THE DEVELOPMENT OF SMALL SCALE SUGARCANE PRODUCERS IN SWAZILAND USING PATNERSHIPS, a CASE STUDY of Komati Downstream Development Project (KDDP)

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1 THE DEVELOPMENT OF SMALL SCALE SUGARCANE PRODUCERS IN SWAZILAND USING PATNERSHIPS, a CASE STUDY of Komati Downstream Development Project (KDDP) By: Mr. Humphrey N. Nxumalo MSc. Environmental Resource Management (University of Swaziland), BSc Agriculture (University of Swaziland), Organization: Swaziland Water and Agricultural Development Enterprise (SWADE), Mbabane. Swaziland 1. INTRODUCTION Despite increasing urbanization in developing countries, the majority of the world s poorest people still live in rural areas. The challenge of rural poverty is enormous, but Swaziland government has played a constructive role in efforts to address the problem. The Government of Swaziland therefore focused on strategies of reducing poverty in the country through harvesting water from the major river basins, hence the formation of the Swaziland Water and Agricultural Development Enterprise (SWADE). SWADE has two major projects namely Komati Downstream Development Project (KDDP) and Lower Usuthu Smallholder Development Project (LUSIP). Both projects were conceived as innovative socioagricultural development initiatives aimed at improving the quality of life of rural communities using water as a catalyst for development. KDDP and LUSIP were initiated in 1999 and 2003 respectively. Their main objective is to reduce poverty through increased household income of the rural population in the Project Development Areas (PDAs). This was to be achieved by creating the conditions for the transformation of subsistence level smallholder farmers into small-scale commercial farmers. According to Lahmeyer International (2010), after review of feasibility study of 1992 it was agreed that Maguga dam be constructed to avail water to the KDDP to develop about 6000ha. The construction of the dam was a partnership between the Government of Swaziland and the Government of the Republic of South Africa on a 40%:60% basis. Government also identified the need to partner with different stakeholders in the development of these farmers. The project development covers a number of agricultural developments but the focus of the paper will be on sugarcane farmers. 2. OBJECTIVES The objectives of the paper are To present the partnerships between public-private sectors in the development of rural community in Swaziland. To present the impact of the KDDP on the land utilisation and livelihood of the community. 3. METHODOLOGY This is a desk top study based on the project reports, socio economic survey and water quality reports. 4. DISCUSSION a. PARTNERS 1

2 The Government of Swaziland (GoS) identified the need to reduce poverty in the country through construction of large reservoirs and developing the people downstream to utilise the water to improve their lives. The construction of Maguga dam which is in the Northern part of the country has led to Swaziland having access to 83mcm 3 water. This dam was constructed in collaboration with the Government of the Republic of South Africa. As a result the water harvested in the dam is shared between the two countries. The construction of the Maguga Dam is the key element in the development of the irrigation potential of the Komati River in Swaziland and in South Africa. Government, through SWADE therefore identified a number of organisations to partner with her in the development of the communities. Other institutions that play a significant role are the development and finance institutions, commercial banks, the sugar mill and the Swaziland Sugar Association (SSA). Even though the partnerships between these institutions have been informal throughout the project implementation, a number of positive results have been achieved. The positive results are achieved because of the mandate given to each player by government to contribute to the development of the country. Financial institutions are governed through the Central Bank of Swaziland to provide financial services to individuals and businesses in the country. The SSA has been established through the Sugar Act of 1967 as a sugar industry structure to provide services to the sugar sector. b. ROLES OF DIFFERENT PARTNERS i. Government of Swaziland The Government of Swaziland partnered with the Government of South Africa towards the construction of the dam. The Government of Swaziland saw the need to establish a parastatal, SWADE, to facilitate the utilisation of the water downstream. SWADE was formed in 1999 through an Act of Parliament and operates under the Ministry of Agriculture. According to SWADE (2010) in their fact sheet, its mandate is to plan and implement the Komati Project and the Lower Usuthu Project, and any other Large Water Project that Government may assign. This parastatal is 50% owned by the Ministry of Natural Resources and Energy and 50% by the Ministry of Agriculture. Other partner ministries who sit in the SWADE Board are the Ministry of Finance and the Ministry of Economic Planning and Development. The mills and the private sector are also represented in the Board. The main role of SWADE in the development is mobilization of the communities and group formation, capacity building, mentoring, extension service, linking communities with stakeholders like financiers and markets. The operations of SWADE are funded through the budget of the government of Swaziland. There are periodic stakeholder forums for project update. The sugarcane schemes developed downstream of the dam draws its water directly from the river. Government also financed the development of the sugarcane farms from the river pump stations to field edge. Another role of government is to provide basic infrastructure like electricity to the river pumps, roads and bridges where necessary to cut down the distance from the farmers to the market. Water and sanitation facilities are also funded by the government. A conducive legal environment is also provided by the government to facilitate trade within the communities and with international markets. The Ministry of Commerce, Industry and Trade facilitates trade localy and internationally. The Sugar Act of 1967 forms the backbone for the establishment of the sugar industry and guides the production, legislation and marketing of sugar by the industry players. Swaziland is also a member of international trade organizations such as Southern African Customs Union and the World Trade Organisation where the sugar is marketed. There are other national laws that facilitate the formation of businesses and that guides the management of labour force in a working environment, Some of the funding used by the financial institutions to finance the farm development was sourced by the government through the African Development Bank (AfDB). 2

