REPÚBLICA DE MOÇAMBIQUE

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MINISTÉRIO DE ECONOMIA E FINANÇAS

Support to inclusive and sustainable agricultural development in

the Zambezi Valley

Phase II

NARRATIVE ANNUAL REPORT 2019

(Short version for publication on IATI)

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Table of contentes

1. INTRODUCTION........................................................................................................................................ 3

1.1 Context............................................................................................................................................ 3

1.2 Objectives and structure of the document ....................................................................................... 3

2. THE ISA-2 PROGRAM: THEORY OF CHANGE .............................................................................................. 3

3. PROGRESS MADE AND DEVIATIONS FROM PLANNING .............................................................................. 4

3.1 OUTCOME LEVEL RESULTS 2019 ....................................................................................................... 4

3.2 COMPONENT 1: Capacity building for the Agency ........................................................................... 5

3.2.1 Studies and (land) planning .......................................................................................................... 5

3.2.2 Technical and financial assistance to agribusiness ........................................................................ 5

3.2.3 General support and management structure ............................................................................... 6

3.3 COMPONENT 2: Strengthening intermediate partners...................................................................... 6

3.3.1 Development of Technical and Professional Skills......................................................................... 6

3.3.2 Provision of Business Development Services ................................................................................ 7

3.3.3 Strengthening Public Dialogue ..................................................................................................... 8

3.4 COMPONENT 3: Implementation projects ....................................................................................... 8

3.4.1 Innovation and Technology Transfer ............................................................................................ 8

3.4.2 Value chain development with a smart climate resilience perspective .......................................... 8

3.4.3 APSAN Vale ............................................................................................................................... 10

3.5 COMPONENT 4: Special projects ................................................................................................... 10

3.5.1 Growth poles project ................................................................................................................. 10

3.5.2 Agrorural Parks .......................................................................................................................... 10

4. RISK ASSESSMENT .................................................................................................................................. 11

5. LESSONS LEARNED AND CONSTRAINTS ................................................................................................... 12

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1. INTRODUCTION

1.1 Context The Governments of Mozambique and the Kingdom of the Netherlands agreed in November 2012 to implement

the Program for "Support for Inclusive and Sustainable Development of the Zambezi Valley" (ISA). This project

was developed by the Zambezi Valley Development Agency (ZVDA), having as a base the development of the

competences of the ZVDA itself and its partners (implementing agents and key private sector organizations). The

first phase of the program (ISA-1) ran from 2014 to 2016. During the year 2016 the design of the second phase

of the program (ISA-2) was developed and approved. ISA-2 runs from 2017 to 2021.

1.2 Objectives and structure of the document The document at hand contains the narrative report for the third year (2019) of ISA-2 and intends to provide

insight into the progress of implementation of the programme and the results achieved. As such, this brief

annual report is complimentary to the reporting that is done quarterly through the IATI dataset. In addition,

ZVDA also submitted a more detailed Portuguese progress report to the Embassy as well.

The document is structured as follows:

• Chapter 2 describes the ISA-2 program, its Theory of Change and its components.

• Chapter 3 presents an overview of the progress made in relation to the Theory of Change. The chapter also

explains any deviations from the envisaged achievements and original intentions.

• Chapter 4 provides an assessment of the risks as identified in the proposal and new problems that may

threaten implementation of the programme and achieving results.

• Chapter 5 summarizes the lessons learned over the first year of ISA-2 implementation.

2. THE ISA-2 PROGRAM: THEORY OF CHANGE

The ISA-II programme aims to guarantee an inclusive and sustainable development of the Zambezi Valley and is

strategically focused on building institutions and human resources, public (including the strengthening of the

ZVDA itself) and private, to provide a range of services and inputs to service providers (intermediaries),

individuals, smallholders and/or associations/cooperatives, agribusinesses and commercial farms to enhance

their technical and business skills, marketing, as well as their access to finance and technology in order to

increase production, improve productivity, incomes and employment.

The programme has different types of beneficiaries:

• The ZVDA itself;

• Intermediary institutions (educational centers, BDS providers, i.e. strategic partners of the ZVDA);

• Small holder farmers, medium-sized farmers and agribusiness enterprises.

