT/Ha if farmers use the correct production techniques

• Quality: Paddy quality is higher due to access to water management

Productionsystem

Rainfed

Irrigated

Comments

• Yield: Rainfed lowland fields can achieve the same yield as irrigated fields but, on average, rainfed fields can achieve 3.5 MT/Ha

• Rainfed fields are vulnerable to weather pattern and climate change, putting yield at risk annually.

• The impact is accentuated as rainfed farmers only achieve 1 harvest per year

• Quality: Paddy quality is poor due to:• poor water management• delays in harvesting (which leads to

paddy that is too dry) as farmers wait until the fields are dry

Currently, irrigated land in Ghana is limited, providing potential for irrigation investment

Yield per harvest [MT/Ha]

6.0

3.5 3.5

12.0

Yield per year [MT/Ha]

Land availability ['000 Ha, %]

286 (99%)

4 (1)%

67

65613

16

31

Total processing capacity

WoraworaGADCO3)Brazil Agro Investment3)

Prairie Volta2)

Machine capacity of major rice mills in Volta, 2012 ['000 MT/p.a.1)]

There is sufficient high quality processing capacity in Volta to support increasing paddy production in the region

Source: Interviews

1) Assuming mill runs for a maximum of ~12 hours a day and 250 days per year; 2) Averyime is owned by rice producer Prairie Volta (20% government owned), 3) GADCO is currently using Brazil Agro Investment to process its paddy until its own mill is complete in September 2012 , with additional mills planned as supply from smallholder producers rises

• The major processors in Volta produce good quality milled rice suited to the demand for high quality rice in Accra

• Currently, Volta's total processing capacity is large enough to support significant increases in production

• Prairie Volta and Brazil Agro investment offer toll processing services to other producers3)

• There are a number of smaller village mills in the region

Under construction; will be operational by September 20123)

• Currently operating at 40% utilization

• Equipment does not allow high quality milled rice, thus, investment is planned to address this

Currently, operating at ~40% utilization

68

Currently, farmers on irrigated farms can produce rice at 24% of local market price for imported premium Thai rice

266

324

377

679

79553

10813

523

1,550

Total

377(24%)

1,173(76%)

Margin (10%)

Trans-port5)

60

Duty (20%) and fees

Landed cost (FOB)4)

900

377(42%)

Total cost per MT milled rice


Trans-port3)

47

Process-ing2)

Total cost per Ha1)

Cart-ing

40

Bags

10

Post harvest

56

24%

Harvest

75

Bird scaring

38

Weed-ing

50

Cropprotect-ion

48

Fert-ilizer

Seed

60

Land prep

57

Irrig-ation

1) Production cost for 1 harvest and assumes yield of 3 MT per Ha for irrigated fields; 2) Assumes paddy loss of 40% from milling; 3) Transportation of 1.8 MT milled rice from Northern to main markets; 4) FOB: Freight on Board, average price per MT: USD 900; 5) Transportation of 1 MT milled rice from Port (Accra) to main markets

Source: Interviews

Cost comparison of imported and local milled rice, 2012 [USD]

Total cost for 3 MT paddy

Total cost for 1.8 MT milled rice

Cost of 1 MT milled local rice on smallholder irrigated farm


Total cost for per MT milled rice

Cost of 1 MT imported premium Thai rice

69

Currently, farmers on rainfed farms can produce rice at 21% of local market price for imported Thai rice

266

324

283

59

569

Harvest

53

Bird scaring

26

Weeding

32

Cropprotect-ion

Duty (20%) and fees

Fert-ilizer

54

Seed1)

0

Land prep

Total

1,550

21%

331(21%)

1,219(79%)

Margin (10%)

Trans-port6)

60

Landed cost (FOB)5)

900

331(37%)

Total cost per 1 MT milled rice

331


358

Trans-port4)

28

17

Process-ing3)

47

Total production cost2)