3 ii. Financial institutions There are several development finance institutions (DFIs) that have partnered with government on this development initiative. These are the Swaziland Industrial Development Company Limited (SIDC), Swazi Bank and Swaziland Development Finance Corporation (FINCORP). Nedbank, which is a commercial bank, has also played a role. They provide credit for both development and operations of the sugarcane farming businesses. The banks also offer loan management services for the farmers and guide them on how best to repay their loans. The banks and the individual farmers business sign loan agreements which define the service to be provided by the bank and the expectations from the farmers. The banks have partnered with SWADE on monitoring payment of service providers for the farmers. Before any payment is made by the farmers these parties have to check whether the farmers have followed good business principles and are charged correctly by the service provider. SWADE also assist in monitoring the quality of the service. This is an informal partnership based on the fact that both the bank and SWADE have the farmers interest at heart and have a responsibility to ensure that they use their financial resources accordingly to the benefit of the businesses and eventually the shareholders. In some cases the banks have put these financial controls in their contracts with the farmers as a condition for giving them the loans. iii. The Sugar Industry The Mhlume sugar mill also saw an opportunity for expansion from the KDDP as it expected that additional 6000ha of sugarcane would be crushed and processed into sugar by the mill as a result of the project. The mill therefore invested in a large expansion to ensure that there is enough capacity to crush the sugarcane. According to the Swaziland Sugar Association (2010), after processing the sugar the Swaziland Sugar Association (SSA) takes over the marketing of the sugar. SSA is an association that is owned by both the Mill and the sugarcane growers on a 50/50 basis. SSA also provides technical services to the growers such as extension services and cane testing. They also manage the seedcane scheme and are responsible for introducing new technology in the industry. SSA then pays the mill for the processing of the sugar while the mill pays the farmer for the amount of sucrose extracted from the sugarcane. Farmers are paid on a fortnightly basis, through a stop order arrangement with the banks from the beginning of the milling season. The stop order is like a contract allowing the banks to first deduct the farmers loan installment before the farmer access the money from the mill. The extension service for the growers is provided through the mill and in collaboration with SWADE. iv. Traditional Authorities The land being used by the farmers under SWADE s PDAs is communal land which is under a Chief that looks after the land on behalf of the King, who is the custodian of the land on behalf of the nation. The Chief also rules in council. For any development to take place, SWADE has to enter the community through the Chief, who authorizes the use of the land to the farmer group (either as a Cooperative Society or a Company) through a lease agreement. During conflict management among FAs or members of each farmer group, the chief and his council becomes the mediator and help to resolve any community conflict. v. Swaziland Environmental Authority 3

4 The Swaziland Environmental Authority (SEA) is a government parastatal that is responsible to ensure that all people and businesses conform to the national environmental legislations. According to SEA 2010, SEA controls that the environment is treated properly and monitors the development in the state of the environment. They play an important role in guiding each business entity through implementation of environmental practices through ensuring compliance to environmental management practices. Before the businesses are developed they have to conduct an Environmental Impact Assessments (EIA) and Comprehensive Mitigation Plans (CMP) depending on the nature and size of the business. The EIA and CMP are assessed by SEA and also go through public reviews before they are accepted. Once accepted, each FA is given an environmental compliance certificate. The FA has to do periodic environmental audits to monitor compliance and proper implementation of their CMP. SWADE also assist in both river and potable water quality monitoring. This is done through periodic sampling and testing for quality. According to SWADE (2010) in the water quality monitoring report, reports compiled for the tests show that the project does not impact negatively on the quality of the water in the Komati River. The tests and reports of the microbial analysis reveal acceptable or low levels of contaminants that are mostly of agricultural origin (namely Phosphates and Nitrates). c. PROJECT CLIENTS i. Community members The community members benefit directly from the developmental projects. They receive training and capacity building from SWADE and other training institutions. Once they are ready for the development, they are linked to markets and financial institutions to access the funding for their businesses. Through formation of the Farmers Associations (FAs) has generated income from these businesses. SWADE (2010) in the KDDP second quarter report reported that a total of 19 FAs are operating in the 10 communities in the KDDP project area. The community members merge their fields to form a single farm entity to use the land for business development. Upon getting the chiefs authority they then register themselves as private or public companies or as multipurpose cooperative societies. The membership ranges from 30 to 240 people. Development has covered a total of 4290 ha, 90%to sugarcane and the10 % to diversified agricultural projects. In 2009, the revenue generated by the businesses was SZL100M (US$14.3) from the sugarcane. After paying the bank loans, the money is then used to buy inputs to operate the farms and the rest is shared as dividends by the members of the FAs. The community members also have access to potable water and sanitation facilities that are provided by government through SWADE. SWADE assist in the construction of the schemes and then hand over a fully operating scheme to the community. The community must have a constitution, a bank account and a fully fledged committee to run the scheme before it is handed over to them. The community is expected to build their sanitation facilities from material provided by the government through SWADE. ii. Service providers Some of the income generated by sugarcane business is used for operational costs. The farmers are expected to pay for all the services provided to them as well as the input costs. Out of the total income about 55 to 60% goes into operational costs which pay for inputs, pump maintenance companies, electricity, harvesting and haulage companies, labour and ripening contractors. In 2009 after forming a farmers Federation, the farmers decided to buy fertilizer in bulk and tendered out the service of provision of fertilizer. Private companies were contracted for this service. They were able to make a total saving of SZL3M from their budget of about SZL12M in one year. 4