Four main beneficiary impact pathways are identified that are structured in four programme components:

• Component 1: Capacity building of the ZVDA. An indirect impact pathway through improved strategic and project planning and coordination achieved through capacity building interventions oriented to the ZVDA;

• Component 2: Strengthening of intermediaries. A second indirect pathway through building improved capacity of educational centers and business providers. This also includes the strengthening of the public-private dialogue;

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• Component 3: Implementation projects. A direct impact pathway through interventions directly oriented to smallholder farmers, i.e. so-called intervention projects and agribusiness-smallholder partnerships. These interventions seek to deliver services to farmers or small businesses in the field to enhance on-farm technology adoption, knowledge and marketing and to increase production and productivity, production, income and employment;

• Component 4: Special projects A third indirect impact pathway is to enhance agribusiness through improving the agribusiness climate through special projects, such as the growth poles project and the creation of agro-parks. This component does not benefit from EKN financing.

The Theory of Change is illustrated in the figure below.

Figure 1: ISA 2, theory of change

3. PROGRESS MADE AND DEVIATIONS FROM PLANNING This chapter presents an overview of the progress made in relation to the Theory of Change. The chapter also

explains the most significant deviations from the envisaged achievements and original intentions.

The discussion initiates with an overview of the 2019 results at the outcome level. Thereafter, a brief reflection

is provided related to the output-level progress within each of the components of ISA-2.

3.1 OUTCOME LEVEL RESULTS 2019 At the outcome level, according to the Theory of Change, the project aims to achieve two main objectives:

1. Enabled agribusiness environment in the Zambezi Valley

2. Increased agricultural commercialization and agricultural processing in the Zambezi Valley

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Table 1 below reports on the EKN targets and realizations for the year 2019 for the outcome level indicators

which are reported in IATI as well. The table shows that, in line with the theory of change, the ZVDA’s activities

contributed to an enabled agribusiness environement and increased agricultural commercialization and

agricultural processing in the Valley as reported through the associated indicators. The data clearly show that

the results on most targets significantly overshoot the planned targets. For a large extents this is due to the

emergency project which was implemented in the aftermath of the Idai cyclone that hit Central Mozambique in

March 2019.

Table 1: EKN targets and realization for the year 2019 per objective (IATI-reported indicators only)

Objective Indicator Target Realized %

1. Enabled agribusiness environment

Nr. of investment proposals that obtained funding through ZVDA funding windows

17 344 2024%

Volume of investments financed through ZVDA's financing windows (millions of Euros)

0.5 2.1 401%

Nr. of graduates of educational institutions whose business activities are funded through ZVDA funds (m/f)

15 50 333%

Nr. of business created 77 80 104%

2. Increased agricultural

commercialization and agricultural

processing

Nr. of farmers and / or MSMEs (m/f) with increased productivity and / or income

2,780 2,695 97%

Number of beneficary farmers and / or MSMEs (m/f) 6,511 10,817 166%

Nr. of jobs created 708 7,897 1115%

Nr. of hectares using climate smart agriculture technics 1,077 2,650 246%

3.2 COMPONENT 1: Capacity building for the Agency In 2019, in line with the theory of change, activities have been undertaken that strengthen the capacities of the

Agency’s various departments in order to be able to contribute to inclusive and sustainable development in the

Valley.

3.2.1 Studies and (land) planning

As planned, the studies and planning department invested in the development and dissemination of studies and

the further training of staff members to maintain and populate the Agency’s database. For instance, with EKN-

funding the studies about renewable energy that were elaborated in 2018 were disseminated. In addition, with

World Bank-funding three pre-feasibility studies were elaborated for the cement, oilseeds and fertilizers value

chains. Unfortunately, as mentioned in previous progress reports, the Agency still awaits the ratification of the

Plano Especial de Ordenamento Territorial (PEOT) by the Assembly of the Republic. Therefore many of the PEOT-

implementation cannot yet take place Nevertheless, in 2019, the Agency managed to initiate the

implementation of 11 district level territorial plans.