Bags

21

Post harvest

21

Source: Interviews

Total cost for 1.8 MT paddy

Total cost per MT milled rice Total cost for 1.08

MT milled rice

Cost of 1 MT milled local rice on smallholder rainfed farmCost of 1 MT imported premium Thai rice


Cost comparison of import and local milled rice, 2012 [USD]

1) Assumed seeds are recycled by rainfed farmers; 2) Production cost for 1 harvest and assumes yield of 1.8 MT per Ha for rainfed fields; 3) Assumes paddy loss of 40% from milling; 4) Transportation of 1.08 MT milled rice from Volta to main markets; 5) FOB: Freight on Board, average price per MT : USD 900; 6) Transportation of 1 MT milled rice from Port (Accra) to main markets

70

If the import tariff (36%) were removed, local rice would still be 35% cheaper

Source: Interviews

Price comparison of domestic and Thai imported rice, 2012 [GHC/50 kg bag]

• Even without import tariffs, Thai premium rice is 34% more expensive than local premium rice

• Further, this difference would be larger if local production improves yield

108

147

70

-35%

-52%

Price of Thai rice without tariffCurrent average price of Thai rice (perfumed <5% broken)

Average price of local rice (perfumed <5% broken)

• The lower price reflects the lower quality of local rice vs. imported rice

71Source: Interviews, OLAM

Distance and time from key producing rice regions and markets, 2012

91

Upper East(Bolgatanga) 780


Volta(Aveyime2))

1) One bag weighs 50kg (trucking providers charge per bag not per km); 2) Most rice production is in the Southern part of Volta

Producing region Distance [km]

South Volta enjoys the lowest transport cost to Accra and is competitive to Kumasi

Accra

Kumasi

4.7

4.0

1.5

Upper East(Bolgatanga) 543


Volta(Aveyime2)) 328

3.0

2.5

3.1

Main market

Cost to ship 1 bag1) [GH₵]

UPPER EAST

NORTHERN

VOLTAASHANTI

Bolgatanga

Tamale

Kumasi

Aveyime91 km

1hr

328 km5hr

780 km10hr

543 km8 hrs

627 km8 hr

382 km5hr

72

Regional rice consumption of imported milled rice, 20111) [%, '000 MT]

Source: OLAM

9% 3% 5% 3% 5%3%

Thus, Volta has good access to Ghana's top rice consuming markets which make up 49% of total rice consumption

5% 6% 6%3% CAGR06-11[%]

• Rapid increase in urbanization and income aredrivers of the "rice diet transition" - Rice is popular in urban

areas as it is easy and quick to prepare

- Rising income has made rice more affordable

- Rising number of hotels and restaurants fuelling demand for (higher quality) rice

• Greater Accra and Ashanti have the highest rice consumption due to higher urbanisation and income per capita

• Greater Accra and Ashanti are key storage points for rice distribution to other markets

• Rice produced in Volta is mainly absorbed by Accra market


492(100%)

Upper West

Upper East

12(2%)

Eastern

35(7%)

Northern

36(7%)

Brong Ahafo

45(9%)

Central

45(9%)

Volta

49(10%)

Western

67(14%)

Greater Accra

83(17%)

Ashanti

108(22%)

12(2%)

Ashanti, Greater Accra and Volta: ∑ 49% of national rice consumption


73

Further, transport infrastructure in the Volta Region is more developed than in other major rice producing regions

Source: Interviews, field visits

Tamale

Bolgatanga

• Roads are more developed in the Volta Region and can support large scale rice transport by trucking

• MiDA has also recently invested in Volta's infrastructure

• Most rice from Afife/Weta irrigation scheme is transported to Accra

Road condition

• Main roads are well developed; however, branch roads are in poor condition, especially those leading to rainfed farms

• During the rainy season, flooding tends to occur due to lack of drainage

• Most rice from the Northern Region is transported to Kumasi

• Main roads are sufficient for large scale truck movement, but suffer from wear and tear (e.g., potholes)

