VALUE CHAIN OPPORTUNITIES FOR SMMES IN ZAMBIAAuthor: Annie Sugrue, with contributions by Mr. Andy Simpson and Ms Mirabel Bausinger

This brief summarises opportunities for SME growth in key agricultural value chains identified during a study for DFID Zambia. The value chains contribute to job creation, food

1security and livelihoods .

Cassava - This crop is an excellent source of starch and flour and 1-2.5 million tons is grown in 2Northern Zambia by 500, 000 smallholder farmers, mostly women. IITA is addressing Low yields,

disease and supplying smallholder with improved varieties and CEEC has launched the Kw 8million 3Cassava Commercialisation Program . Zambian Breweries (ZB) produces an affordable brew, Eagle

Beer from cassava in Ndola, with a 40% blend of cassava flour/sorghum and secured tax concessions from government. ZB can double its production and procure 10,000 T of cassava from smallholders. Cassava starch has many uses and large volumes are imported (Table 1). Premiercon has invested US$3,5 million a starch processing facility in the North West that will process cassava and sweet potatoes. The products will be animal feeds, cassava chips/pellets, starch, crude bioethanol, cassava flour, industrial sweeteners, syrups, adhesives and products for baking and confectionary. Emerging value chains in bioethanol production are in their early development phases but have potential for replacing petroleum as well charcoal and forest products for

5,6domestic use .

Aquaculture - Zambia has 15Ha of water areas that are overfished and hence aquaculture is the most sustainable opportunity to expand fish production in Zambia. 48% of the fish sold in the formal market is imported from Namibia (88%) and China (12%) at a significantly lower price than locally produced fish. Access to high quality fingerlings, affordable feed and the cold chain to markets would increase inclusivity in the market. The AfDB has awarded a US$50m grant to the Government of Zambia to entice youth into the small scale aquaculture sector; CEEC has been

7allocated US$25m of this to set up a revolving loan to small-scale fisheries . World Fish has a program to establish 60 nurseries to supply high quality fingerlings to smallholders. Three large companies and a few smaller, newer companies are producing 30,000 Mt of fish for sale each year. First Wave has a fully integrated value chain producing fish for the market (Yalelo), high quality fingerlings and fish feed (Aller Aqua) and extension services and depots for small holders (Horizon) Capital Fisheries is Zambia's largest wholesaler which buys from suppliers small and large, including from the capture fishery suppliers. A potential challenge is arising as a result of the Tilapia Lake Virus, preventing imports of genetically diverse fingerlings into SADC from Thailand.

Cotton & Textiles - this is a main crop in Zambia in terms of volumes with a highly inclusive value chain of smallholders and women. Production yields in 2018 were almost 70% lower than in 2012, attributed to the low prices. Zambia has a single functional mill (Makuba Textiles) in Ndola operating at 5% capacity with spinning and weaving capability. The Zambian government is in discussions to recapitalise the mill to manufacture textiles and garments. A new Cotton Sector Strategy (2018-2022) which was developed with all key stakeholders identifies key opportunities in the value chain. The Cotton Association of Zambia has trained women in hand spinning and looming that produce a high quality shawls and throws; it is a cottage industry that could be further developed.

Goats - there are 3.4 million goats, 35.5% of them in the Southern Province, 98% of the goats are owned by smallholders, many of them women. The goats are not well managed, left to roam in the community and fend for themselves. The extension, veterinary support services for goat owners is poor, genetic stock is weak and when disease strikes it can wipe out an entire flock in the community. Animals are sold mainly within the community or for low prices to traders who manage the paperwork enabling them to cross borders. A few initiatives are introducing improved stock, services and mobile abattoirs but standards are low and do not meet retailer requirements. The private sector is not active in this sector yet and an off taker could stimulate this market to realise its full potential.

Horticulture - Zambia's value of imported horticulture and processed products in 2014 was approximately US$56m. Despite Zambia's FFV production of 1,4mt at a value of US$235, most retailers import their FVV. Zambia's imports of vegetables alone from South Africa in 2018 was US$8,7m. The imports are driven by the quality and SPS standards demanded by the retail sector which are absent in the existing markets structures in Lusaka. A consortium made up of the Joburg

8Market and the Zambian Investment Fund were selected during an open bidding process to establish a transparent, competitive market place with cold storage, hygienic conditions and a secure payment system that will facilitate the participation of small producers. Predictable good quality supply would attract retailers and the hospitality sector to procure locally.

1 www.imanidevelopment.com

2 http://www.iita.org/iita-countries/zambia/3 http://www.ceec.org.zm/4 http://www.premierconstarch.com/

5 http://www.sunbirdbioenergy.com/ Sunbird has an investment licence and 10,000 Ha of land to develop a cassava to bioethanol plant in Luapula.6 http://www.thomrobiofuels/. Thomro has the first licence in Zambia to produce biofuel. It will produce bioethanol from cassava for domestic cookstoves.7 Zambia Aquaculture Enterprise Development Project (ZAEDP) , AfDB 2016. https://www.afdb.org/en/documents/document/zambia-aquaculture-enterprise-

development-project-93700/8 http://www.joburgmarket.co.za9 Calibrating Informal Cross-Border Trade in Southern Africa, SAMP, Migration Policies Series #69, Growing Informal Cities Project, 201510

An assessment of the viability of a horticulture wholesale market investment in Zambia. MUSIKA & IAPRI. June 2018. www.musika.org.zm & www.iapri.org.zm

Table 1. Summary of trade data (ITC, 2017) and other information relating to the selected value chains.

Value Chain

Factor

Imports 2017

Main challenge

Exports 2017

Market demand SADC and opportunities

Inclusivity and livelihoods

US$ 6,604,000Australia (78%), SA (21%)

Yields and varieties of cassava

US$ 320,000. New exportsKenya(77%), Zimbabwe(18%)

SADC US$27.5 million - (SA- 43%; Zambia 24%; Tanzania & Zimbabwe each 7,2%)

Mostly women, opportunities for youth with growth. Price higher than maize

48,000mtNamibia (88%), China (12%)

Fingerling quality, cost of feed for smallholders. Tilapia Lake Virus. Low costs of imports

X-border trade with DRC is one of the top 3 core

9products traded

100,000T, 52% met by local production. Zambia imports 25% of SADC imports Namibia supplies 78% of all SADC imports. DRC US$100m from Namibia

The formal high quality market could improve its inclusivity, but small scale fish farming provides livelihoods for 1000's smallholders

Almost all garments, homeware, textiles

Yields are low and the lint is unavailable for VC expansion as it is all exported

Lint - US$38million

Lint from Zambia (SA-74% most for re-export; China 8%; Zimbabwe 5%)SA imports 100% of its linen AGOA - Lesotho exports 60% of its clothing to the US

Expansion could reap significant benefits due to the long and complex value chain

N/A

Informal markets and limited support for small lives-stock owners

X-border DRC live goats SADC US$9m (2017) from Namibia to SA (75%) live

Saudi Arabia wants 1 million live goats a year

Inclusive value chain but informal with low quality

US$58m FVV + processed products

Access to transparent, competitive market place

Vibrant x-border trade,

Consumption 1mt/a = US$330m estimated to increase to 1.4mt/a and US$500 by 2020. Net annual sales approx. 1mt worth

10US$200m

330,000 smallholder producing FVV. Participation by women is significant

Starch Fish Cotton Goats Horticulture

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