3.2.2 Technical and financial assistance to agribusiness

In 2019, more results of the Agency’s collaboration with contracted the Wageningen University Research Centre

for Development Innovation (WCDI) became visible. Results include a training of private sector veterinarians, an

assessment of opportunities for aquaculture business development, a publication of the tourism potential of

Magoe National Park, a document on opportunities for business incubation, the Agency’s gender strategy, and

the development of a demonstration programme for the potato sector.

In addition, as foreseen, the Agency organized a series of seminars on agri-business and related topics.

Furthermore, within the context of investment promotion, the Agency participated in trade fairs in

Mozambique, China and Portugal. The Agency also elaborated its marketing and comunication strategy for the

coming five years.

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3.2.3 General support and management structure

In 2019, the Agency continued the implementation of its general staff training program. The ZVDA also

strengthened its monitoring and evaluation team.

3.3 COMPONENT 2: Strengthening intermediate partners In 2019, in line with the theory of change, the ZVDA strengthened its relationship with strategic partners in the

Valley in the fields of education, business development services (BDS), and public-private dialogue. Through

projects with these institutions the ZVDA contributes to an enabled business environment.

3.3.1 Development of Technical and Professional Skills

The ZVDA, making use of both EKN and NICHE-funding, collaborates with 13 (as targeted) educational

institutions throughout the Valley. The purpose of the project is to strengthen the education and training

institutions of the Zambezi Valley in order to secure the necessary quality and quantity of skilled labor to advance

agricultural growth for shared prosperity, job creation, income generation, and to catalyze inclusive growth,

sustainable development and improved livelihoods. The project is on course in terms of staff training and

curriculum development. In 2019, this led to 90 business start-ups (global target: 106) and 1203 MSMEs with

improved production or income (global target: 1056). Through the Agency’s financing platform, in collaboration

with the BNI bank, 27 business plans for a value of EUR 67,000 have been financed.

Figure 2: Training private sector

veterinarians Figure 3: Gender strategy Figure 4: Publication on

tourism development

Figure 5: Training of 40 teachers in IMAC Competence standards (EAC) and the Martires de Wiriyamu

commercial Institute

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3.3.2 Provision of Business Development Services

The provision of BDS is a very important means for supporting the development of MSMEs, which are the basis

for job creation, income generation and which contributes to the growth and economic development of the

region in particular and of the country as a whole.

In this respect, in 2019, the Agency, through private and public BDS providers supported 602 MPMEs (EKN target:

500) of which 361 (EKN target: 300) realized enhancements in productivity or income levels. Also, 64

entrepreneurs passed an audit to be allowed to use the “Do Vale Do Zambeze” certificate of local origin for their

products. Finally, 25 entrepreneurs (target: 21) made use of business incubation service. This includes six

incubatees of the physical business incubator Agrimaq and 19 entrepreneurs who benefitted from Agrimaq’s

mobile business incubator services.

Figure 8: Audits of the productive process of small farmers and or MSMEs for the “Do Vale Do Zambeze” certificate of local origin

Figure 7: Assistance of MSMEs in matters of legalization of companies and preparation of Business Plans

Figure 6: Participation of teachers in short courses

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3.3.3 Strengthening Public Dialogue

During ISA-1, the ZVDA strenghtened provincial business forums (i.e. the CEPs) to reinforce the mechanisms for

public and private sector-dialogue. ISA-2 aims to improve dialogue at the district level through the so-called

CEDs. In 2019, the ZVDA continued supporting (as planned) a series of meetings and training events for the CEDs

and their members. The ZVDA also completed the creation of physical infrastructures for eight CEDs. All other

targets for this activity have also been met.

3.4 COMPONENT 3: Implementation projects This component includes two overarching projects which are directly targeted at small-holders.

3.4.1 Innovation and Technology Transfer

This project aims to contribute to (i) improve the access and availability of low-cost agricultural technologies and

innovations to small producers, (ii) promote the combination of productive and competitive techniques capable

of increasing water productivity, (iii) introduce agroforestry systems and approaches, and (iv) develop inclusive

business models as well as facilitating their integration into the value chain, with the aim of increasing

production, productivity, and the productivity and profitability of farmers.