• Roads leading up to irrigated schemes are in good condition

• Rice from Upper East is mainly transported to Kumasi

Producingregions

Volta

Northern

Upper East

Comments

Sogakofe

Nyanpala – flooding during rain

Navrongo

Afife/Weta irrigation scheme

74

In the short term, GADCO is an attractive partner given their robust commercial model and the importance of smallholders for their commercial goals

Source: interviews

Fit with smallholder goalCompany Key strengths / challengesOwnershipGADCO

Brazil Agro Investment

Prairie Volta

Large Thai producer

• Plan to work with 4.8k smallholders by 20151)

• Need smallholders to obtain 12% market share and increase equity value

100% private owned

Currently not working with smallholders

Currently not working with smallholders

20% government owned

Trial project launched in Kpong irrigation scheme

• Fully integrated model with key partnership along the entire value chain (e.g., inputs to markets to R&D)

• Strong management team able to quickly solve operational challenges

• Able to build relationships with local community

• Unable to obtain target rice volume• Low utilization of processing plant

(operating at ~40%)

• Leading rice company in Thailand • Still on trial phase with in Kpong

Irrigation scheme on a small plot

• Difficulties with government ownership• Financial difficulties • Unable to obtain target rice volume• Low utilization of processing plant

(operating at ~40%)

Attractiveness

100% private owned

100% private company

Strong Medium Low

GADCO’s model can be applied to other regions and partners

1) GADCO smallholder model (Copa Connect) was launched in 2012 and is currently in trial phase

Role


Production



75

F. Volta Region partner analysis1. GADCO's smallholder initiative

76

• Copa Connect package to include certified seeds, chemicals, blended fertiliser tailored to soil need

• Lead farmers provide land preparation, spraying, harvesting

• Smallholders trained on best production practices

• On-line platform to monitor farmers’ compliance

• GADCO guarantees a market for higher quality rice which will be bought at competitive prices

• GADCO creates a brand (Copa Connect) for smallholder long grain rice

• GADCO shares revenue from final product with farmers

• GADCO to help smallholders prepare their land

• GADCO carries out R&D on best seed variety and production practices, and will share knowledge with farmers

• Copa Connect provides training and extension services

GADCO, through its Copa Connect model, plans to support smallholders along the entire value chain

Source: GADCO



Infrastructure Business & finance environment


Research &extension services

• GADCO's revenue share will allow smallholders to increase income further

• Input will be provided on credit

• N/A

• GADCO processes smallholder rice in its mill to produce high quality milled rice blended to maximise price

• Mill capacity will be increased once utilization rate reaches 60%

Copa Connect model still in development

Improved yield

Better quality

Improved yield

Better quality Increased price

Guaranteed market

Improved yield

Better quality

Improved yield

Better quality

Better quality

Increased price

Increased price

77

Improving seeds, fertilizer use and best farming methods will have the largest impact on yields

Source: Interviews

BACKUP

Key drivers for yield improvement

Bird scaring

Mechanization (harvesting)

Best farming methods

Pesticides & Herbicides

Water management

Fertilizer

Seed• Usage of higher yielding seeds, more resistance to weather changes,

pests

• Conduct best farming methods e.g., transplanting, proper and thorough weed removal

• Usage of appropriate amount and blend (fertilizer that is suited to soil chemistry) of fertilizer

• Proper water management control of the field through irrigation

• Post & pre-emergence measures are taken

• Usage of combine harvesters limit harvesting paddy losses

• Conduct scaring to limit paddy losses from birds eating paddy

78

For maximizing rice quality: Processing, post harvest handling and harvest methods have the biggest impact

Source: Interviews

Key drivers for premium rice quality1) [# technical experts citing driver as key quality driver]

5

6

8

8

9Processing

Harvesting

Post harvest handling

Water management

Seed type

Quality mills equipped with complete processing facilities are crucial to ensure:- Cleanliness (no stones or foreign matter) – De-stoner- Grain uniformity - Grader- Good appearance - Polisher- Minimal breakage - Low heat machines