5 5. IMPACTS ON LAND UTILISATION AND LIVELIHOOD a. Land utilisation According to SWADE (2009), in the KDDP, the commercial farming enterprises include sugarcane businesses by 19 farmers associations, other crops, dairy projects, haulage companies, fresh produce market company, feedlots, bee keeping, and poultry projects. The farmers have been performing comparatively to the sugarcane industry and in some cases even better. Their sugarcane yields have averaged at 99tonnes cane per hectare compared to the industry average of 95 tonnes cane per hectare for the past five years. In the beginning of the project less than 500ha were under irrigation. To date a total area of 4290ha is under irrigation. The main crops produced are sugarcane (3890ha) and vegetables and field crops (400ha). This has increased the level of crop diversity from 10 crop varieties in 2000 to 17 in 2009 and reduced the reliance on rain fed farming from 82% to 65%. b. Livelihood of the community The livelihood of the communities in the PDA has changed since year In some cases the change is reflected from 2004 to Table 1 below shows the livelihood changes in the communities. These changes have been as a result of the formation of businesses facilitated by SWADE. SWADE (2009) in their Socioeconomic survey report indicated the changes in the livelihood as shown in table 1 below, Potable water and sanitation projects in different communities have been constructed as well. These projects also contributed to the improvement of the lives of the community members. Table 1. Livelihood Security in the KDDP Impact/Year Children aged less than 6 years who have never been to school 21.15% 20.45% 2004 Population Access to clean water 21.50% 25% 2004 People earning more than E / month 0.90% 20% People earning less than E100.00/ month 32% 3.15% Infant mortality 77/ /1000 CHALLENGES c. The following have been identified as challenges in the implementation of the development: Since the partnerships between government and the stakeholders and among the stakeholders are informal, this sometimes leads to duplication of resources since two or more organizations may provide the same service to the community when fulfilling its mandate. d. The cost of financing of the FAs is high since the interest rates for the farm loans have been ranging from 13% to 20% over the years. 5

6 e. The loan repayment period for the farmers is at least seven years. This leads to slow realization of income by the farmers because of the long repayment period. f. There is low literacy level of community. This translates to slow business acumen. Therefore some of the decisions taken or not taken by the farmers result in unnecessary costs being incurred by the businesses. 6. LESSONS LEARNED The following lessons can be taken from the development: a. The provision of the necessary structures for development leads to the success of the timely implementation of a project. This includes the availing of finance, market, conducive environment and constant, intensive, reiterative capacity building processes. b. There is a need to formalize the partnerships of the different players in the project area through Memorandum of Understanding (MoUs) to avoid duplication of resources where clear roles and responsibilities will be stated. c. Stakeholder collaboration is very important in the implementation of any development project. 6

7 References Swaziland Environmental Authority (2010). Fact sheet. (1/10/2010) Swaziland Sugar Association (2010) Fact Sheet. Mbabane. Swaziland. (7/09/2010) Swaziland Water and Agricultural Development Enterprise (2009) KDDP Socio-Economic Survey: Analytical Report, Mbabane Swaziland. Swaziland Water and Agricultural Development Enterprise (2010). Fact Sheet about SWADE Mbabane. Swaziland. (7/09/2010) Swaziland Water and Agricultural Development Enterprise (2010). Komati Downstream Development Project Second Quarter Report, June Mbabane, Swaziland Swaziland Water and Agricultural Development Enterprise (2010). Water Quality Monitoring Report, June 2010, Mbabane, Swaziland. Lahmeyer International (2010). Engineering Consulting Services, Maguga Dam MDC -4 (1/10/2010) 7

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