In this respect, it was planned that in 2019 a resilient agriculture (climate resilience) sub-project and a seed-

sector strengthening sub-project would start off. However, the procurement process to contract entities to run

the project got delayed and a new approach needed to be defined. As a result, implementation will only

commence in 2020.

3.4.2 Value chain development with a smart climate resilience perspective

The agricultural sector in the Zambezi valley experiences both production and marketing (commercialization of

agricultural products) challenges. In order to tackle these issues, the ZVDA supports value chain development

projects, involving both private and public entities.

Figure 9: Training of CED members

Figure 10: Completed offices of the CEDs

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In line with the 2019 annual plan, during the year the ZVDA – through its partners – undertook activities in the

horticulture, rice, livestock and organic sugar value chains. In 2019, the re-establishment of productive capacity

became one of the core objectives following the devastating cyclone Idai.

• In the horticulture value chain, the partners succeeded enhancing the income of 860 MSMEs (EKN target:

850) and creating 427 jobs (EKN target: 0). This was done through the identification of markets and

producers, the availability of mechanization and financial services (the latter through the FAE fund in

collaboration with the BNI bank, see: http://www.bni.co.mz/fae/) and the continued support to producers

to adhere to the qualities to obtain the Vale Do Zambeze quality seal. Furthermore, the implementation of

this component allowed for the approval of 43 student, entrepreneur and MSME projects, the processing

of 4,390 tons of horticultural produce and the marketing of 12,195 tons of vegetables, legumes and cereals.

• In the rice value chain, applying the same methodology as the horticulture value chain, 361 jobs were

created (EKN target: 100) and 905 MSMEs (EKN target: 1000) enhanced their income. Also, rice processing

unit was supported. On the other hand, the planned installation of another five processing units was still in

process by year end 2019. Nevertheless 1090 tons of rice (EKN target: 1000) were processed and

commercialized through supermarkets and major markets.

• As far as the livestock sector is concerned (an activity which is financed through other sources of funding

than EKN), key results for the year 2019 include the establishment of a support structure for livestock

producers (e.g. trained veterinarians and support centers). As a result of these and other activities 32,160

liters of milk and 120 tons of meat were produced.

• In the organic sugar value chain, with lead private partner Ecofarm 1895 tons of sugar were marketed by

trained members from sugar cooperatives. In total 533 producers benefitted (global target: 518) and 900

jobs were created (global target: 500). In 2019, this activity was financed by the World Bank’s Catalytic Fund.

Figure 11: Supply of transportation boxes for horticulture products

Figure 12: Rice trade fairs in Zambézia

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3.4.3 APSAN Vale

The APSANVALE project, which started late 2018 and is implemented by a consortium of Dutch and Mozambican

firms, focuses on increasing water productivity. In 2019, the improvement of the agricultural practices by the

beneficiaries resulted in an improvement of the water productivity of 8% compared to the baseline values of

the project areas. These trainings reached out to over 1300 farmers in 2019. Based on an average of 4.6 ha per

farmer, this project impacted about 6000ha of which 1700ha irrigated agriculture. Secondly due to trainings,

visits and cooking classes the project was able to reach about 600 families, and proposed treatments to alleviate

the effect of malnutrition by more than 700 children. These numbers, are fulfilling the 2019 project targets.

3.5 COMPONENT 4: Special projects Within this component two non-EKN financed initiatives are taking place.

3.5.1 Growth poles project

The Growth Poles project is funded by the World Bank and aims to improve the performance of businesses and

small producers in the Zambezi Valley by focusing on areas of high potential for growth. In 2019, 21,203 farmers

benefitted from the project (global target: 5,000). Furthermore, 60 kilometers of road rehabilitation works were

completed during the year as well (as planned).

3.5.2 Agrorural Parks

The Rural Transformation Centers will be a collection point for raw materials supplied by farmers and will also

offer other services including but not limited to: agricultural extension services to producers, storage, cold

storage facilities, financial services. In 2017, a detailed design study has been elaborated for a 172 hectares

wholesale market in Marromeu. For the year 2019 the main planned activity was the actual establishment of

Figure 13: Milk collection centre Figure 14: Egg production

Figure 15: Fish conservation Figure 16: Planting sugarcane

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this wholesale market. However, given that a private sector entity to manage the site could not yet be identified

the establishment has not yet taken place.