Usage of combine harvesters during harvest to eradicate manual threshing, ensuring minimal broken grains

Usage of seed that provides quality perfumed rice with good taste and texture

• Drying of rice to right moisture content and no delay between harvesting and milling to ensure minimal broken grains

• Avoid parboiling to ensure good taste and texture

Proper water management ensures that rice forms fully (long grain) and provides good texture

1) Rice quality (as defined by Ghanaian consumers) is measured by: Cleanness, grain uniformity, minimal breakage, taste and texture

BACKUP

79

Copa Connect volume contribution by milled rice production 2012-2020, ['000 MT]

If GADCO is to achieve its target volume of 178k MT by 2020, it will need 75k MT from Copa Connect

Source: GADCO

80

4.8Total

smallholders in 2015

10.6

2.3

2.5Irrigation

Rainfed

Total smallholders

in 2020

Potentialsmallholders

in 2020

15.4

This will need 4.8k smallholders by 2015 and 15.4k by 2020

Source: GADCO

Irrigated Farmers• Copa Connect will work with 2.5k smallholders currently growing rice on

government irrigated schemes within 70-100km of GADCO's nucleus farm• Farmers will be selected based on:

- Number of harvests (target of 2 per year)- Quality of paddy- Yield (target with support of 5.5 MT/Ha)

Rainfed farmers• Rainfed farmers will be integrated once easily accessible irrigated farmers

have been captured• Copa Connect will select 2.3k smallholders from sites with close proximity to the

irrigated scheme• Rainfed farmers are constrained by rainfall and can only achieve 1 harvest per year,

and have lower yield and quality• Estimated yield of rainfed farmers: 3.75 MT/Ha

• GADCO estimates it can work with an additional 10.6k smallholder by 2020• Potential to work with more smallholders from other regions in Ghana (e.g.,

Northern and Upper East region); however, this is still in design, and Copa Connect rice farming will be scaled according to performance in 2012 to 2015

81

Copa Connect irrigated and rainfed smallholders1) 2012-2020,

Initial farmers will mostly be irrigated, however by 2020 72% will be rainfed

Source: GADCO

750

1,200

1,500

1,600

1,700

2,000

800

800

900

900

900

2,000

300

2012 201720152014 20162013

Rainfed

Irrigated

15,350

4,300(28%)

2018 2019 2020

11,050(72%)

Total smallholder in 2020

BACKUP

Pilot

1) Assumes 1 Ha per farmer

82

Impact of Copa Connect on irrigated smallholder income1)2) 2016 [USD, p.a.]

Copa Connect aims to increase irrigated smallholder income by 369% to USD 4,174 per year

Source: GADCO, Interviews

1) Does not taken into account opportunity cost of producing a different crop:; 2) Irrigation allows 2 crop cycles per year; 3) GADCO's price for milled rice: CONFIDENTIAL

801

891

941

890

1,782

821

1,642

185% -369%

2,532 - 4,174

Target income (2016)

890

821


1,883

941

Price improvement3)

3,565

891

Yield improvement

1,602

801

Current income

Harvest 1 Harvest 2

83

Key assumptions for Copa Connect irrigated smallholder income (1/2)


BACKUP

84

Key assumptions for Copa Connect irrigated smallholder income (2/2)


BACKUP

85

Impact of Copa Connect on rainfed smallholder income1)2) [USD, p.a.]

Copa Connect aims to increase rainfed smallholder income by +291% to USD 1,126 per year

1) Does not taken into account opportunity cost of producing a different crop; 2) Rainfed farmers only have 1 crop cycle per year; 3) GADCO's price for milled rice: CONFIDENTIALSource: GADCO, Interviews

653

606

1,027

288419

606

419

Yield improvementCurrent income

288

707 - 1,126

Target income (2016)

+291%

1,213


Price improvement3)

Harvest 1

86

Key assumptions for Copa Connect rainfed smallholder income (1/2)


BACKUP

87

Key assumptions for Copa Connect rainfed smallholder income (2/2)


