Adapting business models to incorporate smallholders into Global Value chains. Presentation by

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1 Adapting business models to incorporate smallholders into Global Value chains. Presentation by Apollo Owuor Kenya Horticultural Exporters Limited To the Multi Year Expert Meeting on Investment, Innovation and Entrepreneurship for Productive Capacity Building and Sustainable Development Geneva 19 th to 21 March 2014

2 Challenges of integrating Small Holder Farmers in GVC Productivity Access to input & service financing/credit facilities Quality Economies of Scale Inadequate access to infrastructure development Standards Compliance- Transaction Costs Global Economic Status

3 CURRENT EXPORTER-SHG MODEL Inputs Production Packing & logistics Distribution & Marketing Seeds Small Holders Supermarket s Fertilizers Food services Agrochemical s Farm equipment Medium Farms Exporter Importer Wholesales Irrigation equipment Large farms Discounters

4 Integrating Small Holder Farmers in Global Supply Chains Farmer Identification and Mobilization Competitiveness Capacity Building Aligned and shared Values Ethics and Sustainability Management Control Investment Planning

5 Integrating Small Holder Farmers in Global Supply Chains Farmer Identification Capacity Building Management Control Aligned and Strategic linkages Market Access Sustainable Production Ethical Trading Competitiveness

6 The KHE model Input Linkages Access to Finance (credit Availability) Market Access Equipment Inputs Infrastructure Third Party Certification Financial Literacy Access to Finance Capacity Building Technical Standards (SPS) Business Skills Management Controls Mobilizations Social Skills Market Access Technology Transaction Costs Marketing Post Harvest storage facilities Bargaining Power Competitiveness Infrastructure Post Harvest GAPS Commercial Sustainability

7 Kenyan Small Growers Case Gives small scale farmers to access the market. Organised into Manageable Groups of between Members. Operate under GAP accreditation. Acreage range typically from 0.5 to 5 acres per farmer Provides a vital sustainable income (approx 4 x national average). Schemes supported through community initiatives. On the ground management teams implement systems /controls. Centralized Management Developing the model wider stakeholder engagement bringing financial institutions and corporates into the mix To provide the financial architecture to drive long term sustainability Development of social and environmental component Mobile phone technology to drive production capability Crop insurance Aligned and Strategic Partnerships -Public and Private Sector for Capacity Building

8 Opportunities for Public, Private Partnerships Promote partnerships btwn SHG & financial credit facilities Promote partnerships between SHG and agro-businesses for input supply models Support SHG to comply with market standards and customer requirements Stimulate production and market information systems Robust ICT Platforms

9 Enhance the management capacities of SHG Financing training & Capacity building Improve infrastructure devt- structural and financial Promote technology transfer - Productivity & Value addition Integrate SHG in research Align and minimize private retailer standards

10 Business sustainability Sustainability is no longer CSR driven but central to business strategy ensuring delivery of products on time to required volume and driving profitability People- labour available when needed/ skills/ commitment Carbon/ Climate change- driving efficiency/ longer term mitigation Waste- crop utilisation/ reuse/ recycle Crop Protectionreduce use/ meet MRLs/ avoid resistance Water- reduce use/ maintain continuity Sustainable supply chains Soil- correct rotations/ increasing soil organic matter Commercial Sustainability

11 The big Qns Development of STI capabilities and innovation systems for integration or upgrading within GVCs, How can this be done? Determinants of the Impact of GVCs on developing Country Firms technology learning &STI capabilities, Which are they? Policy makers can leverage firms participation in GVCs to improve Firms Technological Learning & STI capability devt, How?

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