4. RISK ASSESSMENT

The table below assesses the main risks that were identified in the original ISA-2 proposal. It should be noted

that the formulation of some of the risks has been adapted for editing purposes. No new risks emerged.

Table 2: Risk assessment

Risks Level Mitigating measures / assessment of situation in 2019

Overall low absorption capacity in the Valley.

High As suggested in the proposal, ZVDA at the start of ISA-2, is carefully and gradually selecting implementing partners.

Pressure to opt for hardware (investment) project over software (capacity building)

High The first years of ISA-2 implementation show heavy emphasis on capacity building and implementation projects.

Hardware investments leading to white elephants.

Moderate The ZVDA is outsourcing management to the private sector and runs feasibility studies prior to any investment

Political tensions in the center of the country

High Political tensions in the Zambezi Valley reduced significantly

Reduction in government funding for the ZVDA as a result of tight fiscal policies.

High Stress the importance of the Agency as a high priority -Agricultural Development- in a strategic area. The ZVDA, with increasing coal prices, also has other sources of funding.

Deteriorated business climate, devaluation, also due to political conflict

High Outside the direct control of the Agency

Crisis in coal mining leading to lower demand for agricultural produce and lower revenues for the ZVDA.

High The coal sector is slowly overcoming the crisis. Revenues for ZVDA are picking up.

Dependency on its General Director and a few Directors for overall decision-making

Moderate The Agency has acknowledged the need for a broader management level and decentralization. It will conduct leadership training.

Political preferences influence funding to less critical areas and with less impact for the beneficiaries.

Low Development and application of transparent rules for investment allocations and selection of beneficiaries.

The common mindset of farmers across the Valley is that the support they receive are donations. This undermines the emergence of an entrepreneurial climate and negatively affects the demand for paid BDS.

High Increased coordination with other actors implementing projects in the Valley. Increased awareness raising and involving beneficiaries in project planning and implementation. The ZVDA is selective in the choice of beneficiaries based on motivation, commitment and risk appetite.

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5. LESSONS LEARNED AND CONSTRAINTS The most important lessons learned from the third year of ISA-2 implementation are related to the idenotified

needs to:

• Strengthen coordination, harmonization and alignment of interventions in the Zambezi Valley with an

integrated and multisectoral approach;

• Make the Zambezi Valley Development Plan a strategic and orientating guide for the development of the

Zambezi Valley region;

• Restructure programs and projects to focus interventions in priority areas.

• Create a database in institutions at district and provincial level;

• Create a Geo-Cartographic database of the Zambezi Valley similar to CENACARTA, as a way to allow the

monitoring and management of the physical space to support decision making and contribute to the

facilitation of investments in the Zambezi Valley;

• Establish mechanims to take full benefit of capacity building effort, to foster the exchange of regular

interinstitutional information, to breake barriers and thereby providing solutions to concrete problems in

the various areas that contribute to promoting the development of the region;

• Enhance technical assistance to local governments in the implementation of planning, environmental

management and spatial planning instruments, promoting safe and climate change resilient housing in close

connection with related institutions and in alignment with local and national policies and strategies.

• Reinforce assistance and strategic guidance to Provincial Governments in the area of investment and export

promotion;

• Diversify promotional tools (programs on TV and Radio, newsletters, brochures, telephone service,

seminars, workshops, B2B, etc.);

• Strengthen collaboration with diplomatic missions in the field of investment and export promotion in

coordination with APIEX, embassies and the Ministry of Foreign Affairs and Cooperation.

The main constraints regarding the implementation of ISA-2 are:

• The actual costs for carrying out studies and development projects exceed the expected and available

financial resources;

• Given the lack of reliability of the data collected at district level, the Agency decided to pause such

decentralized collection effortd a and aim for the establishment of a partnership with INE at the central

level instead;

• The carrying out of activities related to the implementation of the PEOT Guidelines still await the ratification

of the referred instrument by the Assembly of the Republic;

• The limited inclusion of spatial planning activities in the plans and budgets of the districts makes it difficult

for local technicians to continue activities.