BACKUP

88

GADCO and its partners stand to achieve substantial benefits from Copa Connect, thus ensuring its sustainability

Source: GADCOSource: GADCO, Interviews

• Increased ability to achieve GADCO's goal to capture 12% market share by 2020

• Higher market share will allow GADCO's equity value to increase

Short term benefit Long term benefit

• Higher revenue, profit• Stronger bargaining power • Less volatile profits

• Fixed cost will fall with increasing rice production from Copa Connect

• Growth• Stronger brand and market

penetration

• Higher revenue, profit• Sygenta Foundation will

benefit from R&D

• Stronger brand and market penetration

• Supports development of products suitable for smallholder farmers

• Higher revenue, profit • Stronger brand and market penetration

• Supports development of products suitable for smallholder farmers

• n/a • n/a

Copa Connect role

• Offers input packages, training, access to processing mill

• Guaranteed market and revenue share

• Offers strong distribution network to quickly move large volumes of rice

• Offers R&D on best seed variety, agronomist experts and right blend of agro-chemicals

• Gives inputs on credit

• Offers fertilizer tailored to soil chemistry

• Offers technical and agronomic assistance, and equipment support which is transferred to Copa Connect via GADCO

89

F. Volta Region partner analysis2. GADCO's commercial model

90

GADCO aims to be a vertically integrated food company in several countries, starting with Ghana

Market-Driven Infrastructure & Corporate Shared Value – SchematicCo-Building Scalable Food Markets with Smallholders

Source: GADCO

91

GADCO has started commercial rice production in Ghana


• Founders Iggy Bassi and Toks Abimbola started research on food production and food markets in Africa

• Selected partners for rice products • Syngenta for inputs• Agropecuarian Foletto

for production • Finatrade for

distribution

• Identified optimal production practices using a number of agronomic trials

• Trial of commercial rice production in Volta Region on 300 Ha and 2 harvests to date

• First sale of Copa branded rice

• Raised capital for scale up from Summit Capital, Acumen Fund, Root Capital and Deutsche Bank

• Expand commercial production (growing to 1,000 Ha by end 2012, 2,000 Ha by end 2013 and adding 2,000 Ha p.a. thereafter)

• Build own processing capacity

• Develop approach to work with smallholders under the brand Copa Connect and launch trial

• Develop BoP product offering

• Continue refining agronomic practices

• Continue to raise capital for expansion

• Produce on commercial farm at scale

• Aggregate from 4,800 smallholder farmers

• Produce targeted BoP products

• Produce higher value products

• Expand to the Northern Region

2010 2011 2012 2013-15

Current stage

Grow commercial and launch trial smallholder production Scale production

Partner selection and acquisition of land lease

First sale of Copa rice brand

92

Total revenue and profit projection 2012 - 2014

For rice alone, GADCO expects to reach USD XXm profit by 2014

Source: GADCO

93

• Irrigation: Infrastructure is limited, under utilized and poorly managed

• Port: Over crowded and delays delivery of imported inputs (e.g., tractors, harvesters, spare parts)

• Storage: Paddy is improperly stored (e.g., in house rooms), warehouses are not typically used

• Financial institutions:- Lack of agriculture financial

services due to longer repayment times, higher default rates (due to side selling),

- When available, interest rates are very high (up to 100%)

• No insurance products available

• R&D: Lack of research on the local rice market

• Technical research: Not effectively disseminated

• Extension services: Insufficient numbers and existing officers are not always trained in the latest knowledge

• Industry bodies: Lack of industry associations, means there is no collective industry voice for rice

In order to achieve this goal, GADCO must overcome a number of challenges along the value chain

• Seed: Almost all seed used is uncertified recycled and low quality

• Fertilizer: Fertilizer is not adapted to soil needs

• Land: Risky to lease land due to tiered land tenure system

• Mechanization: - Government provision of

subsidised equipment discourages private sector involvement

- Spare parts and qualified workshops are not available

- Insufficient small scale machinery

• Farming as a business: Farmers do not consider rice production as a business and do not invest in it

• Low yields: Yields are 2-3 MT/Ha vs. best practice of 6 MT/Ha (10 MT/Ha in Brazil)

• Agrochemicals: Inappropriate and insufficient use of fertilizers, herbicides and pesticides

• Agronomic practices: Manual production practices (planting, protection, harvesting) and poor knowledge reduce yields and area planted

• Bags: Recycled and improper bags used, reducing quality

• Manual post-harvest practices reduce yield, lead to broken rice and increase foreign matter

• Small village mills are typically rundown, outdated and managed by unqualified operators

• Mechanical processing is not always used as operators charge a service fee and do not cover transport cost of the paddy

• Consumer preference is for high quality rice (<5% broken, perfumed, straight mill) which current (smallholder) producers cannot deliver

• Reputation of local rice is poor• Farmgate price: farmers are often

forced to sell paddy at low farmgate price due to lack of market access

• Side selling: smallholders often fail to adhere to contracts and side-sell their output

• Distribution market is highly consolidated (Finatrade and OLAM capture ~60% of imported rice market)

• Local rice market is small; imported rice makes up 60% of the market







94

• Partnership with Syngenta ensures supply of good quality seed, as well as herbicides

• GADCO is currently building a partnership with Yara to ensure the supply of the right blend of fertilizer

• GADCO have hired on-site Brazilian technician to repair machines and supply spare parts to decrease machine down time

• Close relationship with local community has secured land

• Partnership with Agropecuarian Foletto (leading rice producer in Brazil) will allow GADCO to leverage their rice production experience and expertise to maintain target yield levels

• Partnership with Agropecuarian Foletto will allow GADCO to leverage their knowledge and experience in processing rice

• GADCO is building its own high quality processing plant

• Partnership with Finatrade (leading distributor in Ghana) will allow GADCO to leverage its strong distribution network to reach BoP and quickly distribute large volumes of rice

• GADCO's higher quality rice output will satisfy the local demand for higher quality rice

• GADCO is actively developing Copa brand in partnership with Finatrade to improve the image of local rice

• GADCO has invested in irrigation for its commercial rice farms and for service block farmers

• GADCO has been successful raising the funds needed for its commercial operation and has other donors interested in supporting its Copa Connect initiative

• GADCO is conducting research on seed with Syngenta, production practices with Agropecuarian Foletto

• GADCO is using Finatrade's knowledge of the market to conduct market research






GADCO addresses these challenges through its fully integrated model and key partnerships along the value chain


95

GADCO has a strong network of partners1) GADCO's team contains technical expertise

• World leader in rice seed production• Providing seed and chemicals• Developing suitable varieties (geneticist

seconded to GADCO to develop seeds)

• Currently developing partnership with leading fertilizer provider in Ghana

• Providing fertilizer tailored to GADCO’s soil chemistry

• Leading food distributor in Ghana (USD 2 bn revenue)

• Leading rice importer in Ghana• Committed to distribute GADCO’s Copa rice• Developing BoP market with GADCO• Large scale vertically integrated Brazilian

rice producer• Providing technical expertise, seeds and

equipment support

• Agronomists and farm managers recruited from Brazil

• All have extensive experience in producing rice at large scale

Agronomic skills

• Recruited an experienced farm equipment technician from Brazil

• Familiar with all commercial rice production equipment

• Fabricates parts on site

Technical skills

• Working closely with local community leadership to manage land, ensure good community relations and minimise theft

• Member of local community council is leading the Copa Connect initiative

Community manage-ment

GADCO has built a strong network of partners and a team which encompasses key technical expertise

Source: GADCO, Interviews 1) Partnerships are contractual agreements and does not include equity or revenue share

• Syngenta Foundation developing smallholder proposition, including the training program and technology package

• GADCO is building partnerships that will support its development beyond the rice value chain and into its other target food crops• GADCO is developing a partnership with the World Bank to conduct impact assessment on the pilot and scale-up of Copa Connect

96

GADCO has successfully developed strong, trusting relationships with its community


GADCO has managed to build a trusting and good relationship with its community:

• GADO has a revenue share built into the land lease agreement with the local community (which has the potential to increase the local community's income by 200% over a traditional lease)

• GADCO transparently shares operational and yield information with the community

• Local villagers have helped GADCO protect its harvest from thieves

• Community is involved with GADCO operationswith monthly community councils to allow the community to voice their issues

• Constant engagement with the community chief and careful selection of a community aligned with GADCO's beliefs means there is a strong relationship with the leaders of the community (e.g., female participation)

• GADCO is currently training the local community in rice production

GADCO's signboard showing real-time information on its rice operation and yield

BACK UP

97

Total revenue and profit projection 2012 - 2014

For rice alone, GADCO expects to reach USD XXm profit by 2014

Source: GADCO

ADCO management team

Co-founder of GADCO Over 14 years experience in

Principal Investment,Consulting, Strategy and Operations in Europe, Africa, India and Latin America

Co-founder of GADCO Over 15 years experience in

the corporate and advisory sectors (investment, science, technology and sustainability, food security and economic development)

Experience in agriculture, forestry, natural resources management and economic development

Previously worked as a strategy consultant with McKinsey & Company

GADCO is led by a qualified experienced leaders who are ommitted to the business

Toks Abimbola Iggy Bassi Karan Chopra

ndustry experts, business partners and NGOs agree that GADCO's commercial model is attractive

“Of my 13 years of experience I have not met a company with a fully integrated model like GADCO, these guys are smart, motivated and committed” Nabil Moukarzel, Chairman

"We invested in GADCO because we believe in their unique business model and management performance. We have evaluated their track record and are impressed with their ability to resolve challenges" Catherine Casey, Global Expansion Manager

"GADCO’s commercial farming is likely to succeed due to their integration along the entire value chain and key partnerships" Andrew Aforo, ACDI VOCA, Rice value chain specialist

F. Volta Region partner analysis3. Recommendations for GADCO

Copa Connect must help smallholders address challenges all long the value chain

• GADCO will conduct R&D for inputs (seed, agro-chemicals), and best agronomic practices. These findings will be shared with the smallholders

• As more smallholders are engaged in rice farming, community associations can be developed to strengthen the producers’ bargaining

d i

he right good quality inputs will be rovided to smallholders which they have ifficulties accessing asmine 85 seeds will be provided which roduce higher yield and fetch a higher price;

armers currently recycle low quality seed which produce lowered yield and quality, and etch give-away prices Agro chemicals will be provided which mprove paddy quality and reduce risk of paddy oss to outbreaks Water control management is provided for mallholders near commercial farm and unding is provided for rainfed farmers; water

management is critical for low breakage

• Agronomic training will be provided to help smallholder rice farmers achieve higher yields and quality paddy

• Machines and training for harvesting will be provided such as combine harvester to ensure rice is harvested at the right moisture content

• Farmers are provided with high quality processing facility via GADCO's commercial rice mill






Storage facilities provided to armers who may want to store heir rice for when the price of ce is higher

• Inputs will be provided by Copa Connect and repaid in kind at harvest

• Farmers are guaranteed a buyer of paddy and will be offered a share of final revenue to increase their incomes and loyalty

Donors are well placed to support Copa Connect address key mallholder issues (1/2)

ot

gn

em-on

ale

ProcessingProduction Market

• Identify source • Select partners• Sign MoU• Agree specifications• Develop distribution

model• Develop selection

guidelines

• Obtain input• Deliver to

smallholders

• Roll out/implement by NGO partners

• Train business service providers

• Identify and select farmers

• Develop model for paddy collection

• Develop business model

• Help with technical assistance

Collect paddy

• Test inputs• Refine

specifications

• Implement training for staff /business service providers

• Implement training for pilot farmers only2)

• Identify technology if any• Identify and select partners

for implementation • Refine model

• Execute • Refine model• Update prices

• Collect paddy• Refine model

• Design training program• Design model farms• Identify model farmers• Select pilot farmers• Recruit team

• Develop national branding campaign1)

• Determine pricing and set price premium to be paid

• Understand smallholder cash needs

• Design model for rice grading• Develop harvesting model

• Obtain inputs• Deliver to

llh ld

• Implement (business service provider)Id tif l t llh ld

Collect paddy

• Sell, bag rice, pay, review • Develop new product • Review marketing campaign

• Sell, bag rice, pay, review • Develop new product

Inputs

Items in BOLD are suitable for donor support

Donors are well placed to support Copa Connect address key mallholder issues (2/2)

• Develop land preparation model


• Identify new land for irrigation

• n/a

• Develop association

• Run association • Underwrite start

up cost

• Execute land preparation • Refine land preparation

model • Initiate discussion for

irrigation development on irrigation schemes

• Provide finance and monitor repayments

• Refine finance model • Refine insurance model

• Execute market R&D • Share technical R&D• Train the trainers• Update

• Identify association members

• Develop financing model

• Develop insurance model

• Select and identify candidates• Design trainer program and

business model • Identify technical R&D• Design market R&D and

disseminate into pilot

• Execute and obtain partner for irrigation

• Provide finance and insurance

Run association Execute

• Provide finance • Underwrite loss (share

risk of default)• Provide insurance

• Execute • Update





lot

gn

em-on

ale

Items in BOLD are suitable for donor support

G. Next steps

Next steps

• Test required activities with Avnash and GADCO and identify the ones appropriate to support

• Select potential partners to work with

• Request a detailed work outline and cost from potential partners for the support

• Identify donors willing to co-fund the support

• Select partner

• Launch support

Activity Timing

• Aug – Sept 2012

• Sept – Nov 2012

• Nov 2012 – Jan 2013

• Nov 2012 – Jan 2013

• Feb – Mar 2013

• April 2013

here are a range of potential partners to work with in support f implementing the smallholder model

otential implementation partners

• USAID have are targeting the Northern Region and are active in rice

otential funding partners

• L’Agence Française de Développement have expressed interest in working with BMGF and in providing credit guarantees for producer credit

• JICA are very active in the rice industry development (launched rice program in the Northern Region)

• MEL Consulting are a local implementing NGO with experience working with Ghanaian smallholders

• ACDI VOCA have extensive experience working with smallholder rice producers in Northern Ghana

• CDC Development Solutions have undertaken value chain projects in a number of African countries

• FARA aim to enhance rice production in Africa

• IFDC have implemented a number rice programmes, notably in Nigeria

• TechnoServe have extensive experience in implementing value chain programmes in Ghana

APPENDIX

GOs and Industry expertsUSAID

ACDI VOCA (Accra, Northern, Upper East)

ADVANCE

World Bank

AFD (L'Agence Française de Développement)

FARA (Forum of Agricultural Research in Africa)

Mel Consulting

JICA

Millennium Development Program

AGRA

CARD

TechnoServe

Commercial players• GADCO

• Praire Volta

• Brazil Agro Investment

• Acumen

• OLAM

• Finatrade

• Avnash Amsig

• Lolandi

• Nasia Rice Mill

• Novel

• Stallion

• Wienco

• VEGPRO

• Africa Atlantic

Smallholders• Smallholders (Volta, Northern,

Upper East)

• ADVANCE Nucleus farmers

• Avnash outgrowers

Government• Ministry of Agriculture

• Afifie Irrigation scheme Head

• ICOUR (Irrigation Company of Upper Region)

• Extension officers

Desk research• World Bank

• Ministry of Agriculture

• State of Ghanaian Economy

• International Monetary Fund (IMF)

nterviewees and desk research

Documents

Developing the rice industry in Africa - Inter-Réseaux · PDF file · 2015-06-10Developing the rice industry in Africa Ghana assessment July 2012. 2 ... East to source rice for key